5. Will Tesco's Strategies be Sufficient to Improve Its Long Term Competitive Positioning?
This is a very interesting question, as to how Tesco will approach and pursue its long term objectives. Observers of Tesco's changing fortunes and services during the last years will note as their portfolio has grown and expanded well beyond their original grocery product lines, into what some may consider striving to be ‘all things to all men' in the customer and consumer services market, as the strategy to follow to increase their financial strength, which in turn will add further stake-holder value and move them closer to Wal-Mart on the international stage.
Potential Problems - as they continue to expand their overseas interests they will increase their exposure to foreign currency fluctuations against their home-based British Sterling currency. This will require some very professional monitoring and they will need to have control mechanisms in place to determine the times when to hedge, sell and buy foreign currencies according to the movement of what has already become quite a number of foreign currencies. As we may see in the first main paragraph under Item 2.above, during 2008 Tesco obtained sales of £700 million from those foreign countries it is trading in. Although in percentage terms this is only around 1.5% of total sales it is destined to increase as Tesco continues with its growth strategy through international market expansion. From the writer's own business experience of managing a company with 75% export sales, exchange losses can easily become a problem unless careful control is maintained. Similar sized American companies generally seem to avoid this type of potential problem by always insisting their overseas suppliers and customers trade in US dollars, and will mostly get away with it; other countries, including Great Britain cannot and hence the points made above.
With further reference to Item 2.above, Tesco had a net debt of £6,200 million for fiscal year 2008 which may limit any future loans required to fund further overseas expansion. Given the current state of the UK's banking situation, and with pension fund liabilities annually increasing brought about by the current, and anticipated medium-term poor equity and bond market returns, this area may cause difficulties and even possible delays to their expansion programme.
On the environmental front, this should not present any new problems for them as they are already practicing modern applications as discussed earlier, in their other national and international stores, and the group management seems to be aware of the standards and is supporting green policies.
In summary, based on Tesco's sales and profit growth and achievements in new product lines, be they telecom, financial services, legal non-lawyer services, etc. along with their export market progress, they would seem to have the wherewithal to make further export market expansion and follow their strategy successfully.
Another consideration towards their continued growth has to include Group management, and I think in particular the Chief Executive Office, Sir Terence Leahy, who seems to have been instrumental in creating the strategies and managing them towards the global shape they now have, joining the company at an early age, allegedly as a shelf-packer! As for many large and even smaller companies, the entrepreneurial and inspirational leaders are a key to the successful growth and maintenance of these companies, so careful planning for succession is paramount for the Group's longer term future.
- Tesco, Annual Review and Financial Statement 2008 (Page 7), PDF; [Online] Available ; http://www.tescoreports.com/downloads/tesco_review.pdf
- Tesco, Annual Review and Financial Statement 2008 (Page 4), PDF; [Online] Available ; http://www.tescoreports.com/downloads/tesco_review.pdf
- Tesco, Annual Review and Financial Statement 2008 (Page 33), PDF; [Online] Available ; http://www.tescoreports.com/downloads/tesco_review.pdf
- Tesco, Annual Review and Financial Statement 2008 (Page 3), PDF; [Online] Available ; http://www.tescoreports.com/downloads/tesco_review.pdf
- Tesco, Annual Review and Financial Statement 2008 (Page 3), PDF; [Online] Available ; http://www.tescoreports.com/downloads/tesco_review.pdf
- Tesco, Annual Review and Financial Statement 2008 (Page 7), PDF; [Online] Available ; http://www.tescoreports.com/downloads/tesco_review.pdf
- Tesco, Annual Review and Financial Statement 2008 (Page 12), PDF; [Online] Available ; http://www.tescoreports.com/downloads/tesco_review.pdf
- Schaefer, L. (2006, Business Section), DW-WORLD.DE ‘World's Biggest Retailer Wal-Mart Closes Up Shop in Germany' quoted in study by Knorr, A., Arndt A. [Online] Available ; http://www.dw-world.de/dw/article/0,2144,2112746,00.html
- Coles Stores, [Online], Available ; http://www.coles.com.au/
- Woolworths, [Online],Available; http://www.woolworths.com.au/AboutUs/OurStory/
- Franklin Stores,[Online], Available; http://www.franklins.com.au/home/inner.asp?pageID=6&mainID=0
