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A Presentation for International Business: Tesco PLC and India
A Presentation By Group 5
• Tesco is one of the UK’s leading food and grocery retailers, currently ranked third1 globally
• The company presently operates in Europe, the US and Asia
• Headquartered in Hertfordshire, UK• Employees about 472,000 people2
• Revenue of USD 90,445.4 million with a Net Profit of USD 3,698.2 million during FY 2010 and increase of 5.9% and 9.1% respectively over FY 20093
Company Overview
04/08/2023 2International Business - IMT, Ghaziabad
• 1,2 & 3 Source Datamonitor Tesco PLC company report dated August 13, 2010
• Tesco is a food, grocery and other household goods retailer
• It operates 4,811 stores in 14 countries worldwide1
• Tesco has a number of store formats (details next slide)• In addition to store formats Tesco offers
– Online shopping channels (www.tesco.com)– Broadband internet connections – Telecommunication services (50:50 partnership with O2)– Financial services through Tesco Bank and – Market research and intelligence through the research firm
Dunnhumby
Business Description
04/08/2023 3International Business - IMT, Ghaziabad
• 1 Source Datamonitor Tesco PLC company report dated August 13, 2010
Business Description1
04/08/2023 4International Business - IMT, Ghaziabad
Store Type Nos. of Stores Description
One Stop 521 Up to 1,500 sq ftOnly store without Tesco in their nameFood and cash machines
Express 961 Up to 3,000 sq ftOffer fresh food, bakery and wines at convenient locationsSell up to 7,000 products
Metro 174 Up to 7,000 – 15,000 sq ftCity center locations
Superstore 448 Up to 20,000 – 50,000 sq ftOffer food as well as non food products
Extra 200 75,000+ sq ftMainly out-of-town hyper marts
Homeplus 13 Up to 50,000 sq ftNon food items mainly furniture etc
• 1 Source Datamonitor Tesco PLC company report dated August 13, 2010 and company website www.tesco.com
1919
1929
1956
1990
2000
2011
History1
04/08/2023 5International Business - IMT, Ghaziabad
Tesco was established as a tea manufacturing
firm
Opened first store in Burnt Oak,
Edgeware, UK
First self serving supermarket opened in
Maldon, UK
Opened first international stores
in Poland and France
Launched internet retail services
Plans to enter India
• 1 Source company website www.tesco.com
UK (+2.2%)67.6%
Europe (-1.2%)16%
Asia (+19.7%)
14.5%
US (+70.2%)0.6%
Other Businesses1.3%
Revenues1
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Sales of Tesco PLC (in percentage)Total Revenue FY 2010 USD 90,445.4 Million
Revenues grew by 5.9% overall for the firm from last year
• 1 Source Datamonitor Tesco PLC company report dated August 13, 2010
• Sustainable business model
• Value creation through diversification – primary growth driver for future
• Retailing services – high margin
• Leveraging of IT to achieve operating efficiencies
• High cost of growth in Central European markets compared to competitors
• Lack of market experience in Asia
• Non-food products may have an adverse affect due to low growth in markets
• Intense competition• Restrictive legislations
• Strong growth in Indian and other South Asian countries provides opportunities for long term growth
• Strong private labels portfolio
• Focus on fresh produce and convenient store formats in line with changing consumer preference
Strength Weakness
ThreatOpportunity
Tesco SWOT
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• Pegged at USD 1.3 Trillion the Indian economy is one of the fastest growing economies in the world
• It has shown a growth rate of 8.20%1 as of forth quarter of 2010
Indian Economy
04/08/2023 8International Business - IMT, Ghaziabad
• * Depicts estimated figures from 2009 onwards• 1 Source Trading Economics www.tradingeconomics.com• 2 Source International Monetary Fund www.imf.org
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150
500
1000
1500
2000
2500
3000
GDP India 2005 - 2015* (Billion USD)2
• The Indian food retail industry has a total revenue of USD 306.1 Billion In 2009 with a CAGR of 11.7% for the period of 2005-20091
• Convenience stores and gas stations proved the most lucrative with total revenues of USD 200.2 Billion almost 65.4% of total industry revenue2
• Forecasted CAGR for the industry is about 7.7% for the period 2009-2014 and the estimated industry size of USD 443.7 Billion3
The Indian Retail Market
04/08/2023 9International Business - IMT, Ghaziabad
• 1, 2 & 3 Source Datamonitor India – Food Retail Industry Retail report dated June 2010
Indian Retail Industry
04/08/2023 10International Business - IMT, Ghaziabad
• Figures for 2010 onwards are an estimate •1 Source Datamonitor India – Food Retail Industry Retail report dated June 2010
2005 2006 2007 2008 2009 2010 2011 2012 2013 20140
50
100
150
200
250
300
350
400
450
500
Indian Retail Food Industry Market Value1(Billion USD)
65.4%
32.9%
1.3%0.1%
0.3%
Indian Food Retail Segmentation 2009 (% Share by Value)1
Convenience Stores & Gas StationsFood and DrinksHypermart, Supermart & DiscountersCash & Carries & Warehouse ClubsOther
The Indian Retail Market
04/08/2023 11International Business - IMT, Ghaziabad
• 1 Source Datamonitor India – Food Retail Industry Retail report dated June 2010
• India accounts for 25.9% of the Asia-Pacific food retail industry value
• Following players are the main competition in the retail industry– Pantaloons Retail (India) Ltd – Bharti Retail– Reliance Retail– Spencer’s Retail– Vishal Mega Mart
Competition
04/08/2023 12International Business - IMT, Ghaziabad
• 1 Source Datamonitor India – Food Retail Industry Retail report dated June 2010
• Industry is highly fragmented with small stores providing the main channel of sales
• The hypermarket, supermarket segment is still nascent
Five Forces - Competition
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New Enterants
Degree of Rivalary
Supplier Power
Substitutes
Buyer Power
0 0.5 1 1.5 2 2.5 3 3.5 4 4.5
Five Forces Analysis (Industry Competition)
• Large scale retailers have advantage of operating business and economies of scale
• Entry and exit cost are low
• Strong growth rates makes markets attractive
Five Forces - New Entrants
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Market Growth
Low Entry and Exit Cost
Undifferentiated Product
Little Regulation
Supplier Access
0 1 2 3 4 5
Five Forces Analysis (Industry Competition)
• Chief alternative is food service
• Strong campaigns of fast food retailers
• The threat from substitutes is weak to moderate
Five Forces - Substitutes
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Low Cost Switching
Cheap Alternatives
0 1 2 3 4 5
Five Forces Analysis (Industry Competition)
• Consumers have virtually no switching cost
• Price is the main factor for decision making
• Revenue generates by any particular customer is minimal
Five Forces – Buyer Power
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Buyer Independence
Low Cost Switching
Price Sensitivity
Tendnecy to Switch
Undifferentiated Product
0 1 2 3 4 5
Five Forces Analysis (Buyer Power)
• Include food manufactures, farmers and agricultural co-operatives
• Firms maintain a wide base of suppliers
• Limited number of niche suppliers
• Retail companies maintain their own brands
Five Forces Supplier Power
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Quality
Cost
Switching Cost
Supplier Size
Forward Integration
Backward Integration
0 0.5 1 1.5 2 2.5 3 3.5 4 4.5
Five Forces Analysis (Industry Competition)
• Operates multiple format retail stores• Over 1000 stores across 71 cities1
• Occupies retail space of 12 million sq ft• Offers foods products mainly through
the chain ‘Food Bazaar’ (Big Bazaar)• Apart from food also offers fashion
related products• Recorded revenues of USD 1,299.4
million for 20092
Pantaloon Retail (India) Ltd
04/08/2023 18International Business - IMT, Ghaziabad
• 1 & 2 Source Datamonitor India – Food Retail Industry Retail report dated June 2010
• Offers food and other products through retail chain ‘Easyday’
• Operates around 240 stores1
• Entered joint venture with ‘Wal-Mart’ in November 2008 offering cash-and-carry and supply chain management functions
Bharti Retail
04/08/2023 19International Business - IMT, Ghaziabad
• 1 Source Datamonitor India – Food Retail Industry Retail report dated June 2010
• Manages the retail operations of Reliance Industries Ltd. (RIL)
• Operates ‘value’ formats that include neighborhood stores, mini-marts and supermarkets
• Has around 900 stores in 14 states
Reliance Retail
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• 1 Source Datamonitor India – Food Retail Industry Retail report dated June 2010
• Owned by the RPG Group• Established in 1996 presently in 66
cities1
• Offers fashion products, household appliances and other categories products as well
• Stores range from floor area of 1,500 – 15,000 sq ft2
• Revenues for 2009 were USD 450 million3
Spencer’s Retail
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• 1, 2 & 3 Source Datamonitor India – Food Retail Industry Retail report dated June 2010
• Operates as Vishal Mega Mart• Has around 180 stores in 24 states• Provides products like home
furnishings, sports goods footwear apart from food items
• Revenues for 2009 were USD 281 million
Vishal Retail
04/08/2023 22International Business - IMT, Ghaziabad
• 1 Source Datamonitor India – Food Retail Industry Retail report dated June 2010
Business Description
04/08/2023 23International Business - IMT, Ghaziabad
• 1 Source Datamonitor India – Food Retail Industry Retail report dated June 2010