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Strategic Management/SEM II/ 2011/2012
"
Tesco versus Sainsbury's: Growth Strategies and Corporate Competitiveness
[MR111037]
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Type the document title
Strategic Management
SEM II
2011/2012
Individual Case Analysis
Tesco versus Sainsbury's: Growth Strategies and Corporate Competitiveness
Lecturer: Profesor Dr. Mas Bambang Baroto
Prepared By
Nazifa Bte Abd. Ghani
(MR 111037)
International Business School
University Technology Malaysia
May 2012
Contents
Background
Executive Summary.....………......................................…………………………………
2.0 Vision and Mission Analysis…….......………………………………………………..….
2.1 Vision................................................................................................................….....
2.2 Mission ……………………………………………………………………………..
3.0 External Environmental Analysis ……..…………………………………………..….….
3.1PEST Analysis ………………………………........………………………….....……
3.2 Competitive Analysis …………………..………...………………………………....
3.3 Industry Analysis ……………………………………………………………………
3.3.1 The Description of the Industry …………………………………………………
3.3.2 Rivalry among Competitor …………………………………………………..….
3.3.3 Potential Entry of New Competitor ………………………………………….….
3.3.4 Potential Development of Substitute Products ………………………………….
3.3.5 Bargaining Power of Suppliers ………………………………………………....
3.3.6 Bargaining Power of Buyers ……………………………………………………
3.4 Conclusion of the industry …………………………………………………………
3.5 Defining the Key Success Factors of the Industry ………………………………….
3.6 Opportunities and Threats ……………………………………………………….….
3.6.1 Opportunities List ……………………………………………………………….
3.6.2 Threats List ……………………………………………………………………...
3.6.3 The External Evaluation Factor (EFE) Matrix ………………………………….
3.6.4 Competitive Profile Matrix (CPM) ………………………………………….….
4.0 Internal Analysis ……………………………………………………………………...…
4.1 Cultural Analysis ……………………………………………………………………
4.2 Management Functions …………………...…………………………………….…..
4.2.1 Planning ……………………………………………………………………..….
4.2.2 Organising ……………………………………………………………………....
4.2.3 Motivating ………………………………………....……………………………
4.2.4 Staffing …………………………………………………………………….……
4.2.5 Controlling ………………………………………………………………...……
4.3 Marketing Strategy Analysis.......................................................................................
4.3.1 Marketing Strategy ………………………………………………………..…….
4.3.2 Promotion Programs ……………………………………………………….……
4.3.3 Product and Service Planning ……………………………………………….….
4.3.4 Pricing …………………………………………………………………………..
4.3.5 Distribution …………………………………………………………..………….
4.3.6 Marketing Research ………………………………………….………………….
4.4 Financial Analysis……………………………………………………...……………
4.4.1 Financial Ratio…………………………………………………………………..
4.4.2 Finance/Accounting Audit Checklist …………………………………...………
4.5 Production/Operation ………………………………………………………….........
4.5.1 Process …………………………………………………..………………………
4.5.2 Capacity ……………………………………………………………………..…..
4.5.3 Inventory ………………………………………………………………………..
4.5.4 Workforce ………………………………………………………………….........
4.5.5 Quality ……………………………………………………………………..……
4.6 Research and Development (R&D) …………………………………………………
4.7 Management Information System (M.I.S) ……………………………………...…..
4.8 Value Chain Analysis (VCA) ……………………………………………………….
4.9 Strengths and Weaknesses …………………………………………………….……
4.9.1 Strengths List…………………………………………………………….………
4.9.2 Weaknesses List ……………………………………………………………..…
4.9.3Internal Factor Evaluation (IFE) Matrix ……………………..………………….
5.0 Existing Objective and Strategy……………… ……………………….…………….…..
6.0 Strategy Formulation Tools…. …………………………………………………………..
Background of the Company
i) Tesco
Tesco was founded in 1924 by Jack Cohen and opened its first store in 1929 in Middlesex. In 1947, its shares were traded at London Stock Exchange as Tesco Stores (Holdings) Ltd.. Through acquisition, it grew to more than 800 stores in the 50s and 60s. In 1973, Cohen resigned and was replaced by Leslie Porter and he abounded the philosophy of "pile it high and sell it cheap". In 1977, Tesco resorted to price reduction and centralized purchasing by "Operation Checkout". Terry Leahy became CEO in 1977 and introduced "Tesco The Way" with more focus on people. Tesco currently has 5 store formats: Tesco Extra, Tesco Superstore, Tesco Metro, Tesco Express and One Stop. It operates in the food and non food retailing, property development, financial and telecommunication services. Its market share of 31.35% in food retailing segment made Tesco become the market leader in the UK.
ii) Sainsbury's
Sainsbury's was established in 1869 by John James and Mary Ann Sainsbury and it is the oldest retailing business in UK. In n1773, its shares were traded at London Stock Exchanged as J Sainsbury Plc. Sainsbury's currently has 3 store formats: regular stores, local stores and central stores. It operates in food and non food retailing, property development and banking. It was the market leader in UK up till 1995 when it lost its place to Tesco and currently is holding about 16.37% market share.
1.0 Executive Summary
This report provides an insight into the supermarket company, Tesco, with emphasis on its external environment analysis and company analysis or resources, competence and culture. Two future strategic options are suggested in regards to the resource based strategies. As a matter of fact, this report analysis information is only based on the case study given.
This analysis addresses the following segment:
External Environment
Internal Environment
Existing Objective and Strategy
Strategy Formulation Tools ( covered also SWOT analysis)
2.0 Vision and Mission Analysis
2.1 Vision: N/A
Mission: N/A
3.0 External Environment Analysis
3.1 PEST Analysis
Case Facts
Opportunity
Threat
Political, Legal , and governmental forces
N/A
-
-
Economic forces
In the
aftermath of World War l, food supplies were low, so he
bought damaged goods from other stores and re-sold
them at reasonable prices. (Pg.332,para4)
Following these predictions, the United Kingdom has evolved into a leader of internet retailing
in Europe, and growth is continuing. (Pg.335,para5)
Social , Cultural , and Demographic forces
At the beginning of the 1990s, the U.K. retail
market slowly became more competitive(Pg.332,para5)
In the mid-1990s, competition intensified as a price
war among these players emerged, resulting in squeezed
margins and cost cutting. It is not surprising that this
also had an adverse impact on the service level these corporations
provided. (Pg.333,para2)
Toward the end of the 1990s, both firms targeted online
distribution channels that promised large growth
potential(Pg.335,para6)
Non-store retailing growth rates were
expected to be higher than store based rates, as online
usage gained popularity among British consumers. (Pg.335,para6)
Tesco then analyzed countries for expansion, Putting
high emphasis on two dimensions: the market Potential
for growth and the competitive situation in the market.
Only if a market was characterized by relatively high
growth potential and relatively low rivalry was it considered
a real target market and approached in an
orderly fashion. (Pg.337,para1)
Recent trends, such as health and wellness and ethical concerns, have opened opportunities,
even in the saturated food category; however, most food
retailers' growth is expected to stem from non-food
items. (Pg.341,para2)
Technological forces
N/A
-
-
Total
6
2
Conclusion:
From the PEST analysis, Tesco has not being treated by the Treat occurred from other competitors. Tesco can successfully expand its empayar but at the same time still aware with the upcoming competitors as well as the treats. As a matter of fact Tesco cannot avoid from facing this treat but it can control to reduce the treat. Unfortunately, there are no information about technology forces and Political, Legal , and governmental forces to be analysed
3.2 Competitive Analysis
Key Variables
Case facts
Opportunity
Threat
Competitor's Strategy/
Performance
Sainsbury's
Asda
Sainsbury's was established in 1869 by John James
and Mary Ann Sainsbury, making it the oldest food
retailing chain in Britain(Pg.332,para3)
The group is also
engaged in property and banking, owning real estate
worth about €8.6 billion (Pg.332,para3)
Sainsbury's emphasized
price reductions on the standard private labels(Pg.333,para3)
Sainsbury's targeted the upper price segment, positioning itself between
mass market and high end. (Pg.333,para1)
In 1975, Sainsbury's Launched the "Sainsbury's
SavaCentre hypermarket formal as a joint venture with British Home Stores. This was the first attempt in the
United Kingdom to launch supermarkets with a large
non-food range (Pg.333,para4)
Sainsbury's decided
that a separate brand was no longer needed. Over the
following years, these stores were converted to the regular
Sainsbury's superstore format and, subsequently,
Sainsbury's retreated from hypermarkets and changed its
store formats. (Pg.333,para4)
Copying Tesco. Sainsbury' also used its own food brand and transferred them to non-food : items, For example, it extended its clothing range with an organic line. In addition to food and non-food items, Sainsbury expanded into retail banking and property development. (pg.336,para3)
Sainsbury's. Starting in the 1990s, it pursued a broad
set of growth initiatives, steadily increasing its market
share and gaining importance. (Pg.332,para2)
ASDA positioned itself
as the price leader(Pg.332,para3)
ASDA had also moved strongly into the non-food area(Pg.337,para4)
Tesco
In
recent years, Tesco has greatly diversified, extending its
business lines from food into non-food, clothing, financial.
services, and telecommunications(Pg.332,para1)
Tesco launched "Operation Checkout," which included
price reductions and centralized purchasing for all its
stores. As a result, its market share rose by 4 Percent
within two months(Pg.332,para4)
Tesco emphasized its low-price private label ("Value")
and continued to cut prices, (pg333,para3)
While Sainsbury's retreated from hypermarket
Tesco expanded Tesco Extra and strengthened it5
hypermarket formats. , (pg333,para5)
"The Tesco Way" :
implies a shift from a focus on the corporation to a
focus on people, both employees and customers (Pg. 333,para5)
Much of Tesco's sales increases occurred through
increases in total square footage with the opening Of new
stores, including new formats such as Metro and Express. (Pg.337,para1)
This move toward
the financial sector has diversified the Tesco brand and
provides opportunities for growth outside the retailing
sector. For example, Tesco offers Clubcard points or free
petrol when consumers purchase Tesco car Insurance. (Pg.334,para3)
"An inclusive offer" is how Tesco describes its aspiration to appeal to upper, medium-, and low-income
customers in the same stores. (Pg.334,para3)
In 2001, Tesco.com's then-(CEO,
John Browett, received the Wharton Infosys Business
Transformation Award for the innovative processes he
used to support this online food service. 'today, Tesco
operates the world's largest food home shopping service
as well as provides consumer goods, telecommunication and financial services online. As of November
2006, Tesco was the only food retailer to make online
shopping profitable. (Pg.336,para2).
Tesco used its food brands
"Finest" and "Value" to expand into non food items.
In its Extra stores, Finest health and beauty, home, and
clothing lines resulted. (Pg.336,para4).
Rather than purchasing or building its own telecom network, Tesco paired its marketing
strength with the expertise of existing telecom
operators. In autumn 2003, Tesco Mobile was launched
as a joint venture with 02, and Tesco Horne Phone
was created in partnership with Cable & Wireless. InAugust 2004, Tesco Broadband, an ADSL-based service
delivered via BT phone lines, was launched in partnership
with NTL. In January 2006, Tesco Internet Phone,
a Voice over Internet Protocol service, was launched
in conjunction with Freshtel ol Australia.
Many British retailers attempting to build international
businesses have failed. Tesco has responded
to the need to be sensitive to local expectations in
foreign countries by entering into joint ventures with
local partners, such as Samsung Group in South Korea
(Samsung-Tesco Homeplus), and Charoen Pokphand
in Thailand (Tesco Lotus), (Pg.338,para3).
By planning to open
a new store in the United States every two-and-one-half
days, Tesco intends to mimic the successful expansion
of U.S. pharmacy chains such as Walgreens. (Pg.339,para2).
Profit for year
Financial Turnover
Basic Earnings per Share
Competitor's
Weaknesses
For much of the twentieth
century, Sainsbury's was the market leader in the U.K.
supermarket sector, but in 1995 it lost its place to Tesco;
in 2003, it was pushed to third place by ASDA(Pg.332,para3)
By 2004, however,
the group had suffered a decline in performance relative
to its competitors and fell to third in the U.K. food
market. Davis oversaw an almost €3 billion upgrade
of stores, distribution, and IT equipment. Part of this investment included the construction of four fully automated
depots, which, at f.100 million each, cost four times more than standard depots. (Pg.335,para3)
Sainsbury's was "wrong-footed" in its original reaction
to the Tesco Clubcard, showing
"no immediate
response apart from disdain." It lost market share in
subsequent years. In 2004, the London Times quoted a
former executive and others who viewed this event as
the start of the company's downturn due to management
failures by David Sainsbury and his successors, Dino
Adriano and Peter Davis. (Pg.335,para5)
Results
re-affirmed the commentary of retail analysts; that is, the
group was not ensuring that shelves were fully stocked, partly due to the failure of the systems introduced by
Peter Davis. . (Pg.335,para4)
Asda
N/A
-
Total
22
8
Conclusion:
Based on this competitive analysis, I have found out that there are 22 opportunities with 8 threats. Because of the lack of information for ASDA, there are no information stated for ASDA in its weakness. Be aware of the competitor's strength, performance and the strategies are the key success factors to be competitive.
3.3 Industry Analysis
3.3.1 The Description of The Industry
In 2008, the United Kingdom-based international food and general merchandising retailer Tesco reached a market share of about 30 percent in the United Kingdom, roughly the same as its rivals Sainsbury's and ASDA (Pg.332, para1). In order to analyse the industry based on the external analysis, five Porter Forces, which covered 5 segments have been chosen in this study, which are: (1) Rivalry among Competing Firms; (2) Potential entry of new competitors; (3)Substitute Products; (4) Bargaining Power of suppliers; (5) Bargaining Power of Buyers.
As a matter of fact, due to the lack of information about other competitors to compare with Tesco, I have chosen Sainsbury's and ASDA as the main competitors involved in this industry.
At the beginning of the 1990s, the U.K. retail market slowly became more competitive. Three
players dominated the food market: ASDA'(which became Wal-Mart's largest overseas subsidiary in 1999), Sainsbury's, and Tesco. ASDA positioned itself as the price leader and held this position for some time, closely followed by Tesco. Sainsbury's targeted the upper price segment, positioning itself between mass market and high end. (Pg.332,para5)
3.3.2 Rivalry Among Competitor
Key Variables
Case facts
Opportunity
Threat
Competitor's Strategy/
Performance
Sainsbury's
Asda
Sainsbury's was established in 1869 by John James
and Mary Ann Sainsbury, making it the oldest food
retailing chain in Britain(Pg.332,para3)
The group is also
engaged in property and banking, owning real estate
worth about €8.6 billion (Pg.332,para3)
Sainsbury's emphasized
price reductions on the standard private labels(Pg.333,para3)
Sainsbury's targeted the upper price segment, positioning itself between
mass market and high end. (Pg.333,para1)
In 1975, Sainsbury's Launched the "Sainsbury's
SavaCentre hypermarket formal as a joint venture with British Home Stores. This was the first attempt in the
United Kingdom to launch supermarkets with a large
non-food range (Pg.333,para4)
Sainsbury's decided
that a separate brand was no longer needed. Over the
following years, these stores were converted to the regular
Sainsbury's superstore format and, subsequently,
Sainsbury's retreated from hypermarkets and changed its
store formats. (Pg.333,para4)
Copying Tesco. Sainsbury' also used its own food brand and transferred them to non-food : items, For example, it extended its clothing range with an organic line. In addition to food and non-food items, Sainsbury expanded into retail banking and property development. (pg.336,para3)
Sainsbury's. Starting in the 1990s, it pursued a broad
set of growth initiatives, steadily increasing its market
share and gaining importance. (Pg.332,para2)
ASDA positioned itself
as the price leader(Pg.332,para3)
ASDA had also moved strongly into the non-food area(Pg.337,para4)
Tesco
In
recent years, Tesco has greatly diversified, extending its
business lines from food into non-food, clothing, financial.
services, and telecommunications(Pg.332,para1)
Tesco launched "Operation Checkout," which included
price reductions and centralized purchasing for all its
stores. As a result, its market share rose by 4 Percent
within two months(Pg.332,para4)
Tesco emphasized its low-price private label ("Value")
and continued to cut prices, (pg333,para3)
While Sainsbury's retreated from hypermarket
Tesco expanded Tesco Extra and strengthened it5
hypermarket formats. , (pg333,para5)
"The Tesco Way" :
implies a shift from a focus on the corporation to a
focus on people, both employees and customers (Pg. 333,para5)
Much of Tesco's sales increases occurred through
increases in total square footage with the opening Of new
stores, including new formats such as Metro and Express. (Pg.337,para1)
This move toward
the financial sector has diversified the Tesco brand and
provides opportunities for growth outside the retailing
sector. For example, Tesco offers Clubcard points or free
petrol when consumers purchase Tesco car Insurance. (Pg.334,para3)
"An inclusive offer" is how Tesco describes its aspiration to appeal to upper, medium-, and low-income
customers in the same stores. (Pg.334,para3)
In 2001, Tesco.com's then-(CEO,
John Browett, received the Wharton Infosys Business
Transformation Award for the innovative processes he
used to support this online food service. 'today, Tesco
operates the world's largest food home shopping service
as well as provides consumer goods, telecommunication and financial services online. As of November
2006, Tesco was the only food retailer to make online
shopping profitable. (Pg.336,para2).
Tesco used its food brands
"Finest" and "Value" to expand into non food items.
In its Extra stores, Finest health and beauty, home, and
clothing lines resulted. (Pg.336,para4).
Rather than purchasing or building its own telecom network, Tesco paired its marketing
strength with the expertise of existing telecom
operators. In autumn 2003, Tesco Mobile was launched
as a joint venture with 02, and Tesco Horne Phone
was created in partnership with Cable & Wireless. InAugust 2004, Tesco Broadband, an ADSL-based service
delivered via BT phone lines, was launched in partnership
with NTL. In January 2006, Tesco Internet Phone,
a Voice over Internet Protocol service, was launched
in conjunction with Freshtel ol Australia.
Many British retailers attempting to build international
businesses have failed. Tesco has responded
to the need to be sensitive to local expectations in
foreign countries by entering into joint ventures with
local partners, such as Samsung Group in South Korea
(Samsung-Tesco Homeplus), and Charoen Pokphand
in Thailand (Tesco Lotus), (Pg.338,para3).
By planning to open
a new store in the United States every two-and-one-half
days, Tesco intends to mimic the successful expansion
of U.S. pharmacy chains such as Walgreens. (Pg.339,para2).
Profit for year
Financial Turnover
Basic Earnings per Share
Competitor's
Weaknesses
For much of the twentieth
century, Sainsbury's was the market leader in the U.K.
supermarket sector, but in 1995 it lost its place to Tesco;
in 2003, it was pushed to third place by ASDA(Pg.332,para3)
By 2004, however,
the group had suffered a decline in performance relative
to its competitors and fell to third in the U.K. food
market. Davis oversaw an almost €3 billion upgrade
of stores, distribution, and IT equipment. Part of this investment included the construction of four fully automated
depots, which, at f.100 million each, cost four times more than standard depots. (Pg.335,para3)
Sainsbury's was "wrong-footed" in its original reaction
to the Tesco Clubcard, showing
"no immediate
response apart from disdain." It lost market share in
subsequent years. In 2004, the London Times quoted a
former executive and others who viewed this event as
the start of the company's downturn due to management
failures by David Sainsbury and his successors, Dino
Adriano and Peter Davis. (Pg.335,para5)
Results
re-affirmed the commentary of retail analysts; that is, the
group was not ensuring that shelves were fully stocked, partly due to the failure of the systems introduced by
Peter Davis. . (Pg.335,para4)
Asda
N/A
--
Tesco
Tesco was not always the dominant Player it is today.
In 1990. it was a mid-sized food chain far behind its
rival, Sainsbury's.(pg332,para2)
Porter and
managing director Ian Mac Laurin abandoned the' pile it
high and sell it cheap" philosophy of Cohen, which had
left the company stagnating with a bad image.(pg332,para4)
Prices of standard brands and private
labels at both Sainsbury's and Tesco came closer, while
the two firms differed slightly in their discounting Policies. .(pg333,para3)
The small scale nature of this first foray was seen
as a weakness, and the company was eventually sold in the
mid-1980s. .(pg337,para5)
Total
25
15
3.3.3 Potential Entry of New Competitor
Potential Entry of New Competitors
NO
Case facts
Strong
Moderate
Weak
1
2
The price cuts were prompted by the increased price pressure from the market entry of discounters. For example, Aldi entered the market in 1990, followed by Lidl in 1994. In
2005, these two hard discounters had acquired a market share of2.2 percent and 1.9 percent, respectively. (Pg. 333,para3)
ASDA had also moved strongly into the non-food area(Pg.337,para4
Total
1
1
Conclusion:
In this situation, there is lack of information about the new entrants coming into this industry.
3.3.4 Potential Development of Substitute Products
Potential Development of Substitute Products
NO
Case facts
Strong
Moderate
Weak
1
2
3
4
5
6
Sainsbury's has also invested in Private labels. A large
Sainsbury's store typically stock around 50,000 lines of which about half are private labels. These lines include. for example, "Basics" (an economy range similar to Tesco's "Values"), "Taste the Difference" (a premium range similar to Tesco's "Finest"), "Different by Design" (a smaller range of premium non-food lines), "Kids," "Be Good to Yourself' (products with reduced calorific and/or fat content), "Free from," "Sainsbury Organic," "Fair Trade," and "Super Naturals-" (a range of readymade meals with healthy ingredients) (Pg.334,para4)
Sainsbury introduced the Sainsbury's reward
card in 1996. A multiparty card program, "Nectar," was
launched in the autumn of 2002. Nectar gives the customer
a versatile and powerful point gathering system
to be used and redeemed at a variety of stores (Pg.335,para5)
Sainsbury's has been involved in e business and
home-shopping development since 2000, when it launched Sainsbury's to You in April of that year(pg.336,para3)
Sainsbury's did not release any e-commerce sales figures, but said it was still on track to expand its Web service to 200 stores by March
2010. (pg.337,para4)
Copying Tesco. Sainsbury' also used its own food brand. and transferred them to non-food : items, For example, it extended its clothing range with an organic line. In addition to food and non-food items, Sainsbury expanded into retail banking and property development. (pg.336,para3)
Sainsbury's bank offers services similar to Tesco., including travel (insurance and money), savings, and lending; it also offers a Sainsbury's credit card. By 2010, Sainsbury's expects to achieve sales of €3.5 billion, with 33 percent of its total sales coming from non-food businesses. (pg.337,para4)
-
-
Total
3
2
1
Conclusion:
Sainsbury's learnt from Tesco successes strategies. However the way that Sainsbury implements the strategies and policies were different.
3.3.5 Bargaining Power of Suppliers
Bargaining Power of Suppliers
NO
Case facts
Strong
Moderate
Weak
1
In the
aftermath of World War l, food supplies were low, so he
bought damaged goods from other stores and re-sold
them at reasonable prices. (Pg.332,para4)
Total
1
Conclusion:
This force represents the power of suppliers that can be influenced by the major chains and that fear of losing their business to the large supermarket like Tesco. Unfortunately, there is a lack of information for this forces.
3.3.6 Bargaining Power of Buyers
Bargaining Power of Buyers
NO
Case facts
Strong
Moderate
Weak
1
2
3
4
At the beginning of the 1990s, the U.K. retail
market slowly became more competitive(Pg.332,para5)
While service offerings today are quite similar, the
rivals' distribution strategies differ significantly. (Pg.335,para2)
Customers of Sainsbury's, however, spent
the most per order, averaging almost €.90, compared to 80 for both Tesco and ASDA(Pg.336,para3)
This was helped by the trend of consumers to increasingly combine bargain shopping with purchases of
luxury products or services This "schizophrenic" shopping
behaviour blurs Previously separate boundaries (Pg.340,para6)
Total
1
2
Conclusion:
Tesco found out that UK retail market slowly become competitive from day to day. Tesco has taken this key issue for expanding its business into International market and try to find a new market segment as well as offered new products in order to stay competitive and meet the demand in the industry.
3.3.7 Conclusion of the Industry
I believed that the majority of threats to the players in the industry come from existing main players rather than new entrants(lack of information about new entrants). Especially for Sainsbury. It is because Sainsbury keep copying Tesco's strategies. In addition, it is also important to be noted that in this industry there are more opportunities rather that treats meaning that it is a competitive industry and each of the player need to struggle in orde to stay ahead.
3.6 Defining the Key Success
Key Success Factor
NO
Key Success Factor
Case Facts
Brand Value & Reputation
The stole appeals to wide
reaching demographics across the country and has
built up a heritage of reliability and trustworthiness'
which keeps shoppers returning to its stores. These factors
have enabled Tesco to gain close to a third of the
British grocery market-"(Pg.334,para3)
Sainsbury introduced the Sainsbury's reward
card in 1996. A multiparty card program, "Nectar," was
launched in the autumn of 2002. Nectar gives the customer
a versatile and powerful point gathering system
to be used and redeemed at a variety of stores. In Nectar,
Sainsbury's has strong partners such as Barclaycard,
British Petroleum, and the department store chain
Debenhams. (Pg.335,para5)
Tesco formed an alliance with Esso Petroleum
Company t.td (now part of ExxonMobil Corp.). The
agreement included several petrol filling stations on
lease from Esso, where Tesco would operate the store
under the Express format. ln turn, Esso would operate
the forecourts and sell their fuel via the 'Tesco store.
ten years later, over 600 -Tesco/Esso stores can be found
across the United Kingdom(Pg.334,para2)
As Edward Garner, the communications director of the
TNS Super panel, remarks: "Tesco's winning formula"
is largely due to its ability to be all things to all people. According to T'NS, over 60 percent of British house
holds shop in Tesco every four weeks (Pg.334,para3).
Tesco was the first to Launch a Clubcard
system. It was introduced in 1995 and has become the
most popular card in the United Kingdom, with around
l3 million active Clubcard holders. Customers collect
one Clubcard point by every €1 (€1 in Ireland) they
spend in a Tesco store, Tesco Petrol, or at Tesco.com. (Pg.335,para4).
IT Integration
In 2001, Tesco.com's then-(CEO,
John Browett, received the Wharton Infosys Business
Transformation Award for the innovative processes he
used to support this online food service. 'today, Tesco
operates the world's largest food home shopping service
as well as provides consumer goods, telecommunication and financial services online. As of November
2006, Tesco was the only food retailer to make online
shopping profitable. (Pg.336,para2).
Tesco segments their shoppers on the basis of these factors. As soon as the shopper uses the card online or in-store, product information is automatically uploaded
into the Tesco database. Product information is used to
cross-sell additional products and services, such as . food delivery(pg.335,para4)
Sainsbury's has been involved in e business and
hon.re-shopping development since 2000, when it
launched Sainsbury's to You in April of that year(pg.336,para3)
Tesco.com captured two-thirds of all online food
orders in the first seven months of2007, generating sales
of approximately €2.5 million per day. Sainsburytoyou.com
took third place with l4 percent, behind ASDA with
l6 percent(pg.336,para3)
Rather than purchasing or building its own telecom network, Tesco paired its marketing
strength with the expertise of existing telecom
operators. In autumn 2003, Tesco Mobile was launched
as a joint venture with 02, and Tesco Horne Phone
was created in partnership with Cable & Wireless. In
August 2004, Tesco Broadband, an ADSL-based service
delivered via BT phone lines, was launched in partnership
with NTL. In January 2006, Tesco Internet Phone,
a Voice over Internet Protocol service, was launched
in conjunction with Freshtel ol Australia. (pg.337,para2)
Tesco has responded
to the need to be sensitive to local expectations in
foreign countries by entering into joint ventures with
local partners, such as Samsung Group in South Korea
(Samsung-Tesco Homeplus), and Charoen Pokphand
in Thailand (Tesco Lotus), (Pg.338,para3).
Supplier Management
Draw goods from suppliers into regional distribution
centers for preparation and delivery to stores. Tesco is
extending this logistic practice to cover collection from
suppliers (factory gate pricing) and input to suppliers in
a drive to reduce costs and improve reliability. (pg.335,para2)
In 1997. Sainsbury's bank was established as a joint venture between J Sainsbury plc and the Bank of Scotland (now HBOS). Sainsbury's bank offers services similar to Tesco., including travel (insurance and money), savings, and lending; it also offers a Sainsbury's credit card. By 2010, Sainsbury's expects to achieve sales
of €3.5 billion, with 33 percent of its total sales coming
from non-food businesses. (pg.337,para4)
3.6 Opportunities and Threats
The List of Opportunities
NO
Case Fact
Following these predictions, the United Kingdom has evolved into a leader of internet retailing
in Europe, and growth is continuing. (Pg.335,para5
Toward the end of the 1990s, both firms targeted online
distribution channels that promised large growth
potential(Pg.335,para6)
Non-store retailing growth rates were
expected to be higher than store based rates, as online
usage gained popularity among British consumers. (Pg.335,para6)
Tesco then analyzed countries for expansion, Putting
high emphasis on two dimensions: the market Potential
for growth and the competitive situation in the market.
Only if a market was characterized by relatively high
growth potential and relatively low rivalry was it considered
a real target market and approached in an
orderly fashion. (Pg.337,para1)
Recent trends, such as health and wellness and ethical concerns, have opened opportunities,
even in the saturated food category; however, most food
retailers' growth is expected to stem from non-food
items. (Pg.341,para2)
This was helped by the trend of consumers to increasingly combine bargain shopping with purchases of
luxury products or services This "schizophrenic" shopping
behaviour blurs Previously separate boundaries (Pg.340,para6)
Sainsbury's decided
that a separate brand was no longer needed. Over the
following years, these stores were converted to the regular
Sainsbury's superstore format and, subsequently,
Sainsbury's retreated from hypermarkets and changed its
store formats. (Pg.333,para4)
The list of threats
NO
Case Fact
1
Sainsbury's emphasized
price reductions on the standard private labels(Pg.333,para3)
2
At the beginning of the 1990s, the U.K. retail
market slowly became more competitive(Pg.332,para5
3
While service offerings today are quite similar, the
rivals' distribution strategies differ significantly. (Pg.335,para2)
4
At the beginning of the 1990s, the U.K. retail
market slowly became more competitive(Pg.332,para5)
5
In the mid-1990s, competition intensified as a price
war among these players emerged, resulting in squeezed
margins and cost cutting. It is not surprising that this
also had an adverse impact on the service level these corporations
provided. (Pg.333,para2)
6
Sainsbury's was established in 1869 by John James
and Mary Ann Sainsbury, making it the oldest food
retailing chain in Britain(Pg.332,para3)
8
The group is also
engaged in property and banking, owning real estate
worth about €8.6 billion (Sainsbury's) (Pg.332,para3)
9
In 1975, Sainsbury's Launched the "Sainsbury's
SavaCentre hypermarket formal as a joint venture with British Home Stores. This was the first attempt in the
United Kingdom to launch supermarkets with a large
non-food range (Pg.333,para4)
10
Copying Tesco. Sainsbury' also used its own food brand and transferred them to non-food : items, For example, it extended its clothing range with an organic line. In addition to food and non-food items, Sainsbury expanded into retail banking and property development. (pg.336,para3)
11
Sainsbury's. Starting in the 1990s, it pursued a broad
set of growth initiatives, steadily increasing its market
share and gaining importance. (Pg.332,para2)
12
ASDA positioned itself
as the price leader(Pg.332,para3)
13
ASDA had also moved strongly into the non-food area(Pg.337,para4)
14
The price cuts were prompted by the increased price pressure from the market entry of discounters. For example, Aldi entered the market in 1990, followed by Lidl in 1994. In
15
2005, these two hard discounters had acquired a market share of2.2 percent and 1.9 percent, respectively. (Pg. 333,para3)
16
ASDA had also moved strongly into the non-food area(Pg.337,para4)
17
Sainsbury's has also invested in Private labels. A large Sainsbury's store typically stock around 50,000 lines of which about half are private labels. These lines include. for example, "Basics" (an economy range similar to Tesco's "Values"), "Taste the Difference" (a premium range similar to Tesco's "Finest"), "Different by Design" (a smaller range of premium non-food lines), "Kids," "Be Good to Yourself' (products with reduced calorific and/or fat content), "Free from," "Sainsbury Organic," "Fair Trade," and "Super Naturals-" (a range of readymade meals with healthy ingredients) (Pg.334,para4)
18
Sainsbury introduced the Sainsbury's reward
card in 1996. A multiparty card program, "Nectar," was
launched in the autumn of 2002. Nectar gives the customer
a versatile and powerful point gathering system
to be used and redeemed at a variety of stores (Pg.335,para5)
19
Sainsbury's has been involved in e business and
home-shopping development since 2000, when it launched Sainsbury's to You in April of that year(pg.336,para3)
20
Sainsbury's did not release any e-commerce sales figures, but said it was still on track to expand its Web service to 200 stores by March
2010. (pg.337,para4)
21
Copying Tesco. Sainsbury' also used its own food brand. and transferred them to non-food : items, For example, it extended its clothing range with an organic line. In addition to food and non-food items, Sainsbury expanded into retail banking and property development. (pg.336,para3)
22
Sainsbury's bank offers services similar to Tesco., including travel (insurance and money), savings, and lending; it also offers a Sainsbury's credit card. By 2010, Sainsbury's expects to achieve sales of €3.5 billion, with 33 percent of its total sales coming from non-food businesses. (pg.337,para4)
3.7 The External Evaluation Factor (EFE)
Item
Key external factor
Weight
Rating
Weighted score
Opportunity
1
Following these predictions, the United Kingdom has evolved into a leader of internet retailing in Europe, and growth is continuing. (Pg.335,para5
0.09
4
0.36
2
Toward the end of the 1990s, both firms targeted online distribution channels that promised large growth
potential(Pg.335,para6)
0.08
4
0.32
3
Non-store retailing growth rates were
expected to be higher than store based rates, as online
usage gained popularity among British consumers. (Pg.335,para6)
0.08
4
0.32
4
Tesco then analyzed countries for expansion, Putting high emphasis on two dimensions: the market Potential for growth and the competitive situation in the market. Only if a market was characterized by relatively high
growth potential and relatively low rivalry was it considered a real target market and approached in an orderly fashion. (Pg.337,para1)
0.07
3
0.21
5
Recent trends, such as health and wellness and ethical concerns, have opened opportunities,
even in the saturated food category; however, most food
retailers' growth is expected to stem from non-food
items. (Pg.341,para2)
0.07
3
0.21
6
7
Sainsbury's decided that a separate brand was no longer needed. Over the following years, these stores were converted to the regular Sainsbury's superstore format and, subsequently, Sainsbury's retreated from hypermarkets and changed its store formats. (Pg.333,para4)
In the
aftermath of World War l, food supplies were low, so he
bought damaged goods from other stores and re-sold
them at reasonable prices. (Pg.332,para4)
0.08
0.08
4
4
0.32
0.32
Threat
8
This was helped by the trend of consumers to increasingly combine bargain shopping with purchases of
luxury products or services This "schizophrenic" shopping
behaviour blurs Previously separate boundaries (Pg.340,para6)
0.06
3
0.18
9
Sainsbury's emphasized
price reductions on the standard private labels(Pg.333,para3)
0.06
4
0.24
10
At the beginning of the 1990s, the U.K. retail
market slowly became more competitive(Pg.332,para5
0.06
4
0.24
11
While service offerings today are quite similar, the
rivals' distribution strategies differ significantly. (Pg.335,para2)
0.05
3
0.15
12
At the beginning of the 1990s, the U.K. retail
market slowly became more competitive(Pg.332,para5)
0.05
3
0.15
13
In the mid-1990s, competition intensified as a price
war among these players emerged, resulting in squeezed
margins and cost cutting. It is not surprising that this
also had an adverse impact on the service level these corporations
provided. (Pg.333,para2
0.05
4
0.20
14
In 1975, Sainsbury's Launched the "Sainsbury's
SavaCentre hypermarket formal as a joint venture with British Home Stores. This was the first attempt in the
United Kingdom to launch supermarkets with a large
non-food range (Pg.333,para4
0.06
3
0.18
16
Sainsbury's targeted
the upper price segment, positioning itself between
mass market and high end. P333. Par 1
0.06
3
0.18
Total
1
3.58
Conclusion
Based on External Factor Evaluation Analysis, Tesco achieved 3.58 which shows that the company is responding in an outstanding way towards the opportunities and threats in its industries. As a matter of fact, we can clearly see that Tesco external strategies have successfully take advantage of existing opportunities and at the same time struggle to reduce the threats.
3.8 Competitive Profile Matrix (CPM) Analysis
Key SUCCESS FACTORS
Weight
Tesco
ASDA
Sainsbury's
Rating
Score
Rating
Score
Rating
Score
Brand Value & Reputation
0.43
4
1.72
4
1.72
3
1.29
IT Integration
0.37
4
1.48
3
0.11
4
1.48
Supplier Management
0.20
3
0.60
3
0.60
4
0.80
Total
1
3.8
3.43
3.57
Conclusion:
From the CPM analysis we can see that Tesco CPM value is 3.8 which is ahead of the other competitors such as ASDA and Sainsbury. It is clear to know that Tesco is the industry leader. From this analysis we can see that Sainsbury's is the closest competitors for Tesco. On the other hand, because of the lack information about ASDA, I will going to take Sainsbury's as the main competitor for the internal analysis. In fact, there are not so much differences between Sainsbury's and ASDA in terms of their position in the industry.
4.0 Internal Analysis
4.1 Cultural Analysis
Case Facts
S
W
Tesco
Sainsbury's
Tesco is the most customer-focused business that I have ever
worked for. They are absolutely obsessed with the
customer. (Pg. 335,para4)
King perceived Sainsbury's to be not sufficiently
focused on its customers or its main competitors (Pg. 339,para4)
The Tesco Way" :
implies a shift from a focus on the corporation to a
focus on people, both employees and customers (Pg. 333,para5)
N/A
"This obsession with our customers, their needs, and how
these must be changing, means that you should not expect
us to go on opening large edge-of-town superstores long
after the need for new ones has passed. "(Pg. 333,para5)
N/A
Simple and
clear offering logic is also evident in the strategic move
into telecommunications. (Pg. 337,para2)
N/A
Porter anJ
managing director Ian MacLaurin abandoned the'pile it
high and sell it cheap" philosophy of Cohen, which had
left the company stagnating with a bad image(pg.332,para4)
N/A
4.2 Management Functions
Case Facts
S
W
Functions
Tesco
Sainsbury's
Planning
Esso would operate
the forecourts and sell their fuel via the Tesco store.
Ten years later, over 600 -Tesco/Esso stores can be found
across the United Kingdom. (Pg. 332,para4)
N/A
N/A
By 2010, Sainsbury's expects to achieve sales
of €3.5 billion, with 33 percent of its total sales coming
from non-food businesses. (Pg. 337,para4)
-
-
N/A
On October,1, 2007, Sainsbury's announced plans to
relocate their Store Support Centre from Holborn to
Kings Cross 1n 2011. (Pg. 340,para5)
-
-
Organising
ln the 1990s, Tesco strongly expanded overseas
by increasing investments in emerging markets such
as Hungary, the Czech Republic, Thailand, and South
Korea. (Pg. 337,para5)
In 2oo1, Sainsbury's
also expanded its share of the convenience store market through other acquisitions. Bell's Stores, a 54-store chain based in northeast England, was acquired in
February 2004. Jackson's Stores, a chain of 114 stores
based in Yorkshire and the North Midlands, was purchased
in August 2004. JB Beaumont, a chain of six
stores in the East Midlands, was acquired in November, 2004. (Pg. 334,para2)
In 1994, Tesco acquired the Scottish supermarket
chain Williarn Low. (Pg.337,para5)
N/A
In March 1997, Tesco
announced the purchase of the retail arm of Associated
British Foods, which consisted of the Quinnsworth,
Stewarts, and Crazy Prices chains in the Republic of
Ireland and Northern Ireland, as well as associated businesses, for €640 million. This acquisition gave Tesco both
a major presence in the Republic of Ireland and a larger
presence in Northern Ireland than Sainsbury's, (Pg. 337,para5)
Sainsbury's move into Northern lreland was undertaken
in a very different way than that of Tesco. While
Sainsbury's outlets were all new developments(Pg. 339,para2)
Tesco
Extra, launched in 1997, is the largest format, consisting
mainly of out-of-town hypermarkets that stock Tesco's
entire product range and offer free parking (Pg. 333,para5)
Sainsbury's Launched the "Sainsbury's
SavaCentre hypermarket format as a joint venture with
British Home Stores. (Pg. 333,para4)
In
addition, acquisitions and alliances complemented the
organic growth strategy . (Pg. 334,para1)
Sainsbury's also expanded by acquisition. (Pg. 334,para2)
In late
2005, it purchased the 2l remaining Safeway/BP stores
after Morrison's dissolved the Safeway/BP Partnership.
In 1997, (Pg. 334,para1)
As Part
of the acquisition of Safeway Group by Morrison,
Morrison's was to dispose of 53 of the combined
group's stores. In May 200,1, Sainsbury's announced that
it would acquire I4 of these stores, 13 Safeway stores.
and one Morrison's outlet, all located primarily in the
Midlands and the north of England. (Pg. 334,para4)
Tesco, for example, purchased
Adminstore in 2004, owner of 45 Cullens, Europa, and
Harts convenience stores in and around London. (Pg. 334,para1)
SL Shaw Ltd, which owned six stores, was acquired
in April 2005 for 6 million. (Pg. 334,para2)
Tesco formed an alliance with Esso Petroleum
Company t.td (now part of ExxonMobil Corp.) (Pg. 334,para1)
N/A
Tesco Mobile was launched
as a joint venture with 02, and Tesco Home Phone
was created in partnership with Cable & Wireless. In
August 2004, Tesco Broadband, an ADSL-based service
delivered via BT phone lines, was launched in partnership
with NTL. in January 2006, Tesco Internet Phone, a Voice over Internet Protocol service, was launched
in conjunction with Freshtel of Australia(Pg. 334,para2)
Sainsbury was much more reluctant to move into
non food retailing. (Pg. 337,para3)
Tesco Personal Finance was launched as a fifty fifty banking joint venture with the Royal Bank
of Scotland (Pg.336,para4)
Sainsburys bank was established
as a joint venture between J Sainsbury plc and the Bank
of Scotland (now HBOS). (Pg.337,para4)
-
On September 29, 2004
Sainsbury's established Sainsbury's Convenience Stores
Ltd to manage its Sainsbury's local stores and the Bell's
and Jackson's chains (Pg. 334,para2)
-
-
-
Sainsbury's did not release
any e-commerce sales figures, but said it was still on
track to expand its Web service to 200 stores by March
2010. (Pg. 336,para3)
-
-
In 2002, Tesco purchased l3 HIT hypermarkets
in Poland. In June 2003, Tesco purchased the C Two-
Network in lapan. It also acquired a majority stake in
the Turkish supermarket chain Kipa. Another acquisition
was the Lotus chain in Thailand. In mid-2006'
Tesco purchased an 80 Percent stake in Casino's Leader
Price supermarkets in Poland, which were subsequently
reconfigured as small Tesco stores. (Pg. 338,para2)
N/A
Tesco has responded
to the need to be sensitive to local expectations in
foreign countries by entering into Joint ventures with local partners, such as Samsung Group in South Korea
(Samsung-Tesco Homeplus), and Charoen Pokphand
in Thailand (Tesco Lotus) (Pg. 338,para3)
N/A
Tesco announced that it was
selling its operations in Taiwan to Carrefour and purchasing
Carrefour stores in the Czech Republic and
Slovakia. Both companies stated that they were concentrating
their efforts in countries where they had strong
market positions. (Pg. 338,para5)
N/A
Motivating
N/A
lnspired by the success of its main
rivals (ASDA had also moved strongly into the non-food area) and the sheer size of the U.K. non-food market (Pg. 335,para3)
-
-
N/A
Investors
were angered by a bonus share award of over €2 million,
despite poor company performance. (Pg. 339,para3)
-
-
Staffing
Jack Cohen resigned and was replaced
as chairman by his son-in-law, Leslie Porter (Pg. 332,para4)
At the end of March 2004, Davis was promoted to
chairman and was replaced as CEO of Sainsbury's
by Justin King. Justin King joined Sainsbury's from
Marks and Spencer plc, where he was a director with
responsibility for its food division and Kings Super
Markets, Inc, a subsidiary in the United States. King
was also previously a managing director at ASDA, with
responsibility for hypermarkets. (Pg. 339,para3)
N/A
On January 14, 2000, Sir Peter Davis
was appointed Sainsbury's CEO. This decision was well
received by investors and analysts, as in his first two
years he raised profits above targets(Pg. 335,para3)
-
-
The program has numerous
partners (e.g., hundreds of British pubs), but the Clubcard
belongs to Tesco alone (Pg. 335,para4)
In Nectar,
Sainsbury's has strong partners such as Barclaycard,
British Petroleum, and the department store chain
Debenhams. (Pg. 335,para5)
N/A
Although some employees transferred from the traditional
side of the business, Sainsbury's also hired new
staff with Web and marketing skills(Pg. 336,para3)
-
-
Appointing a high
proportion of Local personnel to management Positions(Pg. 338,para3)
ln July 2004, Philip
Hampton was appointed chairrnan. Hampton had
previously worked for British Steel, British Gas, BT, and
Lloyds TSB.
ln 2005 and 2006, the company covertly
sent an advance team consisting of executives in disguise
to conduct intelligence on potential competitors. (Pg. 339,para2).
N/A
N/A
Hired Lawrence Christensen,
previously an expert in logistics at Safeway, as supply
chain director. (Pg. 339,para5)
-
-
Controlling
Tesco expanded Tesco Extra and strengthened its
hypermarket formats (Pg. 333,para5)
Sainsbury's retreated from hypermarket (Pg. 333,para5)
Tesco decided to
draw goods from suppliers into regional distribution
centers for preparation and delivery to stores. Tesco is
extending this logistic practice to cover collection from
suppliers (factory gate pricing) and input to suppliers in
a drive to reduce costs and improve reliability (Pg. 335,para2)
This office, part of a new building
complex. will allow both cost savings and energy
efficiency(Pg. 340,para5)
Tesco paired its marketing
strength with the expertise of existing telecom
operators. (Pg. 337,para3)
N/A
Tesco successfully fought off
Sainsbury's for control of the Dundee-based firm, which then operated 57 stores(Pg. 337,para5)
N/A
4.3 Marketing Strategy
Factors
Case Facts
S
W
Tesco
Sainsbury's
Marketing Strategy
Its overarching store strategy
is reflected in its core marketing slogan adopted when
Terry Leahy became CEO in 1997 (Pg. 333,para4)
N/A
Tesco entered the housing market with a self advertising Web site, Tesco Property Market, Other
strategic initiatives into non-food items include, for
example, following a successful trial in 2006, "Apple"
zones in l2 outlets. (Pg. 337,para3)
N/A
"An inclusive offer" is how Tesco describes its aspiration to appeal to upper, medium-, and low-income customers in the same stores. (Pg. 334,para3)
N/A
They
are promoted by leaflets in Tesco stores and through its website. (Pg. 333,para5)
N/A
One plank of this program has been Tesco's use of its
private label products, including the upmarket "Finest'
and low price "Value." Other examples include organic,
kids, British specialty food, and "free from" brands(pg.334,para3)
N/A
Recently, Tesco entered the housing Market with a
self advertising Web site, Tesco Property Market, Other
strategic initiatives into non-Food items(Pg.337,para3).
N/A
Promotion
Programs
"The Tesco Way" :
implies a shift from a focus on the corporation to a
focus on people, both employees and customers. (Pg. 333,para5)
N/A
Every three months, holders receive a
Clubcard statement offering discount coupons that can
be spent in-store, online (if opted into evouchers), or
on various Clubcard deals.
(Pg. 335,para4)
Today, points on spending in-store are earned at a rate of
two points per €1 spent (except point per liter of Fuel);
500 points can subsequently be exchanged for a voucher
worth €2.50 to spend in Sainsbury's. (Pg. 335,para5)
Product and Service Planning
Tesco has greatly diversified, extending its
business lines from food into non-food, clothing, financial.
Services, and telecommunications. (Pg. 332,para1)
Extended its clothing range with
an organic line. In addition to food and non-food items
Tesco Ireland announced that it
would enter into a joint venture with C)2 Ireland to
offer mobile telecommunications services, also under
the Tesco Mobile brand. (Pg. 3327,para2)
N/A
Today Tesco is the clear market leader (pg. 332 para2)
Tesco Superstores are
the standard large grocery supermarkets, with a much
smaller range of non-food goods than Extra (Pg. 333,para5)
This was the first attempt in the
United Kingdom to launch supermarkets with a large
non-food range. (Pg. 333,para4)
Tesco's use of its private label products, including the upmarket "Finest'
and low price "Value. (Pg. 334,para3)
Sainsbury's has also invested in Private labels. A large
Sainsbury's store typically stock around 50,000 lines of
which about half are private labels. (Pg. 335,para1)
Provides consumer goods, telecommunication, and financial services online. As of November
2006, Tesco was the only food retailer to make online
shopping profitable. (Pg. 336,para2)
In addition to food,
also available are flowers, wine, gifts, and electronics. (Pg. 336,para3)
Tesco was the first to Launch a Clubcard
system. (Pg. 335,para4)
After long internal
debates, Sainsbury introduced the Sainsbury's reward
card in 1996. (Pg. 335,para5)
Tesco has operated on the Internet since 1994
and was the first retailer in the world to offer a robust
home shopping service in 1996 (Pg.335,para4)
N/A
Pricing
Tesco emphasized its low-price private label ("Value") and continued to cut price (Pg. 333,para3)
Sainsbury's emphasized
price reductions on the standard private labels. The price cuts were prompted by the increased price pressure
from the market entry of discounters (Pg. 333,para3)
N/A
Sainsbury's targeted
the upper price segment, positioning itself between
mass market and high end. . (Pg. 333,para1)
-
-
Tesco online customers paid over f4 per delivery (Pg. 336,para3)
Sainsbury's online customers incurred the lowest
average delivery charge during the period, at just over
f3. (Pg. 336,para3)
Distribution
Most
are located in suburbs of cities or on the edges of large and
medium-sized towns. Tesco Metro stores are
sized between normal Tesco stores and Tesco Express
stores. They are mostly located in city centers and on
the high streets of small towns. The first Tesco Metro
was opened in Covent Garden, London, in 1992. (Pg. 333,para5)
N/A
They are found in busy city center districts, in small
shopping precincts in residential areas, and in petrol
station forecourts (Pg. 333,para5)
N/A
The
agreement included several petrol filling stations on
lease from Esso where Tesco would operate the store
under the Express format (Pg. 334,para1)
N/A
The company is currently conducting trials at a finance
center in the Glasgow Silverburn Extra store, providing
free financial advice and quotes for insurance and loans. The center also has a Euro cash machine
providing commission-free Euros and a Bureau de
Change run by Travelex.
(pg.337 ,para1)
Food sales
are available within delivery range of selected stores,
goods being hand-picked within each store (pg.336 ,para2)
in contrast
to the warehouse model followed by most competitors which allows rapid expansion with
limited investment.
(e.g., Ocado) (pg.336 ,para2)
Marketing Research
Tesco implemented the Clubcard
rewards program to gather customer information, which
is then used to cater to specific potential customer needs
and wants. When shoppers sign up for the card, they
automatically submit their ages, genders, and incomes. Tesco segments their shoppers on the basis of these factors. (Pg. 335,para4)
King
ordered a direct mail campaign to one million Sainsbury's
customers, asking what the) wanted from the company
and where the company could improve(Pg. 339,para4)
Like James Bond movie, the company's agents sought
to keep their plans secret by posing as Hollywood film
producers making a movie about supermarkets, according
to Business Week. ln the end Tesco
did obtain the necessary information to proceed with
its store openings. (Pg. 339,para2)
N/A
4.5 Production/Operation
Decision Area
Case Issue
Strength
Weakness
Tesco
Sainsbury's
Process
In 1977,
Tesco launched "Operation Checkout," which included
price reductions and centralized purchasing for all its
stores (Pg. 332,para4)
N/A
They stay open in the late evening and
feature a differentiated pricing and offer system (Pg. 332,para5)
N/A
Tesco
stores are divided into five formats, differentiated
by size and range o[ products, and are customized to
specific segments: Tesco Extra, Tesco Superstores,
Tesco Metro, Tesco Express, and One Stop (see Exhibit
2). The approximately 500 One Stop stores are the
smallest units. (Pg. 333,para5)
Now, Sainsbury's operates three formats:
regular Sainsbury's stores, Sainsbury's local stores (convenience
stores), and Sainsbury's central stores (smaller
supermarkets in urban locations). (Pg. 333,para4)
It also has online operations in
the Republic of Ireland and in South Korea(Pg. 336,para2)
N/A
In 2003, Tesco.com's then-CEO,
John Browett, received the Wharton Infosys Business
Transformation Award for the innovative processes he
used to support this online food service (Pg. 336,para2)
N/A
N/A
Sainsbury's Online currently operates from 144 stores and uses two dedicated picking centers
that are not open to the public. (Pg. 336,para3)
-
-
The company is currently conducting trials at a finance
center in the Glasgow Silverburn Extra store, providing free financial advice and quotes for insurance and loans(Pg. 337,para1)
N/A
Began in the late 1970s
with the purchase of a small company in the Republic of
Ireland. The small scale nature of this first foray was seen
as a weakness, and the company was eventually sold in the
mid-1980s. (Pg. 337,para5)
N/A
Capacity
Total number of stores are 1,988 (Exhibit 2:Tesco's store portfolio in the united Kingdom (at the end of 2007)
Total number of stores are 752 (Exhibit 1: Sainsbury's Store Portfolio in the United Kingdom (at the end of 2006)
Total area is 27,785,000 ft2 (Exhibit 2:Tesco's store portfolio in the united Kingdom (at the end of 2007)
Total area is 16,737,000 ft2 (Exhibit 1: Sainsbury's Store Portfolio in the Un ted Kingdom (at the end of 2006)
Total area's are 2,581,310 ft2 (Exhibit 2:Tesco's store portfolio in the united Kingdom (at the end of 2007)
Total area1,543,000 ft2 (Exhibit 1: Sainsbury's Store Portfolio in the Un ted Kingdom (at the end of 2006).
Tesco managed to increase sales per square feet by
11 percent
(Pg. 334,para1)
while Sainsbury's gained only 3 percent Pg. (334,para1)
Tesco announced in
December 2004 that it had signed up 500,000 customers
to its mobile service in the 12 months since launch.
By December 2005, one million customers were using
its mobile service, and by April 2006, Tesco claimed
over one and, one half million telecom accounts in
total, including mobile, fixed line, and broadband. (Pg. 337,para2)
N/A
Inventory
Compared to 58 units for Tesco(Pg. 336,para3).
Sainsbury's
online shoppers also bought more items per order, with
both averaging 69 units per order. (Pg. 336,para3)
This represents quite strong
growth, but is far less than Tesco, which processes
weekly orders of 250,000. Pg. 336,para3)
October 2007, Sainsbury's was receiving around 80,000
online orders per week. Pg. 336,para3)
Workforce
In 1997, the new CEO, Terry Leahy, enforced
Tesco's international growth strategies beyond Great
Britain.( Pg. 338,para1)
Starting in the 1990s, it pursued a broad
set of growth initiatives, steadily increasing its market
share and gaining importance (Pg. 332,para2)
Specific training
was provided on e business, as well as cross-functional
training. (Pg. 336,para3)
-
N/A
Terminating 750 headquarters staff and recruiting
around 3,000 shop floor staff to improve the quality
of service and the firm's problem of stock availability(Pg. 339,para4).
Quality
The stole appeals to wide
reaching demographics across the country and has
built up a heritage of reliability and trustworthiness which keeps shoppers returning to its store. (Pg. 334,para3)
N/A
it has succeeded in building an image on
providing good value at Low Prices. (Pg. 340,para7)
-
4.6 Research & Development (R&D)
Case Facts
Strength
Weakness
Tesco
Sainsbury's
N/A
Sainsbury's has been involved in e business and
home-shopping development since 2000, when it
launched Sainsbury's to You in April of that year. (Pg.336,para3)
Tesco implemented the Clubcard
rewards program to gather customer information, which
is then used to cater to specific potential customer needs
and wants. When shoppers sign up for the card, they
automatically submit their ages, genders, and incomes(pg.335,para4)
King perceived Sainsbury's to be not sufficiently
focused on its customers or its main competitors. King
ordered a direct mail campaign to one million Sainsbury's
customers, asking what they wanted from the company
and where the company could improve
4.7 Management Information Systems Audit
Case Facts
Strength
Weakness
Tesco
Sainsbury's
As soon as the shopper uses the card online or
in-store, product information is automatically uploaded
into the Tesco database. Product information is used to cross-sell additional products and services, such as food delivery (Pg. 335,para3)
The card scheme
is run by a third-party company, Loyalty management
UK (LMUK), which collects information on behalf of the
partner sponsors. (Pg. 335,para5)
N/A
The
group was not ensuring that shelves were fully stocked,
partly due to the failure of the IT systems introduced by
Peter Davis(Pg. 339,para4)
-
-
4.8 Value Chain Analysis (VCA)
Variables
Case Facts
Strength
Weakness
Tesco
Inbound Logistics
Tesco decided to
draw goods from suppliers into regional distribution
centers for preparation and delivery to stores. Tesco is
extending this logistic practice to cover collection from
suppliers (factory gate pricing) and input to suppliers in
a drive to reduce costs and improve reliability (Pg. 335,para2)
Process
In 1977,
Tesco launched "Operation Checkout," which included
price reductions and centralized purchasing for all its
stores (Pg. 332,para4)
The company is currently conducting trials at a finance
center in the Glasgow Silverburn Extra store, providing free financial advice and quotes for insurance and loans(Pg. 337,para1)
Tesco
stores are divided into five formats, differentiated
by size and range o[ products, and are customized to
specific segments: Tesco Extra, Tesco Superstores,
Tesco Metro, Tesco Express, and One Stop (see Exhibit
2). The approximately 500 One Stop stores are the
smallest units. (Pg. 333,para5)
In 2003, Tesco.com's then-CEO,
John Browett, received the Wharton Infosys Business
Transformation Award for the innovative processes he
used to support this online food service (Pg. 336,para2)
Outbound Logistics
Tesco
Extra, launched in 1997, is the largest format, consisting mainly of out-of-town hypermarkets that stock Tesco's entire product range and offer free parking (pg.333,para5)
They are found in busy city center districts, in small
shopping precincts in residential areas, and in petrol
station forecourts(pg.333,para5)
"An inclusive offer" is how Tesco describes its aspiration to appeal to upper, medium-, and low-income customers in the same stores. (Pg. 334,para3)
They
are promoted by leaflets in Tesco stores and through its website. (Pg. 333,para5)
Food sales
are available within delivery range of selected stores,
goods being hand-picked within each store (pg.336 ,para2)
The company is currently conducting trials at a finance center in the Glasgow Silverburn Extra store, providing free financial advice and quotes for insurance and loans. The center also has a Euro cash machine providing commission-free Euros and a Bureau de Change run by Travelex.
(pg.337 ,para1)
Marketing &Sales
"The Tesco Way" :
implies a shift from a focus on the corporation to a
focus on people, both employees and customers. (Pg. 333,para5)
Every three months, holders receive a
Clubcard statement offering discount coupons that can
be spent in-store, online (if opted into evouchers), or
on various Clubcard deals.
(Pg. 335,para4)
Like James Bond movie, the company's agents sought
to keep their plans secret by posing as Hollywood film
producers making a movie about supermarkets, according
to Business Week. ln the end Tesco
did obtain the necessary information to proceed with
its store openings. (Pg. 339,para2)
Service
Tesco has greatly diversified, extending its
business lines from food into non-food, clothing, financial.
Services, and telecommunications. (Pg. 332,para1)
Tesco Superstores are
the standard large grocery supermarkets, with a much
smaller range of non-food goods than Extra (Pg. 333,para5)
Tesco's use of its private label products, including the upmarket "Finest'
and low price "Value. (Pg. 334,para3)
Provides consumer goods, telecommunication, and financial services online. As of November
2006, Tesco was the only food retailer to make online
shopping profitable. (Pg. 336,para2)
Tesco was the first to Launch a Clubcard
system. (Pg. 335,para4)
Tesco has operated on the Internet since 1994
and was the first retailer in the world to offer a robust
home shopping service in 1996 (Pg.335,para4)
*For the supporting activities, there have already covered in management function, Management Information System and Research & Development.
4.9 Strengths and Weaknesses
4.9.1 Strengths List:
NO
Case Fact
Today Tesco is the clear market leader (pg. 332 para2)
Tesco is the most customer-focused business that I have ever
worked for. They are absolutely obsessed with the
customer. (Pg. 335,para4)
Esso would operate
the forecourts and sell their fuel via the Tesco store.
Ten years later, over 600 -Tesco/Esso stores can be found
across the United Kingdom. (Pg. 332,para4)
ln the 1990s, Tesco strongly expanded overseas
by increasing investments in emerging markets such
as Hungary, the Czech Republic, Thailand, and South
Korea. (Pg. 337,para5)
In 1994, Tesco acquired the Scottish supermarket
chain Williarn Low. (Pg.337,para5)
In March 1997, Tesco
announced the purchase of the retail arm of Associated
British Foods, which consisted of the Quinnsworth,
Stewarts, and Crazy Prices chains in the Republic of
Ireland and Northern Ireland, as well as associated businesses, for €640 million. This acquisition gave Tesco both
a major presence in the Republic of Ireland and a larger
presence in Northern Ireland than Sainsbury's, (Pg. 337,para5)
Tesco
Extra, launched in 1997, is the largest format, consisting
mainly of out-of-town hypermarkets that stock Tesco's
entire product range and offer free parking (Pg. 333,para5)
In
addition, acquisitions and alliances complemented the
organic growth strategy . (Pg. 334,para1)
In late
2005, it purchased the 2l remaining Safeway/BP stores
after Morrison's dissolved the Safeway/BP Partnership.
In 1997, (Pg. 334,para1)
Tesco, for example, purchased
Adminstore in 2004, owner of 45 Cullens, Europa, and
Harts convenience stores in and around London. (Pg. 334,para1)
Tesco formed an alliance with Esso Petroleum
Company t.td (now part of ExxonMobil Corp.) (Pg. 334,para1)
Tesco Mobile was launched
as a joint venture with 02, and Tesco Home Phone
was created in partnership with Cable & Wireless. In
August 2004, Tesco Broadband, an ADSL-based service
delivered via BT phone lines, was launched in partnership
with NTL. in January 2006, Tesco Internet Phone, a Voice over Internet Protocol service, was launched
in conjunction with Freshtel of Australia(Pg. 334,para2)
Tesco Personal Finance was launched as a fifty fifty banking joint venture with the Royal Bank
of Scotland (Pg.336,para4)
In 2002, Tesco purchased l3 HIT hypermarkets
in Poland. In June 2003, Tesco purchased the C Two-
Network in lapan. It also acquired a majority stake in
the Turkish supermarket chain Kipa. Another acquisition
was the Lotus chain in Thailand. In mid-2006'
Tesco purchased an 80 Percent stake in Casino's Leader
Price supermarkets in Poland, which were subsequently
reconfigured as small Tesco stores. (Pg. 338,para2)
Tesco has responded
to the need to be sensitive to local expectations in
foreign countries by entering into Joint ventures with local partners, such as Samsung Group in South Korea
(Samsung-Tesco Homeplus), and Charoen Pokphand
in Thailand (Tesco Lotus) (Pg. 338,para3)
Tesco announced that it was
selling its operations in Taiwan to Carrefour and purchasing
Carrefour stores in the Czech Republic and
Slovakia. Both companies stated that they were concentrating
their efforts in countries where they had strong
market positions. (Pg. 338,para5)
The program has numerous
partners (e.g., hundreds of British pubs), but the Clubcard
belongs to Tesco alone (Pg. 335,para4)
ln 2005 and 2006, the company covertly
sent an advance team consisting of executives in disguise
to conduct intelligence on potential competitors. (Pg. 339,para2).
Tesco expanded Tesco Extra and strengthened its
hypermarket formats (Pg. 333,para5)
Tesco decided to
draw goods from suppliers into regional distribution
centers for preparation and delivery to stores. Tesco is
extending this logistic practice to cover collection from
suppliers (factory gate pricing) and input to suppliers in
a drive to reduce costs and improve reliability (Pg. 335,para2)
Tesco paired its marketing
strength with the expertise of existing telecom
operators. (Pg. 337,para3)
Tesco successfully fought off
Sainsbury's for control of the Dundee-based firm, which then operated 57 stores(Pg. 337,para5)
Its overarching store strategy
is reflected in its core marketing slogan adopted when
Terry Leahy became CEO in 1997 (Pg. 333,para4)
Tesco entered the housing market with a self advertising Web site, Tesco Property Market, Other
strategic initiatives into non-food items include, for
example, following a successful trial in 2006, "Apple"
zones in l2 outlets. (Pg. 337,para3)
"An inclusive offer" is how Tesco describes its aspiration to appeal to upper, medium-, and low-income customers in the same stores. (Pg. 334,para3)
They
are promoted by leaflets in Tesco stores and through its website. (Pg. 333,para5)
"The Tesco Way" :
implies a shift from a focus on the corporation to a
focus on people, both employees and customers. (Pg. 333,para5)
Every three months, holders receive a
Clubcard statement offering discount coupons that can
be spent in-store, online (if opted into evouchers), or
on various Clubcard deals.
(Pg. 335,para4)
Tesco has greatly diversified, extending its
business lines from food into non-food, clothing, financial.
Services, and telecommunications. (Pg. 332,para1)
Tesco Ireland announced that it
would enter into a joint venture with C)2 Ireland to
offer mobile telecommunications services, also under
the Tesco Mobile brand. (Pg. 3327,para2)
Tesco's use of its private label products, including the upmarket "Finest'
and low price "Value. (Pg. 334,para3)
Provides consumer goods, telecommunication, and financial services online. As of November
2006, Tesco was the only food retailer to make online
shopping profitable. (Pg. 336,para2)
Tesco was the first to Launch a Clubcard
system. (Pg. 335,para4)
Tesco has operated on the Internet since 1994
and was the first retailer in the world to offer a robust
home shopping service in 1996 (Pg.335,para4)
Most are located in suburbs of cities or on the edges of large and
medium-sized towns. Tesco Metro stores are
sized between normal Tesco stores and Tesco Express
stores. They are mostly located in city centers and on
the high streets of small towns. The first Tesco Metro
was opened in Covent Garden, London, in 1992. (Pg. 333,para5)
They are found in busy city center districts, in small
shopping precincts in residential areas, and in petrol
station forecourts (Pg. 333,para5)
The
agreement included several petrol filling stations on
lease from Esso where Tesco would operate the store
under the Express format (Pg. 334,para1)
Tesco implemented the Clubcard
rewards program to gather customer information, which
is then used to cater to specific potential customer needs
and wants. When shoppers sign up for the card, they
automatically submit their ages, genders, and incomes. Tesco segments their shoppers on the basis of these factors. (Pg. 335,para4)
Like James Bond movie, the company's agents sought
to keep their plans secret by posing as Hollywood film
producers making a movie about supermarkets, according
to Business Week. ln the end Tesco
did obtain the necessary information to proceed with
its store openings. (Pg. 339,para2)
In 1977,
Tesco launched "Operation Checkout," which included
price reductions and centralized purchasing for all its
stores (Pg. 332,para4)
They stay open in the late evening and
feature a differentiated pricing and offer system (Pg. 332,para5)
Tesco
stores are divided into five formats, differentiated
by size and range o[ products, and are customized to
specific segments: Tesco Extra, Tesco Superstores,
Tesco Metro, Tesco Express, and One Stop (see Exhibit
2). The approximately 500 One Stop stores are the
smallest units. (Pg. 333,para5)
It also has online operations in
the Republic of Ireland and in South Korea(Pg. 336,para2)
In 2003, Tesco.com's then-CEO,
John Browett, received the Wharton Infosys Business
Transformation Award for the innovative processes he
used to support this online food service (Pg. 336,para2)
The company is currently conducting trials at a finance
center in the Glasgow Silverburn Extra store, providing free financial advice and quotes for insurance and loans(Pg. 337,para1)
Total number of stores are 1,988 (Exhibit 2:Tesco's store portfolio in the united Kingdom (at the end of 2007)
Total area is 27,785,000 ft2 (Exhibit 2:Tesco's store portfolio in the united Kingdom (at the end of 2007)
Total area's are 2,581,310 ft2 (Exhibit 2:Tesco's store portfolio in the united Kingdom (at the end of 2007)
Tesco managed to increase sales per square feet by
11 percent
(Pg. 334,para1)
Tesco announced in
December 2004 that it had signed up 500,000 customers
to its mobile service in the 12 months since launch.
By December 2005, one million customers were using
its mobile service, and by April 2006, Tesco claimed
over one and, one half million telecom accounts in
total, including mobile, fixed line, and broadband. (Pg. 337,para2)
This represents quite strong
growth, but is far less than Tesco, which processes
weekly orders of 250,000. Pg. 336,para3)
Starting in the 1990s, it pursued a broad
set of growth initiatives, steadily increasing its market
share and gaining importance (Pg. 332,para2)
The stole appeals to wide
reaching demographics across the country and has
built up a heritage of reliability and trustworthiness which keeps shoppers returning to its store. (Pg. 334,para3)
it has succeeded in building an image on
providing good value at Low Prices. (Pg. 340,para7)
As soon as the shopper uses the card online or
in-store, product information is automatically uploaded
into the Tesco database. Product information is used to cross-sell additional products and services, such as food delivery (Pg. 335,para3)
Profit for year
Financial Turnover
Basic Earnings per Share
4.9.2 Weaknesses List:
NO
Case Fact
Jack Cohen resigned and was replaced
as chairman by his son-in-law, Leslie Porter (Pg. 332,para4)
Tesco Superstores are
the standard large grocery supermarkets, with a much
smaller range of non-food goods than Extra (Pg. 333,para5)
Tesco emphasized its low-price private label ("Value") and continued to cut price (Pg. 333,para3
Tesco online customers paid over f4 per delivery (Pg. 336,para3)
Began in the late 1970s
with the purchase of a small company in the Republic of
Ireland. The small scale nature of this first foray was seen
as a weakness, and the company was eventually sold in the
mid-1980s. (Pg. 337,para5)
Sainsbury's
online shoppers bought more items per order, with
both averaging 69 units Compared to 58 units for Tesco(Pg. 336,para3).
Porter and J
managing director Ian MacLaurin abandoned the 'pile it
high and sell it cheap" philosophy of Cohen, which had
left the company stagnating with a bad image(pg.332,para4)
4. 9.3 Internal Factor Evaluation (IFE) Matrix
Item
Key external factor
Weight
Rating
Weighted score
Strengths
1
Tesco is the most customer-focused business that I have ever worked for. They are absolutely obsessed with the customer. (Pg. 335,para4)
0.10
4
0.40
2
In the 1990s, Tesco strongly expanded overseas by increasing investments in emerging markets such as Hungary, the Czech Republic, Thailand, and South Korea. (Pg. 337,para5)
0.07
3
0.21
3
The stole appeals to wide reaching demographics across the country and has built up a heritage of reliability and trustworthiness which keeps shoppers returning to its store. (Pg. 334,para3)
0.08
3
0.24
4
Tesco has responded to the need to be sensitive to local expectations in foreign countries by entering into Joint ventures with local partners, such as Samsung Group in South Korea(Samsung-Tesco Homeplus), and Charoen Pokphandin Thailand (Tesco Lotus) (Pg. 338,para3)
0.08
3
0.24
5
ln 2005 and 2006, the company covertly sent an advance team consisting of executives in disguise to conduct intelligence on potential competitors. (Pg. 339,para2).
0.07
4
0.28
6
Tesco paired its marketing strength with the expertise of existing telecom operators. (Pg. 337,para3)
0.06
3
0.18
7
Tesco was the first to Launch a Clubcard system. (Pg. 335,para4)
0.08
4
0.32
8
Tesco implemented the Clubcard rewards program to gather customer information, which is then used to cater to specific potential customer needs and wants. When shoppers sign up for the card, they automatically submit their ages, genders, and incomes. Tesco segments their shoppers on the basis of these factors. (Pg. 335,para4)
0.08
4
0.32
9
In 2003, Tesco.com's then-CEO,John Browett, received the Wharton Infosys Business Transformation Award for the innovative processes he used to support this online food service (Pg. 336,para2
0.08
4
0.32
10
it has succeeded in building an image on providing good value at Low Prices. (Pg. 340,para7)
0.09
4
0.36
Weaknesses
1
Tesco Superstores are the standard large grocery supermarkets, with a much smaller range of non-food goods than Extra (Pg. 333,para5)
0.04
2
0.08
2
Tesco emphasized its low-price private label ("Value") and continued to cut price (Pg. 333,para3
0.04
3
0.12
3
Porter and J
managing director Ian MacLaurin abandoned the 'pile it
high and sell it cheap" philosophy of Cohen, which had
left the company stagnating with a bad image(pg.332,para4)
0.05
2
0.10
4
Began in the late 1970swith the purchase of a small company in the Republic of Ireland. The small scale nature of this first foray was seen as a weakness, and the company was eventually sold in the mid-1980s. (Pg. 337,para5)
0.03
2
0.06
5
Sainsbury's online shoppers bought more items per order, with both averaging 69 units Compared to 58 units for Tesco(Pg. 336,para3).
0.05
2
0.10
Total
1
3.33
Conclusion
IFE matrix shows the information related to strategy formulation Tesco. Tesco achieved an overall of 3.33 total weighted score based on the 1-4 scale. From here we can realise that the company is success internally. I considered Sainsbury in this case as Tesco main competitor for the internal analysis.
Existing Objective and Strategy
Existing objectives:
Differentiation strategy toward a narrow, focused market.
Strategy:
Tesco focuses on the creation of internal efficiencies that help Tesco withstand with external pressure
5.1 Long Term Objective
a) Financial Objective: N/A
b) Strategic Objective:
It has a long way to go before it overhauls Wal-Mart as the world's biggest grocer. But analysts said the same about overhauling Sainsbury's 15 years ago.. (Pg. 341, Para1)
5.2 Annual Objective
Objective
Case Fact
Strategic Objective
Market Development Strategy: Strategic Alliances
In 1994, Tesco acquired the Scottish supermarket
chain Williarn Low. (Pg.337,para5)
Tesco formed an alliance with Esso Petroleum
Company t.td (now part of ExxonMobil Corp.) (Pg. 334,para1
Product Development: Diversification
Tesco has greatly diversified, extending its
business lines from food into non-food, clothing, financial.
Services, and telecommunications. (Pg. 332,para1)
Financial Objective
To increase sales per square foot by 14% annually
TESCO managed to increase sales per square foot by 14percent (Pg334 , Para1)
5.3 Strategies
5.3.1 Strategies in action
The Type of Strategies
The Title of Strategies
Case Facts
Integration
Forward
Integration
Back ward
Integration
In common
with most other large retailers, Tesco decided to
draw goods from suppliers into regional distribution
centers for preparation and delivery to stores. P 335.para2
Tesco is
extending this logistic practice to cover collection from
suppliers (factory gate pricing) and input to suppliers in
a drive to reduce costs and improve reliability. P 335. Para 2
Horizontal
Integration
In late 2005, it purchased the 2l remaining Sat-eway/BP stores
after Morrison's dissolved the Safeway/BP Partnership- p334. Par 1
Intensive
Product Development
Products offered included credit cards
loans, mortgages, savings accounts, and several t),Pes ol
insurance, including car, home, line, pet, and travel. P336. Para 6
Market Development
Recently, Tesco entered the housing market with a
self advertising Web site, Tesco Property Market p337. Para 3
In 1994, Tesco acquired the Scottish supermarket
chain William Low. p337. Para 6
In March 1997, Tesco announced the purchase of the retail arn-l of Associated British Foods, which consisted of the Quinnsworth,
Stewarts, and Crazy Prices chains in the Republic of
Ireland and Northern Ireland, as well as associated businesses, for €640 million. p337. Para 6
In the 1990s, Tesco strongly expanded overseas
by increasing investments in emerging markets such
as Hungary, the Czech Republic, Thailand, and South
Korea. p337. Para 7
In 2002, Tesco purchased l3 HIT hypermarkets
in Poland.p338- para 2
In June 2003, Tesco purchased the C Two-
Network in lapan. p338- para 2
It also acquired a majority stake in
the Turkish supermarket chain Kipa. p338- para 2
Another acquisition
was the Lotus chain in Thailand. p338- para 2
In mid-2006'Tesco purchased an 80 Percent stake in Casino's Leader Price supermarkets in Poland, which were subsequently
reconfigured as small Tesco stores p338- para 2
in late 2004, the amount of floor space Tesco operated
outside the United Kingdom surpassed its home
market space for the first time, although the United
Kingdom still accounted for more than 75 Percent of
group revenue due to lower sales Per unit area outside
the territory p338- para 4
Tesco regularly continues to make small acquisitions to expand its international businesses. For example, in the 2005-06 fiscal
year, acquisitions were made in South Korea, Poland,
and Japan p338- para 4
In September 2005, Tesco announced that it was
selling its operations in Taiwan to Carrefour and purchasing
Carrefour stores in the Czech Republic and
Slovakia p338- para 4
In February 2006, Tesco announced its intention
to move into the United States, opening a chain
of convenience stores ol1 the West Coast (Arizona and
California), Fresh & Easy Neighbourhood Market. P 339- para 2
Marketing Penetration
ln 1995, Tesco surpassed
Sainsbury's to become the U.K. market leader- p332. Para 2
Tesco was the first to Launch a Clubcard
system.p335. p 4
Tesco implemented the Clubcard
rewards program to gather customer information, which
is then used to cater to specific potential customer needs
and wants. P335 p 4
Diversification
Related
Diversification
-
Not Related
Diversification
In recent years, Tesco has greatly diversified, extending its
business lines from food into non-food, clothing, financial services, and telecommunications- p33\2. Para 1
Originally specializing in food, Tesco began to
diversity into areas such as discount clothes, consumer
electronics, consumer financial services, DVD sales
and rentals, compact discs and music download
Internet service, consumer telecom, costumer health
insurance, consumer dental plans, and budget software.
p. 336. Para 5
In these new product segments, Tesco heavily built or
its skills in private labels. For example, it introduced
brands such as "Cherokee" and "F+F" in clothing,,
"Technika" and "Digilogic" in consumer electronics,
and other labels ranging from DVD players
televisions and computers. p. 336. Para 5
Tesco used its food brands "Finest" and "Value" to expand into non food In its Extra stores, Finest health and beauty, home, and Clothing lines resulted. p. 336. Para 5
Tesco also entered the telecommunications sector. P337. Para 2
In autumn 2003, Tesco Mobile was launched
as a joint venture with 02, and Tesco Home Phone
was created in partnership with Cable & Wireless. P337. Para 2
In August 2004, Tesco Broadband, an ADSL-based service
delivered via BT phone lines, was launched in partnership
with NTL. P337. Para 2
in January 2006, Tesco Internet Phone,
a Voice over Internet Protocol service, was launched
in conjunction with Freshtel ol Australia. P337. Para 2
. Tesco Mobile offers only four different pay-as-you-go tariffs: Value, Standard, Extra, and Staff (for employees). P337. Para 2
Defensive
Retrenchment
Regarding the pressure exerted from foreign and local rivals , Tesco, should intelligently managed itself, increased product diversification and change some procedures in order to cut costs in order to stay ahead in the industry and at the same time meet demands of the industry
SWOT
MATRIX
Strength
Weakness
1-Today Tesco is the clear market leader (pg. 332 para2)
2: In the 1990s, Tesco strongly expanded overseas
by increasing investments in emerging markets such
as Hungary, the Czech Republic, Thailand, and South
Korea. (Pg. 337,para5)
3:"An inclusive offer" is how Tesco describes its aspiration to appeal to upper, medium-, and low-income customers in the same stores. (Pg. 334,para3)
4- Tesco regularly continues to make acquisitions to expand its international business(pg. 338, para3)
5.Tesco is the most customer-focused business that I have ever worked for. They are absolutely obsessed with the
customer. (Pg. 335,para4)
1:Porter and J
managing director Ian MacLaurin abandoned the 'pile it
high and sell it cheap" philosophy of Cohen, which had
left the company stagnating with a bad image(pg.332,para4)
2:Began in the late 1970s
with the purchase of a small company in the Republic of
Ireland. The small scale nature of this first foray was seen
as a weakness, and the company was eventually sold in the
mid-1980s. (Pg. 337,para5)
Opportunity
SO
WO
1:Recent trends, such as health and wellness and ethical concerns, have opened opportunities,
even in the saturated food category; however, most food
retailers' growth is expected to stem from non-food
items. (Pg.341,para2)
2:Toward the end of the 1990s, both firms targeted online
distribution channels that promised large growth
potential(Pg.335,para6)
3:Non-store retailing growth rates were
expected to be higher than store based rates, as online
usage gained popularity among British consumers. (Pg.335,para6)
4:Following these predictions, the United Kingdom has evolved into a leader of internet retailing
in Europe, and growth is continuing. (Pg.335,para5
1-Relying on its own reputation and experience and applying new opportunities such as beauty and healthiness products based could guarantee success of Tesco in other industries( S1,O1)
2-Tesco strongly expanded overseas and as a market leader n UK Tesco can used the opportunity of the internet to target the growth of the potential customers (S1,O2O3)
3- Tesco which is most customer focused business should grab the opportunity to a new market segment in order to add more target market or consumers.(S5 , O1)
1-Tesco could use the opportunities of online distribution channel as the way for overcome the weakness of" the small scale nature" in order to get ready to compete with major players in the industry(W2,O2)
2-Focus on healthy industries to recover the current weakness (w2o1).
Threat
ST
WT
1: At the beginning of the 1990s, the U.K. retail
market slowly became more competitive(Pg.332,para5)
2:While service offerings today are quite similar, the
rivals' distribution strategies differ significantly. (Pg.335,para2)
3:In the mid-1990s, competition intensified as a price
war among these players emerged, resulting in squeezed
margins and cost cutting. It is not surprising that this
also had an adverse impact on the service level these corporations
provided. (Pg.333,para2)
1-Tesco could use its dominance in expanding its empayar to overseas in order to penetrate a new market and minimize competitive advantages of its competitors(S2,T3)
2-Tesco should continue the strategy of acquisition of its small competitors in order to neutralize their threat of cutting prices (S4, T3)
1-Regarding the pressure exerted from foreign and local rivals , Tesco, should intelligently managed itself, increased product diversification and change some procedures in order to cut costs in order to stay ahead in the industry and at the same time meet demands of the industry (W2T1T2T3)