Tesco v Walmart
TABLE OF CONTENTS
1. Introduction 3
2. Business Issues in the Retail Sector 3
3. Financial Health 5
3.1 Tesco 5
3.2 Walmart 7
4. Cultural Style & Leadership 9
4.1 Tesco 9
4.2 Walmart 10
4.3 Ethical & Environmental Issues 12
5. Conclusions 12
6. References 13
7. Bibliography 14
In 2009 the grocery market in the United Kingdom was worth 146.3 billion pounds, an increase of 4.8% on the previous year [see Figure 1]. Groceries account for fifty-two pence of every pound in retail spending [Newbold, 2010, online].
Figure 1: UK Grocery Market Performance 1998 - 2009
Source: IGD Research 2009
This report looks at contemporary business issues in the grocery sector and then compares the financial health, leadership, cultural style, ethical initiatives and environmental values of two of the biggest business names in the industry – Tesco and Walmart.
2. Business Issuesin the Retail Sector At the expense of small, specialist shops, supermarkets increasingly manage the supply chain from farm to shelf. Technological improvements in stock control and checkout scanning, for example, have lowered costs and attracted customers. Loyalty card schemes provide these superstores with an insight into consumer preferences, enabling them to better match products with customers. To increase efficiency and maintain competitiveness, supermarket chains have consolidated, resulting in a fewer number of giant companies. Consequently, manufacturers have become increasingly dependent on a small number of market outlets, giving these retailers tremendous leverage to negotiate lower prices.
There is also severe competition with discounters such as Lidl. To better manage household budgets during the present credit crunch more British shoppers are shopping at these discount stores. Competition from these discounters has led the big chains to develop new strategies. For example, Tesco has recently launched its new Discount range, in an effort to combat the rise of these popular, super-cheap supermarkets.
Shoppers are not just attracted by low prices. The super centre or hypermarket approach means that one-stop shopping has become a reality for shoppers. Shopping at one of these large stores, possibly two to three times a week, has become a recreational event not a chore. With most shopping now done in malls or online, the traditional high street, with its parking charges, and traffic problems has suffered. There is no much talk about the dead heart of the city.
To counter this trend, convenience stores [under 3000 sq feet and “opened all hours”] are increasing dramatically on the high street [see Figure 2]. With an increasing range of products and improved layouts, convenience multiples such as Spar represent the fastest growing part of the grocery market, with sales increasing by 12.7%. They currently comprise 20.5% of the total United Kingdom food and grocery market [Tesco, 2009, online].
Figure 2: UK Convenience Stores, 2009
Source: IGD Research 2009
The large multiples have responded strongly in this
market sector (e.g. Tesco Express) and have taken
over some existing chains and petrol station forecourts.