Analyse the market for Tesco Groceries within the UK - Essay Example

Founded in 1924, Tesco is the largest retailer in the UK market as well as the largest UK based international supermarket chain with 1,780 stores in the UK and 586 outlets internationally. The company which originally focused on food retailing has now expanded in to retailing of clothing, household electronics, fincial services, internet and telecommunications. Company is displaying tremendours financial performance with over 15% growth in its revenue reaching £ 34 billion in year 2005 and a widely publicised operating profit of £ 2 billion.

With over 1780 stores spread across UK and a strong presence in Ireland and a host of other countries, with its 586 international outlets, Tesco retail operations employ over 240,000 employees. The UK supermarket segment operates on a highly differentiated platform where the segmentation is done on customer profiles, geographic locations as well as product and image offer of each player. The focus on differentiation in the industy is evident in the total expenditure of £150 million on advertising by key players.

Tesco initially positioned itself on “Best Value” platform and based its operations on the principle of "Pile it high, sell it cheap" approach of the founder Jack Cohen. While this positioning attracted the lower income classes, it created a cheap image of the company and alianated the middle class consumers. To counter this negtive image, the company revised its approach to "inclusive offer" a phraseused by Tesco to describe its aim of catering to all stratas of income gorups from the same stores (Tesco.com 2005) .

Under this approach the company offers “Finest and Luxuary” range as well as low priced “Value” range to cater to varying disposable income levels of its differentiated customer bases. The company also differentiate its outlets through five formats, which differ in shop floor size and the range of products sold. These