BDMM8033- Global Strategic Marketing and Competitive Analysis

COMPETING AGAINST INDUSTRY GIANTS. COMPETING AGAINST TESCO

GROUP 4 SUNTHERESAN GANAPATHY IZHAK NORWIRA MIMI AFZAN AFZA

1 2 3 4 5

Company Overview Company History Competitor & Competitor Analysis Core Competencies PESTEL, PORTERS Model & SWOT Analysis TESCO Strategies Recommendation and Conclusion Questions

6
7 8

 is a United Kingdom based international supermarket chain largest British retailer by global sales and by domestic market share established in 1924 by Jack Cohen name is a combination of T.E. Stockwell ( partner in the firm of tea

supplier) and the first two alphabets of Cohen.

1st store in Burnt Oak, Edgeware in 1929 currently the largest in United Kingdom and 3rd largest retailer in the

world next to Wal-mart and Carrefour.

operating 2,715 stores and has over 290,000 employees in UK recognised as worlds largest online grocer ( 1 million customer and

250,000 orders a week)

market share of UK retailing is 12.5%

 has ventured into consumer electronics, consumer financial services,

internet services, telecommunications and gas stations

as of March 2008, every area in UK has a Tesco and it controls over

30% of the grocery market

has expanded to 13 countries outside of UK (5,380 stores and over

490K staff worldwide)

Due to the vast diversity of its business, TESCOs competitors consists of entities in different fields of businesses. Amongst the competitors are:

ASDA Group Ltd Carrefour S.A. J Sainsbury PLC The Big Food Group Marks and Spencer Supermarkets PLC BP PLC ExxonMobil Corp Royal Dutch/ Shell

Safeway Inc Somerfield SPAR HandelsAktiengellschaft The Boots group Wm Morrison Booker Cash & Carry ALDI Group The Carphone Warehouse John Lewis Partnership

Based on BBC in 2006, the supermarket share in UK are as below: Tesco ASDA Sainsburys Morrisons Somerfield Waitrose

- 30.7% - 16.6% - 16.3% - 11.1% - 5.4 % - 3.7 %

(Source Datamonitor, 2010)

Food Specialists

Food & Non Food Specialists

Non Food Specialists

Sainsburys
UKs largest grocers until 1995 3rd position behind Tesco and ASDA in terms of supermarket chain Sahre of 16.5% of the UK market

ASDA
owned by Wal-Mart , a US corporation since 1999 2nd biggest supermarket chain in UK with 17% share biggest competitor to Tesco biggest food chain in the world and annual sales 8 times bigger than Tesco acquired Matalan, a giant discount clothing and home furnishing store In June 2004, operated 259 stores and 19 depots with 122K staff

 Environmentally Friendly Products Customer Focused Strategy Club card since 1995 Quality Products at affordable prices Excellent Labelling Self Check-out

 Store Types
Express Metro Superstore Extra Tesco.com

Offerings
Food and Non Food Retail Petrol Kiosk Home Living Range

Financing
Personal Savings and Financing Insurance

Investments

 Overall profit of 2.0 Billion in 2004/05 first ever for a British

retailer
have approximately 40,000 food products available in store plus

clothing and other non food items

Provide merchandise under own brand name at three levels of values

:- low, normal and finest

direct business with more than 2,000 own-brand primary suppliers

in 98 countries.

 Every Little Helps Providing Low prices Everyday Reducing the lead time in the supply chain Online services

 Political
China s entrance into WTO had allowed TESCO to move in and formed joint

ventures for the development of shopping malls.

Inclusion of 10 other countries in EU provided platform for TESCOs retail network.

Economic
Governments reduction of interest rate increased consumers spending but still has

impact on TESCOs sales and margin.

Positive impact people buy more groceries and eat less outside.

Social
UK Retirees are larger than baby boomers. Food consumption and travelling are

lesser
Online shopping more convenient but costly to TESCO due to small deliveries Health consciousness has increased increased demand for organic food

 Technological
increased in web based technology allows for online direct purchase. Increased in Supply Chain effectiveness between TESCO and its supplier. TESCO also subscribed to ordering via mobile technology

Environmental
Environmental promotion by government helps TESCO reduced its costs reusable

bags
Increased in environmental consciousness of the consumers allowed TESCO to

introduce Greener Living Scheme, rewarding recycling initiatives via the club card and added carbon footprint information on food packaging.

Legal
VAT increased by the government affects TESCO non-food items

Minimum wages increase will increase TESCOs operational costs.

Threat of New Entrants (Medium)

Bargaining Power of Suppliers (Low)

Rivalry Among Competitors (High)

Bargaining Power of Buyers (Medium)

Threat of Substitute Products (Low)

Strengths Increasing market Share Tesco Online, Express and Metro Brand Value Focus on product affordability without compromising quality Loyalty Scheme

Weaknesses Reliance on the UK market Recalling of their products Increase in transportation costs as TESCO has many outlets/ stores

Opportunity Vast Online Business Ventures Foreign markets with formation of joint ventures

Threat Contraction of the UK economy Fluctuation of the Stock Market Decline in income and increase in unemployment Innovation by other supermarkets especially ASDA and Sainsbury Office of Fair Trading investigation Competition Commission Ruling

 Growing the UK Core

focusing on customers & providing greater value, choices and services Introducing Real Food Magazines, Loyalty Card, new stores and Every

Comment Help programme.

Be an Outstanding International Retailer

expansion to 13 countries outside UK

Strong in Everything We Sell

merchandise sourcing globally Direct from manufacturers

Going extra mile in Europe

expansion of product line, addition of complimentary services and multi-

channel capability

 Growing Retail Services

Introduction of tesco.com, bank, telecoms and dunnhumby (customer

feedback business)
own Tesco credit Card

Community at the Heart of what WE DO

leadership in environment actively supporting the local community 1% of pre-tax profit

contribution (2010 - 64 Million)

Creating jobs and careers Introducing Extended Education Programme, Annual Sports Activities

Building Brands
Industry leader especially in UK

Building OUR Team

Career opportunity and development TESCO Academy

Income Statement Revenue Operating Profit Profit before Tax

2009 40,117 3,811 3,535

2008 39,104 3,457 3,176

Balance Sheet Fixed Assets Current Assets Liabilities Premium and Retained Earnings Share Total Equity 35,337 11,438 30,583 16,093 402 16,623 34,258 11,392 31,342 14,157 399 14,681

 Recommendation
Tesco should slow down its expansion plans and concentrate on

refitting its existing stores

Venturing

into strategic alliances with another company to

improve services, capture bigger market share and maybe

overcome some of its weaknesses

Conclusion
TESCO continues to hold strong leadership in UK

It is strong in both cost leadership and differentiation with the

assistance of information technology.

1.

What are the strengths and weaknesses of Tesco from ASDAs and Sainsburys perspective?

Strengths

Market Domination especially in UK Quality and Pricing Online Business and Market Segmentation

Lean and Strong Supply Chain

Weaknesses

Too many stores thus very costly to maintain (especially variable costs or costs fluctuation)

2. What strategies should each company adopt to compete with

Tesco, and what strategies should they avoid? Strategies to Adopt

ASDA

Should continue to acquire or merge Focus on its niche stores

Capitalizing on Wal-mart strategies and supply chain

Moving towards different specialization

SAINSBURY

Focus of its food specialization but expanding to low pricing strategies Venturing into more downstream industries which are food related

2. What strategies should each company adopt to compete with

Tesco, and what strategies should they avoid? Strategies to Avoid

ASDA and SAINSBURY

Compete in the same diversity industries as TESCO Using Price War strategy against TESCO.

3. Does Tesco have any areas of weaknesses or strategies that ASDA

and Sainsburys could exploit? TESCO has no specialization . There are equally into the food and Non-food industry.

Sainsbury should concentrate on Food Specialization but expand to

low, middle and high quality food products and offer

differentiation in pricings for all categories of consumers

ASDA on the other hand should move towards non food specialization and used the advantage of the Wal-Mart Supply Chain. And resources.

4. Are there any market segments that Tesco is not currently serving

that ASDA and Sainsburys could exploit?

TESCO is now serving low to middle class group as they are

providing goods at an affordable pricing.

ASDA and Sainsbury has to target high class income people. In terms of geographical, TESCO has conquered many parts of UK,

thus it is advisable for ASDA and Sainsbury to move into other

parts of European countries.