Industry Overview U.

11%
11%ofofallallVAT-registered
VAT-registeredbusinesses
businessesininthe
theUK
UKare
are
retailers.
retailers.70%
70%ofofUK
UKretail
retailisisOrganized
Organizedandand30%
30%isis
Unorganized.
Unorganized.

The
Theretail
retailsector
sectorgenerates
generatesalmost
almost8%
8%ofofthe
theGross
Gross
Domestic
DomesticProduct
Productofofthe
theUK.
UK.

The
Theretail
retailindustry
industryemployed
employed2.9
2.9million
millionpeople,
people,asas
atatthe
theend
endofofSeptember
September20.
20.

Supermarkets
Supermarketsdominate
dominatethe
theUK
UKfood
foodretail
retailmarket,
market,
with
with56.0%
56.0%ofofsales.
sales.
07/12/21 2
 Company overview
Tesco’s
Tesco’sisisaaUnited
UnitedKingdom
Kingdombased basedinternational
international
supermarket
supermarketchain.
chain.ItItisisthe
thelargest
largestBritish
Britishretailer
retailer
both
bothby
byglobal
globalsales
salesand
andby bydomestic
domesticmarket
marketshare.
share.
Established
Establishedinin1924.
1924.
Tesco
Tescoisisthe
thethird-largest
third-largestretailer
retailerininthe
theworld
worldnext
nexttoto
Wal-Mart,
Wal-Mart,Carrefour
Carrefourand
andisisoperating
operatingaround
around2,440
2,440
stores
storesand
andemploying
employingover
over4,00,000
4,00,000people
people
www.Tesco.com
www.Tesco.comisisrecognized
recognizedasasthe
theworld’s
world’slargest
largest
online
onlinegrocer,
grocer,with
withaacustomer
customerbase
baseofoflittle
littleless
lessthan
than
11million
millionand
andmore
morethan
than250,000
250,000orders
ordersaaweek.
week.

Tesco’s
Tesco’smarket
marketshare
shareofofUK
UKretailing
retailingisis12.5%.
12.5%.
07/12/21 3
 Company overview
Tesco
Tescohas
hasmoved
movedinto
intoareas
areassuch
suchasasclothes,
clothes,
consumer
consumerelectronics,
electronics,consumer
consumerfinancial
financialservices,
services,
internet
internetservices,
services,consumer
consumertelecoms
telecomsand
andgas
gas
stations.
stations.
Tesco
Tesconow
nowcontrols
controlsover
over30%
30%ofofthe
thegrocery
grocerymarket
market
ininU.K.
U.K.

As
AsofofMarch
March2008,
2008,Tesco
Tescohave
haveaastore
storeininevery
every
postcode
postcodeofofthe
theUK.
UK.
1960 1970 1980 1960 2000

07/12/21 4
 Competitors

Competitors

ASDA Group Limited Safeway plc

BP Plc Somerfield
Carrefour S.A. SPAR Handels-
ExxonMobil Aktiengesellschaft
Corporation The Boots Group PLC
The Big Food Group Wm Morrison
Plc Supermarkets PLC
J Sainsbury plc Booker Cash & Carry
Marks and Spencer Limited
Group plc ALDI Group
Royal Dutch/Shell The Carphone Warehouse
Group Group PLC
Safeway
07/12/21 Inc. John Lewis Partnership 5
plc
 Competitor Analysis
SUPERMARKET SHARE
 Tesco: 30.6%

 ASDA: 16.6%

 Sainsbury's: 16.3%

 Morrison's: 11.1%

 Somerfield: 5.4

 Waitrose: 3.7%
Tesco Asda
Sainsbury Morrisons
 Iceland: 1.8%
somerfield waitrose
(Source TNS cited by BBC 2006)
Iceland
07/12/21 6
 Positioning of Competitions

Food Food with Non-Food

Specialists Non-Food Specialists

07/12/21 7
 Strategic Groups
Sainsbury’s
Sainsbury’swas wasthe
theUK's
UK'sbiggest
biggestgrocer
groceruntil
until1995,
1995,but butwas
was
recently
recentlyrelegated
relegatedtotothird
thirdposition
positionbehind
behindTesco
Tescoand andAsda.
Asda.Despite
Despite
the
thefact
factthat
thatcompany
companyhas hasbeen
beenstruggling
strugglinglately
latelyititisisstarting
startingtotoget
get
back
backonontrack.
track.Despite
Despitepredictions
predictionsthat
thatSainsbury's
Sainsbury'swouldwouldregain
regain
second
secondposition
positionand
andaanarrowing
narrowingofofASDA's
ASDA'sleadleadininrecent
recentmonths,
months,
the
thelatest
latestfigures
figuresreleased
releasedby byTaylor
TaylorNelson
NelsonSofres
Sofresshow showAsda's
Asda's
share
shareasas16.6%
16.6%compared
comparedtotoSainsbury's
Sainsbury'satat16.22%.
16.22%.

ASDA
ASDAownedownedby byUSUScorporation
corporationWal-Mart
Wal-Martsincesince1999,
1999,isisthe
the
only
onlysupermarket
supermarketwith
withthe
thepotential
potentialtotobecome
becomeaathorn
thornininthe
theside
side
for
forTesco.
Tesco.Wal-Mart
Wal-Martisisthethebiggest
biggestfood
foodchain
chainininthe
theworld
worldand andhas
has
annual
annualsales
saleseight
eighttimes
timesbigger
biggerthan
thanTesco’s.
Tesco’s.Asda's
Asda'sGeorge
Georgerangerange
ofofclothing is the best selling brand in the UK and company
clothing is the best selling brand in the UK and company is is
thinking
thinkingabout
aboutacquiring
acquiringMatalan,
Matalan,the
thegiant
giantdiscount
discountclothing
clothingand and
home furnishing store.
home furnishing store.
07/12/21 8
 Core competencies

 Environment friendly products.

 Customer focused strategy

 Club card - a loyalty scheme (1995).

 Quality products at low price.

 Improved Labeling.

 Self-Checkout
07/12/21 9
 Resource Based View

UK International
– No. of Stores 2000 – No. of Countries 12
– No. of DC’s 28 – No. of Stores 440
– No. of Staff 270,000 – No. of DC’s 20
– Turnover £29.5 Billion – No. of Staff 1,40,000
– Turnover £7.5 Billion

07/12/21 10
 Resource based view

Store types: Store offerings: Personal Finance:

Express Food Retail Insurance
Metro Non-Food Retail Savings Accounts
Superstore Personal Loans
Petrol Stations
Extra Secure Investment
Home Living Range
Tesco.com
Bonds
Online Mortgage
Finder
1970 1992 1994 1994 1997

07/12/21 11
 Resource Based View
 Overall Profit £2.0 Billion (1st time for a British Retailer)
04/05.

 Tesco sells approximately 40,000 food products in its

superstores, as well as clothing and other non-food lines.

 The company’s own-label products are at three levels

value, normal and finest. Own brand accounts for
approximately 50% of sales.

 Tesco does business with nearly 2,000 own-brand

primary suppliers in 98 countries.
07/12/21 12
 Private labels
 Ellen Wesley
 A trademark for the women who know what they want.
 Daniel Moore
 A successful man trademark
 James
 Be Yourself
 Mirage
 A trademark to fascinate you
 4Future
 A new fashion line for boys from 3 up to 12.
 Miss M
07/12/21  Sports fashion and stylish girl clothing. 13
 Activity Based View

 Every Little helps.

 Providing Low Prices Everyday.

 Reducing the lead time in the supply chain

 Online Service

07/12/21 14
 SWOT Analysis
Strengths Weakness
Increasing market share Reliance upon the UK
Insurance market
Tesco online Debt reduction
Brand value
Signs point to serial
UK market leadership
acquisitions
reinforced
Opportunities Threats
Non-food retail UK structural change could
Health and beauty spark a price war
07/12/21
Further international Overseas returns could fall15
 Adoption of Strategies
 In 1995, Tesco launched the Club card Loyalty scheme.

 With www.tesco.com company emphasized on E-

commerce.

 In 2000, company tied up with a Safeway Inc to launch

an online grocery shopping services

 Recycling of bags

07/12/21 16
 Adoption of Strategies
 Supermarket superpower, you
have to be everywhere

 To be a supermarket Superpower
you have to sell to everybody

 To be a supermarket superpower,
Thou shall sell everything
07/12/21 17
 International market
Country Entered Stores Area (m²) Area (sq ft) +/- Stores
2009/10
China 2004 88 657,382 7,076,000 ▲ 18
Czech Republic 1996 136 454,389 4,891,000 ▲ 23
France 1992 11,400 16,000 ▬0
Hungary 1994 176 614,647 6,616,000 ▲ 27
Republic of
Ireland 1997 119 281,589 3,031,000 ▲3
Japan 2003 142 44,315 477,000 ▲7
Malaysia 2002 352 60,593 2,805,000 ▲3
Poland 1995 336 701,697 7,553,000 ▲ 17
Slovakia 1996 812 92,459 3,148,000 ▲ 11
South Korea 1999 305 1,015,152 10,927,000 ▲ 63
Thailand 1998 663 975,389 10,499,000 ▲ 92
Turkey 2003 105 232,165 2,499,000 ▲9
United States 2007 145 135,267 1,456,000 ▲30

07/12/21 18
 Problems in Europe
 “Retailing is a very localised concept and you need
to be very sensitive to local tastes and habits”
 Steve Woolf, retail analyst at Paribus

 In June 1993, Tesco bought 7 Hypermarkets and 95

Supermarkets in France from French Food Chain,
Catteau for £150 million
 By February 1998, they had sold it to Promodes SA
for £250 million
07/12/21 19
 Reasons For Tescos Divestiture
 Through applying the ‘Tesco Formula’ that had
worked so well in the UK, came up against
protectionist policies by the French Government
 It was unable to increase its market share due to
restrictions on out-town store expansions.
 They were also unable to adapt their own brands
products to local tastes
 Ultimately they felt it wasn’t a suitable springboard
for further expansion into Europe

07/12/21 20
 Weaknesses on Entering Ireland
 Timing was wrong.

 Home market was not strong enough.

 Immature given structural capacity for

expansion.

 Internationalisation was not a priority.

07/12/21 21
 Problems that lead to Tesco’s
Divestment in Ireland
 Seen as extension of U.K.
 Did not engage with local suppliers.
 Built on edge of town locations.
 Failure in integrating Tesco ‘own brand’.
 Price Wars – Trading Losses in 79/80 £1.3M
 Small market share in comparison to competition.
– 1986 Tesco peaked with 10%, compared to Dunnes
Stores 22%, Quinnseworth 20%.

07/12/21 22
 Recent Problems in Ireland
 The Union Mandate have criticised them in the press
“being the lowest payers in Irish retail Trade”
 Mandate and Bertie Ahern have denounced Tescos
plans for 24 hours stores, stating that it isn’t
something the public will demand, plus they are
unwilling to raise safety and security issues with
reference to young female workers.
 In 2002 they have also been charged with collusion
for fixing the prices of milk and dairy products

07/12/21 23
 Problems in the Czech Republic and
Hungary
 The concept of customer loyalty is still a very alien term in
these countries, Consumers will go where they believe will be
cheapest.
 Greenpeace activist have billboarded poster and gave out
flyers reading “Tesco is feeding us with what they don’t want
in their livestock in England” . The activists are wanting to
point out Tescos double policy who refuse to sell GM foods in
Britain but continue to do so in the Czech Republic and in
Hungary.
 Growth was slow and Frustrating. It wasn’t until 2 years later
after entry, that Tesco established its first Hypermarket.

07/12/21 24
 Problems In Poland
   Tesco has entered a very competitive market with excess competition.

 Local retailers have responded by bringing together networks of smaller stores into co-
operative purchasing organisations from
 local suppliers.

 The rise in unemployment, high interest rates and inflation has depressed consumer spending.

 Polish shoppers prefer to shop in city-centre locations.

 Complicated land ownership issues as one of the big challenges for future retail development
by the government still owning much downtown property.

 Bad press on issues for high quality, full-time employment.

 A new law, still to be agreed, may give local retailers in Poland a say in what goods new
hypermarkets can sell.

07/12/21 25
 Problems in Asia
 Thailand small traders are billboarding their towns
and cities (e.g. Bangkok and Chanthaburi) The
Billboards read “A planned Tesco PLC shopping
center nearby will destroy local Retailers”
 Thailand government have sided with local retailers
and are currently drafting laws. Malaysia have also
halted its approvals of large Hypermarkets.
 Charged by Thailand's Commerce Ministry for selling
goods below cost.
 In 2002 three stores where bombed through grenade
attacks from local retailers and Anti-Western
Extremists
07/12/21 26
 Recommendations

 Slow down its expansion plans and

concentrate on refitting existing stores.

 Merging or forming a strategic alliance with

another company is a great way to improve
their services and overcome some of their
weaknesses.
07/12/21 27
07/12/21 28