“UK RETAIL SECTOR”
A study on Tesco Plc.
Prepared by: Sadia Riasat
Submitted to: Dr.Parvez Dabir Elahi
Date: 30th Nov, 2007
INTRODUCTION AND BACKGROUND
The retail industry is a business at the sharp end. Fast moving and complex, high profile and constantly changing, it is an environment where only the best managed and most innovative organizations can succeed and thrive.
Strong competition, changes in consumer lifestyles and extended opening hours are all helping to change the face of retailing. Retail must be innovative in control of the retail environment, making sure it is appropriate to their customer profile, and taking the initiative in local marketing activity. Such organizations are responsible for ensuring the delivery of the very highest standards of customer service by recruiting, training and developing their staff. Good retailers are flexible and have the mental agility to switch between day - to - day decisions and strategic issues such as competitor analysis and market research.
Tesco was founded by Jack Cohen in London's East End. From a modest background, the son of a Polish tailor, he began selling groceries in Well Street market, Hackney in 1919 after World War I. At this time rations and supplies were low, so he would buy damaged goods from other businesses, reselling them at reasonable prices.
The Tesco brand first appeared in 1924. The name came about after Cohen bought a shipment of tea from T.E. Stockwell. He made new labels using the first three letters of the supplier's name (TES), and the first two letters of his surname (CO), forming the word "TESCO". The first Tesco store was opened in 1929 in Burnt Oak, Edgware, Middlesex. Tesco floated on the London Stock Exchange in 1947 as Tesco Stores (Holdings) Limited. The first self service store opened in St Albans in 1947 (still operational in 2007 as a Metro), and the first supermarket in Maldon in 1956.
Tesco plc is a UK-based international grocery and general merchandising retail chain. It is the largest British retailer by both global sales and domestic market share, is the world's third-largest grocery retailer, behind Wal-Mart of the United States and Carrefour of France.
Originally specialising in food, it has diversified into areas such as discount clothes, consumer electronics, consumer financial services, selling and renting DVDs, compact discs and music downloads, Internet service, consumer telecoms, consumer health insurance, consumer dental plans and budget software.
Tesco's sparkling growth has come at the expense of rivals, especially Sainsbury and Safeway, both of whom are battling to keep customers. The other UK supermarkets simply cannot compete on both price and range of different store formats. Sainsbury was the UK's biggest grocer until 1995, but was recently relegated to third position behind Tesco and Asda. Internal problems and strategic errors have left Sainsbury struggling. The company believed it could abandon the classic focus on 'price' in favour of refurbishing store 'fascias' (their own term for aesthetic design) and supply-chain improvements. Its loss of market share illustrates that price is still the key for many consumers. 2004 has also seen shareholder unrest for Sainsbury's. Unpopular board appointments were compounded by the news that Chairman Sir Peter Davis received a massive bonus despite the firm's poor performance. He resigned in July 2004.
Morrisons has currently absorb Safeway and in 2004, issued its first profit warning in 37 years, leaving Asda as Tesco's only really credible UK rival. Asda, owned by US Corporation Wal-Mart since 1999, is the only supermarket with the potential to become a thorn in the side for Tesco. Wal-Mart, with global sales of $256bn in 2003, is the biggest company in the world with annual sales eight times bigger than Tesco's. Asda is rumoured to be about to acquire Matalan, the giant discount clothing...