Weve come a long way since Jack Cohen first opened a market stall in the East End of London

in 1919.
Tesco started life in 1919 when Jack Cohen started selling surplus groceries from a stall in the East End of London. Mr Cohen made a profit of 1 from sales of 4 on his first day. The Tesco brand first appeared five years later in 1924 when he bought a shipment of tea from a Mr T. E Stockwell. The initials and letters were combined to form Tes-co and in 1929 Mr Cohen opened the flagship Tesco store in Burnt Oak, North London. The brand continued its rise in the 1930s when Mr Cohen built a headquaters and warehouse in North London, and in 1932 Tesco became a private limited company. In 1947 Tesco Stores (Holdings) Ltd floated on the stock exchange with a share price of 25p.

Expand and conquer

Tesco showed its expansionary zeal early on by buying up rival shops. In the 1950s the retailer bought 70 Williams stores and 200 Harrow stores, followed by 97 Charles Philips stores and the Victor Value chain in the early 1960s. During the 60s supermarkets started to expand rapidly by selling more products in ever larger stores. In 1961 Tesco Leicester entered the Guiness Book of Records as the largest store in Europe and in 1968 Tesco opened its first 'superstore' in Crawley, West Sussex. Supermarkets revolutionised the way people shopped and by the 1970s Tesco was building a national store network to cover the whole of the UK, which it continues to expand to this day, while also diversifying into other products. In 1974 Tesco opened its first petrol stations, and would become the UK's largest independent petrol retailer. By 1979 total sales topped 1bn, and by 1982 sales had doubled to more than 2bn. In 1987 Tesco successfully completed a hostile takeover of supermarket rival Hillards for 220m.

The battle for top spot

In the 1990s Tesco continued to tighten its grip on the UK with more store openings and an agressive marketing campaign in an attempt to overtake Sainsbury's as the UK's leading grocer. In 1992, the company launched is slogan 'every little helps', followed by the Tesco Value range in 1993. This was followed by the launch of the Tesco Clubcard scheme in 1995, helping Tesco to overtake rival Sainsbury's as the UK's largest food retailer.

1996 saw the retailer introduce its first 24-hour store while it also expanded overseas opening shops in Poland, the Czech Republic, and Slovakia. In 1997 Tesco appointed Sir Terry Leahy as chief executive. Tesco.com was launched in 2000 and the supermarket continued to expand its range of products, which now includes clothes, electricals and personal finance products. In 2004 Tesco entered the broadband market. Two years ago, in 2006, the retailer announced ambitious plans to open stores in the US under the name 'Fresh and Easy' and funded by existing resources. Tesco now operates in 13 countries. Today it reported that group sales were 51.8bn in the year to February 23 2008. Pre-tax profit rose to 2.8bn. In 2008 the retail giant took its conquest of the UK one step further by buying up some rival Somerfield stores on remote islands in Scotland, giving Tesco a presence in every single postcode area in the country. As it stands there is only one postcode in the UK - in Harrogate in North Yorkshire - which does not have a Tesco.

Every little hurts...

As the supermarket giant has grown, so too has the number of places in the UK dubbed 'Tesco town'. In Inverness more than 50p in every pound spent on food by the city's 66,000 residents is done so at a Tesco checkout and similar dominance in other towns has sparked controversy. Because of their size, supermarkets have been accused by some of abusing their position by forcing smaller local shops out of business. According to non-profit organisation Ethical Network, local communities could be losing inward investment of up to 100bn every year because of supermarket centralisation. In 2001 a blackmailer failed in an attempt to extort 5m from Tesco through a parcel bomb campaign and was jailed for 16 years. In 2008 Phillip McHugh, a former tax inspector, was jailed after threatening to bomb Tesco stores unless they gave him 1m. Mr McHugh sent 76 letters to the company threatening to blow up shops and poison customers by contaminating food, promising that "blood will flow" unless they gave into his demands.

GLOBAL PRESENSE/why
UK(home country)
Start trading : No of stores :
No of staff :

1924 2715
293676

US
Start trading : No of stores :
No of staff :

2007 164
4134

United States of America

Tesco moved into the United States market in 2007, opening a chain of grocery convenience stores, named Fresh & Easy, on the West Coast (Arizona, California and Nevada).[101] The company established its U.S. headquarters in El Segundo, California, and the first store opened in Hemet, California in November 2007, with 100 more expected in the first year; they planned to open a new one every two-and-a-half days in the United States. Although the planned rate of expansion was not maintained, largely because of the recession, Fresh & Easy now (August 2011) operates 182 stores in Arizona, California and Nevada.
Why

UK supermarket giant Tesco today announced the risky step of entering the US, a market where other British retailers have seen their ambitions dashed. Britain's leading supermarket will open its first convenience stores on the west coast next year at a cost of 250m. Tesco shares slipped on the news amid doubts over its latest venture, but the company's chief executive, Terry Leahy, said the ground had been carefully prepared. "It is a market we have researched extensively for many years and over the last year we have committed serious resources to developing a format that we believe will be really popular with American consumers," Sir Terry said.

The new venture is modelled on the company's Express stores, which now operate in five countries where more than 800 outlets serve around eight million customers a week. "We know we can't just transplant the UK model or copy other models that are already there," Sir Terry said. "The US is a very large market to grow into, and you're allowed to grow there - there are no restrictive planning laws." Tesco, by far the dominant supermarket in the UK, faces increasing resistance in Britain to building more superstores on rural sites and criticism from environmental and consumer groups. With the company already controlling 30% of the UK market, it has looked increasingly overseas for opportunities to expand. The company has a presence in 12 countries outside the UK, mainly in Asia and central Europe, and half of its selling space is now outside the UK. A retail colossus, Tesco has 2,467 stores and employs over 370,000 people. "Today's announcement represents a strategic move into another developed market, complementing our entry into the emerging Chinese market in July 2004," Tesco said. "It will allow us to build our position in the world's largest markets, and brings the population of markets we operate in to 2.1 billion people, contributing over 55% of global GDP." Tesco, which made a profit of 2bn last year, said the US grocery market is worth $600bn (345bn) a year and is expected to grow 40% over the next five years. The start-up there will be run by Tim Mason, currently Tesco's marketing and property director. The company will be entering a market that has proved dismal ground for other UK retailers. J Sainsbury came a cropper with Shaws supermarkets, while Mark & Spencer made little headway with its small Kings operation, which it is trying to sell. "It's clearly high-risk and a bit surprising," Sanjay Vidyarthi, an analyst at brokerage Teather & Greenwood, told Reuters. "There's a risk in terms of the significant cash involved. As far as the shareholders are concerned, it suggests the cash is going to be invested in growth and won't be returned to them." In morning trading, Tesco was down 2.2% at 319.32p.

Ireland
Start trading : No of stores :
No of staff :

1997 130
13,334

Republic of Ireland
Tesco operated in the Irish grocery market in the early eighties, however sold its operations there in March 1986.[83] Tesco re-entered the Irish market in 1997 after the purchase of Power Supermarkets Ltd. The country's newspaper of record the Irish Times in April 2011 said that "Increasingly, Ireland is being viewed as a provincial backwater by the parent company albeit a very profitable little backwater and all the strategic decisions are being taken in the UK.[84] It now operates from 101 stores across Ireland. Like Tesco stores in the UK, these offer a home delivery shopping service available to 80% of the Irish population as well as petrol, mobile telephone, personal finance, flower delivery service and a weight-loss programme.[85] Also available is Tesco's loyalty programme, the Clubcard. Tesco is now the grocery market leader in the Republic of Ireland, with a reported November 2005 share of 26.3%.[86] Tesco Ireland also claims to be the largest purchaser of Irish food with an estimated 1.5 billion annually. Tesco Ireland operates a small number of Tesco Extra hypermarkets in the Republic of Ireland, with Clarehall Extra on the Malahide Road being the first to open in 2006. Tesco's largest hypermarket store in Europe, with a floorspace of 18,500 m, opened in Naas in Co Kildare in November 2010.[87]

POLAND
Start trading : No of stores :
No of staff :

1996 371
24,932

Poland
Tesco entered the Polish market in 1992. It currently operates from 334 stores.[79] Tesco Poland offers the value, healthy living and own branded line of products as well as regional produce, petrol, personal finance services and on-line photo processing. In August 2008 Tesco opened the first Extra store in Poland located in Czstochowa. Currently there are five Tesco Extra stores in Poland.

Slovakia
Start trading : No of stores :
No of staff :

1996 97
9015

Slovakia

Tesco Slovakia opened in 1996 as part of Tesco's international expansion aims. It now operates from 97 stores and 16 service stations.[94] Tesco Slovakia has recently put great emphasis on organic products. However, Tesco Slovakia caused controversy amongst the Slovak government when it was found to have come foul of food safety laws in 2006.[95] In April 2010 the first Tesco Extra in Central Europe opened in Bratislava Petrzalka, Slovakia as part of a pilot project for Tesco in the region, including the first self-service cash flow in Central Europe. There are currently four Tesco Extra stores in Slovakia three in Bratislava and one in Zvolen.[96]

Hungary
Start trading : No of stores :
No of staff :

1995 205
21,517

Hungary
Tesco launched in Hungary in 1994 after purchasing a small local supermarket group trading as S-Market and based in the North West of Hungary. It opened its first hypermarket in Hungary at the Polus Centre in Budapest in 1996. Tesco operates through more than 200 stores in Hungary with further openings planned.[79] Tesco offers its value, standard, healthy living and finest range in its stores. Tesco Hungary also offers a clothing line and personal finance services.[82] In August 2010 opened the first Tesco Extra in Budapest; its name is Tesco Extra Fogarasi and it is located in Zugl, Budapest.

Czech Republic
Start trading : No of stores : 1996 158

No of staff

12,812

Czech Republic
Tesco opened its first store in the Czech Republic in 1996 and now has over 84 stores, with further planned.[79]Tesco opened its first stores in the Czech Republic by buying US corporation Kmart's operations in the country and converting them into Tesco stores. Tesco is also keen to expand non-food items and has already opened petrol stations and offers personal finance services in the Czech Republic.[80] There are currently three Tesco Extra stores in the Czech Republic one in Prague and two in Plze.

Turkey
Start trading : No of stores :
No of staff :

2003 121
8038

Turkey
Tesco entered Turkey in 2003 and uses the trading name "Kipa". Tesco remains focused on building infrastructure in Turkey to complete its expansion plans and has already introduced the Tesco Express format into Turkey. There are plans to increase the rate of expansion as basic infrastructure is built.[79] The first Tesco Extra in Turkey opened in Izmir, Turkey, Tesco Kipa Extra Balova in September 2010.

Malaysia
Start trading : No of stores :
No of staff :

2002 38
11023

Malaysia
Tesco opened its first store in Malaysia in May 2002 with the opening of its first hypermarket in Puchong, Selangor. Tesco Malaysia currently operates 45 Tesco and Tesco Extra stores. Selangor has 12 stores, Perak seven stores, Johor six stores, Kuala Lumpur and Penang five stores each, Kedah four stores, Negeri Sembilan three stores, Melaka two stores, and Kelantan one store. Tesco has partnered with local conglomerate Sime Darby Berhad, which holds 30% of the shares.[92] Tesco also acquired the Malaysian operation of the wholesaler Makro, which was rebranded Tesco Extra and provides products for local retailers. As of 2011, Tesco has relaunched the Tesco Extra brand in five of its stores in the Klang Valley. The new Tesco Extra brand will now offer the widest choice in the food, clothing, home and electronics ranges. A variety of

complementary services such as a pharmacy, an optician and a Tesco phone shop will also be incorporated into these Tesco Extra stores. Tesco Malaysia offers a value range, its own branded range, electronic goods, the loyalty clubcard and clothing. Tesco Malaysia's clubcard introduced Green ClubCard Points in 2007 making Tesco Malaysia the first Tesco international business to introduce the scheme (Green ClubCard Points).[93]

Thailand
Start trading : No of stores :
No of staff :

1998 782
38,395

Thailand
Tesco-Lotus superstore in Sakon Nakon, Thailand. Shoppers have to pass through a checkpoint before entering the premises. Tesco entered Thailand in 1998 and operates through 380 stores as part of a joint venture with Charoen Pokphand and named the operation Tesco Lotus. This partnership was dissolved in 2003 when Charoen Pokphand sold its shares to Tesco. Tesco Lotus sells a diverse range of products from value food products to electronics to personal finance services. The company is keen to promote its green values and has partnered with the UNEP. Tesco Lotus claims to serve 20 million customers every month and that 97% of its goods are sourced from Thailand.[100]

Japan
Start trading : No of stores :
No of staff :

2003 140
4367

Japan
Tesco Japan first began operations in 2003. It was brought about by a buy-out of C Two stores for 139 million in July 2003 and later Fre'c in April 2004.[90] Tesco has adopted an approach that focuses on small corner shops that operate similarly to its Express format, rather than opening hypermarkets. It has also launched its range of software in Japan.[79] In August 2011, Tesco announced that they would be selling off their Japanese stores after revealing that only half of the stores in the Greater Tokyo Area were making a profit

South Korea
Start trading : No of stores :
No of staff :

1999 354
23,131

South Korea
Tesco launched its South Korean operations in 1999 and partnered with Samsung, currently Tesco holds 94% of the shares in the venture.[97] It operates both hypermarkets and its express format as well as a home delivery shopping service. It is the second largest retailer in South Korea, just behind Shinsegae Group.[97] On 14 May 2008, Tesco agreed to purchase 36 hypermarkets with a combination of food and non-food products from E-Land for $1.9 billion (976 million) in its biggest single acquisition, making Tesco the second largest in the country. The majority of the E-Land stores formerly belonged to French retailer Carrefour before 2006 and most of the stores will be converted to Tesco Homeplus outlets. Tesco's South Korean discount store chain, Home Plus, currently has 66 outlets.[98][99]

China
Start trading : No of stores :
No of staff :

2004 105
27,096

China
Tesco acquired a 50% stake in the Hymall chain, from Ting Hsin in September 2004. In December 2006 it raised its stake to 90% in a 180 million deal.[77] Most of Tesco China's stores are based around Shanghai, but according to Tesco it plans to equip the business to expand more quickly and in different areas. Tesco has a large store in Weifang, Shandong province. Tesco has been increasing its own brand products into the Chinese market as well as introducing the Tesco Express format.[78]

Why China? China has been irresistible to foreign retailers ever since the government started allowing them to set up there back in 1995. The statistics are mouth-watering. China has a population of 1.3 billion people - compared to Britain's 59 million - and an economy which is surging 9% a year. "The middle class is said to outnumber the entire population of the United States," says a spokesman for Britain's Kingfisher which has introduced B&Q to the Chinese. By 2002 foreign companies accounted for nearly one-quarter of major supermarkets in China, the country's State Economic and Trade Commission found.

INDIA In India , we have an exclusive franchise agreement with TRENT ,the retail arm of TATA Group. They are supporting the development of their Star Bazaar format.

India
Tesco has had a limited presence in India with a service centre in Bangalore, and outsourcing.[88] However, in 2008 Tesco announced their intention to invest an initial 60m ($115m) to open a wholesale cash-and-carry business based in Mumbai with the assistance of the Tata Group.[89]

Taiwan
Tesco entered Taiwan in September 2004. In September 2005, Tesco sold its stores in Taiwan to Carrefour.

SWOT ANALYSIS

TESCO Group
Strengths
TESCO have secured commercial standing within the global market place winning Retailer of the Year 2008 at the World Retail Awards. This can be used for marketing campaigns to drive advantage towards the demographic base for future growth and sustainability. In an environment where global retail sales are showing decline or level performance on a like for like basis TESCO Group have published sales gain of 13% for UK markets and 26% growth in international markets.

 As a business looking for continued expansion TESCO have reserve funds of credit coupled with income derived from property portfolio development funds.

Weaknesses
TESCO Finance profit levels were impacted through bad debt, credit card arrears and household insurance claims. TESCOs position as a price leader in UK markets can lead to reduced profit margins in order to retain the key price points on must have commercial items. Grocer outlets are not set up to operate as specialist retailers in specific areas of product which can be capitalised on by other smaller bespoke retailers. Whilst current economic conditions suggest TESCOs key value message will succeed there is a weakness in non-essential, mid to high ticket price items which will suffer from the rising cost of living and lower disposable incomes.

Opportunities
Statistics suggest TESCO is the third largest global grocer which indicates a level of buying power to ensure mainstream economies of scale. The acquisition of Homever provides the opportunity to develop the brand through Asia, specifically South Korea and further grow International markets for the group. The development of Tesco Direct through online and catalogue shopping will grow the use of technology, providing the launch pad for larger non food based products with moderate to high margin returns and less focus on sales and margin per foot return to space. TESCO mobile have grown million customers in 2008 and moved into profitable status suggesting further growth and development within this technological area can be developed.

Threats
UK and American markets have been affected by economic concerns through the credit crunch. Lower available income will impact and strategic focus may need to change to lower priced basic products with less focus on higher priced brands suggesting a switch in price architecture. Rising raw material costs from both food and non food will impact profit margins overall. Sourcing changes to Far East locations with regards exporting restrictions on some non food product areas will reduce margin rates on products with already low margins. Changes to consumer buying behaviours require further analysis - as technology develops consumer buying patterns change which will result in product areas requiring evaluation. For TESCO there is a persistent threat of takeover from the market leader Wal-Mart who has both means and motive to pursue such action

Pricing Strategies
Tesco: Everyday Low-Price Guarantee Strategy
By yordangunawan 4 Comments Categories: Economics

Abstract The UK retail grocery market is widely recognized as being oligopolistic. The retailers often advertise that they will not be undersold. Some firms promise to match any lower price offered by a competitor on the same item (price-matching guarantee), while others promise to beat any competitors lower price on the same item by some percentage of the difference (price-beating guarantee). One of the most interesting examples about using low-price guarantee strategy in oligopoly is Tesco, the supermarket with the largest market share in UK. In this paper, we will try to answer several questions, namely: Does Tesco use this pricing strategy to meet or beat a competitors price? Why does Tesco success by using low-price guarantee? And can Tesco avoid cutting price war? Also, another interesting point is that while Tescos performance in UK is excellent, its new business strategy is to enter US retailing market and to challenge Wal-mart, the top1 US retailer. Wal-Mart can even undercut supermarket prices by as much as 20 percent but is still able to generate considerable profit because of its enormous volume and huge buying power. It is very interesting to research why Tesco decided to compete in such a high competitive market.