Tesco PLC Case Study Tesco Is the Case Study

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Tesco PLC Case Study

Tesco is the third largest retailer globally behind Wal-Mart and Carrefour, and as of March 2011, operates 4,811 stores across 14 countries including Asia, many European countries, UK and the U.S. Tesco is also the leading food, sundry and grocery retailer in the UK and has established itself as the leading provider of ancillary services through the retail channel to Western Europe (Hackney, Grant, Birtwistle, 2006). Tesco has also initiated many extensive information systems projects and pilots to enable their supply chains to be more efficient than competitors (Lindgreen, Hingley, 2003). These include an innovative use of Radio Frequency Identification (RFID) for expediting orders throughout their supply chains and greater levels of coordination throughout their extensive warehouse systems and networks (Bitel, 2011). Tesco concentrates on a very localized approach to expanding markets, go so far as to create ethnographic studies of the potential customers in a given geographic area, as the case study alludes to in the Southern California market. The approach to retailing expansion is unique and quite contrarian to the approach taken by Wal-Mart and their French competitor, Carrefour (Rogers, Ghauri, George, 2005). As of March 2011, the company employs 472,000 globally had attained revenues of £56,910 million ($90,445.4 million) during the latest fiscal year reported. The company attained a net profit of £2,327 million ($3,698.2 million) in the latest fiscal year. The challenges to expanding globally have not specifically affected their revenues in the latest financial period, yet long-term the lack of execution in global markets is a strategic weakness the company must deal with in order to continue profitably growth. The intent of this case analysis is to analyze and recommend how Tesco can grow profitably over time in the U.S.

Table of Contents

Background and Introduction

What environmental trends created the opportunity for Tesco to build its dominant position in the UK market? Analyse the internal and external environment using appropriate strategic management models.

Evaluate Tesco's marketing mix in the UK vs. The U.S. What are its strengths and weaknesses? Why has Tesco been so successful in the UK?

Choose and outline an appropriate marketing strategy (using SAF or another analysis) for Tesco to adopt to increase profit in the short-term and the long-term in the United States.

Bibliography and Reference List

Background and Introduction

As one of the global leaders in retailing, Tesco has divided its investments in store structures and formats Express, Metro, Superstore, Extra and Homeplus formats. As the case indicates, the majority of retail floor space is in the Tesco Superstore (42%) and Tesco Extra (42%) formats.

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As of March 2011, the company also has 961 Express stores that are configured to 3,000 square feet, with a variety of fresh food at high traffic locations throughput suburban and urban locations. The Express stores sell up to 7,000 products including fresh produce, wines and spirits and bakery products. The next category of retail locations are the 174 Metro stores, which range in size from 7,000 to 15,000 square feet in size and are predominantly in suburban locations. These stores are designed to support families whose time is at a premium and who need to pick up ready-to-eat meals and dinners. Tesco also only 448 superstores as of March, 2011 that range in size from 20,000 to 50,000 square feet, which have selections comparable to its global competitors in this range of store size. Food, sundries, DVDs, books and low-end electronics are sold throughout these stores. Tesco also has 177 Extra stores that are 60,000 square feet or larger and have a full range of food, sundries, electronics, clothing, garden, and automotive products and services. The Extra Stores have proven to be the most challenging to expand globally with, just as Wal-Mart has learned with its comparable format of store (Gripsrud, Benito, 2005).

Tesco also has an extensive range of services (Internet, telephone, insurance and travel services) sold through all of their channels and stores, including tesco.com. Tesco continues to see gains in their customer loyalty initiatives by having Tesco.com and Tesco Direct compliment the loyalty card programs with special deals for the most active customers (Child, 2002).

What environmental trends created the opportunity for Tesco to build its dominant position in the UK market? Analyse the internal and external environment using appropriate strategic management models.

There are a variety of factors that led to Tesco being successful over decades of expansion as the leading grocery retailer in the UK and eventually one of the top three globally. Using the Five Forces Model from Dr. Michael Porter to explain the dynamics of the internal and external environment on the performance of the company over time provides a useful framework for analyzing their competitive advantages over time. Figure 1, the Porter Determinants of Competitive Advantage Model (Porter, 1985), illustrates how the competitive rivalry is influenced by the bargaining power of suppliers, threat of new market entrants, bargaining power of buyers and threat of substitute products or services. Tesco has learned how to navigate through the trade-offs exemplified in this model first in the UK market and later globally. This ability to create competitive advantage is also what.....

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