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Tesco

Tesco

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UNIVERSITI UTARA MALAYSIA (UUM

)
BPMN6023 STRATEGIC MANAGEMENT SEMESTER 2010 / 2011

GROUP PROJECT
TITLE: TESCO STORES MALAYSIA SDN BHD

PREPARED FOR

: PROF. P.R. BHATT

PREPARED BY (808493)

: MOHD FHADLI BIN MOHD FUDZI NOOR ULFAH BINTI MUHAMAD ZIN (808504)

SUBMISSION DATE

: 13th FEBRUARY 2011

BPMN 6023 Strategic Management

Page 2

TABLE OF CONTENTS TITLE Table of Contents PAGE NUMBER 2 Acknowledgement 3 Introduction 4-5 Background of company 6 Overview of Retail Industry in Malaysia 7 Business Operation in Malaysia 8 Corporate Strategies 9-14 Competitor and Competitor Analysis 15-22 Financial Performance Analysis 23-24 Recommendations 25 Conclusion 25 Reference Acknowledgement BPMN 6023 Strategic Management Page 3 .

This paper shall present in-depth presentation highlighted on strategies. creativity. For the purpose of this Group Project.R. Project report must be submitted on 13th February 2011. Presentation will be held during class. Students are advised to present their report in a simple yet knowledgeable manner. Hence. BHD. the students are required to submit brief information about their project. presentation and the quality of the report. Bhatt for his kind support and guidance. Marks will be awarded for contents. our team has chosen the topic: TESCO MALAYSIA STORES SDN. BPMN 6023 Strategic Management Page 4 . teamwork.This Group Assignment for subject Strategic Management (BPMN) Semester October 2010 is to choose any topic and issues to be analyzed from the course syllabus. subject to lecturer’s approval. We would like to extent our utmost appreciation and highest gratitude to our self as team members of this Group who had immensely contributed to the completion of this Group Project. P. competitor analysis and recommendation. Special thanks also to our lecturer Prof.

a tea supplier that he used. Edgware. Terry Leahy. In 1995 Tesco became the first supermarket to introduce a company loyalty card. Under the leadership of Ian MacLaurin. the market was changing. By the late 1920s. Tesco Stores PLC renamed itself simply Tesco PLC. Other innovations throughout the 1980s included introducing own-label product lines. who succeeded Jack Cohen in 1973. At first the other supermarkets were skeptical. But Tesco had gauged the popular mood after years of recession. the first store being at Burnt Oak. BPMN 6023 Strategic Management Page 5 . computerizing and centralizing distribution systems and developing shopping centre outside of the major cities. Cohen was responsible for several small revolutions in retailing which led to the rise of 'the supermarket' we know today. a cut-price range of own-label goods. an idea developed by the then Deputy Managing Director. when Tesco introduced 'Value' lines. vigorously pursuing expansion. In 1993. It cost millions in extra staff. At this time. but the concept caught the public imagination leaving the others racing to catch up. shoppers were looking for bargains. In 1983. leaving the company with slim margins and a serious image problem. the selection of goods broad. However. Tesco Stores (Holdings) Ltd was floated on the London Stock Exchange with a share price of 25 pence. competitors scoffed and the share price sank. Tesco started 'One in Front’ opening a new till whenever a checkout line exceeded two trolleys. Tesco decided to try something dramatic and different which to become an ‘inspirational mass retailer’. Sir Jack Cohen concentrated on growing the business. Until the 1970's. sell it cheap. sell it cheap' formula Cohen had imported from the USA. and where a higher volume of business could be generated at increased margins while reducing overheads. Tesco operated on the 'pile it high. A year later. Tesco decided to modernize itself. and extensively upgrading and enlarging others. but customers loved it. Tesco (or TES from TE Stockell. and CO from Cohen) was selling from open-fronted shops in London high streets. Cohen’s motto was “Pile it high. Tesco prioritized the development of large out-of-town stores where parking was convenient.Introduction Tesco History Tesco originated in 1919 when Sir Jack Cohen used his gratuity from his Army service in the First World War to sell groceries from a market stall in the East End of London. and sales soared.” referring to the idea that customers wanted inexpensive products at convenient locations and that volume would drive profitability. closing 500 unprofitable stores.

Express. it has diversified both geographically and by product. Tesco's huge growth is a hard act to follow. The core UK business was an important part of Tesco's activities employing over 250. Malaysia and Thailand.779 stores as of February 2005. It is the fourthlargest retailer in the world measured by revenues after Wal-Mart. Malaysia. bringing into play competition with large firms from other countries. such as US retailing giant Wal-Mart and French multinational Carrefour. CDs. South Korea and Taiwan. Leahy focused on each of the following areas: Tesco's core UK business. telecoms. health. its forays into the non-food sector and retailing services. its international operations. Carrefour and Metro and the second-largest measured by profits after Wal-Mart. Tesco began expanding internationally in the 1990s and now has outlets in the Republic of Ireland.000 people in 1. electronics.Tesco Now and Then Sir Terry Leahy. current CEO of Tesco PLC. BPMN 6023 Strategic Management Page 6 . car and dental insurance. financial services. Hungary.com. Europe and North America and is the grocery market leader in the UK where it has a market share of around 30%. Superstores and Extra. music downloads. United Kingdom. Slovakia. catering to the needs of different types of customers. Metro. into areas such as clothing. The UK business also accounted for 80% of Tesco's total sales. Tesco PLC is a global grocery and general merchandising retailer headquartered in Cheshunt. Thailand. has overseen 13 years of dynamic expansion and development that has taken Tesco from living in their rival’s shadow to the UK's number one retailer and not to mention third in the world after Wal-Mart and France's Carrefour. After becoming CEO of Tesco. but were bold breakthroughs at the time. Internet services and software. Tesco. Originally a UK-focused retailer specializing in food and drink. Poland. the Czech Republic. some UK supermarket chains have looked to overseas markets to maintain their positions. and Tesco. It has also recently bought chains in Turkey and Japan and is in the process of negotiating expansion into China. It operated through four different formats of stores . Britain's biggest and most profitable supermarket chain is the darling of the City. But Tesco was already jumping ahead of its rivals throughout the 1990s with a swathe of innovations that look commonplace now. retailing and renting DVDs. This is a whole new ball game. Each of Tesco market around the world can be categorized into 4 stages which were start-up or entry level. home. It has stores in 14 countries across Asia. With the domestic market increasingly saturated. Tesco continuously innovated and introduced new product lines to provide customers with a wider choice.

the scope will be much on Tesco store in Malaysia. Tesco have rewarded nearly RM10 million worth of Club card Cash Vouchers to the customers. Slovakia and Malaysia. Tesco launched ‘Club Card’. Tesco Malaysia currently operates 33 Tesco and Tesco Extra stores. launching Green Club card Points to incentivize customers shopping with their own bags. Apart from that. For developing market such as Turkey. they have substantial profit centers and strong growth potential. Johor 4 store. Tesco also acquired Makro Cash & Carry in Malaysia. As part of its global commitment. Tesco Malaysia is market leading on tackling climate change in techniques of energy saving. In our full report here. Club card has received an overwhelming response from customers with nearly 2 million household members signed up to date. Later in year 2008. Tesco Choice. promote positive behavior among staff though Energy League competition intra stores and a recycling centre to facilitate customers to do their part for the environment. Kuala Lumpur 3 store. Penang and Kedah 3 store. In 2004. Tesco Stores (Malaysia) Sdn. Perak 5 store. Background of the company Tesco Stores Malaysia Sdn. a local wholesaler which was rebranded to Tesco Extra and provides products for small local retailers. each have good market positions and improving in returns. BPMN 6023 Strategic Management Page 7 . This acts a way to say thank you to customers by giving money back to them. Tesco Malaysia launches its own house brand. Tesco Value. Total store by state in Malaysia is Selangor with 12 store. Selangor. Established market such as UK. Ireland. Thailand and Hungary. China. how they operate and what strategies they used to survive in the market. developing 2 and established market. introduce degradable carrier bags. In year 2003. In December 2006. Czech Republic. Tesco launched Tesco own brand. In 2007. Sime Darby Berhad of which the latter holds 30% of the total shares.developing 1. as a strategic alliance between Tesco Plc UK and local conglomerate. Negeri Sembilan and Kelantan 1 store. Tesco introduce Green Club card and Green bags making Tesco Malaysia to be the first Tesco International business to introduce the Green Club card scheme. Poland. Bhd. Melaka. Japan United states and India falls under entry level market which the market have potential to growth and have dilutive returns for short terms. As of January 2009. Bhd. Tesco opened its first store in Malaysia in February 2002 with the opening of its first hypermarket in Puchong. was incepted on 29 November 2001.

9bil this year.9% in sales during the first quarter of 2010 (Q1). Jegen replaces Chris Bush. TESCO PLC has appointed Tjeerd Jegen as chief executive officer (CEO) for Malaysia from April 26 2010. foreign-owned hypermarkets are fast gaining popularity in Malaysia. finance and corporate affairs. According to Retail Group Malaysia. toys. There are around 400 such outlets in Malaysia. positive sales growth in Q1 2010 was still below the industry expectation of 10% at current prices. Jegen began his retail career in 1995 when he joined Royal Ahold as management trainee. The wholesale and retail sector falls under the supervision of the Ministry of Domestic Trade and Consumer Affairs (MDTCA) through the Committee on Wholesale and Retail Trade.1% at constant prices. It is expected to remain strong despite the slowing of the global economy. the industry recorded a positive growth rate of 7.Tesco has launched new promotion campaign to the consumers. Based on interviews of its Malaysia Retail Association (MRA) members.3% due to a decline in consumer demand.4% during Q1. Since their arrival. In the retail sub-sector. Overview of Retail Industry in Malaysia Major retail outlets have seen tremendous growth since 1980s. As CEO of Tesco Malaysia. retail sales growth for the year 2010 is projected to grow by 5. MRA members stated that positive growths were recorded in retail sales during Q1. attracting customers with their one-stop and all-under-one roof concepts. The group also expects a total sales turnover of RM74. although the difficult economic situation during the same period last year had caused a negative growth of 13. albeit from a low base. Sales in the same quarter last year were down 3. while the Malaysian national economy continued to expand at a faster pace in comparison during the same period by 10. Jegen will be responsible for all areas of the business. However. bedding items and sportswear recorded the highest growth rate at 10. The Malaysian economy has demonstrated resilience in the face of external uncertainties. who has taken over the helm at Tesco Thailand. foreign retailers have been expanding rapidly. Specialty retail stores for instance those selling optical products. Prior to this appointment. 50 basic needs guaranteed not beaten on price. 2009 has embarked Tesco as the number 1 Hypermarket in Malaysia. Profit margins in the retail industry were only up 2. from operations to marketing. Jegen was chief operating officer for Thailand's Tesco Lotus. After making their debut in 1990s.5% and department store cum BPMN 6023 Strategic Management Page 8 .7%. involving 33 stores and over 11.000 staff.5%.

The report also stated several factors that would impact the growth of the industry for the second half of the year.000 lines of products including nearly 3.9%.6%. For the Q410 BMI Malaysia Retail Report reported that total retail sales has grow MYR153. It carries more than 60. Members of the MRA expect their businesses to improve at a slightly slower pace during Q2 with a growth rate of 5. from household needs to apparel. A low unemployment rate. This was because sales have started to slow down unexpectedly during Q2. rising disposable incomes and a strong tourism industry are key factors behind the forecast growth for the year 2010.3%. families and individuals all under one roof by providing a comprehensive range of products and services focused for small BPMN 6023 Strategic Management Page 9 . Malaysia is classified as an uppermiddle income country by the World Bank.5% during Q4. The report showed there were positive growth rate of 9. Q3 sales are also expected to expand by 6% due to the Mega Sales Carnival before maintaining at 3. It was a similar story for profit margins in the subsector as specialty stores were the biggest growers.8% in sales in Q3. Tesco Stores Malaysia Sdn Bhd has been separated into 2 formats which are Tesco Hypermarket and Tesco Extra Hypermarket. Business Operation in Malaysia Tesco Malaysia employs nearly 13.2% whilst department store cum supermarkets suffered the most with a decline of 0.000 employees and operates 36 stores and in two formats following the acquisition of the Makro Cash and Carry business in Malaysia in December 2006. Tesco Hypermarkets The hypermarket format offers customers a complete one stop shopping for their needs from fresh food to groceries. Tesco Extra Hypermarkets The Tesco Extra format serves the needs of small businesses.supermarkets recorded the lowest at 3.10% growth rate in sales. cost of living as well as the cost of borrowing. improving their figures by 11.65bn) in 2010 which only 6. These include the economic conditions.000 own brand of products ranging from food to non-food items.76bn (US$43.

Low Price Strategy i. There are 3 Extra stores located in Klang Valley which is Extra Cheras. The new concept store will combine the best practices of both Tesco and Makro businesses. initially in Asia.businesses including bigger pack sizes.Now. all credit cards accepted. Corporate Strategies Adoption of strategies Tesco Stores Malaysia Sdn. The Tesco Extra store will also cater to all the needs of individual customers and families through its services and extra range of food and non-food products as well as the unbeatable prices that have become the hallmark of Tesco in Malaysia. which allowed Tesco Stores Malaysia Sdn Bhd to strengthen core UK business and drive expansion into new markets. The remaining Extra Stores are located in Ipoh. and different types of trolleys and checkouts to cater to the varying segment of customers. The rationale for the strategy is to broaden the scope of the business to enable it to deliver strong sustainable long-term growth by following the customer into large expanding markets at home such as financial services. Extra Shah Alam and Extra Selayang. parent and baby parking. non-food and telecoms and new markets abroad. special trolleys and checkouts as well as a dedicated business development team to support small business owners with their orders. Tesco has a well-established and consistent strategy for growth. 7 other Extra stores are in operation. the newest business format in Malaysia opens its first store on 30th April in Seremban. Tesco Extra. Bhd. Everyday Low Price 2. Plentong Johor Bharu and Extra Sungai Dua in Penang. with the conversion and refurbishment of what was once Makro Cash & Carry Seremban. That few strategies are: 1. Tesco Stores Malaysia Sdn Bhd adopted few strategies to survive and sustain in the market. Customer-focused Strategy BPMN 6023 Strategic Management Page 10 . customer loading facilities. Tesco Extra also has enhanced facilities in the store including disabled parking and toilets.

Adopting the EDLP strategy demonstrated Tesco's commitment to its customers. while continuing its other promotional activities. Club Card scheme Green Club Card Own brand value 4. daily basis. But a combination of the two is the best means of keeping shoppers happy. iii. Differentiation Strategy i. Tesco went in for massive price reductions. putting customer interests first. according to a recent survey in the UK. but on a regular. To create value for customer to earn their lifetime loyalty 3. Customer-focused Strategy Create value for customer to earn their lifetime loyalty BPMN 6023 Strategic Management Page 11 . ii. After the launch of 'unbeatable value' campaign in 1996. The EDLP program aimed to regularize low prices for Tesco customers. ii. Pricing was a key strategy and selling point for Tesco. iii. Core UK business Non-food business Community Personal Finance Low Price Strategy Everyday Low Price An Every Day Low Pricing (EDLP) strategy of Tesco is more popular with shoppers than one driven purely by promotions. Low prices were not merely a strategy used for the occasional sale. iv.i. Low prices were adopted to maximize sales. Growth Strategy i. Tesco's value-added products at low prices attracted many customers. The company adopted the strategy of 'Everyday Low Pricing' (EDLP).

They aren't about being soft and lovely. Customers get a point on every pound they spend shopping at any stores of Tesco group of companies as well as at stores of their partner companies. However it is interesting to note that while most loyalty schemes and relationship marketing strategies similar to Club card have often failed for other retailers. Thus the main reason behind the success of Tesco’s relationship marketing strategy and loyalty program has been the way it has managed to establish Club card not as a marketing tool but as a product of relevance and value for the customers. Everything TESCO did. They want people in the business feel comfortable with these values and feel they can genuinely demonstrate them. these are then converted into Club card vouchers which enable the customer to save money on shopping. Tesco has been able to address to the customer segments of different age groups. Once a customer accumulates 150 points. is driven by the customers. Imagine how they translate in the context of a multi-billion pound company focusing on people both staff and customers. It remains to be seen whether Tesco will be able to maintain this focus now that it is widely perceived as a great corporate success story and the dominant company in the United Kingdom retail market or if it will succumb to corporate arrogance as sometimes happens to dominant companies. every business decision they take. but there is a clear focus on customer service at the top level of the company. Growth Strategy Club Card scheme Club card is Tesco’s membership scheme which allows customers to save money on shopping by providing them price-off vouchers. BPMN 6023 Strategic Management Page 12 .The core purpose is to create value for customers to earn their lifetime loyalty. It can be said that what has made Club card work so wonderfully for Tesco is the fact that with this simple single loyalty scheme. but about being rigorous and single minded about how they achieve their goals. They believe that by living by the values. every innovation they bring to the market. Values enable them to build a common way of working. Tesco’s Club card has worked well and managed to succeed. One can argue that other retailers also have similar loyalty programs. The underlying aim is of course to make higher profits. they will encourage and demonstrate behavior that will help them achieve in core purpose and set them apart from their competitors.

As competition is so intense retailers such as Tesco use design to differentiate from the competitors. The new businesses which have been created and developed over the last decade as part of this strategy now have scale. As part of its global commitment. currently mobile phones and ink cartridges. The use of Tesco logo is consistent in each of the products design. They can also be earned by recycling a limited number of products. Tesco also introduced its Green Club card League and Green Club card Champions to promote positive behavior among staff through inter-stores Energy League competitions and opened 6 recycling centers to facilitate customers to do their part for the environment. Once earned. Majority of consumers buy the basic Tesco brand as it is cheap and good value for money. through Tesco-branded recycling services. Core UK business BPMN 6023 Strategic Management Page 13 . Differentiation Strategy The strategy to diversify the business was laid down in 1997 and has been the foundation of Tesco’s success in recent years.Green Club Card Green Clubcard points are earned when customers re-use bags when shopping in store one point per bag. but are listed separately on receipts and Clubcard statements. Green Clubcard points are equal in value to normal points. Tesco uses design to give something back to customers for shopping at Tesco. or opt out of receiving bagged products when shopping online one point per ten items delivered. especially strategically. degradable carrier bags and Green Club card Points scheme to incentivize customers shopping with their own bags. Tesco Malaysia is market leading on tackling climate change agenda around energy saving initiatives. Tesco is very good at using design across their own label. the International business alone makes about the same profit as the entire Group did a decade ago. they are competitive and profitable in fact. Brand values of Tesco are successfully throughout Tesco own brand ranges demonstrated through experience and way finding system. Tesco is often used as one of the best examples of own brand label in the retail industry. Own brand value Own brand value portrayed the strong brand image of TESCO based on effective strategy.

By late 2004 it was widely regarded as a major competitive threat to traditional high street chains in many sectors. Tesco has 702 stores and is the largest food retailer in the United Kingdom. Community Making Corporate Responsibility integral to our business is essential in applying our values as a responsible business. offering better value and providing more choice and convenience for customers. price and service for our customers as in the food business. Many supermarket chains have attempted to diversify into other areas. This means offering the same great quality. and we aim to help improve the quality of life for these children through customer and staff fundraising activities at all its stores nationwide. but Tesco has been exceptionally successful. from clothing to consumer electronics to health and beauty to media products. Market share of the UK has grown steadily since the early nineties as a result of our customer focused strategy Non-food business The aim is to be as strong in non-food as in food. such as making a large-scale move into the convenience-store sector. Tesco sells an expanding range of own-brand non-food products. Tesco Malaysia is committed to stay close to the heart of the communities Tesco Malaysia is part of. Tesco Malaysia’s Charity partner of the Year 2010 is Nur Salam. Personal Finance BPMN 6023 Strategic Management Page 14 . Tesco continue to increase market share through their policy of cheaper prices.The UK is the biggest market and the core of TESCO business. It has been innovative and energetic in finding ways to expand. including non-food Value and Finest ranges. Tesco has also raised funds for the Malaysian Nature Society through the sales of its designer green bag and carrier bag sales and Walk for Schools donation to local primary schools. We responded and worked with many local communities including NGOs such as the National Cancer Council (MAKNA) to raise RM450. We believe it is also an opportunity for growth. which the major supermarket chains have traditionally shunned. range. It also has done quite well in non-food sales in Malaysia. The aim is to provide all of the customers with excellent value and choice. 000 through fundraising and Walk for Life series to raise cancer awareness.

They will consider any move to make shopping at Tesco an enjoyable and beneficial experience for our customers. buying life and personal accident insurance. and concern that this step will further strengthen our partnership and cooperation. applying for a credit or debit card. instant banking products being offered to existing and new customers expanding the range of products that customers can access quickly and conveniently while shopping at Tesco. and 2 kiosks at LRT stations and now with Tesco as the distribution channel. It is a matter of keeping the interests of customers at heart.Tesco has followed its customers into the growing world of retailing services. Following the successful launch of its first two financial products in January 2009. 5 Easy by RHB @ Pos Malaysia. This signifies another important milestone for Tesco in expanding its financial services in Malaysia. everything is quick and convenient at Tesco. Customers are of utmost importance and Tesco want to be able to give them as much benefit as they can. The RHB Banking Group is appreciative to Tesco in bringing Easy into their stores. Background checks and approvals are completed on the spot at conveniently located kiosks in Tesco stores. Whether it's opening a savings account. open from 10am to 10pm. Easy by RHB @ Tesco is a revolutionary banking concept that offers simple. This may include entering into collaborations with other companies so that Tesco can offer the best in the market for their customers. This concept of being the first and only hypermarket in Malaysia to provide banking to their customers is exclusive to Tesco. collaboration with the RHB Banking Group. which will make the total number of Easy by RHB outlets 55 hope to reach out to more customers and give them value-add BPMN 6023 Strategic Management Page 15 . aiming to bring simplicity and value to complex markets. the co-brand Tesco-RHB Credit and Debit Cards. there are now five new. all without the need to fill-up any forms as details are captured electronically and a unique biometric verification system is used. 000. Customers just need to bring their MyKad for on-the-spot approval and instant cash or loans up to RM50. There are 33 existing Easy outlets in operation. The Easy by RHB @ Tesco kiosks are now available at 22 of Tesco's 33 stores nationwide daily. 26 standalone. This is Tesco's way of showing that TESCO are looking into the needs of their customers by bringing them a more convenient way to get financial services and this new concept of banking allows our customers to get banking services during weekends and after office hours. arranging Amanah Saham Bumiputera financing or applying for personal loans up to RM50. fast and convenient banking. Tesco Stores (Malaysia) Sdn Bhd is making it easier for customers at 22 of its stores nationwide to do hassle-free banking within 10 minutes through Easy by RHB at Tesco stores. 000.

Name such as Giant. to shop for everyday groceries beside Tesco. the Carrefour Malaysia is about to transform themselves and redesign its organization. and in order to improve as a retailer. and create new relationships between head offices. Jusco provide laid back environment in their shopping complex. countries and stores. This has been underscored by few surveys conduct in Malaysia. Carrefour BPMN 6023 Strategic Management Page 16 . To increase efficiency and competitiveness. Giant holds second biggest share market in retail industry in Malaysia for the year of 2010 after Tesco. big variety and great value. Customer feels free to shop not just that. this easy banking concept. In addition to that. Carrefour Malaysia Carrefour's success is based on the talent and motivation of its staff. This report will explain further regarding the Tesco Stores Malaysia rival. they can also spend time with their family eating at the food court provided by Jusco. the name Giant has become synonymous with everyday low prices. which showed that Giant was perceived as the cheapest place. it is vital for a shopping centre to have the right environment and tenant mix. Jusco In order to be successful. in Malaysia. Giant Hypermarket In Malaysia. enhance synergies between sales and purchasing.services that they do not get from other financial providers. Carrefour and Jusco are the biggest rival for Tesco Stores Malaysia to compete in the industry. Competitor and Competitor Analysis Competitor In this retail industry there is stiff competition between hypermarkets. convenient and affordable manner. touted to be the first-of-its-kind. also empowers the people to take control of their finances in a simple. Only then will customers be willing to spend endless hours here in pursuit of activities that entertain and help them to relax. Jusco holds 22% of market shares and the third biggest after Tesco and Giant for the year of 2010.

Stiff competition within industry BPMN 6023 Strategic Management Page 17 . SWOT Analysis The SWOT Analysis shows that Tesco Stores Malaysia currently has the resource capabilities to successfully enter the market and is capable of implementing a market development strategy. the study utilized SWOT and value chain analyses for the industry attractiveness. Success in any company that operates for marketing and profit acquisition lies on the ability of the management in positioning and establishing the products or services being offered. This report analyzes the strategic capability of TESCO Malaysia (Exhibit 1). Furthermore.still sustains in the market in Malaysia and has 15% of market share in retail industry for the year of 2010. The report recommends that Tesco target the high-end market segment with a differentiation strategy. The constant development and innovation on the product line and the growing number of clientele also define the corporate standing of a company. Practical and strategic recommendations are elicited in relation to some pitfalls observed in this report. In analyzing how Tesco Stores Malaysia is competitive. the ability of the company and its management to compete and maintain a competitive edge among its competitor is another basis to say that it is successful. Strengths Own brand value Competitive pricing strategy Customer loyalty/relationship Acquisition of Makro Strong hypermarket format Opportunities Threats Weaknesses Dependable of UK business Burden of higher advertisement cost High turnover rate of employees Have ready customers from low and mid.

but Tesco Extra allow but charge higher than those buy in bulk. For example. Strong hypermarket format BPMN 6023 Strategic Management Page 18 . By doing so.income households Explore into new location in Malaysia Diversification to maintain UK business Changing in customer tastes Government policies Exhibit 1: SWOT Analysis for Tesco Stores Malaysia Sdn Bhd. Tesco has extended its low price positioning in coregroceries across non-foods lines to undercut competition which actually Tesco selling with low price but provide high volume. Strengths Own brand value Tesco has a strong own brand value which is becoming known throughout Malaysia due to existing expansion programme. Makro do not allow customer to buy in small quantity. Acquisition of Makro Tesco acquire Makro and convert it to Tesco Extra. Competitive Pricing Strategy The targeted price cuts enabled Tesco to attract more shoppers from competitors and capture the volume that supported the lower prices. What Tesco do is they operate it similar to Makro. Tesco could earn profit from those SME as well. Customers like the Club card programme mainly due to the personalized treatment they receive and the relevance of rewards. but more flexible. besides individual customers or family type customers. Customer loyalty/relationship Tesco gained customer loyalty or relationship by launching Club Card scheme.

Tesco PLC has to adapt to local business. and is expected to contribute greater amounts to Tesco's profits over the next few years. all the business decision has to follow UK. Many of their employees resign after only working one or two months in their supermarket.The expansion of new stores by adding space to existing locations has contributed to the growth of Tesco supermarket. will somehow affect the Asia market such as Malaysia. Any changes in the UK supermarket industry over the next year for example. Burden of higher advertisement cost Since Tesco Stores Malaysia launching Everyday Low Price campaign. people and distribution and marketing promotion has to be bare by Tesco. Weaknesses Dependable of UK business Since Tesco Stores Malaysia is one of Tesco PLC UK market in Asia. printing. The cost of training and development for new staff will burden Tesco. Since Tesco is foreign brand hypermarket in Malaysia. This could be the weaknesses for Tesco Malaysia to expand their business widely. Tesco runs two type of hypermarkets format which Tesco Hypermarket and Tesco Extra Hypermarket. Although international business is still growing. Tesco Stores Malaysia is still highly dependent on the UK market (73.8% of 2003 revenues). High turnover rate of employees Tesco experienced high turnover rate with their employees especially in the operation department. Opportunities Have ready customers from low and mid-income households BPMN 6023 Strategic Management Page 19 . which is not good for them as they will need to find and employ new employees. Besides that. all the cost including papers.

Tesco have ready customer instantly which come from low and mid-income households. customers would assume that by buying low price product. they can try to increase the variety of their house brand. Tesco Stores Malaysia has to make sure they maintain their images and create more value for customer. To make sure Tesco successful in the industry is to make sure Tesco sustain in the market and establish to be number hypermarket in Malaysia. Diversification to maintain UK business Tesco Stores Malaysia have discovered the potential to exploit weaker competition and higher margins (cross-subsidize core groceries) and giving customer more alternative to choose variety product and services instantly. Threats Stiff competition within industry There are other major supermarket chains. Explore new location in Malaysia This is conjunction with their current strategic plan which is to open up more stores. Changing in customer tastes Customers’ tastes and preferences would change according time. Carrefour and Jusco in Malaysia competing alongside with Tesco Malaysia. such as Giant. as well as introducing other products for their house brand to compete with their competitors. BPMN 6023 Strategic Management Page 20 . this creates a good demand for them. Households now are increasing and everyone needs to buy household products. Sometimes. Besides that. it will reflect the bad images of the products.

The logistical tasks. Tesco tries to maintain the level of consumer choice in store (+).Government policies Government rules and policies sometimes will pose great threats to small and medium-size retailers in Malaysia especially to foreign own hypermarket like Tesco. the elements of this stage are considered to be upstream activities. storage of goods. handling & transportation of goods internally and placing the products on the shelves. Losses value (-). include the receipt of goods from suppliers. Therefore. in this case. Tesco Stores Malaysia needs to follow Value Chain Analysis Another analysis that would be discuss in this report is Value Chain Analysis (Exhibit 2) Primary Activities [Adds value (+). whilst improving the efficiency BPMN 6023 Strategic Management Page 21 . Potential to add value (P+)] Exhibit 2: Porter’s Generic Value Chain for Tesco Stores Malaysia Sdn Bhd Inbound logistics Inbound logistics are placed at the first stage of the value chain as they possess the earliest opportunity to create value.

therefore preventing these costs being passed on to the consumer (P+). as well as making these facilities readily available and quicker to obtain (P+). Outbound logistics The third stage of the value chain is the outbound logistics that is concerned with delivering the product to the customer. where it does not occur or opening new Metro and Express stores (P+). other tangibles that have to be improved are those of parking facilities. which is essentially takes away competitive advantage (-). it may give the company some constraints in terms of selling environmentally friendly products (-). In order to obtain future competitive advantage Tesco has to consider expanding further in terms of operating hours in those places. In applying a quality control procedure concerning damaged goods and products. Tesco currently adds value in its home delivery service (+). operations could be the second upstream opportunities that enable services and products to be provided. trolley collectors. Tesco may also decide to attract more customers by advertising “lower prices” advertising campaign or more discounts offers (+). Operations The production element of Tesco’ activities are service orientated.of its distribution system (+). if executed more efficiently than competitors. and the stock (+). Adding value could be achieved through the implementation of a trolley deposit system. Marketing and sales Marketing and sales are placed under downstream elements of the value chain. However. However. In return. maintaining the shelves. However. this might be restricted by law or planning councils. it provides an excellent opportunity to reduce costs unfairly incurred by the company. With a more customer sophistication and their awareness of ethical business practices. keeping them tidy and enabling customers to get to and from the premises quicker. whilst increasing the turnaround (+). Tesco can take it as an advantage and provide customers with more of the recycling BPMN 6023 Strategic Management Page 22 . Hence. tasks such as opening every day in accordance with trading hours. till staff and systems to gain competitive advantage. Club card gives further discounts and loyalty for the customers (+). they will add value by saving the customer time (+).

people are helping the environment (P+). not the costs (+). installation and capital investment is a long term process and needs total commitment of the staff. and are encouraged to improve their approach to customers and service provision quality (P+). The company has now increased its staff count who are involved in upgrading its anti-fraud software (infrastructure/technology interdependence). Human resource management HRM is regarded as up and downstream activity. so the staff are motivated to learn. Profit & Loss BPMN 6023 Strategic Management Page 23 . as Tesco’s brand name gives the product vitality (+). However. covering everything from recruitment to management development.points and include information in their advertisements. It also remains a key competitive advantage. where training is also linked directly to pay. Support Activities Company Infrastructure Planning and control functions are the ones that account to provide the continued focus on the costs and cash control of the company’s operations (+). Tesco continues to invest in customer service (+). adding value for customers who will believe that by choosing to shop at Tesco. an expense the customer will now not have to cover in the price of their purchases (+). But who will be responsible for the service provision and the floor personnel? (-) Financial Performance Analysis. The company aims to increase the number of training schemes and further develop its recruitment programmes so to pass on to the customer the benefits of a well recruited. well trained staff. and installing new security systems which aim to reduce internal theft. And departments such as profit protection whose main jobs are to reduce shrink. adding value. Technology development It is a downstream activity and is the ability to provide new innovative product ranges/ solutions that anticipate customer needs.

0 1378.0 22563.0 2673.96 2008 26.0 15882.0 -63.05 2009 27.0 1464.0 53898.37 22 10.0 -362.0 1788.61 27.0 19787.0 2819.0 18262.0 1325.0 -126.0 1015.0 3509.30 16 8.0 1525.0 18644.0 46023.0 309.0 1202.0 -314.95 26.0 24807.0 2729.0 1881.14 26.0 24203.33 29.0 42641.0 4076.0 1534.0 2430.82 10 13.0 2803.0 2653.0 3457.0 5786.0 2336.61 23.19 31.0 -127.64 20.31 22.0 2045.96 29.36 10 9.0 32658.0 23928.0 39454.0 2616.0 Balance Sheet Year Ended 27 February £ millions Intangible Assets Tangible Assets Fixed Investments Total Fixed Assets Stocks Cash at Bank and in Hand Total Assets Creditors Amount Within 1 year Creditors Amount After 1 year Total Liabilities 4177.0 3176.0 2010 2009 2008 2007 2006 Key Figures Year Ended 27 February Earings Per Share Basic (p) Earings Per Share Diluted (p) Earings Per Share Adjusted (p) Earnings Per Share Growth (%) Total Dividend (p) 2010 29.0 14236.20 19.0 2280.0 321.0 23152.0 30164.0 2138.0 1931.0 3169.0 2791.0 2130.90 2007 23.0 45564.0 23864.0 322.92 20.0 31342.0 1042.0 2235.0 13119.0 22789.06 6 11.0 2336.0 6598.0 480.0 34258.0 16976.0 2917.0 8179.0 32085.Year Ended 27 February £ millions Turnover Operating Profit Net Interest Profit Before Tax Profit After Tax 2010 2009 2008 2007 2006 56910.0 1796.0 47298.0 20231.0 2669.0 1586.63 2006 BPMN 6023 Strategic Management Page 24 .

Operating Margin (%) ROCE (%) Dividend Cover Dividend Yield Price / Earnings Ratio 6 15 2.60 6 19 2. In a rapidly changing business environment with a high competitors pressure Tesco have to adopt new expansion strategies or diversified the existing in order to sustain its leading market position in an already established retailing market.35 2. we find that the use of strong identities of the Value and Finest ranges (own brand value) to transfer across the store could create a better customer experience. customer might have good minded set of Tesco.51 2. consumer experience and brand extensions.20 19.44 3.50 Tesco must also have in place both financial and strategic controls. Financial controls are in terms of profit targets.70 14. Besides that. political controversy.50 6 17 2. If they could create more exclusive brand image of Tesco. optional services and infrastructure and any short-term constraints such as human resources. Recommendation In this report.20 6 13 2.90 6 20 2.43 3.32 2. The company must constantly adapt to the BPMN 6023 Strategic Management Page 25 . Strategic controls in terms of overall strategic balance.com. capital bids and performance appraisal. This will totally increase the demand to shop at Tesco.60 16. Conclusion The success of the Tesco Stores Malaysia shows how far the branding and effective service delivery can come in moving beyond splashing one's logo on a billboard. Tesco Stores Malaysia needs to improve in term of quality of brand appearance. Customer could access to any of Tesco product online and have more information about the product before buying it. It had fostered powerful identities by making their retailing concept into a virus and spending it out into the culture via a variety of channels which are cultural sponsorship.60 11.10 13. agreed business plan. Tesco Stores Malaysia should applied or adopt TESCO PLC strategy which to have an online transaction such as Tesco.

. D. 7th Edition.H. Global Marketing Strategies.tesco. Tesco's strategy at a corporate level defines the businesses in which Tesco will compete. In large organizations as Tesco strategy should be analyzed and implemented at various levels within the hierarchy.my http://www.E. (2005) Exploring Corporate Strategy Text and Cases. Whittington. the effect of possible actions towards these goals and how to implement and execute these actions. 6th Edition.com.com. Johnson. FT Prentice Hall M. K. which includes learning about the goals. Scholes. Porter.. in a way that focuses resources to convert distinctive competence into competitive advantage. 1985 Jeannet. The quality of a formulated strategy and the speed of its implementation will therefore directly depend on the quality of Tesco's cognitive and behavioral learning processes. Hennessey. J. Free Press. Strategy formulation should therefore be regarded as a process of continuous learning. Houghton Mifflin BPMN 6023 Strategic Management Page 26 . References http://www.fast changing circumstances. These different levels of strategy should be related and mutually supporting. G.tesco.. R.. Competitive Advantage: Creating and Sustaining Superior Performance.

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