Tesco reported that 2015 was the worst in

Tesco is a British multinational grocery and general merchandise
retail with headquarters in England, United Kingdom. Measured by profit, it is
the third largest retailer in the world. In the current time, it has stores in
12 countries across Europe and Asia and it is leading the grocery market in the
UK.

Tesco has been found in 1919 when Jack Cohen started selling
surplus groceries from a stall in the East of London and he made a profit of £1 from sales of £4 on his first day. The Tesco brand appeared after
5 years, in 1924 when Cohen bought a shipment of tea and sold it under the
brand name “Tesco Tea”. In 1929 Cohen opened the first Tesco store in north
London and by 1947 was floated on the stock exchange with a share price of 25
pence. Tesco continued growing up, increasing the number of their stores and
diversified the products that they sell and in 1973, Tesco opened their first
petrol station at major sites across the UK. Through the 1990s and early 2000s
Tesco start opening new stores in other countries such as Hungary, Czech
Republican, Slovakia, Poland, Ireland, Thailand, South Korea, Malaysia, Turkey,
Japan, China, India and the US. According to Retail Economics (2014) Tesco was
the UK’s top retailer in 2013 and by 2017 Tesco becomes the first retailer to offer
same day grocery delivery through the United Kingdom.

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Tesco start facing real financial issues, The Guardian and BBC
reported that 2015 was the worst in Tesco’s history after recording a £6.4bn
loss. This loss was a direct cause of falling in the value of property,
especially in the supermarkets out of town. After the recession, consumer
buying behavior has been changed and they became more conscious to cost and
switched from the large supermarkets to those discounters like Aldi and Lidl.
Through this case study we will go deeper into the details of the financial
status of Tesco through a vertical an analysis of their financial statements
from 2013 to 2017.

 

 

The case write-up

SOWT analysis:

Strength:

–      
Powerful retail brand globally.

–      
Strong position being third largest grocery
retailer in the world.

–      
Leadership position in the UK.

–      
Effective online operations.

–      
Strong property portfolio.

–      
Innovative in the business methods (such as
Tesco Metro and Tesco Express).

–      
Diversified geographically, it presents in 14
countries all over the world.

 Weakness:

–      
Weak financial performance.

–      
Serious damage to the brand image due to
commercial income scandal in 2015 (accounting mis-declaration ).

–      
Reliance on the UK market.

–      
Bad debt from credit cards.

–      
Poor retail format in some countries.

Opportunities:

–      
International market expansion.

–      
Increasing presence in financial service
industry.

–      
Increasing non-food retail products.

–      
Investing more in the online shopping.

Threats:

–      
Tesco’s leading position in the UK makes it a target
of consistent competition from the other retail brands (Sainsburys, Aldi, and
Waitrose).

–      
Economic recessions.

–      
Increasing in raw material cost.

–      
Higher labor cost

–      
Changing government strategies regarding
taxation.

 

After 2005 many supermarkets start competing to control the market
and increase their share by building more stores and Tesco was one of these
companies who start building big size stores. As it has been mentioned in the
introduction, the recession made the people more conscious when it comes to
cost and many consumers start looking for better prices in the small
convenience stores. Declining the sales while Tesco was paying the rents and
the labor costs for all its stores started creating a pressure on the company.