Tesco - Strategic Marketing Techqniques

Tesco's is a United Kingdom based international supermarket chain. It is the largest British retailer both by global sales and by domestic market share. Originally specialising in food, it has moved into areas such as clothes consumer electronics, consumer financial services internet services and consumer telecoms.

The Current Position

In 1995 Tesco overtook Sainsbury's as the UK's largest supermarket. In 2001 Tesco occupied 15.6% of the UK grocery retail market and was the market leader by 6%. Tesco's enormous share still grew and by September 2004, it had increased to a massive 28%, around 12% more than its nearest market rival, Asda. In the year ended 26 February 2005 Tesco made a pre-tax profit of Ј1.962 billon on turnover of Ј33.974 billion. Some would argue that if we were to include Tesco's share of the convenience store market (bizarrely considered a separate sector by UK competition authorities) in this figure, Tesco could be said to control 34% of the grocery market. Considering how concentrated and cut-throat the 'supermarket' market is, this is quite an achievement.

Tesco is equally impressive when considering its share of the total retail market. In its interim statement of results (August 2003), Tesco claimed 'our share of the total retail market is just 12.3% and there is a lot left to go for.' Already, 'just 12.3%' means that almost one pound in every eight spent in the UK is spent in Tesco.

Tesco profits have increased every year but one since 1987. In April 2004, Tesco announced profits of Ј1.6bn for the financial year ending on 28 February; Ј4.4m profit a day, 17.6% higher than the previous year. As a comparison, in 2003 Tesco made as much profit as M&S, Sainsbury, Next and WH Smith combined.

Tesco is Europe's second largest supermarket after the French firm Carrefour, and according to Mintel market research in 2004, Tesco is closing the gap. It is the fourth largest supermarket in the world. Tesco operates 2,318 stores in 12 countries around the world and employs 326,000 people, 237,000 of them in Britain where it is the largest private employer. According to Terry Leahy, CEO Tesco, Tesco is market leader in 6 out of the 12 countries that it operates in, with its largest store, not in Bristol or Birmingham, but in Budapest.

Formats

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

* Tesco Extra are larger, out-of-town hypermarkets that stock all of Tesco's product ranges. The first Extra opened in 1997 thanks to the Tesco Hypermarkets that opened in 1976 with a flagship store in Irlam( amazing enough this store was sadly demolished to make way for a smaller Tesco Extra). The 100th store opened in the 2004/05 financial year. The number of these is now being increased by about 20 a year, mainly by conversions from the second category. Typical size 66,000 square feet (6,100 mІ). As of January 2006 Tesco's largest UK store is in Slough and is 190,000 square feet (18,300 mІ). This store is unusual in being raised on stilts to maximise space utilisation. A standard Wal-Mart Supercenter in the U.S. is around 200,000 square feet (20,000 mІ).

* Tesco stores 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 located in suburbs of cities or on the edges of large and medium-sized towns. The typical size is 31,000 square feet (2,900 mІ).

* 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. Typical size is 12,000 square feet (1,100 mІ).

* 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 are 546 stores at 26 February 2005 year end, with a typical size of 2,000 square feet (190 mІ).

* One Stop The only category which does not include the word Tesco in its name. 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 will keep their old name. There are more than 500 of them. Typical size 1,300 square feet (120 mІ).

In May 2005 Tesco confirmed that it will be trialing a non-food only format.

* Tesco Homeplus : These stores offer all of Tesco's ranges except food in warehouse-style units in retail parks. The first one opened in Manchester in September 2005. 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 operates 1,878 stores in the UK, 261 stores in Europe and 179 stores across Asia, and plans to open 184 stores worldwide over the next year.

A study carried out for the Sunday Times by research group CACI revealed that Tesco has almost total control of the food market in 108 of Britain's postal areas - 7.4% of the country. This includes Epping in Essex, Penarth in South Glamorgan and Buckingham. In a further 104 areas, it accounts for more than half of grocery spending. Competition law states that a corporation should not account for more than a quarter of the UK market nationally, but this study showed 325 areas where Tesco exceeds this limit. The populations in Buckingham, Bicester and Brackley can now choose from 'Tesco, Tesco or Tesco' as a result of the chain's recent acquisition of the One Stop chain of convenience stores.

At the end of 2003, Tesco was voted most admired company and its chief executive, Sir Terry Leahy was voted most admired leader by Management Today. The most impressive aspect of Tesco's triumph was the 'margin of victory' in both categories. Tesco also came top in other categories, 'Quality of Management', 'Quality of Goods & Services', 'Ability to Attract, Develop & Maintain Top Talent', 'Value as a Long-Term Investment', 'Quality of Marketing' and 'Use of Corporate Assets'. Only in the rankings for