Profile on Tesco

The task of this assignment is to produce a report/profile on a UK limited company and to evaluate the quality of information available to support the production of the report. I have chosen Tesco as my organisation as I believe there will be a lot of information available regarding their financial details and on Press as they are the number one superstore in the UK. He first part of the assignment consists of Tesco’s details, looking at the Industry, Key events in the development of Tesco and so forth.

The second part of the assignment involves critical analysis and evaluation of the quality and quantity of information available to support the production of the company report. Supermarket began with radical Co-operative movement in the 19th century. This was a movement of independent local retailers. During and after World War Two, the government-supported mechanisation of agriculture led to larger fields and farms, and thus enabled larger retail outlets to prosper.

“Over the past 50 years, retail sales have grown approximately nine times as fast as population and about the same rate as income”(Stern ; Ansary, 1998) The abolition of Retail Price Maintenance (RPM) in 1964, the system whereby goods gad to be sold at a price dictated by the manufacturer, assisted the mergence of price competition and the supermarket multiples. With market liberalisation, the supermarket began to dictate prices back to the suppliers, offering bargains and ‘loss leaders’ to entice customers.

“During the last three decades, the UK has been transformed from being what Napolean described as a “nation of shopkeepers” with innumerable small businesses, towards a supermarket culture dominated by a handful of large retailers” (www. co-operatewatch. co. uk). The market is mainly composed largely of the major multiple supermarkets chains the UK. The top four are currently Tesco, Sainsbury’s Asda- WalMart and Safeway, which has been taken over my WM Morrison. In addition there are more expensive supermarkets focusing more on the ‘quality’ niche market, such as Waitrose and Marks & Spencer.

The second tiers of retailers are smaller or regional based such as Budgens, Iceland and Co-Op. “The top five supermarkets control over 70% of the grocery market in the UK. The share of trade expenditure is Tesco (25. 8%), Sainsbury’s (17. 4%), Asda-Walmart (15. 9%), Safeway (10%) and Morrison (5. 9%)” (Grocer, 2003: pp3) recently Morrison acquired Safeway to take its market share up to 15. 9%. Source: (Marketing Week: p39) “In the UK, the supermarket and superstore market continues to grow. In 2002, retail sales of food through supermarket ; superstores reached an estimated i??

83. 68 bn, a growth of 5. 1 % in the previous year”(Keynote, 2003) according to Keynotes (2003) the value of retail sales of food by supermarkets and superstores will grow by 16% between 2003 and 2007. Sales of non-food items will increase at a much faster rate, becoming a more dominant part of the supermarket. Since 1995, the strategies of the major supermarket have included intense price competition, loyalty schemes, and a rapid increase in non-food products and services. Many stores have pharmacy, petrol station, restaurant and clothes stores in order to boost profits.

Supermarkets have growth in terms of volume and value, eating up small retailers on their way. Supermarkets are an important part of the UK retail sector. Tesco Tesco is the largest supermarket company in Britain, it holds 27% of its market share, and this is almost twice the market share of its nearest rivals. Tesco is a long established firm with a good reputation and customer loyalty, it was founded in 1924 by Sir Jack Cohen and together with his tea producer T. E. Stockwell the started the brand name TESCO. Since then there stores have popped up all around the UK and then around the world.

Tesco operates 2,291 stores around the world and employs 296,000 people It also has stores around the world in the Republic of Ireland, Hungary, Poland, Czech and Slovak republics, Thailand and South Korea and they are currently expanding to Malaysia and Taiwan. Its main competitors are J. Sainsbury’s, Safeway and ASDA and they keep Tesco striving to lower prices and provide the best possible service they can. With the motto “every little helps” they advertise through T. V, radio, newspapers and there own newsletter style leaflets which are delivered door to door on a monthly basis.

Rivalry within the industry is high, for several main factors. The market for groceries in the UK is a mature industry, with growth rates below that of GDP and spending. This lack of growth is promoting competition, as the businesses within the industry strive to retain their own customers, and to increase sales by poaching those of their competitors. The industry is also characterised by high level of fixed costs associated with an industry that has to spend very large sums on premises, and significant sums on supply chain management.

Reports on supermarket pricing practices, such as the Competition Commission’s Supermarkets: A report on the supply of groceries from multiple stores in the United Kingdom published in October 2000 often note that the major supermarkets’ pricing policy includes the sale of goods such as milk and bread (‘loss leaders’) at below market price in order to attract shoppers away from smaller retail outlets that cannot afford such cuts. These low prices are made up for by the higher cost of other goods, particularly fruit and vegetables.

Tesco depends on their suppliers to provide the foods that they sell at the right time, in the right quantity, of appropriate quality and at a competitive price and at a competitive price. In many cases a supermarket may uses its power in suppressing a supplier to reduce its product cost, which leaves them dependant on the supermarket. Sometimes all of the suppliers raise price at the same thus restricting the retailer’s ability to negotiate by playing one off against the other. Suppliers to Tesco vary from large multinational company to local independent providers.

Many of the manufacturers of branded goods also supply retailer’s own-label products, which compete with the manufacturer’s branded products. Other manufacturers are not prepared to supply both branded and directly competing retailer’s own-label products. There are certain stocks that Tesco relies heavily on suppliers. While some suppliers stock may represent large amount of their sales to Tesco, the suppliers stock represents only a small fraction of Tesco’s overall sales figures.