This document summarizes strategic plans and initiatives by Tesco, a major retail chain in Malaysia, to strengthen its competitive position. It discusses Tesco's plans to convert all stores to its expanded "Extra" format, collaborate with international brands like Samsung to sell their products, expand offerings and services for small businesses, pursue joint ventures with Malaysian companies, focus on house brand products, and strengthen its supply chain through new distribution centers. The goal is to provide customers with a better shopping experience, strengthen competitive advantages through partnerships and supply chain efficiencies, and build loyalty through low prices.
1. Strategic
Management
Industry
:
Retail
Synergy
Presented
by
:
Mohd
Farid
Awang
Norhaizum
Sahril
3. VISION
Our
vision
is
for
Tesco
to
be
most
highly
valued
by
the
customers
we
serve,
the
communiAes
in
which
we
operate,
our
loyal
and
commiCed
staff
and
our
shareholders;
to
be
a
growth
company;
a
modern
and
innovaAve
company
and
winning
locally,
applying
our
skills
globally.
10. Tesco
aims
to
convert
all
stores
to
‘Extra’
format
Friday,
21
September
2012
Tesco
Stores
(M)
Sdn
Bhd
(Tesco)
aims
to
relaunch
all
of
its
naHonwide
stores
with
the
‘Extra’
format
within
a
few
years,
its
chief
execuHve
officer
(CEO)
Sung
Hwan
Do
said.
The
“Extra”
format,
an
innovaHve
hypermarket
format
adopted
in
all
Tesco
stores
worldwide,
supports
and
caters
to
the
wider
needs
of
small
businesses
apart
from
our
end-‐user
customers,
offering
extra
services,
choices
and
faciliHes
to
Tesco
customers.
The
new
concept
not
only
offers
new
range
of
products
at
low
prices,
but
also
offers
an
array
of
shops
and
kiosks
in
the
mall
area,
which
includes
a
new
food
court,
playland,
addiAonal
automated
teller
machines,
WiFi,
mobile
and
telecommunicaAon
shops
and
an
improved
car
park
system.
The
new
flagship
Tesco
Extra
MuHara
Damansara,
which
first
opened
in
2003,
had
undergone
a
five-‐month
long
renovaHon
period
to
unveil
a
modernised
look,
offering
a
wider
variety
to
customers
under
one
roof.
11. COLLABORATE
WITH
INTERNATIONAL
PLAYER
The
Star
Online
>
Friday
October
5,
2012
Samsung
products
to
be
sold
at
Tesco
Extra
SAMSUNG
Malaysia
Electronics
has
partnered
Tesco
to
introduce
Samsung
World
shop-‐in-‐shop
(SIS)
concept
retail
experience
to
a
hypermarket.
Aptly
named
Samsung
World,
the
partnership
culminated
in
a
launch
event
held
at
Tesco
Extra
MuAara
Damansara,
which
was
recently
refurbished
to
offer
a
whole
new
shopping
experience
to
customers.
The
strategic
collaboraAon
with
Tesco
Stores
(Malaysia)
Sdn
Bhd
entails
a
designated
area
within
Tesco
Extra
stores
that
features
Samsung’s
latest
range
of
innovaAve
products.
Aimed
at
providing
patrons
of
Tesco
Extra
with
a
different
retail
experience
and
a
beCer
understanding
of
Samsung’s
range
of
smart
living
soluAons,
Samsung’s
trained
product
experts
will
also
be
assigned
at
Samsung
World,
facilitaAng
consumers
and
providing
insights
on
the
latest
Samsung
innovaAons,
ranging
from
audio-‐visual
products,
mobile
phones,
digital
appliances,
digital
imaging
devices
and
IT
products.
“In
addiAon
to
designing
and
manufacturing
state-‐of-‐the-‐art
products
to
provide
beCer
soluAons
to
consumers’
daily
rouAnes,
Samsung
is
also
commiCed
in
ensuring
our
customers
receive
the
best
user
experiences,
be
it
ader
they
have
purchased
the
products
or
at
retail
level.
Latest
offerings:
Kwon
(led)
introducing
Samsung’s
range
of
televisions
to
Do.
Latest
offerings:
Kwon
(led)
introducing
Samsung’s
range
of
televisions
to
Do.
“We
are
honoured
and
excited
to
partner
Tesco
in
providing
a
brand
new
retail
experience
through
Samsung
World,
which
will
help
customers
beCer
understand
Samsung
products
and
how
they
can
enhance
users’
lives,”
said
Samsung
Malaysia
Electronics
managing
director
Kwon
Jae
Hoon.
15. STRENGTHEN
SUPPLY
CHAIN
RM60mio
:
Fresh
Food
DistribuAon
Centre
• Chilled
environment
• Three
different
temperature
zones:
-‐26°C
for
frozen
foods;
1°C;
and
12°C
for
other
fresh
produce
23. CLEARLY
STATED
CUSTOMER
RIGHT
Shop
with
confidence!
• We
welcome
all
customers.
No
membership
is
required.
• If
you
are
unsaHsfied
with
your
purchase,
you
may
return
your
purchase(s)
together
with
the
original
receipt
within
7
days
from
the
date
of
purchase.
• Return
policy
does
not
apply
to
display
items
or
items
from
stock
clearance
promoHons
• Return
policy
does
not
apply
to
fresh
produce,
frozen
goods,
cameras,
mobile
phones,
computer
(including
peripherals)
and
undergarments.
• Tesco
Value,
Tesco
Choice
and
Tesco
Finest
products
are
not
to
be
sold
commercially.
If
you
are
unsaHsfied
with
the
quality
of
any
of
our
Tesco
Value,
Tesco
Choice
or
Tesco
Finest
products,
you
may
return
your
purchase(s)
with
the
original
receipt
to
us
within
28
days
from
the
date
of
purchase
and
we
will
either
make
a
replacement
or
remit
a
full
refund.
Always
in
stock!
Delivery
service
for
your
convenience!
• Free
delivery
service
(up
to
30km)
is
available
for
electronic
goods.
A
charge
of
RM2.50/km
will
be
levied
beyond
the
30th
km.
• Delivery
service
is
offered
for
goods
that
have
been
purchased
in
bulk
by
Biz
Clubcard
members
24. EXPAND
MARKET
SEGMENT
FOCUS
ON
HOUSE
BRAND
AcquisiAon
of
MAKRO
Cash
&
Carry
Produce
more
range
of
House
Brand
• To
tap
SMEs
market
• TESCO
value
–
affordable
range.
• TESCO
choice
–
quality
products.
• TESCO
light
choice
–
nutriAous
low-‐calorie
food.
FOCUS
ON
PROFITABLE
AREA
• TESCO
finest
–
premium
ingredients
Exit
non-‐profitable
market
• BanAng
&
Senawang
JOINT
VENTURE
WITH
LOCAL
PLAYER
Equity
Partner
–
Sime
Darby
• 70:30
BUILD
GOOD
RELATIONSHIP
WITH
GOVERNMENT
• MOU
with
Malaysia
InternaAonal
Timber
Board
BUILD
REPUTATION
AMONG
SUPPLIER
• TESCO
is
one
of
enabler
for
TUKAR
Support
local
SMEs
programme
• Bulk
purchase
for
local
small
retailer
• Introduce
local
products
to
TESCO
oversea
STRENGTHEN
SUPPLY
CHAIN
Established
distribuAon
centre
BUILD
LOYAL
CUSTOMER
• Simpang
Pulai
:
fresh
products
• Clubcard
• Bukit
Beruntung
:
grocery,
• Campaign
for
the
no
1
of
great
price
electronics,
high
tech
and
retailer
apparel
• Fresh
vegetables
COLLABORATE
WITH
SAMSUNG
CLEARLY
STATED
CUSTOMER
RIGHT
25. WHAT
IS
TESCO
STRATEGY
TO
BUILD
A
SUSTAINABLE
COMPETITIVE
ADVANTAGE?
COLLABORATE
WITH
SAMSUNG
FOCUS
ON
HOUSE
BRAND
TESCO
FOCUS
ON
COST-‐LEADERSHIP
STRENGTHEN
SUPPLY
CHAIN
Established
distribuAon
centre
BUILD
LOYAL
CUSTOMER
• Simpang
Pulai
:
fresh
products
• Campaign
for
the
no
1
of
great
price
• Bukit
Beruntung
:
grocery,
retailer
electronics,
high
tech
and
apparel
26. MACRO
ENVIRONMENT
Industry
Growth
Government
Social
forces
Support
&
Policies
RETAIL
INDUSTRY
Rules
&
Technology
RegulaHons
28. GOVERNMENT
FULLY
SUPPORT
WHOLESALE
AND
RETAIL
GROWTH
" Within
the
next
10
years,
Malaysia
government
through
EPP
aimed
to
carry
RM17.4
billion
investment
in
order
to
contribute
RM8.5
billion
GNI
and
create
68,600
jobs
by
2020.
33. CHANGES
IN
SOCIAL
FORCES
•
Based
on
2010
Census,
Malaysia’s
total
populaHon
stood
at
28.3
million
with
a
populaHon
density
of
86
persons
per
square
kilometer.
The
naHon’s
capital,
Kuala
Lumpur,
has
a
populaHon
of
around
1.67
million
and
a
much
higher
density
of
6891
persons
per
square
kilometer.
Although
East
Malaysia
makes
up
60%
of
Malaysia’s
landmass,
it
only
accounts
for
20%
of
the
country’s
populaHon.
•
Over
the
last
11
years,
Malaysia’s
populaHon
has
been
growing
at
a
steady
rate
of
2.0%
per
annum.
The
country
is
experiencing
an
increase
in
rural
to
urban
migraHon.
The
average
age
of
Malaysian
populaHon
is
young
at
26
years
old
and
the
average
life
expectancy
stands
at
over
73
years.
34. INCOME/BUYING
POWER
-‐
Malaysia
is
classified
as
an
upper-‐middle
income
country,
and
considered
as
one
of
the
m o s t
d e v e l o p e d
o f
t h e
developing
countries.
The
proporHon
of
middle
income
households,
defined
as
those
earning
between
RM2,841
and
MYR4,025
per
month,
has
increased
from
6.5%
in
2009
to
9.2%
in
2007.
-‐
On
average,
household
living
in
urban
areas
spent
1.5
Hes
more
than
households
living
in
r u r a l
a r e a s .
A v e r a g e
h o u s e h o l d
s p e n d i n g
expenditure
is
stands
at
RM2190
per
month
37. CONSUMER
BEHAVIOR
Average
household
spending
palerns:
-‐
Malaysians
spend
a
high
percentage
of
their
household
income
on
food,
groceries
and
personal
care
items,
ranking
third
out
of
the
ten
major
economies
in
the
Asia-‐
Pacific
region
(excl.Japan)
-‐
According
to
ACNielsen,
Malaysians
on
average
spent
MYR505
per
month
on
food
and
groceries,
with
just
half
of
hat
on
fresh
food
like
meat,
fruits
and
vegetables.
Lifestyles/Shopping
habits:
-‐ Malaysia’s
consumer
lifestyle
has
been
evolving
and
changing
due
in
part
to
rising
affluence
and
educaHon
levels.
-‐ High
profile
internaHonal
retailers
and
the
global
mass
media
have
also
played
a
hand
in
shaping
consumer-‐buying
behavior.
-‐ Malaysians
are
becoming
more
westernized,
sophisHcated
and
cosmopolitan.
-‐ Since
the
emergence
of
the
foreign-‐owned
hypermarkets,
Malaysians
who
lived=
in
urban
have
become
accustomed
to
shopping
for
groceries
at
hypermarkets
and
supermarkets.
-‐ Meanwhile
rural
people
conHnue
to
purchase
from
tradiHonal
grocers,
convenience
stores
and
mini-‐marts
41. MAJOR
RETAIL
PLAYERS
Ran Group
Name
Ownership
Retail
Formats
Number
of
2011
Net
sales
king
Stores
1
Dairy
Farm
Giant
Retail
Diary
Farm
Supermarket/ 125
na
InternaHonal
superstores
(54)
and
hypermarkets
(71)
2
TESCO
PLC
JV
(70%
TESCO
PLC
:
Hypermarkets
46
3.53
billion
30%
Sime
Darby)
3
Carrefour
Group
Carrefour
Group
Hypermarkets
26
1.8
billion
4
Econsave
Cash
&
Carry
Econsave
Cash
&
Carry
Supermarkets/ 29
700
million
Sdn
Bhd
hypermarkets
5
MYDIN
Mydin
Mohamed
Hypermarkets
(10)
100
1.5billion
Holdings
Bhd
Emporiums
(18)
Bazaar
(3)
Mini
Market
(54)
Convenient
store
(9)
Franchise
(6)
42. STRATEGIC MAPPING
High
PRICE/QUALITY
CARREFOUR
TESCO
ECONSAV
MYDIN
E
Low
GIANT
Few
LocaHons
Many
LocaHons
GEOGRAPHIC
COVERAGE
43. • High startup cost IF consumers see little
• Small market
WEAK
Threat
of
difference between
New
Entrants
the Price - they
will tend to choose
on price.
STRONG
Rivalry
HIGH
Bargaining
WEAK
Bargaining
Among
Current
Power
Of
Suppliers
Power
of
Buyers
CompeAtors
supermarkets dictate the • If a single item too
price they pay to the expensive in Tesco,
supplier
buyers will exercise
their power and
WEAK
Threat
move to Giant which
of
SubsAtute
can be easily access
Products
• Time consuming
43
• Selling similar products
• Offer similar services
44. KEY
SUCCESS
FACTOR
1.
INCREASE
IN
INTERNAL
DEMAND
2.
GOVERNMENT
SUPPORT
3.
REGULATORY
POLICIES
TO
PROMOTE
HEALTHY
COMPETITION
ENVIRONMENT
4.
HIGH
BARGAINING
POWER
OVER
CUSTOMER
&
SUPPLIER
5.
CHANGES
IN
SOCIAL
FORCES
6.
GOOD
INFRASTUCTURE
FOR
ONLINE
7.
GOOD
SUPPLY
CHAIN
MANAGEMENT
(SOFTWARE
&
HARDWARE)
46. ASSESSMENT
OF
INTERNAL
FACTORS
FOR
STRATEGIC
ADVANTAGE
(ASSIST)
(RANKING
STRENGTH
AND
WEAKNESSES)
Value
Rareness
Imitability
Sustainability
LIST
UNDER
RESOURCES
S2
:
Fresh
DC
S2
DisAncAve
DisAncAve
CompeAAve
PotenAal
S3
:
Non-‐chilled
DC
CompeHHve
CompeHHve
CompeHHve
PotenHal
S5
:
Standard
lay-‐out
CompeHHve
PotenHal
PotenHal
PotenHal
S6
:
Tesco
Hypermarkets
CompeHHve
PotenHal
PotenHal
PotenHal
S7
:
House
Brand
S3
CompeAAve
PotenAal
PotenAal
CompeAAve
S8
:
Tesco
Extra
S5
DisAncAve
DisAncAve
PotenAal
CompeAAve
S9
:
Tesco
Clubcard
and
Biz
Clubcard
CompeHHve
CompeHHve
PotenHal
PotenHal
S11
:
Tesco
VALUE
S4
DisAncAve
PotenAal
PotenAal
CompeAAve
W4
:
Low
sales
volume
for
Tesco
Extra
DisHncHve
CompeHHve
CompeHHve
PotenHal
W5
:
Small
margin
DisAncAve
CompeAAve
CompeAAve
DisAncAve
W3
W6
:
High
A&P
cost
DisHncHve
CompeHHve
CompeHHve
PotenHal
W7
:
High
capital
investment
W2
DisAncAve
CompeAAve
CompeAAve
DisAncAve
LIST
UNDER
CAPABILITIES
S1
:
High
bargaining
power
S1
DisAncAve
CompeAAve
PotenAal
CompeAAve
S4
:
The
applicaHon
of
ERP
system
DisHncHve
PotenHal
PotenHal
PotenHal
S10
:
Focus
on
customer
service
DisHncHve
CompeHHve
PotenHal
PotenHal
W1
:
Certain
supplier
dictate
price
W4
DisAncAve
PotenAal
PotenAal
PotenAal
W2
:
No
Online
Shopping
capability
W5
DisAncAve
DisAncAve
CompeAAve
PotenAal
W3
:
High
bargaining
power
of
retail
customer
DisAncAve
W1
CompeAAve
CompeAAve
DisAncAve
47. VALUE
CHAIN
FOR
TESCO
(BASED
ON
PORTER
ORIGINAL)
W2,W3
DC,
FINANCE
TRAINING
W2
L
SYSTEM
O
W
SUPPLIER
MGT
M
A
R
G
I
N
S1,S2,W4
S5,W1
S4
W5
48. VALUE
CHAIN
FOR
TESCO
(BASED
ON
PORTER
ORIGINAL)
W2,W3
DC,
FINANCE
TRAINING
W2
L
SYSTEM
O
W
SUPPLIER
MGT
M
A
R
G
I
N
S1
S5,W1
S4
S2,W4
W5
49. S1
High
bargaining
power
over
supplier
W1
High
bargaining
power
of
customer
(capabili8es)
(capabili8es)
S2
Fresh
DC
(Resources)
W2
High
capital
investment
(Resources)
S3
House
Brand
(Resources)
W3
Small
margin
(Resources)
S4
Tesco
VALUE
(Resources)
W4
Certain
supplier
dictate
price
S5
Tesco
Extra
(Resources)
(capabili8es)
W5
No
Online
(capabili8es)
SW
O1
Online
shopping
O T
O2
Co-‐operate
with
Malaysian
Government
to
setup
1
Malaysia
Mall
O3
Open
branch
in
East
Malaysia
&
East
T1
Decreasing
in
Internal
Demand
Coast
(TESCO
EXTRA)
T2
1
Malaysia
Mall
O4
Acquire
small
&
medium
local
retailers
T3
Merger
of
current
compeHtor
O5
More
house
brand
(OEM
for
1Malaysia
T4
Entrance
of
new
player
Brand)
O6
Form
Halal
Supermarket
50. RECOMMENDATION
(to
be
compeAAve)
• COMPETITIVE
STRATEGY
• VALUE
CHAIN
• MISSION
&
VISION
SUSTAINABLE
COMPETITIVE
ADVANTAGE
52. VALUE
CHAIN
FOR
TESCO
LOWER
CAPITAL
INVESTMENT
DC,
STORE
REDUCE
MAN
POWER
TRAINING
UPGRADING
SYSTEM
(ONLINE)
L
SYSTEM
O
W
SUPPLIER
MGT
M
A
Sales
&
R
INVENTORY
DISTRIBUTION
TESCO
WHOLSALE,
Services
G
PURCHASE
CENTRE
TESCO
EXTRA
(TESCO
VALUE
I
&
TOM)
N
53. VISION
&
MISSION
NEW
VISION
Dedicated
to
deliver
fresh
and
quality
groceries
at
the
lowest
price
to
all
over
Malaysia
NEW
MISSION
Offer
customer
a
whole
new
shopping
experience
for
a
quality
products
at
lower
price
54. SUSTAINABLE
COMPETITIVE
ADVANTAGE
Ø Focus
low-‐cost
strategy
within
a
narrow
buyer
segment
(market
niche)
–
Focus
on
suplying
Fresh
&
Quality
groceries
(make
use
of
Chilled-‐DC
in
Simpang
Pulai).
Target
market
:
family
Ø Introduce
ONLINE
shopping
55. WAY
FORWARD
" Malaysian
saw
the
growth
of
the
large
format
retail
sub-‐sector
today;
121
hypermarkets,
113
superstores
and
133
departments
stores
run
by
local
and
foreign
operators,
bringing
beler
quality,
wider
choice,
lower
product
cost,
greater
product
availability
and
new
retailing
technology
and
skills.
" Within
the
next
10
years,
Malaysia
government
through
EPP
aimed
to
carry
RM17.4
billion
investment
in
order
to
contribute
RM8.5
billion
GNI
and
create
68,600
jobs
by
2020.
" TESCO
sHll
have
the
opportunity
to
re-‐strategize
their
business
in
Malaysia
60. MAJOR
RETAIL
PLAYERS
Ran Group
Name
Ownership
Retail
Formats
Number
of
2011
Net
sales
king
Stores
1
Dairy
Farm
Giant
Retail
Diary
Farm
Supermarket/ 125
na
InternaHonal
superstores
(54)
and
hypermarkets
(71)
2
TESCO
PLC
JV
(70%
TESCO
PLC
:
Hypermarkets
46
3.53
billion
30%
Sime
Darby)
3
Carrefour
Group
Carrefour
Group
Hypermarkets
13
na
4
Econsave
Cash
&
Carry
Econsave
Cash
&
Carry
Supermarkets/ 29
700
million
Sdn
Bhd
hypermarkets
5
MYDIN
Mydin
Mohamed
Hypermarkets
(10)
100
1.5billion
Holdings
Bhd
Emporiums
(18)
Bazaar
(3)
Mini
Market
(54)
Convenient
store
(9)
Franchise
(6)