6. Build a Branded business - developing the retail brands which will build the important lasting relationships with customers takes time.
In July 2005, Tesco staged its Group board meeting in China for the first time, indicating the significance of its continued emphasis on growth in international markets . At the full-year results announcement in April of the same year, chief executive Terry Leahy talked about Tesco's overseas march before even touching on the UK where the retailer now sells over 30 per cent of all groceries sold in large supermarkets . He said Tesco was only about 20 per cent into its international expansion plans, which last year generated £370m profit on £7.6bn of sales.
The future
In the UK, Tesco now sells 30 per cent of all groceries . What's more, it outsells its nearest competitor by nearly two-to-one (see Figure One). Positioned right in the middle of the market, appealing to customers from all income groups, it has more stores than any other UK retailer across a full suite of formats, reaching down to convenience stores. It has a vital edge in buying power over its domestic competitors, reinforced by sophisticated supply-chain management and deep customer understanding. By continuing its drive into non-foods, it has scope to drive down margins in return for volume. It is already Britain's biggest health and beauty retailer. Meanwhile, it is expanding abroad, gaining critical mass, country-by- country .
At the time of writing, Tesco's success had not yet led to a significant popular backlash although suppliers had been complaining for some time about some of its pricing and payment practices . While Wal-Mart has come under mounting criticism for the treatment of small suppliers and community retailers, the Tesco brand is still one of the most trusted in the UK. Even so, future success cannot be taken for granted - whether at home or overseas. For example, Tesco may run up against regulatory constraints in the UK. An Office of Fair Trade ruling on a full Competition Commission enquiry is imminent and a parliamentary group on the future of High Street Britain warns of the dangers of continued concentration of grocery market share into the big four retailers. Overseas, Tesco's operations remain small in scale, especially compared with those of rival Carrefour. Also, it lacks Wal-Mart's global purchasing power and there is a perennial threat from hard discounters, which are beginning to become dominant in much of continental Europe. With UK competition authorities on high alert and room for expansion now limited at home, Tesco will now have to decide whether it has the muscle and appetite for a global battle with the super-retailers and the signs are that it has. In February 2006, it announced plans to spend £250m a year to open a chain of convenience stores on the West Coast of the USA during 2007. The chain will be modelled on Tesco's Express format and will be headed up by Tim Mason, Marketing and Board Director.