The macro environment that surrounds the UK supermarket industry is made up of numerous factors that influence nearly all the players in the industry. In this Pestel and Swot case study, we will decipher how various political, economic, social, technological, legal and environmental factors, in form of positive and negative trends have affected the supermarket industry in the UK. A pestle analysis of Tesco in 2022 explores the impact of different factors like Brexit, falling post covid disposable income levels, new trade agreements, the rise of contactless technology as well as other legal and environmental factors. Critically, a macro environmental analysis will reveal the inherent opportunities as well as underlying threats facing Tesco and other supermarket multiples in the United Kingdom.
Peyton, Mariam (2022) "Pestle and Swot Analysis of Tesco 2021-2022" 123 Writing [Online] at https://www.123writing.com/sample/pestle-and-swot-analysis-of-tesco-2021-2022
Peyton, M. 2022. Pestle and Swot Analysis of Tesco 2021-2022. 123 Writing. Retrieved from https://www.123writing.com/sample/pestle-and-swot-analysis-of-tesco-2021-2022
Tesco Pestle & Swot 2022 Case Study
Key Learning Outcomes
- Understand the broad macro-environment of Tesco and the UK supermarket industry in terms of political, economic, social, technological, environmental and legal factors (PESTEL/PEST/STEEPLE).
- Use our swot analysis example to gain an overall understanding of Tesco's strengths and weaknesses and strategic options arising from the opportunities and threats that have been identified from the Pestle analysis example on it's business environment.
- To apply strategy business models and frameworks such as Pestle/Pest/Steeple, Swot etc to real company cases.
From its inception in 1919, Tesco has grown over the years to become one of the biggest retailers globally. Tesco is already the largest supermarket chain in the UK, holding a market share of 25.6% as of 2021, with over 37,000 employees running its more than 3,700 Superstores, Metros and Express convenience stores. Tesco’s success is largely attributed to its competitive pricing strategy as well as its two-part branding which positions the company as a) low-price supermarket for the low-income earners and b) premium store for high income earners (IBISWorld, 2021). The company’s group sales stood at £56.7 billion in 2020, a 0.7% decrease from its £56.9 billion sales in 2019. Tesco’s product portfolio ranges from food items to books, clothing, electronics, furniture, toys, financial, internet and telecom services among others (Annual Report, 2020).
The decline in revenue in 2020 was due to the covid pandemic. Supermarkets in the UK generally performed well during the Covid-19 pandemic, recording over £36.9 billion in sales during 2020 (Euromonitor, 2021). As a result, the UK supermarket industry recorded revenue of £189.9 billion and general merchandise accumulated a profit of £4.7 billion in 2020 representing a 2.5% growth from the preceding year. It’s not hard to see why since supermarkets sell essential food items and groceries that include fruits, vegetables, dairy, meat, toiletries, alcohol, and cigarettes among others.
But industry dynamics mean Tesco is increasingly facing tighter competition, primarily driven by the entry of discounters like Aldi and Lidl offering cheaper options for shoppers and threatening the position of the Big Four which has resulted in constant price wars and continuous reduction in prices by supermarkets. Nevertheless, the four major supermarket chains still control more than 60% of the market share led by Tesco Plc with 25.6% market share, Sainsbury's Supermarkets Ltd in 2nd place with a market share of 16.3%, Asda Stores Limited in third with 12.3%, and WM Morrison Supermarkets plc in 4th place with 9.4%. Aldi Stores Ltd overtook Waitrose to become fifth biggest supermarket chain in the UK with 6.8% market share (IBISWorld, 2021). But as the table below shows, their combined market share has been in decline over the last few years.
Table 1: UK Big 4 Supermarket Market Share 2017-2021
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