Tesco

1. Introduction. Tesco a leading food retailing company founded in 1924 by Sir Jack Cohen who used gratuity from his Army service to start selling groceries in London’s East End markets. The food and drink retail sector r?pr?s?nts the largest industry in the UK, providing ?mploym?nt for over thr?? million people in primary production, manufacturing and retailing. In 2003 retail accounted for 9% of gross domestic product (Data monitor, 2003).

In recent years UK supermarkets have come under increased scrutiny over their treatment of suppliers, particularly of own-label products, yet the d?v?lopm?nt of strategic supply networks has b??n an integral part of most supermarket strategies for the past decade. The report below provides an insight into the supermarket company, Tesco, with emphasis on its ?xt?rnal ?nvironm?nt analysis and company’s analysis of resources, comp?t?nc? and culture. Two future strategic options are suggested in regards to the resources based strategies.

Tesco is one of the largest food retailers in the world, operating around 2,318 stores and employing over 326,000 people. It provides online services through its subsidiary, T?sco. com. The UK is the company’s largest market, where it operates under four banners of Extra, Superstore, Metro and ?xpr?ss. The company sells almost 40,000 food products, including clothing and other non-food lines. The company’s own-label products (50 p?rc?nt of sal?s) ar? at thr?? l?v?ls, valu?, normal and fin?st. As w?ll as conv?ni?nc? produce, many stor?s hav? gas stations, b?coming on? of Britain’s larg?st ind?p?nd?nt p?trol r?tail?rs.

Oth?r r?tailing s?rvic?s off?r?d includ? T?sco P?rsonal Financ?. 2. 0 Vision. “Our core purpose is to create value for customers to earn their lifetime loyalty. We do this through our values and code of conduct, the way we choose to work at Tesco. Our values are summed up in two phrases – ‘no-one tries harder for customers’ and ‘treat people how we like to be treated’. ” Tesco customer values are their commitment to understanding customers better than anyone, and using Their strengths to deliver unbeatable value for Tesco customers. They do this through Every Little Helps, three little words that basically sum up what Tesco is all about.

But what does it stand for? Well, they used to be a business that was doing things very well. But they decided they wanted to do more for our customers than that. So we did quite a remarkable thing. They asked costomers what they wanted from Tesco. Costomers reminded tesco of one important fact. Nobody loves doing the shopping. The “oh, we’ve run out of sugar – and we need some more loo roll” kind of shopping. So, Tesco figured that they needed to do something to make shopping more bearable. So Every Little Helps was born. And it covered a whole range of initiatives. To help mums, Tesco put nappy changing facilities in stores.

To speed up queues, they started packing customers’ bags. And if someone wanted a fatter melon, Tesco let them swap. It’s summed up in two phrases – ‘no-one tries harder for customers’ and treat people how we like to be treated’. And as part of Every Little Helps, Tesco developed a list of customer promises: • I can get what I want • The aisles are clear • The prices are good • I don’t have to queue • The staff are great Sounds simple, doesn’t it? But the funny thing is, it works. And it helps everybody at Tesco to understand why we’re here and what Tesco aiming to achieve.

Obviously, at the end of the day, Tesco is a commercial business. And naturally, they aim to be a highly successful one. But Every Little Helps is part of that too. Because by looking after Tesco customers and giving them something that makes their lives a little bit easier, Tesco will grown and grown. And, as you’ll see in our working enviroment section, Every Little Helps applies just as much to Tesco’s own people. Tesco made similar promises to them. About being respected. About being helped at work. About having the chance to get on. And about doing something interesting that allows them to use their initiative and be creative.

Because if Tesco not looking after them, then Tesco not looking after their customers. So with Every Little Helps everybody wins really. 3. 0 Mission. “Creating value for customers, to earn their lifetime loyalty. ” Business Objectives Company Mission Statement is a qualitative statement of an organization’s aims. It uses language intended to motivate employees and those within the firm and convince customers and suppliers and those outside the firm of its sincerity and commitment. Tesco has a Company Mission Statement, which is also represented as an image. This statement is at the centre of all, which Tesco do. “Creating value for customers, to earn their lifetime loyalty. ” Tesco have two values that force the way they do business, which are: No one tries harder for customers: * Understand customers better than anyone * Be energetic, be innovative and be first for customers * Use our strengths to deliver unbeatable value to our customers * Look after our people so they can look after our customers treat people how we like to be treated: * All retailers, there’s one team… The Tesco Team * Trust and respect each other 4. 0 Tesco Business Objectives A Company Mission Statement is a qualitative statement of an organization’s aims.

It uses language intended to motivate employees and those within the firm and convince customers and suppliers and those outside the firm of its sincerity and commitment. An objectives or goal ssis a target that must be achieved in order to realise the stated aim. It tends to be a medium to long term and set in order to coordinate business activity, guides the actions. Tesco have resent objectives which they are working on to achieve such as: * To become a satisfying place to work by giving their staff the opportunity to be themselves, actively encouraging their health and well being and support their work/life balance needs. Tesco’s target is to expand their sale of organic produce to 1 billion pounds over the next five years. * Tesco now have a 5% market share in Non-food business. Their goal is to be as strong in non-food as in food. Tesco have many objectives in the past, which included: * Tesco’s target is to expand their sale of organic produce to 1 billion pounds over the next five years. This could be done by supplying more organic products, which therefore will increase the number of customers for organic products, and leading to an increase in sales. Last year, Tesco set a target to build 80% of their new stores and extensions on brown field sites. Which they managed to exceed, achieving 90%! I no this because they have built many new stores over the world such as china, hungry etc. these new stores will attract many customers in the area which will help the firm expand. P?st?l Analysis. Political Factors Operating in a globalized ?nvironm?nt with stores around the globe (Tesco now operates in six countries in Europe in addition to the UK; the Republic of Ireland, Hungary, Czech Republic, Slovakia, Turkey and Poland.

It also operates in Asia: in South Korea, Thailand, Malaysia, Japan and Taiwan), Tesco’s performance is highly influenced by the political and legislative conditions of these countries, including the ?urop?an Union For ?mploym?nt legislations, the government ?ncourag?s retailers to provide a mix of job opportunities from flexible, lower-paid and locally-based jobs to highly-skilled, higher-paid and c?ntrally-locat?d jobs (Balchin, 1994). Also to m??t the demand from population categories such as students, working parents and senior citizens. Tesco understands that retailing has a gr?at mpact on jobs and people factors (new store d?v?lopm?nts are often s??n as destroying other jobs in the retail sector as traditional stores go out of business or are forced to cut costs to compete), being an inherently local and labour-int?nsiv? sector. Tesco employs large numbers of; student, disabled and ?ld?rly workers, often paying them lower rates. In an industry with a typically high staff turnover, these workers offer a higher level of loyalty and there fore r?pr?s?nt desirable ?mploy??s. Economical Factors Economic factors ar? of conc?rn to T?sco, b?caus? they ar? likely to influence demand, costs, prices and profits.

On? of th? most influential factors on th? economy is high unemployment levels, which d?cr?as?s th? ?ff?ctiv? demand for many goods, adversely aff?cting th? demand r?quir?d to produc? such goods. These economic factors ar? largely outside th? control of Th? Company, but th?ir ?ff?cts on p?rformanc? and th? mark?ting mix can b? profound. Although int?rnational busin?ss is still growing, and is ?xp?ct?d to contribut? gr?at?r amounts to Tesco’s profits ov?r th? n?xt f?w y?ars, th? company is still highly d?p?nd?nt on th? UK mark?t.

H?nc?, T?sco would b? badly aff?ct?d by any slowdown in th? UK food mark?t and ar? ?xpos?d to mark?t conc?ntration risks. Social/Cultural Factors Curr?nt tr?nds indicat? that British custom?rs hav? mov?d towards ‘on?-stop’ and ‘bulk’ shopping, which is du? to a vari?ty of social chang?s. T?sco hav?, th?r?for?, incr?as?d th? amount of non-food it?ms availabl? for sal?. D?mographic chang?s such as th? aging population, an increase in female work?rs and a d?clin? in home m?al pr?paration m?an that UK r?tail?rs ar? also focusing on add?d-valu? products and s?rvic?s.

In addition, th? focus is now towards; th? own-lab?l shar? of th? busin?ss mix, th? supply chain and oth?r op?rational improv?m?nts, which can driv? costs out of th? busin?ss. National r?tail?rs ar? incr?asingly r?tic?nt to tak? on n?w suppli?rs. Th? typ? of goods and s?rvic?s d?mand?d by consum?rs is a function of th?ir social conditioning and th?ir cons?qu?nt attitud?s and b?li?fs. Consum?rs ar? b?coming mor? and mor? awar? of h?alth issu?s, and th?ir attitud?s towards food ar? constantly changing. On? ?xampl? of T?sco adapting its product mix is to accommodat? an incr?as?d d?mand for organic products.

Th? Company was also th? first to allow custom?rs to pay in ch?qu?s and cash at th? ch?ckout. T?chnological Factors T?chnology is a major macro-?nvironm?ntal variabl? which has influ?nc?d th? d?v?lopm?nt of many of th? T?sco products. Th? n?w t?chnologi?s b?n?fit both custom?rs and th? company: custom?r satisfaction ris?s b?caus? goods ar? r?adily availabl?, s?rvic?s can b?com? mor? p?rsonalis?d and shopping mor? conv?ni?nt. Th? launch of th? ?ffici?nt Consum?r R?spons? initiativ? provid?d th? shift that is now appar?nt in th? manag?m?nt of food supply chains (Datamonitor R?port, 2003).

T?sco stor?s utilis? th? following t?chnologi?s: • Wir?l?ss d?vic?s • Int?llig?nt scal? • ?l?ctronic sh?lf lab?lling • S?lf ch?ck-out machin? • Radio Fr?qu?ncy Id?ntification (RFID). Th? adoption of ?l?ctronic Point of Sal? ?l?ctronic Funds Transf?r Syst?ms and ?l?ctronic scann?rs hav? gr?atly improv?d th? ?ffici?ncy of distribution and stocking activiti?s, with n??ds b?ing communicat?d almost in r?al tim? to th? suppli?r. ?nvironm?ntal Factors In 2003, th?r? has b??n incr?as?d pr?ssur? on many compani?s and manag?rs to acknowl?dg? th?ir r?sponsibility to soci?ty, and act in a way which b?n?fits soci?ty ov?rall.

Th? major soci?tal issu? thr?at?ning food r?tail?rs has b??n ?nvironm?ntal issu?s, a k?y ar?a for compani?s to act in a socially r?sponsibl? way. H?nc?, by r?cognizing this tr?nd within th? broad ?thical stanc?, Tesco’s corporat? social r?sponsibility is conc?rn?d with th? ways in which an organization ?xc??ds th? minimum obligations to stak?hold?rs sp?cifi?d through r?gulation and corporat? gov?rnanc?. Grais?r and Scott 49 stat? that in 2003 th? gov?rnm?nt has int?nd?d to launch a n?w strat?gy for sustainabl? consumption and production to cut wast?, r?duc? consumption of r?sourc?s and minimis? ?nvironm?ntal damag?.

Th? lat?st l?gislation cr?at?d a n?w tax on adv?rtising highly proc?ss?d and fatty foods. Th? so-call?d ‘fat tax’ dir?ctly aff?ct?d th? T?sco product rang?s that hav? subs?qu?ntly b??n adapt?d, aff?cting r?lationships with both suppli?rs and custom?rs L?gislativ? Factors Various gov?rnm?nt legislations and policies hav? a direct impact on th? p?rformanc? of T?sco. For instance, th? Food Retailing Commission suggested an ?nforc?abl? Code of Practice should b? set up banning many of th? currant practices, such as demanding payments from suppli?rs and changing agr??d prices r?trosp?ctiv?ly or without notice.

Th? pr?s?nc? of powerful competitors with ?stablish?d brands crates a threat of intense price wars and strong r?quir?m?nts for product differentiation. Th? government’s policies for monopoly controls and reduction of buyers’’ power can limit entry to this sector with such controls as license r?quir?m?nts and limits on access to raw materials In order to implement politically correct pricing policies, Tesco offers consumers a price reduction on fuel purchases based on the amount spent on groceries at its stores.

While prices are lowered on promoted goods, prices ?ls?wh?r? in the store are raised to compensate. SWOT Analysis Tesco is the top grocer and leading retailer in its home market of the UK. Pitched at the broad middle mass-market, it has maintained its position through a clear focus, well targeted product offer and ?xc?ll?nt record both in product and format innovation. Tesco also leads the world in online grocery retailing. In the UK the company concentrates on running grocery superstores, c-stores and an online service. ?ls?wh?r? the focus is usually on hypermarkets.

In 2003, the group’s trading record around Europe and UK has b??n outstanding. Strengths Increasing market share Tesco holds a 13% share of the UK retail market. Its multi-format capability means that it will continue to grow share in food, while increasing space contribution from hypermarkets will allow it to drive a higher share in non-food. Tesco’s general growth and ROI show no sign of abating In the UK, Tesco’s late 2002 investment into West-midlands based convenience store group T&S was billed as the most aggressive move into the neighborhood market by a big-name retailer so far.

The deal has turned Tesco into the country’s second biggest convenience store chain after the Co-operative Group, and the company also plans to open up 59 new stores in the UK this year. Tesco has grown its non-food division to the extent that its revenues now total 23% of total group earnings. Tesco’s international business segment is growing steadily, and is predicted to contribute nearly a quarter of group profits over the next five years. If geographical spread continues to grow, this will ensure Tesco’s continued regional strength. Insurance

In fiscal 2003 Tesco Personal Finance reached the milestone of one million motor insurance policies, making it the fastest growing motor insurance provider ever. The group’s instant travel insurance allows Club card holders to buy their holiday insurance conveniently at the checkout. Pet insurance now has over 330,000 cats and dogs covered, while the life insurance policy followed on from the success of last year, when it was voted The Most Competitive Life Insurance Provider in the Money Facts Awards 2003. Tesco online Tesco. com is the world’s biggest online supermarket and this year the group had sales of over ? 77 million, an increase of 29% on last year. Tesco online now operates in over 270 stores around the country, covering 96% of the UK. With over a million households nationwide having used the company’s online services, the company has a strong platform to further develop this revenue stream. Brand value Profits for Tesco’s operations in Europe, Asia and Ireland increased by 78% during the last fiscal year. The company has a strong brand image, and is associated with good quality, trustworthy goods that represent excellent value.

Tesco’s innovative ways of improving the customer shopping experience, as well as its efforts to branch out into finance and insurance have also capitalized on this. UK market leadership reinforced Since acquiring number one ranking in 1996, Tesco has developed a successful multiform at strategy that has accelerated its advantage. Its UK sales are now 71% larger than Sainsbury’s. Also the Competition Commission’s report makes it very difficult for a competitor to challenge its scale and has effectively scuppered Wal-Mart’s chances of stealing UK leadership. Therefore, Tesco is in an enormously strong position in its domestic market.

Weaknesses Reliance upon the UK market Although international business is still growing, and is expected to contribute greater amounts to Tesco’s profits over the next few years, the company is still highly dependent on the UK market (73. 8% of 2003 revenues). While this isn’t a major weakness in the short term, any changes in the UK supermarket industry over the next year for example, like the Morrison’s group successfully purchasing the Safeway chain could alter the balance of UK supermarket power, and affect share. Debt reduction Tesco is not expected to reduce its debt until at least 2006.

Tesco has a large capital expenditure program mainly due to its huge investment in space for new stores. Since its expansion is so aggressive, Tesco has little free cash for any other operations. Signs point to serial acquisitions With an enterprise value of ? 23 billion, Tesco clearly has enormous firepower. Also, its product range is vast and almost any acquisition can be justified, particularly in the UK. While ‘fill the gap’ strategy would be useful to the company, as has been the case with the UK convenience market, there is the danger of Tesco becoming a serial acquirer, as this tends to reduce earnings visibility and quality.

Opportunities Non-food retail The growth in Tesco’s hypermarket format in the UK means that there are expectations of seeing its 13% share of retail sales climb sharply over the next few years. It can use its footfall and low cost structure together with improved merchandising skills to add another leg to growth. Equally, its growth overseas will further increase earnings and scale, taking Tesco onto the virtuous circle of growth. It is estimated that Tesco’s non-food sales will double over the next four years. Worldwide it has sales of ? 7 billion in non-food, some 23% of the total.

Its aim to be ‘as strong in non-food as we are in food’, no longer sounds like the consultancy-speak that it once did, and they are getting there using the basic tenets of value, choice and convenience that have been so successful in food. Around half of new space opened in the UK last year was for non-food and the result has been to increase its market share from 5% to 6% and its overall share of UK retail sales has increased by 100 basis points to 12. 8%. The company’s telecoms venture is the latest stage in its strategy to develop popular retail services.

It has repeated its approach in banking, by capitalizing on its brand. Health and beauty Tesco’s UK health and beauty ranges continue to grow, and it is currently the fastest growing skincare retailer in the market. The company has a volume market-leading position in both toiletries and healthcare and is number one retailer in the baby goods markets. Across all health and beauty ranges Tesco continues to invest in price to deliver the value customers have come to expect and this year invested ? 27 million on health and beauty pricing alone.

The company now has 19 stores with opticians and nearly 200 stores with pharmacies. Further international growth Tesco now operates in six countries in Europe in addition to the UK; the Republic of Ireland, Hungary, Czech Republic, Slovakia, Turkey and Poland. It also operates in Asia: in South Korea, Thailand, Malaysia, Japan and Taiwan. Seven years ago, its International sales were ? 770 million. Now, they are nearly 10 times larger, at almost ? 7 billion, with profits of ? 306 million. In the current year, Tesco will add 2. 5 million square feet to sales area and could well enter another major market.

Growing internationally has forced Tesco to become serious about hypermarkets and this has had seriously positive implications for growth in the UK. Tesco has formed a strategic relationship with US supermarket, Safeway Inc, to take the tesco. com home shopping model to the US. Telecoms are the latest stage in its strategy to develop popular retail services. It has repeated its approach in banking, by capitalizing on its brand. In 2004 the company plans to enter the Chinese market, as China is one of the largest economies in the world with tremendous forecast growth and will present many opportunities for Tesco. Threats

UK structural change could spark a price war The price followers in the UK market are about to become aggressive investors in price, Safeway because of new ownership and Sainsbury because of new management. Morrison is reducing Safeway’s prices by up to 6% and Sainsbury is bound to see lower prices as one of the basic changes necessary to drive its recovery. With both Asda and Tesco committed to price leadership, this could result in a step down in industry profitability. Overseas returns could fall The buy case for Tesco is predicated around investment overseas driving higher group returns as each country moves past critical mass.

This might not happen, either because of economic conditions, competitor action, or failure in Tesco’s business model. It also could come as a consequence of an aggressive move into a larger market, such as China or Japan. Wal-Mart/Asda challenge Since the US shopping giant Wal-mart purchased Asda, Tesco’s rank as the top UK supermarket has been threatened. Asda can now compete extremely well on price and range of goods. For the moment, Asda is the third largest supermarket in the UK, just behind Sainsbury’s and then Tesco.

However, Asda closed the gap on Sainsbury’s in 2003, leaving the company to directly challenge Tesco’s dominance. Tesco is well aware of this, and has so far been quick to keep up with price cuts or special offers at Asda. Wal-mart may also decide to wield its buying power more heavily in the UK, and this could spell the end of Tesco’s brand dominance in the future. HOW Tesco using classical Management principles theory. Scientific management (also called Taylorism or the Taylor system) is a theory of management that analyzes and synthesizes workflows, with the objective of improving labor productivity.

The core ideas of the theory were developed by Frederick Winslow Taylor in the 1880s and 1890s, and were first published in his monographs, Shop Management (1905) and The Principles of Scientific Management (1911). He began trying to discover a way for workers to increase their efficiency when he was the foreperson at the Midvale Steele Company in 1875. Taylor believed that decisions based upon tradition and rules of thumb should be replaced by precise procedures developed after careful study of an individual at work.

Its application is contingent on a high level of managerial control over employee work practices. Taylorism is a variation on the theme of efficiency; it is a late 19th and early 20th century instance of the larger recurring theme in human life of increasing efficiency, decreasing waste, and using empirical to decide what matters, rather than uncritically accepting pre-existing ideas of what matters. Thus it is a chapter in the larger narrative that also includes, for example, the folk wisdom of thrift, time and motion study, Fordism, and lean manufacturing.

It overlapped considerably with the Efficiency Movement, which was the broader cultural echo of scientific management’s impact on business managers specifically. In management literature today, the greatest use of the concept of Taylorism is as a contrast to a new, improved way of doing business. In political and sociological terms, Taylorism can be seen as the division of labor pushed to its logical extreme, with a consequent de-skilling of the worker and dehumanization of the workplace Marketing of Tesco Marketing Objective

Tesco could have the following objectives: •    Profitability, in terms of operating margin (a 10% target) •    Swedish Market share (a 20% target) •    Customer advocacy (the number of customers who recommend Tesco branded clothing, repeat business) •    Respected company (the number of community stakeholders who respect Tesco) •    Employee motivation (the number of employees who feel motivated to deliver Tesco’s goals) Tesco must ensure that it sets ‘SMART’ marketing objectives that are measurable, time limited, attainable and relevant. Marketing Strategy

Tesco’ strategy is clear, with growth being pursued from four areas – the core UK grocery business, non-food, international expansion and retailing services such as financial services, the dotcom business and telecommunication packages. Basically, Tesco is using its strong stable core to keep the business ticking over while it forges new riskier areas of growth. Pushing further into non-food in the next phase (Johnson, G. , Scholes, K. , Whittington, R. , (2005)). Lidl is currently “destroying” the market by selling the products below cost price.

Therefore, Tesco’s generic strategy will have to be cost leadership, unless we can successfully differentiate our line of clothing so that we can charge a premium price. A marketing strategy will involve analyzing the markets, and which products to offer. The strategy is implemented through marketing tactics, which involve detailed decisions about factors such as the price and the way the product is distributed. So Tesco must decide on its model of entry in terms of, own stores, Internet selling or joint venture with an existing national retailer . 0 Industry Analysis: Porter’s Five Forces Rivalry among the Competitors The grocery ?nvironm?nt has s??n a very significant growth in the size and market dominance of the larger players, with grater store size, increased retailer concentration and the utilization of a range of formats, which are now prominent characteristics of the sector. As it was mentioned above, the purchasing power of the food-retailing industry is concentrated in the hands of a relatively small number of retail buyers.

Operating in a mature, flat market where growth is difficult (a driver of the diversification into non-food areas), and consumers are increasingly demanding and sophisticated, large chains as Tosco are accruing large amounts of consumer information that can be used to communicate with the consumer (Ritz 2005 Pp. 113 This highly competitive market has fostered an acc?l?rat?d level of d?v?lopm?nt, resulting in a situation in which UK grocery retailers have had to be innovative to maintain and build market share. Such innovation can be s??n in the d?v?lopm?nt of a range of trading formats, in response to changes in consumer behavior.

The dominant market leaders have responded by refocusing on price and value, whilst reinforcing th? added value ?l?m?nts of their s?rvic?. Threat of New Entrants The UK grocery market is primary dominated by fowl competitors, including four major brands of Tesco, Asda, Sainsbury’s and Safeway that possess a market share of 70% and small chains of Somerfield, Waitrose and Budg?ns with a further 10%. Over the last 30 years, according to (Ritz 2005 Pp. 57), the grocery market has b??n transformed into th? sup?rmark?t-dominat?d business.

Majority of large chains have built their power due to operating ?ffici?ncy, one-stop shopping and major mark?ting-mix ?xp?nditur?. This powerful force had a great impact on th? small traditional shops, such as butchers, bakers and ?tc. Hence, nowadays it possesses a strong barrier for new companies who desire to ?nt?r th? grocery market. For instance, it becomes rather difficult for new entrants to raise sufficient capital because of large fixed costs and highly d?v?lop?d supply chains. This is also ?vid?nt in huge investments done by large chains, such as

Tesco, in advanced technology for checkouts and stock control systems that impact new entrants and th? existing ones. Other barriers include ?conomi?s of scale and differentiation (in th? provision of products or services with a higher p?rc?iv?d value than th? competition) achieved by Tesco and Asda s??n in th?ir aggressive op?rational tactics in product d?v?lopm?nt, promotional activity and better distribution. Suppliers Power This force r?pr?s?nts th? power of suppliers’ that can be influenced by major grocery chains and that fear of losing their business to th? large supermarkets.

Th?r?for?, this consolidates further leading positions of stores like Tesco and Asda in negotiating better promotional prices from suppliers those small individual chains are unable to match (Ritz Pp. 59 2005). In return, UK based suppliers are also thr?at?n?d by th? growing ability of large retailers to source their products from abroad at cheaper deals. Th? relationship with sellers can have similar ?ff?cts in constraining th? strategic fr??dom of Th? Company and in influencing its margins. Th? forces of competitive rivalry have reduced th? profit margins for supermarket chains and suppliers.

Customers Power Porter theorized that th? more products that become standardized or undiff?r?ntiat?d, th? lower th? switching cost, and hence, more power is yielded to buyers (Porter M. Pp. 162 1980) Tesco’s famous loyalty card – Club card remains th? most successful customer retention strategy that significantly increases th? profitability of Tesco’s business. In m??ting customer n??ds, customizing service, ensure low prices, better choices, and constant flow of in-store promotions ?nabl?s brands like Tesco to control and retain their customer base.

In recent years a crucial change in food retailing has occurred due to a large demand of consumers doing th? majority of their shopping in supermarkets that shows a greater n??d for supermarkets to sell non-food items. It has also provided supermarkets with a new strategic expansion into new markets of banking, pharmacies, ?tc. Consumers also have become more aware of th? issues surrounding fairer trade and th? influence of western consumers on th? ?xp?ctations and aspirations of Third World producers. Ecologically benign and ethically sound production of onsumer produce such as tea, coff?? and cocoa is viable, and such products are now widely available at th? majority of large chains. Threat of Substitutes General substitution is able to reduce demand for a particular product, as there is a threat of consumers switching to th? alternatives Porter M. 1980 Pp. 162 In th? grocery industry this can be s??n in th? form of product-for-product or th? substitute of n??d and is further w?ak?n?d by new trends, such as th? way small chains of conv?ni?nc? stores are ?m?rging in th? industry.

In this case Tesco, Asda and Sainsbury’s are trying to acquire existing small-scal? op?rations and op?ning M?tro and ?xpr?ss stor?s in local towns and city c?ntr?s (Ritz Pp. 112 2005). Finance Prior to the formation of TPF, Tesco had a banking joint venture with NatWest which ended in February 1997. Tesco Personal Finance was formed in July 1997 following the successful launch of Sainsbury’s Bank by its main UK competitor, J Sainsbury plc Sainsbury’s. The bank was launched as a joint venture with the Royal Bank of Scotland, which processed all its financial transactions.

Subsidiary companies of the Royal Bank, such as Direct Line, UKI and Lombard Direct helped Tesco Personal Finance provide insurance products. Tesco Personal Finance has been a great success for both Tesco and the Royal Bank of Scotland, returning profits of ? 65 million for Tesco for the financial year to February 2007. Tesco is able to use its large customer base to cross sell financial services products, and allows customers to accumulate Tesco Club card points when they purchase finance products.

This strategy is highly effective because it can be combined with in store offers which results in customers spending higher amounts of money, often on non-food items in order to increase sales across all product lines thus causing sustainable yet competitive growth which allows them to deal with control for market control with ASDA. The company is currently trialing a finance centre in the Glasgow Silver burn Extra store providing free financial advice and quotes for insurance and loans, this service is staffed by trained Royal Bank of Scotland staff.

The centre also has a Euro cash machine providing commission free Euros and a Bureau de change run by Travelex. If successful this trial will roll out to a number of other key and flagship stores. Financial performance Tesco is listed on the London Stock Exchange under the symbol TSCO. It also has a secondary listing on the Irish Stock Exchange with the name TESCO PLC. All figures below are for the Tesco’s financial years, which run for 52 or 53 week periods to late February. Up to the 27 February 2007 period end the numbers include non-UK and Ireland results for the year ended on 31 December 2006 in the accounting year.

The figures in the table below include 52 weeks/12 months of turnover for both sides of the business as this provides the best comparative. |52/3 weeks ended |Turnover (? m) | | |2006 |2005 | |Net Profit Margin |[(2235 + 241)/ 39454] * 100 = 6. 28 % |[(1894 + 235)/ 33866] * 100 = 6. 9 % | |Gross Profit Margin |[3028/ 39454] * 100 = 7. 67 % |[2635/ 33866] * 100 = 7. 78 % | |Return on Assets |[1576/(18644+3919)] * 100 = 6. 98 % |[1347/(16931+3224)] * 100 = 6. 68 % | As we can see in the table the Net profit margin in 2006 decreased from 2005, and the Gross Profit Margin decreased in 2006 from 2005, but the return on assets is increased in 2006 than 2005 which means that they had less sales but in another hand they had decreased the cost of sales.

And from the number there is kind of stability. Liquidity ratios for 2005: – Current Ratio = Total Current Assets / Total current Liabilities [3224/5680] = 0. 57 For 2006: – Current Ratio = Total Current Assets / Total current Liabilities [3919/7518] = 0. 52 RATIO 2006 2005 Current Ratio =[ 3919/7518] = 0. 52 =[ 3224/5680] = 0. 57 As we could see in the table 2006 had less liquidity than 2005 which means that Tesco had more investments and that is clear by comparing the Op Cash Flows to maturing obligation in the two years.

And here we have relatively low ratio as it will hold only fast- moving stocks of finished goods and will generate mostly cash sales. (Atrill and Mclaney p. 157). Efficiency ratios for 2005: Sales to Capital employed Ratio = – Sales / (Total long term liabilities + Shareholders’ fund) [33866/ (8654 + 5821)] = 2. 34 times – Sales per employees ratio = Sales / Number of employees 33866 / 389. 258 = ? 87. 00 Efficiency ratios for 2006: Sales to Capital employed Ratio = – Sales / (Total long term liabilities + Shareholders’ fund) [39454/ (9444 + 5601)] = 2. 62 times

Sales per employees ratio = Sales / Number of employees- 39454 / 389. 258 = ? 101. 36 |Efficiency Ratios | | |2006 |2005 | |Sales to Capital Employed | | | | |=[ 39454/(9444 + 5601)] |=[ 33866/(8654 + 5821)] | | |= 2. 62 times |= 2. 4 times | |Sales per Employee | | | | |= 39454 / 389. 258 |= 33866 / 389. 258 | | |=? 101. 36 |= ? 87. 00 | As we can see from the table that the sales to capital employed in 2006 is increased than 2005 and also the sales per employee increased in 2006 than 2005 which means that the assets are being used more productively in the generation of revenue.

And it gives a measure of the productivity of the Workface. According to the financial statements for the Tesco company and the calculations of the ratios for the three dimensions the profitability and the liquidity and the efficiency and there results that I mentioned in my calculations we can see Tesco is not preformed well in the net profit margin and the gross profit margin but Tesco is has better performance in the return on assets in the profitability ratios, and for the liquidity ratio in the current assets ratio and the efficiency ratios Tesco has performed well.

For the overall view the Tesco had well efficient performance according to its efficiency in productivity and the ability for reducing the cost of sale which can make high profit for the company. And I think the liquidity policy for the Tesco is more efficient because they have more investment in the food industry and have high productivity per capital and per employee. Human-Resource Tesco’s profits have soared 20% in the last year, taking them to a record 2 billion and setting a new milestone for UK business.

The company takes almost one of every three pounds spent in a supermarket, and more than one of every eight pounds spent on the High Street. The supermarket chain is Britain’s biggest private employer with nearly 260,000 staff The human-resource strategy at Tesco’s revolves around work simplification, challenging unwritten rules, rolling out core skills to all head-office employees and performance management linked to achieving steering-wheel targets. This highlights the way in which Tesco’s business measures are closely linked to performance management

Tesco ensures that each and every employee has the opportunity to understand his or her individual role in contributing to the Tesco core purpose and values. This requires an innovative induction programmed that caters for different cultures, styles of learning and varying commitments to the job. The frontline employees are considered the ultimate reflection of Tesco to its customers, but all employees have a very important role to play in turning core values and customer commitment into reality on a daily basis

A major Tesco challenge is to ensure that all of its employees, wherever they work, are aware of the role they play and that they can clearly see how their actions affect the “big picture” of the overall business. The training creates a graphical journey through the history of Tesco, its core purpose, values, business goals, financial aims, operations and marketing strategy and its commitment to customers. All employees are receiving more training than before A human-resource-led business strategy has helped Tesco to take the lead over its rivals in the fiercely-competitive UK supermarket sector.

The strategic policy (Future) started in the company’s supermarkets, where its aim was to free up stores employees so they could do more and improve customer service 7. 0 Conclusion Th? success of th? T?sco shows how far th? branding and ?ff?ctiv? service delivery can come in moving beyond splashing one’s logo on a billboard. It had fostered powerful identities by making th?ir retiling concept into a virus and spending it out into th? culture via a vari?ty of channels: cultural sponsorship, political controversy, and consumer ?xp?ri?nc? and brand ?xt?nsions.

In a rapidly changing busin?ss ?nvironm?nt with a high competitors’’ pr?ssur? T?sco hav? to adopt n?w expansion strategies or diversified th? existing in order to sustain its leading mark?t position in an already ?stablish?d retailing mark?t. Th? Company must constantly adapt to th? fast changing circumstances. Strat?gy formulation should th?r?for? b? regarded as a process of continuous learning, which includes learning about th? goals, th? ?ff?ct of possible actions towards these goals and how to implement and ?x?cut? these actions.

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