Introduction:

Tesco is one of the biggest brands in the grocery industry in the United Kingdom and
this presents an intriguing opportunity for an in-depth study.

I have chosen Tesco as my research case to evaluate and have a deeper insight into
how the brand has achieved so much success over the years irrespective of stiff
competition from other supermarket chains, namely, Asda and Sainsbury's amidst other
economic, political and social challenges. This proposal justifies the selection of Tesco
for my research case study.

Our research methodology will involve data collection and analysis. I will be using both
quantitative and qualitative, to understand and examine Tesco's operations, financial
performance, and global social impact.

Background of Tesco
Tesco originated in 1919 when Jack Cohen began selling additional groceries from a
stall at the Brixton East End market in London. On the first day, Mr. Cohen made a profit
of £1 from £4 in sales. (Tesco,1919). The Tesco brand continued to grow, leading Mr.
Cohen to establish a headquarters warehouse in North London in the 1930s. (Tesco,
1934) By 1932, Tesco had become a private limited company (PLC) (ICMR, 1932),. In
1947, Tesco Stores (Holdings) Ltd became a publicly traded company with a share
price of 25p. (Gov.UK Company History, 1947)

Tesco, headquartered in Cheshunt, Hertfordshire, has evolved beyond being a grocery

store and expanded into various retail sectors, including non-food products such as
clothing and electronics (BBC, 2006). In 2007, Tesco reported revenues of £42,641
million, marking an 8.1% increase from the previous year. The company also achieved
a profit of £2,648 million in the same financial year, reflecting a 16.1% increase over
2006.(Tesco Annual Report 2007)

While Tesco's roots were in groceries, the company has diversified its offerings to
include services like insurance, travel agencies, telecom, and financial products. Tesco
is also a significant player in the petrol retailing business. The company operates in
various formats, including convenience stores (Tesco Express), small high street outlets
(Tesco Metro), supercentres (Tesco Extra), and non-food specialists (Tesco Homeplus).
(Life-Hacks, 2020)

Research Objectives
The primary objectives of this research case study are as follows:

 To comprehensively analyze Tesco's market presence and dominance within the

grocery industry.
 To evaluate Tesco's financial stability and performance, shedding light on its
financial health.
 To assess the significance of Tesco within the broader retail industry landscape.
 To explore Tesco's diverse product portfolio and its impact on consumers.
 To examine the ethical considerations surrounding Tesco's business practices.
 To understand Tesco's global expansion strategy and its implications.
 To analyze consumer behavior and loyalty through Tesco's Clubcard program.
 To assess Tesco's competitive landscape, including its main competitors.
 To investigate Tesco's engagement with small and medium-sized enterprises
(SMEs) and its role in fostering economic growth in this sector.
 To identify and evaluate the current issues facing Tesco, with a focus on
sustainability challenges

Justification for Choosing Tesco As A Case Study

The choice of Tesco as the subject of this case study is for several key factors. These
factors collectively make Tesco a compelling focus for in-depth analysis:

 Tesco as a Grocery Giant: Tesco is basically one of the biggest supermarket

chains globally, not just in the UK but all over the place. (Prash K Prince, 2004)
It’s fascinating to study a company with such a huge global reach also Tesco as
one of the biggest retailers globally, I am eager to study how its financial stability
has helped it grow and stay strong, especially with the COVID pandemic and
global economic crisis.
  Financial Strength: Tesco consistently earns massive profits, which is a sign
that it's doing something right financially. Learning about how Tesco manages its
money and grows can give us insights into the retail world. An insight into these
financial metrics and performance indicators, as presented in Tesco's annual
report between 2012 – 2022. (Hargreaves Lansdown, 2022). I will provide a
comprehensive overview of Tesco's financial state. It enables stakeholders,
investors, and researchers to assess the company's financial strength and its
ability to navigate the ever-changing retail landscape.

 Industry Representative of the Retail Market: Understanding the retail

industry, Tesco is at the pinnacle of the industry. It's a massive player in this
dynamic and highly competitive sector. (Philip Clarke, 2014). This makes it a
perfect case study for understanding how big retailers operate.

 Products: Tesco offers a wide range of products and services that extend
beyond traditional grocery retailing. This diversity makes it a great subject for a
thorough analysis. (Tesco Annual, Report, 2023). Here is a list of some of the
key products and services offered by Tesco

1 Groceries Fresh fruits and vegetables

Meat and poultry
Dairy and eggs
Bakery items
Frozen foods
Deli and prepared meals
Snacks and confectionery
Beverages
2 Non-food Products Clothing and apparel
Electronics and appliances
Home and garden products
Health and beauty items
Toys and entertainment
Books and stationery
Pet supplies
3 Financial Services Tesco Banking and Insurance
4 E-commerce Tesco.com
5 Clubcard Loyalty Program Tesco Clubcard.
 6 Fuel and Petrol Stations Tesco Petrol Stations
7 Pharmacy Services Healthcare products.
8 Travel Services Tesco Travel
9 Mobile Services Tesco Mobile

 Challenges and Competition: Like many big companies, Tesco has to deal with
ethical issues like sustainability and corporate social responsibility as I propose
to analyze its competitors like Sainsbury's, Morrison and Asda. (MRAB
Rosnizam, 2020) It will be an eye-opener to understand how they manage these
challenges.

 Loyalty Campaigns: Tesco's loyalty program, Clubcard, is legendary (David

Eshun Yawson,2020). It's a great case study for understanding how companies
use loyalty programs and data to keep customers coming back.

Data Gathering
 Production and Costs
The historical record of Tesco's yearly and quarterly cost of goods sold, as well as its
growth rate from 2010 to 2023, can be examined. Cost of goods sold is defined as the
difference between the initial and final inventories of tangible products, resulting in an
expense that represents production and sales costs.

In the annual context, Tesco's cost of goods sold for the year 2023 reached $75.397
billion, demonstrating a decline of 3.07% in comparison to the figures from 2022.
Contrarily, the annual cost of goods sold for 2022 stood at $77.785 billion, marking an
11.31% surge from the figures reported in 2021. Lastly, for the year 2021, Tesco's
annual cost of goods sold amounted to $69.883 billion, signifying a decrease of 9.15%
when compared to the values recorded in 2020

 Overview of Tesco’s Financial State

Tesco as a retail giant in the United Kingdom, prides itself on the highest sales and
employing over 330,000 staff across 3,146 stores. Tesco recorded annual revenue
exceeding £60 billion in the United Kingdom and the Republic of Ireland. This marked
an impressive growth of over £3 billion compared to the previous fiscal year. Also, the
company's profit in the UK and the ROI also saw an increase, reaching £1,249 million in
2022/23. (Emma Bedford, 2023)

Tesco and Its Competitors

Tesco, a retail giant in the United Kingdom, is continually challenged by formidable

competitors. These competitors have a notable presence in the market and exert
significant pressure on Tesco's market share and position. Let's delve into the
landscape of Tesco's competitors and understand their role in this competitive arena.

 Sainsbury’s: Sainsbury’s is one of Tesco’s chief rivals, boasting a widespread

presence in the UK. Known for its diverse product offerings and strong brand
reputation, Sainsbury’s competes fiercely with Tesco for market dominance.
 Asda: Asda is another strong competitor in the retail sector and a direct
competitor to Tesco. With its wide network of stores and focus on competitive
pricing, Asda consistently fights for a larger market share.
 Morrison’s: Morrison’s, a well-established brand, adds to the intense
competition among the "big four" retailers. It seeks to capture the attention of
British consumers by offering a range of products and services that rival Tesco's.

Competitors like Aldi, Lidl, Iceland foods, small retail and other franchises constitute
about 20.8% market share.

Despite Tesco's commanding presence with a 26% market share in 2023, the UK
market is characterized by intense competition. The "big four" retailers, including Tesco,
Sainsbury’s, Asda, and Morrisons, engage in fierce competition. However, this
competitive landscape extends beyond the major players, encompassing nine Tesco
competitors who collectively shape the dynamics of the UK retail market.

The Grocery Industry

The market dominance of the leading supermarkets in Great Britain (GB) has exhibited
a notable degree of stability from January 2017 to August 2023. Throughout this period,
Tesco and Sainsbury's consistently maintained the largest market share, jointly
commanding 41.8% of the market as of August 2023. (Emma Bedford, 2023)
Before the ascent of discount retailers, the landscape of the grocery retail sector was
largely controlled by the 'big four' supermarkets, namely Tesco, Sainsbury's, Asda, and
Morrisons. However, with the uncertainties following the Brexit decision and the
escalating inflation rates, consumer preferences have gravitated toward more cost-
effective alternatives such as Aldi and Lidl. In September 2022, Aldi achieved a
significant milestone by surpassing Morrisons to secure the fourth position in the
grocery store rankings. Subsequently, in April 2023, Aldi's market share exceeded ten
percent for the first time, reaching 10.2 percent by August 2023. (Emma Bedford, 2023)

The Case Study - Tesco Grocery Industry:

I will be exploring Tesco's engagement as an industry leader but also its impact on
small businesses, its role in fostering economic growth, Its strengths and weaknesses,
challenges and opportunities, supply chain etc.

Also, I will be examining the current issue facing Tesco related to sustainability and
environmental challenges reflecting the growing global awareness of climate change
and environmental responsibility.

As a prominent player in the retail industry, Tesco is navigating these challenges by

setting sustainability goals, engaging with stakeholders, and reporting on its progress.
Addressing these issues is not only a matter of corporate responsibility but also a
strategic imperative to remain competitive and meet the expectations of socially and
environmentally conscious consumers.

Research Approach

As the researcher, my objective is to conduct a thorough analysis of Tesco's strategic

position, options, and implementation strategies using well-structured research methods
below.

Strategic Position Analysis:

Environmental Analysis: My goal is to assess Tesco's external environment, including

market trends, regulatory factors, opportunities, and threats. I will employ tools like
PESTEL analysis to systematically evaluate these external factors.
Internal Analysis: Understanding Tesco's strategic capabilities, resources, strengths,
and weaknesses is essential. I will conduct a SWOT analysis to identify internal factors
impacting the company's strategy.

Cultural Analysis: I aim to examine the culture, beliefs, and assumptions within Tesco
to gain insights into its organizational dynamics. The Cultural Web Model will help shed
light on Tesco's corporate culture.

Stakeholder Analysis: My objective is to assess the power and expectations of

stakeholders, such as employees and shareholders, to gauge their influence on Tesco's
strategy.

Financial Analysis: I will evaluate Tesco's financial performance to understand its

strategic position. Financial ratios will be used to analyze Tesco's financial health and
make comparisons with competitors and industry averages.

Strategic Options:

Porter's Generic Strategies: My aim is to assess the strategic options available to

Tesco, including cost leadership, differentiation, and focus strategies.

Ansoff Growth Matrix: I will explore Tesco's growth options, such as market
penetration, product development, market development, and diversification, using this
matrix.

Institutional Strategies: I intend to analyze how Tesco's partnerships, acquisitions,

and market expansions align with its strategic objectives.

Strategic Implementation:

Change Diagnosis: Using Lewin's Change models, I will diagnose the changes Tesco
will undergo during the chosen strategic implementation. This includes understanding
the driving and restraining forces for change.

Emergent Strategies Analysis: My objective is to evaluate Tesco's emergent

strategies in people and operations, information and software, internet, and e-business
using McFarlan’s Grid and the 4 Ws (Who, What, Where, When).
By employing these research methods and frameworks, I aim to provide a
comprehensive understanding of Tesco's strategic landscape, offering insights into its
competitive position, potential growth avenues, and the practicality of implementing
specific strategies.

Tesco Issues and Challenges

This case study will focus on Tesco's journey from being a retail success to facing a
decline in its UK operations as a result of the impact of the 2008 recession, which
significantly affected individual disposable incomes, leading them to seek better deals
from competitors.

Tesco also faced issues of underinvestment and a shift in focus towards international
operations, resulting in operational and marketing problems in its local UK operations. In
as much as the implementation of a strategic turnaround plan, sales continued to drop,
raising questions about the effectiveness of the strategy.

The Impact of the 2008 Recession

The effect of the 2008 recession had an adverse effect on Tesco's performance in the
UK. The recession negatively affected disposable incomes, prompting them to seek
more affordable shopping options from competitors with the attraction of better prices,
product quality, shopping experiences, and customer service (Perepu, 2013).

Shifting Focus

Tesco's shifting of focus on its international operations was a key factor in contributing
to its decline in the UK market. Resources and attention were redirected away from its
domestic market, resulting in operational and marketing challenges within the UK. Staff
reductions and operational inefficiencies began to impact Tesco's market share
negatively (PLC, 2012).
Strategic Response:

In response to the decline in its UK operations, Tesco introduced a strategic plan under
the leadership of Philip Clark. This plan encompassed six key elements, including the
restoration of stores, staff training and expansion, improvements in its online retail
channel, enhancement of the value and range of offerings, and competitive pricing
(Tesco, 2012). However, despite the logical nature of this strategy, it failed to reverse
the declining sales volume (Kantar, 2013).

Current Challenges and Future Prospects

Even after four years of implementing the turnaround strategy, Tesco continues to face
significant challenges. Chairman John Allan acknowledged that addressing these
challenges would take time, and despite their efforts, the organization has not fully
recovered (TESCO, 2015).

UK Retail Industry Overview

The UK retail industry holds a significant position in the country's economy, contributing
approximately 11% of its total output (Rhodes, 2015). However, the industry was
severely impacted by the 2008 recession, with retail sales declining and many
businesses forced to close or shut down entirely (Burt, Sparks, & Teller, 2010). Even
though the growth in the retail sector outpaced the overall economy in 2014, many
retailers, including Tesco, were still dealing with the recession's effects (Rhodes, 2015).

Market Structure and Competition

The UK retail market is dominated by the big four retailers, Tesco, Sainsbury, Asda, and
Morrison, along with Marks and Spencer, account for a substantial portion of the market
share (Burt, Sparks, & Teller, 2010). In 2013, these four retailers represented 75% of
total retail sales (Grocerynews, 2014).

Despite the competitive monopoly, UK consumers' objective is to get the best deals and
bargains, they frequently shop at various retailers and are open to purchasing from
smaller, unlabeled product retailers. This trend is expected to intensify in the future with
their shopping preferences (Rhodes, 2015).
Competitions

Competition within the UK retail market is characterized by non-price-based

competition, with a strong focus on controlling and replicating a branded retail offer
(Burt, Sparks, & Teller, 2010). However, the advent of e-commerce has intensified
competition by lowering entry barriers for new online retailers, thereby increasing the
challenges of global competition for local retailers.

Nevertheless, I will be analyzing closely the milestones achieved so far by Tesco in

mitigating or limiting these challenges. Tesco has also set ambitious targets to eliminate
single-use plastics from its operations and promote responsible sourcing. As a giant in
the grocery industry, Tesco is engaging with stakeholders to ensure transparency and
accountability in its sustainability efforts. (Rosnizam, Muhammad, 2020).
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