What are the key elements to Tescos success in the competitive retailing industry?

Tesco is the largest supermarket company in the UK and one of the four largest global retailers.
In my opinion, the Tesco Club Card is major contribution to the success of business. Tesco was
capturing valuable information with every swipe of its Club 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 were and was not buying,
where they were spending their time in the store, and where they were not. The Club Card has
helped Tescos marketing by allowing these tailored marketing campaigns to individual
consumers and target groups. It has also helped to build loyalty with is a points system where
you get 1 point for every dollar spent and these points can be exchanged for vouchers that can be
spent in store.
The 2
nd
key element to Tescos success is the company is able to adapt its distribution channels
to meet local market needs and the requirements of the business environment in which it operates.
The trend of the UK people has been changed to one stop shopping and they want to get
everything at one place. In order to make a solid position in the UK market, Tesco has been
spending a huge amount of money on the development of existing infrastructure, from large
7,500-square-foot Tesco Extra hypermarket formats with a full range of food and nonfood
products, down to small 1,600-square-foot One Stop convenience stores. Tesco is also opening a
range of nonfood stores branded Tesco Homeplus when it faces difficulties to receive planning
permission for expanding its large food stores. This expansion allows Tesco to grow its nonfood
division to the extent that its nonfood revenue is now total 23% of total group earnings. Tescos
international business segment is also growing steadily. The company has expanded into Eastern
Europe, emerging markets such as China and South Korea and even the US, through mid-market
supermarkets known as Fresh and Easy. In addition, Tesco has also developed its on-line sales
system after considering the fact that nowadays majority of people have less time for shopping.
The company is now became the biggest online supermarket and gain more chances to explore
its grocery market.
Tesco has a strong brand image and is associated with good quality, trustworthy goods that
represent excellent value. The company has its own-brand products, including the upmarket
Finest, mid-range Tesco brand and low price Value encompassing several product categories
such as food, beverage, bakery, clothing and Tesco Mobile. Tescos innovative ways of
improving the customer experience, as well as its efforts to brand out into finance have also help
the company to build the strong brand image. Tesco began marketing itself using the phrase The
Tesco Way to describe the companys core purposes, values, principles and goals in 1997 when
Terry Leahy took over as CEO. This phrase became the standard marketing speak for Tesco as it
expanded domestically and internationally under Leahys leadership, implying a shift by
company to focus on people, both customers and employees.

In view of the tough retailing environment for international retailers, what challenges do you
think Tesco will face in the future in the Chinese Market?
China is one of the emerging and lucrative retail markets in the world. The major retail players in
the world are operating in China including Walmart and Carrefour. Tesco will face a severe
competition from these retailers. These retailers have a competitive advantage over Tesco as
there retailers entered into the Chinese market before Tesco and have made their presence and
strong branding in China than Tesco. Not only international retailers, Tesco are facing difficulty
from the local retailers as well. The local retailers are copying whatever Tesco is introducing in
the market from store format to product prices and quality and are forcing Tesco to innovate at a
later stage to be distinctive. Inflation in the China market also made it difficult for Tesco to sell
at lower prices and cater to the demands of Chinese consumers.
Another challenge that Tesco will face is adapting to the Chinese Market where the Chinese
consumers preferred more of a local shopping experience than a big-box retail model. Most of
the Tesco outlets are large hypermarkets and very focused on areas surrounding Beijing,
Shanghai and Guangzhou in an effort to increase its market share. There are only a small number
of smaller, more localized, neighborhood type stores and this can really deters a lot of customers
from considering going there.
Tesco may also face challenges from the Chinese Government for their stores expansion plans.
Chinese Government is more favor to the local retailers as compared to foreign investors in the
retails sector, in order to protect the local retailers. Preferences may especially be giving to local
retailers in respect of allocation of store location.

Which of the market entry strategies identified in the chapter is Tesco using in China? Do you
think this is the appropriate strategy?
Tesco enter into the China market using go-it-alone entry strategy and opened 105 stores since
the company first entering China in 2004. Tesco is investing $7.5 billion in new stores, including
some Tesco Express stores and Lifespace-branded shopping malls anchored by Tesco
hypermarkets. In my opinion, this strategy is not appropriate. The Chinese mainland is a very
different market from Britain, where relationship with suppliers, distributors and regulators is a
key and difficult to build and government decision making can be opaque. The Chinese are also
very different and changing, and food is inextricably linked to cultural and social factors in
China. Moreover, with established and entrenched competitors such as Walmart and Carrefour, it
is difficult for Tesco to succeed with the go-it-alone strategy.