COUNTRY REPORT 2018

TESCO
VS
BIG BAZAAR

SUBMITTED TO:
DR. IAN BATHGATE
 Group Details

PROGRAM: SAP 2018 (PG)

GROUP MEMBERS: DEEPANSHU BANSAL (A30101917104) (6C)

DIPANSHU CHOPRA (A30101917070) (6C)

RAGHAV GARG (A30101917081) (6C)

RAJ MADHAV SOOD (A0102217125) (7)

ABHAY SINGH (A0102217145) (7)

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Table of contents

• ‘Tesco company profile

• Food Retail Industry in UK
• TOWS analysis Tesco
• SWOT analysis Tesco
• Porter’s 5 forces Tesco
• Supply chain initiatives of Tesco
• Big Bazaar company profile
• Food Retail Industry in India
• SWOT analysis Big Bazaar
• Porter’s 5 forces Big Bazaar
• Challenges faced by Tesco
• Challenges faced by Big Bazaar
• Supply chain initiatives of Big Bazaar
• Conclusion
• Bibliography

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Tesco is Britain’s leading food retailer & the third largest in the world. Its first store
was opened in 1929 in London & by the early 1960s Tesco was a familiar feature of
most UK high streets. After joining the eighties trend for large out-of-town
supermarkets, in the 1990s the company started pioneering many new innovations.
It developed new store concepts such as Tesco Metro, a city center store meeting
the needs of local shoppers, & Tesco Express, the first UK petrol station
convenience store. In 1995 the company introduced its Club card, the UK’s first
customer loyalty card, & two years later formed a joint venture with the Royal
Bank of Scotland to offer a range of financial services. 2000 marked the start of
tesco.com which was built on the back of existing stores &, with low capital spend,
was profitable from the start – a key internal requirement. Tesco’s international
operation, which started in 1994, has steadily expanded & now accounts for half of
its total retail space. Since 2000 there has also been an increasing focus on building
non-food sales both in store & online with the result that, for example, Tesco is
now the UK’s largest CD retailer.

TRENDS
• There was a slight rise in economic confidence in the UK in 2016, thanks to a
second year of reasonable real GDP growth & low inflation. Unemployment
meanwhile dropped by almost a percentage point to below 6% in 2016, with many
consumers thus becoming willing to spend a little more freely. This benefited
sales via grocery retailers. Consumers however remain highly price-sensitive &
focused on seeking bargains, even as they became more indulgent in their
selection. This trend benefited private label in general but particularly benefited
discounters such as Aldi & Lidl, who increasingly attracted consumers by offering
premium indulgence at discount prices.

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COMPETITIVE LAND SCAPE

• Grocery retailers continues to be led by the established "big four" players: Tesco,
J Sainsbury, Asda & Wm Morrisons. Tesco accounted for 22% value share in
2016, ranking it far ahead of J Sainsbury with 13% & Asda with 12%. Tesco
benefits from having the largest network of outlets across the UK with an
impressive 3,751 stores in the year. Tesco also embraced the local shopping trend
that emerged from the middle of the review period & proved keen to open
convenience stores. By 2016, convenience stores accounted for a dominant 69%
of the company's overall outlet volume in grocery retailers, with expansion
continuing to focus mainly on this channel.

PROSPECTS
• There is expected to be a strong focus on technological innovation for the leading
grocery retailers in the forecast period, as leaders such as Tesco & J Sainsbury
seek to ward off competition from discounters & internet retailing. Waitrose for
example operates the Waitrose Hot Idea programmed focused on innovation, with
this trialing the Hiku home scanner device at the end of the review period. This
small magnetic device can be attached to a fridge for easy access & products can
be automatically added to an online shopping basket by scanning, while the
device also has voice recognition. A similar app may also be offered. J Sainsbury
is meanwhile trialing its Smart Shop shopping list app for smartphones, with this
also offering a scanner & a GPS in-store guide indicating product location. Once
selected consumers will also be able to scan via the Smart Shop h&set & pay via
their phone, thus avoiding the checkouts altogether.

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TOWS & SWOT ANALYSIS OF TESCO
Internal Strengths:
1. Largest UK grocery market share, with 28.4% (Telegraph, 2015).

2. Established supply networks with 58% supplier satisfaction (Tesco Plc, 2015).

3. Employee satisfaction is high, with 70% employees recommending Tesco as a good

workplace, and 77% recommending it as a good place to shop (Tesco Plc, 2015).

Weaknesses:
1. Sales including VAT and fuel declined by 1.3% in 2014/15 (Tesco Plc, 2015).

2. Group profit declined by 1.4 billion GBP in 2014/15 (Tesco Plc, 2015).

3. Retail cash flow declined 2014/15 by 1.9 billion GBP.

4. Too much debt, 22 billion GBP as of 2014/15 (Tesco Plc, 2015).

Opportunities:
1. Boost in clean eating promoting sales of fresh food, with a growth of 5% in the sales
of fruits and vegetables (Kantar, 2016).

2. Lower corporation tax can be used to lower prices to gain price advantage.

3. Sales of organic food rose are rising, by 4% in 2014 (Ft, 2015). Tesco has the
opportunity to introduce their own organic product line.

TOWS :
Strengths and Opportunities:
1. Since Tesco is an already well established business with 28.4% of the grocery market
share, they have the opportunity to move into the growing organic food market using
their established brand name and market position (S1 O1 O3).

2. Established supply network and good supplier relations could enable better price
negotiations for Tesco, which paired with lower corporation tax can assist in gaining
price advantage for Tesco in the competitive grocery market (S2 O2).

Weaknesses and Opportunities:

1. Declining sales could be countered by focusing on the growing trend of clean eating,
by supplying more fresh and organic food to boost sales (W1 O1 O3).

2. Focusing on the emerging health food market could also help Tesco solve its
profitability and liquidity issues if sales are boosted (W2 W3 W4 O1 O3).

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 Threats:
1. The growing popularity of discount and convenience stores, such as Aldi and Lidl.

2. Supermarket price wars forcing the prices lower, 2% in 2015 (Telegraph, 2015).

3. Threat of losing reputation and consumer confidence because of the 2014 accounting
scandal (Tesco Plc, 2015).

Strengths and Threats:

1. Since Tesco is still the market leader, Tesco has competitive advantage over the
rising discount stores, and they can use their scale to counter competition using price
cuts, which can be achieved through mass buying (economies of scale) (S1 T1).

2. Tesco can regain their reputation through customer and employee satisfaction, which
will automatically promote consumer confidence in the company, especially if consumers
and employees recommend the company to others (S3 T3).

Weaknesses and Threats:

1. Since the biggest cause of loss of sales forTesco is the growth of discount and
convenience stores, an alternative area of focus for Tesco could be to open more
convenience stores of its own, and close some of its supermarket outlets (W1 T1).

Threat of new entrants

The UK grocery market is primary dominated by few competitors, including four
major br&s of Tesco, Asda, Sainsbury’s & Safeway that possess a market share of
70% & small chains of Somerfield, Waitrose & Budgens with a further 10%.
Majority of large chains have built their power due to operating efficiency, one-
stop shopping & major marketing-mix expenditure. Hence, nowadays it possesses
a strong barrier for new companies who desire to enter the grocery market.

Bargaining Power of Suppliers

• This force represents the power of suppliers that can be influenced by major
grocery chains & that fear of losing their business to the large supermarkets.
Therefore, this consolidates further leading positions of stores like Tesco & Asda
in negotiating better promotional prices from suppliers that small individual
chains are unable to match Ritz (2005).

Bargaining Power of Customers

• Porter theorized that the more products that become st&ardized or
undifferentiated, the lower the switching cost, & hence, more power is yielded to

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 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 & retain their customer base.

Threat of Substitutes
• 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 & 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 &
Sainsbury’s are trying to acquire existing small-scale operations & opening Metro
& Express stores in local towns & city centres Ritz (2005).

• Bargaining Power of Competitors The grocery environment has seen a very

significant growth in the size & market dominance of the larger players, with
greater store size, increased retailer concentration, & the utilisation of a range of
formats, which are now prominent characteristics of the sector. Operating in a
mature, flat market where growth is difficult & consumers are increasingly
dem&ing & sophisticated, large chains as Tesco are accruing large amounts of
consumer information that can be used to communicate with the consumer Ritz.

• Point of scale scanning

• Centralized ordering
• Automated warehouse control
• Electronic data interchange
• Just in time approach

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 Big Bazaar Pvt., Ltd operates a hypermarket that offers fashion & general
merch&ise such as home furnishings, utensils, crockery, cutlery, sports goods,
electronics, toys, footwear, men's & women's apparel, accessories such as
sunglasses, watches, & h&bags, luggage, fruits, vegetables, & stationary products.
The company sells its products through its retail stores located nationwide. Big
Bazaar Pvt., Ltd was founded in 2001 & is based in Mumbai, India. The company
operates as a subsidiary of Future Retail Limited.

• TRENDS
Modern grocery retailing registered current value growth of 18.2% in 2016. This
was stronger than the growth observed by traditional grocery retailers, which was
10.7%. Modern grocery retailing registered the stronger growth due to the
increased footfalls by urban consumers at hypermarkets & supermarkets. Young
urban consumers prefer to shop for their groceries once a week, which is most
convenient to do at modern grocery retailing, as the offers given by these retailers
when buying in bulk translate to lower pricing as compared to that of traditional
grocery retailers. However, the size of traditional grocery retailers continues to be
much larger than that of modern grocery retailers. Consumers continue to prefer
traditional retailers when buying daily goods, as it requires less time, billing
processes are much faster & free home delivery is available as well.
• COMPETITIVE LAND SCAPE
Future Value Retail maintained its leading position amongst grocery retailers with
a 1% value share in 2016. The company, with its flagship br& Big Bazaar,
maintained its lead due to its strong br& value, affordable pricing & long st&ing
presence.
• PROSPECTS
Value sales of grocery retailing are expected to grow at a CAGR of 11% at
constant 2016 prices over the 2016-2020 forecast period, driven by both
traditional & modern grocery retailers. Both the channels are expected to grow
side by side, as the target audience & the purpose for which they were used are
different, where modern grocery retailers will be preferred for bulk shopping &
traditional grocery retailers will be preferred for quick-stop shopping.

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 Strengths:
• High br& equity enjoyed by Big Bazaar
• State of the art infrastructure
• A vast variety of stuff available under one roof
• Everyday low prices, which attract customers
• Maximum percent of footfalls converted in sales
• Huge investment capacity
• Biggest value retail chain in India
• It offers a family shopping experience, where entire family can visit together

Weakness:
• Unable to meet store opening targets on time
• Falling revenue per sq ft
• General perception: ‘Low price = Low quality’
• Overcrowded during offers
• Long lines at billing counters which are time consuming
• Limited only to value offering low price products.

Opportunity:
• A lot of scope in Indian organized retail as it st&s at approximately 4%.
• Increasing mall culture in India.
• More people these days prefer to visit big stores where they can find large variety
under one roof

Threats:
• Competition from other value retail chains such as Shoprite, Reliance (Fresh &
trends), Hypercity & D mart.
• Unorganized retail also appears to be a threat to Big Bazaar’s business. A large
population still prefers to visit local convenient stores for daily purchases
• Changing Government policies
International players looking to foray India

Barriers to entry – 10 years ago barriers to enter the retail industry would have
been quite low. Capital requirements then were quite small & anyone with a small
loan could put up a small neighbourhood shop & sell goods. Two things have
changed in today’s scenario. Firstly, major industrial houses have opened up
supermarkets & hypermarkets. Secondly, consumers’ preferences in shopping
have shown a marked interest in malls & big shopping centers. As a result entry
barriers have increased manifold as setting up a small shop may not realize the
required return on investment.

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Rivalry within the industry – The industry today is highly fragmented which
means the rivalry is quite low. At the same time the rapid growth of retailing
means there’s enough room for everyone to survive & grow. Things will change
as the share of organized retail grows from the current measly 2%. As more &
more players start setting up shop we can see an increase competition but this is
not expected to occur for at least another 5-6 years as there is enough room for all.

Threat of substitutes – Technology can be a big threat to the industry if the

Internet takes off & e-tailing follows suit. That is unless the current players are
unable to integrate their current channels with the Internet. In fact many players
have already begun to invest in multi-channel operations & are reaping the
benefits of the same.

Bargaining power of suppliers – The changing dynamics of the industry makes

this a difficult force to examine. About 10 years ago with mostly smaller players
in the market the big FMCG suppliers wielded most of the bargaining power &
were able to dictate terms. However, the organized sector has been able to scale
up really fast & is now able to use this scale to get better terms from the suppliers.
A recent example of the tilt in the balance is Big Bazaar’s refusal to stock Frito
Lays unless it got bigger margins. With a huge customer base Big Bazaar was
able to refuse shelf space for an important snack item which is a best seller
amongst the masses.

Bargaining power of buyers – Although the bargaining power of buyers has not
improved the advent of organized retail has certainly helped them get better deals.
Disintermediation has helped eliminate non-value adding entities from the supply
chain there by reducing costs which are ultimately passed on to the end customer.
If we take into account all the five forces we can see that the industry is quite
attractive if you have the capital to set up & scale up rapidly. We can see more &
more corporate houses entering the fray to make the most of this golden
opportunity.

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Trading
Tesco outperformed expectations by placing thous&s of extra staff on the shop
floor & tempting shoppers back from the discounters with special offers on basics
such as the ‘festive five’ vegetables including carrots, sprouts & parsnips.
The latest industry figures suggest momentum has slowed as rivals such as ALDI
& ASDA have both cut prices further.
One of Davies’ first priorities will be to work on where & how Tesco should be
cutting prices or using its Club card & advertising to get shoppers back through its
doors.

Morale
One of the first moves by Tesco chief executive Dave Lewis, who arrived in
September, was to put more staff on the shop floor in an attempt to improve
service. But Tesco has also been going through a brutal process of cost-cutting,
with tiers of management removed from stores & thous&s of jobs going at its
head offices. The group is also dumping its final-salary pension scheme &
changing the way it calculates staff bonuses.
If Tesco wants to win back shoppers, then its army of shop staff have a key role to
play & Davies needs to lift morale following the job cuts & remotivate staff.

Improving service
In his previous roles at Halfords & Pets at Home, Davies oversaw training
programmes which rewarded staff for improving their skills & helped the
business lift sales by having more informed shop assistants.
He’s likely to bring that approach to Tesco. He will have to adapt it for Tesco’s
shop floor as grocery retailing is inherently more self-service than the businesses
Davies has previously worked in.
Tesco has spent millions of pounds installing self-service tills. Some shoppers
love them, but others detest being lectured by a mis-functioning machine. Davies
will have to decide how to get the balance right.

Rebuild the brand

British shoppers have fallen out of love with Tesco. Davies needs to work out the
detail of how the Tescopoly can turn into a consumer champion. That can’t just be
about advertising & PR, although both tools will be important.
£263m accounting sc&al, Tesco has changed its ways. Deals with suppliers are
already being overhauled.
Tesco can use its vast size for the benefit of its shoppers & their communities – &
that doesn’t just mean 5p off a tin of beans.

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 Concept of sabse sasta din-
This concept was idea of Mr. kishore biyani owner of Future group. Question here
arises is why they had chosen 26 January for this promotion scheme. Main reason
was according to KB (who knowns the pulse of Indian consumer) that because at
this day people used to stay at home due to holiday of Republic day. so, they
thought why should not we convert this day in happy day. so, people can enjoy
shopping at his store.

Challenges of this promotion scheme-

When all executives were in the meeting the decision has been taken that we are
going to introduce this scheme in mass market. Mostly executives were afraid &
they raises following questions during meeting.
Does Indian consumer respond it?
Without using mathematical tools how far it would be effective?
Does Innovative idea works?
After clarifying all the doubts final decision took place & Head of operation told
that 26 KO 26 crore should be sales target. All became agree & jumped into
market. For mitigation of this risk they also had planned that this scheme would
be for only one day.

• The Big Bazaar distribution centres act as warehouses alone unlike those of the
Wal-mart where these centres act as developers of suppliers.
• There is actually no pull mechanism in order generation and it depends largely on
the decisions by individual category managers on weekly basis.

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 It is clear therefore that the retailed industry is a big industry in both countries,
even in the UK despite having existed for so long because of the continued
growth in the retail sector. As mentioned earlier, both companies can take
advantage of each others strategies to perform better in their own respective
countries.

• marketingfact.blogspot.co.uk
• theguardian.com
• wikipedia.org
• tescoplc.com
• bigbazaar.com
• bigbazaardirect.com
• quora.com

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