Customers' Attitudes Towards Own Labels: Multiple Chapters

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Tesco, the largest UK company, employs 260,000 people. This corporation has global aspirations and has come a long way in a relatively short period of time" (2003, p. 3).

According to the company's promotional literature, the employment figure for 2003 has almost doubled today, as shown in Table 1 below.

Table 1

Current Key Figures for Tesco

Category

Statistic

Staff worldwide

472,000

Staff in the UK

287,669

Stores worldwide

5,008

Total stores in the UK

2,545

Extra

13

Homeplus

Superstore

Metro

Express

OneStop

Number of markets

14

Which markets

China, Czech Republic, Hungary, India, Japan, Malaysia, Poland, Republic of Ireland, Slovakia, South Korea, Thailand, Turkey, UK, USA

Note: Facts correct October 2010

Source: Tesco Quick Facts 2010

Figure 1. Respective Number of Tesco Retail Formats in the U.K.

Source: Based on tabular data in Tesco Quick Facts 2010

A brief summary of the company's guiding corporate strategy is provided in Table 2 below.

Table 2

Summary of Tesco's Guiding Corporate Strategy

Strategic Area

Description

Core UK

The UK is our biggest market and the core of our business. We aim to provide all our customers with excellent value and choice.

Community

Making Corporate Responsibility integral to our business is essential in applying our values as a responsible business. We believe it is also an opportunity for growth.

Non-food

Our aim is to be as strong in non-food as in food. This means offering the same great quality, range, price and service for our customers as we do in our food business.

Retailing Services

Tesco has followed its customers into the growing world of retailing services, aiming to bring simplicity and value to complex markets. All our customers are different, and their needs are continually changing. That's why we continue to offer more than one way to shop:

Tesco Personal Finance (TPF): Tesco Personal Finance recently celebrated its eleventh anniversary and over the last decade it has grown to be the UK's most successful supermarket bank. Customers have a choice of 28 products ranging from savings accounts and credit cards to car and travel insurance.

Tesco.com: Since launching in 2000, Tesco.com has gone from strength to strength, with over 1 million active customers now choosing to buy online. Shopping for groceries online has been a revolution for people leading busy lives and those without access to transport.

Tesco Telecoms: Tesco Telecoms offers simple, straightforward telecoms services with great value tariffs. Customers can benefit from our mobile network, home phone service, internet access and an internet phone service. Tesco Telecoms also offers a wide range of telecoms products in store and online.

International

Tesco is an international retailer and wherever we operate we focus on giving local customers what they want.

Source: Our strategy 2010, p. 3

At Tesco, this core strategy is supported by specific corporate goals for growth. In this regard, Child reports that Tesco has succeeded where a number of competitors have failed: "Many retailers have tried and failed to establish themselves outside their home markets. Likewise, some retailers have gone astray trying to exploit Internet shopping. As a result, Tesco, the United Kingdom's biggest grocer, has attracted considerable attention because of its ambitious overseas strategy and its successful online home delivery service" (2002, p. 135). As an overall brand, Tesco has expanded its image among an increasingly diverse consumer base in recent years in ways that traditional retail grocers have been unable to match. For instance, Child also notes that, "Relying on sales of nonfood items and on international sales -- particularly in emerging markets -- for an important part of the company's future expansion, Tesco has delivered one of the fastest organic growth rates of any major retailer in the world. Its nonfood business rose by 18% in 2000-01, and its international business, which began with a launch in Hungary in 1994, now accounts for more than 40% of the group's floor space" (2002, p. 136). Besides non-food offerings, Tesco has been in the vanguard of retail grocers with online offerings including home delivery. In this regard, Child adds that, "Tesco also happens to be the undisputed world leader in Internet grocery sales (www.tesco.com). Its online home delivery service is now profitable, Tesco says, and it has struck a deal in the United States with Safeway, which will use Tesco's system for a home-shopping service" (2002, p. 136).

On the one hand, this impressive corporate performance is attributed to Tesco's leadership team's emphasis on efficiency: "Underpinning Tesco's success is excellent management and an obsession with operational efficiency and productivity gains, which the company uses to keep prices low or to improve service rather than to increase its operating margins.

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Despite this impressive record, Tesco is still relatively small compared with the likes of Carrefour and Wal-Mart, but it is growing faster" (Child 2002, p. 136). On the other hand, the company's rapid growth has involved a much broader range of store formats, as well as its online offerings, each of which involves different considerations as they relate to an optimum branding strategy.

This enormous range of retailing formats described in Table 1 above, though, clearly provides Tesco with countless branding mix opportunities, and the profitability of these mixes can be fine-tuned to provide superior returns on investment if the process is approached properly and administered carefully. For example, Tesco's "one-stop" format provides the opportunity to promote additional private brands that may be more profitable while restricting the choice for competing brand names, while the company's "superstore" format may require a more complete mix of brand offerings. Given the diverse cultural settings in which Tesco competes, identifying this optimum mix assumes some truly daunting aspects, but it is clear that Tesco has achieved superior results where others have faltered and these issues are discussed further below.

Branding Strategies at Tesco

As noted above, Tesco has become the largest employer in the U.K., making it a major actor in the domestic grocery retailing sector. This level of performance has been facilitated by the organizational practices that Tesco's leadership has used to guide the company into the 21st century that have responded to shifts in consumer purchasing behaviors. One of the more visible and therefore prominent organizational practices used by Tesco has been the physical environment in which retail sales are conducted. Recent trends in retail grocery stores have included the introduction of so-called "superstores" that generally range between 2,325-4,650 square meters in size; this retail format was introduced during the mid-1960s and was specifically developed for grocery retailing purposes (Bromley & Thomas, 1993). According to Bromley and Thomas, "Development was most active between 1977 and 1990; by the early 1990s, 600 such stores transacted 20 per cent of the British grocery trade [and] a Tesco Superstore is an example" (1993, pp. 7-8).

These innovations in the physical retailing environment have been directly linked with Tesco's overall strategy to sustain and grow its business operations in Europe and abroad. Clearly, though, the company has enjoyed the advantage of having the resources that were required for such corporate adventurism, but Tesco has remained focused on the logistical aspects of their operations in order to ensure a reasonable return on their investment of resources. In this regard, Lynch et al. (2000) emphasize that, "Logistics capabilities are significantly linked to strategy. Resources (capabilities) are necessary in order for firms to pursue a given strategy. This seems to be the case, at least in the retail grocery industry [and] certain activities a firm performs will lead to sustainable competitive advantage" (p. 48).

Superior logistics capabilities therefore involve identifying a product mix that provides the most profit per square foot of retail space while satisfying certain minimal criteria with regards to consumer expectations for different brand availability and price. Based on their analysis of profitable marketing practices in the retail grocery industry, Lynch and his associates (2000) identified two basic successful strategies: (a) cost leadership and (b) differentiation. According to these researchers, "Although the links between strategy and performance have been examined, the results are not always consistent. In our study, strategy appears to be positively linked to performance. Therefore, it is important for a firm to adopt and pursue a generic strategy" (Lynch et al. 2000, p. 48).

A generic strategy in this context involves the provision of brands that provide cost leadership as well as differentiating the brand from its competitors. According to the company's published "strategy": The strategy to diversify the business was laid down in 1997 and has been the foundation of Tesco's success in recent years. The new businesses which have been created and developed over the last 12 years as part of this strategy now have scale, they are competitive and profitable - in fact we are now market leader in many of our markets outside the UK" (Our strategy 2010, p. 2). In this regard, Tesco's generic strategy success is also driven and supported by a top-down inspired organizational culture that embraces these cost leadership tenets as part….....

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