INTERNATIONAL RETAIL

TESCO PLC

Submitted By:

Harshal Jain - 12
Kavish Jain– 20
Yash Srivastava – 53
Juhi Thanvi – 55
Riya Narula - 56

Under the guidance of:

Prof. Dr Swapna Pradhan

DECEMBER 13, 2021

About Tesco PLC:

From market stall to UK’s biggest supermarket

Jack Cohen, the son of Jewish migrants from Poland, founded Tesco in 1919 when
he began to sell war-surplus groceries from a stall at Well Street Market, Hackney, in
the East End of London. The Tesco brand first appeared in 1924. The name came
about after Jack Cohen bought a shipment of tea from Thomas Edward Stockwell.
He made new labels using the initials of the supplier's name (TES), and the first two
letters of his surname (CO), forming the word TESCO. After experimenting with his
first permanent indoor market stall at Tooting in November 1930, Jack Cohen
opened the first Tesco shop in September 1931 at 54 Watling Street, Burnt Oak,
Edgware, Middlesex.
Tesco was floated on the London Stock Exchange in 1947 as Tesco Stores
(Holdings) Limited.The first self-service shop opened in St Albans in 1956 (which
remained operational until 2010 before relocating to larger premises on the same
street, with a period as a Tesco Metro),and the first supermarket in Maldon in
1956.In 1961 Tesco Leicester made an appearance in the Guinness Book of
Records as the largest shop in Europe.

In May 1987, Tesco completed its hostile takeover of the Hillards chain of 40
supermarkets in the North of England for £220 million.
In 1994, the company took over the supermarket chain William Low.  This paved the
way for Tesco to expand its presence in Scotland, in which its presence was weaker
than in England.
Tesco introduced a loyalty card, branded 'Clubcard' in 1995 and later an Internet
shopping service. Overseas operations were introduced in the year 1996 .

On 21 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 Ireland and Northern Ireland, and associated businesses, for
£640 million.The deal was approved by the European Commission on 6 May 1997.
Formats

1. Hypermarket –
Tesco Extra shops are larger, mainly out-of-town hyper market that stock nearly all
of Tesco's product ranges, although some are in the heart of town centres and inner-
city locations. The largest shop in England by floor space is Tesco Extra in Walkden,
with 17,230 square metres (185,500 sq ft) of floorspace.

2. Supermarket –
Tesco Superstores are standard large supermarkets, stocking groceries and a
much smaller range of non-food goods than Extra hypermarkets. The shops have
 always been branded as 'Tesco', but a new shop in Liverpool was the first to use the
format brand 'Tesco Superstore' above the door.

3. Tesco Metro - 
Tesco Metro shops are sized between Tesco superstores and Tesco Express
shops, with shops averaging 1,000 square metres (11,000 sq ft). They are mainly
located in town centres and similar urban locations and were designed to
accommodate larger weekly shops as well as top-up shopping.

In May 2021, Tesco announced the brand would be retired as only 31% of
customers were using the stores for larger shops. 89 locations will convert to the
Tesco Express format while the remaining 58 will adopt the standard superstore
format.
4. Tesco Express -
Tesco Express shops are neighbourhood convenience shops averaging 200 square
metres (2,200 sq ft), stocking mainly food with an emphasis on higher-margin
products such as sweets, crisps, chocolate, biscuits, fizzy drinks and processed food
(due to small shop size, and the necessity to maximise revenue per square foot)
alongside everyday essentials. 

5. Online –
In the United Kingdom Tesco operates a home shopping service through the
Tesco.com website. As of November 2006, Tesco was the only food retailer to make
online shopping profitable.

Tesco Product Range

Products &
services

Groceries F&F Clothing TESCO bank TESCO Mobile TESCO Photo Others

Fresh & Frozen

Men's Clothing ClubCard Pay+ All mobiles TESCO Photo Recipes
Food

Women's SIM only Online Photo

Bakery Travel Insurance Clubcards
Clothing contracts Printing

TESCO
Drinks School Uniform Car Insurance SIM free Phones Photo Book
Magazines
 TESCO
Credit Cards and
Baby Products Kids Clothing International Photo Canvas
Loans
Calling

International Pay As you go

Household Baby Clothing Photo gifts
Money transfer
Market of study where Tesco has been aPhones
failure
Tesco announced its entry into the U.S. market in 2006. At the time, Tesco was the
third-biggest retailer on the planet. The UK's biggest supermarket chain, however,
did not go down so well across the pond where Tesco was renamed, ˜Fresh & Easy'.
The American behaviour of shopping was much different than what Fresh & Easy
offered. Americans bought groceries in bulk and Fresh & Easy were small stores,
designed for people who want to shop daily (like most Brits who live in big cities).

This reason along with other reasons led to failure of Tesco in the US market and
our team would want to study this further.
SWOT of TESCO

STRENGTHS :-
1. Tech Advantage-
Tesco has been updating and moving up with the pace of technology in the field of m-
commerce. Like it has an advanced featured mobile app for online shoppers, it has also
launched an RFID barcode system that automatically counts the products of shoppers.
2. Diverse Retail Stores-
Under the umbrella of TESCO, it has launched many stores to cover more demographics
of the entire market. Like TESCO Superstores, Tesco Express, Tesco Extra, One Stop,
Tesco Metro, Tesco HomePlus, and Jack’s business.  
3. Efficient Network of Suppliers-
Suppliers play a very important role in the operations of any business. TESO has been
following a very simple business model, and that is to reduce costs by having an efficient
waste management system. As a result, it has been having an effective relationship with
its suppliers, who deliver the products on time.
4. Largest Private Employer in Europe-
The other reason for its popularity among the public is that TESCO has been creating
more and more job opportunities for people. It has employed roundabout 500,000
worldwide, and it has offered 743k job opportunities so far.
5. Variety of Products in the Diverse Market-
CoTesco offers diverse and variety of products and services to its employees across the
world like telephonic and financial services, rental DVDs, clothes and school uniforms,
mobile phone accessories, home, and ware items and cotton fair trade business
worldwide.
6. Private label and exclusive in-house products give customers a
cheaper choice but similar quality to that of famous brands.
Tesco has contracts with brand name manufacturers to produce their goods but
distribute them under the Tesco brand. As a result, Tesco can offer them cheaper than if
the products bear the original name and many customers prefer them given their
competitive price and quality. Sales in the UK and Ireland in the fiscal year 2019 went up
3%, partially thanks to the introduction of eight new “Exclusively at Tesco” brands,
including Ms. Molly’s and Hearty Food.

OPPORTUNITY :-
1. Increase sales through online channels-
Currently, customers can order groceries on the Tesco website and have them deliver as
soon as on the same day of the order. However, apart from groceries, other non-food
items are very limited in terms of choice and pricing, which eliminates Tesco.com from
customers’ one-stop-shop website list. Instead, Tesco can follow Wal-Mart in the U.S to
sell many more items at a very competitive price, such as electronic devices,
entertainment, tools, and gardening.
2. Expansion of Jack’s Store-
Tesco has launched a new discount store by the name of Jacks, and it has been
performing well. The company should invest more in it because it has the potential to
grow and compete with low-cost rivals like Lidl and Aldi.
3. Joint Venture-
There are few Tesco’s stores in some countries that aren’t performing well. If it partners
up with the local businesses and learn the knowledge about the local market, then its
performance can move up the graph. Therefore, Tesco should take it as an opportunity
and partner up with local businesses
4. New Emerging Markets-
Although Tesco has expanded its business operations in 14 countries, but there are
some emerging markets like Turkey, Indonesia, and South Korea. These markets have a
great potential to grow.

WEAKNESSES :-

1. Weak Operating Performance

The operational performance of certain stores of Tesco in some countries has always
been low, which shows that the marketing department isn’t doing sufficient ground
research before opening up stores.
2. Low-cost Technique
Tesco has been following the business model of low-cost strategy, which is to offer
products and services at a low price to its customers. But this strategy is costing the
company in terms of low profit.

THREATS :-

1. Lack of innovation leads to cutting costs as the main strategy to

boost net income.
Tesco has been struggling to increase sales and its profit margin since its culture does
not encourage finding new ways to grow the business besides acquisition. However,
cutting costs is not a sustainable strategy since the company can only cut down so much
until it backfires.
2. Discounted stores are taking over the British grocery market.
Aldi and Lidl are now running a large supermarket format and step into Tesco’s territory.
Moreover, changing perceptions among higher-income shoppers allows the German to
add more space to affluent areas in London, further compete with Tesco’s Jack’s brand
of the discounted store. Jack has not reached the level of momentum necessary to be
considered a serious threat to Aldi and Lidl. 
 

UNIQUE FEATURES OF US MARKET -

1. The Demographics of US Retail Industry-

Based on research conducted by the Euro Monitor, the US retail industry had a total of
USD 5.4 trillion in sales in 2019. The health and beauty sector had the highest share with
the apparel and footwear sectors acquiring the second biggest share.
Looking at the US retail market, we can easily see that it is comprised of a few
primary players which hold more than 35% of market share. These include Walmart,
Kroger, Costco, Target and Home Depot at the top. The market is really competitive
which makes it challenging for foreign brands to acquire a credible spot. However,
foreign brands like H&M, Zara and Ikea have been able to penetrate the market.
2. Largest Retail States-
Many of the big retail states are located on the east coast and in the Midwest regions of
the nation. The top 5 states account for about 40% of the market sales which offer
various business opportunities.

These top 5 states include (percentage of total sales) –

California (12.8%)
Texas (8.5%)
New York (6.9%)
Florida (6.5%)
Illinois (4.0%)

Consumers in large metropolitan areas tend to spend more compared to those in the
rural areas. This induces more sales of luxury goods which are projected to increase 3
times faster than in Western Europe. In dissecting the consumer profile, shoppers with
high educational attainment spend more. Degrees and the salary are directly correlated
with the level of education.

3. Business opportunities
There is no doubt that the US retail market is attractive. However, there are challenges
for new market player entries and the requirements are also high. A foreign brand has to
face tough competition against established and well-known brands in the market. It is
also important for those who plan to indulge in business in the American retail market to
be prepared for the tedious legal process that lies ahead.

4. Rise in online shopping

In retailing, the decline in in-store shopping was offset partially by a sharp rise in online
shopping. This was consistent with other aspects of life that involved more online
interaction such as working from home, being entertained from home, and learning from
home.
So, to attract a customer in the US today, retailers need to have strong online presence
and provide hassle-free experience. In the United States, online share of retail increased
from 11.8% in the first quarter of 2020 to 16.1% in the second quarter of 2020.