Tesco is a British multinational groceries and general merchandise retailer headquartered in Welwyn Garden City England. It is the third largest retailer in the world measured by the gross revenues and the ninth largest in the world measured by gross revenues and is also known to be the third largest retailer in the world measured by revenues. It has outlets across seven countries Europe, USA and Asia. The company is a market leader of groceries in the Ireland, Hungary and Thailand and UK, where it has a market share of around 28.4%.
Tesco is probably one of the most recognizable retail names in the United Kingdom especially when it comes to grocery shopping. But what you may not know is that the company also completes with other retailers like convenience stores and general merchandise. The British conglomerate has made a name for itself through organic growth and most notably through a series of strategic acquisitions it’s acquired and its subsidiaries since it was first created.
Now Tesco has expanded into a combinations of acquisitions of new stores, retail services and by adapting to the needs of consumers. Tesco primary aim is to serve the customer. Keeping existing customers happy is important as they are more likely to return. This is more cost effective for the business than acquiring new ones. Tesco’s record breaking sales of more than £1billion a week and better than expected annual profits of more than £3.4billion for the 53 weeks to 28 February 2010, despite the impact of the global downturn.
In the UK, Tesco now has over 2,200 stores ranging from the large Extra hypermarket style stores to small Tesco Express high street outlets. Tesco’s original product range of grocery and general merchandise has diversified to include banking, insurance services, electrical goods as well as telephone equipment and airtime. This move towards ‘one stop shopping’ means customers can meet all their purchasing needs from one place. Tesco has also expanded its customer base through its Tesco.com website which attracts one million regular users.
The Business Model of Tesco
Tesco is one of the largest commercial and grocery store chains in the world and it’s definitely a leading market force when we regard the European market. Not only is Tesco very successful in terms of selling its products but it’s also known to be extremely unique and professional in its ways of handling business and further possibilities. Tesco describes their business model as straightforward because it they buy, move and sell products and services to their customers to get insight in order to do a bit better each time.
Tesco business model focuses on four core activities and try to gain an insight into what customers want and try to understand their needs. By doing that it enables the company to sell and distribute to their customers. The company believe that by adjusting and improving on their four core activities for customers each time that they shop with them it will make their shopping experience better and easier. The four main components of the business model are:
The offers that the company creates for its customers is developed by their Product team. The team has absolute focus on fair, transparent, mutually beneficial relationships with suppliers. The Product team works with our suppliers to source the best-possible range of quality products that meet and anticipate our customers’ needs.
To bring the best products to customers, Tesco works through a range of channels from small shops to large shops and through our growing online business. As part of improving our offer, we are investing in making our channels even more efficient and convenient for our customers.
Tesco exists to serve customers and their business model has customers at its core. We listen to our customers and act on what is important to them to deliver the best shopping trip: price, service, range and availability.
The main focus is to improve Tesco for customers. Tesco is committed in becoming more efficient and reinvesting some of the savings we make to improve the shopping trip. The reason for this reinvestment is clear, the better a job we do for customers, the more we will improve sales; the more our sales improve, the more we can reinvest.
The Dynamic Business Model of Tesco
Tesco has is one of the most dynamical when it comes to looking at its rapid expansion first throughout the United Kingdom, then conquering the whole of Eastern European area along with Ireland and Scotland. Tesco gains its large number of stores by simply buying off over a dozen small to midsized grocery store chains which instantly resulted in gaining dozens of new stores with one business transaction. The dynamic model of Tesco includes:
Buying a lot equals to selling cheap
Everyone knows that the more someone buys from a product, the cheaper the product will become. The company maintains highly competitive prices up to the point where it has started to self-produce most of its grocery products in order to become even cheaper and give way to further specialization.
Tesco has also been extensively successful because it’s been producing its own grocery products since a long time now. This way it can work with way lower rates than its competitors who do not have the means to produce their own goods. The company has become so successful in terms of self-producing its goods that these days it’s also been dealing with the producing of premiere quality products which are sold under Tesco’s brand name.
Online shopping system
Tesco has been selling its products online with massive success since the Eighties in the UK and throughout Europe as well. Many people are not aware that this creates a unique situation as Tesco is the only chain of its kind in Europe who could keep its online shopping system successful and profitable.
Diversification of its stores
Tesco has recently started to diversify its stores, in order to make its products more widely available for a larger number of people. This way, one doesn’t need to travel out of town to shop at a Tesco, it’s enough to pop in for a quick shopping in a Tesco Express or in a Tesco Metro which were established for this exact reason.
Key activities of Tesco
- Customer fidelization
- Buying and selling consumer goods
- Effective distribution system
- Analyze consumer demand
- Warehousing and logistics
Value preposition of Tesco
Tesco covers all segments of the market like:
- One stop shopping place
- good prices
- complementary services
- wide range presence and selection
- variety combined
- 24/7 shopping experience
- convenient online shopping
- business diversification (telecom, gas station, banking and photo)
The Main Competitors of Tesco
The main competitors of Tesco are Sainsbury’s, ASDA, Waitrose and Morrison’s which are often called as the Big Four in the United Kingdom. In recent years, German grocers like Aldi and Lidl have also become strong competitors in the UK grocery market. Tesco also competes with convenience stores, which are gaining popularities as consumer tastes shift toward more trips for fewer items. The convenience store market is highly fragmented. As of May 2020, Tesco is the U.K. grocery market leader with 26.9% market share, followed by Sainsbury's and ASDA, which respectively have 15% and 14.1% of market share.
ASDA is a wholly owned subsidiary of Walmart following its 1999 acquisition was purchased by Zuber and Mohsin Issa and TDR capital. The company has a total of 635 retail location, 584 of which are supermarkets. ASDA also operates larger format superstores, which sell items such as clothing and furnishing in addition to groceries. ASDA's competitive strategy prioritizes maintaining the lowest prices improving its store layouts and online sales channel to reflect evolving shopper habit.
Sainsbury is one of Tesco top rivals Sainsbury was founded in London England in 1869. Like Tesco, Sainsbury also competes in the logistics, wholesale and Retail distributor’s space. Compared to Tesco, Sainsbury’s generates $47.3 billion less revenue. Sainbury’s is the second largest grocery chain in the United Kingdom, with 1,415 locations.
The company to charges a premium for grocery products, though price reduction has been an important element of its recent competitive strategy. To increase customer engagement, Sainsbury's is experimenting with different store layouts, expanding its offering to general merchandise categories and promoting its in-store banking services.
Morrisons is a top competitors of Tesco which is headquartered in Bradford, England. The company was founded in 1899 and is in the Hypermarket and Super centers industry. The company operates in 492 supermarkets and 50 convenient stores. Morrisons operates 18 food manufacturing facilities, eight distribution centers, and engages farmers to source poultry, meat and produce.
Morrisons is working to drive efficiency improvements along with its vertically integrated structure while reducing everyday prices. The company is creating a more balanced approach to promotional pricing is also an important element of the strategic price review. Morrisons has also adopted a strict capital expenditure budget, and most of the new stores opening are in the smaller convenience format.
Aldi is headquartered in Germany but operates in over 10,000 stores in 19 different countries. Aldi fills the discount grocer niche, offering low priced items with a disproportionately high private label offering. Aldi typically does not accept manufacturer coupons. In addition to discount groceries, Aldi holds weekly specials on general merchandise products.
Waitrose was founded in 1908 and is headquartered in London, England. Like Tesco, Waitrose also operates in the logistics, wholesalers and retail distribution space. The British grocer Waitrose operates 336 locations most of which are supermarkets. British grocer Waitrose operates 336 locations, most of which are supermarkets. Some stores include restaurants that serve hot foods, while certain locations specialize in general merchandise in addition to food.