TESCO

A CASE ANALYSIS BY:-

MAYANK PRAKASH(500090551)
SHRADHA BISHT(50009415)
DAVESH SINGH(500096332)
UTKARSH MADNANI(500094866)
MBA- Logistics and Supply Chain Management
University of Petroleum and Energy Studies
Guided by:- Dr. NEERAJ ANAND
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INTRODUCTION

Tesco is a multinational grocery and general merchandise

retailer headquartered in Welwyn Garden City, England,
founded in UK in 1919, and operated internationally since 1979
It acquired Albert Gubay’s “Three guys” business in Republic of
Ireland
Now has retail stores in UK(home country), Ireland, India,
Malaysia, South Korea, Thailand,Czech Republic, Hungary,and
etc.Now with 65%it’s retail stores outside the country.
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First expansion

Ireland was its first expansion which was culturally, and

geographically close to them, their appetite for risk
increased and wante to explore those countries which have
less in common.Where they used different “market entry
methods” and different distribution channels

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Failure

Withdrawal from US market after only six years of exposure

after disappointing results of its wholly owned subsidiary
“fresh & easy”and also exit from Japan in 2011 after just 9
years
The idea of expansion was great , but the timing was not
right, it would have been done great, especially if they gave
importance to their domestic market of UK.In last the move
of exiting markets was seen as distraction
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Another Venture

After failing in first expansion, for second expansion it waited for the
another expansion, and started with acquisition in a geographically
proximate(close in the sense of geography) market of france. Though,
it faced much competition from the local such as Carrefour, and left in
1997
Break of soviet union
Central and eastern european market opened and looked like an
attractive market for the company which was looking for pool of
consumers eager to adopt western style convenience
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Readiness from the company to adapt to other cultures

When we look their approach regarding the adoption of the cultures

in hungary it shows readiness of Tesco to adopt their culture, rather
than imposing western culture. Which led them to claiming of 85%
of its product offering their, which also to help them to provide
variety of products in UK which customers are always searching for.
After success in Hungary , markets of Czech republic and Slovakia
were also explored,which is still running on till date, and also
provides online services
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Major Competitions

 Local retailers – which knows their customers, and

distribution channels
 Sainsbury’s
 ASDA
 Morrison
 Aldi and Lidl

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Products Offered
 Tesco Stocks around 90,000 different products
 228 different options
Where other competitors are offering around 2,000 products,
people are prone to go on the retailers which has a variety of
products
When we talk about adding value – chain this is one of the
major things to consider, stocking the right amount for the right
customer and also proving them a variety is a part of value chain

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Analysis

In start Tesco attempted to follow a model of incremental expansion,

giving access which felt were similar to the UK, but limited success led
them to explore seek out further market which were unknown or
unexplored.
The approach to target local market which they applied in Ireland, is
locally responsive may have been successful in the market which might
have needed in the countries(initially) such as Thailand and South Korea
However they broke when they entered US market, they thought US
market was similar of that of UK, but found to be unexpectedly wrong

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Analysis Contd.

Initially they approached a strategy of collaborative approach which may

have its own positiveness like attractive entry ,lower risk of finance, and
access to local marker
But has weakness to like
Sharing of technology with local partners
Danger of creating competitor
But, they were aware of the dangers, while increase in the market they
started reduce holdings of the local company or didn’t shared technology
right away

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Creating and capturing values in supply chain

 TESCO did not have to change its supply chain due to its new
strategies but moreover focusing on expanding its workforce and
capacity
 TESCO defined consumer needs and expanded range of products
 High bargaining power over customers and suppliers
 The new expansion of product line improved the supply chain
without making drastic changes
 Company already had an online channel for food, it was not
difficult for non food products
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How Tesco added Value
 Primary Activities
Inbound logistics

Tesco inbound logistics operations are complex and involve the supply of
hundreds. Its operations is a major source of value creation for Tesco.
The company makes regular investments to increase the capacity of
logistics so that the economies of scales can be exploited to a greater
extent.
For example, in 2013 as a part of a government-backed trial program
testing the efficacy of longer trailers, Tesco received 25 new 51-foot Gray
& Adams refrigerated units. New trailers can carry 51 cages (UK shipping
units), six more than a standard 45-foot trailer. This change resulted in 13
per cent increase in logistics productivity[
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Operations
Tesco operations can be divided into three large segments:
1. Retail. This segment represents the core business of Tesco PLC. With more than 80 million
shopping trips made thousands of Tesco shops in 11 countries around the world the scope of Tesco’s
retail operations is extensive. The company operates stores in the following format:
Metro. Metro stores sell wide range of food and a smaller selection of general items such as cook
ware and greetings cards.

Express. The smallest size of stores, Tesco Express aims to bring fresh food as close as possible to
home and work. Express store formats are designed for top-up purchases and small shopping visits

Extra. The largest type of store, Tesco Extra offers the greatest choice of products, including
electrical equipment, clothing, homeware, health and beauty services, and financial services such as
travel money.
Superstore. Stores of this format offer a good range of food and other products. Each Superstore
also has a bakery and fresh food counters

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Operations contd.
2. Manufacturing. The grocery retail chain sells own brand products under Everyday
Value basic range products. Recently, the company launched 76 lines with fictitious
farm names across seven brands as an attempt to revamp its budget range of own-
brand value products. This latest move allows the supermarket chain to compete
against German discounters Aldi and Lidl with “farm” brands, while
maintaining Everyday Value low price.
3. Banking. Tesco Bank is a wholly owned bank by Tesco PLC, and it has more than
3000 employees serving about 7 million customers.[7]Initially launched as a joint
venture with the Royal Bank of Scotland, the bank became a wholly owned Tesco PLC
subsidiary since 2008. In 2014 Tesco Bank generated trading profits of GBP 194 million
with a net interest margin of 4.4 per cent, double that of Lloyds Banking Group.
 
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Other Activities

Outbound logistics
Flexibility and cost-effectiveness of deliveries are the main
sources of value for Tesco outbound logistics. The supermarket
chain offers several home delivery options for purchases made
online from Tesco Direct. These include delivery for GBP 1
(British Pound) subject to availability of slots, Delivery
Saver plan that offers unlimited free grocery delivery for one
month and Free Next Day Click + Collect plan. The options
above require the minimum spending of GBP 40 and a GBP 4
surcharge will be applied to all online grocery orders under
GBP 40. The company also offers home delivery of products
purchased from offline physical Tesco stores in selected 15
Marketing and sales

‘Every Little Helps’ is the main marketing communication message of

the supermarket chain and accordingly, Tesco’s marketing strategy
attempts to associate the brand with competitive prices, wide
selection of products and the best quality/price balance. Currently,
Tesco marketing strategy also pursues the aim of restoring
stakeholder trust towards the brand to address the severe damage to
the brand image caused by commercial income scandal and the
instances of poor supplier treatment under the previous leadership.
The company uses online and offline sale channels, and the UK
represents more than two-thirds of Tesco Plc. sales

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Service

Customer loyalty based on the frequency of shopping and an average weekly

spend has declined by 2.5 per cent during 2015. While there is no doubt that
Tesco’s commercial income scandal played a great role in causing such a decline,
it can be argued that flaws associated with the provision of customer services may
have also played a certain role.

Due to the choice of cost leadership business strategy, it is difficult for Tesco to
provide the customer services of the highest standards. In other words, Tesco
business strategy focuses on cost reduction, while exceptional customer services
come of additional costs. Therefore, it is difficult for Tesco, as well as any other
business to offer the lowest prices and the most exceptional customer services at
the same time

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Conclusion
 Initially when they were following a model of incremental expansion by
pursuing distribution opportunities in proximate markets which was
seen as profitable but found to be loss for future
 And the collaborative model with the knowledge of future competition
made them a good example of farsightedness but we cannot say, case of
South Korea to be a failure it was the timings which was not right, it
was more of Internal problem of performance rather than of strategy
 It is important for TESCO to have an operation strategy because it
establishes the type of goods and services the company will offer to its
target market and how to get advantage over its competitors

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 THANK YOU!
AND
ALL QUESTIONS ARE WELCOME

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