Swot Analysis Tesco

Overview

Tesco PLC is a British retail company which was founded in 1919 by Jack Cohen. Now Tesco is a multinational grocery with retail banking and insurance services. Tesco now ranks as one of the highest performing retailers globally.

During the 1950s and the 1960s, Tesco grew organically, and through acquisitions, until it owned more than 800 stores. In 2001, Tesco entered the food market in the USA. In 2002, Tesco started its activity in Poland and major move into UK convenience store market. In 2003, Tesco expanded its operations in the Japan and Turkish markets.

The diversification and development were rapid and extensive. Tesco offers a lot of services such as: Tesco Extra, Tesco Superstores, Tesco Express, Tesco Metro, One Stop, Tesco.com

In both Ireland and the UK Tesco are the leading supermarket chain and, in the UK, they have a staggering 27.8% market share in 2017 (www.bbc.com : 2017). Tesco’s biggest competitors in the UK are ASDA, Sainsbury’s and Morrison’s. ASDA is Tesco’s second biggest competitors due to having the lowest prices out of the “Big Four” as they are commonly referred to. ASDA has a market share of 15.3% (www.bbc.com : 2017). ASDA also has its own range of clothing like Tesco and is currently working on improving its online sales channel. Tesco dominates the online sales channel for supermarkets and with ASDA improving theirs this is a potential threat. One of Tesco’s main competitive advantage is it has the advantage of economies of scale and with ASDA investing a greater amount into lower prices therefore they are Tesco’s biggest competitors (www.ukessays.com

This included a purchase of government bonds worth £2,903m. While this increases the company’s liabilities, the low risk associated with government bonds was a motivating factor in this decision and should be considered for analysis.

Equity

The only significant change in equity was a drop in retained earnings from £10,535m to £332m between 2013 and 2017. The largest aspect of this was a loss resulting from changes in the discount factor used for the defined pension scheme of £7,450m in 2017 that was offset against retained earnings.

Ratios

The overall profitability of Tesco has been low over the five-year period, both comparatively and historically speaking. (Telegraph, 2018)

Apart from 2015, the gross profit was consistently around 5-6%, like competitor Sainsburys, but considerably lower than international competitor Carrefour’s average of 22% for the same period. (Zacks, 2018)

The net profit margin was exceptionally low for the period, being negative for two of the five years, lower than the industry average of