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HISTORY

In the year 1920s, Tesco's founder Sir Jack Cohen had already begun to set up high
street grocery stores in and around London. The Tesco name was used for the first
time in 1929 in Edgeware, London. The name was drawn from the initials of the
company's tea supplier (T.E.Stockwell), and Cohen's own name. In 1932, Tesco was
formally established as a private limited company. During the rest of the decade, the
company continued to grow, adding more than 100 stores, mainly in London. After
visiting the US in 1935 to study its self-service supermarkets, Cohen developed
Tesco's "pile it high and sell it cheap" format. This format became the core of Tesco's
retail philosophy for many years to come.

Tesco continued to grow after World War II. The retail chain appealed to price-
conscious working class customers. After the war, the company was listed on the
London Stock Exchange as Tesco Stores (Holdings). By 1950, Tesco was already
operating 20 self-service stores. During the 1950s and the 1960s, Tesco grew
primarily through acquisitions. It acquired 70 Williamsons stores in 1957, 200 Harrow
Stores in 1959, 212 Irwins outlets in 1960, 97 Charles Phillips stores in 1964, and the
Victor Value chain of discount stores in 1968 (sold in 1986). By the 1960s, Tesco had
become a chain of over 800 stores.

During the 1970s, Tesco's customers began to look for quality and choice, but Tesco
failed to satisfy their needs. In fact, in the early 1980s, Tesco looked like winding up.
Consumers had a negative image of Tesco, which competed almost exclusively on
price. Poorly maintained stores and an inadequate assortment of poor quality items
reinforced this general perception.

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Tesco plc is an UK-based international grocery and general merchandising retail
chain. It is the largest British retailer by both global sales and domestic market share,
is the world's third-largest grocery retailer, and is the fourth-largest retailer behind
Wal-Mart of the United States, Carrefour of France, and The Home Depot of the
United States.

Tesco now controls just over 30% of the grocery


market in the UK, approximate to the combined
market share of its closest rivals, Asda and
Sainsbury's. In 2007, the supermarket chain
announced over £2.5 billion in profits.

Originally specializing in food, it has diversified


into areas such as discount clothes, consumer
electronics, consumer financial services, selling
and renting DVDs, compact discs and music
downloads, Internet service consumer telecoms,
budget software. They are now entering into the
housing market, with a self-advertising website
called Tesco Property Market.

Formation

Tesco was founded, as a one-man business, by Jack in London's East End. He came
from a modest background, being the son of a Polish tailor. He began selling groceries
in Well Street market, Hackney, in 1919 after World War 1. The £30 demobilisation
money he received after serving in the First World War was spent on purchasing
goods for that first stall. At this time rations and supplies were low, so he would buy
damaged goods from other businesses and resell them at reasonable prices.

The Tesco brand first appeared in 1924. The name came about after Jack bought a
large shipment of tea from T.E. Stockwell. He made new labels by using the first three
letters of the supplier's name (TES) forming the word "TESCO".

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The first Tesco store was opened in 1929 in Burnt Oak, Edgware, Middlesex. Tesco
floated on the London Stock Exchange in 1947 as Tesco Stores (Holdings) Limited.
The first self service store opened in St Albans in 1947, and the first supermarket in
Maldon in 1956.

Strategy

"We have continued to make strong progress with all four parts of our strategy - a
strong UK core business, non-food, retailing services and international - by keeping
our focus on trying to improve what we do for customers:

• making their shopping trip as easy as possible

• constantly seeking to reduce our prices to help them spend less

• offering the convenience of either large or small stores

• bringing simplicity and value to complicated markets"

[Source: Tesco Preliminary Results 2004/5]

Management and strategy changes

The founder, Jack , was an enthusiastic advocate of trading stamps as an inducement


for shoppers to patronize his stores: he signed up to Green Shield Stamps in 1963, and
became one of the company’s largest clients.

In 1973 Jack resigned and was replaced as Chairman by his son-in-law Leslie Porter.
Porter and managing director Ian MacLaurin abandoned the "pile it high sell it cheap"
philosophy of Cohen which had left the company "stagnating" and with a "bad
image". In 1977 Tesco launched "Operation Checkout" which saw it abandon Green
Shield stamps in favour of cutting prices and centralized buying for all of its stores.
The result was a rise in market share of 4% in two months.

Corporate strategy

1.An "inclusive offer". This phrase is used by Tesco to describe its aspiration to
appeal to upper, medium and low income customers in the same stores. According to

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Citigroup retail analyst David McCarthy, "They've pulled off a trick that I'm not
aware of any other retailer achieving. That is to appeal to all segments of the market".

2.One plank of this inclusivity has been Tesco's use of its own-brand products,
including the upmarket "Finest" and low-price "Value".

3.Tesco implemented the Clubcard rewards program to gather necessary customer


information, which it then used to cater to specific customer needs and potential
wants. When shoppers signed up for the card, they automatically submitted their age,
gender, and income. Tesco was able to segment their shoppers based on these factors.
As soon as the shopper used the card when shopping online or in-store, purchased
product information was automatically uploaded into Tesco database. Product
information was used to cross-sell additional products and services such as grocery
delivery services.

Corporate social responsibility

Tesco has made a very public commitment to Corporate social responsibility, in the
form of contributions of 1.87% in 2006 of its pre-tax profits to charities/local
community organisations. This compares favourably with Marks & Spencer's 1.51%
but not well with Sainsbury's 7.02%. Will Hutton, in his role as chief executive of The
Work Foundation recently praised Tesco for leading the debate on corporate
responsibility. However Intelligent Giving has criticised the company for directing all
"staff giving" support to the company's Charity of the Year.

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DEMOGRAPHIC CHANGES

ETHNIC GROUPS(AS A GOOD OPPORTUNITES FOR TESCO)

Tesco's UK stores are divided into five formats, differentiated by size and the range of
products sold.

• TESCO EXTRA are larger, mostly out-of-town hypermarkets that stock all of
Tesco's product ranges - with free car parks. The first Extra opened in 1997.

E xtra, Southport, EnglandThe 100th


store opened in the 2004/05 financial
year (specifically opening 29
November 2004, located on the
Newport Road in Stafford,
Staffordshire). The number of these
is now being increased by about 20 a
year, mainly by conversions from the second category. The largest store in England is
Tesco Extra Kingston Park with floorspace of 11,055sq m and the largest in Scotland is
the Port Glasgow store, which opened in July 2007 with a floorspace of (110,000 sq ft)
(net sales area). For comparison a standard Wal-Mart Supercenter in the U.S. is around
18,400 m² (200,000 sq ft).Tesco Extra stores can also be on two floors, ground floor for
mainly food and first floor for clothing, electronics etc. Most Tesco Extra stores have a
cafe too. Recently, progressively larger stores have been opened - and as a result many
people claim that their town has the UK's largest Tesco, when the biggest one is in
Kingston Park.

• TESCO SUPERSTORES are standard


large supermarkets, stocking groceries
plus a much smaller range of non-food
goods than Extra. They are referred to as
"superstores" for convenience, but this
word does not appear on the shops. It is
the "standard" Tesco format, accounting for the majority of UK floorspace. Most are

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located in suburbs of cities or on the edges of large and medium-sized towns. The
typical size is 2,900 m² (31,000
sq ft).
• TESCO METRO STORES
are sized between normal Tesco
stores and Tesco Express
stores. They are mostly located
in city centres and on the high
streets of small towns or
villages such as Rowlands Gill,
Gateshead. Typical size is 1,100 m² (12,000 sq ft). The first Tesco Metro was opened
in Covent Garden, London in 1992. Since then all Tesco branches that have a high
street format including those which opened before the Covent Garden branch have
been subsequently rebranded from Tesco to Tesco Metro probably to give an identity
to the Tesco high street sub brand. The Tesco store in Devizes was the last store to
finish rebranding, in September 2006. The store had not been renovated for over 20
years.
• TESCO EXPRESS stores are neighbourhood
convenience shops, stocking mainly food with an
emphasis on higher-margin products (due to lack of
economies of scale) alongside everyday essentials.
They are found in busy city centre districts and small
shopping precincts in residential areas, and on petrol
station forecourts. There were 654 stores at 25 February 2006 year end, with a typical
size of 190 m² (2,100 sq ft).
• ONE STOP are the only category which does not include the word Tesco in its name.
This is widely believed to be because the
reputation of Tesco would be brought
down by the lower standards of the One
Stop stores. These are the very smallest
stores. They were part of the T&S Stores
business but, unlike many which have
been converted to Tesco Express, these

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will keep their old name. However, some have Tesco Personal Finance branded cash
machines. There are more than 500 of them. One Stop Stores also work on a different
pricing and offers system to the other Tesco stores, and generally have later opening
hours than all except the 24-hour Tesco stores. Typical size 125 m² (1,350 sq ft). In
May 2005 Tesco announced a trial non-food only format in Manchester and Aberdeen,
and the first store opened in October 2005:

• TESCO HOMEPLUS STORES offer all of Tesco's ranges except food in


warehouse-style units in
retail parks. Tesco is trying
this format because only
20% of its customers have
access to a Tesco Extra, and
the company is restricted in
how many of its superstores
it can convert into Extras and
how quickly it can do so.
Large units for non-food retailing are much more readily available. It plans to open at
least three more Homeplus stores in 2006. As of 2 October 2006 Homeplus remains a
"trial" format and no decision has been taken on expansion beyond the

three stores already open and two that will open shortly. The Staines branch opened on 27
November 2006. The newest Homeplus branch opened in Bromborough on 26 March
2007.

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PRODUCT CUSTOMER SEGMENTATION

FINER FOODS 19%

HEALTHY 17%

TRADITIONAL 15%

MAINSTREAM 24%

CONVENIENCE 9%

PRICE SENSITIVITY 16%

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PRODUCT DIVERSIFICATION

TESCO PERSONAL FINANCE

Tesco has a banking arm called Tesco Personal Finance, a 50:50 joint venture with the
Royal Bank of Scotland. Products on offer include credit cards, loans, mortgages,
savings accounts and several types of insurance, including car, home, life and travel.
They are promoted by leaflets in Tesco's stores and through its website. The business
made a profit of £130 million for the 52 weeks to 24 February 2007, of which Tesco's
share was £66 million.

This move towards the financial sector has diversified the Tesco brand and provides
opportunities for growth outside of the retailing sector.

Tesco personal finance offer loans, car loans, Instant access saving accounts, business
credit card, bonus credit card (the credit card that pays you interest back), Clubcard
credit card (where you can earn 1 point for every £4.00 spent on it) and mortgages.
Tesco also offer insurance including travel insurance, pet insurance, car insurance, life
insurance, home insurance and car breakdown cover in association with green flag. A
key marketing strategy is Tesco offering Clubcard points or free petrol when you buy
Tesco car insurance.

The company is currently trialling a finance centre in the Glasgow Silverburn Extra
store providing free financial advice and quotes for insurance and loans, this service is
staffed by trained Royal Bank of Scotland staff. The centre also has a Euro cash
machine providing commission free Euros and a Bureau de Change run by Travelex.
If successful this trial will roll out to a number of other key and flagship stores.

TELECOMS

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Tesco operates ISP, mobile phone, home phone and VoIP businesses. These are
available to UK residential consumers and marketed via the Tesco website and
through Tesco stores.

Though it launched its ISP service in 1998, the firm did not get serious about telecoms
until 2003. It has not purchased or built a telecoms network, but instead has pursued a
strategy of pairing its marketing strength with the expertise of existing telcoms. In
autumn 2003 Tesco Mobile was launched as a joint venture with O2, and Tesco Home
Phone created in partnership with Cable & Wireless. In August 2004 Tesco
broadband, an ADSL-based service delivered via BT phone lines, was launched in
partnership with NTL. In January 2006, Tesco Internet Phone, a Voice over Internet
Protocol, VoIP, service was launched in conjunction with Freshtel of Australia.

Tesco announced in December 2004 that it has signed up 500,000 customers to its
mobile service in the 12 months since launch. In December 2005, it announced it had
one million customers using its mobile service. In April 2006 it announced that it had
over one and a half million telecom accounts in total, including mobile, fixed line and
broadband accounts.

On 19 December 2006 Tesco Ireland announced that it would enter into a joint
venture with O2 Ireland to offer mobile telecommunications services. The service,
which will be Ireland's first MVNO, will use the O2 network but operate separately. It
will be allocated the STD code 089. As with Tesco's similar service in the UK, it will
be branded Tesco Mobile.

FUEL

Tesco first started selling petrol in 1974. Tesco sells 95 and 99 RON petrol on a retail
basis (a fuel developed by Greenergy of which Tesco is a shareholder). Tesco have
recently diversified into biofuels, offering petrol-bioethanol and diesel-biodiesel
blends instead of pure petrol and diesel at their petrol stations, and now offering
Greenergy 100% biodiesel at many stores in the South-East of the United Kingdom.

Problems arose on 28 February 2007 when motorists in South East England reported
that their cars were breaking down. This was due to petrol sold by Tesco and others

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being contaminated with silicon, the fuel coming from the Vopak terminal in the
Thames Estuary, where fuel is supplied by Harvest Energy and Greenergy. Then on 2
March 2007 Tesco announced that they were emptying and refilling tanks at 150
petrol stations but were not suspending sales.

Tesco has been criticised with claims that they had been alerted to the problem as
early as 12 February 2007. Affected motorists are facing bills of several hundred
pounds to repair their cars and, with up to 10,000 cars needing repair, the suppliers
could be liable for compensation claims of up to £10 million. However, on 6 March,
Tesco offered to pay for any damage caused by the faulty petrol, after printing full
page apologies in many national newspapers.

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BRAND IMAGE

1. Tesco is one of the few retailers to offer a "good, better & best" policy for its
products[. This now encompasses several product categories such as food,
beverage, home, clothing and financial services.
2. Tesco Value - Aimed at families on low income. These products minimise
Tesco's costs, including simple packaging to keep the retail cost as low as
possible. These products are never on offer. This range has recently expanded
into small home electrical items like kettles, toasters and floor heaters.
3. Tesco Brand - Standard products at "mid range, own label store prices".
4. Tesco Finest - Aimed at middle to high income customers. These products use
"superior" ingredients and in some cases, Tesco claim they are
designed/recommended by top chefs. Has also moved into the Non-Food
segment of the market, with Finest Health and Beauty, Home and Clothing
lines being stocked in Extra stores.
5. Healthy Living - Usually contains lower fat, sugar and salt content than in
standard Tesco Brand.
6. Organic - Tesco's own brand range of organic foods, has also moved into the
Non-Food market, with organic bedding and clothing planned.
7. Tesco Kids - Brands aimed at children, although this range is being phased out
in certain areas.
8. Best Of British - British speciality foods.
9. World Foods - Speciality foods from around the world.
10. Tesco Wholefoods - Range of natural, unprocessed products such as, dried
fruit, seeds & nuts.
11. Tesco Bakery has fresh baked pastries and breads made daily, including
freshly baked cookies at competitive prices.
12. Free From - Food that does not contain certain ingredients (i.e. dairy & nuts).

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13. Tesco Christmas - Seasonal goods that Tesco only stock during the Christmas
period.
14. Cherokee - Tesco's own clothing label.
15. F+F (formerly Florence for women, and Fred for men) - Another clothing
brand at Tesco.
16. Technika - Range of Tesco own brand electrical items (from DVD players to
televisions and computers).
17. Digilogic - Another range of own brand electrical items (from DVD players to
televisions and computers).
18. Tesco Mobile - Tesco's own mobile network has 4 pay as you go tariffs; Value
tariff, Standard tariff, Extra tariff and the Staff Tariff for employees

TESCO IN POPULAR CULTURE

• Tesco is name-checked (among others) on the track "Aisle of Plenty" on the album
Selling England by the Pound by the band Genesis.
• Tesco is also mentioned on the track "The Fallen" on the album You Could Have It
So Much Better by the band Franz Ferdinand.
• Tesco is mentioned on the track "LDN" 'She Was Struggling With Bags From
Tesco' on the album Alright, Still by Lily Allen.
• The 1990s UK indie band Senseless Things entitled one of their songs Fishing at
Tescos.
• The Tesco Value brand has become a meme, and is often used in the digital editing
community when one substitutes a cheap or poorly made item for a more
expensive and high quality one, for example a picture of a penis enlargement kit
labelled Tesco Value Porsche.
• The six episode television mockumentary Time Trumpet, which was set as a look
back at the past thirty years from the year 2031, included a section about Tesco's
invasion of Denmark, turning it into the world's first 'retail country'.
• Tesco is often mistakenly referred to by its customers as Tesco's.

Not Everyone Buys Tesco's Strategy Britain's No. 1 grocer is turning in great results,
but its aggressive pricing doesn't sit well with suppliers and mom-and-pop rivals

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British grocery and retailing giant Tesco hasn't had trouble pleasing investors lately.
Shares of the country's largest supermarket chain rose to an all-time high of $5.93 on
Nov. 25, after its third-quarter trading report showed better-than-expected results.
Among the impressive figures: In a competitive home market, sales rose 12.3% over
last year.

All signs suggest that Tesco's strategy of aggressive cost-cutting and expansion into
products ranging from digital cameras to mortgages continues to work. In September's
interim results, the company -- which operates some 1,900 stores in Britain and 440
more in Ireland, Eastern Europe, and Asia -- announced half-year pretax underlying
profit growth of 24.4%, outpacing last year's 21.9% pace.

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GROWTH OF TESCO IN THE MARKET DUE TO ABOVE FACTORS

2001 2002 2003 2004 2005


Turnover (£m) 20,800 23,400 26,004 30,814 33,974
Number of stores 907 979 2,291 2,318 2,365

Selling space (000 sq ft) 28,362 32,491 39,944 45,402 51,772

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GROWING SLICE: Moreover, the top British retailer is staying ahead of its rivals.
According to researcher TNS Superpanel, which gathers spending data electronically
from 15,000 British households, Tesco now accounts for 28.3% of the country's
supermarket business, up from 26.5% a year ago.

Its closest competitor, Wal-Mart-owned (WMT ) Asda, holds a 16.7% market share,
up from 16.5% last year. Verdict Research, a London-based retail consulting firm,
estimates that Tesco takes in $1 out of every $11 spent on retail in Britain.

"These are pretty stunning figures," says Iain McDonald, a retail analyst at Numis
Securities in London, who applauds the way Tesco translates its buying power into
lower prices. Says McDonald: "They're in a virtuous circle."

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BRINGING PRICE DOWN AND STEERING WHEEL

SIGNS OF CONCERN:However, try telling that to the handful of protestors who


were passing out leaflets and holding signs outside one of Tesco's new, small, inner-
London convenience stores last week. While office workers and holiday shoppers
dipped into the store for lunch fixings and other essentials, the activists handed out
postcards addressed to Tesco Chairman Sir Terry Leahy, imploring him to increase
what the company pays dairy farmers for milk.

In another sign of concern over the retailer's dominance, on the day Tesco released its
strong third-quarter results, a coalition of advocacy groups representing convenience
stores, dairy suppliers, a women's group, and environmentalists made a formal
application to the Office of Fair Trading asking for an investigation into consolidation
in the supermarket industry. One of the group's claims is that the big chains are
unfairly squeezing out smaller stores with predatory pricing.

Other supermarket chains have also felt some heat. A different group of dairy farmers
has blocked depots owned by Asda with their vehicles to protest milk prices. And the
petition to the Office of Fair Trading affects the entire supermarket industry, where
Tesco and Asda are followed in market share by J. Sainsbury's and the William

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Morrison supermarket groups. Still, Tesco's market-leading position makes it the
biggest target for complaints.

VILLAGE PRESERVATION: One reason for the recent increase in concern over
the chain is its highly visible move into the convenience-store market. In 2002, Tesco
purchased a chain of 1,202 T&S convenience stores, and this year it bought another
45-store London-based chain. Thanks mainly to conversions from these chains, in the
first six months of this year, Tesco opened 200 small stores in Britain.

Analysts have praised Tesco's push into smaller stores as a move that sets it apart
from Asda, which has focused on superstores. But the strategy has also exposed Tesco
to additional criticism. In the North London village of Highgate, for example, where
Tesco recently replaced a small grocery store, not all residents are pleased.

Brendan Nolan, a member of the local preservation group, is concerned that the new
Tesco will threaten not just the local independent grocer but also the newsstand, two
wine shops, and a butcher. He is printing leaflets urging his neighbors to patronize the
village grocery shop, which he says has lost 40% of its business since Tesco moved
in. "If the village store is forced out of business, it will have a deleterious effect on the
whole street," Nolan said. "We'll be down to one grocery store, and it will just be
Tesco."

SLIPPING REPUTATION: Tesco officials say the company is fair to suppliers and
doesn't engage in predatory pricing. They also contend that far from hurting local
communities, Tesco stores have revitalized some Main Streets by drawing foot traffic.
As for complaints about competition, Jonathan Church, Tesco communication
manager, says, "We make no apology for bringing value to customers."

To what extent such protests will tarnish Tesco's generally good corporate reputation
is unclear. A survey conducted by Nottingham Business School and published in
Management Today magazine shows that Tesco slipped from first place to fourth in an
annual list of Britain's most-admired companies. Tesco lost the top spot, which it won
handily last year, because of its community and environmental record, says Matthew
Gwyther, the magazine's editor.

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However, analysts say Tesco is unlikely to be hurt in the near future by any backlash,
as long as it continues to offer low prices and desirable products. "Part of getting a
better deal for customers is inevitably putting more pressure on your suppliers," says
Gavin Rothwell, senior analyst at Verdict Research.

COMPROMISE HOPE:

Indeed, even some of Tesco's opponents acknowledge the benefits the store has
brought to their neighborhood, in the form of affordable groceries. Tony Hillier,
president of the Heath & Hampstead Society conservation group, has been lobbying
Tesco to change the look of its new store in his Hampstead neighborhood, saying it's
out of place on the historic street.

But even Hillier agrees that in a commercial district dominated by high-priced


clothing stores, Tesco's low-cost groceries are welcome. Moreover, he was
encouraged by a meeting angry residents had with a Tesco official. "We hope very
much we will not have to escalate the campaign," says Hillier. Certainly Tesco -- and
its shareholders -- would hope the same.

TESCO & ESSO BUSINESS ALLIANCE

In 1997, Tesco Stores Limited and Esso Petroleum Company Ltd (Now part of
Exxonmobil Corporation) came together to form a business alliance. The agreement
included several petrol filling stations on leases from Esso, where Tesco would
operate the store under the Express format. In turn, Esso would operate the forecourts
and sell their fuel via the Tesco store. Ten years later, over 600 Tesco/Esso stores can
now be found across the United Kingdom.

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GLOBAL FOOD RETAIL GIANT AS IT LANDS IN U.S.(REPORT ANALYSIS)

TESCO
Tesco is a broad-range supermarket operating a variety of store formats and sizes. It
told us that its aim was continually to increase value for money, defined as the whole
shopping experience. Actual price policies were implemented through a basket
system. The baskets acted as a framework within which individual prices were set for
each product line. The national basket covered around 4,0001 lines and was now
reaching 49 per cent of turnover. The aim was to achieve the cheapest national basket
after Kwik Save, to remove any price gap with Asda, and to beat Sainsbury and
Safeway. It told us that the policy was to track overall competitiveness, not individual
product lines, and there were no percentage price gap targets other than to get cheaper
over time. Tesco told us that it had undertaken five price initiatives over the period
1996 to 1999, where large numbers of prices were reduced simultaneously on a non-
temporary basis. These initiatives had been the principal means, we were told, by
which its basket price had been reduced. In these initiatives, prices had been cut on
1,800 product lines by an average of 9 per cent in nominal terms. Tesco submitted
evidence that prices across all its products had fallen by 6 per cent relative to the RPI
between 1996 and 1999, which means that they rose in nominal terms by 2 per cent.
This suggests that the price initiatives on a limited range of products account for much
of Tesco’s overall price cuts. However, as prices on these lines may have been
changed before or after the initiatives, it is not possible to calculate the exact
proportions. Tesco was unable in the time available to supply further information on
the extent to which individual price campaigns on selected product lines accounted for
the overall 6 per cent price fall (relative to the RPI) over recent years.
From June 1998 to July 1999, Tesco ran around 15,000 promotions. The average
volume uplift per line was 200 per cent, and sales value uplift was 122 per cent
(ignoring the effects of switching from other product lines). It told us that the number
of promotions was being reduced, from around 1,100 promotions a week in 1997 to
below 500 per week in 1999. This reflected the emphasis on permanent price cuts.

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70. Metro and Express fascia stores charged slightly higher prices on some lines; this
was attributed to higher costs such as site costs and wastage. Tesco also told us that
around one-third of its stores were designated as ‘local stores’ where slightly lower
prices were charged on a limited range of products. It told us that the price difference
averaged around 3 per cent on the flexed products, which it said represented a price
difference of around 0.3 per cent between local and national stores for a representative
consumer. Additionally, prices on ‘value’ (budget own-label) products could if
necessary be reduced by a store manager if a competitor was selling a similar product
more cheaply within a mile of that store.
[SOURCE:http://www.competition-commission.gov.uk/rep_pub/reports/
2000/fulltext/446a7.1.pdf]

TESCO’S PROMISES, POLICIES, AND PAST PERFORMANCE

Promises made by British food giant Tesco as it prepares to enter the U.S. market,
according to a new analysis by the Occidental College Urban & Environmental Policy
Institute released today.With plans to open more than 100 stores during the next year
under the name Fresh & Easy Neighborhood Markets in California, Arizona and
Nevada, Tesco intends to replicate its dominant presence in the United Kingdom,
where it commands a 31% share of the grocery industry, according to the report.
Tesco’s arrival in the United States has the potential to significantly influence the
direction of the U.S. grocery business in such areas as labor, environment, health and
the food system, the report says.

“However, our examination of Tesco’s track record shows significant gaps between
what it has promised and how it has achieved its current position as one of the top
multinational operations.”

“Tesco’s move across the Atlantic comes at a moment when issues of food access in
low-income communities, widening income gaps, environmental concerns, and
changing demographics are all on the front burner,” continued Gottlieb. “We are
releasing this report before Tesco’s rollout because we want to provide a
comprehensive picture of how the company operates in the 12 countries where it has
set up shop and its plans for the U.S.

KEY FINDINGS IN THE REPORT INCLUDE: Global Position: Tesco is a


sophisticated and successful corporation with strong marketing savvy. Tesco has

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quickly expanded to become the third largest global retailer and now challenges Wal-
Mart as the most aggressive and dominant food retailer in many of the places it
operates.

GLOBALIZATION STRATEGY

TESCO CEO ON MOVING INTO A NEW TERRITORY--THE USA


I've had the opportunity to help several companies
set up shop in the USA. It's a very challenging and
costly process, even for companies that have had
success in other foreign markets.
European companies can leverage the EC, the
euro and geographical proximity when expanding
to other countries in Europe. The USA is a different matter. It's massive in size, covers
four timezones, has laws and tax rules that differ state to state, and its customers are

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used to getting their own way with products. Succeeding, however, can bring the
company its largest market. Ask Toyota.
In Thursday's Wall Street Journal, the "Boss Talk" column featured an interview with
Terry Leahy, CEO of Tesco, the largest grocer in the UK.Highly innovative in its
home market, Tesco has set its sights on the US--but not with its superstore concept.
Instead, Tesco is building smaller, 10,000 square foot neighborhood stores. Leahy
describes planning the US launch, doing market research, and competing with
Walmart. A sample:
We didn't want to buy an existing business because what's the point of going to
America and just doing the same as everybody else? There is already so much retail
there. So what we tried to do is turn a weakness we had -- that we had no presence in
America -- into an advantage: We can research and design the perfect store for the
American consumer in the 21st century.This interview should be required reading of
any CEO who has dreams of conquering America.

[SOURCE:http://blog.pennlive.com/shoptalkmarketing/strategy/]

Many executives like to tell us how complex their jobs are. Spend a day in Tesco's
headquarters on the outskirts of London, however, and you'll hear quite the opposite.
Tesco espouses the idea that marketing strategy should be simple. At its core, an
equally simple idea that's written into its marketing manuals: Reward the behavior
you seek.

During a period of sustained growth, Tesco has been seeking one thing: long-term
loyalty. Its "core purpose," as stated on the backs of the business cards of many of its
executives, is "to earn the lifetime loyalty of our customers." Seeking and rewarding
that behavior is a principle that has led Tesco to make some tough choices. It is the
ability to make those choices that characterizes Tesco's expansion through Europe and
Asia"and will undoubtedly be the cornerstone of its expansion into the United States
in late 2007.

In 1995, Tesco wasn't even the largest supermarket in the United Kingdom. Today it is
not only the United Kingdom's largest retailer but also its largest non-government
employer, accounting for one dollar in every seven dollars spent retail in the United
Kingdom. It also has overseas business in 12 other countries, from Poland to China,
generating $15 billion of sales and $700 million profit.

23
Tesco probably will approach the American consumer in the way it has expanded in
Eastern Europe and Asia. First, Tesco does more in-depth, and broader, research into
customer behavior than any other retailer. In the United Kingdom, insight from data
that Tesco has gleaned from its Clubcard loyalty program is the driver behind the
products it stocks (especially in small-format neighborhood stores), its opening hours,
its product launches, its promotions, the pricing strategy and even where Tesco
management decides to site new stores. Tesco's U.S. CEO, Tim Mason, was one of the
architects of Tesco's loyalty program, and he proudly claims that today there is some
Clubcard data analysis in every internal Tesco meeting. In countries where there is no
card-based program, Tesco will send its executives to live with consumers, watching
them shop but also watching them cook and eat; finding how they spend their leisure
time, what they worry about, even how they get around (in the United Kingdom,
every Tesco executive"including the CEO"must work a junior job in-store for one
week every year).

Adaptability
Second, Tesco performs radical surgery to its business plan based on what it finds.
Store layouts and stock are virtually unrecognizable from country to country. In
Thailand, Tesco shops look like a series of market stalls. In China, live fish are offered
for sale. In South Korea, a giant Tesco outlet is more like a department store than a
traditional supermarket, and the loyalty program offers vouchers for adult education
classes. And when I visited Tesco in Prague in the spring, 50 shoppers stood in line at
a concession that recalled the smaller independent stores that Czechs valued: the fresh
sausage counter.

‘Tesco performs radical surgery to its business plan based on what it finds. ’

Third, Tesco recruits as many locals as possible. With half of Tesco's floor space now
outside the United Kingdom, fewer than 100 of Tesco's 100,000 international
employees have been relocated from the United Kingdom.

Finally—and most importantly for the U.S. market—Tesco looks toward market
leadership as its goal, but it doesn't attempt to "buy" market share using traditional
sales-driving techniques. Most supermarkets worldwide (Wal-Mart's "everyday low
prices" strategy is an exception) use the sales promotion budget to reward disloyal
customers using a "hi-lo" principle: Deep discounts on some popular items attract

24
customers to the store. But the discounts will be clawed back if the customers' weekly
shopping incorporates higher-priced items.

Eighty-eight percent of Tesco's revenue comes from the most loyal 40 percent of
customers. Using Clubcard data, the company has concentrated promotions on
rewards on those customers and the products they buy, attempting to deepen these
relationships rather than indiscriminately recruiting new customers. That strategy
sometimes means saying "no" to suppliers who are offering promotions that Tesco
thinks will destroy long-term loyalty. In 2003, Tesco spent $300 million of its sales
promotion budget on incentives for "opportunity" customers. By 2004, after using its
loyalty card data to predict customer loyalty—and sales growth—long term, Tesco
switched almost the entire budget to rewarding long-term loyal customers.

In Europe and the Far East, Tesco has concentrated on raising standards in store and
using its research to refine the range and quality of products to accurately reflect the
customers who visit the store. Where Tesco uses a formal loyalty program—in the
United Kingdom, the Republic of Ireland and South Korea—it targets discounts and
promotions primarily at long-term loyal customers.

Tesco's dedication to "long-termism" will face its sternest test in the United States,
where competition is much stronger than in any of Tesco's other overseas markets; no
other European supermarket has managed to successfully adapt to U.S. retailing
conditions. Superficially, Tesco in the United States won't look like Tesco anywhere
else, but while the appearance of the store may change, Tesco U.S. will still be
"rewarding the behavior it seeks"—not least because the architect of its loyalty
program now runs the company. Tesco CEO Terry Leahy is a Tesco lifer who started
out at Tesco stocking the shelves. As he says: "A good company is run on principles
and values; it is not run on last week's results. ... Our loyalty strategy is entirely
consistent with that."

25
FAILURE STORIES OF TESCO

Tesco's failure rate at making factory gate collections from suppliers is


"unacceptable", the chain's commercial director has admitted. While the timeliness
and reliability of pick ups by Tesco-nominated trucks was no worse than when
suppliers were delivering their own product or using third-party hauliers, the Tesco
service was not always a great deal better, conceded Richard Brasher, speaking at a
logistics conference last month.

"The primary distribution network [between suppliers and distribution centres] isn't
optimised yet", he said. "I'm basically not in a position to say that Tesco is offering the
most competitive rate and always turns up at factories or depots on time". More than
65% of goods bound for Tesco's distribution centres were now arriving on Tesco's

26
own lorries or trucks run by contractors, he said. Suppliers operating on this basis
with Tesco were selling their goods at factory gate prices, without distribution costs
built in.

He added: "I want to assure suppliers that it is an absolute priority for me to tackle
this. I want to have honest and open discussions with suppliers to improve the
situation". Those in the audience declined to comment publicly on Tesco's factory
gate collection service, but the md at one leading branded supplier said: "Tesco's
distribution systems on the ground are not quite as efficient as they appear on paper".

Meanwhile, Tesco is launching a web-based information portal to help suppliers plan


production more effectively to service demand. Tesco Link, which is being piloted
with 10 of the retailer's suppliers, contains store-specific electronic point of sale
information plus data on stock levels throughout Tesco's supply chain and depot
network, said Brasher. He said: "This is the next generation of Tesco Information
Exchange [a similar information portal] that suppliers can access through a secure
password, but it provides extra granularity of information. It's also free".

Suppliers welcomed the initiative. "Anything that improves the accuracy and
timeliness of information on demand patterns at our customers is a good thing", one
planning manager commented. "The problem with many of these systems historically
is that the information isn't accurate enough, detailed enough, or up to date. It can also
take ages to plough through if you're logging on to a different data portal for each
major customer". Tesco's failure rate at making factory gate collections from suppliers
is "unacceptable", the chain's commercial director has admitted. While the timeliness
and reliability of pick ups by Tesco-nominated trucks was no worse than when
suppliers were delivering their own product or using third-party hauliers, the Tesco
service was not always a great deal better, conceded Richard Brasher, speaking at a
logistics conference last month. "The primary distribution network [between suppliers
and distribution centres] isn't optimised yet", he said. "I'm basically not in a position
to say that Tesco is offering the most competitive rate and always turns up at factories
or depots on time". More than 65% of goods bound for Tesco's distribution centres
were now arriving on Tesco's own lorries or trucks run by contractors, he said.
Suppliers operating on this basis with Tesco were selling their goods at factory gate
prices, without distribution costs built in.

27
He added: "I want to assure suppliers that it is an absolute priority for me to tackle
this. I want to have honest and open discussions with suppliers to improve the
situation". Those in the audience declined to comment publicly on Tesco's factory
gate collection service, but the md at one leading branded supplier said: "Tesco's
distribution systems on the ground are not quite as efficient as they appear on paper".

Meanwhile, Tesco is launching a web-based information portal to help suppliers plan


production more effectively to service demand. Tesco Link, which is being piloted
with 10 of the retailer's suppliers, contains store-specific electronic point of sale
information plus data on stock levels throughout Tesco's supply chain and depot
network.

Suppliers welcomed the initiative. "Anything that improves the accuracy and
timeliness of information on demand patterns at our customers is a good thing", one
planning manager commented. "The problem with many of these systems historically
is that the information isn't accurate enough, detailed enough, or up to date. It can also
take ages to plough through if you're logging on to a different data portal for each
major customer".Tesco Revises RFID Plans Tesco, the United Kingdom's largest
supermarket chain and one of the key early UHF RFID adopters in Europe, has
changed its plans for the technology within its operations, claiming complications
from using UHF RFID under European Union (EU) regulations have hampered its use
of the technology. Tesco's Secure Supply Chain trial began in October 2003, with the
retailer planning to deploy RFID in its 1,400 stores and 30 distribution centers in the
United Kingdom by November 2005. This rollout, which focused on tracking tagged
trays of high-value goods transported from the DCs to the stores, was later revised to
mid-2006. Currently, Tesco says, only 40 stores and one DC have so far been thus
equipped.
"There have been significant challenges with regard to EU standards and operating in
dense-reader environments," says Deborah Watson, Tesco's press officer, "but we are
working with standards bodies and our partners to deliver the right solution."
Now, instead of using disposable EPC-compliant tags in its shipping trays and on
pallets, Tesco reports that the Secure Supply Chain program has evolved into what it
calls its Unit of Delivery plan, which will use reusable tags attached to roll cages and
dollies. The company hopes this will result in RFID being more widely implemented

28
across Tesco's operations instead of being restricted to certain shipments.
According to Tesco, the change in strategy builds on the lessons learned in its Secure
Supply Chain project. The company says the project proved RFID can provide greater
supply chain visibility and simpler processes for its staff, while resulting in improved
product availability, better service and cheaper prices for its customers.

SUPPLIER RELATIONSHIPS

Tesco say they have strong relationships with their UK suppliers, and that our
statement that they have producers “over a barrel” is inaccurate. Tesco support this
by quoting positive examples of their interactions with suppliers, which we have no
doubt are accurate.However, they have done nothing to refute the fact that there are
many suppliers who do not paint such a rosy picture of their relationship although
they are, in the main, too frightened to speak out.Tesco quote a South African grape
grower praising the supplier-retailer relationship, yet a recent Grocer magazine article
revealed that South African growers were claiming that “worsening returns from
supplying UK supermarkets meant some producers were already starting to hawk
their produce around Asia The Competition Commission in 2000 noted that use of 27
practices by Tesco and the other.

TESCO’S RECOVERY STRATEGY FROM ITS FAILURE

Objectives: Improving the company’s image; increasing market share in Great Britain
and becoming the sector leader.

Solution: Total focus on customer in all company processes; Clubcard; improvements


in distribution network and points of sale, optimization of layout and management by
categories.

Result: Tesco is the leading supermarket chain in the country.

The British supermarket chain Tesco is a perfect example of the maxim that focusing
on the customer can save a company from failure. The company’s poor service and

29
lack of popularity with the public led, in the 1980’s, to using the expression “Doing a
Tesco” as an equivalent to failure.

THE TESCO TAKEOVER

supermarkets “operates against the public interest”. For this reason a Code of
Practice was introduced. Sadly, the recent review of that Code’s effectiveness in 2004
indicated that supermarkets had not needed to change their practices as the Code is so
weak. Therefore these practices continue and suppliers suffer. Tesco state that they
take the Supermarkets Code of Practice very seriously, and deny that it is a voluntary
and weak code. It is essentially a voluntary code – we are aware that it became legally
binding once the supermarkets signed up to it, but the big four supermarkets of the
time only agreed to be bound by a Code that was produced in close liaison with
themselves, thereby ensuring that the terms of the Code were not particularly onerous.
The Code is vaguely worded and weaker than the recommendations of the
Competition Commission that led to its development.

SUPPORT FOR BRITISH FARMING

Tesco state that they are British agriculture’s number one customer. Tesco’s size no
doubt means that this is the case. But although fresh meat and dairy may be
predominantly British, processed food is not considered in these figures. Tesco also
needs to deal with large-scale suppliers in order to achieve cheap prices – this
excludes small British farmers, who are already an endangered species. They also do
not comment on the recent Soil Association organic meat survey we quoted, which
showed Tesco imports half of its organic pork and more than half of its organic beef.
Tesco state that they have increased prices paid to milk and cheese suppliers. We did
in fact mention in our report that Tesco increased prices for cheese in May 2005.

Unfortunately Tesco fail to address the point we actually made: to reassure us that the
price will be maintained, and the price rise will reach farmers.Tesco ignore the
findings of our 2003 survey on apples, quoting proportions of various apple varieties
that are British in season and outlining future plans. The fact is that volunteers from
over 35 Friends of the Earth local groups visited local supermarkets in early
November 2003. 40 Tesco stores were visited, and just 42% of the apple lines on sale

30
were sourced in the UK. We are pleased that Tesco intend to offer more support for
British apple growers, but disappointed that they dismiss the findings of our survey
out of hand.

AN IMAGE PROBLEM

Since 1947, when they opened the first British shop based on the American concept of
“self-service”, the company had focused on optimizing their relationship with
members and providers, improving their logistical processes at the cost of leaving the
customer behind. Over time, this strategy wore on the organization, whose image
among consumers was one of a cheap company with bad quality and poor customer
service. At the beginning of the 1990’s, the firm went in a new direction, led by its
then Marketing director and current CEO Terry Leahy. Leahy proposed a complete
change in the Tesco culture in order to put the company back on its feet.

The company had three immediate objectives. First, fighting to distinguish themselves
from the competition. To do that, it was essential to stop imitating the sales strategy of
its main rival, Sainsbury’s. Secondly, they had to put the customer at the focal point of
any decision taken from then on. Finally, and related to the last point, they would
design a new sales offer based on consumer preferences.

TESCO-THE BRAND EXPERIENCE IS EVERYTHING

Tesco, the giant and most successful supermarket chain in the U.K., has a CRM
system that is the envy of many. Tesco found, while looking at its customer base for a
typical retail outlet, that the top 100 customers were worth the same as the bottom
4,000. It also found that the bottom 25% of customers represented only 2% of sales,
and that the top 5% of customers were responsible for 20% of sales. Like many other
companies that have embarked on CRM programs, Tesco realized that all customers
are not equal! Tesco now measures valuable customers by the frequency of purchase
and value of expenditure.

31
When Tesco says, "Every little helps", it really means it. Its CRM program is certainly
one of the best in the world, and customers love it. Tesco has been principally a food
retailer in the U.K., in a mature market that has grown little in the last 20 years or so.
That Tesco has grown its business at all is a testament to consumer attraction, when
the only route to growth is taking market share from competitors. Its CRM program
started with the Clubcard in 1995, offering points on purchases and giving a small
rebate to loyal shoppers. Dismissing the initiative as nothing new, competitors did not
realize that Tesco was capturing valuable information with every swipe of the card
and building a powerful database of customers, which it gained through card
membership information.

The card provided Tesco with vital customer information such as what products they
wer and were not buying, where they were spending their time in the store, and where
they were not, as measured by spending. Customers received vouchers for items they
liked to buy and offers to explore parts of the store that they hd not yet seen. Different
lifestyle magazines were created for different customers, and high-value customers
got calls from the manager of the store, valet parking when they came to shop, and
other special privileges.

In 1996 Tesco created a student card and another card for mothers, with offers suited
to their needs. Tesco then added a travel service through a partnership with Lunn Poly,
giving discounts off high-street prices. It also combined its card with Visa through the
Royal Bank of Scotland, and offered discounts on DIY goods through well-known
home improvement chain B&Q. In 1997 it added a full range of financial services,
and the Tesco Direct service. Adding value was mandatory to these functional items
so, for example, expectant mothers were given priority parking outside the store,
changing facilities, and personal shopping assistants to help them. In 1998, after the
U.K.'s deregulation of utilities, Tesco began to offer electricity and
telecommunications products and services. Also in that year, clothing was added to
the range through Next. By this time, Tesco had identified 108 customer market
segments. This year, 2000, a joint undertaking with General Motors allows customers
to buy cars from Tesco.

Noting the interest of some customers in the Internet, Tesco also sells online,
delivering products to the customer's door, by refrigerated truck, if necessary. Visit the

32
company's website (www.tesco.com) and you get the same friendly look and feel that
people get in Tesco's physical stores. Everything is made easy, and you can buy
groceries, books, CDs, furniture, videos, and other items, as well as arrange your
personal finance. And, of course, every time there is a transaction, the points mount
up. And as the points accumulate, more and more relevant special offers and
privileges are given. All in all, the company offers great value and a great experience.

The company is now well on its way to becoming a successful international brand,
expanding into Asia by taking over the Lotus supermarket chain in Thailand, where
customers can now buy scooters (tescooters) and have them delivered to their homes.
But adding value to the customer relationship is still the driving force behind Tesco's
success.

As a result of Tesco's efforts to delight the customer, its profits and market share
figures rose tremendously over time, making it a prime example of how technology,
coupled with a human touch, can provide customers with a great experience.

[SOURCE:http://www.brandingasia.com/cases/tesco.htm]

CLUB CARD FOR CUSTOMERS

In 1995, Tesco introduced the Clubcard, a loyalty card for customers who were able to
collect points from purchases and use them to exchange for goods. It also gave Tesco
a massive amount of information about the customers who visited its stores, what they
bought, the regularity with which they bought them and how they responded to the in-
store promotions and special offers. Sainsbury's dismissed the card as a gimmick but
were soon to lose out on sales to Tesco and in the latter part of 1995, Tesco became
the market leader with a market share of 17%.

Throughout the 1990s, Tesco introduced further measures to improve its service and
the range of goods and services it offered its customers. This included such things as
making staff available to help customers pack bags and take them to the car, having a

33
policy of opening checkouts if there was more than one person in a queue, linking in
with the Airmiles group in relation to its Clubcard and the provision of facilities such
as baby changing units, restaurants and coffee bars.

Apart from the basic services it was providing, it was building on the range of
products it was offering. It opened pharmacies in some stores, developed a range of
financial services including a Visa card, mortgages, insurance and a bank account all
in conjunction with the Royal Bank of Scotland. The expansion of the non-food side
included offering entertainment goods such as TVs, DVD players and home
entertainment systems as well as white goods, household products, clothing and so on.
Its well-publicised battle with Levi's over the selling of jeans at prices considerably
below that of Levi's outlets was lost but not before Tesco had presented itself as a
champion of the customer in its battle to bring quality and value for money to the
retail supermarket scene.

In the new century, further developments pushed Tesco's profits higher still; it
introduced shopping via the Internet and home delivery, Internet service provision,
and a range of foods reflecting different qualities from the 'Value' range which had
been introduced in 1993 through to its 'Finest' products as well as a brand called 'Free
from' for customers with special dietary needs.

BUSINESS CHALLENGE

Tesco Corporation utilized a large number of custom-written legacy systems that were
unable to keep pace with the company’s growth. The cost of using and maintaining
this non-integrated software was more than $400,000 each year. Additionally,
$250,000 was being spent annually on administrative staff who worked to maintain
company information.

Multiple locations presented Tesco Corporation with a challenge in gathering


information from the remote locations. It was also difficult to provide these locations
the knowledge and tools to manage business effectively.

The need for a fully-integrated system that would provide continuity of information
across multiple locations and countries became increasingly urgent as Tesco

34
Corporation expanded to more locations in more countries. The company needed the
ability to support each local business unit while monitoring each unit for
accountability.

SOLUTION

Tesco Corporation approached Microsoft Business Solutions reselling partner Callow


& Associates with a list of challenges to their current system and demands for a new
system. The company investigated many industry-specific solutions before choosing
Microsoft® Business Solutions–Great Plains® for its power and functionality.

Through working sessions with more than 50 Tesco Corporation employees,


requirements were fine-tuned and the baseline for a new system defined. With recent
corporate reorganization, a large user count and short window for implementation, the
project seemed daunting.

The IT group at Tesco Corporation began to manage the distribution of the many tasks
that needed to be completed so the group could gain product knowledge. Certain areas
or modules were assigned to members of both teams who either already had expertise
or were quickly going to become experts. These team members had to work closely
together to teach, learn, implement and troubleshoot.

The cooperation between Tesco Corporation and Callow & Associates in planning,
data conversion, customization, integration and support made this a satisfying and
successful implementation. Open communication has allowed for the completion of
post-implementation activities in a timely manner, exceeding the expectations of
Tesco Corporation.

CONTINUED SOLUTION GROWTH

The Tesco Corporation solution includes approximately 100 VBA, Dexterity and
Microsoft SQL Server Stored Procedure/Trigger customizations designed to
streamline business processes. These customizations have allowed Tesco Corporation
to solve unique business problems ranging from payroll to human resources to sales
and purchase order processing.

35
Tesco Corporation uses Microsoft Business Solutions CustomerSource and eSupport
to answer a significant number of users’ questions. Callow & Associates review these
support incidents to ensure a high level of satisfaction.

The addition of supporting applications that integrate with Microsoft Business


Solutions has been easy because of Tesco Corporation’s experienced internal staff.
The company has added new projects for modules including Human Resource
Management and Canadian Payroll after the success of the initial implementation.
Tesco Corporation continues to discover new opportunities where Microsoft Business
Solutions can deliver efficiencies throughout the organization.

THE CHALLENGE

International growth is high on Tesco’s list of priorities and the $600 billion US food
retail market, which is set to expand by 40% in the next five years, makes an
attractive target. Tesco plans to tackle this lucrative market and has embarked upon a
bold plan to launch the Tesco Express store format there, starting with California in
2007. The Tesco team is confident that the competitiveness of their operations will
ensure success anywhere in the world. Tesco’s proven competitiveness in retail is in
no small part dependent on its highly effective IT systems. This is especially true for
its innovative Continuous Replenishment (CR) system, which drives store ordering
and makes sure that what customers want is always available while minimizing
waste. This unique application was developed by the Tesco IT department in the UK
and encapsulates decades of retail expertise and experience. The CR application plays
a key part in generating tens of millions of pounds in profit for Tesco in the UK and,
probably more importantly, provides a very significant improvement in customer
satisfaction.

The challenge was that this highly sophisticated stores ordering system resides on an
IBM z/OS mainframe in the UK and Tesco wanted to make this Intellectual Property
and associated competitive advantage available to the rest of its group where the data
centers are based around IBM p Servers running Oracle Retail under AIX.

Several options presented themselves to the Tesco team: • Upgrade UK mainframe


capabilities and support international operations from UK using z/OS-based CR •

36
Introduce mainframes and the mainframe based CR system into all international data
centres • Build a new system from scratch for AIX and integrate it with Oracle Retail
• Update the current Oracle Retail based replenishment system and enhance to include
the unique capabilities available in CR •Make z/OS-based CR available on AIX (port
it to AIX) However, guiding Tesco’s decisions is its common Operating

Model, which defines how to build a set of repeatable processes and systems to
support international growth. This involves the establishment of a standard computing
platform using consistent technologies and then ensuring that all their key
applications can run in this environment. An important aspect of this flexible
approach is that all versions of the enterprise applications have to be derived from
common sources, even if they run on different platforms. This is essential to ensure
that enhancements and fixes only have to be developed once and can be propagated
consistently and quickly.Given the company’s dependence on its powerful
z/OSmainframe in the UK and a global platform strategy based on IBM System p
servers running AIX, plus the fact that IT is under constant pressure for new features,
achieving the goals of a common Operating Model is challenging. Product Solution

[SOURCE:http://www.microfocus.com/000/Tesco_highres_US_V2_tcm21-
15509.pdf]

KNOWING THE CUSTOMERS

A fundamental step in putting this system into action was providing customers with a
means of expressing their opinions of the company. The simple use of suggestion
boxes began to show the first important clues to improving Tesco supermarkets.

The company spent more time in getting to know their customers, going beyond what
any of their competitors had done previously. One of the instruments that best served
this task was the Clubcard. Introduced in 1995, it marked a before and after in the
field of loyalty cards. Tesco gathered and analyzed all the information provided by the
cards in order to build customer profiles. Knowing their purchasing habits, why and
when they decided on some products and not others, which were their favorite brands
and how often they went to the supermarket, they could offer proposals and

37
personalized discounts in real time. Since then, more than 24 million customers use
the Clubcard, and the savings created by it surpass 470 million euros.

This policy of focusing on the customer ingratiated the company with its customers,
who regained their lost confidence thanks to information provided by the consumers.
The company optimized its sales network distribution, and improved its management
of stocks and shelf displays by using a better design for promotional offers: by
adapting to their customer’s tastes, they were able to eliminate what the customers
weren’t interested in, without the consumer perceiving fewer purchase opportunities.

Tesco currently has one of the most complex and complete management-by-category
systems in the world. The company uses more than 16.000 segmentation models and
their corresponding algorithm units and alarms to analyze its customers, establishing
an advanced “need segments” model, by which it organizes its marketing and
communications strategy. This way, the company has numerous versions of its
brochures and promotional magazines, which it distributes to one segment or another
based on its characteristics. In this manner, Tesco is able to anticipate their customer’s
wishes and offer them what most suits their needs, saving large amounts of money.

In a short time, Tesco has come to be seen as synonymous with quality, maintaining a
policy of competitive prices which has allowed other powerful international groups
such as Wal-Mart or Carrefour to successfully face the entrance into the Anglo-Saxon
market.

[SOURCE:http://www.daemonquest.com/en/research_and_insight/2004/05/01/tesco_
100_commitment_to_customers]

FOOD ACCESS: Tesco has highlighted its commitment to increasing fresh food in
low-income communities by promising to locate stores in underserved areas. The
report finds that 10 of the first 98 Fresh & Easy sites in California, Arizona, and
Nevada can be considered low-income, high poverty areas. Of those, only one store is
located in an urban area that does not have another full-service grocery store. In some
counties, such as Clark County in Nevada, none of the stores are in high poverty
neighborhoods. Overall, more than half of the Fresh & Easy sites are in
neighborhoods where the median income is higher than average.

38
WORKPLACE ISSUES: While Tesco has promised that its U.S. stores will be a
“great place to work,” the company has decided to rely on part-time rather than full-
time employees. This limits the ability of workers to achieve a living wage without
having to juggle multiple jobs. Tesco executives say they are not currently considering
engaging in discussions with local unions -- although they tout a model partnership
with the union that represents their store workers in the U.K.

HEALTH & ENVIRONMENTAL CONCERNS: While Tesco has promoted its


environmental and health-related profile, it plans to duplicate only some of its U.K.
initiatives in this area. For example, it has no plans to develop a local food sourcing
approach nor eliminate genetically modified food for its house brands.

SUPPLY CHAIN ISSUES: Tesco has a global supply chain that involves thousands
of suppliers and subcontractors. Tesco exerts tremendous pressure over its suppliers to
maximize cost savings and production flexibility. When supply chain abuses are
documented, Tesco says that it tries to respond, but adds that it is difficult to monitor
all the activities of its suppliers and subcontractors.

Tesco’s U.S. operations will utilize what Tesco has relied upon in its U.K. operations:
a strong marketing capacity and a powerful influence over numerous groups from city
councils to farmers and suppliers. The report presents a series of recommendations for
how Tesco can operate responsibly in its stores and supply chains.

“As it seeks to become one of the biggest, if not the biggest, grocery chain in the
United States, Tesco needs to be held accountable for its actions” said Amanda
Shaffer, the report’s lead author. “We have identified opportunities for policymakers
and community, labor and environmental groups to establish standards for Tesco and
all supermarket chains. Tesco can choose to take the high road of healthy food access,
quality jobs, and environmental change or the low road of its main competitor Wal-
Mart.”

TESCO PUTS DOWN ROOTS IN GARDEN CENTRE MARKET

Tesco waded into a new area of retail yesterday, revealing a surprise £156m agreed
bid for the Dobbies garden centre chain. The grocer said it was "chasing the green
pound" and intended to expand the Scottish-based chain across the UK to sell cut-
price eco products such as wind turbines, insulation, solar panels and water butts.

39
It also intends to cash in on the ageing population and the growing popularity of
gardening. The market for gardening products is worth more than £5bn a year.
Sir Terry Leahy, the chief executive, described the garden centres as "an exciting
opportunity" which would help consumers go green. "The acquisition provides an
excellent platform through which Tesco can provide customers with greater access to
products which help reduce their impact on the environment."
However, the move is likely to be viewed as further evidence of the mammoth
grocer's determination to dominate the entire UK retail business. Tesco has nearly
one-third of the grocery business and accounts for more than £1 out of every £8 spent
on the UK high street. In recent years it has focused on expanding overseas and
grabbing more non-food sales in the UK - which offer higher profit margins - and has
expanded into fashion, electrical goods and big ticket homewares through its Argos-
style Tesco Direct. Last year its profits climbed 20% to £2.7bn.
The retail giant said the Dobbies deal - equal to just over one day of Tesco's
worldwide takings - would be good for shareholders, customers and the wider
community as a Tesco-controlled garden centre chain would provide "greater access
to affordable energy saving and environmental products".
The 21-outlet Dobbies chain is based in Midlothian and stretches from Reading to
Aberdeen. The group has 1,500 employees and is the country's second largest garden
centre operator. Tesco intends to open new stores and buy other independent operators
to make the chain nationwide. Finance director Andrew Higginson refused to say how
many garden centres it wanted to open.
The Dobbies chain will retain its own name and will not sell Tesco-branded products.
Retail analyst David McCarthy at Citigroup said: "Arguably the most significant
aspect of this is the decision to retain the Dobbies brand. We do not think this is just
about Dobbies having a strong name. It could be political, ie avoiding concern on the
Tescofication of the UK." However, he said it was a good business move: "Tesco
appears to have once again leap-frogged over the competition to take the lead in an
evolving consumer trend."
Dobbies chief executive James Barnes, who will bank some £10m for his 6.5% stake,
will continue to run the business but will report to Tesco director Richard Brasher. Mr
Barnes said: "We have a strategy in place to open more garden centers. Tesco will
underwrite all our plans." Environmental campaigners Friends of the Earth said
customers would have less choice and suppliers would be squeezed. Spokeswoman

40
Sandra Bell said the deal was "another example of Tesco trying to take over every
aspect of our lives".
The Forum for Private Business said it was a "scary time" for independent garden
centers and suppliers to garden retailers. A spokesman for the forum said: "Small
independents may struggle to compete. Their [Tesco's] ambition knows no bounds."
Dobbies said last month that it had received a takeover approach which was assumed
to have come from retail entrepreneur Sir Tom Hunter, who already owns 10% of
Dobbies. Private equity group Apax Partners was also tipped as a potential bidder.
Tesco is offering £15 cash for each Dobbies share - a 23% premium to the price the
day before it admitted to an approach. The enterprise value of the deal, including debt
and pension deficit, is £228m. Tesco shares closed up 4.75p at 440p.

[source: http://www.guardian.co.uk/supermarkets/story/0,,2099148,00.html]
TESCO STRATEGIES TURN UP COMPETITIVE HEAT IN U.K
RETAILING TODAY

LONDON -- Tesco has been attracting attention for its ability to thwart Wal-Mart's
Asda division in the United Kingdom, and retailers in the United States are looking to
the U.K. for insight on how to compete more effectively against Wal-Mart in the
United States.

In mid-February, TNS, a research firm, confirmed that Tesco is increasingly becoming


the dominant force in U.K. food retailing.

Tesco reached a 29.1% U.K. market share in the 12 weeks ended Jan. 30, up from
26.8% in the year-earlier period. Wal-Mart-owned Asda had a 17.1% share. Third-
placed Sainsbury gained share from the previous period to 16% but still is down year
over year.

Early in 2005, The Grocer, a U.K. trade publication, said that Tesco had beaten the
long-time price leader for the first time in a 100-item shopping basket test. The news
was big in Britain, but it needs to be qualified. Tesco's price beat Asda's only for one
week, by 0.4%, in late autumn. Yet Tesco has consistently narrowed the price gap with
Asda from mid-summer. In July 2004, the Asda 100-item shopping basket totaled

41
about $316 compared with $328 at Tesco, a 3.6% difference. The difference narrowed
further from July 6 through Dec. 14 to 1.6%.

As it has closed the price gap, The Grocer noted, Tesco has been able to invest
revenue from incremental growth into the battle to put itself into a position to end
Asda's seven-year reign as the best-priced supermarket chain in Britain.Asda was
having none of it, of course."We are determined to be the U.K.'s best value retailer
once again this year, for the eighth year running," Asda spokesman Dominic Burch
said, adding that, in the more frequent Grocer survey of 33 core supermarket items,
Asda is the unbeaten price champ.

Tesco's pricing strategy, though, is considered to be among the most effective versus
Wal-Mart and holds out hope for U.S. food retailers.Many U.S. supermarkets are
making efforts to close price gaps with Wal-Mart, convinced that there is a golden
price range. The expression refers to pricing that--even if Wal-Mart is cheaper--is
sufficiently attractive that other benefits, whether convenience, service or assortment,
will compel many consumers to shop the supermarket despite the availability of a
supercenter.

Tesco has narrowed the price difference between itself and Asda while realigning the
competitive assortment. To that end, Tesco has made private labels a critical part of its
strategy.In Britain, private labels are widely embraced. Lately, Tesco has been
promoting its upscale private label, Finest, and giving the label key merchandising
space in Tesco stores--space U.S. supermarket chains would rather devote to national
brands.

Finest is especially important to Tesco's strategy because it has a wider margin than
the company's other private-label products. The additional margin has helped Tesco
lower prices in value brands, boosting the retailer's cost competitiveness.Another
important element in Tesco's strategy is its in tense customer-research effort.Clive
Humby, of the consulting firm dunnhumby, works with Tesco in analyzing and
applying sales data. He told the CIES Market Forum in December that the retailer is
becoming ever more sophisticated in using information derived from its loyalty card
program to pinpoint and respond to customer preferences.

42
Rewards coupons, the customer return from the programs, are personalized based on
data derived from previous purchases--information that helps Tesco designate
customers as Mainstream, Finer Foods, Healthy or Price Sensitive.U.S. retailers may
imitate Tesco's initiatives, but that doesn't mean they will be able to duplicate its
success. While Loblaw has built President's Choice into a leading brand in Canada, no
U.S. supermarket has managed to turn private label into a key draw. Only Costco has
been able to build a private label--Kirkland--into a significant strategic asset.Kruger
has hired dunnhumby to help with its loyalty card program, hoping for some Tesco-
style results.

[SOURCE:http://findarticles.com/p/articles/mi_m0FNP/is_4_44/ai_n13248624]

TESCO’S SUCCESS AFTER THE RECOVERY

Sunday August 26, 2007 Tesco is a stunning financial success, reshaping itself to
consumers' needs, moving into new markets, and holding off Sainsbury's and US
giant Wal-Mart. But its sheer scale makes it hugely controversial: the pressure group
'Tescopoly', an alliance of trades unions, farmers and campaigners, was set up two
years ago to highlight the environmental and social impact of the supermarket giant.
Last year, as the Competition Commission prepared to investigate supermarket power,
chief executive Sir Terry Leahy committed Tesco to cutting greenhouse emissions
from its stores by 50 per cent from 2000 levels by 2010, and promised to set up a
£100m fund to pay for renewable energy sources. It sounded great, but Friends of the
Earth found that even if Tesco achieves the targets in existing stores, its expansion
will outweigh any emissions cuts.

43
When charity War on Want investigated firms supplying cut-price clothes for UK
supermarkets, it found Bangladeshi workers slaving in dangerous factories for 80
hours a week at just 5p an hour. Tesco was one of the retailers named and shamed. A
founding member of the Ethical Trading Initiative, Tesco claims to use independent
audits to ensure its suppliers provide minimum standards. But a number of
investigations by campaigners have shown there are problems with the social auditing
system.
Tesco has acknowledged the problems and ordered spot checks of all its Bangladeshi
suppliers. But securing a living wage for factory workers and developing long-term
partnerships would help it counter the accusation that it uses its market muscle to
squeeze suppliers.
On public health problems such as obesity, Tesco has shunned the Food Standards
Agency's 'traffic light' labels and insisted on its own labeling system. Consumer
groups accused it of confusing shoppers. However, Tesco has made efforts to help
customers eat healthily, including reducing salt, fat and sugar in more than 500
products.
Tesco is frequently involved in fractious battles about where new stores are sited, and
is accused of using its lobbying power to outgun planning departments. It has
responded with community outreach programmes, trying to cut down litter outside its
stores, and using more local products. On corporate governance, Tesco generally
scores well, but this year 18 per cent of shareholders voted against an incentive
package for Leahy that could land him up to £11.5m if Tesco's push into American
convenience stores succeeds.
Tesco has switched from a reluctant, reactive response on social responsibility to
more positive policies. But its approach is still heavily focused on headline-grabbing
initiatives to please customers and win short-term brand loyalty, rather than longer-
term measures to secure the social and environmental sustainability of the business.
However, until the disquiet of the Tescopolists is reflected in a widespread consumer
boycott, most investors will stay happy.

TESCO GOES BACK TO BASICS WITH RENEWED FOCUS ON PRICE

44
Tesco commercial director Richard Brasher said he had been aware of the mounting
strain on household budgets for more than six months: "I could see price coming up
the agenda last year, even though the talk was all about quality."
He said shoppers wanted cheaper prices on premium ranges and were once again
starting to buy cheaper products, such as Tesco's Value range of basic items: "Lines
that have been quiet are now starting to step up . The market is quite challenging. I'm
not all doom and despondency, but it is a competitive market where consumers are
more focused on value-for-money than they were a year ago." He added: "It has
become more important as we've gone through this year." The decision to refocus on
price to drive sales comes less than a month after the retailer sent a shiver through the
sector when it confirmed a slowdown in sales growth. Tesco had been concentrating
too much on more affluent shoppers or green issues: "If you don't make sure you have
the basic things right you will be talking at the edge rather than at the centre."
Last month the grocer, which accounts for about a third of British grocery shopping
and a growing proportion of all other high street spending, said like-for-like UK sales
had grown 4.7% in the 13 weeks to the end of May, down from 5.8% in the previous
quarter. Analysts had expected about 5.5%. At the time the retailer's finance director
Andrew Higginson warned the Bank of England monetary policy committee not to
"overdo it" with further interest rate rises. The cost of borrowing has since risen for
the fifth time in 10 months to 5.75%. Focus on price had been prompted on "what we
are hearing from consumers". He added: "Coming down the road is a tougher time
and that is why we are doing this now."
Three weeks ago Tesco and rival Asda announced £500m of tit-for-tat price cuts in
what Asda described as "the first salvo" of a new supermarket price war. Yesterday
Tesco's new campaign was aimed at Asda. He insisted that Tesco only wanted to be
"transparent" on prices. The new campaign, which uses actor Bob Hoskins for the
voiceover, will publicise Tesco's online price check - which was introduced in 2000
and now allows consumers to compare the prices of 10,000 products from the big four
grocers every week. Mr Brasher said that over the past year the price check process
had shown Tesco to be usually 1%-2% cheaper than Asda, about 4% cheaper than
Morrisons and about 7% cheaper than Sainsbury's. The price information is collected
by an independent research group which Tesco says it is not allowed to name. The
adverts will boast how many products of the 10,000 surveyed are cheaper at Tesco.

45
PROPER MANAGEMENT ( MAINTENANCE , CONTROL AND
MONITORING)

The Board has overall responsibility for internal control, including risk management.
We agree appropriate policies that will safeguard the achievement of the Company's
objectives. Executive management is responsible for identifying, evaluating and
managing financial and non-financial risks. It is the Executives' role to implement and
maintain the control systems across the Group in accordance with the Board's policies
and in line with best practice identified in the Turnbull Guidance.

Identifying risks
The Board considers and approves the Key Risk Register and the mitigating actions.
In addition, at the annual two-day Board conference, we also consider where future
opportunities and risks lie which helps shape our overall future corporate strategy. The
key risks are a regular feature of the Board's agenda and further assurance on
implementation comes from the reviews by management and internal audit, the
Compliance Committee, the Corporate Responsibility Committee and the Finance
Committee.

Internal controls and risk management


From the Key Risk Register, we assess the impact and probability of each risk and the
effectiveness of the mitigating controls. Methods for monitoring each specific risk are
then agreed. Accountabilities for managing these operational risks are clearly assigned
to line management. Risk assessments are carried out routinely by management
throughout the UK and international businesses. Procedures exist to ensure that
significant risks and control failures are escalated to senior management and the
Board on a timely basis.
We have a five-year rolling business plan that focuses on delivering the Group's
strategy. Each business unit and support function derives its objectives from the plan
and these are cascaded to form individual objectives. The plan covers all the key
trading and financial performance measures and targets to deliver the financial returns
on the capital employed in the business.
On an annual basis these plans are combined with detailed budgets and also our
balanced scorecard (which we call our Steering Wheel) which unites the Group's

46
resources around our customers, people, operations and finance. This enables the
business to be operated and monitored on a balanced basis with due regard for all
stakeholders. In our fast moving business trading is tracked on a daily and weekly
basis, financial performance is reviewed weekly and monthly and the Steering Wheel
is reviewed quarterly. In addition, all major initiatives require business cases to be
prepared, normally covering a minimum period of five years. Post-investment
appraisals are also carried out.
We have a structured programme for internal communication of policies and
procedures and performance. This provides employees with a clear definition of the
Group's purpose and goals, accountabilities and the scope of permitted activities of
companies, executive functions and individual staff. This ensures decision-making
takes place at the correct level and that all our people understand what is expected of
them and how we have performed.

Monitoring the controls


The Board agrees clear processes for monitoring controls through the Statutory
Committees: Audit Committee, Nomination Committee and Remuneration
Committee. In addition, the Executive Committee monitors controls through three key
committees: Compliance Committee, Corporate Responsibility Committee and
Finance Committee. All of these provide assurance that the business is operating
legally, ethically and within approved financial and operational policies. The
Committee reports are circulated to the Board who hold a formal discussion on each
at least once a year.

• Audit Committee The Audit Committee, described above, reports to the Board on
its review of the effectiveness of the systems of internal control for the accounting
year and the period to the date of approval of the financial statements. Overall, the
Audit Committee seeks to ensure that the whole management process provides
adequate control over major risks to the Group. This is achieved through
consideration of regular reports from internal and external audit, alongside
discussions with senior managers. It should be understood that such systems are
designed to provide reasonable, but not absolute, assurance against material mis-
statement or loss

47
• Internal and External Audit The internal audit department is fully independent of
business operations and has a Group-wide mandate. It operates on a risk-based
methodology so ensuring that the Group's key risks receive appropriate regular
examination. The head of internal audit also attends all Audit Committee
meetings.

PricewaterhouseCoopers LLP, the company's external auditors, contribute a


further independent perspective on certain aspects of the internal financial control
system arising from their work.The engagement and independence of external
auditors is considered annually by the Audit Committee before they recommend
their selection to the Board. The Committee has satisfied itself that
PricewaterhouseCoopers LLP are independent and there are adequate controls in
place to safeguard their objectivity. Such measures include the requirement to
rotate audit partners every five years. We have a non-audit services policy which
sets out criteria for employing external auditors and identifies areas where it is
inappropriate for PricewaterhouseCoopers LLP to work. Non-audit services work
carried out by PricewatrehouseCoopers LLP is predominantly transaction work
and corporate tax services. PricewaterhouseCoopers LLP also follow their own
ethical guidelines and continually review their audit team to ensure their
independence is not compromised.

• Finance Committee Membership includes Non-executive Directors with relevant


financial expertise, Executive Directors and members of senior management. The
Committee usually meets twice a year. Its role is to review and agree the Finance
plan on an annual basis; to review reports of the Treasury policies; and to review
and approve Treasury limits and delegations.
• Compliance Committee Membership of the Compliance Committee includes three
Executive Directors and members of senior management. The Company Secretary
attends meetings of the Committee in his capacity as its Secretary. The Committee
normally meets six times a year and its remit is to ensure that the Group complies
with all necessary laws and regulations in all of its operations world-wide. The
Committee has established a schedule for the regular review of operational
activities and legal exposure. Every international business in the Group is also

48
required to have a local Compliance Committee designed to ensure compliance
with local laws and regulations as well as Group Compliance policies.
• Corporate Responsibility Committee The Committee is chaired by an Executive
Director and membership is made up of senior executives from across the
business. It meets at least four times a year to support, develop and monitor
policies on social, ethical and environmental issues. It reviews threats and
opportunities for the Group. Key Performance Indicators (KPIs) for key areas of
corporate responsibility are tracked through the 'Responsible and safe' segment of
our Steering Wheel. In addition to the Board discussion of the work of the
Committee that takes place at least annually, the Chair of the Committee reports
regularly to the Executive Committee on corporate responsibility matters.

Other specialist functions, notably the Corporate and Legal Affairs department and the
Trading Law and Technical department provide assurance and advice on health and
safety, legal compliance and social, ethical and environmental matters. These
functions report their findings on a regular basis to the relevant committees and
escalate matters as appropriate. Subsidiary businesses also maintain key risk registers
and confirm their compliance with Group policies annually. These statements confirm
that the Board's governance policies have been adopted in practice and spirit. For
certain joint ventures, the Board places reliance upon the systems of internal control
operating within our partners' infrastructure and the obligations upon partners' Boards
relating to the effectiveness of their own systems.

Non-financial risks
We manage a broad range of financial and non-financial risks, including social,
ethical and environmental responsibilities. The construction of the Key Risk Register
takes into account all these matters. The risk management policies, procedures and
monitoring methods described in this report apply equally to corporate responsibility
activities.
In addition, in accordance with ABI guidelines on social responsibility, the Group has
dedicated specific time and resource to this area. In our view, there are appropriate
controls in place to manage both financial and non-financial risks.

49
• Customer focus is fundamental to delivering the overall strategy and is key to the
way risk is managed. Business practices centre on serving the customer and in
meeting those challenges the Group recognises its responsibility to deliver safe,
quality products at the right price.
• We recognise that our people may have to face ethical dilemmas in the normal
course of business and our guidance to them stems from the Tesco Values. The
Values set out the standards that the Board wish to uphold in how we treat our
people. These are supported by Codes of Ethics and govern the relationships
between the Group and employees, suppliers and contractors. The Compliance
Committee regularly monitors adherence to these codes. We are a founder
member of the Ethical Trading Initiative and a signatory to the UK Government's
Supplier Code of Practice.
• Excellent health and safety standards are a high priority. We are committed to
providing a safe shopping and working environment for customers, staff and
contractors. The company has established policies, procedures and training to
identify and minimise the risks inherent in a retail and distribution business. The
Group has established, over many years, a comprehensive due diligence process
supported by technical and product development standards and procedures. This
assurance covers staff training, and providing guidance for, and auditing of,
suppliers to ensure they supply quality products in a safe and ethical way.
• The Company has conducted a comprehensive risk analysis of products, suppliers
and factories upon which the audit programme is based. Auditing is carried out on
both a routine and unannounced basis. Supply chain risks can include, for
example, a failure of standards relating to product safety, quality, labour standards
and animal welfare. Technical, due diligence and crisis management procedures
are regularly reviewed in the light of the latest scientific research and expert
opinion, to ensure that these risks are managed effectively. In-house experts are
used as well as external advisors to look for and analyse emerging issues so that
appropriate action can be taken.

[SOURCE:http://www.tescocorporate.com/page.aspx?pointerid=F6F76C42B3CE4BF
99D1F0FE3CE93221D]

50
CONCLUSION

Tesco being one of the largest retailers world wide a complete study was made and
analysed that,Tesco in the category of INTERNALIST it suggests that once they
moved into the international arena most likely as a result of push factors from the
domestic market they experience in operating on an international basis grew and
hence this makes them a cautious internationalist. The dimensions of location decision
makng is very extensive. Locational decisions engage the different deciplines of
strategic marketing, the geography of retailing, town planning , operations research ,

51
consumer behaviour and economics. Tesco embarked upon these factors to develop
smaller stores. These stores were developed at different locations which was a serving
advantage to different consumer demands. These out of town , edge of town super
stores offoer one-stop shoping services for weekly outings, the smaller in town stores
offer top up shopping facilities. Thus the Tesco’s portfolio was complemented.

S.NO CONTENTS PAGE NO

1. HISTORY OF TESCO 1

2. DEMOGRAPHIC CHANGES 6

52
3 PRODUCT CUSTOMER SEGMENTATION 8

4 PRODUCT DIVERSIFICATION 9

5 BRAND IMAGE 12

6 GLOBAL FOOD RETAIL GIANTS 19

7 GLOBALIZATION STRATEGIES 22

8 FAILURES STORIES 23

9 TESCO RECOVERY 29

10 TESCO FINDING SOLUTION


34

11 TESCO STRATEGIES 41

12 CONCLUSION 51

53
TESCO: ITS PATH FOR ITS
SUPER MARKET
EXCELLENCE

BY
S.SANDHYA
A.SRUJANA
S.YADHAVI

54

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