COMPANY BACKGROUND:Tesco ("the company") is one of UKs leading food and grocery retailers.

The company operates in Europe, the US and Asia. Tesco is headquartered in Hertfordshire, the UK and employs about 472,000 people.9The company recorded revenues of 56,910 million ($90,445.4 million) during the financial year ended February 2010 (FY2010), an increase of 5.6% over 2009.9The operating profit of the company was 3,457 million ($5,494.1 million) in FY2010, an increase of 9.1% over 2009.9 The net profit was 2,327 million ($3,698.2 million) in FY2010, an increase of 9.1% over 2009. 9LITERETURE REVIEW:The external position is analysed using PETEL model.2Political factors indicate those factors which are affected by the government. 2 Economic factors mainly represent the economic trend of any economy. 3 Changes in trends of social factors could have a great impact on the peoples demand.4 Technological factors mean those factors which are related with the production procedure in a factory of a company.2 Weather and climate change is the main concern of environmental factors. 2 Legal or legislative factors mean the legal environment in which any company operates. 2 SWOT analysis is a method by which we can know about the strength, weakness, opportunities of a company in current market, as well as the threats.6 This analysis counts the internal and external factors of a company to achieve the ultimate goal. Porters five forces is a model or framework. Generally this is used for the analysis of industry and developing business strategy.6 According to the analysis, it tries to derive five forces to find out the intensity of competition within the market and general condition of a market. PESTEL Analysis POLITICAL ECONOMIC SOCIAL TECHNOLOGICAL ENVIRONMENTAL LEGAL LOCAL Service probations declared by local council.(9) Income in local area(8) Population growth in locality(8) Local technological improvement(8,9) Local waste disposal(8) Planning permission(8) NATIONAL Policies on subsidies of UK agovernment(7) Interest rates in UK(9) Change in demographic condition(9) UK wide technology(9) UK climate(8) UK legislation(7) GLOBAL International trade agreements (7) International economic growth(9) Migration rate(9) International technological breakthroughs(9) Global climate change(7)

International environmental policy(9) A free flow of foreign trades has been promoted with Chinas accession to the WTO. To encourage Western companies, including Tesco, they remove all barriers. It helped Tesco to enter into the most profitable market of the world which contains over 1.3 billion consumer. 4An agreement was signed in 2009 between Tesco and Chinese Government to set up a series of joint ventures to establish some shopping malls in different provinces of China. According to this agreement 18 new supermarkets are expected to open till the end of 2010 .7 10 more countries were immersed with the European Union (EU ) in 2004. This immersion helped Tesco to promote trade between Eastern and Western European countries. This initiative acted as a platform for Tesco to expand their business operation to all over Europe. 4Economic factors are very important. These factors do have impacts on the buying power of the consumer. Although a recession was officially declared at the end of 2008 in UK, the decision of decreasing the interest rate helped to lower the unemployment rate. During 2009.8

Figure : 1 Overall Consumer Spending on Food (%) in UK from 2004 to 2008.4 Because of recession, the customers eat outside less and more at home. This kind of impact provides opportunities to increase their output for grocery retailers like Tesco. This is the positive impact of recession for Tesco. Thats why in 2009 the spending was increased than 2008.4An analysis shows the proportion of retired people is higher than children in UK .1 This aging population is less like to supermarkets to shop comparing with the younger generation. Consumers choice towards the food is also changing day by day. Thats why the supply of organic food is increased by Tesco because of the change in consumer demand. There is great impact of technological changes in modern economy. E-commerce is becoming more and more popular day by day. Online shopping is becoming more and more popular because of the increased and easy access to broadband. Recent analysis shows that in UK the number internet users is 15.5 million which almost 70% of the total market is. So online market or e-business counts a lot for modern days. 9Due to the consumer awareness of environmental issues, Tesco introduced its Greener Living Scheme to aware the customers about recycling the various types of products to save the environment. Tesco also give green club card point which is earned by recycling the plastic bag, aluminum cans etc .7The VAT is raised to 20% because the government wants to cover a huge deficit in the national budget. This will affect the other non-food sector of Tesco such as clothing, petroleum etc. In previous, the 2008 and 2009 combined up-ratings made an increase in the minimum wage of 15.5% which increased the operating costs of Tesco. 7Porters Five Forces Analysis To measure the competitive nature of the business environment where Tesco operates, Porters five forces analysis is very useful. Threat of substitute products and services -The major substitute source for food retailers like Tesco are small chains of convenience shops, organic food shops and off licenses. But these are not a very large threat for the products of companies like Tesco. Most of the time the brand name, quality and price of a product emphasize the decision of a customer.8 Threat of entry of new competitors -There is always threat for any new entry or competitors in a market. But to challenge a huge company like Tesco, the new competitors need to produce something in exceptionally low price and/or high quality. Without this it will not be possible for them to gain market establishment. Major brand like Tesco, Sainsburys, Morrisons and Asda are already captured the food retail market in UK. Almost 80% of all shopping in UK is occurred there. 8 Intensity of competitive rivalry -There are some rival companies for Tesco like Asda, Sainsburys, Waitrose etc. These companies compete with Tesco with their price and quality of the products. The competitor for Tesco is Asda which is part of American retailer Wall-mart. In 2010/09 Asda increased their market share from 16.6% to 16.8%. This increase shows that the rivalry is increasing among the companies and these companies are threatening Tescos leadership position in the market. 8

Tesco has built a sustainable business over the years and has differentiated itself in a unique way with the club card, low prices and improvement to customer shopping trip. (One stop shopping) The SWOT Analysis of Tesco emphasis on the strength on the company, the weaknesses that the company poses, the opportunities that the company needs to explore the threat, or potential threat that the company faces, STRENGTH SUSTAINABLE BUSSINESS MODEL

Tesco is the third largest retailer in the world, and has built a sustainable business over the years, through diversification in to new geographies, new product areas and new services xxx. Tesco operate across the globe in countries that contribute 53% of the worlds GDP, enjoys market leading position in many market outside the UK. Its international business generates 22% of its profit in 2010. Market advantage over rivals Tesco has being able to predominantly gain advantage over main rivals such as Wal-Mart and Carrefour, (the world number and two respectively) whom have both pulled out of the south Korea market, which is the fourth biggest economy11. Its operation in South Korea has generated 4.16bn ($ 6.7bn) of sales in the year to February 2010.11. Retailing service Tesco has increased it focus on its retailing service business in other to drive incremental sales. In addition to these services the company offer online retailing, banking, telecom and market research. Each of these services complements each other. Tesco has aim to adjust to the changes in customer shopping patterns, and has leveraged on its strengths of large customer base, large store network and brand. Tesco store network provide the company with a unique competitive advantage. Tesco has improved customer service by increasing investment in self-service checkouts which has accounted for a quarter of all its transaction, by the end of 2009. WEAKNESS HIGH COST OF GROWTH IN CENTRAL EUROPE. Tesco operate a high capital intensive model in the central Europe which is placing the company at a disadvantage when compare to its competitors. This high capital cost is leading to lower capital turnover which is pressurizing the ROIC. UNDER UTILISED CAPACITY IN U.S The economic slump in the U.S has force Tesco to slow down in expansion plan, thereby leaving the company with under-utilised capacity at Riverside (which is capable of supplying about 400 stores) thereby adding to the operating cost of the business.1 Tesco grocery market is reaching saturation point. The company already takes 1 of every 3 spent in U.K supermarket, and the grocery sector is building shops faster than people are spending money. This poses a great threat for Tesco, since the UK business account for nearly three- quarter of the group

profit, and also provides the capital it needs to invest in the faster- growing markets overseas2. OPPORTUNITIES STRONG IN ASIA The strong growth in the South Korean, Chinese and Indian market will provide a long term opportunities for Tesco. The growth in these country is expected to reach ($543.2 billion) by 2014. Which provide strong opportunity for Tesco to expand in regions . 6 Strong private label portfolio enables the company to effectively differentiate. The current market trend of Tesco has suggested that the private label market is expected to grow which will enable Tesco to leverage on its strong portfolio. Such label has being gaining importance has customer are trading down, since with this label Tesco target the vale conscious customer as they prove to be cheaper the national brand by 30%5. THREATS INTENSE COMPETITION The intense competition in the industry affects the customer retention policy of Tesco adversely. In times of economic down turn Tesco has being loosing it customer base, to discounter who have target highly price sensitive customer, who are choosing a cheaper alternatives mainly in the Uk16. Conclusion Tesco is in a strong position in the retail industry, and there position appears to be getting stronger. Tesco would achieve this by holding on to their strength, exploiting their opportunities, turning their weakness in to strength and reducing their threats.

RFERENCES 1.Dai, J.J., S. Lorenzato, and D.M. Rocke 2009. A knowledge-based model of watershed assessment for sediment. Environmental Modelling & Software 19: 423433//2.J. Scott Armstrong,1982. "The Value of Formal Planning for Strategic Decisions". Strategic Management Journal 3: 197211//3.Lynch, R. 2006, Corporate Strategy (4th ed.) (Harlow: Pearson Education Limited)//4.Mintel, 2009, Food Retail Industry Including Online, Mintel Research//5..Porter, M.E. 2008, The Five Competitive Forces That Shape Strategy, Harvard business Review, January 2008//6.Wall, S., Minocha, S. & Rees, B., 2010. International Business 3rd ed. Essex: Pearson Education Limited// 7. Tesco, 2009, Corporate Responsibility Report, Tesco. Available at: http://www.investis.com/plc/cr09/crr09.pdf [Accessed 17/08/2010, 9.00 pm]// 8. Tesco, 2009, Corporate Responsibility Report, Tesco. Available

at:http://www.oup.com/uk/orc/bin/9780199296378/01student/additional/page_12.htm [Accessed 15/08/2010, 9.45 pm]//

9.Source:

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b3daa214a87d%40sessionmgr113&vid=6 on 11.02.2011 at 21:27 pm from Data base called Business source premier and the name of the publisher is Datamonitor

10.Smaller stores to propel Tesco US expansion Published by Jonathan Birchall in New York Feb 1 2011. Updated Feb 1 2011 www.FT.com. Viewed 23/2/2011 11.Tesco banks on next chapter of growth. Elizabeth Rigby. Published September 21 2010 www.FT.com . Viewed 23/2/2011. 12.Data monitor. Published 13 August 2010. P.14 13.(Data monitor ) published 13August 2010 p.12 14.Data monitor. Published 13 August 2010.p11.