Tesco's Supply Chain Management Practices
| Case Code: OPER054 Case Length: 19 Pages Period: 2000-2005 Pub Date: 2006 Teaching Note: Not Available |
Price: Rs.400 Organization : Tesco Industry :Retail Countries : UK Themes: Supply Chain Management |
Abstract Case Intro 1 Case Intro 2 Excerpts
Background Note
Tesco was founded in 1919 by Jack Cohen (Cohen), who invested his serviceman's gratuity of £30 in a grocery stall. The first private label product introduced by Cohen was Tesco Tea. The name Tesco was a combination of the initials of the tea supplier - TE Stockwell and the first two letters of Cohen's name.
Tesco opened its first store in 1929. Cohen was influenced by the supermarket culture in America and tried to introduce the concept in the UK. The company's driving force was the idea: 'Pile it high and sell it cheap.' In 1947, Tesco went public and a year later, Tesco self-service stores were started. In 1956, the first Tesco self-service supermarket was opened.
In the 1960s, Tesco went on an expansion spree and acquired several store chains. The Retail Price Maintenance (RPM) Act in Britain prohibited large retailers from pricing goods below a price agreed upon by the suppliers.
To overcome this obstacle to price reduction, Tesco introduced trading stamps which were given to customers when they purchased products; they could be traded for cash or other gifts. RPM was abolished in 1964, and from then on, Tesco was able to offer competitively priced products to its customers. The first Tesco superstore, with an area of 90,000 square feet, was opened in 1967.
By the 1970s, Tesco's 'Pile it high, sell it cheap' philosophy no longer appealed to shoppers. As people got richer, they started demanding expensive and luxury items. The poor performance of Tesco even led to the saying 'doing a Tesco,' which meant snatching defeat from victory. Tesco's image took a further beating when Imperial Tobacco Company which had considered acquiring Tesco as a part of its diversification strategy, did not go ahead with the deal as it felt that Tesco might damage its corporate image. To arrest the downslide in its fortunes, Tesco's management went in for an overhaul of its stores during the decade. Several stores were closed down to concentrate on the superstores.
The smaller stores that still remained were refurbished to make them more customer-friendly. Tesco diversified into operating petrol pumps in 1974. In 1975, Tesco offered price discounts through a scheme called 'Checkout at Tesco.' By 1979, the company's turnover had reached £1 billion...
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