Sample 4 Tesco

Strategic Management
SEM II
2011/2012
Individual Case Analysis
Tesco versus Sainsburys: Growth Strategies and
Corporate Competitiveness
Lecturer: Profesor Dr. Mas Bambang Baroto

Prepared By
Nazifa Bte Abd. Ghani
(MR 111037)
International Business School

University Technology Malaysia
May 2012
Contents
Background
[MR111037]
1.0 Executive Summary...........................................

2.0 Vision and Mission Analysis..........
2.1 Vision.....................................................................................................................
2.2 Mission ..
3.0 External Environmental Analysis ......
3.1PEST Analysis .............
3.2 Competitive Analysis .........
3.3 Industry Analysis
3.3.1 The Description of the Industry
3.3.2 Rivalry among Competitor ...
3.3.3 Potential Entry of New Competitor ..
3.3.4 Potential Development of Substitute Products .
3.3.5 Bargaining Power of Suppliers ....
3.3.6 Bargaining Power of Buyers
3.4 Conclusion of the industry
3.5 Defining the Key Success Factors of the Industry .
3.6 Opportunities and Threats ..
3.6.1 Opportunities List .
3.6.2 Threats List ...
3.6.3 The External Evaluation Factor (EFE) Matrix .
3.6.4 Competitive Profile Matrix (CPM) ..
4.0 Internal Analysis ...
4.1 Cultural Analysis
4.2 Management Functions ......
4.2.1 Planning ...
4.2.2 Organising ....
4.2.3 Motivating ....
4.2.4 Staffing .
4.2.5 Controlling ...
4.3 Marketing Strategy Analysis.......................................................................................
4.3.1 Marketing Strategy ...
4.3.2 Promotion Programs .
4.3.3 Product and Service Planning ..
4.3.4 Pricing ..
4.3.5 Distribution ...
4.3.6 Marketing Research ..
4.4 Financial Analysis...
4.4.1 Financial Ratio..
4.4.2 Finance/Accounting Audit Checklist ...
4.5 Production/Operation .........
4.5.1 Process ..
4.5.2 Capacity ....
4.5.3 Inventory ..
4.5.4 Workforce .........
4.5.5 Quality ..
4.6 Research and Development (R&D)
1
Strategic Management/SEM II/ 2011/2012
[MR111037]
4.7 Management Information System (M.I.S) .....

4.8 Value Chain Analysis (VCA) .
4.9 Strengths and Weaknesses .
4.9.1 Strengths List.
4.9.2 Weaknesses List ..
4.9.3Internal Factor Evaluation (IFE) Matrix ...
5.0 Existing Objective and Strategy ....
6.0 Strategy Formulation Tools. ..
Background of the Company

i) Tesco
2
[MR111037]
Tesco was founded in 1924 by Jack Cohen and opened its first store in 1929 in
Middlesex. In 1947, its shares were traded at London Stock Exchange as Tesco Stores
(Holdings) Ltd.. Through acquisition, it grew to more than 800 stores in the 50s and 60s.
In 1973, Cohen resigned and was replaced by Leslie Porter and he abounded the
philosophy of pile it high and sell it cheap. In 1977, Tesco resorted to price reduction
and centralized purchasing by Operation Checkout. Terry Leahy became CEO in 1977
and introduced Tesco The Way with more focus on people. Tesco currently has 5 store
formats: Tesco Extra, Tesco Superstore, Tesco Metro, Tesco Express and One Stop. It
operates in the food and non food retailing, property development, financial and
telecommunication services. Its market share of 31.35% in food retailing segment made
Tesco become the market leader in the UK.
ii) Sainsburys
Sainsburys was established in 1869 by John James and Mary Ann Sainsbury and it is
the oldest retailing business in UK. In n1773, its shares were traded at London Stock
Exchanged as J Sainsbury Plc. Sainsburys currently has 3 store formats: regular stores,
local stores and central stores. It operates in food and non food retailing, property
development and banking. It was the market leader in UK up till 1995 when it lost its
place to Tesco and currently is holding about 16.37% market share.
1.0 Executive Summary

This report provides an insight into the supermarket company, Tesco, with emphasis on its
external environment analysis and company analysis or resources, competence and culture.
3
[MR111037]
Two future strategic options are suggested in regards to the resource based strategies. As a
matter of fact, this report analysis information is only based on the case study given.
This analysis addresses the following segment:
1) External Environment
2) Internal Environment
3) Existing Objective and Strategy
4) Strategy Formulation Tools ( covered also SWOT analysis)
2.0 Vision and Mission Analysis
2.1 Vision: N/A
2.2 Mission: N/A
3.0 External Environment Analysis
3.1 PEST Analysis
Case Facts
Opportunit
Threat
Political, Legal , and governmental forces

N/A
Economic forces
In the
aftermath of World War l, food supplies were low, so he
bought damaged goods from other stores and re-sold
them at reasonable prices. (Pg.332,para4)
Following these predictions, the United Kingdom has evolved

into a leader of internet retailing
in Europe, and growth is continuing. (Pg.335,para5)
Social , Cultural , and Demographic forces

At the beginning of the 1990s, the U.K. retail
market slowly became more competitive(Pg.332,para5)
4
[MR111037]
In the mid-1990s, competition intensified as a price

war among these players emerged, resulting in squeezed
margins and cost cutting. It is not surprising that this
also had an adverse impact on the service level these
corporations
provided. (Pg.333,para2)
Toward the end of the 1990s, both firms targeted online

distribution channels that promised large growth
potential(Pg.335,para6)
Non-store retailing growth rates were

expected to be higher than store based rates, as online
usage gained popularity among British consumers.
(Pg.335,para6)
Tesco then analyzed countries for expansion, Putting

high emphasis on two dimensions: the market Potential
for growth and the competitive situation in the market.
Only if a market was characterized by relatively high
growth potential and relatively low rivalry was it considered
a real target market and approached in an
orderly fashion. (Pg.337,para1)
Recent trends, such as health and wellness and ethical

concerns, have opened opportunities,
even in the saturated food category; however, most food
retailers' growth is expected to stem from non-food
items. (Pg.341,para2)
Technological forces
[MR111037]
N/A
Total
Conclusion:
From the PEST analysis, Tesco has not being treated by the Treat occurred from other
competitors. Tesco can successfully expand its empayar but at the same time still aware with
the upcoming competitors as well as the treats. As a matter of fact Tesco cannot avoid from
facing this treat but it can control to reduce the treat. Unfortunately, there are no information
about technology forces and Political, Legal , and governmental forces to be
analysed
3.2 Competitive Analysis
Key
Variables
Case facts
Sainsbury's was
established in 1869
by John James
and Mary Ann
Sainsbury, making
it the oldest food
retailing chain in
Britain(Pg.332,par
a3)
Competitors
Strategy/
Performance
Sainsburys
The group is also

engaged in
property and
banking, owning
real estate
worth about 8.6
billion
(Pg.332,para3)
Opportunit
y
Threa
t
[MR111037]
Sainsbury's
emphasized
price reductions
on the standard
private
labels(Pg.333,para
3)
Sainsbury's
targeted the upper
price segment,
positioning itself
between
mass market and
high end.
(Pg.333,para1)
In 1975,
Sainsbury's
Launched the
"Sainsbury's
SavaCentre
hypermarket
formal as a joint
venture with
British Home
Stores. This was
the first attempt in
the
United Kingdom
to launch
supermarkets with
a large
non-food range
(Pg.333,para4)
[MR111037]
Sainsbury's
decided
that a separate
brand was no
longer needed.
Over the
following years,
these stores were
converted to the
regular
Sainsbury's
superstore format
and, subsequently,
Sainsbury's
retreated from
hypermarkets and
changed its
store formats.
(Pg.333,para4)
Copying Tesco.
Sainsbury' also
used its own food
brand and
transferred them
to non-food :
items, For
example, it
extended its
clothing range with
an organic line. In
addition to food
and non-food
items, Sainsbury
expanded into
retail banking and
property
development.
(pg.336,para3)
[MR111037]
Sainsbury's.
Starting in the
1990s, it pursued a
broad
set of growth
initiatives, steadily
increasing its
market
share and gaining
importance.
(Pg.332,para2)
Asda
ASDA positioned
itself
as the price
leader(Pg.332,para
3)
ASDA had also

moved strongly
into the non-food
area(Pg.337,para4)
In
recent years, Tesco
has greatly
diversified,
extending its
business lines
from food into
non-food, clothing,
9
[MR111037]
Tesco
10
financial.
services, and
telecommunication
s(Pg.332,para1)
Tesco launched
"Operation
Checkout," which
included
price reductions
and centralized
purchasing for all
its
stores. As a result,
its market share
rose by 4 Percent
within two
months(Pg.332,par
a4)
Tesco emphasized
its low-price
private label
("Value")
and continued to
cut prices,
(pg333,para3)
While Sainsbury's
retreated from
hypermarket
Tesco expanded
Tesco Extra and
strengthened it5
hypermarket
formats. ,
(pg333,para5)
The Tesco Way" :
implies a shift from
a focus on the
corporation to a
focus on people,
both employees
and customers (Pg.
333,para5)
[MR111037]
Much of Tesco's
sales increases
occurred through
increases in total
square footage
with the opening
Of new
stores, including
new formats such
as Metro and
Express.
(Pg.337,para1)
This move toward

the financial sector
has diversified the
Tesco brand and
provides
opportunities for
growth outside the
retailing
sector. For
example, Tesco
offers Clubcard
points or free
petrol when
consumers
purchase Tesco car
Insurance.
(Pg.334,para3)
"An inclusive
offer" is how
Tesco describes its
aspiration to appeal
to upper, medium-,
and low-income
customers in the
same stores.
11
[MR111037]
(Pg.334,para3)
In 2001,
Tesco.com's then(CEO,
John Browett,
received the
Wharton Infosys
Business
Transformation
Award for the
innovative
processes he
used to support
this online food
service. 'today,
Tesco
operates the
world's largest food
home shopping
service
as well as provides
consumer goods,
telecommunication
and financial
services online. As
of November
2006, Tesco was
the only food
retailer to make
online
shopping
profitable.
(Pg.336,para2).
Tesco used its food

brands
"Finest" and
"Value" to expand
into non food
items.
In its Extra stores,
12
[MR111037]
Finest health and

beauty, home, and
clothing lines
resulted.
(Pg.336,para4).
Rather than
purchasing or
building its own
telecom network,
Tesco paired its
marketing
strength with the
expertise of
existing telecom
operators. In
autumn 2003,
Tesco Mobile was
launched
as a joint venture
with 02, and Tesco
Horne Phone
was created in
partnership with
Cable & Wireless.
InAugust 2004,
Tesco Broadband,
an ADSL-based
service
delivered via BT
phone lines, was
launched in
partnership
with NTL. In
January 2006,
Tesco Internet
Phone,
a Voice over
Internet Protocol
service, was
launched
in conjunction with
13
[MR111037]
Freshtel ol
Australia.
Many British
retailers
attempting to build
international
businesses have
failed. Tesco has
responded
to the need to be
sensitive to local
expectations in
foreign countries
by entering into
joint ventures with
local partners, such
as Samsung Group
in South Korea
(Samsung-Tesco
Homeplus), and
Charoen Pokphand
in Thailand (Tesco
Lotus),
(Pg.338,para3).
By planning to
open
a new store in the
United States
every two-andone-half
days, Tesco
intends to mimic
the successful
expansion
of U.S. pharmacy
chains such as
Walgreens.
(Pg.339,para2).
14
[MR111037]
Profit for year
Financial Turnover
Basic Earnings per

Share
Competitors
Weaknesses
For much of the

twentieth
century,
Sainsbury's was
the market leader
in the U.K.
supermarket
sector, but in 1995
it lost its place to
Tesco;
in 2003, it was
pushed to third
place by
ASDA(Pg.332,para
3)
By 2004, however,
the group had
suffered a decline
in performance
relative
to its competitors
and fell to third in
the U.K. food
market. Davis
oversaw an almost
15
[MR111037]
3 billion upgrade
of stores,
distribution, and IT
equipment. Part of
this investment
included the
construction of
four fully
automated
depots, which, at
f.100 million each,
cost four times
more than standard
depots.
(Pg.335,para3)
Sainsbury's was
"wrong-footed" in
its original reaction
to the Tesco
Clubcard, showing
"no immediate
response apart
from disdain. It
lost market share in
subsequent years.
In 2004, the
London Times
quoted a
former executive
and others who
viewed this event
as
the start of the
company's
downturn due to
management
failures by David
Sainsbury and his
successors, Dino
Adriano and Peter
16
[MR111037]
Davis.
(Pg.335,para5)
Results
re-affirmed the
commentary of
retail analysts;
that is, the
group was not
ensuring that
shelves were fully
stocked, partly due
to the failure of the
systems introduced
by
Peter Davis. .
(Pg.335,para4)
N/A
Asda
Total
Conclusion:
17
22
[MR111037]
Based on this competitive analysis, I have found out that there are 22 opportunities with 8
threats. Because of the lack of information for ASDA, there are no information stated for
ASDA in its weakness. Be aware of the competitors strength, performance and the strategies
are the key success factors to be competitive.
3.3 Industry Analysis
3.3.1 The Description of The Industry
In 2008, the United Kingdom-based international food and general merchandising retailer
Tesco reached a market share of about 30 percent in the United Kingdom, roughly the same
as its rivals Sainsburys and ASDA (Pg.332, para1). In order to analyse the industry based on
the external analysis, five Porter Forces, which covered 5 segments have been chosen in this
study, which are: (1) Rivalry among Competing Firms; (2) Potential entry of new
competitors; (3)Substitute Products; (4) Bargaining Power of suppliers; (5) Bargaining Power
of Buyers.
As a matter of fact, due to the lack of information about other competitors to compare with
Tesco, I have chosen Sainsburys and ASDA as the main competitors involved in this
industry.
At the beginning of the 1990s, the U.K. retail market slowly became more competitive. Three
players dominated the food market: ASDA'(which became Wal-Mart's largest overseas
subsidiary in 1999), Sainsbury's, and Tesco. ASDA positioned itself as the price leader and
held this position for some time, closely followed by Tesco. Sainsbury's targeted the upper
price segment, positioning itself between mass market and high end. (Pg.332,para5)
3.3.2 Rivalry Among Competitor

Key
Variables
Case facts
Competitors
Strategy/
Performance
18
Sainsbury's was
established in 1869
by John James
and Mary Ann
Sainsbury, making
it the oldest food
retailing chain in
Britain(Pg.332,par
a3)
Opportunit
y
Threa
t
[MR111037]
Sainsburys
The group is also

engaged in
property and
banking, owning
real estate
worth about 8.6
billion
(Pg.332,para3)
Sainsbury's
emphasized
price reductions
on the standard
private
labels(Pg.333,para
3)
Sainsbury's
targeted the upper
price segment,
positioning itself
between
mass market and
high end.
(Pg.333,para1)
In 1975,
Sainsbury's
Launched the
"Sainsbury's
SavaCentre
hypermarket
formal as a joint
venture with
British Home
Stores. This was
the first attempt in
the
United Kingdom
19
[MR111037]
to launch
supermarkets with
a large
non-food range
(Pg.333,para4)
Sainsbury's
decided
that a separate
brand was no
longer needed.
Over the
following years,
these stores were
converted to the
regular
Sainsbury's
superstore format
and, subsequently,
Sainsbury's
retreated from
hypermarkets and
changed its
store formats.
(Pg.333,para4)
Copying Tesco.
Sainsbury' also
used its own food
brand and
transferred them
to non-food :
items, For
example, it
extended its
clothing range with
an organic line. In
addition to food
and non-food
items, Sainsbury
expanded into
20
[MR111037]
retail banking and

property
development.
(pg.336,para3)
Sainsbury's.
Starting in the
1990s, it pursued a
broad
set of growth
initiatives, steadily
increasing its
market
share and gaining
importance.
(Pg.332,para2)
Asda
ASDA positioned
itself
as the price
leader(Pg.332,para
3)
ASDA had also

moved strongly
into the non-food
area(Pg.337,para4)
In
recent years, Tesco
has greatly
21
[MR111037]
Tesco
22
diversified,
extending its
business lines
from food into
non-food, clothing,
financial.
services, and
telecommunication
s(Pg.332,para1)
Tesco launched
"Operation
Checkout," which
included
price reductions
and centralized
purchasing for all
its
stores. As a result,
its market share
rose by 4 Percent
within two
months(Pg.332,par
a4)
Tesco emphasized
its low-price
private label
("Value")
and continued to
cut prices,
(pg333,para3)
While Sainsbury's
retreated from
hypermarket
Tesco expanded
Tesco Extra and
strengthened it5
hypermarket
formats. ,
(pg333,para5)
The Tesco Way" :
implies a shift from
a focus on the
corporation to a
[MR111037]
focus on people,
both employees
and customers (Pg.
333,para5)
Much of Tesco's
sales increases
occurred through
increases in total
square footage
with the opening
Of new
stores, including
new formats such
as Metro and
Express.
(Pg.337,para1)
This move toward

the financial sector
has diversified the
Tesco brand and
provides
opportunities for
growth outside the
retailing
sector. For
example, Tesco
offers Clubcard
points or free
petrol when
consumers
purchase Tesco car
Insurance.
(Pg.334,para3)
"An inclusive
offer" is how
Tesco describes its
23
[MR111037]
aspiration to appeal
to upper, medium-,
and low-income
customers in the
same stores.
(Pg.334,para3)
In 2001,
Tesco.com's then(CEO,
John Browett,
received the
Wharton Infosys
Business
Transformation
Award for the
innovative
processes he
used to support
this online food
service. 'today,
Tesco
operates the
world's largest food
home shopping
service
as well as provides
consumer goods,
telecommunication
and financial
services online. As
of November
2006, Tesco was
the only food
retailer to make
online
shopping
profitable.
(Pg.336,para2).
Tesco used its food

brands
24
[MR111037]
"Finest" and
"Value" to expand
into non food
items.
In its Extra stores,
Finest health and
beauty, home, and
clothing lines
resulted.
(Pg.336,para4).
Rather than
purchasing or
building its own
telecom network,
Tesco paired its
marketing
strength with the
expertise of
existing telecom
operators. In
autumn 2003,
Tesco Mobile was
launched
as a joint venture
with 02, and Tesco
Horne Phone
was created in
partnership with
Cable & Wireless.
InAugust 2004,
Tesco Broadband,
an ADSL-based
service
delivered via BT
phone lines, was
launched in
partnership
with NTL. In
January 2006,
Tesco Internet
Phone,
25
[MR111037]
a Voice over
Internet Protocol
service, was
launched
in conjunction with
Freshtel ol
Australia.
Many British
retailers
attempting to build
international
businesses have
failed. Tesco has
responded
to the need to be
sensitive to local
expectations in
foreign countries
by entering into
joint ventures with
local partners, such
as Samsung Group
in South Korea
(Samsung-Tesco
Homeplus), and
Charoen Pokphand
in Thailand (Tesco
Lotus),
(Pg.338,para3).
By planning to
open
a new store in the
United States
every two-andone-half
days, Tesco
intends to mimic
the successful
26
[MR111037]
expansion
of U.S. pharmacy
chains such as
Walgreens.
(Pg.339,para2).
Profit for year
Financial Turnover
Basic Earnings per

Share
Competitors
Weaknesses
For much of the

twentieth
century,
Sainsbury's was
the market leader
in the U.K.
supermarket
sector, but in 1995
it lost its place to
Tesco;
in 2003, it was
pushed to third
place by
ASDA(Pg.332,para
3)
By 2004, however,
the group had
suffered a decline
in performance
relative
27
[MR111037]
to its competitors
and fell to third in
the U.K. food
market. Davis
oversaw an almost
3 billion upgrade
of stores,
distribution, and IT
equipment. Part of
this investment
included the
construction of
four fully
automated
depots, which, at
f.100 million each,
cost four times
more than standard
depots.
(Pg.335,para3)
Sainsbury's was
"wrong-footed" in
its original reaction
to the Tesco
Clubcard, showing
"no immediate
response apart
from disdain. It
lost market share in
subsequent years.
In 2004, the
London Times
quoted a
former executive
and others who
viewed this event
as
the start of the
company's
downturn due to
28
[MR111037]
management
failures by David
Sainsbury and his
successors, Dino
Adriano and Peter
Davis.
(Pg.335,para5)
Results
re-affirmed the
commentary of
retail analysts;
that is, the
group was not
ensuring that
shelves were fully
stocked, partly due
to the failure of the
systems introduced
by
Peter Davis. .
(Pg.335,para4)
-N/A
Asda
29
[MR111037]
Tesco
Tesco was not

always the
dominant Player it
is today.
In 1990. it was a
mid-sized food
chain far behind
its
rival, Sainsbury's.
(pg332,para2)
Porter and
managing director
Ian Mac Laurin
abandoned the' pile
it
high and sell it
cheap" philosophy
of Cohen, which
had
left the company
stagnating with a
bad image.
(pg332,para4)
Prices of standard
brands and private
labels at both
Sainsbury's and
Tesco came closer,
while
the two firms
differed slightly in
their discounting
Policies. .
(pg333,para3)
30
[MR111037]
The small scale

nature of this first
foray was seen
as a weakness, and
the company was
eventually sold in
the
mid-1980s. .
(pg337,para5)
Total
3.3.3 Potential Entry of New Competitor
Potential Entry of New Competitors
NO
Case facts
31
25
Strong
15
Moderate
Weak
[MR111037]
The price cuts were prompted by the increased

price pressure from the market entry of
discounters. For example, Aldi entered the
market in 1990, followed by Lidl in 1994. In
2005, these two hard discounters had acquired a
market share of2.2 percent and 1.9 percent,
respectively. (Pg. 333,para3)
ASDA had also moved strongly into the nonfood area(Pg.337,para4
Total
Conclusion:
In this situation, there is lack of information about the new entrants coming into this industry.
3.3.4 Potential Development of Substitute Products

Potential Development of Substitute Products
32
[MR111037]
NO
1
Case facts
Sainsbury's has also invested in Private
labels. A large
Sainsbury's store typically stock around
50,000 lines of which about half are
private labels. These lines include. for
example, "Basics" (an economy range
similar to Tesco's "Values"), "Taste the
Difference" (a premium range similar to
Tesco's "Finest"), "Different by Design"
(a smaller range of premium non-food
lines), "Kids," "Be Good to Yourself'
(products with reduced calorific and/or fat
content), "Free from," "Sainsbury
Organic," "Fair Trade," and "Super
Naturals-" (a range of readymade meals
with healthy ingredients) (Pg.334,para4)
Strong
Moderate
-
Sainsbury introduced the Sainsbury's

reward
card in 1996. A multiparty card program,
"Nectar," was
launched in the autumn of 2002. Nectar
gives the customer
a versatile and powerful point gathering
system
to be used and redeemed at a variety of
stores (Pg.335,para5)
Sainsbury's has been involved in e

business and
home-shopping development since 2000,
when it launched Sainsbury's to You in
April of that year(pg.336,para3)
Sainsbury's did not release any ecommerce sales figures, but said it was
still on track to expand its Web service to
200 stores by March
2010. (pg.337,para4)
33
Weak
-
[MR111037]
Copying Tesco. Sainsbury' also used its

own food brand. and transferred them
to non-food : items, For example, it
extended its clothing range with an
organic line. In addition to food and nonfood items, Sainsbury expanded into
retail banking and property development.
(pg.336,para3)
Sainsbury's bank offers services similar to

Tesco., including travel (insurance and
money), savings, and lending; it also
offers a Sainsbury's credit card. By 2010,
Sainsbury's expects to achieve sales of
3.5 billion, with 33 percent of its total
sales coming from non-food businesses.
(pg.337,para4)
Total
Conclusion:
Sainsburys learnt from Tesco successes strategies. However the way that Sainsbury
implements the strategies and policies were different.
3.3.5 Bargaining Power of Suppliers
Bargaining Power of Suppliers
NO Case facts
1 In the
aftermath of World War l, food supplies were low, so
he
bought damaged goods from other stores and re-sold
them at reasonable prices. (Pg.332,para4)
Total
Conclusion:
34
Stron
g
Moderat
e
Wea
k
[MR111037]
This force represents the power of suppliers that can be influenced by the major chains and
that fear of losing their business to the large supermarket like Tesco. Unfortunately, there is a
lack of information for this forces.
3.3.6 Bargaining Power of Buyers

Bargaining Power of Buyers
NO
Case facts
1
At the beginning of the 1990s, the U.K.
retail
market slowly became more
competitive(Pg.332,para5)
Strong
While service offerings today are quite

similar, the
rivals' distribution strategies differ
significantly. (Pg.335,para2)
This was helped by the trend of consumers

to increasingly combine bargain shopping
with purchases of
luxury products or services This
"schizophrenic" shopping
behaviour blurs Previously separate
boundaries (Pg.340,para6)
Total
Conclusion:
Weak
Customers of Sainsbury's, however, spent

the most per order, averaging almost .90,
compared to 80 for both Tesco and
ASDA(Pg.336,para3)
Moderate
Tesco found out that UK retail market slowly become competitive from day to day. Tesco has
taken this key issue for expanding its business into International market and try to find a new
35
[MR111037]
market segment as well as offered new products in order to stay competitive and meet the
demand in the industry.
3.3.7 Conclusion of the Industry
I believed that the majority of threats to the players in the industry come from existing main
players rather than new entrants(lack of information about new entrants). Especially for
Sainsbury. It is because Sainsbury keep copying Tescos strategies. In addition, it is also
important to be noted that in this industry there are more opportunities rather that treats
meaning that it is a competitive industry and each of the player need to struggle in orde to
stay ahead.
3.6 Defining the Key Success
Brand Value & Reputation
Key Success Factor

NO
Key Success
Factor
1.
Case Facts
The stole appeals to wide

reaching demographics across the country and has
built up a heritage of reliability and trustworthiness'
which keeps shoppers returning to its stores. These
factors
have enabled Tesco to gain close to a third of the
British grocery market-"(Pg.334,para3)
Sainsbury introduced the Sainsbury's reward

card in 1996. A multiparty card program, "Nectar," was
launched in the autumn of 2002. Nectar gives the
customer
a versatile and powerful point gathering system
to be used and redeemed at a variety of stores. In
Nectar,
Sainsbury's has strong partners such as Barclaycard,
British Petroleum, and the department store chain
Debenhams. (Pg.335,para5)
Tesco formed an alliance with Esso Petroleum

Company t.td (now part of ExxonMobil Corp.). The
agreement included several petrol filling stations on
lease from Esso, where Tesco would operate the store
36
[MR111037]
under the Express format. ln turn, Esso would operate

the forecourts and sell their fuel via the Tesco store.
ten years later, over 600 -Tesco/Esso stores can be
found
across the United Kingdom(Pg.334,para2)
As Edward Garner, the communications director of the

TNS Super panel, remarks: "Tesco's winning
formula
is largely due to its ability to be all things to all people.
According to T'NS, over 60 percent of British house
holds shop in Tesco every four weeks (Pg.334,para3).
Tesco was the first to Launch a Clubcard

system. It was introduced in 1995 and has become the
most popular card in the United Kingdom, with around
l3 million active Clubcard holders. Customers collect
one Clubcard point by every 1 (1 in Ireland) they
spend in a Tesco store, Tesco Petrol, or at Tesco.com.
(Pg.335,para4).
Supplier Management
IT Integration
3.
4.
37
In 2001, Tesco.com's then-(CEO,

John Browett, received the Wharton Infosys Business
Transformation Award for the innovative processes he
used to support this online food service. 'today, Tesco
operates the world's largest food home shopping service
as well as provides consumer goods, telecommunication
and financial services online. As of November
2006, Tesco was the only food retailer to make online
shopping
profitable.
(Pg.336,para2).
Draw
goods
from suppliers
into regional distribution
centers for preparation and delivery to stores. Tesco is
extending this logistic practice to cover collection from
suppliers (factory gate pricing) and input to suppliers in
a drive to reduce costs and improve reliability.
(pg.335,para2)
[MR111037]
In 1997. Sainsburys bank was established as a joint

venture between J Sainsbury plc and the Bank of
Scotland (now HBOS). Sainsbury's bank offers services
similar to Tesco., including travel (insurance and
money), savings, and lending; it also offers a
Sainsbury's credit card. By 2010, Sainsbury's expects to
achieve sales
of 3.5 billion, with 33 percent of its total sales coming
from non-food businesses. (pg.337,para4)
3.6 Opportunities and Threats

The List of Opportunities
NO
Case Fact
1.
Following these predictions, the United Kingdom has evolved into a leader of
internet retailing
in Europe, and growth is continuing. (Pg.335,para5
2. Toward the end of the 1990s, both firms targeted online
distribution channels that promised large growth
3. Non-store retailing growth rates were
expected to be higher than store based rates, as online
usage gained popularity among British consumers. (Pg.335,para6)
4. Tesco then analyzed countries for expansion, Putting
high emphasis on two dimensions: the market Potential
for growth and the competitive situation in the market.
Only if a market was characterized by relatively high
38
[MR111037]
growth potential and relatively low rivalry was it considered

a real target market and approached in an
orderly fashion. (Pg.337,para1)
5. Recent trends, such as health and wellness and ethical concerns, have opened
opportunities,
even in the saturated food category; however, most food
retailers' growth is expected to stem from non-food
6. This was helped by the trend of consumers to increasingly combine bargain
shopping with purchases of
luxury products or services This "schizophrenic" shopping
behaviour blurs Previously separate boundaries (Pg.340,para6)
7. Sainsbury's decided
that a separate brand was no longer needed. Over the
following years, these stores were converted to the regular
Sainsbury's superstore format and, subsequently,
Sainsbury's retreated from hypermarkets and changed its
store formats. (Pg.333,para4)
The list of threats

NO
Case Fact
Sainsbury's emphasized
price reductions on the standard private labels(Pg.333,para3)

market slowly became more competitive(Pg.332,para5
3
While service offerings today are quite similar, the
rivals' distribution strategies differ significantly. (Pg.335,para2)
4
market slowly became more competitive(Pg.332,para5)
39
In the mid-1990s, competition intensified as a price

war among these players emerged, resulting in squeezed
[MR111037]
margins and cost cutting. It is not surprising that this

also had an adverse impact on the service level these corporations
provided. (Pg.333,para2)
6
Sainsbury's was established in 1869 by John James

and Mary Ann Sainsbury, making it the oldest food
retailing chain in Britain(Pg.332,para3)
The group is also

engaged in property and banking, owning real estate
worth about 8.6 billion (Sainsburys) (Pg.332,para3)
In 1975, Sainsbury's Launched the "Sainsbury's

SavaCentre hypermarket formal as a joint venture with British Home Stores.
This was the first attempt in the
United Kingdom to launch supermarkets with a large
non-food range (Pg.333,para4)
1
0
Copying Tesco. Sainsbury' also used its own food brand and transferred
them to non-food : items, For example, it extended its clothing range with an
organic line. In addition to food and non-food items, Sainsbury expanded into
retail banking and property development. (pg.336,para3)
1
1
Sainsbury's. Starting in the 1990s, it pursued a broad

set of growth initiatives, steadily increasing its market
share and gaining importance. (Pg.332,para2)
1
2
40
ASDA positioned itself

as the price leader(Pg.332,para3)
1
3
1
4
ASDA had also moved strongly into the non-food area(Pg.337,para4)
1
5
2005, these two hard discounters had acquired a market share of2.2 percent and
1.9 percent, respectively. (Pg. 333,para3)
1
6
1
ASDA had also moved strongly into the non-food area(Pg.337,para4)
The price cuts were prompted by the increased price pressure from the market
entry of discounters. For example, Aldi entered the market in 1990, followed
by Lidl in 1994. In
Sainsbury's has also invested in Private labels. A large Sainsbury's store

[MR111037]
typically stock around 50,000 lines of which about half are private labels.
These lines include. for example, "Basics" (an economy range similar to
Tesco's "Values"), "Taste the Difference" (a premium range similar to Tesco's
"Finest"), "Different by Design" (a smaller range of premium non-food lines),
"Kids," "Be Good to Yourself' (products with reduced calorific and/or fat
content), "Free from," "Sainsbury Organic," "Fair Trade," and "Super
Naturals-" (a range of readymade meals with healthy ingredients)
(Pg.334,para4)
1
8
Sainsbury introduced the Sainsbury's reward

card in 1996. A multiparty card program, "Nectar," was
launched in the autumn of 2002. Nectar gives the customer
a versatile and powerful point gathering system
to be used and redeemed at a variety of stores (Pg.335,para5)
1
9
Sainsbury's has been involved in e business and

home-shopping development since 2000, when it launched Sainsbury's to You
in April of that year(pg.336,para3)
2
0
Sainsbury's did not release any e-commerce sales figures, but said it was still
on track to expand its Web service to 200 stores by March
2010. (pg.337,para4)
2
1
Copying Tesco. Sainsbury' also used its own food brand. and transferred
them to non-food : items, For example, it extended its clothing range with an
organic line. In addition to food and non-food items, Sainsbury expanded into
retail banking and property development. (pg.336,para3)
2
2
Sainsbury's bank offers services similar to Tesco., including travel (insurance

and money), savings, and lending; it also offers a Sainsbury's credit card. By
2010, Sainsbury's expects to achieve sales of 3.5 billion, with 33 percent of its
total sales coming from non-food businesses. (pg.337,para4)
3.7 The External Evaluation Factor (EFE)

Ite
m
Key external factor
Following these predictions,

the United Kingdom has
evolved into a leader of
41
Weight
Rating
Weighted
score
Opportunity
0.09
0.36
[MR111037]
internet retailing in
Europe, and growth is
continuing. (Pg.335,para5
Toward the end of the

1990s, both firms targeted
online distribution
channels that promised
large growth
0.08
0.32
0.08
0.32
0.21
Non-store retailing growth

rates were
expected to be higher than
store based rates, as online
usage gained popularity
among British consumers.
(Pg.335,para6)
Tesco then analyzed

countries for expansion,
0.07
Putting high emphasis on
two dimensions: the market
Potential for growth and
the competitive situation
in the market. Only if a
market was characterized by
relatively high
growth potential and

relatively low rivalry was it
considered a real target
market and approached in an
orderly fashion.
(Pg.337,para1)
42
[MR111037]
Recent trends, such as

health and wellness and
ethical concerns, have
opened opportunities,
0.07
0.21
0.08
0.32
0.08
0.32
even in the saturated food

category; however, most
food
retailers' growth is expected
to stem from non-food
Sainsbury's decided that a

separate brand was no
longer needed. Over the
following years, these stores
were converted to the
regular Sainsbury's
superstore format and,
subsequently, Sainsbury's
retreated from
hypermarkets and changed
its store formats.
(Pg.333,para4)
7
In the
aftermath of World War l,
food supplies were low, so
he
bought damaged goods from
43
[MR111037]
other stores and re-sold

them at reasonable prices.
(Pg.332,para4)
Threat
8
This was helped by the

trend of consumers to
increasingly combine
bargain shopping with
purchases of
luxury products or services
This "schizophrenic"
shopping
0.06
0.18
0.06
0.24
market slowly became

more
competitive(Pg.332,para5
0.06
0.24
While service offerings

today are quite similar,
0.05
0.15
behaviour blurs Previously

separate boundaries
(Pg.340,para6)
price reductions on the
standard private
labels(Pg.333,para3)
10
At the beginning of the
1990s, the U.K. retail
11
44
[MR111037]
the
rivals' distribution
strategies differ
significantly.
(Pg.335,para2)
12
At the beginning of the

1990s, the U.K. retail
0.05
0.15
0.05
0.20
0.06
0.18
market slowly became

more
competitive(Pg.332,para5)
13
In the mid-1990s,
competition intensified as a
price
war among these players
emerged, resulting in
squeezed
margins and cost cutting. It
is not surprising that this
also had an adverse impact
on the service level these
corporations
provided. (Pg.333,para2
14
In 1975, Sainsbury's
Launched the "Sainsbury's
SavaCentre hypermarket
formal as a joint venture
with British Home Stores.
This was the first attempt
in the
United Kingdom to launch
supermarkets with a large
45
[MR111037]
non-food range
(Pg.333,para4
16
Sainsbury's targeted
0.06
0.18
the upper price segment,

positioning itself between
mass market and high end.
P333. Par 1
Total
3.58
Conclusion
Based on External Factor Evaluation Analysis, Tesco achieved 3.58 which shows that the
company is responding in an outstanding way towards the opportunities and threats in its
industries. As a matter of fact, we can clearly see that Tesco external strategies have
successfully take advantage of existing opportunities and at the same time struggle to reduce
the threats.
3.8 Competitive Profile Matrix (CPM) Analysis
Key
SUCCESS
FACTORS
Brand Value
&
IT
Reputation
Integration
Supplier
Management
Total
Tesco
Weight
ASDA
Sainsburys
Rating
Score
Rating
Score
Rating
Score
1.72
1.72
1.29
1.48
0.11
1.48
0.60
0.60
0.80
0.43
0.37
0.20
1
3.8
3.43
3.57
Conclusion:
From the CPM analysis we can see that Tesco CPM value is 3.8 which is ahead of the other
competitors such as ASDA and Sainsbury. It is clear to know that Tesco is the industry leader.
From this analysis we can see that Sainsburys is the closest competitors for Tesco. On the
other hand, because of the lack information about ASDA, I will going to take Sainsburys as
the main competitor for the internal analysis. In fact, there are not so much differences
between Sainsburys and ASDA in terms of their position in the industry.
4.0 Internal Analysis
4.1 Cultural Analysis
Case Facts
46
[MR111037]
Tesco
Tesco is the most customer-focused
business that I have ever
worked for. They are absolutely
obsessed with the
customer. (Pg. 335,para4)
Sainsburys
King perceived Sainsbury's to be not
sufficiently
focused on its customers or its main
competitors (Pg. 339,para4)
The Tesco Way" :

implies a shift from a focus on the
corporation to a
focus on people, both employees
and customers (Pg. 333,para5)
This obsession with our customers,
their needs, and how
these must be changing, means that
you should not expect
us to go on opening large edge-oftown superstores long
after the need for new ones has
passed. (Pg. 333,para5)
Simple and
clear offering logic is also evident in
the strategic move
into telecommunications. (Pg.
337,para2)
N/A
N/A
N/A
Porter anJ
managing director Ian MacLaurin
abandoned the'pile it
high and sell it cheap" philosophy
of Cohen, which had
left the company stagnating with a
bad image(pg.332,para4)
4.2 Management Functions
47
N/A
[MR111037]
Case Facts
Functions
Tesco
Sainsburys
Esso would operate

the forecourts and sell their fuel
via the Tesco store.
Ten years later, over 600
-Tesco/Esso stores can be found
across the United Kingdom.
(Pg. 332,para4)
Planning
N/A
N/A
N/A
By 2010, Sainsbury's expects

to achieve sales
of 3.5 billion, with 33
percent of its total sales
coming
from non-food businesses.
(Pg. 337,para4)
On October,1, 2007,
Sainsbury's announced plans
to
relocate their Store Support
Centre from Holborn to
Kings Cross 1n 2011. (Pg.
340,para5)
48
In 2oo1, Sainsburys
also expanded its share of
the convenience store market
through other acquisitions.
Bell's Stores, a 54-store
chain based in northeast
Organising
ln the 1990s, Tesco strongly
expanded overseas
by increasing investments in
emerging markets such
as Hungary, the Czech
Republic, Thailand, and South
Korea. (Pg. 337,para5)
[MR111037]
England, was acquired in

February 2004. Jackson's
Stores, a chain of 114 stores
based in Yorkshire and the
North Midlands, was
purchased
in August 2004. JB
Beaumont, a chain of six
stores in the East Midlands,
was acquired in November,
2004. (Pg. 334,para2)
In 1994, Tesco acquired the

Scottish supermarket
chain Williarn Low.
(Pg.337,para5)
N/A
In March 1997, Tesco

announced the purchase of the
retail arm of Associated
British Foods, which consisted
of the Quinnsworth,
Stewarts, and Crazy Prices
chains in the Republic of
Ireland and Northern Ireland, as
well as associated businesses,
for 640 million. This
acquisition gave Tesco both
a major presence in the
Republic of Ireland and a larger
presence in Northern Ireland
than Sainsbury's, (Pg.
49
Sainsbury's move into

Northern lreland was
undertaken
in a very different way than
that of Tesco. While
Sainsbury's outlets were all
new developments(Pg.
339,para2)
[MR111037]
337,para5)
Tesco
Extra, launched in 1997, is the
largest format, consisting
mainly of out-of-town
hypermarkets that stock Tesco's
entire product range and offer
free parking (Pg. 333,para5)
In
addition, acquisitions and
alliances complemented the
organic growth strategy . (Pg.
334,para1)
In late
2005, it purchased the 2l
remaining Safeway/BP stores
after Morrison's dissolved the
Safeway/BP Partnership.
In 1997, (Pg. 334,para1)
50
Sainsbury's Launched the

"Sainsbury's
SavaCentre hypermarket
format as a joint venture
with
British Home Stores. (Pg.
333,para4)
Sainsbury's also expanded

by acquisition. (Pg.
334,para2)
As Part
of the acquisition of Safeway
Group by Morrison,
Morrison's was to dispose of
53 of the combined
group's stores. In May 200,1,
Sainsbury's announced that
it would acquire I4 of these
stores, 13 Safeway stores.
and one Morrison's outlet, all
located primarily in the
Midlands and the north of
England. (Pg. 334,para4)
[MR111037]
Tesco, for example, purchased

Adminstore in 2004, owner of
45 Cullens, Europa, and
Harts convenience stores in and
around London. (Pg. 334,para1)
SL Shaw Ltd, which owned

six stores, was acquired
in April 2005 for 6 million.
(Pg. 334,para2)
Tesco formed an alliance with

Esso Petroleum
Company t.td (now part of
ExxonMobil Corp.) (Pg.
334,para1)
Tesco Mobile was launched

as a joint venture with 02, and
Tesco Home Phone
was created in partnership with
Cable & Wireless. In
August 2004, Tesco Broadband,
an ADSL-based service
delivered via BT phone lines,
was launched in partnership
with NTL. in January 2006,
Tesco Internet Phone, a Voice
over Internet Protocol service,
was launched
in conjunction with Freshtel of
Australia(Pg. 334,para2)
Tesco Personal Finance was
launched as a fifty fifty banking
joint venture with the Royal
Bank
of Scotland (Pg.336,para4)
51
N/A
Sainsbury was much more

reluctant to move into
non food retailing. (Pg.
337,para3)
Sainsburys bank was

established
as a joint venture between J
Sainsbury plc and the Bank
of Scotland (now HBOS).
(Pg.337,para4)
[MR111037]
On September 29, 2004

Sainsbury's established
Sainsbury's Convenience
Stores
Ltd to manage its
Sainsbury's local stores and
the Bell's
and Jackson's chains (Pg.
334,para2)
Sainsbury's did not release
any e-commerce sales
figures, but said it was still
on
track to expand its Web
service to 200 stores by
March
2010. (Pg. 336,para3)
In 2002, Tesco purchased l3

HIT hypermarkets
in Poland. In June 2003, Tesco
purchased the C TwoNetwork in lapan. It also
acquired a majority stake in
the Turkish supermarket chain
Kipa. Another acquisition
was the Lotus chain in
Thailand. In mid-2006'
Tesco purchased an 80 Percent
stake in Casino's Leader
Price supermarkets in Poland,
which were subsequently
reconfigured as small Tesco
stores. (Pg. 338,para2)
52
N/A
-
[MR111037]
Tesco has responded

to the need to be sensitive to
local expectations in
foreign countries by entering
into Joint ventures with local
partners, such as Samsung
Group in South Korea
(Samsung-Tesco Homeplus),
and Charoen Pokphand
in Thailand (Tesco Lotus) (Pg.
338,para3)
N/A
Tesco announced that it was

selling its operations in Taiwan
to Carrefour and purchasing
Carrefour stores in the Czech
Republic and
Slovakia. Both companies
stated that they were
concentrating
their efforts in countries where
they had strong
market positions. (Pg.
338,para5)
N/A
Motivating
53
N/A
lnspired by the success of its

main
rivals (ASDA had also
moved strongly into the nonfood area) and the sheer size
of the U.K. non-food market
(Pg. 335,para3)
[MR111037]
N/A
Jack Cohen resigned and was

replaced
as chairman by his son-in-law,
Leslie Porter (Pg. 332,para4)
Staffing
54
Investors
were angered by a bonus
share award of over 2
million,
despite poor company
performance. (Pg.
339,para3)
At the end of March 2004,

Davis was promoted to
chairman and was replaced
as CEO of Sainsbury's
by Justin King. Justin King
joined Sainsbury's from
Marks and Spencer plc,
where he was a director with
responsibility for its food
division and Kings Super
Markets, Inc, a subsidiary in
the United States. King
was also previously a
managing director at ASDA,
with
responsibility for
hypermarkets. (Pg.
339,para3)
[MR111037]
N/A
The program has numerous

partners (e.g., hundreds of
British pubs), but the Clubcard
belongs to Tesco alone (Pg.
335,para4)
N/A
Appointing a high
proportion of Local personnel
to management Positions(Pg.
338,para3)
55
On January 14, 2000, Sir

Peter Davis
was appointed Sainsbury's
CEO. This decision was well
received by investors and
analysts, as in his first two
years he raised profits above
targets(Pg. 335,para3)
In Nectar,
Sainsbury's has strong
partners such as Barclaycard,
British Petroleum, and the
department store chain
Debenhams. (Pg. 335,para5)
Although some employees

transferred from the
traditional
side of the business,
Sainsbury's also hired new
staff with Web and
marketing skills(Pg.
336,para3)
ln July 2004, Philip

Hampton was appointed
chairrnan. Hampton had
previously worked for
British Steel, British Gas,
BT, and
Lloyds TSB.
[MR111037]
ln 2005 and 2006, the company

covertly
sent an advance team consisting
of executives in disguise
to conduct intelligence on
potential competitors. (Pg.
339,para2).
N/A
N/A
Hired Lawrence Christensen,

previously an expert in
logistics at Safeway, as
supply
chain director. (Pg.
339,para5)
Tesco expanded Tesco Extra

and strengthened its
Sainsbury's retreated from
hypermarket
formats
(Pg. hypermarket (Pg. 333,para5)
333,para5)
Controlling
Tesco decided to
draw goods from suppliers into
regional distribution
centers for preparation and
delivery to stores. Tesco is
extending this logistic practice
to cover collection from
suppliers (factory gate pricing)
and input to suppliers in
a drive to reduce costs and
improve
reliability
(Pg.
335,para2)
This office, part of a new

building
complex. will allow both
cost savings and energy
efficiency(Pg. 340,para5)
Tesco paired its marketing

strength with the expertise of
existing telecom
operators. (Pg. 337,para3)
56
N/A
[MR111037]
Tesco successfully fought off

Sainsbury's for control of the
Dundee-based firm, which then
operated 57 stores(Pg.
337,para5)
N/A
4.3 Marketing Strategy

Case Facts
Factors
Marketing
Strategy
Tesco
Its overarching store strategy
is reflected in its core marketing
slogan adopted when
Terry Leahy became CEO in 1997
(Pg. 333,para4)
Tesco entered the housing market with

a self advertising Web site, Tesco
Property Market, Other
strategic initiatives into non-food
items include, for
example, following a successful trial
in 2006, Apple
zones in l2 outlets. (Pg. 337,para3)
An inclusive offer is how Tesco
describes its aspiration to appeal to
upper, medium-, and low-income
customers in the same stores. (Pg.
334,para3)
They
are promoted by leaflets in Tesco
stores and through its website. (Pg.
333,para5)
57
S
Sainsburys
N/A
N/A
N/A
N/A
[MR111037]
One plank of this program has been

Tesco's use of its
private label products, including the
upmarket "Finest'
and low price "Value." Other
examples include organic,
kids, British specialty food, and "free
from" brands(pg.334,para3)
N/A
N/A
Recently, Tesco entered the housing
Market with a
self advertising Web site, Tesco
Property Market, Other
strategic initiatives into non-Food
items(Pg.337,para3).
Promotion
Programs
The Tesco Way :

implies a shift from a focus on the
corporation to a
focus on people, both employees and
N/A
customers. (Pg. 333,para5)

Every three months, holders receive a
Clubcard statement offering discount
coupons that can
be spent in-store, online (if opted into
evouchers), or
on various Clubcard deals.
(Pg. 335,para4)
Today, points on spending

in-store are earned at a rate
of
two points per 1 spent
(except point per liter of
Fuel);
500 points can
subsequently be
exchanged for a voucher
worth 2.50 to spend in
Sainsbury's. (Pg.
335,para5)
58
[MR111037]
Product and
Service
Planning
Tesco has greatly diversified,

extending its
business lines from food into nonfood, clothing, financial.
Services, and telecommunications.
(Pg. 332,para1)
Tesco Ireland announced that it

would enter into a joint venture with
C)2 Ireland to
offer mobile telecommunications
services, also under
the Tesco Mobile brand. (Pg.
3327,para2)
Extended its clothing

range with
an organic line. In addition
to food and non-food items
N/A
Today Tesco is the clear market leader

(pg. 332 para2)
Tesco Superstores are

This was the first attempt
the standard large grocery
in the
supermarkets, with a much
United Kingdom to launch
smaller range of non-food goods than supermarkets with a large
Extra (Pg. 333,para5)
non-food range. (Pg.
333,para4)
59
[MR111037]
Tesco's use of its private label

products, including the upmarket
"Finest'
and low price "Value. (Pg. 334,para3)
Sainsbury's has also

invested in Private labels.
A large
Sainsbury's store typically
stock around 50,000 lines
of
which about half are
private labels. (Pg.
335,para1)
Provides consumer goods,

telecommunication, and financial
services online. As of November
2006, Tesco was the only food retailer
to make online
shopping profitable. (Pg. 336,para2)
In addition to food,
also available are flowers,
wine, gifts, and
electronics. (Pg.
336,para3)
Tesco was the first to Launch a

Clubcard
system. (Pg. 335,para4)
Tesco has operated on the Internet

since 1994
and was the first retailer in the world
to offer a robust
home shopping service in 1996
After long internal

debates, Sainsbury
introduced the Sainsbury's
reward
card in 1996. (Pg.
335,para5)
N/A
(Pg.335,para4)
Pricing
Tesco emphasized its low-price
private label ("Value") and continued
to cut price (Pg. 333,para3)
60
price reductions on the
standard private labels.
The price cuts were
prompted by the increased
price pressure
from the market entry of
discounters (Pg.
333,para3)
[MR111037]
N/A
Tesco online customers paid over f4

per delivery (Pg. 336,para3)
Distribution
Most
are located in suburbs of cities or on
the edges of large and
medium-sized towns. Tesco Metro
stores are
sized between normal Tesco stores and
Tesco Express
stores. They are mostly located in city
centers and on
the high streets of small towns. The
first Tesco Metro
was opened in Covent Garden,
London, in 1992. (Pg. 333,para5)
They are found in busy city center

districts, in small
shopping precincts in residential areas,
and in petrol
station forecourts (Pg. 333,para5)
The
agreement included several petrol
filling stations on
lease from Esso where Tesco would
operate the store
under the Express format (Pg.
334,para1)
61
Sainsbury's targeted
the upper price segment,
positioning itself between
mass market and high end.
. (Pg. 333,para1)
Sainsbury's online
customers incurred the
lowest
average delivery charge
during the period, at just
over
f3. (Pg. 336,para3)
N/A
N/A
N/A
[MR111037]
The company is currently conducting

trials at a finance
center in the Glasgow Silverburn
Extra store, providing
free financial advice and quotes for
insurance and loans. The center also
has a Euro cash machine
providing commission-free Euros and
a Bureau de
Change run by Travelex.
(pg.337 ,para1)
Food sales
are available within delivery range of
selected stores,
goods being hand-picked within each
store (pg.336 ,para2)
in contrast
to the warehouse model
followed by most
competitors which allows
rapid expansion with
limited investment.
(e.g., Ocado) (pg.336
,para2)
Marketing
Research
Tesco implemented the Clubcard

rewards program to gather customer
information, which
is then used to cater to specific
potential customer needs
and wants. When shoppers sign up for
the card, they
automatically submit their ages,
King
ordered a direct mail
campaign to one million
Sainsbury's
customers, asking what
the) wanted from the
company
and where the company
genders, and incomes. Tesco segments
could improve(Pg.
their shoppers on the basis of these
339,para4)
factors. (Pg. 335,para4)
62
[MR111037]
Like James Bond movie, the

company's agents sought
to keep their plans secret by posing as
Hollywood film
producers making a movie about
supermarkets, according
to Business Week. ln the end Tesco
did obtain the necessary information
to proceed with
its store openings. (Pg. 339,para2)
N/A
4.5 Production/Operation
Decision
Area
Process
Case Issue
Tesco
In 1977,
Tesco launched
"Operation Checkout,"
which included
price reductions and
centralized purchasing
for all its
stores (Pg. 332,para4)
They stay open in the
late evening and
feature a differentiated
pricing and offer system
(Pg. 332,para5)
63
Sainsburys
N/A
N/A
Strengt
h
Weaknes
s
[MR111037]
Tesco
stores are divided into
five formats,
differentiated
by size and range
o[ products, and are
customized to
specific segments: Tesco
Extra, Tesco
Superstores,
Tesco Metro, Tesco
Express, and One Stop
(see Exhibit
2). The approximately
500 One Stop stores are
the
smallest units. (Pg.
333,para5)
It also has online

operations in
the Republic of Ireland
and in South Korea(Pg.
336,para2)
In 2003, Tesco.coms
then-CEO,
John Browett, received
the Wharton Infosys
Business
Transformation Award
for the innovative
processes he
used to support this
online food service (Pg.
336,para2)
64
Now, Sainsbury's
operates three formats:
regular Sainsbury's
stores, Sainsbury's local
stores (convenience
stores), and Sainsbury's
central stores (smaller
supermarkets in urban
locations). (Pg.
333,para4)
N/A
N/A
[MR111037]
N/A
The company is
currently conducting
trials at a finance
center in the Glasgow
Silverburn Extra store,
providing free financial
advice and quotes for
insurance and loans(Pg.
337,para1)
Began in the late 1970s

with the purchase of a
small company in the
Republic of
Ireland. The small scale
nature of this first foray
was seen
as a weakness, and the
company was eventually
sold in the
mid-1980s. (Pg.
337,para5)
Capacity
65
Total number of stores

are 1,988 (Exhibit
2:Tescos store portfolio
in the united Kingdom
(at the end of 2007)
Sainsbury's Online
currently operates from
144 stores and uses two
dedicated picking centers
that are not open to the
public. (Pg. 336,para3)
N/A
N/A
Total number of stores

are 752 (Exhibit 1:
Sainsburys Store
Portfolio in the United
Kingdom (at the end of
2006)
[MR111037]
Total area is 27,785,000

ft2 (Exhibit 2:Tescos
store portfolio in the
united Kingdom (at the
end of 2007)
Total areas are

2,581,310 ft2 (Exhibit
2:Tescos store portfolio
in the united Kingdom
(at the end of 2007)
Tesco managed to
increase sales per square
feet by
11 percent
(Pg. 334,para1)
Tesco announced in
December 2004 that it
had signed up 500,000
customers
to its mobile service in
the 12 months since
launch.
By December 2005, one
million customers were
using
its mobile service, and
by April 2006, Tesco
claimed
over one and, one half
million telecom accounts
in
total, including mobile,
fixed line, and
broadband. (Pg.
337,para2)
66
Total area is 16,737,000

ft2 (Exhibit 1:
Sainsburys Store
Portfolio in the Un ted
Kingdom (at the end of
2006)
Total area1,543,000 ft2
(Exhibit 1: Sainsburys
Store Portfolio in the Un
ted Kingdom (at the end
of 2006).
while Sainsburys gained

only 3 percent Pg.
(334,para1)
N/A
[MR111037]
Sainsburys
online shoppers also
bought more items per
Compared to 58 units for
order, with
Tesco(Pg. 336,para3).
both averaging 69 units
per order. (Pg.
336,para3)
Inventory
This represents quite
strong
growth, but is far less
than Tesco, which
processes
weekly
orders
of
250,000. Pg. 336,para3)
October 2007,
Sainsbury's was
receiving around 80,000
online orders per week.
Pg. 336,para3)
In 1997, the new CEO,

Terry Leahy, enforced
Tesco's international
growth strategies beyond
Great
Britain.( Pg. 338,para1)
Workforce
Starting in the 1990s, it
pursued a broad
set of growth initiatives,
steadily increasing its
market
share and gaining
importance (Pg.
332,para2)
67
Specific training
was provided on e
business, as well as
cross-functional
training. (Pg. 336,para3)
[MR111037]
N/A
Quality
68
The stole appeals to

wide
reaching demographics
across the country and
has
built up a heritage of
reliability and
trustworthiness which
keeps shoppers returning
to its store. (Pg.
334,para3)
it has succeeded in
building an image on
providing good value at
Terminating 750
headquarters staff and
recruiting
around 3,000 shop floor
staff to improve the
quality
of service and the firm's
problem of stock
availability(Pg.
339,para4).
N/A
[MR111037]
Low Prices. (Pg.

340,para7)
4.6 Research & Development (R&D)

Case Facts
Strength
Tesco
Sainsburys
N/A
Sainsbury's has been involved in

e business and
home-shopping development
since 2000, when it
launched Sainsbury's to You in
April of that year.
(Pg.336,para3)
Tesco implemented the

Clubcard
rewards program to gather
customer information, which
is then used to cater to
specific potential customer
needs
and wants. When shoppers
sign up for the card, they
automatically submit their
ages, genders, and
incomes(pg.335,para4)
69
King perceived Sainsbury's to

be not sufficiently
focused on its customers or its
main competitors. King
ordered a direct mail campaign
to one million Sainsbury's
customers, asking what they
wanted from the company
and where the company could
improve
Weakness
[MR111037]
4.7 Management Information Systems Audit

Case Facts
Strength
Tesco
Sainsburys
As soon as the shopper uses

the card online or
in-store, product information
is automatically uploaded
into the Tesco database.
Product information is used
to cross-sell additional
products and services, such
as food delivery (Pg.
335,para3)
The card scheme

is run by a third-party company,
Loyalty management
UK (LMUK), which collects
information on behalf of the
partner sponsors. (Pg.
335,para5)
N/A
70
The
group was not ensuring that
shelves were fully stocked,
partly due to the failure of the
IT systems introduced by
Peter Davis(Pg. 339,para4)
Weakness
[MR111037]
4.8 Value Chain Analysis (VCA)

Variabl
es
Case Facts
Strength
Tesco
Tesco decided to
draw goods from suppliers into regional distribution
extending this logistic practice to cover collection
from
Inbound suppliers (factory gate pricing) and input to suppliers
Logistic in
a drive to reduce costs and improve reliability (Pg.
s
335,para2)
Process
In 1977,
Tesco launched "Operation Checkout," which
included
price reductions and centralized purchasing for all its
The company is currently conducting trials at a
finance
center in the Glasgow Silverburn Extra store,
providing free financial advice and quotes for
insurance and loans(Pg. 337,para1)
71
Weakness
[MR111037]
Tesco
stores are divided into five formats, differentiated
by size and range o[ products, and are customized to
specific segments: Tesco Extra, Tesco Superstores,
Tesco Metro, Tesco Express, and One Stop (see
Exhibit
2). The approximately 500 One Stop stores are the
smallest units. (Pg. 333,para5)
In 2003, Tesco.coms then-CEO,

used to support this online food service (Pg.
336,para2)
Tesco
Extra, launched in 1997, is the largest format,
consisting mainly of out-of-town hypermarkets that
stock Tesco's entire product range and offer free
parking (pg.333,para5)
They are found in busy city center districts, in small
shopping precincts in residential areas, and in petrol
station forecourts(pg.333,para5)
Outbou
nd
Logistic
s
An inclusive offer is how Tesco describes its

aspiration to appeal to upper, medium-, and lowincome customers in the same stores. (Pg. 334,para3)
They
are promoted by leaflets in Tesco stores and through
its website. (Pg. 333,para5)
72
[MR111037]
Food sales
are available within delivery range of selected stores,
goods being hand-picked within each store (pg.336
,para2)
The company is currently conducting trials at a

finance center in the Glasgow Silverburn Extra store,
providing free financial advice and quotes for
insurance and loans. The center also has a Euro cash
machine providing commission-free Euros and a
Bureau de Change run by Travelex.
(pg.337 ,para1)
The Tesco Way :

implies a shift from a focus on the corporation to a
focus on people, both employees and customers. (Pg.

333,para5)
Marketi
ng
&Sales

Clubcard statement offering discount coupons that can
be spent in-store, online (if opted into evouchers), or
(Pg. 335,para4)
Like James Bond movie, the company's agents sought
to keep their plans secret by posing as Hollywood
film
producers making a movie about supermarkets,
according
did obtain the necessary information to proceed with
73
[MR111037]
Tesco has greatly diversified, extending its

business lines from food into non-food, clothing,
financial.
Services, and telecommunications. (Pg. 332,para1)

the standard large grocery supermarkets, with a much
smaller range of non-food goods than Extra (Pg.
333,para5)
Service
Tesco's use of its private label products, including the

upmarket "Finest'
Provides consumer goods, telecommunication, and

financial services online. As of November

Tesco has operated on the Internet since 1994

and was the first retailer in the world to offer a robust
home shopping service in 1996 (Pg.335,para4)
*For the supporting activities, there have already covered in

management function, Management Information System and
Research & Development.
4.9 Strengths and Weaknesses

74
[MR111037]
4.9.1 Strengths List:

NO
1.
Today Tesco is the clear market leader (pg. 332 para2)
2.
Tesco is the most customer-focused business that I have ever

worked for. They are absolutely obsessed with the
3.
Esso would operate

the forecourts and sell their fuel via the Tesco store.
Ten years later, over 600 -Tesco/Esso stores can be found
across the United Kingdom. (Pg. 332,para4)
4.
ln the 1990s, Tesco strongly expanded overseas

by increasing investments in emerging markets such
as Hungary, the Czech Republic, Thailand, and South
5.
In 1994, Tesco acquired the Scottish supermarket

chain Williarn Low. (Pg.337,para5)
6.
In March 1997, Tesco

announced the purchase of the retail arm of Associated
British Foods, which consisted of the Quinnsworth,
Stewarts, and Crazy Prices chains in the Republic of
Ireland and Northern Ireland, as well as associated
businesses, for 640 million. This acquisition gave Tesco
both
a major presence in the Republic of Ireland and a larger
presence in Northern Ireland than Sainsbury's, (Pg.
337,para5)
Tesco
Extra, launched in 1997, is the largest format, consisting
mainly of out-of-town hypermarkets that stock Tesco's
entire product range and offer free parking (Pg. 333,para5)
In
addition, acquisitions and alliances complemented the
organic growth strategy . (Pg. 334,para1)
7.
8.
9.
75
Case Fact
In late
2005, it purchased the 2l remaining Safeway/BP stores
[MR111037]
after Morrison's dissolved the Safeway/BP Partnership.

In 1997, (Pg. 334,para1)
10.
Tesco, for example, purchased

Adminstore in 2004, owner of 45 Cullens, Europa, and
Harts convenience stores in and around London. (Pg.
334,para1)
11.
Tesco formed an alliance with Esso Petroleum

Company t.td (now part of ExxonMobil Corp.) (Pg.
334,para1)
12.
Tesco Mobile was launched

as a joint venture with 02, and Tesco Home Phone
was created in partnership with Cable & Wireless. In
August 2004, Tesco Broadband, an ADSL-based service
delivered via BT phone lines, was launched in partnership
with NTL. in January 2006, Tesco Internet Phone, a Voice
over Internet Protocol service, was launched
in conjunction with Freshtel of Australia(Pg. 334,para2)
Tesco Personal Finance was launched as a fifty fifty banking
joint venture with the Royal Bank
of Scotland (Pg.336,para4)
In 2002, Tesco purchased l3 HIT hypermarkets
in Poland. In June 2003, Tesco purchased the C TwoNetwork in lapan. It also acquired a majority stake in
the Turkish supermarket chain Kipa. Another acquisition
was the Lotus chain in Thailand. In mid-2006'
Tesco purchased an 80 Percent stake in Casino's Leader
Price supermarkets in Poland, which were subsequently
reconfigured as small Tesco stores. (Pg. 338,para2)
13.
14.
76
15.
Tesco has responded

to the need to be sensitive to local expectations in
foreign countries by entering into Joint ventures with local
partners, such as Samsung Group in South Korea
(Samsung-Tesco Homeplus), and Charoen Pokphand
in Thailand (Tesco Lotus) (Pg. 338,para3)
16.
Tesco announced that it was

selling its operations in Taiwan to Carrefour and purchasing
Carrefour stores in the Czech Republic and
Slovakia. Both companies stated that they were
[MR111037]
concentrating
their efforts in countries where they had strong
market positions. (Pg. 338,para5)
17.
The program has numerous
partners (e.g., hundreds of British pubs), but the Clubcard
belongs to Tesco alone (Pg. 335,para4)
18.
ln 2005 and 2006, the company covertly
sent an advance team consisting of executives in disguise
to conduct intelligence on potential competitors. (Pg.
339,para2).
77
19.
Tesco expanded Tesco Extra and strengthened its

hypermarket formats (Pg. 333,para5)
20.
Tesco decided to
draw goods from suppliers into regional distribution
extending this logistic practice to cover collection from
suppliers (factory gate pricing) and input to suppliers in
a drive to reduce costs and improve reliability (Pg.
335,para2)
21.

strength with the expertise of existing telecom
22.
Tesco successfully fought off

Sainsbury's for control of the Dundee-based firm, which
then operated 57 stores(Pg. 337,para5)
23.
Its overarching store strategy

is reflected in its core marketing slogan adopted when
Terry Leahy became CEO in 1997 (Pg. 333,para4)
24.
Tesco entered the housing market with a self advertising Web

site, Tesco Property Market, Other
strategic initiatives into non-food items include, for
example, following a successful trial in 2006, Apple
zones in l2 outlets. (Pg. 337,para3)
[MR111037]
25.
An inclusive offer is how Tesco describes its aspiration to

appeal to upper, medium-, and low-income customers in the
same stores. (Pg. 334,para3)
26.
They
are promoted by leaflets in Tesco stores and through its
website. (Pg. 333,para5)
27.
The Tesco Way :

implies a shift from a focus on the corporation to a
focus on people, both employees and customers. (Pg. 333,para5)
28.

Clubcard statement offering discount coupons that can
be spent in-store, online (if opted into evouchers), or
(Pg. 335,para4)
29.

business lines from food into non-food, clothing, financial.
Services, and telecommunications. (Pg. 332,para1)
30.
Tesco Ireland announced that it

would enter into a joint venture with C)2 Ireland to
offer mobile telecommunications services, also under
the Tesco Mobile brand. (Pg. 3327,para2)
31.
Tesco's use of its private label products, including the

upmarket "Finest'
32.
Provides consumer goods, telecommunication, and financial

services online. As of November
33.
34.
Tesco has operated on the Internet since 1994

and was the first retailer in the world to offer a robust
home shopping service in 1996 (Pg.335,para4)
35.
78
Most are located in suburbs of cities or on the edges of large

and
[MR111037]
medium-sized towns. Tesco Metro stores are

sized between normal Tesco stores and Tesco Express
stores. They are mostly located in city centers and on
the high streets of small towns. The first Tesco Metro
was opened in Covent Garden, London, in 1992. (Pg.
333,para5)
36.
They are found in busy city center districts, in small
shopping precincts in residential areas, and in petrol
station forecourts (Pg. 333,para5)
37.
The
agreement included several petrol filling stations on
lease from Esso where Tesco would operate the store
under the Express format (Pg. 334,para1)
38.

rewards program to gather customer information, which
is then used to cater to specific potential customer needs
and wants. When shoppers sign up for the card, they
automatically submit their ages, genders, and incomes. Tesco
segments their shoppers on the basis of these factors. (Pg.
335,para4)
39.
Like James Bond movie, the company's agents sought

to keep their plans secret by posing as Hollywood film
producers making a movie about supermarkets, according
did obtain the necessary information to proceed with
79
40.
In 1977,
Tesco launched "Operation Checkout," which included
price reductions and centralized purchasing for all its
41.
They stay open in the late evening and

feature a differentiated pricing and offer system (Pg.
332,para5)
42.
Tesco
stores are divided into five formats, differentiated
[MR111037]
by size and range o[ products, and are customized to

specific segments: Tesco Extra, Tesco Superstores,
Tesco Metro, Tesco Express, and One Stop (see Exhibit
2). The approximately 500 One Stop stores are the
smallest units. (Pg. 333,para5)
43.
It also has online operations in

the Republic of Ireland and in South Korea(Pg. 336,para2)
44.
In 2003, Tesco.coms then-CEO,

used to support this online food service (Pg. 336,para2)
45.
The company is currently conducting trials at a finance

center in the Glasgow Silverburn Extra store, providing free
financial advice and quotes for insurance and loans(Pg.
337,para1)
46.
Total number of stores are 1,988 (Exhibit 2:Tescos store

portfolio in the united Kingdom (at the end of 2007)
47.
Total area is 27,785,000 ft2 (Exhibit 2:Tescos store portfolio

in the united Kingdom (at the end of 2007)
48.
Total areas are 2,581,310 ft2 (Exhibit 2:Tescos store

portfolio in the united Kingdom (at the end of 2007)
49.
Tesco managed to increase sales per square feet by

11 percent
(Pg. 334,para1)
50.
Tesco announced in
December 2004 that it had signed up 500,000 customers
to its mobile service in the 12 months since launch.
By December 2005, one million customers were using
its mobile service, and by April 2006, Tesco claimed
over one and, one half million telecom accounts in
total, including mobile, fixed line, and broadband. (Pg.
337,para2)
This represents quite strong
growth, but is far less than Tesco, which processes
weekly orders of 250,000. Pg. 336,para3)
51.
80
[MR111037]
52.
Starting in the 1990s, it pursued a broad

set of growth initiatives, steadily increasing its market
share and gaining importance (Pg. 332,para2)
53.
56.

reaching demographics across the country and has
built up a heritage of reliability and trustworthiness which
keeps shoppers returning to its store. (Pg. 334,para3)
it has succeeded in building an image on
providing good value at Low Prices. (Pg. 340,para7)
As soon as the shopper uses the card online or
in-store, product information is automatically uploaded
into the Tesco database. Product information is used to
cross-sell additional products and services, such as food
delivery (Pg. 335,para3)
Profit for year
57.
Financial Turnover
58.
Basic Earnings per Share
54.
55.
4.9.2 Weaknesses List:

NO
Case Fact
1.
Jack Cohen resigned and was replaced

as chairman by his son-in-law, Leslie Porter (Pg. 332,para4)
2.

the standard large grocery supermarkets, with a much
smaller range of non-food goods than Extra (Pg. 333,para5)
3.
Tesco emphasized its low-price private label ("Value") and continued to cut
price (Pg. 333,para3
4.
5.
Tesco online customers paid over f4 per delivery (Pg. 336,para3)
6.
Sainsburys
81
Began in the late 1970s

with the purchase of a small company in the Republic of
Ireland. The small scale nature of this first foray was seen
as a weakness, and the company was eventually sold in the
mid-1980s. (Pg. 337,para5)
[MR111037]
online shoppers bought more items per order, with

both averaging 69 units Compared to 58 units for Tesco(Pg. 336,para3).
Porter and J
managing director Ian MacLaurin abandoned the 'pile it
high and sell it cheap" philosophy of Cohen, which had
left the company stagnating with a bad image(pg.332,para4)
7.
4. 9.3 Internal Factor Evaluation (IFE) Matrix

Ite
m
Key external factor
Weight
Rating
Weighted
score
Strengths
1
Tesco is the most customerfocused business that I have

ever worked for. They are
absolutely obsessed with
the customer. (Pg.
335,para4)
0.10
0.40
In the 1990s, Tesco strongly

expanded overseas by
increasing investments in
emerging markets such as
Hungary, the Czech
Republic, Thailand, and
South Korea. (Pg.
337,para5)
0.07
0.21

reaching demographics
across the country and has
built up a heritage of
reliability and
trustworthiness which
keeps shoppers returning to
its store. (Pg. 334,para3)
0.08
0.24
0.08
0.24
Tesco has responded to the

need to be sensitive to local
expectations in foreign
countries by entering into
Joint ventures with local
82
[MR111037]
partners, such as Samsung

Group in South
Korea(Samsung-Tesco
Homeplus), and Charoen
Pokphandin Thailand
(Tesco Lotus) (Pg.
338,para3)
ln 2005 and 2006, the

company covertly sent an
advance team consisting of
executives in disguise to
conduct intelligence on
potential competitors. (Pg.
339,para2).
0.07
0.28

strength with the expertise
of existing telecom
0.06
0.18
0.08
0.32
0.08
0.32
0.08
0.32
Tesco was the first to

Launch a Clubcard system.
(Pg. 335,para4)
Tesco implemented the

Clubcard rewards program
to gather customer
information, which is then
used to cater to specific
potential customer needs
and wants. When shoppers
sign up for the card, they
automatically submit their
ages, genders, and incomes.
Tesco segments their shoppers
on the basis of these factors.
(Pg. 335,para4)
In 2003, Tesco.coms thenCEO,John Browett,

received the Wharton
Infosys Business
Transformation Award for
83
[MR111037]
the innovative processes he

used to support this online
food service (Pg. 336,para2
10
it has succeeded in building

an image on providing
good value at Low Prices.
(Pg. 340,para7)
Tesco Superstores are the

standard large grocery
supermarkets, with a much
smaller range of non-food
goods than Extra (Pg.
333,para5)
0.09
0.36
0.04
0.08
0.04
0.12
Weaknesses
Tesco emphasized its lowprice private label ("Value")

and continued to cut price
(Pg. 333,para3
Porter and J
managing director Ian
MacLaurin abandoned the
'pile it
high and sell it cheap"
philosophy of Cohen,
which had
left the company
stagnating with a bad
image(pg.332,para4)
0.05
0.10
Began in the late 1970swith

the purchase of a small
company in the Republic of
was seen as a weakness,
and the company was
eventually sold in the mid-
0.03
0.06
84
[MR111037]
1980s. (Pg. 337,para5)
Sainsburys online shoppers

bought more items per
order, with both averaging
69 units Compared to 58
units for Tesco(Pg.
336,para3).
Total
0.05
2
0.10
3.33
Conclusion
IFE matrix shows the information related to strategy formulation Tesco.
Tesco achieved an overall of 3.33 total weighted score based on the 1-4
scale. From here we can realise that the company is success internally. I
considered Sainsbury in this case as Tesco main competitor for the
internal analysis.
85
[MR111037]
5.0
Existing Objective and Strategy
Existing objectives:
Differentiation strategy toward a narrow, focused market.
Strategy:
Tesco focuses on the creation of internal efficiencies that help Tesco
withstand with external pressure
5.1 Long Term Objective
a) Financial Objective:
N/A
b) Strategic Objective:
It has a long way to go before it overhauls Wal-Mart as the worlds biggest grocer. But
analysts said the same about overhauling Sainsburys 15 years ago.. (Pg. 341, Para1)
5.2 Annual Objective
86
[MR111037]
5.3 Strategies
5.3.1 Strategies in action
The Type of
Strategies
Integration
The Title of
Strategies
Forward
Integration
Back ward
Integration
Case Facts
In common
with most other large retailers, Tesco decided to
Objective
Case
draw goods from suppliers
intoFact
regional distribution
Strategic
Objective
centers for preparation and delivery to stores. P
In 1994, Tesco acquired the Scottish
335.para2
supermarket
Tesco is chain Williarn Low. (Pg.337,para5)
extending this logistic practice to cover collection

Market Development Strategy: Strategic
from
Alliances
Tesco formed an alliance with Esso
suppliers (factory gate pricing) and input to suppliers
Petroleum
in
Company t.td (now part of ExxonMobil
a drive to reduce costs and improve reliability. P 335.
Corp.) (Pg. 334,para1
Para 2
business lines from food into non-food,
Product Development: Diversification
clothing, financial.
Services, and telecommunications. (Pg.
Horizontal
In late 2005, it purchased the 2l remaining Sat332,para1)
Integration
eway/BP stores
after Morrison's dissolved the Safeway/BP
Financial Objective
p334. Par
1
To increase sales per square foot by Partnership14%
TESCO
managed
to increase sales per
Product
Products offered included credit cards
annually
square foot by 14percent (Pg334 , Para1)
Development
loans, mortgages, savings accounts, and several t),Pes
Intensive
ol
insurance, including car, home, line, pet, and travel.
P336. Para 6
Market
Recently, Tesco entered the housing market with a
Development
self advertising Web site, Tesco Property Market
p337. Para 3
In 1994, Tesco acquired the Scottish supermarket
chain William Low. p337. Para 6
In March 1997, Tesco announced the purchase of the
retail arn-l of Associated British Foods, which
87
[MR111037]
consisted of the Quinnsworth,

Stewarts, and Crazy Prices chains in the Republic of
Ireland and Northern Ireland, as well as associated
businesses, for 640 million. p337. Para 6
In the 1990s, Tesco strongly expanded overseas
by increasing investments in emerging markets such
as Hungary, the Czech Republic, Thailand, and South
Korea. p337. Para 7
In 2002, Tesco purchased l3 HIT hypermarkets
in Poland.p338- para 2
In June 2003, Tesco purchased the C TwoNetwork in lapan. p338- para 2
It also acquired a majority stake in
the Turkish supermarket chain Kipa. p338- para 2
Another acquisition
was the Lotus chain in Thailand. p338- para 2
In mid-2006'Tesco purchased an 80 Percent stake in

Casino's Leader Price supermarkets in Poland, which
were subsequently
reconfigured as small Tesco stores p338- para 2
in late 2004, the amount of floor space Tesco operated
outside the United Kingdom surpassed its home
market space for the first time, although the United
Kingdom still accounted for more than 75 Percent of
group revenue due to lower sales Per unit area outside
the territory p338- para 4
Tesco regularly continues to make small acquisitions
to expand its international businesses. For example, in
the 2005-06 fiscal
year, acquisitions were made in South Korea, Poland,
and Japan p338- para 4
In September 2005, Tesco announced that it was
selling its operations in Taiwan to Carrefour and
purchasing
88
[MR111037]
Carrefour stores in the Czech Republic and

Slovakia p338- para 4
In February 2006, Tesco announced its intention

to move into the United States, opening a chain
of convenience stores ol1 the West Coast (Arizona and
California), Fresh & Easy Neighbourhood Market. P
339- para 2
Marketing
Penetration
ln 1995, Tesco surpassed

Sainsbury's to become the U.K. market leader- p332.
Para 2
system.p335. p 4
Diversification
Related
Diversification
Not Related
Diversification

rewards program to gather customer information,
which
is then used to cater to specific potential customer
needs
and wants. P335 p 4
In recent years, Tesco has greatly diversified,
extending its
business lines from food into non-food, clothing,
financial services, and telecommunications- p33\2.
Para 1
Originally specializing in food, Tesco began to
diversity into areas such as discount clothes, consumer
electronics, consumer financial services, DVD sales
and rentals, compact discs and music download
Internet service, consumer telecom, costumer health
insurance, consumer dental plans, and budget
software.
p. 336. Para 5
89
[MR111037]
In these new product segments, Tesco heavily built or

its skills in private labels. For example, it introduced
brands such as "Cherokee" and "F+F" in clothing,,
"Technika" and "Digilogic" in consumer electronics,
and other labels ranging from DVD players
televisions and computers. p. 336. Para 5
Tesco used its food brands "Finest" and "Value" to

expand into non food In its Extra stores, Finest health
and beauty, home, and Clothing lines resulted. p. 336.
Para 5
Tesco also entered the telecommunications sector.
P337. Para 2
In autumn 2003, Tesco Mobile was launched
as a joint venture with 02, and Tesco Home Phone
was created in partnership with Cable & Wireless.
P337. Para 2
In August 2004, Tesco Broadband, an ADSL-based

service
delivered via BT phone lines, was launched in
partnership
with NTL. P337. Para 2
in January 2006, Tesco Internet Phone,

a Voice over Internet Protocol service, was launched
in conjunction with Freshtel ol Australia. P337. Para 2
. Tesco Mobile offers only four different pay-as-yougo tariffs: Value, Standard, Extra, and Staff (for
employees). P337. Para 2
90
[MR111037]
Retrenchment
Defensive
91
Regarding the pressure exerted from foreign

and local rivals , Tesco, should intelligently
managed itself, increased product
diversification and change some procedures in
order to cut costs in order to stay ahead in the
industry and at the same time meet demands
of the industry
[MR111037]
Strength
SWOT
MATRIX
Opportunity
1:Recent trends, such as

health and wellness and
ethical concerns, have
opened opportunities,
even in the saturated food
category; however, most food
retailers' growth is expected to
stem from non-food
1-Today Tesco is the clear

market leader (pg. 332 para2)
2: In the 1990s, Tesco
strongly expanded overseas
by increasing investments in
emerging markets such
as Hungary, the Czech
Republic, Thailand, and
South
3:An inclusive offer is how
Tesco describes its aspiration
to appeal to upper, medium-,
and low-income customers in
the same stores. (Pg.
334,para3)
4- Tesco regularly continues
to make acquisitions to
expand
its
international
business(pg. 338, para3)
5.Tesco is the most customerfocused business that I have
ever worked for. They are
absolutely obsessed with the
SO
1-Relying on its own
reputation
and
experience and applying
new opportunities such as
beauty and healthiness
products
based
could
guarantee
success
of
Tesco
in
other
industries( S1,O1)
92
1:Porter and J
managing director Ian
MacLaurin abandoned
the 'pile it
high and sell it cheap"
philosophy of Cohen,
which had
left the company
stagnating with a bad
image(pg.332,para4)
2:Began in the late 1970s

with the purchase of a
small company in the
Republic of
was seen
as a weakness, and the
company was eventually
sold in the
mid-1980s. (Pg.
337,para5)
WO
1-Tesco could use the
opportunities of online
distribution
channel
as
the
way
for
overcome
the
weakness
of
the
small scale nature in
order to get ready to
compete with major
players
in
the
2-Tesco
strongly industry(W2,O2)
expanded overseas and
as a market leader n UK 2-Focus on healthy
Tesco
can
used
the industries to recover
opportunity
of
the the current weakness
internet to target the (w2o1).
growth of the potential
customers (S1,O2O3)
2:Toward the end of the

1990s, both firms targeted
online
distribution channels that
promised large growth
3:Non-store retailing growth
rates were
expected to be higher than
Weakness
3- Tesco which is most

customer
focused
business should grab the
opportunity to a new
[MR111037]
93

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Strategic Management

Lecturer: Profesor Dr. Mas Bambang Baroto

International Business School

1.0 Executive Summary...........................................

Strategic Management/SEM II/ 2011/2012

4.7 Management Information System (M.I.S) .....

Background of the Company

Strategic Management/SEM II/ 2011/2012

1.0 Executive Summary

Strategic Management/SEM II/ 2011/2012

Political, Legal , and governmental forces

Following these predictions, the United Kingdom has evolved

Social , Cultural , and Demographic forces

Strategic Management/SEM II/ 2011/2012

In the mid-1990s, competition intensified as a price

Toward the end of the 1990s, both firms targeted online

Non-store retailing growth rates were

Tesco then analyzed countries for expansion, Putting

Recent trends, such as health and wellness and ethical

Strategic Management/SEM II/ 2011/2012

The group is also

Strategic Management/SEM II/ 2011/2012

Strategic Management/SEM II/ 2011/2012

Strategic Management/SEM II/ 2011/2012

ASDA had also

Strategic Management/SEM II/ 2011/2012

Strategic Management/SEM II/ 2011/2012

This move toward

Strategic Management/SEM II/ 2011/2012

Tesco used its food

Strategic Management/SEM II/ 2011/2012

Finest health and

Strategic Management/SEM II/ 2011/2012

Strategic Management/SEM II/ 2011/2012

Profit for year

Basic Earnings per

For much of the

Strategic Management/SEM II/ 2011/2012

Strategic Management/SEM II/ 2011/2012

Strategic Management/SEM II/ 2011/2012

3.3.2 Rivalry Among Competitor

Strategic Management/SEM II/ 2011/2012

The group is also

Strategic Management/SEM II/ 2011/2012

Strategic Management/SEM II/ 2011/2012

retail banking and

ASDA had also

Strategic Management/SEM II/ 2011/2012

Strategic Management/SEM II/ 2011/2012

This move toward

Strategic Management/SEM II/ 2011/2012

Tesco used its food

Strategic Management/SEM II/ 2011/2012

Strategic Management/SEM II/ 2011/2012

Strategic Management/SEM II/ 2011/2012

Profit for year

Basic Earnings per

For much of the

Strategic Management/SEM II/ 2011/2012

Strategic Management/SEM II/ 2011/2012

Strategic Management/SEM II/ 2011/2012

Tesco was not

Strategic Management/SEM II/ 2011/2012

The small scale