Strategic Management Industry : Retail Synergy Presented by : Mohd Farid Awang Norhaizum Sahril
VISION Our vision is for Tesco to be most highly valued by the customers we serve, the communiAes in which we operate, our loyal and commiCed staﬀ and our shareholders; to be a growth company; a modern and innovaAve company and winning locally, applying our skills globally.
Tesco aims to convert all stores to ‘Extra’ format Friday, 21 September 2012 Tesco Stores (M) Sdn Bhd (Tesco) aims to relaunch all of its naHonwide stores with the ‘Extra’ format within a few years, its chief execuHve oﬃcer (CEO) Sung Hwan Do said.The “Extra” format, an innovaHve hypermarket format adopted in all Tesco stores worldwide, supports and caters to the wider needs of small businesses apart from our end-‐user customers, oﬀering extra services, choices and faciliHes to Tesco customers. The new concept not only oﬀers new range of products at low prices, but also oﬀers an array of shops and kiosks in the mall area, which includes a new food court, playland, addiAonal automated teller machines, WiFi, mobile and telecommunicaAon shops and an improved car park system. The new ﬂagship Tesco Extra MuHara Damansara, which ﬁrst opened in 2003, had undergone a ﬁve-‐month long renovaHon period to unveil a modernised look, oﬀering a wider variety to customers under one roof.
COLLABORATE WITH INTERNATIONAL PLAYER The Star Online > Friday October 5, 2012 Samsung products to be sold at Tesco Extra SAMSUNG Malaysia Electronics has partnered Tesco to introduce Samsung World shop-‐in-‐shop (SIS) concept retail experience to a hypermarket. Aptly named Samsung World, the partnership culminated in a launch event held at Tesco Extra MuAara Damansara, which was recently refurbished to oﬀer a whole new shopping experience to customers. The strategic collaboraAon with Tesco Stores (Malaysia) Sdn Bhd entails a designated area within Tesco Extra stores that features Samsung’s latest range of innovaAve products. Aimed at providing patrons of Tesco Extra with a diﬀerent retail experience and a beCer understanding of Samsung’s range of smart living soluAons, Samsung’s trained product experts will also be assigned at Samsung World, facilitaAng consumers and providing insights on the latest Samsung innovaAons, ranging from audio-‐visual products, mobile phones, digital appliances, digital imaging devices and IT products. “In addiAon to designing and manufacturing state-‐of-‐the-‐art products to provide beCer soluAons to consumers’ daily rouAnes, Samsung is also commiCed in ensuring our customers receive the best user experiences, be it ader they have purchased the products or at retail level. Latest oﬀerings: Kwon (led) introducing Samsung’s range of televisions to Do. Latest oﬀerings: Kwon (led) introducing Samsung’s range of televisions to Do. “We are honoured and excited to partner Tesco in providing a brand new retail experience through Samsung World, which will help customers beCer understand Samsung products and how they can enhance users’ lives,” said Samsung Malaysia Electronics managing director Kwon Jae Hoon.
CLEARLY STATED CUSTOMER RIGHT Shop with conﬁdence! • We welcome all customers. No membership is required. • If you are unsaHsﬁed with your purchase, you may return your purchase(s) together with the original receipt within 7 days from the date of purchase. • Return policy does not apply to display items or items from stock clearance promoHons • Return policy does not apply to fresh produce, frozen goods, cameras, mobile phones, computer (including peripherals) and undergarments. • Tesco Value, Tesco Choice and Tesco Finest products are not to be sold commercially. If you are unsaHsﬁed with the quality of any of our Tesco Value, Tesco Choice or Tesco Finest products, you may return your purchase(s) with the original receipt to us within 28 days from the date of purchase and we will either make a replacement or remit a full refund. Always in stock! Delivery service for your convenience! • Free delivery service (up to 30km) is available for electronic goods. A charge of RM2.50/km will be levied beyond the 30th km. • Delivery service is oﬀered for goods that have been purchased in bulk by Biz Clubcard members
EXPAND MARKET SEGMENT FOCUS ON HOUSE BRAND AcquisiAon of MAKRO Cash & Carry Produce more range of House Brand • To tap SMEs market • TESCO value – aﬀordable range. • TESCO choice – quality products. • TESCO light choice – nutriAous low-‐calorie food. FOCUS ON PROFITABLE AREA • TESCO ﬁnest – premium ingredients Exit non-‐proﬁtable market • BanAng & Senawang JOINT VENTURE WITH LOCAL PLAYER Equity Partner – Sime Darby • 70:30 BUILD GOOD RELATIONSHIP WITH GOVERNMENT • MOU with Malaysia InternaAonal Timber Board BUILD REPUTATION AMONG SUPPLIER • TESCO is one of enabler for TUKAR Support local SMEs programme • Bulk purchase for local small retailer • Introduce local products to TESCO oversea STRENGTHEN SUPPLY CHAIN Established distribuAon centre BUILD LOYAL CUSTOMER • Simpang Pulai : fresh products • Clubcard • Bukit Beruntung : grocery, • Campaign for the no 1 of great price electronics, high tech and retailer apparel • Fresh vegetables COLLABORATE WITH SAMSUNG CLEARLY STATED CUSTOMER RIGHT
WHAT IS TESCO STRATEGY TO BUILD A SUSTAINABLE COMPETITIVE ADVANTAGE? COLLABORATE WITH SAMSUNG FOCUS ON HOUSE BRAND TESCO FOCUS ON COST-‐LEADERSHIP STRENGTHEN SUPPLY CHAIN Established distribuAon centre BUILD LOYAL CUSTOMER • Simpang Pulai : fresh products • Campaign for the no 1 of great price • Bukit Beruntung : grocery, retailer electronics, high tech and apparel
MACRO ENVIRONMENT Industry Growth Government Social forces Support & Policies RETAIL INDUSTRY Rules & Technology RegulaHons
GOVERNMENT FULLY SUPPORT WHOLESALE AND RETAIL GROWTH " Within the next 10 years, Malaysia government through EPP aimed to carry RM17.4 billion investment in order to contribute RM8.5 billion GNI and create 68,600 jobs by 2020.
REGULATORY POLICIES TO PROMOTE HEALTHY COMPETITION ENVIRONMENT
ONLINE MARKET (LOCAL) OPPORTUNITY Online purchase & Virtual Store
ONLINE MARKET (GLOBAL) OPPORTUNITY Online purchase & Virtual Store
CHANGES IN SOCIAL FORCES • Based on 2010 Census, Malaysia’s total populaHon stood at 28.3 million with a populaHon density of 86 persons per square kilometer. The naHon’s capital, Kuala Lumpur, has a populaHon of around 1.67 million and a much higher density of 6891 persons per square kilometer. Although East Malaysia makes up 60% of Malaysia’s landmass, it only accounts for 20% of the country’s populaHon. • Over the last 11 years, Malaysia’s populaHon has been growing at a steady rate of 2.0% per annum. The country is experiencing an increase in rural to urban migraHon. The average age of Malaysian populaHon is young at 26 years old and the average life expectancy stands at over 73 years.
INCOME/BUYING POWER -‐ Malaysia is classiﬁed as an upper-‐middle income country, and considered as one of the m o s t d e v e l o p e d o f t h e developing countries. The proporHon of middle income households, deﬁned as those earning between RM2,841 and MYR4,025 per month, has increased from 6.5% in 2009 to 9.2% in 2007. -‐ On average, household living in urban areas spent 1.5 Hes more than households living in r u r a l a r e a s . A v e r a g e h o u s e h o l d s p e n d i n g expenditure is stands at RM2190 per month
CONSUMER BEHAVIOR Average household spending palerns: -‐ Malaysians spend a high percentage of their household income on food, groceries and personal care items, ranking third out of the ten major economies in the Asia-‐Paciﬁc region (excl.Japan) -‐ According to ACNielsen, Malaysians on average spent MYR505 per month on food and groceries, with just half of hat on fresh food like meat, fruits and vegetables. Lifestyles/Shopping habits: -‐ Malaysia’s consumer lifestyle has been evolving and changing due in part to rising aﬄuence and educaHon levels. -‐ High proﬁle internaHonal retailers and the global mass media have also played a hand in shaping consumer-‐buying behavior. -‐ Malaysians are becoming more westernized, sophisHcated and cosmopolitan. -‐ Since the emergence of the foreign-‐owned hypermarkets, Malaysians who lived= in urban have become accustomed to shopping for groceries at hypermarkets and supermarkets. -‐ Meanwhile rural people conHnue to purchase from tradiHonal grocers, convenience stores and mini-‐marts
MAJOR RETAIL PLAYERS Ran Group Name Ownership Retail Formats Number of 2011 Net sales king Stores 1 Dairy Farm Giant Retail Diary Farm Supermarket/ 125 na InternaHonal superstores (54) and hypermarkets (71) 2 TESCO PLC JV (70% TESCO PLC : Hypermarkets 46 3.53 billion 30% Sime Darby) 3 Carrefour Group Carrefour Group Hypermarkets 26 1.8 billion 4 Econsave Cash & Carry Econsave Cash & Carry Supermarkets/ 29 700 million Sdn Bhd hypermarkets 5 MYDIN Mydin Mohamed Hypermarkets (10) 100 1.5billion Holdings Bhd Emporiums (18) Bazaar (3) Mini Market (54) Convenient store (9) Franchise (6)
STRATEGIC MAPPING High PRICE/QUALITY CARREFOUR TESCO ECONSAV MYDIN E Low GIANT Few LocaHons Many LocaHons GEOGRAPHIC COVERAGE
• High startup cost IF consumers see little • Small market WEAK Threat of difference between New Entrants the Price - they will tend to choose on price. STRONG Rivalry HIGH Bargaining WEAK Bargaining Among Current Power Of Suppliers Power of Buyers CompeAtors supermarkets dictate the • If a single item too price they pay to the expensive in Tesco, supplier buyers will exercise their power and WEAK Threat move to Giant which of SubsAtute can be easily access Products • Time consuming 43 • Selling similar products • Offer similar services
KEY SUCCESS FACTOR 1. INCREASE IN INTERNAL DEMAND 2. GOVERNMENT SUPPORT 3. REGULATORY POLICIES TO PROMOTE HEALTHY COMPETITION ENVIRONMENT 4. HIGH BARGAINING POWER OVER CUSTOMER & SUPPLIER 5. CHANGES IN SOCIAL FORCES 6. GOOD INFRASTUCTURE FOR ONLINE 7. GOOD SUPPLY CHAIN MANAGEMENT (SOFTWARE & HARDWARE)
ASSESSMENT OF INTERNAL FACTORS FOR STRATEGIC ADVANTAGE (ASSIST) (RANKING STRENGTH AND WEAKNESSES) Value Rareness Imitability Sustainability LIST UNDER RESOURCES S2 : Fresh DC S2 DisAncAve DisAncAve CompeAAve PotenAal S3 : Non-‐chilled DC CompeHHve CompeHHve CompeHHve PotenHal S5 : Standard lay-‐out CompeHHve PotenHal PotenHal PotenHal S6 : Tesco Hypermarkets CompeHHve PotenHal PotenHal PotenHal S7 : House Brand S3 CompeAAve PotenAal PotenAal CompeAAve S8 : Tesco Extra S5 DisAncAve DisAncAve PotenAal CompeAAve S9 : Tesco Clubcard and Biz Clubcard CompeHHve CompeHHve PotenHal PotenHal S11 : Tesco VALUE S4 DisAncAve PotenAal PotenAal CompeAAve W4 : Low sales volume for Tesco Extra DisHncHve CompeHHve CompeHHve PotenHal W5 : Small margin DisAncAve CompeAAve CompeAAve DisAncAve W3 W6 : High A&P cost DisHncHve CompeHHve CompeHHve PotenHal W7 : High capital investment W2 DisAncAve CompeAAve CompeAAve DisAncAve LIST UNDER CAPABILITIES S1 : High bargaining power S1 DisAncAve CompeAAve PotenAal CompeAAve S4 : The applicaHon of ERP system DisHncHve PotenHal PotenHal PotenHal S10 : Focus on customer service DisHncHve CompeHHve PotenHal PotenHal W1 : Certain supplier dictate price W4 DisAncAve PotenAal PotenAal PotenAal W2 : No Online Shopping capability W5 DisAncAve DisAncAve CompeAAve PotenAal W3 : High bargaining power of retail customer DisAncAve W1 CompeAAve CompeAAve DisAncAve
VALUE CHAIN FOR TESCO (BASED ON PORTER ORIGINAL) W2,W3 DC, FINANCE TRAINING W2 L SYSTEM O W SUPPLIER MGT M A R G I N S1,S2,W4 S5,W1 S4 W5
VALUE CHAIN FOR TESCO (BASED ON PORTER ORIGINAL) W2,W3 DC, FINANCE TRAINING W2 L SYSTEM O W SUPPLIER MGT M A R G I N S1 S5,W1 S4 S2,W4 W5
S1 High bargaining power over supplier W1 High bargaining power of customer (capabili8es) (capabili8es) S2 Fresh DC (Resources) W2 High capital investment (Resources) S3 House Brand (Resources) W3 Small margin (Resources) S4 Tesco VALUE (Resources) W4 Certain supplier dictate price S5 Tesco Extra (Resources) (capabili8es) W5 No Online (capabili8es) SWO1 Online shopping O TO2 Co-‐operate with Malaysian Government to setup 1 Malaysia Mall O3 Open branch in East Malaysia & East T1 Decreasing in Internal Demand Coast (TESCO EXTRA) T2 1 Malaysia Mall O4 Acquire small & medium local retailers T3 Merger of current compeHtor O5 More house brand (OEM for 1Malaysia T4 Entrance of new player Brand) O6 Form Halal Supermarket
RECOMMENDATION (to be compeAAve) • COMPETITIVE STRATEGY • VALUE CHAIN • MISSION & VISION SUSTAINABLE COMPETITIVE ADVANTAGE
COMPETITIVE STRATEGY Current Future Groceries -‐ Online
VALUE CHAIN FOR TESCO LOWER CAPITAL INVESTMENT DC, STORE REDUCE MAN POWER TRAINING UPGRADING SYSTEM (ONLINE) L SYSTEM O W SUPPLIER MGT M A Sales & RINVENTORY DISTRIBUTION TESCO WHOLSALE, Services G PURCHASE CENTRE TESCO EXTRA (TESCO VALUE I & TOM) N
VISION & MISSION NEW VISION Dedicated to deliver fresh and quality groceries at the lowest price to all over Malaysia NEW MISSION Oﬀer customer a whole new shopping experience for a quality products at lower price
SUSTAINABLE COMPETITIVE ADVANTAGE Ø Focus low-‐cost strategy within a narrow buyer segment (market niche) – Focus on suplying Fresh & Quality groceries (make use of Chilled-‐DC in Simpang Pulai). Target market : family Ø Introduce ONLINE shopping
WAY FORWARD " Malaysian saw the growth of the large format retail sub-‐sector today; 121 hypermarkets, 113 superstores and 133 departments stores run by local and foreign operators, bringing beler quality, wider choice, lower product cost, greater product availability and new retailing technology and skills. " Within the next 10 years, Malaysia government through EPP aimed to carry RM17.4 billion investment in order to contribute RM8.5 billion GNI and create 68,600 jobs by 2020. " TESCO sHll have the opportunity to re-‐strategize their business in Malaysia
MAJOR RETAIL PLAYERS Ran Group Name Ownership Retail Formats Number of 2011 Net sales king Stores 1 Dairy Farm Giant Retail Diary Farm Supermarket/ 125 na InternaHonal superstores (54) and hypermarkets (71) 2 TESCO PLC JV (70% TESCO PLC : Hypermarkets 46 3.53 billion 30% Sime Darby) 3 Carrefour Group Carrefour Group Hypermarkets 13 na 4 Econsave Cash & Carry Econsave Cash & Carry Supermarkets/ 29 700 million Sdn Bhd hypermarkets 5 MYDIN Mydin Mohamed Hypermarkets (10) 100 1.5billion Holdings Bhd Emporiums (18) Bazaar (3) Mini Market (54) Convenient store (9) Franchise (6)