Tesco Plc.

Company Background

Tesco often called as Tesco plc is the world’s 3rd and UK’s largest food retail chain of stores.

Tesco is a bit younger then the era of Marks and Spencer’s and Sainsbury’s and was found

in 1929 in the city of Westminster, London. By the time of late 90’s in the 1960’s the

company was quite familiar among the people and have secured a comfortable position in

the retail sector with its competitors like Sainsbury’s, ASDA, and Morrison’s. Tesco was the

first company to change the market trend in the UK food retail market of the large out of town

supermarkets and in the next decade the company brought forward new techniques and

marketing plans like opening up the in city retail store which could meet the needs and

requirements of the local customers named as Tesco Metro and Tesco Express which was

the 1st petrol refilling station convenience store. Five years later in 1995 the company

released the customer loyalty cards named as ‘Club card’ which were the very first cash

back cards in UK. In the meantime the company formed the joint venture with the Royal

bank of Scotland and started offering various financial services like the property loans, car

loans, and insurance services. The new century 20K marked the evolution of Tesco.com

providing the similar services and product offers shopping online which was a successful

mark in the history of Tesco’s because the company has become a reliable position in the

options for the customers providing good quality and service and same was carried online

which save the time of the busy business professionals.

'No matter how fast we grew Sainsbury's were always in front of us. But slowly but surely we

managed to grind them down and grind them out.' – Tim Manson (3rd Managing Director of

Tesco plc.).

Figure 1 : Market share retail food groups

'We have only got 5% of the non-food market in Britain, we've only got 6% of the

convenience market and we have only got 2-3% of the banking market...In all those

examples we could be much bigger' - Sir Terry Leahy.

The new strategy for the company is to expand its business in overseas deviating from big

revenue generating the clothing and financial services market merchandising a strong UK

core business. The success strategy of Tesco is based on innovating new offers and price

options, customer loyalty and services, and the banking services which are the most

affordable and cheapest insurance services in whole of the UK, therefore it attracts most of

the UK customers who cannot afford to have the car or the home insurance services with the

banking companies like Barclays, HSBC and the other banking groups.

Review of Management Accounting

Management accounting concerns about assessing and reporting the financial and non –

financial data to the senior management department or directly to the managers which could

help in making the decisions for the organisation which is generally used in satisfying the

needs and requirements of the company for revenue generation. Management accounting is

generally implemented by managers in any organisation for the selection, communication

and implementation of plans and strategies helping in making profit for the organisation. Also

management accounting aid in synchronizing the manufacturing and product design,

production and marketing decisions. Management accounting report is critically important to

for the company and should not be revealed to the public or any non-organisational person,

because this could breach the confidentiality of the company plans and strategies for the

future. Management accounting is generally information for the future purposes and serves

as the guideline or the walkout for the future decisions and productions. The management

accounting consists with the private information of the stakeholders of the company

therefore it is limited to only the management department in any organisation and any

amendments within or outside the organisation are reported to the managers in the form of

Decision support systems.

Management accounting plays a vital role in the success of any organisation as it deals with

the cost analysis, profit and loss analysis, price modeling, data analysis, planning and

financial forecasting about the about the market and company. The management accountant

keeps an eye on the sales and profit made in the specific sector of the organisation which

depicts the information about the consumer behavior or the change in trend in the market in

sales and services. Therefore updating with this information to the managers in a structural

format helps the organisation to review over their products as per the current market

requirements. The data statistics of an organisation are accessed on the regular basis and

are either sent to the managers or are amended by the management accountant himself

depending on the priority of the situation.

Recommendations and Analysis

Assessment and combination of the company background and the management accounting

strategies results to the analysis of the company highlights the dodges that the company is

facing or might face in future, the recommendations for the company assessed through the

issues Tesco is working on may be described as follows:

1. Wal-Mart/ASDA challenge: With the over taken of ASDA by Wal-Mart in 2004, ASDA

has been emerging as the real tough competitor for Tesco, it can compete with

Tesco the price and range of products. ASDA is now UK’s second most powerful

food retailer with only a margin of 10% share difference in the market between ASDA

and Tesco, ASDA has also left competitors like Sainsbury and M&S far behind in

terms of sales. Wal-Mart strategy is to take over the market of Tesco and make

dominance in UK market as well after being the world’s largest shopping giant. Tesco

should be aware about this and should increase its purchasing parity in UK to secure

its dominating position in UK market.

2. Expanding Internationally: International Expansion of the company would cost the

company a huge capital as gaining license, land and purchasing products may be

expensive along with the marketing of the new company products and offers.

Expansion of the company business overseas require heavy marketing as to

maintain the standard of the Brand thus the plans should be dropped until the

company deals with the emerging of the new market giants in UK or the debt of the

company went on increasing and the economy begins to decline.

3. Price War: The market trend change could ignite the spark for a price war in UK as

the preceding market retailers which are trying to raise their profits could decrease

the Safeway prices may be up to 10% of the Tesco’s as like Morrison has reduced

the Safeway prices by 7% and Sainsbury is looking ahead to lower down its price

menu as to recover from the loss and secure a good hold in the market. Along with

Tesco and Asda who works on the strategy of price leadership, the decrease in the

Safeway prices could bring tough competitions between the retail giants resulting in

loss to the retail industry of the country and the lowed prices may increase the

expectations and standards prices in the market for the customers.

4. Offering potential access in the market: The competitive environment and the future

plans and strategies for business may lead the company to bring the new products

and offers for the customers alike the earlier times when Marks and Spencer’s used

to rule the market, Tesco emerged as an Entrepreneur in Retail supermarkets which

made it distinctive and made its brand proposition different from others. Tesco is now

believed to be reliable company by customers for its customer service, relationship

and loyalty therefore the should focus on the customer service which is its USP and

try to eradicate the issues having a feedback from the customers in from of

competition for prizes and in store offers.

Strengths and Weakness

Strengths: The report briefly represents the current market hold of Tesco which could be

used in the management accounting, some of the strengths that have been discussed in the

report are:

1. Increased market share: Tesco is the UK market leader in Retail and food

supermarket’s since 1995 and has earned the trust and reliability of the customers

towards them, which is the results for the maximum sales and profits for the company

compared to its other competitors.

2. Insurance: The Tesco insurance is the cheapest insurance in UK providing the

cheapest and affordable home and car insurance for the middle class families.

3. Tesco Online: Tesco was the first supermarket retailer to release the online shopping

facility to its customers offering free delivery of the shopping on a certain purchase

which was resulted to be a success for the company.

4. Brand Value: The customer Services, loyalty and trust on their products have built a

strong brand value of the company, also the company have been near a century in

the market and has made the respect in the hearts of the customers.

Weakness: The weakness in the report were the PELTEL and SWOT analysis of the

company as these are the most vital requirement of any report which highlights the

current problems and issues that company is coping up at present and the future

outcomes of these problems because of the word limit. But some of the weaknesses that

have been analyzed in the report are:

1. Focus on the reliance upon the UK market: The report has focused on the expansion

of its subsidiaries overseas and given justifications of generating profits from them

rather than focusing on the UK market.

2. Debt Reduction: The report also focused on providing the strategies and plans for

fighting the competition with the emerging retail giants rather than looking to recover

the loss that the company has faced from its marketing and expansion of group

overseas.

3. Non- food retail: The report only describes the food retail market in brief and the

market completion and the company’s plans and policies in future rather than the

clothing and housewares that the company does.

4. Further International Growth: The report does not give the information about the

international market establishment and success as like the Wal-Mart and the future

prospectus of the company except the expansion of the group in Paris.

References:

Company Profile, http://innovationleaders.org/tes_company_profile.html , retrieved on 2nd

July, 2012.

Background, http://www.corporatewatch.org/?lid=252 , retrieved on 2nd July, 2012.

Figure 1 : http://www.mirror.co.uk/money/city-news/tesco-suffers-23-sales-drop-171948,

retrieved on 2nd July, 2012.

Management accounting, http://management.blurtit.com/q514965.html , retrieved on 3rd July,

2012.

Bhattacharyya Debarshi, ‘Management Accounting’, Ace Pro India Binding House New

Delhi.

Analysis, http://www.ivoryresearch.com/sample5.php, retrieved on 4th July, 2012.

Recommendations, http://www.tesco-graduates.com/home/programmes/office/research-and-

analysis/, retrieved on 4th July, 2012.

Future prospective, http://www.just-food.com/companies/tesco_id40, retrieved on 4th July,

2012.