Case Study Tesco
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Transcript of Case Study Tesco
CASE STUDYCOMPETING AGAINST INDUSTRY GIANTS.
COMPETING AGAINST TESCO
GROUP 4SUNTHERESAN GANAPATHY
IZHAK NORWIRAMIMI AFZAN AFZA
BDMM8033- Global Strategic Marketing and Competitive Analysis
TESCOCompany Overview
Company History
Competitor & Competitor Analysis
Core Competencies
PESTEL, PORTER’S Model & SWOT Analysis
TESCO Strategies
Recommendation and Conclusion
Questions
1
2
3
7
6
5
4
8
About TESCO is a United Kingdom based international supermarket
chain
largest British retailer by global sales and by domestic
market share
established in 1924 by Jack Cohen
name is a combination of T.E. Stockwell ( partner in the
firm of tea
supplier) and the first two alphabets of Cohen.
1st store in Burnt Oak, Edgeware in 1929
currently the largest in United Kingdom and 3rd largest
retailer in the
world next to Wal-mart and Carrefour.
operating 2,715 stores and has over 290,000 employees
in UK
recognised as world’s largest online grocer ( 1 million
customer and
250,000 orders a week)
market share of UK retailing is 12.5%
About TESCO has ventured into consumer electronics, consumer
financial services,
internet services, telecommunications and gas stations
as of March 2008, every area in UK has a Tesco and it
controls over
30% of the grocery market
has expanded to 13 countries outside of UK (5,380 stores
and over
490K staff worldwide)
CompetitorsDue to the vast diversity of its business, TESCO’s
competitors consists of entities in different fields of
businesses. Amongst the competitors are:
ASDA Group LtdCarrefour S.A.
J Sainsbury PLCThe Big Food GroupMarks and SpencerSupermarkets PLC
BP PLCExxonMobil CorpRoyal Dutch/ Shell
Safeway IncSomerfield
SPAR Handels-AktiengellschaftThe Boots group
Wm MorrisonBooker Cash & Carry
ALDI GroupThe Carphone
WarehouseJohn Lewis Partnership
Competitor AnalysisBased on BBC in 2006, the supermarket share in UK are
as below:-
Tesco - 30.7%
ASDA - 16.6%
Sainsbury’s - 16.3%
Morrison’s - 11.1%
Somerfield - 5.4 %
Waitrose - 3.7 %
(Source Datamonitor, 2010)
Positioning of Competitors
Food Specialists Food & Non Food SpecialistsNon Food Specialists
Sainsbury’s
TESCO
ASDA
About CompetitorsSainsbury’s
UK’s largest grocers until 1995
3rd position behind Tesco and ASDA in terms of
supermarket chain
Sahre of 16.5% of the UK market ASDA
owned by Wal-Mart , a US corporation since 1999
2nd biggest supermarket chain in UK with 17% share
biggest competitor to Tesco
biggest food chain in the world and annual sales 8 times
bigger than Tesco
acquired Matalan, a giant discount clothing and home
furnishing store
In June 2004, operated 259 stores and 19 depots with 122K
staff
TESCO Core Competencies Environmentally Friendly Products
Customer Focused Strategy
Club card since 1995
Quality Products at affordable prices
Excellent Labelling
Self Check-out
Resource Based View Store Types
Express
Metro
Superstore
Extra
Tesco.com
Offerings
Food and Non Food Retail
Petrol Kiosk
Home Living Range
Financing
Personal Savings and Financing
Insurance
Investments
Resource Based View - cont Overall profit of £2.0 Billion in 2004/05 – first ever for a
British
retailer
have approximately 40,000 food products available in
store plus
clothing and other non food items
Provide merchandise under own brand name at three
levels of values
:- low, normal and finest
direct business with more than 2,000 own-brand primary
suppliers
in 98 countries.
Activity Based View Every Little Helps
Providing Low prices Everyday
Reducing the lead time in the supply chain
Online services
PESTEL ANALYSIS Political
China ‘s entrance into WTO had allowed TESCO to move in and
formed joint
ventures for the development of shopping malls.
Inclusion of 10 other countries in EU provided platform for TESCO’s
retail network.
Economic
Government’s reduction of interest rate increased consumers’
spending but still has
impact on TESCO’s sales and margin.
Positive impact – people buy more groceries and eat less outside.
Social
UK – Retirees are larger than baby boomers. Food consumption and
travelling are
lesser
Online shopping more convenient but costly to TESCO due to small
deliveries
Health consciousness has increased – increased demand for organic
food
PESTEL ANALYSIS Technological
increased in web based technology allows for online direct purchase.
Increased in Supply Chain effectiveness between TESCO and its
supplier.
TESCO also subscribed to ordering via mobile technology
Environmental
Environmental promotion by government helps TESCO reduced its
costs – reusable
bags
Increased in environmental consciousness of the consumers allowed
TESCO to
introduce Greener Living Scheme, rewarding recycling initiatives via
the club card
and added carbon footprint information on food packaging.
Legal
VAT increased by the government affects TESCO non-food items
Minimum wages increase will increase TESCO’s operational
costs.
Five Forces Model of CompetitionThreat of
New Entrants(Medium)
Threat of Substitute Products
(Low)
Bargaining Power of Buyers
(Medium)
Bargaining Power of Suppliers
(Low)
Rivalry Among
Competitors
(High)
SWOT AnalysisStrengths Increasing market Share Tesco Online, Express and Metro Brand Value Focus on product affordability without compromising quality Loyalty Scheme
Weaknesses Reliance on the UK market Recalling of their products Increase in transportation costs as TESCO has many outlets/ stores
Threat Contraction of the UK economy Fluctuation of the Stock Market Decline in income and increase in unemployment Innovation by other supermarkets especially ASDA and Sainsbury Office of Fair Trading investigation Competition Commission Ruling
Opportunity Vast Online Business Ventures Foreign markets with formation of joint ventures
Strategy Adoption Growing the UK Core
focusing on customers & providing greater value, choices
and services
Introducing Real Food Magazines, Loyalty Card, new stores
and “Every
Comment Help” programme.
Be an Outstanding International Retailer
expansion to 13 countries outside UK
Strong in Everything We Sell
merchandise sourcing globally
Direct from manufacturers
Going extra mile in Europe
expansion of product line, addition of complimentary
services and multi-
channel capability
Strategy Adoption Growing Retail Services
Introduction of tesco.com, bank, telecoms and dunnhumby
(customer feedback business)
own Tesco credit Card
Community at the Heart of what WE DO
leadership in environment
actively supporting the local community – 1% of pre-tax
profit contribution (2010 - £64 Million)
Creating jobs and careers
Introducing Extended Education Programme, Annual Sports
Activities
Building Brands
Industry leader especially in UK
Building OUR Team
Career opportunity and development
TESCO Academy
Financial AnalysisIncome Statement 2009
2008
Revenue 40,117
39,104
Operating Profit 3,811
3,457
Profit before Tax 3,535
3,176
Balance Sheet
Fixed Assets 35,337
34,258
Current Assets 11,438
11,392
Liabilities 30,583
31,342
Premium and Retained Earnings 16,093
14,157
Share 402
399
Total Equity 16,623
14,681
Recommendation and conclusion
Recommendation
Tesco should slow down its expansion plans and
concentrate on
refitting its existing stores
Venturing into strategic alliances with another
company to
improve services, capture bigger market share and
maybe
overcome some of its weaknesses
Conclusion
TESCO continues to hold strong leadership in UK
It is strong in both cost leadership and differentiation
with the
assistance of information technology.
Question 11. What are the strengths and weaknesses of Tesco from
ASDA’s and Sainsbury’s perspective?
Strengths
Market Domination especially in UK
Quality and Pricing
Online Business and Market Segmentation
Lean and Strong Supply Chain
Weaknesses
Too many stores thus very costly to maintain (especially
variable costs or costs fluctuation)
Question 22. What strategies should each company adopt to compete
with Tesco, and what strategies should they avoid?
Strategies to Adopt
ASDA
Should continue to acquire or merge
Focus on its niche stores
Capitalizing on Wal-mart strategies and supply chain
Moving towards different specialization
SAINSBURY
Focus of its food specialization but expanding to low pricing
strategies
Venturing into more downstream industries which are food
related
Question 2 - cont2. What strategies should each company adopt to compete
with Tesco, and what strategies should they avoid?
Strategies to Avoid
ASDA and SAINSBURY
Compete in the same diversity industries as TESCO
Using Price War strategy against TESCO.
Question 33. Does Tesco have any areas of weaknesses or strategies
that ASDA and Sainsbury’s could exploit?
TESCO has no specialization . There are equally into the
food and Non-food industry.
Sainsbury should concentrate on Food Specialization
but expand to low, middle and high quality food products
and offer differentiation in pricings for all categories of
consumers
ASDA on the other hand should move towards non food
specialization and used the advantage of the Wal-Mart
Supply Chain. And resources.
Question 44. Are there any market segments that Tesco is not
currently serving that ASDA and Sainsbury’s could
exploit?
TESCO is now serving low to middle class group as they
are providing goods at an affordable pricing.
ASDA and Sainsbury has to target high class income
people.
In terms of geographical, TESCO has conquered many
parts of UK, thus it is advisable for ASDA and
Sainsbury to move into other parts of European
countries.