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204/11/23
Contents
Industry Overview1
Company Overview2
Competitors & competitor analysis3
Strategic Groups4
Resource Based View6
Core Competencies5
Activity Based View7
Five Forces Model & Value Net8
Value chain & SWOT Analysis9
Adoption Of Strategies10
Financial analysis & Recommendation11
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Industry Overview U.K
The retail industry employed 2.9 million people, as at the end of September 20.
The retail industry employed 2.9 million people, as at the end of September 20.
The retail sector generates almost 8% of the Gross Domestic Product of the UK.
The retail sector generates almost 8% of the Gross Domestic Product of the UK.
Supermarkets dominate the UK food retail market, with 56.0% of sales.
Supermarkets dominate the UK food retail market, with 56.0% of sales.
11% of all VAT-registered businesses in the UK are retailers. 70% of UK retail is Organized and 30% is Unorganized.
11% of all VAT-registered businesses in the UK are retailers. 70% of UK retail is Organized and 30% is Unorganized.
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Company overview
www.Tesco.com is recognized as the world’s largest online grocer, with a customer base of little less than 1 million and more than 250,000 orders a week.
www.Tesco.com is recognized as the world’s largest online grocer, with a customer base of little less than 1 million and more than 250,000 orders a week.
Tesco is the third-largest retailer in the world next to Wal-Mart, Carrefour and is operating around 2,440 stores and employing over 4,00,000 people
Tesco is the third-largest retailer in the world next to Wal-Mart, Carrefour and is operating around 2,440 stores and employing over 4,00,000 people
Tesco’s market share of UK retailing is 12.5%.Tesco’s market share of UK retailing is 12.5%.
Tesco’s is a United Kingdom based international supermarket chain. It is the largest British retailer both by global sales and by domestic market share. Established in 1924.
Tesco’s is a United Kingdom based international supermarket chain. It is the largest British retailer both by global sales and by domestic market share. Established in 1924.
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Company overview
As of March 2008, Tesco have a store in every postcode of the UK.
As of March 2008, Tesco have a store in every postcode of the UK.
Tesco now controls over 30% of the grocery market in U.K.
Tesco now controls over 30% of the grocery market in U.K.
Tesco has moved into areas such as clothes, consumer electronics, consumer financial services, internet services, consumer telecoms and gas stations.
Tesco has moved into areas such as clothes, consumer electronics, consumer financial services, internet services, consumer telecoms and gas stations.
1960 1970 1980 1960 2000
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Competitors
Safeway plcSomerfieldSPAR Handels-AktiengesellschaftThe Boots Group PLCWm Morrison Supermarkets PLCBooker Cash & Carry LimitedALDI GroupThe Carphone Warehouse Group PLCJohn Lewis Partnership plc
ASDA Group LimitedBP PlcCarrefour S.A.ExxonMobil CorporationThe Big Food Group PlcJ Sainsbury plcMarks and Spencer Group plcRoyal Dutch/Shell GroupSafeway Inc.
Competitors
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Competitor Analysis
SUPERMARKET SHARE Tesco: 30.6% ASDA: 16.6% Sainsbury's: 16.3% Morrison's: 11.1% Somerfield: 5.4 Waitrose: 3.7% Iceland: 1.8%(Source TNS cited by BBC 2006)
Tesco AsdaSainsbury Morrisonssomerfield waitroseIceland
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Positioning of CompetitionsPositioning of Competitions
FoodSpecialists
Food withNon-Food
Non-FoodSpecialists
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Strategic Groups
Sainsbury’s was the UK's biggest grocer until 1995, but was recently relegated to third position behind Tesco and Asda. Despite the fact that company has been struggling lately it is starting to get back on track. Despite predictions that Sainsbury's would regain second position and a narrowing of ASDA's lead in recent months, the latest figures released by Taylor Nelson Sofres show Asda's share as 16.6% compared to Sainsbury's at 16.22%.
Sainsbury’s was the UK's biggest grocer until 1995, but was recently relegated to third position behind Tesco and Asda. Despite the fact that company has been struggling lately it is starting to get back on track. Despite predictions that Sainsbury's would regain second position and a narrowing of ASDA's lead in recent months, the latest figures released by Taylor Nelson Sofres show Asda's share as 16.6% compared to Sainsbury's at 16.22%.
ASDA owned by US corporation Wal-Mart since 1999, is the only supermarket with the potential to become a thorn in the side for Tesco. Wal-Mart is the biggest food chain in the world and has annual sales eight times bigger than Tesco’s. Asda's George range of clothing is the best selling brand in the UK and company is thinking about acquiring Matalan, the giant discount clothing and home furnishing store.
ASDA owned by US corporation Wal-Mart since 1999, is the only supermarket with the potential to become a thorn in the side for Tesco. Wal-Mart is the biggest food chain in the world and has annual sales eight times bigger than Tesco’s. Asda's George range of clothing is the best selling brand in the UK and company is thinking about acquiring Matalan, the giant discount clothing and home furnishing store.
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Core competencies
Environment friendly products.
Customer focused strategy Club card - a loyalty scheme (1995).
Quality products at low price.
Improved Labeling.
Self-Checkout
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International– No. of Countries 12– No. of Stores 440– No. of DC’s 20– No. of Staff 1,40,000– Turnover £7.5 Billion
UK– No. of Stores 2000– No. of DC’s 28– No. of Staff 270,000– Turnover £29.5 Billion
Resource Based View
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Resource based view
Store types:ExpressMetroSuperstoreExtraTesco.com
Store offerings:Food RetailNon-Food RetailPetrol StationsHome Living Range
Personal Finance:InsuranceSavings AccountsPersonal LoansSecure Investment BondsOnline Mortgage Finder
199419921970 19971994
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Resource Based View
Overall Profit £2.0 Billion (1st time for a British Retailer) 04/05.
Tesco sells approximately 40,000 food products in its superstores, as well as clothing and other non-food lines.
The company’s own-label products are at three levels value, normal and finest. Own brand accounts for approximately 50% of sales.
Tesco does business with nearly 2,000 own-brand primary suppliers in 98 countries.
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Private labels
Ellen Wesley A trademark for the women who know what they want.
Daniel Moore A successful man trademark
James Be Yourself
Mirage A trademark to fascinate you
4Future A new fashion line for boys from 3 up to 12.
Miss M Sports fashion and stylish girl clothing.
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Activity Based View
Every Little helps.
Providing Low Prices Everyday.
Reducing the lead time in the supply chain
Online Service
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Rivalry Among Competitors
(High)
Bargaining Power of Buyers(Medium)
Threat of New Entrants
(Medium)
Threat of Substitute Products
(Low)
Bargaining PowerOf Suppliers
(Low)
Five forces Model of competition
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Five forces Model of competition
Threats Of New Entrants Competitive Rivalry is considered a high threat and are
people like Amazon and Asda including other supermarkets and non-food retailers who are involved in the same concept. IF consumers see little difference between the product and that of the competition then they will tend to choose on price.
Bargaining Power of Suppliers- There is little threat as often large supermarkets dictate the
price they pay to the supplier. If the supplier does not agree to Tesco’s price then the supplier will be left with no retailer.
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Five forces Model of competition
Threats of New Entrants- Tesco, Asda, Sainsbury and other supermarket chains put
up considerable barriers to entry. Anyone starting up a new supermarket chain has barriers imposed on them, implicitly or explicitly, by the existing supermarkets.
Bargaining Power of Buyer- Buyer power also acts to force prices down. If beans are
too expensive in Tesco, buyers will exercise their power and move to Sainsbury. Tesco including other supermarkets have a disciplined approach to prices setting. This approach stops them from destroying each other in a profit war.
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Five forces Model of competition
Threat of Substitute Products- Tesco competition from other supermarkets which can
provide substitute goods drives the prices of both companies down; therefore substitute is seen as a Low threat.
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Tesco Complementors
Suppliers
Buyers
Competitors
Value net
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Porter’s Generic Value Chain
21
MA
RG
INM
AR
GIN
PRIMARY ACTIVITIES
SUPPORT ACTIVITIES
TECHNOLOGY DEVELOPMENT
FIRM INFRASTRUCTURE
HUMAN RESOURCE MANAGEMENT
PROCUREMENT
INBOUND LOGISTICS
OPERATIONS OUTBOUND LOGISTICS
MARKETING & SALES
SERVICE
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SWOT Analysis
StrengthsIncreasing market share
Insurance
Tesco online
Brand value
UK market leadership reinforced
WeaknessReliance upon the UK market
Debt reduction
Signs point to serial acquisitions
OpportunitiesNon-food retail
Health and beauty
Further international growth
ThreatsUK structural change could spark a price war
Overseas returns could fall
Wal-Mart/Asda challenge
International expansion
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Sustaining superior performance
Imitation
Slack
Substitution
Hold Up
Added ValueAppropriate Value
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Adoption of Strategies
In 1995, Tesco launched the Club card Loyalty scheme.
With www.tesco.com company emphasized on E-commerce.
In 2000, company tied up with a Safeway Inc to launch an online grocery shopping services
Recycling of bags
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Adoption of Strategies
Supermarket superpower, you have to be everywhere
To be a supermarket Superpower you have to sell to everybody
To be a supermarket superpower, Thou shall sell everything
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Financial Analysis
2007 2006 Increase
£m £m %
Revenue (sales excluding VAT) 22,631 20,735 9.1
Gross profit 1,614 1,439 12.2
Operating profit 1,309 1,101 18.9
Profit before tax 1,289 1,092 18.0
Profit for the period 938 791 18.6
Attributable to:
Equity holders of the parent 936 788 15.8
Minority interests 2 3
Income Statement
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Tesco Balance sheet
2007 2006 Inc/Dec
£m £m %
Fixed assets
Investments in subsidiaries and Joint ventures 7,382 9,805 24.7
Current assets
Derivative financial instruments 70 –
Debtors 4,857 2,702 44.36
Current asset investments 90 150 40.00
Creditors (2,644) (2,720) 2.79
Net current assets 2,373 132 94.43
Total assets less current liabilities 9,755 9,937 1.83
Creditors (3,608) (4,037) 10.63
Net assets 6,147 5,900 4.02
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Balance Sheet continued….
Capital and reserves
Called up share capital 395 389 1.52
Share premium account 3,988 3,704 7.12
Profit and loss reserve 1,764 1,807 2.38
Total equity 6,147 5,900 4.02
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Recommendations
Slow down its expansion plans and concentrate on refitting existing stores.
Merging or forming a strategic alliance with another company is a great way to improve their services and overcome some of their weaknesses.
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Bibliography
www.wikipedia.com
www.tescocorporate.com
www.tesco.com
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