Tesco Case Study

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Tesco are a Public Limited Company, most commonly known as a PLC. This refers to them as being a Public Limited Company which gives them the chance to operate on the stock market by selling shares.

Tesco operates 2,291 stores around the world and employs 296,000 people. We have grown from a domestic retailer, to an International Group, through our organic growth programme. This year, all four parts of the Tesco strategy, the core UK business, non-food, retailing services and international, have increased in profitability.

Tesco personal finance, established in 1997, now has over 3.4 million customer accounts and 15 products and services. It achieved profits of �96m in 2003 (Tesco share �48m). Tesco.com is the largest grocery e-tailer in the world and achieved a profit of �12m in 2003. They now also own a fixed line phone service as well.

Half of their UK new space opened this year has been for non-food and the result has been to grow their market share to 5%.

As is shown above when the capital expenditure rose in 1997 from 758 million pounds to. The extra 83 million pounds spending being concentrated in Ireland and central Europe. This sending has added 23 new stores to the U.K.

Tesco’s has also started an over seas investment program since 1994 so their name becomes a world wide known brand. This investment looks like this:

1994 France

1995 Hungary and Poland

1996 Czech Republic and Slovakia

1998 Northern Ireland and Thailand

But since the first investment in France in 1994 Tesco has decided to sell all but one of their stores in favour of expanding else wear due to expenditure not being recovered as quickly as they would have aimed.

Tesco’s objectives of product promotion are to give a large and relevant range of product promotion in all of their stores. This then should be both relevant to both the customer and the product. They aim to differentiate their market and they try to make the promotion strategy applied to the market they are aiming at. For example they would aim chicken shaped as rabbits at the parents with young children and not the elderly and retired population. They aim to operate a long side their normally goods a W.I.G.I.G strategy. Which is a set of one-off promotions, it stands for “When Its Gone Its Gone.”

This is when Tesco sell leading and expensive brands such as Calvin Klein, but they sell these goods at very competitive prices. They only have a limited number though so it is once they are gone they are gone, most of these goods are imported from America or other parts of Europe where they can be accurate at a cheaper price. Many company object to this but then attempts to try and stop them have always failed.

Tesco’s marketing is manly used to promote themselves as a store that represents their customers and gives good value for money whilst still providing high quality goods. This promotion is separated into two very different and distinctive groups, which are as follows:

1. The name that is advertised through national advertising.

2. The promotion of the products in side the store it self, for example special deals or say Televisions. This type of comparing is shown on television the national and local Newspapers. This is as it has been proven that two third of adults will react because of seeing an advert. During the year 1997 Tesco’s advertisements appeared 2000 times in the newspapers.

The Tesco strategy is for long-term growth, and focuses on four elements:

Core UK business

The UK business remains Tesco’s core market. Tesco’s focused strategy of providing exceptional value and choice for customers ensures that we continue to grow market share. Tesco have four store types:

1. Extra, Tesco’s regular ‘supermarket’ but with extra services.

2. Superstores, Tesco’s regular ‘supermarket’.

3. Metro, Tesco’s town centre and city centre stores.

4. Express, Tesco’s convenience offer.

Non-food business

Tesco now have a 5% market share. Tesco’s goal is to be as strong in non-food as in food. Tesco’s non-food offer encompasses electrical, home entertainment, clothing, homeshop, cookshop and, in Tesco’s largest stores, white goods.

Retailing services

As customers’ shopping habits change, Tesco change and respond by providing new products and services. Tesco’s e-commerce business has grown rapidly. Tesco are the world’s largest grocery e-tailer and operate their own system in the international markets. Both tesco.com and Tesco Personal Finance demonstrate Tesco’s ability to extend the Tesco brand. Tesco have also moved into Telecoms, launching a fixed line phone service and a directory enquiry service.

International

Tesco has successfully opened up new growth markets in Central Europe and Asia. The proportion of total Group space outside of the UK was 47% at the half year 2003/2004. Tesco now operate in Hungary, Poland, the Czech Republic, the Slovak Republic, Thailand, South Korea, Taiwan, Malaysia and the Republic of Ireland. In 2003/2004 Tesco acquired the C Two-Network, a price leading retailer in Japan.

Inside Tesco, there are a number of different functions, namely:

* Finance / Accounts

* Operations

* Personnel / Human Resources

* Marketing

* Research and Development

Finance/Accounts

In any company, the accounts function is always going to be the backbone. They are the core of the company’s records as they must keep detailed records of all transactions within the business. Usually in Tesco, all the financial accountancy records are kept on computer.

Within Tesco there are two parts of the accounts department. One type being the individual accounting of smaller stores, usually on a balance sheet basis, but in some larger stores the accounting will take place through each department, i.e. vegetables, electrical, clothing, entertainment, etc.

The other part of the accounting process is then where the individual stores accounts are put together and added to the ‘main accounts’. This is available to each store’s Manager(s) and will help them in single decision-making in each store.

Accounting alone in Tesco is the main function that will help show weither Tesco are meeting their objectives or not. Forecasts can be made with managers by looking at the accounting records. They can look at if the store is reaching their profit levels, increasing their market share and basically keeping a positive cash flow through the store. Through the decisions made in accordance with accounts, managers can look and see what product ranges are being sold and what ones aren’t. These will then be forwarded to other functions to help sell the product ranges that aren’t selling as well or to enhance a product range to help enhance their sales.

Operations

This is basically Tesco’s production function. In Tesco, the main objective is obviously to ‘sell the product’. This simply means that the Operations function will need to be connected to every other function in Tesco. This is basically Tesco’s core function. This function will link with other functions such as Finance/Accounts, Research and Development and Marketing.

Tesco use Operations as their main way to make sure that the service they offer, products they sell and the quality of the products are superlative at all times. This function is a huge asset to Tesco, as without it Tesco would have a rough time making sure that everything ran smoothly and that stores constantly had a good supply of stock.

Personnel / Human Resources

Personnel in Tesco take on a few roles. These roles are based around the comfort of the Employee. They are:

* Policy Making

* Welfare

* Support

* Negotiations

* Administration

* Education and Development

* Recruitment

There are roles that will be carried out on each store of Tesco, but then there are some of the roles that will be carried out on a wider geographical area. Individual stores will have Human Resources functions in them, but then there will also be a larger Personnel function that will cover a certain amount of stores in a set area with policies set from the Head Office.

Policy Making, Negotiations and Education and Development are all roles that are fulfilled at Head Office. Welfare, Support and Administration are all satisfied at single stores.

Marketing

Tesco have one of the best marketing functions in the world. They take pride in their marketing force and realise that Tesco would not be the number one supermarket in the U.K. without the work that their marketing function has done for them. They take it as the only way to inform their customer base of the ‘goings on’ of the stores. It is seen as a way to identify, anticipate and satisfy customer requirements profitably.

Tesco recently released a series of Television advertisements with Prunella Scales, who played Cybil in Fawlty Towers. These have become an outstanding success and are almost seen as a miniature television series as we are always waiting to see what sort of antics that she gets up to in her next television advert.

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