As a result, the UK retail industry has also lost heavily the opportunities to grow in the ongoing recession. In this scenario, large scale or mega retailers like TESCO faces an increased challenge to devise strategies to survive through the hard time. They also need to adjust their retail formats to survive and secure the needed growth. Part 02: About TESCO TESCO is a global grocery and general merchandise retailer headquartered in Cheshunt, United Kingdom. It is the third-largest retailer in the world measured by revenues (after Wal-Mart and Carrefour) and the second-largest measured by profits (after Wal-Mart).
The decrease in revenues was due to more specialized competition from retail competitors to Wal-Mart. Kmart, and Target – among others – were building a stronger culture, improving employee benefits, and strengthening loyalty as a result among their customers and employees. These strategic changes began to give them a competitive advantage over Wal-Mart. Wal-Mart, on the other hand, began losing their workforce in part because of their low wages policy created to keep prices down which in turn created malcontent among employees—publicity around which started shifting consumer behaviour as well—and away from Wal-Mart. Additionally, as internet shopping started to take a larger piece of the consumer ‘pie,’ Wal-Mart could not keep the pace of its direct opponents.
Why is (was) Wal-Mart successful in the US? What are Wal-Mart’s competitive advantages? Wal-Mart was established in 1962 and has since become the largest company in the US. Within five decades it has become one of the largest discount retailers in the country and is rapidly expanding around the world. “Wal-Mart serves customers and members more than 200 million times per week at more than 8,692 retail units under 55 different banners in 15 countries.
This was a strategic in cost reduction and increased profit, in response to recession driven growth of private label brands (Figure 1). Problem Identification: In years following their initial work together, Wal-Mart had considered private label brands in its stores rather than solely carrying national brands. From 1993 onwards, Wal-Mart had introduced brands such as Ultra Clean (priced 30-40% less than first tier national brands) and Kimberly-Clark (KC) (priced 20% less than national brands), who had items similar to already existing P&G brands, Tide and Huggies. This was following a period where P&G market share had decreased due to an increase in other private label brands that had favourable retailer margins. In 1994 Wal-Mart sales increased 21%, thus projecting an increase in P&G sales through the retailer by $90,000,000.
Wal-Mart worked with the deodorant manufacturers by asking them to eliminate the box. By eliminating the box Wal-Mart saved customers money, and as a result they could offer lower prices then their retail competitors. Making small changes, like removing the deodorant box, enables Wal-Mart to stay the most successful and competitive retail store worldwide. Reference Walmart Stores, Inc.. (2012). Walmart history.
The Body Shop Case Recommendation Our recommendation for The Body Shop to fulfill its financing needs they will need to borrow 82.4 million GBP for 2002, 106.5 million GBP for 2003, and 132.9 million GBP for 2004. This financing need will be relatively high we believe, thus we would advise that The Body Shop cut back on unnecessary expenses, discontinue product lines that don't sell well, close stores that not make good revenue, expand more in ecommerce, and increase profit margins accordingly for a better net profit. For better growth of the company we suggest The Body Shop look more closely in to making products that have a lower cost to produce and create more new products that would differentiate them from its competitors. Also seeing that The Body Shop doesn’t have a marketing or advertising department we recommend they look more into possibility creating one to increase its presence. Company Background The Body Shop opened its first store on March 26th 1976 in Brighton England.
Over the course of the last thirty years, Wal-Mart, the retail giant, has seen rapid expansion and huge profit increases. With saturation in every geographically relevant area in the United States, Wal-Mart is a familiar face to nearly every American. As a result of its cost-driven strategy, its performance continues to triumph over the competition. In recent years, the public forum has shifted to debate the ethicality of Wal-Mart’s corporate strategy. Perhaps the most widely discussed criticism of Wal-Mart revolves around their high employee turnover rates and the causes of employee dissatisfaction.
The cost of sales is the major expense account, and makes up 84.4% of all operating expenses. Total Asset Turnover Ratio The total asset turnover ratio, or sales generated per dollar of assets, has been increasing slightly since 2008, at 1.0, to 2009, at 1.03 to 2010, at 1.06 (Apple 2008, 2009, 2010). This trend suggests a gradual increase in efficiency at converting assets to sales revenue.
A growth in economy is a positive sign for Tesco because it results in a growth in the supermarket industry, which is the main industry in which Tesco operates. When there is an economic recession, which is the opposite of economic growth the rate of unemployment increases. This results in lower disposable income in the hands of the British people. Therefore, customers will decrease spending and will shift to products of a lower price (Mankiw, 2012, p. 97).Therefore, recovery from the economic recession stimulates revenue growth for Tesco. Social The number of elderly people is increasing in the UK due to the baby boom generation.
Wal-Mart’s growth increased rapidly in recent years (2006), by adding almost one new store every day. By February 8, 2007, the Wal-Mart Corporation’s total retail store count had reached 6,782 units world wide. As Wal-Mart’s presence continued to grow, so did it’s sales, by the end of fiscal year 2007 Wal-Mart sales reached an all time record high of 345 billion dollars. As the business continued to grow and expand world wide, so do its problems. The Wal-Mart Corporation’s immense development brought with it massive conflicts and controversy.