Abstract

The report is base on Sainsburys and Tesco management and business plans and
perfoms an analysis of the companys performance, governance and strategies. The
report and analysis seperately focuses on various method. The strategic opportunities,
PESTEL analysis, Porters 5 Forces, Value Chain analysis, and SWOT analysis has
also been performed to show the strength, weakness, opportunities and threats of both
the companies.

Introduction

The food and drink retail sector represents the largest industry in the United Kingdom
by providing th eemployment for over three million people in their main primary
production, manufacturing and in retailing. In the year 2003, retail accounted for 9%
of gross domestic product (Datamonitor, 2003). In recent years, UK supermarkets
have gone through detailed checking over their treatment suppliers, especially among
the owned-label products, yet the development of strategic supply networks has been
an integral part of most supermarket strategies fo the past decade.
Tesco being one of the largest food retailers in the world. After its gradualy expand
into Ireland in the 1990s, Tesco began rapidly expanded in the late 1990s into the
developing markets focusing into the Eastern Europe and Southeast Asia market.
However, the majority stores are still within the UK 3,376 out of 6,351 stores as of
April 2012. Within UK itself, it operates under four banners of Extra, Superstore,
Metro and Express. Not forgetting that Tesco also provides online services through it
subsidiary, Tesco.com. Tesco sells almost 40,000 food products, including clothing,
homeware, electrical, and other non-food products and merchandises. Tescos ownlabel products (50 percent of sales) are at three levels, value, normal and finest. Apart
from running within the four different banners, Tesco also has its own gas station,
being one of Britains largest independent petrol retailers; and Tesco Personal
Finance.
On the other hand, Sainsbury supermarkets are Britains major food retailing chain
store as well. One single Sainsbury supermarket can offer up to 30,000 variations of
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products, and among these products offered, Sainsburys own-lable and fresh produce
have taken up 50 percent of the total products in store. Sainsbury also offers a broad
range of products and services offerings including bakeries, delicatessens, wine and
spirits stores, banks, florist, clothing, pharmacies, books, CDs, DVDs, florweres, gifts,
and electrical appliances. Not only these, Sainsbury also has it share in the banking
sector. Through Sainsbury Bank, the compan also offers health coverage products, life
coverage products, saving accounts, credit cards, personal loans, car finances, car
insurance, propoerty insurance, travel insurance, and pet care insurance. With these
diverse products and servces offerings, it increases its cross selling opportunities.

Marketing Mix

The marketing mix is a set of controllable marketing variables that company blend in,
in line with the marketing strategies in order to achieve the desired reponse by their
target market (Mohammaed and Pervaiz, 1995). The mareketing mix comprises of
four main componenets which include product, place, price and promotion.
Tesco provides a wide range of products that range from food to non food items
which literally cover all the shopping needs of an average shopper in the UK. Items
ranging from clothing, kitchenware, electronics, mobile phones, accessories and
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others are offered (ADVFN, 2011). In addition, the chain offers a range of products
under their own brand. The company has recently embarked on increasing its product
portfolio on its online products hence enabling them to serve a wide range of
customers. This contributes to the level of contentment of the shoppers making it
unnecessary for them to look for other shoppers. Sainsbury offers similar advantages
to their customers giving them the required product range to ensure satisfaction
among different classes of individuals (J Sansbury Plc, 2011). Like Tesco, Sainsbury
also makes use of their loyalty cards to gather information and gather intelligence on
which products to develop and offer to the market to ensure enhanced levels of
satisfaction.
The average consumers in the UK are price sensitive. This is due to the fact that there
is very little level of product differentiation in the market making it easier for
consumers to easily switch from one retailer to the next with the determinant factor
being the price in most of the situations (Datamonitor, 2011). Both Tesco and
Sainsbury use the competitive pricing strategy where the price deals at their
possession are undertaken to avoid loss of customers to the other retail chains (Tesco,
2011; Baker, 2010). The commitment to remain affordable to the bulk of the
consumers is contained in Tescos mission statement where they play the lead role in
setting the product prices with Sainsbury and other retail chains seeming to follow
soot. In order to restore faith in their pricing strategies, Sainsbury came up with a
money back coupon available at the till in case the shopping baskets would be found
to be more expensive than similar baskets at Tesco or any of the other leading
supermarkets such as ASDA (Baker, 2010). This exercise was mainly targeted at the
Nothern Ireland stores where the chain had lost its image as a pocket-friendly chain.
This guarantee was aimed at giving consumers the confidence that their pricing was
fair if nor fairer than their competitors and was aimed at capturing the consumers
keen on making some good savings when shopping.
Place in the context of a business mostly refers to the distribution network and the
strategic positioning of such a network. Retail chains must of necessity ensure that
their products can be easily accessible by their target customers. Tesco maintains over
1800 stores across the UK (Tesco, 2011). These stores are distributed across the
different sections and designed differently in order to meet the preferences of the
targeted customers. The stores are accordingly categorised into express stores (735),
metro stores (162), superstores (433) and extra stores among others (Tesco, 2011).
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Similarly, Sainsbury maintains a total of 934 stores which include 557 supermarkets
and 337 convenience stores which are strategically distributed across the UK (J
Sansbury Plc, 2011). As can be seen, the distribution network for Tesco is wider than
that of Sainsbury and probably accounts for Tescos leadership over their rivals in the
market.
In order to ensure more effective distribution, Tesco operates an online store which
enables them to reach more and more customers. Sainsbury also does the same even
though their online shops are yet to be as developed as Tescos.
Promotional activities involve the choice of communications styles that the
organisations choose to use when creating demand among the targeted consumers.
The promotional methods most prevalent include direct marketing, sales promotion,
public relations, advertising, and personal selling (Kotler, 2010).
The predominant approach taken by Tesco has been the use of a modified style of
direct marketing where the information collected from their loyalty cards are used to
anticipate the needs of their consumers who are then contacted with the offers for
products that they may need (Humby, Hunt and Phillps, 2004). The customers are
batched up into different groups depending on their shopping trends and contacted
through personalised means such as emails and postal boxes. The loyalty cards
offered by Tesco are categorised to target the market segments and include the Tesco
Kids Club, Tesco Baby and Toddler Club, Tesco Healthy Living Club, Tesco World of
Wine Club, and Tesco Airmiles Travel Company (Humby, Hunt and Phillps, 2004).
The direct marketing has been viewed largely as quite effective with the loyalty levels
for Tesco remaining very high. Tesco has maintained a 30% market share for a period
of 4 years with signs that the levels would remain in the next two or so years (Aroq,
2011; Datamonitor, 2011). Other promotional tools used by Tesco involve the use of
advertisements which are posted on the TVs and radios, cinemas, newspapers,
magazines and other means. The advertisements are seen as important tools that help
solidify the brand image for Tesco and therefore contribute to its stable performance
in the market.
Sainsbury on the other hand conducts limited level of direct marketing when
compared to Tesco. However, they also make use of the Nectar loyalty cards which
not only help them to retain customers but also allow them to collect useful
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information about the shopping habits of their clients for the purposes of product
development and effective marketing (Lepitak, 2011). Sainsbury has recently
revamped its advertisement efforts on television, radio and field marketing with the
running theme being to encourage customers to try something new (J Sansbury Plc,
2011). This message reflects on their effort to communicate to customers that they
have a wide array of products which the customers should try out for a new and
exciting experience. These messages have propagated done through mass media,
online social networks, magazines, and field marketing. In-store advertisements have
also been used widely. Sainsbury has also displayed brilliance in their marketing
strategies with initiatives such as Feed your family for 50 and the use of seasonal
campaigns (Lepitak, 2011). These initiatives have been very effective helping
Sainsbury to gain on the market share from 15.9% to 16.2% in 2010 and a further
growth in pre-tax profits by 12.8% in 2011 (Lepitak, 2011; Aroq Ltd, 2011). The
effectiveness of a marketing process is determined by the resultant financial
performance and Sainsburys marketing campaigns must be ranked as highly
effective.

Marketing Strategy

The marketing strategy may be described as the overall aim and approach that an
organisation embraces to advance its predetermined organisational goals (Stanton,
1981). Tesco holds a market leadership position and are mainly focused on retaining
this market share by endearing themselves to their client by promoting brand
awarenss and brand loyalty (Tesco, 2011). Tesco marketing strategy is therefore
aligned to the objective of promoting brand loyalty. To this end, the chain maintains a
large database using their various loyalty identity cards which they use to collect
information on the shopping habits of their clients. This information helps them to
conduct a bigger scale of direct marketing where customers are approached with
offers on products that they are likely to need at any particular day (Humby, Hunt and
Phillips, 2004). For instance, a mother who has just given birth to a baby is likely to
need baby clothes, milk, diapers and other items that are useful for the infants. Tesco
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would use this information to conduct a targeted marketing to create need for such
products for such parents. The shoppers are therefore categorised into the various
segmented groups according to their anticipated needs and contacted accordingly.
Tesco therefore builds the image of being all things to all men to portray them as a
store that is keen to meet their customers needs at any time. Brand enhancement
campaigns are also conducted through advertisement in televisions, radios, and
through various sociable sites (Thomas, 2011). Tesco strategy is obvious, with
development being practiced from four areas, the core UK grocery business,
international growth and retailing services, non food, the dot-com business and
telecommunication packages. Essentially, Tesco is using its strong constant core to
keep the business marking over while it forges new riskier areas of expansion.
Pushing additional into non food in the next stage. (Johnson, G., Scholes, K.,
Whittington, R., (2005)). Lidl is presently "destroying" the market by selling the
products under cost price. Therefore, Tescos broad strategy will have to be cost
leadership, unless we can successfully distinguish our line of clothing so that we can
charge a finest price. A marketing strategy will engage analyzing the markets, and
which products to offer. The strategy is executed through marketing tactics, which
involve detailed conclusions about factors as the price and how the product is
distributed. So Tesco must choose on its model of entry in terms of, Internet
advertising, own stores, or joint venture with an existing nationwide retailer.
Tesco's growth over the last twenty or thirty years has concerned an alteration of its
strategy and image. Its primary achievement was based on the "Pile it high, sell it
cheap" advance of the founder Jack Cohen.
Every little helps Tesco has very attractive slogan for their business these days , As
they provide every little thing to their customers.
An inclusive offer" This slogan is used by Tesco to convey its ambition to appeal to
upper income, medium income and low income customers They've dragged off a trick
that I am not conscious of any other retailer achieving. That is to appeal to all
segments of the market.
One board of this inclusivity has been Tesco's use of its own brand products, as well
as the upmarket "Finest" and low-price "Value varieties. The company has overcome
customer refusal to purchasing own brands, which are generally considered to be

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more cost effective for a supermarket as it upholds a high portion of the overall profit
than it does for labelled products.
The company has a four-pronged strategy:
Core UK business: It has been active and innovative in finding ways to enlarge, such
as making a large scale move into the ease store sector.
Non-food business: Tesco sells a growing variety of own brand non food products, as
well as non food Value and Finest series. It also has done pretty well in non food sales
in Ireland.
Retailing services: Tesco has obtained the lead in its segment in growing into areas
like telecoms, personal finance, and utilities.
International: - Tesco began to enlarge globally in 1994, and in the year ending March
2005 its global operations accounted for just over 20.5% of
sales, or about 7.2 billion.
Sainsbury on the other hand had fight from a weakened market position having lost its
market leadership in the 1990s and dropped to its current third position (Baker, 2010).
Its marketing strategy is therefore more focused on growing its market share though
with a keen focus on ensuring that the customers gained are retained. With this
objective in mind, the chain has been intermixture advert campaigns with various
loyalty card program that have been of help in enabling them to collect useful data on
the shopping habits of their customers (Braue, 2005). Having realised that most
shoppers only wanted to buy the same items over and over, the company has recently
embarked on a mission to encourage customers to try on some new products. This
approach was of course aimed at not only stimulating new sales among existing
customers, but also attracting an additional customer base Sainsbury is trying to
design its marketing strategies and plans while considering the modern needs and
requirements of the customers. Increasing consumer awareness of health and
environmental issues along with an increasing resistance towards genetically modified
(GM) food products and GM farming, has led to the rapid increase in the demand for
organic food. Natural and organic food products segment is one of the fastest growing
categories in food retailing. In 2007, retail sales of organic food in the UK were
approximately 2 billion (approximately $4 billion). The overall sales of organic
products grew at an annual growth of 27% in the past decade. It is estimated to grow
at a CAGR of 15% during 200510, to touch approximately 3 billion (approximately
$6 billion) by 2010. Sainsbury already has an established organic brand, Sainsburys
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SO organic, which has over 450 products including organic meat, eggs and milk.
Increasing customer preference for organic foods would favorably impact the
companys sales (Levin, 2003, pp. 281-290).
With the mission of Making Sainsburys great again, the company has set its goals
as follows:
To deliver an ever-improving quality shopping experience for customers with great
products at fair prices.To exceed customer expectations for healthy, safe, fresh and
tasty food to help make their lives easier every day (from j-sainsbury.co.uk, 2006).
The core values of the company are given as:
Getting better every day the company is focused on improving its services
Great service drives sales providing better service is aimed for higher sales
Individual responsibility team delivery although teamwork is encouraged, very
individual in the company has a responsibility in meeting service standards
Keep it simple simple and efficient services are offered (from j-sainsbury.co.uk,
2006)
Respect for the individual every individual and employee within the company is
respected
Treat everyone as your own the revenue of the company is aimed at distribution and
betterment of the company
The business priorities of the company are focused on:
Making Sainsburys great again is the priority of the company and the focus of their
business agenda. Sainsburys tries to obtain feedback from customers and colleagues,
and then compare the products available in the stores to understand what is in the way
of delivery to customers and what issues or obstacles should be sorted out. The
company is focused on dealing with the basics that can help accelerate the services
through getting better every day so as to achieve the goal (from j-sainsbury.co.uk,
2006). Recreating universal customer appeal through giving customers an improved
shopping experience is their main agenda. This means improving services on a daily
basis. Improving availability of services and products seems to be vital in providing
good quality to consumers. Stores are arranged and maintained in a way to provide a
welcoming and clean atmosphere for shopping. The aim is also to reduce or minimize
queues with very efficient service counters. The objective is to adhere to the fact that
great service drives sales, which is the main priority. Customers increasingly demand
healthy, fresh, safe and tasty food and Sainsburys aims to provide these and improve
customer satisfaction so that customers return to shop with the company again and
again. The premium and healthy ranges for products are made available more
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frequently and in larger quantities. Sainsburys aim is to be a part of the daily lives of
customers providing for their daily and weekly food and grocery shopping needs, as
well as providing the ability for them to buy clothing and other products. Depending
upon the size of a store and its location Sainsburys aims to offer products that will
meet all the needs of customers (from j-sainsbury.co.uk, 2006).

The SWOT analysis for Sainsburys could be performed and this would focus on:
Strengths:
Strong brand name, a large number of employees, strong presence across the UK,
solid customer base, and good reputation
Weaknesses:
Many competitors in the market, loyalty schemes introduced are not implemented
appropriately so the major benefits of the scheme remain uncertain, and more focus
on management strategy and better customer service could be recommended
Sainsburys should conduct thorough market research to introduce cheaper products
than other supermarkets.
Opportunities:
Large consumer base especially during Christmas and festivals Sainsburys is already
one of the main competitors and major retail store in the UK. Opportunities in terms
of online marketing and financial services are abundant
Threats:
Competition from other companies such as Tesco and Asda. Price of Sainsburys
products may be higher than competitors, and importance of building long term
customer relationships as customers may be driven away by competitors.

Industry Analysis
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Operating in a globalized environment with stores around the globe (Tesco now
operates in six countries in Europe in addition to the UK; the Republic of Ireland,
Hungary, Czech Republic, Slovakia, Turkey and Poland. It also operates in Asia: in
South Korea, Thailand, Malaysia, Japan and Taiwan), Tesco's performance is highly
influenced by the political and legislative conditions of these countries, including the
European Union (EU).
For employment legislations, the government encourages retailers to provide a mix of
job opportunities from flexible, lowerpaid and locally-based jobs to highly-skilled,
higher-paid and centrally-located jobs (Balchin, 1994). Also to meet the demand from
population categories such as students, working parents and senior citizens. Tesco
understands that retailing has a great impact on jobs and people factors (new store
developments are often seen as destroying other jobs in the retail sector as traditional
stores go out of business or are forced to cut costs to compete), being an inherently
local and labour-intensive sector. Tesco employs large numbers of; student, disabled
and elderly workers, often paying them lower rates. In an industry with a typically
high staff turnover, these workers offer a higher level of loyalty and therefore
represent desirable employees.
Economic factors are of concern to Tesco, because they are likely to influence
demand, costs, prices and profits. One of the most influential factors on the economy
is high unemployment levels, which decreases the effective demand for many goods,
adversely affecting the demand required to produce such goods.
These economic factors are largely outside the control of the company, but their
effects on performance and the marketing mix can be profound. Although
international business is still growing, and is expected to contribute greater amounts
to Tesco's profits over the next few years, the company is still highly dependent on the
UK market. Hence, Tesco would be badly affected by any slowdown in the UK food
market and are exposed to market concentration risks.
Current trends indicate that British customers have moved towards 'one-stop' and
'bulk' shopping, which is due to a variety of social changes. Tesco have, therefore,
increased the amount of non-food items available for sale. Demographic changes such
as the aging population, an increase in female workers and a decline in home meal
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preparation mean that UK retailers are also focusing on added-value products and
services. In addition, the focus is now towards; the own-label share of the business
mix, the supply chain and other operational improvements, which can drive costs out
of the business. National retailers are increasingly reticent to take on new suppliers
(Clarke, Bennison and Guy,1994; Datamonitor Report, 2003).
The type of goods and services demanded by consumers is a function of their social
conditioning and their consequent attitudes and beliefs. Consumers are becoming
more and more aware of health issues, and their attitudes towards food are constantly
changing. One example of Tesco adapting its product mix is to accommodate an
increased demand for organic products. The company was also the first to allow
customers to pay in cheques and cash at the checkout.
Technology is a major macro-environmental variable which has influenced the
development of many of the Tesco products. The new technologies benefit both
customers and the company: customer satisfaction rises because goods are readily
available, services can become more personalised and shopping more convenient.The
launch of the Efficient Consumer Response (ECR) initiative provided the shift that is
now apparent in the management of food supply chains (Datamonitor Report, 2003).
Tesco stores utilise the following technologies:
Wireless devices
Intelligent scale
Electronic shelf labeling
Self check-out machine
Radio Frequency Identification (RFID).
The adoption of Electronic Point of Sale (EPoS), Electronic Funds Transfer Systems
(EFTPoS) and electronic scanners have greatly improved the efficiency of distribution
and stocking activities, with needs being communicated almost in real time to the
supplier (Finch, 2004).
In 2003, there has been increased pressure on many companies and managers to
acknowledge their responsibility to society, and act in a way which benefits society
overall (Lindgreen and Hingley, 2003). The major societal issue threatening food
retailers has been environmental issues, a key area for companies to act in a socially
responsible way. Hence, by recognizing this trend within the broad ethical stance,
Tesco's corporate social responsibility is concerned with the ways in which an
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organization exceeds the minimum obligations to stakeholders specified through

regulation and corporate governance. (Johnson and Scholes, 2003) Graiser and Scott
(2004) state that in 2003 the government has intended to launch a new strategy for
sustainable consumption and production to cut waste, reduce consumption of
resources and minimise environmental damage. The latest legislation created a new
tax on advertising highly processed and fatty foods. The socalled 'fat tax' directly
affected the Tesco product ranges that have subsequently been adapted, affecting
relationships with both suppliers and customers
Various government legislations and policies have a direct impact on the performance
of Tesco. For instance, the Food Retailing Commission (FRC) suggested an
enforceable Code of Practice should be set up banning many of the current practices,
such as demanding payments from suppliers and changing agreed prices
retrospectively or without notice (Mintel Report, 2004). The presence of powerful
competitors with established brands creates a threat of intense price wars and strong
requirements for product differentiation. The government's policies for monopoly
controls and reduction of buyers' power can limit entry to this sector with such
controls as license requirements and limits on access to raw materials (Mintel Report,
2004; Myers, 2004). In order to implement politically correct pricing policies, Tesco
offers consumers a price reduction on fuel purchases based on the amount spent on
groceries at its stores. While prices are lowered on promoted goods, prices elsewhere
in the store are raised to compensate.
The UK grocery market is primary dominated by few competitors, including four
major brands of Tesco, Asda, Sainsbury's and Safeway that possess a market share of
70% and small chains of Somerfield, Waitrose and Budgens with a further 10%. Over
the last 30 years, according to Ritz (2005), the grocery market has been transformed
into the supermarket-dominated business. Majority of large chains have built their
power due to operating efficiency, one-stop shopping and major marketing-mix
expenditure. This powerful force had a great impact on the small traditional shops,
such as butchers, bakers and etc. Hence, nowadays it possesses a strong barrier for
new companies who desire to enter the grocery market. For instance, it becomes
rather difficult for new entrants to raise sufficient capital because of large fixed costs
and highly developed supply chains. This is also evident in huge investments done by
large chains, such as Tesco, in advanced technology for checkouts and stock control
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systems that impact new entrants and the existing ones. Other barriers include
economies of scale and differentiation (in the provision of products or services with a
higher perceived value than the competition) achieved by Tesco and Asda seen in their
aggressive operational tactics in product development, promotional activity and better
distribution.
The bargaining power of suppliers that can be influenced by major grocery chains and
that fear of losing their business to the large supermarkets. Therefore, this
consolidates further leading positions of stores like Tesco and Asda in negotiating
better promotional prices from suppliers that small individual chains are unable to
match Ritz (2005). In return, UK based suppliers are also threatened by the growing
ability of large retailers to source their products from abroad at cheaper deals. The
relationship with sellers can have similar effects in constraining the strategic freedom
of the company and in influencing its margins. The forces of competitive rivalry have
reduced the profit margins for supermarket chains and suppliers.
Porter theorized that the more products that become standardized or undifferentiated,
the lower the switching cost, and hence, more power is yielded to buyers Porter M.
(1980). Tesco's famous loyalty card - Clubcard remains the most successful customer
retention strategy that significantly increases the profitability of Tesco's business. In
meeting customer needs, customizing service, ensure low prices, better choices,
constant flow of in-store promotions enables brands like Tesco to control and retain
their customer base. In recent years a crucial change in food retailing has occurred
due to a large demand of consumers doing the majority of their shopping in
supermarkets that shows a greater need for supermarkets to sell non-food items. It has
also provided supermarkets with a new strategic expansion into new markets of
banking, pharmacies, etc. Consumers also have become more aware of the issues
surrounding fairer trade and the influence of western consumers on the expectations
and aspirations of Third World producers. Ecologically benign and ethically sound
production of consumer produce such as tea, coffee and cocoa is viable, and such
products are now widely available at the majority of large chains.
General substitution is able to reduce demand for a particular product, as there is a
threat of consumers switching to the alternatives Porter M. (1980). In the grocery
industry this can be seen in the form of product-for-product or the substitute of need
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and is further weakened by new trends, such as the way small chains of convenience
stores are emerging in the industry. In this case Tesco, Asda and Sainsbury's are trying
to acquire existing small-scale operations and opening Metro and Express stores in
local towns and city centres Ritz (2005).
The grocery environment has seen a very significant growth in the size and market
dominance of the larger players, with greater store size, increased retailer
concentration, and the utilization of a range of formats, which are now prominent
characteristics of the sector. As it was mentioned above, the purchasing power of the
food retailing industry is concentrated in the hands of a relatively small number of
retail buyers. Operating in a mature, flat market where growth is difficult (a driver of
the diversification into non-food areas), and consumers are increasingly demanding
and sophisticated, large chains as Tesco are accruing large amounts of consumer
information that can be used to communicate with the consumer Ritz (2005). This
highly competitive market has fostered an accelerated level of development, resulting
in a situation in which UK grocery retailers have had to be innovative to maintain and
build market share. Such innovation can be seen in the development of a range of
trading formats, in response to changes in consumer behaviour. The dominant market
leaders have responded by refocusing on price and value, whilst reinforcing the added
value elements of their service.
Tesco is the top grocer and leading retailer in its home market of the UK. Pitched at
the broad middle mass-market, it has maintained its position through a clear focus,
well targeted product offer and excellent record both in product and format
innovation. Tesco also leads the world in online grocery retailing. In the UK the
company concentrates on running grocery superstores, cstores and an online service.
Elsewhere the focus is usually on hypermarkets. In 2003, the group's trading record
around Europe and UK has been outstanding.
Superior performance, according to Johnson and Scholes (2003), has to be determined
by the way in which company's resources are deployed to create competence in the
organisational activities. Core competencies are activities or processes that critically
underpin the company's competitive advantage. The primary target for the company is
to recognize that competition between businesses is as much a race for competence as
it is for market position and market power. Therefore, the goal for Tesco management
is to focus the attention on competencies that really affect competitive advantage. The
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competence leads to levels of performance from an activity or process that is

significantly better than competitors. Benchmarking may help in understanding
performance standards and what constitutes good or bad performance. However, it
will be crucial for Tesco to look at the generic level. Core competences may be
embedded deep in Tesco at an operational level in the work routines. The framework
developed by Prahalad and Hamel in the 1990s suggests that over time companies
may develop key areas of expertise which are distinctive to that company and critical
to the company's long term growth (Drejer, 2000; De Toni, and Tonchia, 2003). In the
case of Tesco the areas of expertise are most likely to develop in the critical, central
areas of the organisation where the most value is added to its service and its delivery.
For example, trust in the Tesco brand lies at the heart of these services and in 2003 the
number of retail service accounts rose by 36%. Some 50,000 new service accounts per
week are being opened and Tesco sees these areas as long term businesses with the
potential to build real scale. Financial services have also been launched internationally
in for example Hungary and Korea (Datamonitor Report, 2003; MarketWatch, 2004).
Through a long period of operations, core competencies of Tesco have to be rather
fixed. Prahald's and Hamel's approach states that core competencies should change in
response to changes in the company's environment and be flexible and evolve over
time. Therefore, Tesco needs to adapt to new rapidly changing circumstances and
opportunities, so its core competencies will have to adapt and change. The example of
this was when the company has launched its loyalty card and went into banking. Core
competences framework suggests three factors, which can help to identify core
competences: Provide potential access to a wide variety of markets : enables the
creation of new products and services. Fro instance, Tesco has established a strong
leadership in food retailing industry. The core competence that enabled Tesco to enter
retailing of food and non-food products was a clear distinctive brand proposition that
had a focus on a properly define market segment. Tesco is recognized as the company,
providing the most customized and efficient service, based on a good customer
relationship management. Makes a significant contribution to the perceived customer
benefits of the outcome: delivers a fundamental customer benefit. In order to identify
core competences in a particular market, the question of - why is the customer willing
to pay more or less for one product or service than another- needs to be addressed. For
example, Tesco have been very successful in capturing the leadership of the retailing
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market. This shows that Tesco designs and implements effective supply systems and
deliver an efficient "customer interface". Tesco was the first UK grocer to launch a
loyalty card and has been the most effective. Palmer (2004) claims that until recently,
it was the only grocer to use the information to mail customers every month. Difficult
for competitors to imitate highlights the need for a core competence to be
competitively unique. This indicated the importance of product differentiation. For
example, for many years up to 2003 (In 2003 Tesco has been recognised a leading UK
food retailer) Tesco had a very strong position within the retailing industry. It had a
different approach to the service concept, providing good corporate reputation and
introducing new premium quality products (MarketWatch, 2004). Applying this
framework to Tesco shows that the company in order to be successful has to base its
business strategy on these capabilities. Capabilities result from Tesco's ability to
combine and exploit these resources in uniquely different ways. In the external
environment, the intensity of competition is not completely under the retailer's
control, however, to compete effectively Tesco have to identify its core competences
and use them for company's advantage.
Conclusion

Tesco and Sainsbury have been engaged in a battle for supremacy for decades with
Tesco seeming to have the upper hand in the battles. However, with the brilliance of
Sainsburys marketing initiatives, they may be able to recover some of the lost
grounds. Tesco on the other hand commands impressive levels of customer loyalty: a
fact that would make it difficult for Sainsbury to make more than proportionate gains.
The marketing campaign adopted by Sainsbury of encouraging new consumptions is
bound to wear out consumers and in the absence of an equally brilliant campaign; the
growth momentum may be lost. The battle for supremacy in the market is therefore
likely to be won by the organisation that will pursue the right marketing strategy and
implement it effectively.
The success of the Tesco shows how far the branding and effective service delivery
can come in moving beyond splashing one's logo on a billboard. It had fostered
powerful identities by making their retiling concept into a virus and spending it out
into the culture via a variety of channels: cultural sponsorship, political controversy,
consumer experience and brand extensions. In a rapidly changing business
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environment with a high competitors' pressure Tesco have to adopt new expansion
strategies or diversified the existing in order to sustain its leading market position in
an already established retailing market. The company must constantly adapt to the fast
changing circumstances. Strategy formulation should therefore be regarded as a
process of continuous learning, which includes learning about the goals, the effect of
possible actions towards these goals and how to implement and execute these actions.
The quality of a formulated strategy and the speed of its implementation will therefore
directly depend on the quality of Tesco's cognitive and behavioural learning
processes. In large organizations as Tesco strategy should be analysed and
implemented at various levels within the hierarchy. These different levels of strategy
should be related and mutually supporting. Tesco's strategy at a corporate level
defines the businesses in which Tesco will compete, in a way that focuses resources to
convert distinctive competence into competitive advantage.

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