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Current market situation of the retail Tesco

Tesco Plc is the UK’s largest retailer and the 4th in the world (after Wal-Mart, Carrefour and Metro AG). Tesco was established in 1919 by Jack Cohen. The Tesco brand first appeared in 1924. Then the first Tesco store was opened in 1929 in Burnt Oak, Edgware, London.

Tesco’s businesses operate in the Europe, the USA and Asia with over 470,000 employees. In 2010 their revenue was in excess of £56,910 million which was an increase of 5.6% over 2009. The operating profit of the company in 2010 was £3,457 million which was grown 9.1% comparing to 2009. The net profit was rose by 9.3% over 2009 with £2,336 million and £2,138 million respectively.

With approximately 4,800 stores in 14 countries around the world, its products and services include:

Store types: Extra, Superstore, Metro, Express, Homeplus, Tesco.com

Store offerings: Food Retail, Non-Food Retail, Petrol Stations, Home Living Range

Tesco Personal Finance: (Tesco Bank) Life Insurance, Pet Insurance, Home Insurance, Travel Insurance, Motor Insurance, Credit cards, Savings Accounts, Personal Loans, Secure Investment Bonds, Online Mortgage Finder

Tesco Telecom: Dial up internet access, Broadband, Tesco mobile value SIM, Tesco mobile network, Mobile phones

2/ With about 24% revenue of the total, non-food is a business generates the most revenue of Tesco. In 2010, group non-food sales rose 6.2% to £13.1 billion with £9.0 billion in the UK and £4.1 billion in International. The non food retailing was created with the multi arrangements and they focus on price strategy that low cost structure together with improved merchandising skills. Teesport as an example that help them get better, simpler and cheaper. Moreover, a non-food performance is significantly very strong in the UK with steadily improving like-for-like sales during the year to add another leg to growth. Although the downturn, non-food performance has been definitely resilient and contributed to bring Tesco becomes one of the top retailers in the world.

3/ UK is one of the most important key strategies of Tesco. UK has delivered a good performance in a challenging market achieving a 4.2% increase in sales with profits rising 6.7% to £2.4 billion in 2010. They focus on helping customers spend less time and price with new products and high quality services to earn customers’ faithful. Clubcard is example for “thank you” to their customers. Customers earned £550 million in voucher from Clubcard. However, they have faced a number of impediments of the UK retail market. In addition, according to the Competition Commission’s report that it is actually not easy for a competitor to challenge its scale. Therefore, Tesco still remains the top position of domestic market.

4/ Tesco’s international business is growing steadily and they are non-stop trying to expand its business to over the world. Although there is a challenging global economic environment and the start-up losses in US business, Tesco significantly keeps a symbol for a gigantic development today when their international business generates 22% with 16% of the Retailing Services markets of profits and £19.4 billion of group sales in 2010. Increasingly, Tesco draws on their skill and capabilities to utilize their international sourcing such as F&F clothing now in ten countries, Discount Brands now in seven markets, Clubcard was introduced in seven countries with more Clubcard holders internationally than in the UK. They will also open 8.5 million square feet in addition in 2011. Tesco’s strategy is working – “we have grown sales, profits and market shares and we have continued to invest in the drivers of future growth”. Moreover, beside Europe and US, Asia is definitely a potential market when they increase 23.9% of profits with £9,072 million of sales in 2010. Tesco has continued regional strength and grown well although the economics have been on crisis.

5/ In 2007, Tesco became the UK’s largest non-food retailer and the similar trends are occurring in Europe. Additionally, Tesco took part in a joint venture with O2 to found the Tesco Mobile - mobile virtual network operator by 2007. One year later, they were the number one mobile network in UK customer service. Furthermore, in 2008, Tesco combined in a joint venture with the Royal Bank of Scotland with 50% share holding and their revenue was £49,522 million on this year although the economic downturn.

Q2.

1/ Corporate social responsibility (CSR) is one of the most important parts of company to take the interests of all stakeholders through their decision-making processes which is balanced with shareholders’ benefits. Tesco’s opinion is that CRS is not a specialist function in Tesco, it is a part of everybody’s job every day. They use Steering Wheel – a balanced scorecard of the key elements of their business to create the new Community Promises:

Actively supporting local communities

Buying and selling our products responsibly

Caring for the environment

Giving customers healthy choices

Creating good jobs and careers

Particularly, the Community Plans are used for all markets and help them change the way they do business, for example by reducing our carbon emissions. Through Customer Question Times (CQTs), meetings and surveys, Tesco talks to customers and other stakeholders in each region to identify local priorities. Moreover, throughout the year 2010, Tesco gave over £60 million in donations to charities and contributions to community projects including cause-related marketing, gifts-inkind, staff time and management costs. In the other hand, 16,000 jobs were created in Tesco this year including 9,000 in the UK.

2/ Sustainability are not only a “project” but it is also a way of business and consumers expect it. The Sustainable Consumption Institute (SCI) was established with a £25 million commitment to the University of Manchester. The SCI aims to perform some subjects about how to make a consumer society sustainable. There are some actions which Tesco have done to respond to the challenge of sustainability as:

Sustainable products (Biofuels, Palm oil, Genetically modified (GM) foods, Timber): help customers reduce their carbon footprint and decrease their use of fossil fuels, reduce the chances of deforestation and controls on CO2 emissions…

Supporting UK farmers (suppliers):

The Tesco Sustainable Beef Project launched in 2008 to improve productivity and profitability as well as the tenderness and flavour of beef.

The Tesco Sustainable Dairy Group (TSDG) was established in 2008 to provide expertise in cattle health and welfare for farmers.

Forum for the Future: Tesco works with leading organizations in business and the public sector to create a sustainable future as the sustainable development charity.

3/ Climate change is continuously the main strategic challenge in CSR of Tesco. Among their endeavour to engage employees overcome climate change, Energy Champions is appeared in the Czech Republic, Hungary, Malaysia, Poland, Slovakia, South Korea, Thailand, Turkey and the UK. Energy Champions are responsible for reducing energy consumption in stores through engaging staff and implementing energy-saving measures.

Tesco’s climate change programme has three main parts:

Leading by example: reducing our own direct carbon footprint

Working with our supply chains and partners to reduce emissions more broadly

Leading a revolution in green consumption.

Extraordinarily, Tesco uses a 50:50 biodiesel mix in their own vehicles; offering Clubcard points for customers to reusing carrier bags, and their customers have took over 400 million fewer free plastic bags by the end of April 2007; putting an aero plane symbol on all air-freighted products because this method of transport results in far higher carbon emissions than any other.

4/ Remarkably, Tesco asked for stakeholders’ feedback on their quality, material issues, strategy and performance. Particularly, there are some evidences with external stakeholders as follow:

Customers: Using Customer Question Time (CQT) to identify customers’ changing needs and help them listen to customers’ responses on quality and service.

Suppliers: Organizing regular meetings with suppliers, processors, manufacturers and get feedback of them by annual Viewpoint survey. Additionally, Tesco provides training course and capacity building for suppliers in appropriate places. Producer Clubs was launched to share experiences together.

Governments and regulators: Planning processes and consultations on new regulations including healthy eating and alcohol.

Non-governmental organizations (NGOs): In 2008, Tesco operated many meetings with NGOs to discuss issues including climate change, biofuels, ethical trading and animal welfare. They also provide information as request and take part to research and surveys from NGOs.

Q3.

1/ As many large corporations, Tesco have been criticized by others companies, writers and organizations. The major way that Tesco have applied is issue writs for criminal defamation and civil libel. Then, they involved in litigation for claims form personal injury from customers, staff and other commercial matters (for example, against The Guardian newspaper about corporation tax in 2007). In the other hand, Tesco usually faced to opposition by government and local people to their expansion. They must adjust their plan to adapt requirement of them (for example, Tesco open a store in Birmingham in 2007; a "No Mill Road Tesco" campaign is against Tesco opening a store on Cambridge's Mill Road in 2007). In some cases, Tesco must retreat their plans (for example, Tesco build a store in Tonypandy, South Wales in 2008 and a store on Hope Street, Liverpool in 2009).

2/ In the financial year 2008 – 2009, Tesco like other large companies, they also decreased on the market because of the economics downturn. Unquestioningly, Tesco has an abundant capability in the finance market with reputation brand. However, its non-stop in that, Tesco decided to tie up with the Royal Bank of Scotland (RBS) in 2008 with 50% of share holding. RBS operates in insurance and banking. They have a good market position with £49,522 million of revenue in 2008. After cooperating with RBS, Tesco launched consumer banking to service customers’ needs and loyalty. They offered the bank accounts to the customers for saving time. It can be clearly seen that it appears a reciprocal relation on their businesses between retail and banking. Actually, consumer banking is a good way to sustain the facilities of retailing services which support to their major business as well. Through the deal, Tesco entered the financial market and handled the financial crisis impressively with £500 million profit in 2009. Total customers are £5.5 million with £1.3 million of Bank Credit card accounts. Basically, that is a strategic decision which helps Tesco not only overcame the difficult period but also continuously grow with the successful efforts.

Q4.

1/ In 2010, with 287,669 employees and 2,482 stores, Tesco has a significant growth in the core UK business. Then, the UK still remains as the biggest market of Tesco with £38,558 million of revenue which is increased 4.2% in 2010. In fact, although two-thirds of the group's shop floor space is now overseas, but two-thirds of group sales and 70% of profits still come from the UK. They offer five types of stores including Metro, Extra, Express, Homeplus and Superstore. In addition, non-food retailing market is continued a goal which Tesco aims. Group non-food sales rose 6.2% to £13.1 billion with £9 billion in UK in 2010. It evidences that their business has been very strong through the economics’ crisis. They focus on improving greater value to get more customers who have been encouraged to try non-food range with some key categories such as electrical, entertainment, toys and clothing.

2/ Core Strength:

Tesco is currently ranked the third largest global grocery retailer but the second largest based on profit behind Wal-Mart with approximately 4,810 stores in 14 countries within the Europe, the USA and Asia. In addition, the company occupied 30.7% share of the UK grocery retail market in 2010.

One of the strategic capabilities of Tesco is a strong financial performance. In 2010, their revenue rose to 5.6% with around £56,910 million comparing to 2009. The products and services are provided in accordance with the market demands is the first strategy of them.

Taking full advantage of development and usefulness of internet over the world, online non-food retail (Tesco Direct) business has significantly matured over 50% through 2009.

Tesco provides Clubcard to give customers greater reward for their loyalty to increase investment. Today Tesco has 15 million active Clubcard holders over seven countries in the world.

3/ Undoubtedly, Tesco is actually a leader on innovation to achieve the high profit and position on business. Innovative products and services is becoming a major competitive advantage in the retailing industry today. Therefore, Tesco focuses on better value of services and products than concentrate on pricing alone. Additionally, the company’s aim is improving customers’ shopping experience as easy as possible (many types of stores). Furthermore, Tesco’s innovation success is ability to control margin well. There are many kinds of goods with low price or sometime an amazing price. Clubcard is also a great success of Tesco’s innovation. It attracts consumers and influences the behavior of secondary customers to bring them into the fold.

Q5.

1/ Tesco's vision is to strive and achieve the highest standards, to ensure the long-term access to quality produce and maintain their position as the UK's number 1 of supermarket. Their core purpose is “To create value for customers to earn their lifetime loyalty” through their values are “No-one tries harder for customers” by “Understand customers; Be first to meet their needs; Act responsibly for our communities” and they “Treat people as we like to be treated”. It can be clearly seen that the way they treat their customers, staffs and suppliers in a culture of “Trust and respect each other” would help them to raise not only their profits but also their Cooperate Social Responsibilities in where their businesses operate.

2/ Tesco’s mission statement is to retain loyal customers. That means they want people shop at Tesco frequently and permanently. To achieve the statement, they must set themselves aims. Tesco aims are to maintain customers with excellent values for their money and the top customer service. Customers can enjoy different experiences through many kinds of ranges such as goods and services and many types of stores including luxurious stores. In the other hand, they offer low prices to attract more customers. Furthermore, Tesco also keep their customers loyal to them by providing Clubcard to encourage customers shopping with them to get extra points and special voucher. In fact that Tesco revenue is continuously increased annual. Additionally, Tesco defined their mission clearly with what is the main segment they focus on. Therefore, Tesco significantly have a right strategy and action to support their mission.

3/ Tesco’s objectives are:

To be a successful international retailer

To grow the core UK business

To be as strong in non-food as in food

To develop retailing services - such as Tesco Personal Finance, Telecoms and Tesco.com

To put community at the heart of what we do

Tesco comprehends what they pay attention and their capacities. Undoubtedly, profit is always the first concern of all companies and their shareholders. They expand their sales and profit by focusing on the UK business, non-food and retailing services as well as maintaining their position as the number one retail company in the UK and the top retail company in the world. Accomplishing these targets mean that Tesco surpasses their competitors and preserves the market leader. Moreover, providing goods and services that is cheap and affordable to consumers or the public as a strategy will also support Tesco’s objectives. Tesco demonstrates that they are trying to achieve their goals totally with successful efforts during past time.

4/ People are entirely a key strategy that every company has to focus on. To motivate staffs Tesco offers a competitive salary, an opportunity to develop a long-term varied career with quality training and especially many good benefits. Basically, all employees have healthcare cash plan and a chance to join pension scheme from the day they start. Some managers and senior managers will be provided private medical insurance. Others policies are standard 20 days for holiday, then 25 days for five year service at Tesco. A lot of staffs work in part-time, thus they are also offered emergency leave, career breaks, shift swaps and flexible hours. Additionally, Tesco built affordable housing to offer for its employees in London. Moreover, staffs are encouraged to involve in the financial performance of the company through a variety of schemes, principally the Tesco employee profit-sharing scheme (Shares in Success), the savings related share option scheme (Save As You Earn) and the partnership share plan (Buy As You Earn). Remarkably, £175 million payout was shared for all staffs through Save As You Earn (Sharesave) scheme with high appreciates of employees. Above all others, Tesco give a strategy to make its staffs understand and want to contribute their best to the company’s development through the company’s values.


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