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An Evaluation and Critical Analysis of Financial & Business

Performance of Tesco PLC for financial years
2011, 2012&2013

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Table of Contents

Pg. #

1.

Executive Summary

2.

Introduction

3.

Literature Review

4.

Aims and Objectives

10

5.

Methodology

10

6.

Data Collection

11

7.

Business Performance Analysis, Findings and Discussion

12

7.1

Political

12

7.2

Economic

12

7.3

Social

12

7.4

Technological

13

7.5

Environmental

13

7.6

Legal

13

8.

Financial Performance Analysis, Findings and Discussion

13

8.1

Profitability ratios

13

8.1.1

Revenue Growth

14

8.1.2

Return on Capital Employed

15

8.1.3

Net Profit Margin and Growth

17

8.2

Efficiency Ratio

18

8.3

Gearing Ratio

19

8.3.1

19

8.4

9.

Interest Cover

Investor Ratios

20

8.4.1

Earnings per Share

20

8.4.2

Dividend Growth

21

Conclusions & Recommendations

21
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10.

References

24

11.

Appendices (Financial Statements & Ratio Calculation (Formulas)

28

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1. Executive Summary
Tesco performance is getting bad to worst in last few years. In this research Tescos financial and
business performance has been evaluated to assess the reason behind this downfall in
performance. Period under research consideration is from 2011-2013and reason for choosing this
time period is start of decline in Tescos business performance which hits its low with worst
performance in year 2013 in last 20 years. Sainsburys has been chosen as similar market
competitor for comparison of financial and business performance of Tesco. Primary objective of
financial performance has been analysed through analysis of profitability, efficiency and investor
ratios. While secondary objective is impact of political, social, economic, technological,
environmental, legal and regulatory factors on the profitability and efficiency of business
performance has been carried out using PESTEL analysis. Tesco has performed healthy in 2011
but start declining during the year 2012 and had worst performance in 2013 from results of ratio
analysis due to tough economic and market conditions. In comparison Sainsburys growth was
steady over the 3 years period although a slight hick up in 2012 due to tough economic
conditions. Mixed approach of both qualitative and quantitative data has been used and data used
is of secondary nature i.e. financial statements of both Tesco and Sainsburys. Official websites
of both companies are the main source of data and reason behind gathering data from here is
accuracy and authenticity. Analysis and discussions has led to following overall performances of
both companies.
Overall Tescos performance in the under research period of 3 year starting from 2011-2013 is
disappointing as the company start losing its grip on the market leadership and had the worst financial and
business performance year 2013 which is first time in last 20 years of its business. It has raised serious
questions about Tescos future performance and group should quickly resolve these issues.
Sainsburys overall performance has been steady and sound during this 3 year period and they have
shown satisfactory growth in their business and they had a better run than Tesco in 2013 which can be
seen in the analysis and discussion above of different ratios comparison between Tesco and Sainsburys.
Third objective of this research was to assess whether Tesco still holds the leadership status and results of
discussions shows that although it still rank as market leader in UK but now the competition is getting
stronger and bad performances of Tesco in recent years might indicate towards loosing this status in
future.

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Recommendation like better strategic planning, concentration towards UK market, improvement in online
shopping and closing of loss making stores has been provided in the last section of this research report.

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2. Introduction
Tesco Plc is the biggest British multinational grocery store and general merchandise retailer, its head
office is located in Delamare Road, Cheshunt, Hertfordshire, England, United Kingdom (Tesco plc,
2015).According to telegraph article A history of Tesco: The rise of Britains biggest supermarket, Tesco
is the success story of 20th century in Britain as it grows from a single shop opened by Mr. Jack Cohen in
1919 to the second largest retailer in the world after Wal-Mart (Clark & Chan, 2014). Tesco has crossed
its shores of homeland UK where it has a market share of around 30% the retail giant has also got its foot
holding in more than 12 countries across Europe, Asia and North America (Tesco plc, 2014). Tesco plc
employs over 530,000 people and has the vision of providing the best customer service and shopping
experience to their customers. (Tesco plc, 2014). Year 2013 has been a tumultuous one for this
supermarket giant and Tesco has reported its worst performance for last 20 years (Clark & Chan, 2014).

3. Literature Review
Financial analysis is the evaluation of a firm's past, present and anticipated future financial performance
and financial condition (Drake & Fabozzi, 2012). Financial ratios are the principal tools of financial
analysis and they seek to measure and manage the success which can be measured in financial terms for a
company in its respective market (Bull, 2008). It is essential to compare the financial performance with
other competitors within the same industry because having comparison of the level of performance is a
one of the major tool to survive in a competitive market (Atrill & McLaney, 2006). There are different
measures associated with financial performance evaluation. Management can use different ratios for
identifying internal and external strengths. Traditionally, financial performance measures are split into
Profitability, Liquidity, Efficiency, Solvency (Basu, 2014). Financial performance plays an important part
in measuring performance management but relative importance of financial and non-financial indictors is
debateable as some time non-consideration of non-financial factor doesnt satisfy all questions (Kaplan,
2014). It gives an idea to shareholders about the performance of company with respect to its market
conditions.
Generally companies struggled during last few years and financial position of Tesco in the market is
showing underlying profits fall by (6.9) % (Tesco plc, 2014) from being the leader of market. Although it
maintains its supremacy in supermarket for over the years but now it came under attack from private
shareholders at its annual meeting on Friday June 27, with some accusing Britains biggest retailer of
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arrogance and abusing investors (Felsted, 2014). According to guardian article in recent studies of
Goldman Sachs, one of five UK supermarket must close to restore profits growth and Tesco has been
hardest hit in the current scenario (Wood, 2014). Mintel estimated market value of UK supermarket
industry in 2013 to be 102,558m, showing slight dent on the upward curve due to the financial crisis in
2009/2010 (guardian, 2012).The following picture shows the supermarket giant Tesco facing problem
despite big brand name as its market share is on decline from 2011-2013.

\
Market share

Source (BBC, 2014)

Comparison is the key in obtaining meaningful information from ratio analysis. Establishing whether
things are improving or declining for the company through comparison of ratios over time within the
same business or to see whether the company you are analysing is better or worse than average within its
specific business sector (BPP Learning Media Ltd, 2011a, p.300).Ratio analysis has been used in this
research to look at Tescos financial performance by comparing it with Sainsburys. The Financial
statements of both Sainsburys and Tesco has been prepared in accordance with international financial
reporting standards with having similar year end dates.

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There are some limitations related to ratio analysis as described below: (BPP Learning Media Ltd, 2011a,
p.330)

Its nearly impossible for having the same business and financial risk profile even the Sainsburys
and Tesco are operating in the same industry because Tesco having better access to borrowing at

cheap rates and because of this would have higher level of gearing.
Accounting policies to choose greatly influence the ratios .For example, one company may

choose not to revalue its assets to maintain or increase its ROCE.

Window dressing or creative accounting techniques can be used to manipulate ratios.

Business analysis is a set of tools and techniques to analyse organisation structure, policies and its
operations and proposing suggestions and recommendations to remove any roadblocks (Carkenord,
2014).According to business expert Bischel in 2003, usually financial measures are the one used for the
performance management and analysis but certain aspect of the business must be measured through Nonfinancial measures or indicators. Managers need to first determine what sort and type of non-financial
measures they should use in terms of performance measurement after that measuring factors needs to be
completed. Next and most important step would be collection of data they would use in their analysis.
After overcoming these obstacles there would be an effective performance measurement system in place.
(Bichsel, 2003).
PESTEL model is a business analysis technique that would be used for analyzing general environment
and the internal and external factors that are favorable and unfavorable for supermarket players to achieve
their goals. It focus on Political, Economic, Social, Environmental and legal issues relating to companies
and how they are effecting their performance (BPP Learning Media Ltd, 2011b, p.26 & p.115).
According to stern studies out of seven ways to measure business financial performance three appear on
the financial statements, three do not, and one is outside the business altogether.
From your financial statements
1. Profitability 2. Health of company 3. Balance sheet strength means companys assets relative to its
liabilities
Business items not found on the financial statements
4. Risk attached to a business 5.Owners time invested in business 6. Fair market value (FMV) of
business 7. Owners net worth leading to any value to shareholders wealth (Stern, 2010).

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During period of 2011-2013, Political and Economic factors has affected the supermarkets greatly, Tax
and other government policies like political factor concerning UK leaving Europe has impacted in a big
way and because of this the consumer buying is on declining side and growth of the big supermarket
companies are on hold or making losses in general and according to different studies one out of five
supermarket giant has to close their stores.
Financial analysis is a good technique of determining a companys health and stability (Griffin, 2014)
however according to Debarshi in 2011, there are some limitations attached to it as well like

Non-exhibition of current financial position as usually prepared on historical cost basis.

Financial statements cannot predict the future results.

Financial statements ignore the Qualitative aspect of the business.

In order to do research on financial and Business performance of Tesco and analysis of its performance it
must be compare against its competitor Sainsburys. Sainsburys operate in the same sector as Tesco and
there is rivalry between both companies in the market.

4. Aims and Objectives:

Analysis of the business and financial performance of Tesco during turbulent period of 2011-2013 for
Tesco and its comparison with industry rival is the core objective of this research project. Although other
objectives like key factors contributing towards success of Tesco over a vast span of period and
challenges this giant retailer facing presently also make an important part of this research. Tesco has seen
its declining phase during Period from 2011-2013 and thats the reason behind choosing this time period
for research.
Research Aims:
1) To find out, whether in financial terms Tesco has performed better than its competitor Sainsburys
for the past three years?
2) To identify the effect of Political, economic, social, technological, environmental and legal
factors on profitability and business performance of Tesco.
3) Is Tesco still regarded as market leader in supermarket industry by achieving its goals?

5. Methodology:
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This is an archival research based on secondary data collection from financial statements and then their
analysis (Saunders et al, 2009). Secondary data usually collected by someone else for some other purpose
but for research purpose another researcher can analyses and evaluate it (Crossman, 2014).Financial
statements like balance sheets, income statements and cash-flow statements of Tesco for previous 3 years
is a secondary source of data available for research. Balance sheet is a good source of analyzing financial
position of a company. Ratios will be calculated after gathering data from Tesco and Sainsburys financial
statements. According to Mohana in 2011 ratios are popular tools for financial analysis of a firm and
they provide users with better understanding of the financial strengths and weaknesses of a company.
Although ratios are an easy way to understand the business financial aspects but they have their
limitations as well (Jan, 2013).
In this research a mixed approach of data will be analysed and evaluated i.e using both qualitative and
quantitative method. The ratios will be calculated on the basis of quantitative data, while the business
performance will be analysed through qualitative data approach. The central premise of mixed methods
research is the use of both quantitative and qualitative approaches in combination provide better
understanding of the research rather than a single approach alone (Creswell & Clark, 2007, p.5).

6. Data Collection:
Collection of data for this research paper is based on the secondary source of information available and
following are the different sources used for collection of information:

Internet:
Tescos website www.tesco.com and Sainsburys website www.sainsburys.co.uk were used for
the history, financial statements, recent news, strategies and annual reports for collection of data.
Google and Yahoo search engines were also used for accessing the relevant information regarding
this research.
However gathering reliable information from internet is a difficult but cautious approach was
used in this respect. Financial times, Guardian and telegraph are some of the quality website
explored for news and articles related to this research.

Books, newspaper & articles :

Different Accounting related books like BPP University F5, P2 for different accounting
techniques and ratio analysis. Also other books used for this research like Creswell book on
designing and conducting a research will be used.
The Economist, Financial Times related articles are also one of the sources used.

Advantages of secondary source data (Beri, 2010)

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This method is Economical or cost effective as collecting primary data can be costly.
Collection of secondary data saves much of time and leads to early completion of the report.

Disadvantages of secondary source data (Bajpai, 2011)

Secondary data may not be relevance to research.

Reliability and accuracy of data collected cannot be guaranteed.
Secondary data is usually outdated.

Financial statements of both companies Tesco and Sainsburys were firstly analysed by calculating
different accounting ratios and then by comparing against each other and previous years. After that the
Business performance of Tesco is analysed by using SWOT & PESTEL business models.

7. Business Performance Analysis, Findings and Discussions:

The limitation of using PESTEL analysis is ever-changing macro environment where factors are variable
and exposed to changes in the environment and also it needs large amount of information to be process
and analysed, so some of the important and critical factors can be missed out (Henry, 2008).
7.1

Political

Being a multi-national organization operating in more than 12 countries and it has suppliers from
different parts of world, the political situation in that country can affect Tesco in an extreme way.
According to annual report in 2012, In Hungry the new political regime levied favourable sales taxes and
that affected Tescos performance in a big way leading to a growth of 5.2% in groups trading profits. In
2011 UK government increased VAT rate from 17.5% to 20% (BBC, 2011) and this impacted Tesco in a
big way.
7.2

Economic

Tesco is a multinational company and should be aware of consequences of different number of economic
variables such as interest rates, taxation laws, exchange rates, inflation rates and consumer spending it
faced.
External factors like fuel prices affects profitability of Tesco. As Tesco is a retail business and
transportation/logistic is an integral part of this business and higher costs can in turn can decrease the
profits of it. Hedging techniques can be used in reducing substantial losses due to these uncontrollable
factors.

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The recent recession after 2007 is still having its impact on the overall global economy hence leading to
decreased consumer spending.UK market contributes 65% to the total revenue of Tesco and recently UKs
economy went through double dip recession (BBC News, 2012) which created a hot issue of Tescos high
degree of reliance on UK market.
7.3

Social

UK social customer behaviors are changing as there is an increased demand for green and organic foods
than before and Tesco needs to keep these ever-changing patterns in view and should develop business
strategy accordingly. Also recently there is change in customer trends towards carbon products. Recent
research of Carbon Trust shows that despite the recent tough economic climate there is increase in
demand of consumers for lower-carbon products and services (Morrison, 2011).Because of above the
customers awareness towards impacts of carbon footprints on environment and are demanding labelled
carbon ratings on products.
7.4

Technology

For companies to remain competitive in todays market they need to work on technology factor which is
becoming increasingly important for success. According to Tescos annual report on-line shopping is
becoming the new norm of todays world and for the year ended 2012 Tesco saw an increase of 40% in
online sales in global sales while UK market sales increased by 40% of sales. Trends has been similar in
the following years and despite the troublesome last two years 2013 & 2014 and there is increase in
online shopping and grown by 25% in 2013 and 11% respectively (Rigby, 2014).According to Tesco
annual report 2012 growing online is the priority for organisation in way to adapt customer changing
needs.
7.5

Environment

In 2010 Tesco opened worlds first zero carbon store in Ramsey-Cambridgeshire to pave path for its plans
to be carbon free business (Finch, 2010). In viewing the customers change in thinking and shift towards
carbon footprints and human impact on environment through carbon emission. According to Annual
report 2011, Tesco has taken up this issue very seriously and has allocated quite big amounts towards
research in this regard and has committed itself to be a zero carbon business by 2050.
7.6

Legal & Regulatory

Tesco being a multinational organisation needs to comply with number of legal factors which vary from
one country to another. It has to make sure that the local regulations on different work ethics such as
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working conditions, health and safety, minimum wages and other trading requirement and taxation issues.
Non-compliance of any of the above mentioned factors can cause a huge impact on Tescos operations.
According to annual reports in 2012 there is going to be change in the trading hours in South Korea for
the large retailers in the country. This can have a knock-on-profits as the reduction in trading hours will
affect the revenues being generated (Tesco plc, 2012a, p.5) and according to telegraph article in 2012 the
Tesco said pre-tax profits fell 11.6pc to 1.7bn in the half-year to August (Ruddick, 2012).

8. Financial Performance Analysis, Findings and Discussion:

8.1 Profitability ratios :

8.1.1

Revenue growth:

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Source Appendices

Revenue growth
7

6.23

6.76

5.7

5.65

4.5

5
4
3
2

0.44

1
0

2011

2012
tesco

2013

sainsburry's

In years 2011 and 2012 Tesco enjoyed a healthy growth in its revenue (exc. vat) in contrast to year 2013,
company saw little or almost no growth in revenues for the year ended 2013 due to tough economic
conditions. The new legislation in South Korea about restriction on store opening hours badly hits Tescos
performance outside UK (Tesco plc, 2013c, p.4).Only 1.8% increase in revenue from UK market which is
largest market contribute 66% of the revenue and negative contribution of -5.5% for the financial year
ending 2013 are also reasons behind(Tesco plc, 2013c, p.1).
Keeping in view the tough economic situation in retail market Sainsburys performed well for the year
ending 2013. In terms of growth and revenue Tesco outperformed by Sainsburys during year
2013.According to chairman statement in Sainsburys annual report it was another good year and they
outperformed the market (J Sainsbury plc,2013a, p.2).
Healthy growth in revenues for year ended 2011 and 2012 was mainly due to strong international
performance of Tesco in Asian market and Tesco group managed to increase its revenue by more than
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10% for the year ending 2012 (Tesco plc, 2012.FC) and according to chairman statement in annual report
of 2012 groups business sales increased globally.
In comparison Sainsburys delivered good performance in years 2011 & 2012 even though there was
tough consumer environment according to chief executive Justin king (BBC News Business,
2011).Despite the fact Tesco is bigger and more diversified Sainsburys enjoyed more stable growth.
Tesco invested 1 billion in its UK market to boost it up which is their home & largest market and is
having disappointing performance at the moment. Tesco also need some radical steps in addition to their
investment in UK market to quickly come up with solution for the big and ever growing challenges which
it is currently facing right now.
8.1.2

Return on capital employed

Source Appendices

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9.71%
2013

7.77%

10.18%
2012

13.46%

11.15%
2011

0.00%

13.99%

2.00%

4.00%

6.00%
tesco

8.00%

10.00%

12.00%

14.00%

sainsbury's

ROCE is an important tool helps in analyzing that how much capital is invested in a business to how
much profits it generates or how effectively is business utilizing its investments. Both Sainsburys and
Tesco shows similar ROCE pattern which has declined in period from 2011-2013.
Tesco strong performance during years ended 2011-2012 can be due to the higher ROCE for these years.
There was an increase in capital employed during the year ended 2012 and it is due to Tescos investment
in assets which leads to slight downfall in Tescos ROCE. According to the annual report of Tesco
decisions like investing in assets and increasing capital employed

shows companys long term

strengthening of the business which impacted the financial performance of the company.
Sainsburys had ROCE quite similar in year 2011 & 2012 and there was only a slight downfall in ROCE
in 2013 as compared to Tesco. The reason behind steady ROCE in case of Sainsburys is due to good
business performance and slight downfall in 2013is due to marginal increase in capital employed.
Tescos huge fall in ROCE for the year ending year 2013 is due to decrease in profits level of the group
and annual report of Tesco also communicates that the decrease in ROCE is a reflection of the companys
bad trading profit performance (Tesco plc, 2013, P.16-17).Although Tesco invested in capital employed in
2012 but in 2013 due to implications of write-down value of property and impairment of goodwill lead to
decrease in the ROCE value.

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net profit margin

4.42

4.36

4.5
4

3.03

3.5

2.68

tesco

2.63
sainsburry

2.5
2
1.5
1

0.19

0.5
0

2011

2012

2013

8.1.3
Net profit margin and growth:

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Source Appendices
Net profit ratio is an important ratio which gives information about the performance of a company in
respect of generating profits from every of revenue it is earning (Khan et al, 2010).
In last 20 years up till 2012 Tesco never saw a decrease in its profits (Wood, 2012) and first time in 2013
it saw huge downfall in its profits, which leaded to huge downfall in Net profit margin. According to
Tescos annual report huge decrease in trading profits due to fall in trading profits of Tesco bank and
Europe market by -37.8% and -15% respectively (Tesco plc, 2013, p.FC2) and partially because of its exit
from USA market where it invested more than 1.2bn for exit and decision to leave Japan increased total
loss from discontinued operations to be 1266m.
Tesco only had a marginal decrease in its profit margins in the year ended 2013.
In year 2011 and 2012 Tesco performed really good and enjoyed healthy profit margins because of the
strong performances in international market. These profits went through a big downfall in 2013 and the
reason behind this major effect on profits can be due to the regulatory changes in South Korean market,
big investments in UK declining market and challenging European economic conditions (Tesco plc,
2013).
Sainsburys had a up and down pattern in last 3 years, showing strong growth in year 2011 & 2013 while
a negative growth of 6.56% in 2012 and this decrease in 2012 is due to the tough economic conditions of
retail market and recession in UK in general.
In summary Tesco after solid growth in 2011 could not continue this growth in 2012 & 2013 due to poor
UK performance in 2012 and bad performance in 2013 was due to closure of USA and Japanese
business .Group saw profits going down for the first time in 2013 for the last 20 years. While in
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comparison Sainsbury enjoyed mixed fortune in terms of profits growth, after decrease in profits in 2012
the company bounced back with an impressive performance in 2013.

8.2 Efficiency Ratios:

Source Appendices
Evaluation of business efficiency about maintaining a good balance in paying back to suppliers and in
amounts received from credit customers is an important tool, receivable days and payable days ratio can
be used for this purpose (Pignataro. 2013).
Tesco has higher number of receivable days than Sainsburys meaning it is taking longer than Sainsburys
to get back its money from credit customers. Although its a good comparison but in this situation it
cannot be that useful as it will be in any other situation because Tesco is a multinational diversified
company and is much bigger business than Sainsburys so it is arguable that to retain its customer base
and their confidence group is relaxing towards its credit customers. Payable days in case of Tesco is a
positive sign that company is paying back in two months time and keeping working capital available.
8.3 Gearing Ratios:
8.3.1 Interest cover

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10.2

12
10

8.54 8.13

6.79

5.27

tesco

6.55
sainsbury's

4
2
0

2011

2012

2013

Sour
ce Appendices

One ratio which is really important for the lenders to look upon is the interest cover ratio as this ratio tells
them that what number of times a company can pay out finance cost or interest payment out of its profits
generated during a year (Khan & Jain, 2006).
Tesco enjoyed huge profits during 2011 & 2012 and for that reason Tesco had a healthy interest cover
ratio for these two years. In comparison interest cover ratio of Sainsburys is lower than Tesco in 2011 &
2012, which resulted because of decrease in profits and increased in finance cost but still its a healthy
interest cover ratio. In 2013 Tescos interest cover ratio gone down in a big way mainly because of
declining profits level .However there is only a marginal decrease in Sainsburys ratio due to slight
decrease in profits.
8.4 Investors Ratios:

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8.4.1

Earnings per share:

34.4
34.98

33.1
p
e
n
c
e

32.6

32

35
30
tesco

25

sainsbury's

20
15
5
0

sainsbury's

1.54

10

tesco
2011

2012

2013

EPS is a good measure of a firms profitability and is an important measure for investors to look upon
companys ability that how much earning a company is generating per share (Sheeba, 2011).Tesco
enjoyed good earnings trends during years 2011 & 2012 which resulted in higher EPS during these two
years but due to decision to exit from the US and Japanese markets and economic conditions there is a
huge downfall in earnings in 2013 which had an impact on EPS.
In comparison Sainsburys showed a steady EPS for the three years and is quite big number in year 2013
where Tescos EPS is 1.54 and Sainsburys 32.6.

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8.4.2

Dividend Growth:

dividend growth
12.00%

10.80%

8.13%

10.00%

6.62%

8.00%
6.00%

3.70%

4.00%

2.07%

2.00%
0.00%

0.00%
2011

2012

2013

Tesco dividends are on downward slope over the three years under consideration with no growth in the
final year and the reason behind this downfall is the poor performance of the group during year 2012 &
2013 and in these three years Sainsbury overtook Tesco dividend growth in 2012 where it showed an
increase of 6.62% as compared to Tescos 2.07% and according to Sainsburys chairman they remained
focused on delivering good performance and making good returns to shareholders (J Sainsburys
plc,2012, Pg.3).In 2013 again Sainsbury remained ahead of Tesco in dividend growth with growth of
3.70% to no or 0 growth.

9. Conclusions and Recommendations:

Tesco being the market leader in the first two years 2011 & 2012 showed good financial performance and
were still holding the strong international presence through its diversification and multinational status.
However start of the decline can be seen during these two years but this becomes prominent in year 2013,
when the group hits the lowest profits for the first time in last 20 years. This was a big setback for a
company which was losing its glory for last few years due to tough economic conditions and start of
recession after 2007.
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UK was the main market of Tesco but its poor economy, difficult retail market conditions were the major
reasons for worst performance in 2013.Big decisions such as closing down its loss making US business
and spending an extra 1.2bn for closure also impacted a big way on the profits of year 2013.
Tescos major concern is their UK market as their competitors are started to outperform Tesco in all
spheres of business. CEO of company has observed this situation and according to annual report of Tesco
they already spent 1bn in its UK market to boost its declining leadership and to improve its customer
shopping experience.
In this research the use of PESTEL helped in identifying some of the Political factors like the Hungarian
governments tax regime impacted Tescos performance during year 2012 but overall Tesco maintained a
good mutual partnerships with most of the governments it doing business within their country. Economy
also plays an important role as the struggling economy of UK during this period under research impacted
Tesco performance in a big way. Social culture also plays an important role as different market got
different social behaviors like now a days large working women shoppers prefer ready to eat meals.
Technological and environmental factors also plays an important role in performance of a company as
online sales and less carbon emission programs helps in boosting the sales and creating a fresh face for
Tesco. Legal and regulatory factors played a big role in Tescos poor performance during year 2013,
where business hour regulation in South Korea impacted heavily.
Recommendations:

Lack of strategic planning:

This is a key issue in entering a new market, although Tesco would have done some good market
feasibility research during their decision to enter USA but due to some loop holes in that report
resulted in a bad outing in US market. As company had never enjoyed any profits during all time
and had to spend 1.2bn on their exit. Now as the company is entering into different territories of
Asian continent so they should understand the culture and market forces of this region which are
completely different from European or American markets and they should keep in mind the
respective social and environmental values of these regions as these non-financial factor plays an

important role in the business and financial performance of the company.

Attention towards UK business:
Although Tesco still dominated the UK market during this period of 3 years but the group
performance is on declining side after 2013,Tescos position as market leader is now gradually on
its way to low levels. Tesco need to pay special attention towards its UK market competitors who
are offering cheap alternatives to consumers who cannot afford luxury or more expensive items
due to tough economic conditions. Group invested in this market but it needs to invest more both
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in human capital as well as non-human capital. Also Tesco needs to consider the ever increasing
multi ethnic society and should try to make their stores more ethnic to attract more customers

from all around the world ethnic groups (Foerster and Kreuz, 2007).
Improvement in online shopping facilities:
To create a competitive advantage over their rivals, Tesco should improve their online shopping
facilities. They should create an environment where the potential customers would feel protected,
assured and will feel more secure that their personal information would not leak out. For more
dependable and fast online process Tesco should create their website free of couplets and hackers

and this will lead to sharing of more information between internet customer and retail giant.
Closing of loss generating big stores and opening small stores in UK:
To maintain its profits and business in eastern European market, Tesco will do more investment
on setting up small stores (Cunliffe, 2013).Tesco should adopt that strategy for its UK market as
well by closing down the big stores which are not generating any profits for last few years and
should try to open small stores with less running costs to reduce their losses.

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11. Appendices

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