Tesco is proof of the good a little dressing up can do. The company runs some 2,000 supermarkets, supercenters, and convenience shops in the UK(where it’s the #1 retailer), 1,200 stores in Ireland, Central Europe, and Asia, and now the US. Built on the “pile it high and sell it cheap” creed of founder Sir Jack Cohen, Tesco abandoned its discount format, with its down-market image, for a variety of dressier midmarket formats. Its operations include convenience and gasoline retailing (Tesco Express), small urban stores (Tesco Metro), supercenters (Tesco Extra), and financial services through Tesco Personal Finance. Tesco.com covers 98% of the UK and is the country’s leading Internet delivery service.

Corporate Facts

Corporate History

reprinted from Wikipedia

• 1924 The Tesco brand first appears. Jack Cohen, the owner of wholesale business, creates the Tesco brand name from the initials of a tea supplier, T. E. Stockwell and the first two initials of his own name.

• 1931 The first two Tesco stores open in Becontree and Burnt Oak. By 1939, Cohen will own a hundred more stores.

• 1947 Tesco float on the London Stock Exchange as Tesco Stores (Holdings) Limited. Also, The first self service store opens in St. Albans.

• 1956 First Tesco supermarket opens in Maldon.

• 1957 Tesco purchase 70 Williamsons stores.

• 1959 Tesco purchase 200 Harrow stores outlets.

• 1960 Tesco purchase 212 Irwin stores.

• 1963 As an enthusiastic advocate of trading stamps, Jack Cohen signs up with Green Sheild Stamps and becomes one of the company’s largest clients.

• 1964 Tesco purchase 97 Charles Phillips stores.

• 1968 Tesco purchase the Victor Value chain.

• 1973 Jack Cohen resigns as Chairman and is replace by his son-in-law, Leslie Porter. Porter and managing director Ian MacLaurin abandon the “pile it high and sell it cheap” philosophy of Cohen which had left the company stagnating and with a bad image.

• 1977 Tesco launch ‘Operation Checkout’ with the abandonment of Green Sheilds stamps , price reductions and centralised buying for all stores. The result was a rise in market share of 4% in two months.

• 1987 Tesco completes hostile takeover of the Hillards chain of supermarkets in the North of England for £220 million.

• 1994 The Scottish supermarket chain William Low is bought by Tesco who successfully fight off Sainsbury’s. The purchase of 57 stores pave the way for Tesco’s presense in Scotland which previously was weaker than in England.

• 1995 Tesco becomes the UK’s market leader in the supermarket sector, beating Sainsbury’s. It also introduces it’s customer loyalty card scheme, ‘Clubcard’.

• 1997 Terry Leahy assumes the role of Chief Executive. Also, Tesco announce the purchase of the retail arm of Associated British Foods for £640 million. This acquisition gives it a major presence in the Republic of Ireland, also giving it a larger presence in Northen Ireland than Sainsbury’s, who had been making moves into the province.

• Also in 1997, Tesco and Esso Petroleum Company LTD (now part of Exxonmobil) come together to form a business alliance. The agreement included several petrol filling stations on leases from Esso, where Tesco would operate the store under the Express format. In turn, Esso would operate the forecourts and sell their fuel via the Tesco store.

• 2001 Tesco becomes involved in internet grocery retailing in the USA when it obtains a 35% stake of GroceryWorks.

• 2002 13 HIT hypermakets in Poland are bought by Tesco. Also it makes a major move in the UK convenience store market with its purchase of T & S Stores, owner of 870 convenience stores.

• 2003 Tesco launches a UK telecoms division, comprising mobile and home phone services, to complement its existing Internet service provider business. In June 2003 Tesco purchases the C Two-Network in Japan. It also acquired a majority stake in Turkish supermarket chain Kipa.

• 2004 Tesco acquires Adminstore, owner of 45 convenience stores, in and around London. In August 2004, it also launches a broadband service.

• 2005 Tesco acquires 21 remaining Safeway/BP stores after Morrisons dissolved the Safeway/BP partnership.

• 2006 Tesco purchases an 80% stake in Casino’s Leader Price supermarkets in Poland.

• 2007 Fourteen Tesco stores across the UK were temporarily close after a ‘bomb scare’ and a criminal investigation launched after threats were made. A ‘suspect device’ was found in one store causing the store and surrounding area to be sealed off while the Army Explosive Ordnance Disposal unit disposed of the package.

• Also Tesco join forces with O2 in Ireland to form Tesco Mobile, using the 089 prefix. Tesco owns 50% of the network, with O2 owning the remainder. Tesco has not built its own network in Ireland, but is roaming on the O2 infrastructure already in place. By doing this, Tesco has saved money and already has 99.6% population network coverage and 95% geographical coverage.

• In 2007, Tesco is placed under investigation by the UK The Office of Fair Trading (OFT) for acting as part of a cartel of five supermarkets (Safeway, Tesco, Asda, Morrisons and Sainsburys) and a number of dairy companies to fix the price of milk, butter and cheese. In December 2007 Asda, Sainsburys and the former Safeway admitted that they acted covertly against the interests of consumers while publicly claiming that they were supporting 5,000 farmers recovering from the foot-and-mouth crisis. They were were fined a total of £116M. Tesco, which maintains that it was not a part of the cartel, is still under investigation by the OFT.

Corporate Strategy

• An “inclusive offer”. This phrase is used by Tesco to describe its aspiration to appeal to upper, medium and low income customers in the same stores. According to Citigroup retail analyst David McCarthy, “They’ve pulled off a trick that I’m not aware of any other retailer achieving. That is to appeal to all segments of the market”.
• One plank of this inclusivity has been Tesco’s use of its own-brand products, including the upmarket “Finest” and low-price “Value”.
• Tesco implemented the Clubcard rewards program to gather necessary customer information, which it then used to cater to specific customer needs and potential wants. When shoppers signed up for the card, they automatically submitted their age, gender, and income. Tesco was able to segment their shoppers based on these factors. As soon as the shopper used the card when shopping online or in-store, purchased product information was automatically uploaded into Tesco database. Product information was used to cross-sell additional products and services such as grocery delivery services.
• Beginning in 1997 when Terry Leahy took over as CEO, Tesco began marketing itself using the phrase “The Tesco Way” to describe the company’s core purposes, values, principles, and goals. This phrase became the standard marketing speak for Tesco as it expanded domestically and internationally under Leahy’s leadership, implying a shift by the company to focus on people, both customers and employees.

Criticism

Worker Rights

In May 2004, Tesco announced it was reducing sick pay in an attempt to reduce levels of unplanned absence, which led to concerns over employees continuing to work despite poor health (faced with a reduced income otherwise).

Tesco is also censured by those who think that it infringes upon the interests of farmers and smaller suppliers. The company responds by claiming that it follows industry-best practice and sources locally where it can to meet customer demand. In March 2005 the Office of Fair Trading published an audit of the workings of its code of practice on relationships between supermarkets and their suppliers. It reported that no official complaints had been received against Tesco or any of the other major supermarkets, but the supermarkets’ critics, including Friends of the Earth, contested that suppliers were prevented from complaining by fear of losing business, and called for more rigorous supervision of the supermarkets. A further report by the Office of Fair Trading in August 2005 concluded that the aims of the Code of Practice were being met.

In Autumn 2006, Tesco was caught up in two scandals over the treatment of workers in factories supplying it in Bangladesh. The first was a Channel 4 News investigation, which found child labour in four such factories. The second was a report published by War on Want, which alleged that wages were as low as 5 pence per hour, with workers often working 80+ hour weeks. In its defence, Tesco said that, “All suppliers to Tesco must demonstrate that they meet our ethical standards on worker welfare, which are closely monitored. Our suppliers comply with local labour laws, and workers at all Bangladeshi suppliers to Tesco are paid above the national minimum wage.” Campaigners have argued that the minimum wage in Bangladesh is too low, and that monitoring systems used by clothing retailers are ineffective.

In September 2006, Tesco came to an agreement with Tyrrells Crisps to stop selling grey market supplies. Tyrrells was started by potato farmer Will Chase after big supermarkets’ power of purchasing almost put his farm out of business. He started Tyrrells to gain greater margin by selling directly, and only sold through delicatessens and Waitrose supermarket. After Tesco bought supplies from the grey market, Chase sought legal advice but Tesco backed down.

Consumer Rights

In January 2005, Tesco faced criticism for their testing of RFID tags used to collect information on product movement in pilot stores. Critics label the tags “Spy Chips” and allege that they are to be used to collect information on customers’ shopping habits.

On 22 May 2007 the BBC’s Whistleblower programme showed undercover footage detailing breaches of food hygiene rules in a branch of Tesco. The Whistleblower reporter applied for a job following a tip-off from a former employee. Breaches included the sale of products after their sell-by date (which is not illegal); allegations that the company illegally sold products after their use by date; falsification of temperature records; and the sale of partially cooked mince mixed with uncooked mince.

Political Influence

In February 2006, a group of UK MPs produced a report highlighting the near monopoly powers of the big four supermarkets. One problem discussed by the group was that of building without appropriate planning permission. The discussion stemmed from the company’s building of a store in Stockport that was 20% larger than the company actually had permission to build. In September 2006, subsequent (retrospective) planning permission was requested by Tesco but refused.

Business Ethics

Tesco’s 2004 Adminstore acquisition led to local and UK-wide protests. Tesco’s other store openings and expansions are sometimes contested by campaign groups. When a company controls more than 25% of a business sector in the UK, it is usually blocked from buying other companies in that sector (but not from increasing its market share through organic growth). The Office of Fair Trading currently treats supermarkets and convenience stores as two distinct sectors — although this definition has been challenged by smaller retailers, including the Association of Convenience Stores.

In 2006 the Office of Fair Trading referred the UK grocery market to the Competition Commission for a new inquiry. In January 2007, the Competition Commission, published its initial findings into the UK grocery market. It said that they were “concerned with whether Tesco or any other supermarket can get into such a strong position, either nationally or locally, that no other retailer can compete effectively”. It however found no actual basis for accusations that Tesco could use its land bank to control nearly half of national grocery retailing, and that suppliers’ profits were being squeezed by the supermarket.

The group has been criticised for its pricing tactics, including allegedly misleading consumers with “phoney” price cuts. For example, increasing and swiftly decreasing the price of a particular item back to it’s original value and advertising it as a ‘price cut’.