The main purpose of this research is to analyse the influence of transaction costs on the business performance of Tesco supermarket. This research is structured into four sections which are introduction, literature review, theoretical analysis and conclusion. Literature review on transaction cost theory and the business phenomenon which is the Tesco £4.6 billion loss in 2015 was critically reviewed. A theoretical analysis was carried out identifying Tesco supermarket having high transaction cost. The Chief Executive of Tesco reduced the price of some goods and close down some outlet of Tesco which was not making profit, the business performance improves and they gain sustainable competitive advantages. The research concluded that for any business organization to perform and to gain sustainable competitive advantages, top managers must be ready to review the strategic roadmap of the business organization to fit in any political, economic, social, cultural and technological environment challenges.