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4.1 Tesco China

The author spent nearly two years working for Tesco in Shanghai, its key location in China, in the HR and Marketing functions. This Tesco case study explores the approach and problems in other Asian markets that Tesco has entered earlier, to help better understand it general market entry and growth strategy. It has a greater emphasis on Thailand, since it has had the longest presence there. The Thai experience has highlighted a range of Tesco criticisms and government attempts at legislation to control Tesco which have been repeated in a few other countries. It then focuses on the China experience so far.

4.1.1 Introduction

Tesco is Britain No. 1 grocer, the biggest and most profitable supermarket chain in the UK. It is also one of the most successful global expansionists from the UK in the last 10 years. Now Tesco is Europe's second largest supermarket after the French firm Carrefour, and is the fourth largest supermarket business in the world. It operates 1,878 stores in the UK, 261 stores in Europe and 179 stores across Asia, and plans to open 184 stores worldwide in the next 3 years. Tesco has drawn many critics as a result of its “apparent” success. They claim that behind the fascia of the 'under one roof' out-of-town Tesco Extra, or the friendly high street Tesco Metro, lies a ruthless billion pound operation. In recent years, Tesco and its major supermarket rivals have faced criticism for abusing their monopoly positions and contributing to some of the major social and environmental problems plaguing society today. These include exploiting small

farmers in the UK and worldwide and hastening their replacement with industrial monoculture plantations where wages are low and labour rights are minimal; undercutting almost every other retailer and hence turning our town canters into boarded-up ghost towns; co-operating with climate criminals such as Exxon; as well as numerous other corporate crimes. (Julia Finch, The Guardian 6/3/04) (Note: some of the references cited may appear to be old, however I am relating them to the move into the Chinese market and the climate within Tesco at the time.)

Table 4-1 Market Share of the Top Four Supermarkets (%)

  |1998 |1999 |2000 |2001 |Sep 2003 |Apr 2005 |Feb 2006 | |Tesco |22.9 |23.4 |24.2 |22.8 |29.8 |26 |30.6 | |Sainsbury's |19.8 |19.1 |18.6 |15.8 |16.2 |15.9 |16.3 | |Asda |14.1 |14.8 |16.2 |12.4 |17 |16.5 |16.6 | |Safeway |10.2 |10.0 |10.1 |9.3 |10 |- |- | |Morrisons |- |- |- |- |6 |12.2* |11.1* | |Follows Morrisons' takeover of Safeway Sources: BBC News(http://news.bbc.co.uk/1/hi/business/4694974.stm) and Yahoo UK( (dates?)) [pic]

Figure 4-1 Tesco's Share Price (July 2004 - May 2006)

4.1.2 The global expansion
Tesco operates 2,318 stores in 12 countries around the world and employs 87,000 people overseas. According to Terry Leahy, Tesco is market leader in 6 out of the 12 countries that it operates in, with its largest store, not in Bristol or Birmingham, but in Budapest.9 (Web: tesco.com (26/01/04), Sir Terry Leahy speech) Tesco is a company that appears to be doing things right, at the end of 2003, Tesco was voted most admired company and its chief executive, Sir Terry Leahy was voted most admired leader by Management Today. The most impressive aspect of Tesco's triumph was the 'margin of victory' in both categories. Tesco also came top in other categories, 'Quality of Management', 'Quality of Goods & Services', 'Ability to Attract, Develop & Maintain Top Talent', 'Value as a Long-Term Investment', 'Quality of Marketing' and 'Use of Corporate Assets'. Only in the rankings for 'Community and Environmental Responsibility' did it fall outside the top 10. (Management Today, 12/03) These accolades have continued to the present day. The publically stated strategy of Tesco places strong emphasis on its international expansion. "We have continued to make strong progress with all four parts of our...
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