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Tesco Analysis - Essay Example

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Globalisation and consumerism have led to the rapid development of the retailing industry. It seems like yesterday a portrait of the typical store depicted a small building specialised only in few types of goods. Today markets of developed countries are overrun by large multinational corporations gradually replacing local entrepreneurs…
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Tesco Analysis
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Download file to see previous pages At first an extensive background of the company is given, providing the data on the past of the corporation. Tesco walked through a considerable number of obstacles on its path with a single principle: price is the most considerable factor in retailing. While using 'pile it high, sell it cheap' strategy the firm has made its name on the three main notions: perfect use of online retailing, perfect meeting of customers' demands, and perfect pricing policy. More detail to these factors is given in the next part of the report. After that the report dwells on the market environment surrounding Tesco. Interestingly, another company that used strategy similar to Tesco is also a top retailer in its domestic market environment - it is Wal-Mart. The comparison between Tesco and Wal-Mart is drawn next. The report concludes with forecasting what strategic options Tesco will have in its nearest future.
Tesco was founded in 1924. However, the real history of Tesco began in 1931 when the first store was opened. At first the company specialized only in food retailing, which already had some major players, e.g. Sainsbury - a leading company of that time. Despite many differences, such as family issues in controlling businesses both companies had similarities. Both Tesco and Sainsbury families were very influential, however unlike Sainsbury, where all the managerial control belonged to the family, Tesco always had non-family board of directors (Morelli 2004). At the same time, both Tesco and Sainsbury based their success on regional strategies placing their stores in highly concentrated South Western and South Eastern parts of England. In fact, this was one of the reasons of imperfect competition between these tow companies.
Tesco became a public license company in 1949. The company has been noted for a rapid and effective use of its investors in compare with its competitors. While Sainsbury's growth was incremental through the use of retained earnings for investment in new stores (Williams 1994), Tesco has been known for the effective use of share floatation to gain the necessary capital for takeovers (Morelli 1996). Sainsbury became a public licensed company only 24 years later in 1973 - the unwillingness of the company to utilize leasing was one of the reasons why Tesco has become a new market-leading company.
Meanwhile the industry of retailing was developing rapidly. Upcoming trends of those days were integrated supermarkets, allowing its customers to buy everything they need within one building and self-service, which granted lower expenditures on the retailing personnel. Later, "from the adoption of still larger superstores, computerisation, stock control systems and sub-contracting out of warehousing and distribution in the 1980s, the modem supermarket retailer has been prepared to rapidly develop new organizational approaches" (Morelli 2004, p. 771). Tesco began selling non food goods in 1964. Introducing innovative techniques, such as loyalty cards, banking services, one-stop shopping, etc. has also given Tesco some advantage, although all these methods were quickly imitated by other companies.
Pricing was always one of the most important issues in retailing. Being similar among all the major players of the UK retailing industry, prices were hardly anyone's advantage. There were some ways to attract customers, though. For instance, one of ...Download file to see next pagesRead More
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