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Latest posts by Jonathan Kush (see all)

    Tesco has been the UK's most dominant supermarket for more than two decades and it is still the biggest supermarket in the UK. But all is not well with Tesco at the moment. Since 2013, the food retailing giant has posted declining UK sales. It also been losing market share in the UK from a high of 30.9% in 2012 to 827.6% as of 2018. Using Pestle, Swot and Porters Five Framework, we examine external and internal factors behind Tesco’s poor performance, such as the rise of hard discounters Aldi and Lidl, who have benefited from a significant rise in consumer frugal shopping habits since 2009. Both Aldi and Lidl have doubled their market share in five years, at the expense of the Big Four supermarkets.

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    Tesco Strategy Case Study


    Key Learning Outcomes

    By the end of the case, students should be able to:
    • Understand the broad macro-environment of Tesco and the UK grocery retailing industry in terms of political, economic, social, technological, environmental and legal factors (PESTEL).
    • Use our swot analysis example to gain an overall understanding of Tescos strengths and weaknesses and strategic options arising from the opportunities and threats that have been identified from the analysis of the business environment.
    • To apply strategy business models and frameworks such as Pestle, Swot etc to real company cases.

     

    Analyse the internal or external environment of Tesco using Pestle and Swot.

    1.0 INTRODUCTION


    Tesco is the biggest supermarket group in the UK with a market share of 27.8% ahead of main competitors Sainsbury’s, Asda and Morrison’s who together make up the UK Big Four (Mintel 2017). Started as a vegetable stall in 1924 in London’s East End by Sir Jack Cohen, it has gone to become an international retailer now ranked third in the world behind Walmart and Carrefour.  While Tesco is mostly engaged in grocery retailing, it has also expanded into retail banking, mobile and insurance services and non-grocery such as clothing, electronics and many household goods. Tesco is synonymous with having some of the largest superstores (Extras) often reaching 100,000 sq. ft. But as will be seen later, it is cutting back on the large store format in favour of the much smaller 3,000 sq. ft. the C-store formats known as Tesco Express and the mid-level 10,000 sq. ft. city centre based Metro stores selling groceries and convenience foods (Mintel 2017).

    An overview of Tesco's current performance 2016-2018

    All is not well with Tesco at the moment. Since 2013, the company has posted declining UK sales. The food retailing giant has also been losing market share in the UK from a high of 30.9% in 2012 to the current 27.6% as of 2018 (Statista 2017; Eley 2018).

    Using Pestle, Swot and Porters Five Framework, we examine the factors behind Tesco’s poor performance such as the rise of hard discounters Aldi and Lidl, who have benefited from a significant rise in consumer frugal shopping habits since 2009. Both Aldi and Lidl have doubled their market share in five years (Mintel 2017).

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