Tesco Sainsbury
Case Study:
TESCO
versus
SAINSBURY’S
A Collaborative Effort of:
Charles Dawes • James Gullett • Daniel Naas • Brian Rihm • Eric Rolston • Emily Taylor MGT 499‐B01 • 08/11/2010
Case Study: TESCO versus SAINSBURY’S
INTRODUCTION AND OVERVIEW It is not uncommon for one company to be a forerunner and command a significant, early lead in an industry. Likewise, it is not uncommon for that market leader to be out‐matched by a seemingly innocuous, smaller competitor and squander that lead. In this study we look to the United Kingdom to see how Sainsbury’s, an early market leader in retailing, lost its lead to a smaller rival, Tesco, and fell to a distant third in market position. We begin by looking at a brief historical sketch of the two companies to compare and contrast their divergent paths. Established in 1869, Sainsbury’s is the oldest food retailer in the United Kingdom. A cornerstone of British retailing, it was the market leader throughout most of the twentieth century. The company’s performance was so successful that at the time the Sainsbury Family took the company public in 1973, it was the largest initial public offering ever tendered on the London Stock Exchange. In 1975, Sainsbury’s launched into the hypermarket format in a joint venture with British Home Stores. A pioneering event in the United Kingdom, they were mega‐format supermarkets with an extensive selection of both food and non‐food items. Changing strategies in the late 1980’s, it SALES GROWTH COMPARISON inexplicably abandoned the hypermarket format, opting instead for regular supermarkets and convenience stores. At the same time, it changed its marketing efforts to focus on the upper‐price market segment, a somewhat narrow market fragment that falls between the mass‐market and the high‐end market segments.
TESCO
versus
SAINSBURY’S
A Collaborative Effort of:
Charles Dawes • James Gullett • Daniel Naas • Brian Rihm • Eric Rolston • Emily Taylor MGT 499‐B01 • 08/11/2010
Case Study: TESCO versus SAINSBURY’S
INTRODUCTION AND OVERVIEW It is not uncommon for one company to be a forerunner and command a significant, early lead in an industry. Likewise, it is not uncommon for that market leader to be out‐matched by a seemingly innocuous, smaller competitor and squander that lead. In this study we look to the United Kingdom to see how Sainsbury’s, an early market leader in retailing, lost its lead to a smaller rival, Tesco, and fell to a distant third in market position. We begin by looking at a brief historical sketch of the two companies to compare and contrast their divergent paths. Established in 1869, Sainsbury’s is the oldest food retailer in the United Kingdom. A cornerstone of British retailing, it was the market leader throughout most of the twentieth century. The company’s performance was so successful that at the time the Sainsbury Family took the company public in 1973, it was the largest initial public offering ever tendered on the London Stock Exchange. In 1975, Sainsbury’s launched into the hypermarket format in a joint venture with British Home Stores. A pioneering event in the United Kingdom, they were mega‐format supermarkets with an extensive selection of both food and non‐food items. Changing strategies in the late 1980’s, it SALES GROWTH COMPARISON inexplicably abandoned the hypermarket format, opting instead for regular supermarkets and convenience stores. At the same time, it changed its marketing efforts to focus on the upper‐price market segment, a somewhat narrow market fragment that falls between the mass‐market and the high‐end market segments.