Analyze How the 2008 Recession Affected Tesco
Mariam Peyton is a professional Financial Analyst. She holds a Masters degree in Economics. She specialises in financial analysis and forecasting. Her expertise includes studying the financial performance of companies, markets and entire industries looking for trends, insights and information that can help you glean rich insights for use in academic and market research.
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Tesco is among the largest retail companies in Europe serving 345,000 people with reasonably priced, healthy, and sustainable food via its stores and those online with an intention of improving the people’s standards of living. The company operates through the UK, ROI, Central Europe, Asia, and the Tesco Bank. Tesco has a total of 4,752 stores in the market in the areas of the UK, Ireland, Czech Republic, Slovakia, and Hungary. Tesco was heavily impacted by the recession in numerous ways which put pressure on the company to favorably compete in the market. The 2008 recession caused about a reduction in the company profits resulting from less consumer spending which decreased Tesco’s sales. The company was faced with the burden of securing a competitive edge in order to increase profits and maintain its growth.
This essay is going to critically analyze how the 2008 recession affected Tesco Company. The 2008 recession was a global economic crisis that had significant impacts on various businesses, including Tesco Company. This essay will examine how Tesco responded to the challenges and opportunities presented by the recession, and how its performance and strategies were affected by the changing market conditions. The essay will also evaluate the strengths and weaknesses of Tesco's approach, and provide some recommendations for future improvement.
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Analyze How the 2008 Recession Affected Tesco Case Study
Key Learning Outcomes
By the end of the case, students should be able to:
- Understand and discuss how the 2008 Recession Affected Tesco
- Assess the different approaches that Tesco undertook to respond to the 2008 Recession
- Point Three
1.0 INTRODUCTION
Founded in 1919 by Jack Cohen as a collection of market stalls, Tesco has grown to become the biggest UK supermarket chain, holding a market share of 25.6% as of 2022, with over 37,000 employees running its more than 3,700 Superstores, Metros, and Express convenience stores. It has also successfully expanded its operations to other countries in Europe and Asia and has continued to command the highest market share despite the growing competition from German discounters Aldi and Lidl.
Tesco’s success is traditionally attributed to its competitive pricing strategy. Indeed, the everyday low pricing strategy has been the bedrock of its success. But this essay is going to analyze how the structure and culture of Tesco have also contributed to its success. The 2008 recession was a global economic downturn that had a significant impact on many businesses, including Tesco, the largest supermarket chain in the UK. In this essay, I will critically analyze how the recession affected Tesco's performance, strategy, and competitive advantage. Key questions answered are; how has the recession affected Tesco? How did Tesco respond to the 2008 recession?
The 2008 recession affected the performance of the company. According to its annual reports, Tesco's revenue grew by 11.1% in 2008 but slowed down to 8.3% in 2009 and 6.8% in 2010. Its operating profit margin also declined from 5.9% in 2008 to 5.4% in 2010. These figures suggest that Tesco faced lower consumer demand, higher costs, and increased competition during the recession.
It affected Tesco's strategy. One of the main strategic responses that Tesco adopted was to focus on its core UK market and its value proposition. Tesco launched a range of initiatives to offer customers better value, such as price cuts, promotions, loyalty schemes, and quality improvements. Tesco also invested in expanding its online and convenience store formats, which were more resilient to the recession than its large hypermarkets. Moreover, Tesco reduced its capital expenditure and debt levels to improve its financial stability.
The recession affected Tesco's competitive advantage. Despite the challenging economic conditions, Tesco maintained its market leadership in the UK grocery sector, with a market share of around 30%. Tesco's competitive advantage was based on its scale, efficiency, innovation, and customer loyalty. However, Tesco also faced some threats to its competitive position, such as the rise of discounters like Aldi and Lidl, the emergence of online rivals like Amazon and Ocado, and the loss of trust due to scandals like the horsemeat contamination incident.
In conclusion, the 2008 recession had a mixed effect on Tesco Company. On one hand, it negatively affected its financial performance and growth prospects. On the other hand, it prompted Tesco to adopt a more customer-focused and flexible strategy that helped it retain its market dominance and competitive edge.
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