Study of Tesco

Comparing two existing online businesses

For this assignment I will compare and contrast two online businesses, the businesses I have chosen are Tesco & Amazon.

History of Tesco

Jack Cohen began selling surplus groceries from a stall in the East End of London in 1919. The first own-brand product sold by Jack was Tesco Tea - before the company was called Tesco. The name comes from the initials of TE Stockwell, who was a partner in the firm of tea suppliers, and CO from Jack's surname. In the 1930s Jack Cohen grew the business by buying stores in the expanding London suburbs.

Computers for Schools was launched in 1992. The Every Little Helps strap line was launched in 1993. The first two Tesco Express stores opened in London in 1994. The Tesco Clubcard was launched and with the introduction of Clubcard, Tesco overtook Sainsbury's in market share in 1995.

Tesco.com, launched in 2000, has grown to serve over 500,000 customers weekly. A new 'Every Little Helps' campaign was launched in 2004. Tesco Direct, their catalogue business, launched in 2006. A new Clubcard app launched in the UK in 2010. Tesco launched the new Everyday Value range to replace Tesco Value in 2012.

Number of stores - 3,054 

Revenue for 2011/12 - £42,248m

Current share price – 360.55p

Challenges that Tesco faced in the early years

The following companies are the major competitors of Tesco PLC:

ASDA

ALDI

John Lewis

Marks and Spencer

Morrison’s

Sainsbury

These are all competitors of Tesco and have all been battling with Tesco in order to survive and show that they have to be taken seriously.

P.E.S.T Analysis on Tesco

Political

Politically, the recession is currently affecting all the countries which may lead to higher numbers of unemployment. As one of the fastest growing retailers more jobs will be available with Tesco therefore helping to reduce unemployment.

Economical

One of Tesco’s competitive advantages at present relates to their overwhelming physical presence, but there are issues about Tesco driving out the competition from other retailers.

The situation is in no way being assisted by the ever expanding chains of store.

Under EU law, there is presumption that an organisation with a large market share is dominant. The concerns with this are that quality of products and services will slip and there is a risk of paying higher prices.

Tesco to date has not been assessed as posing a risk of exploitation but should bear this in mind.

Social

This involves lifestyle trends, demographics consumer attitudes and opinions, consumer buying patterns major events and influences buying access and trends in the case of Tesco considerations such as the increase in immigration of Eastern Europeans or increase in young professionals.

Naturally there is therefore a demand for new goods for example; the career minded professional who is a single person.

Technological

Technological factors which have perhaps had the most impact on Tesco have been the growth in the use of the internet. Internet has given new shape to new day shopping.

They have capitalised on the use of online shopping forum Tesco direct and provide a delivery service through their website at www.Tesco.com which has aided the company to cater to a larger segment of people.

Tesco are also instrumental as a retailer in supporting carbon reductions and have created a £100 million Sustainable Technology Fund for this purpose.

SWOT Analysis - Strength, Weakness, Threat and Opportunities of Tesco

 

Strengths

One of the largest and renowned grocery retailers.

Diversified into different countries with about 1 million workforces from different backgrounds.

Won several retail awards for keeping up their standards and providing best retails services.

Continuously expanding with propositions of opening several stores on an international level.

Use its own-brand products, including the upmarket "Finest", mid-range Tesco brand and low-price "Value".

Offer loyalty card schemes to customers.

Weaknesses

Due to the current economic conditions Tesco may suffer from the rising cost of living and lower incomes available to the public resulting in less demand for the non essential and mid to high priced items.

Due to the ongoing recession Tesco’s Finance profit levels were impacted through bad debt, credit card arrears and household insurance claims. This could continue if the market doesn’t see change soon.

Retained its position as a price leader in UK markets.

Opportunities

The third largest global grocer which indicates a level of buying power to ensure mainstream economies of scale.

Tesco Direct has been one of the recent achievements which have been seen as one of the important tools in increasing the sales margins.

The online and catalogue shopping will grow the use of technology.

Tesco mobile have grown ¼ million customers in 2008 and moved into profitable status suggesting further growth and development within this technological area can be developed.

Threats

Loss of employment and lower income available will impact and strategic focus may need to change to lower priced basic products with less focus on higher priced brands and luxury products suggesting a change in pricing structure due to the recession.

Rising raw material costs from both food and non food will impact profit margins.

Has always feared the threat of takeover from the market leader Wal-Mart who has both means and motive to pursue such action. With its alliance with ASDA in the UK they are one of the nearest competitors.

Growth Strategies and the future plans for Tesco

To be the most successful international retailer.

Tesco has products that will be suitable for different geographical areas, population or age.

Tesco has a well-established and consistent strategy for growth.

Tesco aim to be as strong in non-food as in food.

Tesco emphasis on providing value services and to earn life time loyalty.

Have close connections with charitable organizations like cancer research, race for life etc.

The expansion of Tesco relies on retaining existing customers and acquiring new ones.

Tesco's structured approach to training and developing its existing and new employees provides a strong foundation for its continuing growth.