Tesco: A Comprehensive Analysis of the UK's Leading Food Retailer

Running head: TESCO
TESCO
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1TESCO
Introduction
In 1919, Jack Cohen founded Tesco in a market stall at the east end of London
city (Cuthbertson, Furseth and Ezell, 2015). In the UK, Tesco is the leading food
retailer, which deals with a wide range of food services and other merchandises
including entertainment, insurance, appliances including more. (Global Company
Intelligence, 2017) It works with more than 440,000 people worldwide and over
280,000 people in the United Kingdom. There are more than 2,000 stalls in the UK
and innumerable stores in Hungary, Thailand, China including the United States. In
2017, the revenue of Tesco plc is 43.9 billion, which takes about 26.3% of market
share in the retailing industry in British (Global Company Intelligence et al, 2017).
Tesco had 3,433 UK establishments in February 2017 (Tesco, 2017). The big success
of Tesco is not sudden or unplanned; it has high research value not only for its
competitors but also for the growing retailing industry.
Founded more than 100 years ago, Morrison had a booth at the Bradford Market.
(Moore, 2002) For a long time since then, it has been a family business. Under the 55-
years of leadership of Sir Ken Morrison till his retirement in 2008, the company has
grown steadily from "market stalls" to "supermarkets" with more than 450 stores and
is now the fourth largest food retailer in the UK (Toms, 2015). In 2017, Morrison
occupied 9.9% of market share. It is one of the major competitors of Tesco
(IBISWORLD, 2017). The revenue of Tesco and Morrison experienced a little change
compared to its other competitors from 2016 to 2017. As the operating profit of Tesco

2TESCO
fell, the operating profit of Morrison increased. It is important to analysis the statistics
in order to find the reasons for such changes.
Background
The supermarket industry has experienced fundamental changes in the last five
years. The financial downturn, widespread changes in the shopping habits of the
consumers and the massive extension of discounted supermarkets in Aldi and Lidl,
have affected the industry severely (Wortmann, 2004). In March 2014, Tesco and
Morrison announced significant price cuts, triggering a price war. Asda and Sainsbury
also followed, similar price cuts for the rest of the year. The price war mainly aims at
curbing the advancement of discount supermarkets with an increase in market share in
the recent years (IBISWORLD, 2017). In addition to these trends, Tesco, the largest
player in the industry, was involved in the accounting scandal in mid-2014, resulting
in massive regulatory changes in both Tesco as well as the broader industry. The
combined effect of these factors is expected to result in a relatively poor performance
of the five years in 2017-18. However, industry revenue is expected to increase this
year, due in part to rising inflationary pressures caused by rising procurement costs
(IBISWORLD et al, 2017).
In the last five years, operators in the industry have already begun to take advantages
of consumers' requirements for minimizing expenses and to earn revenue from the