Introduction to Tesco.

Case Study:

Introduction to Tesco

The name of the company that I am going to be studying is called Tesco. It has its headquarters in Chesunt, but has many stores around the country. These stores are in many cities including Manchester, Birmingham, and London. It has many types of stores and includes Tesco Extra (24 hour), Tesco Metro (located in town centres) and Tesco Express (attached to garages).

It sells many things including food and non-food items. These items include: toys, food, drinks, toiletry, CDs, videos, DVDs, books, cosmetics, medicine, tobacco, alcohol, fruits, vegetables, electrical goods, clothes, organic food. In Newport there are stores based at Spytty and Maesglas.

The type of ownership that my company has is public limited company. This means it is a large company with many employees. It has shares on the stock exchange and anyone over 18 can invest in a share. This will make anyone who has bought the share a part owner of the joint stock company.

As Tesco is a joint stock company the shareholders want a good return on their capital and to receive a dividend each year. If the company went bankrupt then the owners would have to pay off all of their debts, this would even mean selling their houses and cars.

The main objective of a business is to make a profit. If a business did not make a profit, it could not survive for long as it would be spending more than it received. A business needs to make a profit to pay- suppliers, employees, taxes, a dividend to shareholders and interest charges on money it has borrowed.

Companies are far more complicated to set up than sole traders or partnerships. They must be registered by companies’ house. A certificate of incorporation is like a birth certificate for a company and will only be issued if the registrar is happy with the documents he receives from a company. The memorandum of association sets out the name of the company and the objectives of the company. The articles of association cover the internal rights of the company.

The advantages of Tesco being a public limited company is that the people who own Tesco will have holidays and if they aren’t present and they have loss they won’t have to pay for it.

Tesco have limited liability because the shareholders or owners have limited liability. Their financial liability is limited to the amount of money they have invested.

A company might be making so little profit that it could not pay its way and is forced to stop trading by going into liquidation. The company might be millions of pounds in debt, but the shareholders would not be responsible, they might lose the money they have invested in shares but not a penny more.

The disadvantages of Tesco being a public limited company is that, it is more complicated to ...

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Tesco have limited liability because the shareholders or owners have limited liability. Their financial liability is limited to the amount of money they have invested.

The disadvantages of Tesco being a public limited company is that, it is more complicated to set up a limited company than it is to start a business as a sole trader.

It is also more expensive as it is necessary to employ a solicitor to register the company.

Tescos main activity is retailing. Some of the activities involved are manufacturing. It also has an Internet delivery system that involves transport. It has many stores that are directed at different types of customers for example Tesco extra is for people who work during the day and prefer to do their shopping at night, Tesco express is for people who just need a pint of milk and not many things and prefer not to go into the main store, Tesco metro is for people who prefer to do their shopping in the town centre.

In many stores you will find the following items being sold-food clothes music electrical goods pharmacy insurance savings accounts credit cards club card newsagents photo development.

Tescos have produced a card called club card, this allows customers to get points when shopping and then turn these points into vouchers.

Types of Tesco Stores

Metro

Tesco first opened metro in 1992. They sell a wide range of quality products and luxury goods, to meet the needs of people at work and those who prefer to shop in the town centre.

Express

Tesco first introduced Tesco express stores in 1994. Tesco express is a combination of a filling station and retail sites. They sell quality Tesco goods at low prices for people who want to pick up a bit of shopping as they put in some petrol.

Extra

Tesco extra is the newest and largest store format. The first Tesco extra was opened in Essex in June 1997 and a second is planned for Peterborough. The ranges of goods sold vary from household goods to clothes. They have also added food courts for in-store and take away dinners. They attract customers who are at work during the day and prefer do their shopping at night.

Business Strategy

There are four parts to the Tesco Strategy

1. Core UK business
Tesco continue to increase market share through our policy of getting cheaper, offering better value and providing more choice and convenience for our customers.

2. Non-food business
Tesco currently has over a 4% market share of a market worth £75bn in the UK, where our goal is to be as strong in non-food as in food. Our non-food offer now encompasses electrical, home entertainment, clothing, homeshop, cookshop and even white goods and furniture in our largest stores.

3. Retailing services
As customers' shopping habits change we change and respond by providing new products and services. Our e-commerce business has grown rapidly. We are the world’s largest grocery retailers. Both tesco.com and Tesco Personal Finance demonstrate the ability to extend the Tesco brand. Tesco Personal Finance continues to grow and develop excellent products offering value and choice

4. International
Tesco has been successful in opening up new growth markets in Central Europe and Asia. The proportion of total Group space outside of the UK was 47% at the half year. We now operate in Hungary, Poland, Czech Republic, Slovak Republic, Thailand, South Korea, Taiwan and the Republic of Ireland. In May 2002 we opened our first store in Malaysia.

Tesco Purpose & Values

Our Core Purpose is all about customers.

"To create value for our customers, to earn their lifetime loyalty".

This statement is at the centre of all we do.

Our two values drive the whole way we do business.

No one tries harder for customers:

Understand customers better than anyone
Be energetic, be innovative and be first for customers
Use our strengths to deliver unbeatable values to our customers
Look after our people so they can look after our customers

Treat people how we like to be treated:

All retailers, there's one team … The Tesco Team
Trust and respect each other
Strive to do our very best
Give support to each other and praise more than criticise
Ask more than tell and share knowledge so that it can be used
Enjoy work, celebrate success and learn from experience

UK Stores

In August 2002 Tesco had 759 stores and remains the largest food retailer in the United Kingdom.

Tesco operates 4 store formats in the United Kingdom.

Store formats at February 2002

UK Market Share

Our share of the UK market has grown steadily since the early nineties as a result of our customer focused strategy: our market share is now over 16.5%.

This is how we compare with our competitors (based on IGD data)

In total Tesco have 1,023 stores in ten countries.

As of August 2002 Tesco had the following stores.

Employees

Tesco employs over 260,000 people worldwide 195,000 people in the UK and 65,000 overseas. Full and part time UK employees have harmonised benefits, competitive salaries, discount on Tesco purchases, pensions, profit share and Save and Buy As You Earn schemes.

Community & Charity Involvement

Computers for Schools goes from strength to strength and is in its 11th consecutive year. To date, over £77m worth of PC's and computer related equipment have been donated to over 20,000 schools in local communities around our stores. For more information on this area visit our Corporate Social Responsibility website.

In 2001, the Alzheimer's Society and Alzheimer Scotland were Tesco Charities of the year. Cystic Fibrosis is the Tesco Charity of the year in 2002. Additionally, Tesco is the national sponsor for Race for Life, in aid of the Imperial Cancer Research Fund. Over 250,000 women have participated raising over £15m.

Price Position

We have continued to bring value to our customers and have now established a competitive price position against all of our competitors. In the last 5 years we have invested over £1.2 billion in price, making prices 12.5% cheaper than they were 5 years ago.

Product Offer

Typically Tesco sells 40,000 food products in a superstore, as well as clothing and other non-food lines. Tesco sells branded products and own brand products. Our own label products are at three levels, Value normal and Finest products. Own brand accounts for approximately 50% of sales. In 2001/02 we introduced over 3,500 new food lines. Tesco also stocks over 1,100 organic lines. Tesco own brand can now be found in many of the Groups International Stores.

Tesco Petrol

Tesco is one of Britain’s largest independent retailers, with over 340 petrol stations, including Express sites and sells one in every 8 gallons (12.5%) of petrol sold in the UK. Within the next 2 years Tesco/Esso will complete its role out of more than 150 Tesco Express stores.

Tesco was the first petrol retailer to introduce low benzene unleaded petrol in line with the Royal Commission on environmental pollution.

Tesco Personal Finance

Tesco Personal Finance (TPF) was launched in July 1997 and is a joint venture with Royal Bank of Scotland. Products include Clubcard Plus, a grocery budgeting account. A Tesco Visa Card was launched in July 1997, Tesco Instant Access Savings Account in September 1997, Home Insurance in April 1998, Loans in May 1998, Pensions in June 1998, Travel Insurance in July 1998, ISAs in April 1999, Pet Insurance in October 1999 and mortgages in June 2000. The joint venture has over 1 million-customer credit cards and 3m customer accounts. Tesco Personal Finance delivered a profit of £34m of which the Tesco share was £17m in the first half of 2002/03.

Tesco.com

Tesco is the largest grocery homeshopping business in the world. Annualised sales are £300m and we now cover 95% of the UK population. We already have homeshopping in the Republic of Ireland and South Korea. In June 2001 Tesco took its grocery homeshopping model to the USA through a partnership with Safeway Inc, this has now been rolled out to over 20 stores.

Tesco.com also offers online shopping for electrical, books, home entertainment and wine delivered direct to your door.