1 Stage 1 Report
1.1 Tesco’s history, development and growth
Tesco is a British multinational company (MNC), which has the head office in
Hertfordshire, United Kingdom (UK). Tesco owed its foundation to Jack Cohen in 1919, an
insignificant booth in East End of London which sold surplus groceries. At the present, Tesco
is the owner of more than 6,700 outlets all over the world and offering service to tens of
millions of persons every week (Tesco, 2013). It became the third biggest retailer all over the
world with outlets presenting in 14 territories worldwide, with the inclusion of China, India,
Malaysia, Korea, America, Ireland and Slovakia (Tesco, 2013). In its wide-ranging scope of
products and services, Tesco offers fresh foods as well as groceries items, electronics,
clothes, household items as well as financial services.
Tesco aims at expanding its business range and diversifying globally to pursue a solid and
sustainable long-term development (Tesco Plc., 2013e). Correspondingly, below are its
corporate vision and main strategic targets: growing the UK market, and becoming a booming
global retailer in-store and online (Tesco Plc., 2013e). Tesco sets the development strategy of
expanding and diversifying internationally.
Basing on the formerly assessment, an amount of advices are advisable for Tesco in terms
of how it might maintain and set up a sustainable competitive advantage in its primary market
in the United Kingdom and also in its other global markets, for now and in the upcoming
1.2.1 Retaining competitive advantage
Vitality of Localisation and Marketing
The providing of the grocery retail industry strongly stands for a community’s customs,
concerning the clients’ day to day needs for example foodstuff. Therefore, it is advised that
Tesco go on incorporating tactical localization as well as realize cultural sensitivity in every
of its globalization plans. Both in the UK and its global markets, Tesco are advised to be
more creative and active in terms of its marketing plans, for example, by enlarging the variety
of its Club Card loyalty systems further than client’s shopping customs. Being an
enlargement to localization tactic, Tesco is capable of enhancing its customer database as
well as market sensitivity to offer clients greater tailoring with shopping encounter, since
clients in GRM puts vitality on customer service.
Low customer loyalty and switching costs in the GRM highlight the vitality of marketing
actions. Influentially, the capability of understanding customer values and drawing their
attraction is critical in national as well as global GRM. Correspondingly, the current
marketing range for GRM includes market – as well as – client – focused tactics with
concentration on client intimacy enhancement. Obviously, in global markets, local
management proves to be more appropriate in terms of tactical decision making. Besides,
using locals might as well lead to saving considerable costs of thorough market investigation
in overseas markets. In UK as well as global markets, it is advisable Tesco as well be more
active in its marketing creations, for example, in detecting new client segments. Tesco might
as well refresh its internationalisation process to make sure of sustainable competitive
advantage, for instance, by example, by incorporating stakeholder-marketing-oriented
Tesco has become preoccupied with its global enlargement, specifically in the US and
Chinese market, as cited by David Gray, a retail analyst, Tesco kept on an acquisition and
diversification spree. As a consequence, it dropped concentration on its UK operating
activities leading to sluggish response to competitors’ marketing creations and growths (e.g.
Sainbury’s and Morrisons) which might have led to Tesco’s insignificant corrosion in market
share between 2012 and 2013, while its competitors had proved some increases in market
share and financial performance. Thus, it is advised that Tesco get back to put concentration
on its primary UK business venture.
1.2.2 Creating competitive advanatges
Re-entering the US market
Even though Tesco have just lately left the US market, it might have become a wise
selection to leave before that time if it got an exit plan prepared, or at least stop outlet
enlargement throughout the territory. Tesco might be capable of re-entering the US market in
the upcoming time, yet with appropriate attentiveness in much wider range of the US clients
instead of merely based thorough market investigation on shopping and eating customs. With
lessons withdrawn from previous leavings of a lot of retailers from Europe (e.g. Carrefour in
2000, M&S and Sainsbury in 2001) comprising itself, a various and careful entrant to market
investigation had better be executed. An IJV might be advantageous to Tesco for forthcoming
US operating activities. Nonetheless, Tesco might as well re-approach the US market by GI
given that it has studied from its past faults by using US top management team with retail
expertise as well as understanding about market, as well as incorporating an exit strategy.
Expansions into New International Markets
Investigation has proved chances for invasion into other BRIC economies, specifically
Brazil, Russia and India. Such developing markets, comprising Mexico, have proved fast
actual development in retail markets, enlargement in mid-class consumer base, and steadiness
and development in clients’ disposable income. Besides, the low proportions of internet
employment in SEA has been observed to be a solid development prospective in terms of
Internet retailing as well as online advertising divisions, and are hoped to encounter fast
enlargement in such areas in the upcoming time. It would be possible for Tesco to penetrate
SEA markets, with its technological experience as well as its competitive advantage whilst
achieving a first-mover benefit in grocery e-tailing.
Nonetheless, it is advised that Tesco be attentive since such are high-context customs
markets with great cultural disparity comparative to the UK’s. Therefore, it is requested of
more due carefulness of the environments, since chances might as well turn out to be a
hazardous risk. From the foresaid assessment of its tactics, it is advisable that Tesco either
approaches new markets via IJV with local partners or acquisition of local grocery retailers,
or employs local employees with local comprehension and sense of local market dynamics,
and therefore become capable of making up to date determinations, making Tesco capable of
a successful competing with native competitors.
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Details of our financial performance over the last five years
2009 2010 2011 2012 2013
Financial statistics (£m)
Sales including VAT excluding IFRIC 13 59,426 62,537 67,074 71,402 72,363
Revenue excluding IFRIC 13
UK 38,028 39,104 40,766 42,803 43,579
Rest of Europe 8,862 8,724 9,192 9,866 9,319
Asia 7,068 8,465 9,802 10,828 11,479
US 206 349 495 – –
Tesco Bank 163 860 919 1,044 1,021
Group revenue excluding IFRIC 13 54,327 57,502 61,174 64,541 65,398
UK 2,309 2,413 2,504 2,478 2,272
Rest of Europe 496 474 527 529 329
Asia 355 440 605 737 661
US (142) (165) (186) – –
Tesco Bank 68 250 264 225 191
Group trading profit 3,086 3,412 3,714 3,969 3,453
Operating profit 3,169 3,457 3,917 4,182 2,188
Operating profit margin 5.8% 6.0% 6.4% 6.5% 3.3%
Share of post-tax profits of joint ventures and
110 33 57 91 54
Net finance costs (362) (314) (333) (235) (282)
Profit before tax 2,917 3,176 3,641 4,038 1,960
Taxation (779) (840) (864) (874) (574)
Profit for the year from continuing operations 2,138 2,336 2,777 3,164 1,386
Discontinued operations – – (106) (350) (1,266)
Profit for the period 2,138 2,336 2,671 2,814 120
2009 2010 2011 2012 2013
Owners of the parent 2,133 2,327 2,655 2,806 124
Non-controlling interests 5 9 16 8 (4)
Underlying profit before tax – continuing operations 3,124 3,395 3,853 4,149 3,549
Other financial statistics
Diluted earnings per share – continuing operations 26.96p 29.19p 34.25p 39.23p 17.30p
Underlying diluted earnings per share – continuing
28.87p 31.66p 36.26p 40.31p 35.97p
Dividend per share 11.96p 13.05p 14.46p 14.76p 14.76p
Return on capital employed (‘ROCE’) 12.8%7
12.1% 12.9% 14.7% 12.7%
Total shareholder return 8.0% 9.5% 6.7% (3.0)% 2.1%
Net debt (£m) 9,600 7,929 6,790 6,838 6,597
Enterprise value (£m) 35,907 41,442 39,462 32,324 36,578
Group retail statistics
Number of stores 4,332 4,836 5,265 6,049 6,784
Total sales area – 000 sq ft 88,556 95,231 103,172 110,563 116,236
Average employees 468,508 472,094 488,347 514,615 537,784
Average full-time equivalent employees 364,015 366,413 382,049 401,791 416,441
UK retail statistics
Number of stores 2,306 2,507 2,715 2,979 3,146
Total sales area – 000 sq ft 32,389 34,237 36,722 39,082 40,495
Average full-time equivalent employees 194,420 196,604 200,966 205,852 213,304
Revenue per employee – £ 195,597 198,897 202,850 207,931 204,305
Weekly sales per sq ft – £ 25.34 25.22 24.95 24.86 24.15