TESCO Article: Importing Tesco to the United States

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TESCOArticle Importing Tesco to the United
States

• Chelyn, Mary and Keith

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BACKGROUND INFORMATION

• Over 30 market share in the UK
• With over 2,500 store locations
• Flourishing in parts of the Europe and Asian
  markets
• Global Sales of 65 billion U.S. dollars
• Total Profits of 3.5 billion U.S. dollars

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FOUR RETAIL FORMATS

• 1. Tesco Express
• 3,000 sq. feet.
• A smaller store format
• sells fresh produce, wine and in-house baked
  goods
• 2. Tesco Metro
• 7,000 to 15,000 sq. feet.
• Same products as Express
• More variety

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FOUR RETAIL FORMATS CONT

• 3. Tesco Supercenters
• 20,000 to 50,000 sq. feet
• Carry additional non-food items
• For example DVDs and books
• 4. Tesco Extras
• Over 60,000 sq. feet
• Supreme Variety Product Mix
• Wide variety of products
• Clothing, housewares, electronics, cosmetics and
  garden furniture

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Proposed Course of Action

• Strong entrance into the US market
• Needed to take market share as soon as possible
• 100-150 stores are to be built initially
• Planning to invest 400 million to build stores

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Proposed Course of Action Cont

• Provide variety of store formats to give
  flexibility
• Express format is emphasis on US expansion
• Express format offers same product variety and
  depth as larger stores but in a smaller and more
  convenient layout

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Proposed Course of Action

• Plans to locate on west coast exclusively
• Competitors like Wal-Mart less prevalent on west
  coast
• Lack of a dominant retailer here
• Fully take advantage of all retail formats

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Identifying the Opportunity creating a
competitive advantage

• Customize to the community offering a unique
  combination and creating efficiency
• Following trends adding relevance
• Employee satisfaction learning from competitors
• Creating customer value connecting with the
  community
• The success of their growth the reason for
  expansion

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Customizing offering a unique combination and
creating efficiency

• Four different store formats Express, Metro,
  Extra, Superstore and online
• meet different needs for customers wherever they
  live and however they want to shop.
• Each offers different product line
• Offers insurance, gas, clothing competitors
  offer
• The Tescos being introduced on the west coast
  will be of the express format, and typically
  wont offer gas stations.

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Following trends adding relevance

• The movement towards organic and healthful
  products has affected American shopping habits
• Tesco offers a Healthy Living brand that has been
  so popular, 80 new products have been added. They
  have also launched a Kids Healthy range of over
  40 lines.
• These products are bought by over a million
  customers each week

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Following trends adding relevancecont.

• Tesco has invested over 10 million euros in
  reducing the prices of these products, and the
  total organic sales have grown 26 in the last
  year, including 30 growth in poultry and fish.
• Also offer diet analysis and online menu
• Ability to provide low cost organic foods will
  give them a competitive advantage over
  competitors who offer a small selection at high
  prices.

10,000,000 euros is equal to roughly 20,000,000
dollars
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Employee satisfaction learning from competitors

• Tesco shares their success with their employees,
  offering a number of benefits and an attractive
  salary.
• Two share schemes, they can either save as they
  earn, and buy Tesco stock at a discounted rate of
  up to 20, or buy as they earn.
• Childcare vouchers and a defined benefit pension
  are offered to part and full- time workers
• These benefits maintain a loyal and hardworking
  staff, while avoiding employee slander Wal Mart

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Creating customer value connecting with the
community

• Tesco offers a Club card, which recently
  celebrated their 10th anniversary, with one
  million more customers than the previous year and
  a total of 13 million cardholders
• customers receive points that are quadrupled into
  deal tokens, which offer four times the value.
• Tesco cardholders can easily redeem magazine
  subscriptions, theme park tickets, travel deals,
  and driving lessons.
• This offers a large incentive for consumers to
  shop at Tesco, and more brand name loyalty when
  the points are used for other activities.

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The success of their growth the reason for
expansion

• Although the economy and unemployment have led to
  a loss in disposable income, Tesco group sales
  grew 16.7 to 43.1 billion euros.
• Group profits before taxes increased by 18
• Underlying earnings per share grew by 15.1.
• Cost control and productivity have absorbed
  external costs increases throughout the year.
  Consequently operating profit for the UK was
  14.9 higher and record efficiency savings of 330
  million Euros were facilitated by the Step Change
  Program

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Conclusion

• Credibility
• Background
• Established credibility through profits
• Store formats
• Location
• Expanding to the United States
• Wal-Marts lack of presence, Tesco can survive
  and flourish in profit

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Conclusion

• Once entering the U.S. Market
• Utilize their strengths and tailor to the U.S
  Market
• Customizing-combination of themes to intrigue the
  American consumer
• Local Trends-diet analysis to local tastes
• Public Image-employee satisfaction and customer
  delight
• Promote Uniqueness
• Express and Metro stores can be successful,
  because America has not been exposed to its
  uniqueness

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Questions?
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Sources

• Bhatnagar, Parija. "Wal-Mart, Kroger, Safeway
  Better Watch Out. the British are Coming!"
  CNNMoney. 27 Feb. 2006. CNNMoney. 16 Apr. 2006
  lthttp//money.cnn.com/2006/02/24/news/companies/te
  sco_us/index.htmgt.
• "International." Tesco. 17 Apr. 2006
  lthttp//www.tescocorporate.com/page.aspx?pointerid
  3B3A4B25C27741408604630168DAE624gt.
• www.tesco.com
• www.tescocorporate.com