UNIVERSITI UTARA MALAYSIA (UUM)BPMN6023 STRATEGIC MANAGEMENT SEMESTER 2010 / 2011
GROUP PROJECTTITLE: TESCO STORES MALAYSIA SDN BHD
: PROF. P.R. BHATT
PREPARED BY (808493)
: MOHD FHADLI BIN MOHD FUDZI NOOR ULFAH BINTI MUHAMAD ZIN (808504)
: 13th FEBRUARY 2011
BPMN 6023 Strategic Management
TABLE OF CONTENTSTITLE Table of Contents PAGE NUMBER 2
Background of company
Overview of Retail Industry in Malaysia
Business Operation in Malaysia
Competitor and Competitor Analysis
Financial Performance Analysis
AcknowledgementBPMN 6023 Strategic Management Page 3
This Group Assignment for subject Strategic Management (BPMN) Semester October 2010 is to choose any topic and issues to be analyzed from the course syllabus, subject to lecturers approval. Hence, the students are required to submit brief information about their project.
Project report must be submitted on 13th February 2011. Presentation will be held during class. Students are advised to present their report in a simple yet knowledgeable manner. Marks will be awarded for contents, teamwork, creativity, presentation and the quality of the report. For the purpose of this Group Project, our team has chosen the topic: TESCO MALAYSIA STORES SDN. BHD. This paper shall present in-depth presentation highlighted on strategies, competitor analysis and recommendation.
We would like to extent our utmost appreciation and highest gratitude to our self as team members of this Group who had immensely contributed to the completion of this Group Project. Special thanks also to our lecturer Prof. P.R. Bhatt for his kind support and guidance.
BPMN 6023 Strategic Management
Introduction Tesco History Tesco originated in 1919 when Sir Jack Cohen used his gratuity from his Army service in the First World War to sell groceries from a market stall in the East End of London. By the late 1920s, Tesco (or TES from TE Stockell, a tea supplier that he used, and CO from Cohen) was selling from open-fronted shops in London high streets, the first store being at Burnt Oak, Edgware. Cohens motto was Pile it high, sell it cheap, referring to the idea that customers wanted inexpensive products at convenient locations and that volume would drive profitability. Sir Jack Cohen concentrated on growing the business, vigorously pursuing expansion. Tesco Stores (Holdings) Ltd was floated on the London Stock Exchange with a share price of 25 pence. Until the 1970's, Tesco operated on the 'pile it high, sell it cheap' formula Cohen had imported from the USA. However, the market was changing, leaving the company with slim margins and a serious image problem. Under the leadership of Ian MacLaurin, who succeeded Jack Cohen in 1973, Tesco decided to try something dramatic and different which to become an inspirational mass retailer. Tesco decided to modernize itself, closing 500 unprofitable stores, and extensively upgrading and enlarging others. At this time, Tesco prioritized the development of large out-of-town stores where parking was convenient, the selection of goods broad, and where a higher volume of business could be generated at increased margins while reducing overheads. Other innovations throughout the 1980s included introducing own-label product lines, computerizing and centralizing distribution systems and developing shopping centre outside of the major cities. In 1983, Tesco Stores PLC renamed itself simply Tesco PLC. In 1993, when Tesco introduced 'Value' lines, a cut-price range of own-label goods, competitors scoffed and the share price sank. But Tesco had gauged the popular mood after years of recession, shoppers were looking for bargains, and sales soared. A year later, Tesco started 'One in Front opening a new till whenever a checkout line exceeded two trolleys. It cost millions in extra staff, but customers loved it. In 1995 Tesco became the first supermarket to introduce a company loyalty card, an idea developed by the then Deputy Managing Director, Terry Leahy. At first the other supermarkets were skeptical, but the concept caught the public imagination leaving the others racing to catch up. Cohen was responsible for several small revolutions in retailing which led to the rise of 'the supermarket' we know today.BPMN 6023 Strategic Management Page 5
Tesco Now and Then Sir Terry Leahy, current CEO of Tesco PLC, has overseen 13 years of dynamic expansion and development that has taken Tesco from living in their rivals shadow to the UK's number one retailer and not to mention third in the world after Wal-Mart and France's Carrefour. After becoming CEO of Tesco, Leahy focused on each of the following areas: Tesco's core UK business, its international operations, its forays into the non-food sector and retailing services, and Tesco.com. The core UK business was an important part of Tesco's activities employing over 250,000 people in 1,779 stores as of February 2005. The UK business also accounted for 80% of Tesco's total sales. It operated through four different formats of stores - Express, Metro, Superstores and Extra, catering to the needs of different types of customers. Tesco continuously innovated and introduced new product lines to provide customers with a wider choice. But Tesco was already jumping ahead of its rivals throughout the 1990s with a swathe of innovations that look commonplace now, but were bold breakthroughs at the time. Tesco, Britain's biggest and most profitable supermarket chain is the darling of the City. Tesco PLC is a global grocery and general merchandising retailer headquartered in Cheshunt, United Kingdom. It is the fourthlargest retailer in the world measured by revenues after Wal-Mart, Carrefour and Metro and the second-largest measured by profits after Wal-Mart. It has stores in 14 countries across Asia, Europe and North America and is the grocery market leader in the UK where it has a market share of around 30%, Malaysia and Thailand. Originally a UK-focused retailer specializing in food and drink, it has diversified both geographically and by product, into areas such as clothing, electronics, financial services, telecoms, home, health, car and dental insurance, retailing and renting DVDs, CDs, music downloads, Internet services and software. Tesco's huge growth is a hard act to follow. With the domestic market increasingly saturated, some UK supermarket chains have looked to overseas markets to maintain their positions. This is a whole new ball game, bringing into play competition with large firms from other countries, such as US retailing giant Wal-Mart and French multinational Carrefour. Tesco began expanding internationally in the 1990s and now has outlets in the Republic of Ireland, Poland, Hungary, the Czech Republic, Slovakia, Thailand, Malaysia, South Korea and Taiwan. It has also recently bought chains in Turkey and Japan and is in the process of negotiating expansion into China. Each of Tesco market around the world can be categorized into 4 stages which were start-up or entry level,BPMN 6023 Strategic Management Page 6
developing 1, developing 2 and established market. China, Japan United states and India falls under entry level market which the market have potential to growth and have dilutive returns for short terms. For developing market such as Turkey, Poland, Czech Republic, Slovakia and Malaysia, each have good market positions and improving in returns. Established market such as UK, Ireland, Thailand and Hungary, they have substantial profit centers and strong growth potential. In our full report here, the scope will be much on Tesco store in Malaysia, how they operate and what strategies they used to survive in the market. Background of the company Tesco Stores Malaysia Sdn. Bhd. Tesco Stores (Malaysia) Sdn. Bhd. was incepted on 29 November 2001, as a strategic alliance between Tesco Plc UK and local conglomerate, Sime Darby Berhad of which the latter holds 30% of the total shares. Tesco opened its first store in Malaysia in February 2002 with the opening of its first hypermarket in Puchong, Selangor. Tesco Malaysia currently operates 33 Tesco and Tesco Extra stores. Total store by state in Malaysia is Selangor with 12 store, Kuala Lumpur 3 store, Perak 5 store, Johor 4 store, Penang and Kedah 3 store, Melaka, Negeri Sembilan and Kelantan 1 store. In year 2003, Tesco launched Tesco own brand, Tesco Value. In 2004, Tesco Malaysia launches its own house brand, Tesco Choice. In December 2006, Tesco also acquired Makro Cash & Carry in Malaysia, a local wholesaler which was rebranded to Tesco Extra and provides products for small local retailers. In 2007, Tesco launched Club Card. This acts a way to say thank you to customers by giving money back to them. Club card has received an overwhelming response from customers with nearly 2 million household members signed up to date. As of January 2009, Tesco have rewarded nearly RM10 million worth of Club card Cash Vouchers to the customers. Later in year 2008, Tesco introduce Green Club card and Green bags making Tesco Malaysia to be the first Tesco International business to introduce the Green Club card scheme. As part of its global commitment, Tesco Malaysia is market leading on tackling climate change in techniques of energy saving, launching Green Club card Points to incentivize customers shopping with their own bags, introduce degradable carrier bags, promote positive behavior among staff though Energy League competition intra stores and a recycling centre to facilitate customers to do their part for the environme