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.

Contact Details


Tesco House

Delamere Road





01992 632222

SIC Code: 52119



[email protected]

Industry Sector

History of Supermarket

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" (

Definition of Supermarket

Supermarkets tend to come in different sizes and with different selection of goods, typically small supermarkets for smaller area and areas with less demand and larger areas with greater demand. Webster's dictionary defines:

- Supermarket as self-service retail market selling especially foods and household merchandise

Keynotes (2003) defines a supermarket as:

A self-service grocery store that sells food, beverages and other goods. It is usually located on urban high streets or in shopping malls, covering an area of between 4 - 12,000 ft.

Industry Sector

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 £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 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.

Below is a table showing approximate number of suppliers each retailers has.

Major buyer

Number of suppliers











Source: (2000:231)

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.

PEST Analysis

Political Environment

The environment comprises of laws, government agencies and pressure groups that influence and limit Tesco PLC.

* With the increase in market concentration in recent years the UK's leading grocery retailers have come increasingly under the scrutiny of the Office of Fair Trading (OFT) for allegedly exerting monopsony powers in agricultural markets. It was suggested that these retailers abused their dominant position by dictating particularly favourable terms and conditions on suppliers such as farmers.

* Public concerns about the operation of the grocery retail sector-one campaign on "rip-off" Britain had highlighted the fact that food prices in the UK were consistently above those in other European countries-lead to a referral to the Competition Commission (formerly the Monopolies and Mergers Commission) in 1999.

* Public disquiet about the effect of out of town superstores on town centres has grown and both current and future planning policies will seriously hamper future development. Though conversions of existing stores allows some increase in selling space it is limited.

* Community organisations have since gained momentum consequent to the Competition Commissions ruling and have been lobbying neighbourhoods to boycott supermarkets and large food manufacturers and instead support small independent suppliers, processors and retailers at the expense of large supermarkets like Tesco.

Economic Environment

* The UK food retailing market is mature and highly competitive. In order to improve margins large grocery retailers has moved into non food retailing where it now claims a 4% market share of non-food goods with a target of 6%. While non food items have higher margins they do have marginally higher costs in that they require adjustments to the supply chain process.

* The UK market has been affected by negative inflation in the food sector. This negative inflation has been driven by the so-called 'Wal-Mart effect' i.e. downward pressure on prices from Asda / Wal-Mart's aggressive 'Every Day Low Price (EDLP)' strategy, It was not just the Wal-Mart effect that pressurised retailers into a price war but.

* The saturation of domestic markets and the desire for growth have fuelled increasing globalisation in retailing through self-start, merger and acquisition and franchising. The increasing merger activity in the retail sector has also been partly driven by global shortages of real estate available to retailers to build stores, particularly with strong growth restrictions in Western Europe.

* Scarce land resources compounded by government legislation on planning restrictions on out of town shopping facilities makes it difficult to expand into these locations.

* Britain's supermarkets are racing to open small high street stores to cash in on demand for convenience shopping in urban areas

Social Environment

* The over powering proposition of the "everything under one roof" format has been a major factor in the demise of the small independent grocer, butcher and green grocer in recent times thus replacing the high street as the focal point of community life.

* With no strong attachments to Local communities, supermarkets readily use job cuts as a safety net to ensure profits. Consequently local communities are haemorrhaging quantities of meaningful skilled jobs. The British Retail Planning Forum of 1998 revealed that every time a large supermarket opens and average of 276 jobs are lost.

* Declining meal preparation consequent to demographic changes such as an increasing number of single-person households and working women is forcing UK retailers are to focus on added-value products such as the booming 'food-to-go" sector (eating out is now the UK's favourite leisure time pursuit).

* Time pressures have increased during the 1990s-giving rise to the expression 'money rich, time poor' consumers. Despite this, there has been a trend towards increased spending on leisure, which rose by 2.89% pa between 1971 and 1987, and a shift away from food and housing.

* Changes in work patterns has necessitated retailers to be more flexible in opening hours as well as adding extra shopping days e.g. Sunday shopping.

* The U.K population on a whole is far more health conscious than in previous years. There has been a trend away from genetically modified foods towards organic foods

* The increase in disposable income among Britons has led to more sophisticated customer preferences and demands for greater choice and comfort in the shopping experience.

Technological Environment

* The Grocery retail sector is a major user of new technology. The increasing use of electronic data interchange, laser and self-scanning and other point-of-sale equipment has been a feature of recent innovations by retailers. The use of loyalty cards and the provision of financial and other services have also involved the introduction of sophisticated computer-based systems.

* The development of supply-chain partnerships have helped to improve competitiveness. The supply chain has been one of the main catalysts for improvements in quality and costs, and the best partnerships between manufacturers and large food retailers have led to close long-term trading relationships and encouraged innovation.

* Almost every major food retailer in the UK has experimented with home shopping, home delivery and/or e-tailing. Order fulfilment has proved to be very costly whether centrally based or store based. Also, many customers have found the experience of Web-based grocery shopping dissatisfying, with software problems and general unreliability of the Web causing frustration. Tesco's home delivery and on-line schemes have proved most successful of these experiments.


* Government legislation has made it increasingly difficult to obtain planning permission for building out of town stores where land is cheaper.
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* Proposals from the European commission to clamp down on predatory pricing policies to prevent the selling of goods below cost price such as exist within France Germany, Ireland and Spain. These proposals could cause Tesco and others who rely on loss leaders and aggressive pricing policies to draw consumers in a great deal of damage.



* Tesco is a market leader in the U.K, holding 20.6% of the market followed by Sainsbury 14.5% and Asda; 11.2% Market share respectively.

* It has clear market positioning and a strong "own ...

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