Case Study Tesco

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CASE STUDY COMPETING AGAINST INDUSTRY GIANTS. COMPETING AGAINST TESCO GROUP 4 SUNTHERESAN GANAPATHY IZHAK NORWIRA MIMI AFZAN AFZA BDMM8033- Global Strategic Marketing and Competitive Analysis

Transcript of Case Study Tesco

Page 1: 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

Page 2: Case Study Tesco

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

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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%

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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)

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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

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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)

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Positioning of Competitors

Food Specialists Food & Non Food SpecialistsNon Food Specialists

Sainsbury’s

TESCO

ASDA

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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

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TESCO Core Competencies Environmentally Friendly Products

Customer Focused Strategy

Club card since 1995

Quality Products at affordable prices

Excellent Labelling

Self Check-out

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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

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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.

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Activity Based View Every Little Helps

Providing Low prices Everyday

Reducing the lead time in the supply chain

Online services

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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

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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.

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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)

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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

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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

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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

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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

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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.

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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)

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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

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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.

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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.

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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.