CSEB3102

INTERNATIONAL BUSINESS MANAGEMENT

MNC REPORT

INSTRUCTOR:
DR. MOHAMAD SAID BIN OTHMAN

PREPARED BY GROUP 7:
MELISSA SHEENA BONG

CEA130052

NOOR AZIEMAH BT BAHRIN

CEA130059

NURLINA ANATI BT ROSAZMAN

CEA130067

USHA NANTHINI

CEA130092

ZUHRINA BT ZULKEFLI

CEA130101

TABLE OF CONTENT

NO.

TITLE

PAGE

PREPARED
BY:

QUANTITATIVE ANALYSIS
1
2
3
4
5
6

Industry background
Table 1 : sales turnover
Table 2 : profit
Table 3 : revenue
Table 4: no. Of employees
Table 5 : market share

2-3
4-5
5-6
6-7
8
9-10

Impact of Current Global Economic

Uncertainty on Food and Drug Stores And
The Solutions.

11-13

Nurlina
Aziemah
Zuhrina
Usha
Melissa
Nurlina
Usha
Melissa
Zuhrina
Aziemah

QUALITATIVE ANALYSIS
8
9
10
11
12
13

Woolworths holdings limited

Metro inc.
The kroger co.
Tesco plc
Sainsbury
References

14-18
19-23
24-27
28-33
34-39
40-41

Usha
Zuhrina
Melissa
Nurlina
Aziemah

QUANTITATIVE ANALYSIS

1. INTRODUCTION TO INDUSTRY BACKGROUND

World War II, giant supermarkets, discount houses, chain stores, and shopping
malls have developed in prevalence. Indeed, individually owned businesses thrive,
regularly giving customers more personal and better-informed service. As villages and
towns developed, trading posts formed into general stores and started to offer sustenance,
ranch necessities, and attire. Commonly keep running by a solitary individual, these
stores at times served as the post office and turned into the social and economic center of
their groups. The retail industry has changed extraordinarily in the most recent two
decades. It used to be involved an abundance of little, regularly family-worked shops,
retail stores, and shopping centers. Today, it is progressively more basic to see
individuals doing their shopping in large mass merchandise stores, specialty stores, or
online stores.
Retailing is a vital commercial activity, giving customers a chance to buy
merchandise and services from different sorts of dealers. The retail field comprises of
mall, retail establishments, chain stores, specialty stores, assortment stores, franchise
stores, mail-request houses, online traders, and door-to-door sellers. Retail stores
purchase their merchandise from wholesalers, stock the products, and resell them to
individual customers in little amounts. The retail sector plays a vital role, not just as a
noteworthy driver of the worldwide economy, additionally as the most essential
connection amongst suppliers and buyers in affecting this worldwide movement.
2

The major functions of retailing may be divided into five categories of activities
which is merchandising and buying, store operations, sales promotion and advertising,
bookkeeping and accounting, and personnel. Merchandising and buying decides on the
types and amount of merchandise to be sold, displayed, or stocked in a business's shop.
Store operations specialists keep up the retailer's building. Sales promotion and
advertising advices clients and potential clients about the accessible products and
services. Bookkeeping and accounting workers keep records of cash flows, as well as
records of payrolls, taxes, and money due from customers. The personnel department
staffs the store with qualified employees.

2. QUANTITATIVE ANALYSIS

Table 1 Sales Turnover

Companies
Tesco
The Kroger Co.
Metro Inc.
Woolworths Limited
Sainsbury

Sales Turnover ($)

26.17 Billion
19.1 Billion
14.9 Billion
6.32 Billion
23,443 Million

The sales turnover is the is the company's total amount of revenue, including both the
invoice, cash payments and other revenues generated by a business during the calculation period.
The concept is valuable to detect the level of sales over the trend line through the measurement
range, in order to detect significant changes in the level of activity. The sales turnover
calculation period is usually one year. The results are included in the calculation of both cash
sales and credit sales. This measurement can also be divided into the following units sold, by
geographical area, by a subsidiary, and so on. The number of sales is limited to the income
generated from operations. Therefore, it does not include profit from financial activities or
others, such as interest income, gains on sales of fixed assets, or receiving of payments related to
an insurance claim.
Based on the table above, Tesco had the highest sales turnover of $26.17 billion,
compared to the other groups followed by The Kroger Co., $19.1 billion, Metro Inc., $14.9
billion, Woolworths Limited, $6.32 billion and the last ranking is Sainsbury amounted $23,443
million. There were very significant differences of sales turnover, which is amounted $7.07
billion between Tesco and The Kroger Co. This is because Tesco was the third biggest retailer in
4

the world and also had stores in 12 nations crosswise over Asia and Europe. Therefore Tesco
may have set quotas of the sales turnover that their sales agents must meet annually. Although
Tesco had the highest sales turnover, this is not mean that it has the highest profit too, because
the amount of sales turnover recognized by a business may vary, depending on whether it uses
the accrual basis of accounting or the cash basis.
The figures for sales turnover in the profit and loss account does not mean that the firm
has gotten that entire amount. In spite of the fact that they may have sold quantities and value of
products but they may still be some of the money owed by their debtors. Therefore, the figure for
the total sales turnover in the Profit & Lost account represents the number of their products or
services were sold, not the genuine measure of cash they have received.

Table 2 Profit
Companies
The Kroger Co.
Woolworths Holdings Limited
Metro Inc.
Tesco
Sainsbury

Profit ($)
1.73 Billion
1.1 Billion
0.519 Billion
0.19 Billion
(0.166 Billion)

Profit is a financial advantage that is acknowledged when the amount of income gained from
a business activity exceeds the expenses, costs and assessments expected to maintain the
movement. Any benefit that is picked up goes to the entrepreneurs', who could conceivably
choose to spend it on the business. It is reflected in decrease in liabilities, increment in assets,
and/or increment in owners equity. It outfits resources for putting resources into future
operations, and its absence may bring about the eradication of an organization. As an indicator of
comparative performance, notwithstanding, it is less significant than return on investment (ROI).
5

Based on the table above, The Kroger Co. had highest profit of $1.73 billion compared to
other groups. The significant differences of $0.63 billion between The Kroger Co. and
Woolworths Holdings Limited maybe cause by customers demands. Not only that, The Kroger
Co. is a countrys largest supermarket chain by revenue so that is why they have larger profit
than others.
On the contrary, Sainsbury had no profit and experience extreme declining of profit in 2014
compared to Tesco, Metro Inc, Woolworths Holdings Limited and The Kroger Co.The
Sainsbury's outcomes come a month after Tesco reported a second fall in benefits in the same
number of years. This group trading profit fell to deficit of $0.166 billion. Even though
Sainsbury is the second largest chain of supermarket in UK, however the other groups might
have a higher competitive advantages and been influenced by other factors. As for instance,
Tesco had retail operation in UK, Asia and Europe.

Table 3 Revenue
Companies
The Kroger Co.
Tesco
Woolworths Limited
Sainsbury
Metro Inc.

Revenue ($)
108.5 Billion
79.54 Billion
30.27 Billion
23.8 billion
12.2Billion

Revenue is the income generated from sale of goods or services, or any other use of capital or
assets, associated with the main operations of an organization before any costs or expenses are
deducted. Revenue is shown usually as the top item in an income (profit and loss) statement from
which all charges, costs, and expenses are subtracted to arrive at net income. Revenue is

calculated by multiplying the price at which goods or services are sold by the number of units or
amount sold.
From the table above, it shows that The Kroger Co had the highest revenue among all the
five retailing stores which is $108.5 Billion. It shows that, Kroger Co had lots of sales in 2015
compared to other retailing stores even though their target customers are only from United
States. As Kroger is the biggest retail store in America, all the residents shops in Kroger which
leads to increase in their sales.
Besides, Metro Inc. has the lowest revenue in the year 2015. This is due to decrease in
demand from consumers. The reason behind this is, Metro is the third largest supermarket in
Canada. Therefore, most of the residents prefer other supermarkets than Metro. The table shows
that Tesco is the second largest in terms of revenue. This is because, Tesco is known worldwide
where almost most of the states have Tesco and also it popular as it attracts their customers by
selling products with low prices.
Woolworths Limited has the largest supermarket in Australia. Its revenue is Australian
Dollar 42.13 billion but the value was decreased as it was converted to USD. It is the second
largest retail company in Australia by revenue while Sainsbury is the second lowest company by
revenue which consists of $23.8 Billion. Woolworths and Sainsburys revenue low because they
only focus particular target customers. Woolworths covered Australia while Sainsbury covered
only United Kingdom. Therefore the demand from customers is lower than the supply which
reduces the revenues.

Table 4 No. of Employees

Companies
Tesco
The Kroger Co.
Sainsbury
Woolworths Limited
Metro Inc.

No. of Employees
482,152
431,000
161,000
111,000
65,000

Based on above table, Tesco has the largest number of associates working under the
company. The total employees of Tesco are estimated about 482,152 people. This is because
Tesco has numerous franchises worldwide. The least number of employees among these five
companies is Metro Inc. which it has about 65,000 employees worldwide. The Kroger Co. or
better known as Kroger placed second with 431,000 of employees. After Kroger, Sainsbury is
next place with the total number of 161,000 employees then followed by Woolworth Ltd with a
total of 111,000 employees worldwide.

Table 5 Market Share

Companies
Metro Inc.
Woolworths Holdings Limited
Tesco
Sainsbury
The Kroger Co.

Market Share (%)

35.73
30.6
28.0
16.9
14.6

Table 5 above show the percentage of market share in ranked.Market share is the percentage
of an industry or market's total sales that was earned by a particular company over a specified
time period. Market share is calculated by dividing the company's sales over the period by the
total sales of the industry over the same period. It indicated about of the size of a company to its
market and its competitors. As the total market for a product or service grows, a company that is
growing its market share will be growing its revenues faster than its competitors that can help
company in improving its profit and at the same time achieve the greater scale of operations.
Therefore, companies are always looking to expand their share of the market, in addition to
trying to grow the size of the total market by appealing to larger demographics, lowering prices,
or through advertising.
Metro Inc. had the highest market share which was 35.73%. This because Metro Inc. was
holding their own despite fierce price competition in order to attract customers and to maintain in
the industry. Therefore, it can get more profit by offering lower price and more discounts and at
the same time increase the market share. The second highest market share ranked was hold by
Woolworths Holdings Limited 30.6% of market share because of the demographics factor and
advertising. This is because it operates in three divisions which were Woolworths South Africa
(WSA) and a chain department and apparel retailer that was located in Australia. Woolworths
9

has approximately about 89 stores within 11 countries and the company trade in over 1,300 store
locations. Besides, Woolworths also offers its product under various brand such as Woolworths,
RE, JTOne, Distraction, Country Road, Trenery and Mimco in order to increase market
competitiveness and stay in the industry.
The company that had lowest market share was The Kroger Co because Kroger casts a wider
net, searching for locations in an area with a minimum median income of just $40,000. For
comparison, nationwide median household income is just above $51,000. Besides that, as a large
retail grocer, Kroger faces competition from similar chains, local stores, and niche stores, such
as Whole Foods Market (WFMI) and Safeway (SWY). Wal-Mart (WMT) represents the most
significant long term threat to the firm's continued growth. In 2015, the stock dropped 7%
followed by an additional 2.5% decrease the following day after the company missed revenue
expectations.

10

2. Impact of Current Global Economic Uncertainty on Food and Drug

Stores and the Solutions.
A downturn is a slowdown in economic activity. High levels of inflation in a boom can
lead to businesses becoming uncompetitive. Inflation increases uncertainty as rising costs and
prices are difficult to predict. In order to try to control demand when inflation is high, the
government can increase taxes. In addition to this, the Banks also can raise the interest rates.
These actions encourage saving and discourage spending. The result is that economic activities
begin to decline. A downturn can lead to a recession which is defined as when there are two
successive quarters of negative economic growth. During a recession, demand in the economy is
low and markets shrink. There are pressures for businesses to reduce costs, which can lead to
increased unemployment as companies lay off workers. The resulting higher unemployment
means people have less money to spend, thus contributing to the downturn in the economy and
some businesses may have to close down.
One of the negative impacts of economic uncertainty is the sales of food stores drops
drastically because consumers need to cut spending, so they prefer cheap meals like Big Macs
and Whoppers. As a result, fast-food chains have weathered the recession better than their pricier
competitors. In 2015 sales at full-service restaurants in America fell by more than 6%, but total
sales remained about the same at fast-food chains. In some markets, such as Japan, France and
Britain, total spending on fast food increased. But not all fast-food companies have been as
fortunate. Many, such as Burger King, have seen sales fall. In a severe recession, while some
people trade down to fast food, many others eat at home more frequently to save money.

11

The economic downturn also has caused the unemployment rate within this industry to
increase. As the economy slowing down, the industry had to cut down costs, including cost on
salaries and wages of the employees. They also had to follow the trends of the customer
behaviour, which the customers tend to choose cheaper products and the food and drug stores
were forced to lower their products prices in order to compete and survive the crisis.
Import activity was also affected. This is because the imported products priced higher
than the local products especially as regards to food industry. Customers would prefer local
products over imported ones, as they were cheaper and affordable. Therefore, food industry had
to cope with the current demand of their customers.
On the other hand there are also positive impacts where demand for drugs and alcohol
has been increased due to economic downturn. This is because; people are struggling to cope
with stress due to unemployment, financial problems and low morale. Concomitant fiscal
pressures during difficult economic times also place additional pressures on treatment and
prevention providers, forcing some to contemplate cutting back services. Therefore peoples tend
to consume more alcohols and drugs which coincidently increase the sales of drugs and alcohols
in supermarkets and drugs stores.
With the collapse of world economic, it is hard to gauge the implications of recession on
this industry. The impact can be severe if we look back at the past recession experience. As the
purchasing trends of customer changed, this industry should also change selling trends. They
need to develop the products which can adapted the new consumers eating needs and habits.
Other than that, it will be more preferable if the product being manufactured with local raw
materials which not required high cost and in a low spending capacity.

12

It is important to retain consumers loyalty during this hard period hence, certain stores
can develop local distribution channel in which they easily can approach their consumers who
have no transportation and usually buy things daily at stores nearby their home. It made up a
good competitive advantage for stores producing the same products. This is an opportunities to
add value into the market strategy of the industry. Furthermore, with the premium value added
product market, the development of affordable product market will eventually growing rapidly
with high purchasing power of consumers.
Another way to win over consumers loyalty within companies which competing in high
segments of products is to offer a higher added value to them. While maintaining the prices level,
they need to rise up the quality of the product. Not only that, some innovation and differentiation
will be needed to thrive in that forcibly fosters competition during recession.
During this economic downturn, companies should be more understand the evolving
behaviors of consumer segments and monitor them. They should be responding to each category.
Normal business during this time is not a good option. They have to adapt to the current
economic condition. As to be say, some of organization performing admirably in an economic
uncertainty will likewise perform well in a recovery, and more will change their business to
exploit it, yet numerous will be left by their toughened-up brethren that race ahead in bull
markets.

13

QUALITATIVE ANALYSIS

WOOLWORTHS LIMITED
1. Introduction

Woolworths Limited is a major Australian company with extensive retail interest

throughout Australia and New Zealand. It is the second largest company in Australia by revenue,
after Perth-based retail-focused conglomerate Wesfarmers, and the second largest in New
Zealand. In addition, Woolworths Limited is the largest takeaway liquor retailer in Australia, the
largest hotel and gaming poker machine operator in Australia, and was the 19th largest retailer in
the world in 2008. The company generates the majority of its income from the Supermarkets and
Grocery Stores in Australia industry.
Woolworths Limited was established in 1924 with the initial store opening in Sydney's
Imperial Arcade. Its opening advertisement claimed that every city required the Woolworths and
thus everybody needed a handy place where good things were cheap (Karen Plunkett-Powell,
2001). Woolworths was founded by Stanley Edward Chatterton, Harold Percival Christmas,
Ernest Robert Williams, George William Percival Creed and Cecil Scott Waine. Stanley
Chatterton and Percy Christmas had opened the first floor Frock Salon in Queen Victoria

14

Markets currently the Queen Victoria Building at the corner of George and Market streets in
Sydney (Collier and Evans, 2010).
Woolworths Limited operates as a food, liquor, petrol, home improvement and general
merchandise retailer, and also operates in the hospitality and gaming sector. The group's main
business operations are categorized into the following divisions; Supermarkets and Woolworths
Liquor Group. The company operates Woolworths Supermarkets, Thomas Dux grocery stores,
Countdown grocery stores (in New Zealand). Woolworths Supermarket is the company's premier
supermarket chain, which operates in every Australian state and territory. The supermarkets are
often colloquially known as "Woolies" and have used the slogan 'The Fresh Food People' since
1987.
Woolworths Liquor is a department of Woolworths supermarket stores. They are not
located in Queensland and Tasmania, as State law there prohibits liquor sales at supermarkets.
These stores were formerly known as "Mac's Liquor". In 2012, 'Woolworths Liquor' was
rebranded as Beer Wine Spirits (BWS). BWS now stands at 1500 Stores nationwide and is one
of the largest Australian liquor retailers. Woolworthss other liquor businesses are like Dan
Murphys (Large liquor barns often referred to as Liquor Supermarkets. Dan Murphy's is one of
the company's best growth performers, with plans for up to 100 stores (from the current 55) to
exist within the next 23 years), Cellarmasters (Online wine business) and Langtons (Wine
auctioneers and retailers).

15

2. Impact of Current Global Economic Uncertainty on Woolworths

Limited And The Solutions.
Ever since the global financial crisis in 2009, the Australian economy has been through
several fluctuations and uncertainties. The global economic downturns in 2015 might have hurt
the retail industry as consumer confidence and domestic demand fell markedly while
unemployment rose from 4.8% in 2014 to around 6.2% in 2015. Woolworths was aware of the
risks facing its sales throughout this tough time, but with a strategy that focused on long-term
sustainable growth, it realized that there were still significant chances for growth and expansions.
Global economic uncertainty affects Woolworthss market where Woolworths faces
increasing competition from existing and new competitors because of a decline in economic
activity in key markets such as Australia and New Zealand and further disruption in global
economies. It was certainly tough year for Woolworths Limited as consumer confidence was
undoubtedly shaken. There was a marked changes in customers behavior and shopping trends as
people sought to make their household budgets stretch further. Private label thrived as customers
switched to products that offered the same quality as brands but for a lower price.
Besides that, Global economic uncertainty such as recession gives strong impact on
Woolworthss financial performance as this factor leads to lower sales, ultimately causing
financial decline (Woolworths Limited, 2015). Woolworthss earnings grow between 3 and 6
percent, which was below the analyst expectations of 7.8 percent growth. Woolworths' earnings
growth has slowed as a price war with rival Wesfarmers, owner of Coles supermarkets, ate into
profits at its biggest-earning division. Sales growth at Woolworths has been consistently below
the pace at Coles, because Woolworths was suffering from price deflation which results from the

16

sank sales of seasonal goods such as soft drinks and ice cream and contributed to the
supermarket's overall stagnant sales growth.
Moreover, rising of interest rates also one of the problems faced by Woolworths because
of the economic uncertainties. Rising of interest rates leads to increase in loans expenses as
Woolworths need to pay more than the usual rates. It becomes worst as Woolworths took loans
and did purchases from foreign companies. Therefore, Woolworths faced foreign exchange loss
as Woolworths doesnt expect economic downturn because during that time the economy was
stable so Woolworths confidently did the purchase and took some loans.
In order to overcome the economic downturn, Woolworths Limited took some initiatives
which finally give a positive contribution to Australian Economy. Woolworths first step is, they
created many thousands of new jobs to reduce the number of employments. In 2015, Woolworths
opened 30 (net) new supermarkets and 10 (net) new Dan Murphy so that jobless Australian
residents can start work in these supermarkets and earn income. Besides, Woolworths also
refurbished 58 supermarkets and 5 Dan Murphy which allows them to better meet the needs of
their customers.
Furthermore, Woolworths tries to increase their sales by creating customer values.
Woolworths introduced Everyday Rewards Program which attract mostly all the consumers
where more than 4.2 million customers registered for the rewards. According to Woolworths,
this program has enormous potential for our business because it is not only increasing sales but
it also vastly increasing our knowledge about our customers in a way that will help us to
continually improve our services and ranging.

17

In addition, Woolworths Limited did hedging in order to reduce risks in terms of foreign
exchange loss. Hedging prevent Woolworths from a big loss otherwise Woolworths had to bear a
big sum of expenses because of rising in interest rate. As Woolworths used hedging instrument
in foreign exchange, they could eliminate their foreign exchange risk results from transaction in
foreign currencies.
On top of that, Woolworths starts to rebrand their liquor and fresh foods to boost their
sales growth. Woolworths also launch More Savings Every Day marketing campaign at the end
of the fourth quarter and it had been well received by all the consumers. According to Brad
Banducci, Director of Liquor, Highlights for the year include the re-branding of all Woolworths
Supermarket Liquor sites to BWS, the continued strong growth of Dan Murphys, as well as
strong performance from all our direct businesses including danmurpheys.com.au, Langtons and
Cellarmasters. Dan Murphys also continues to lead multi-option innovation liquor with Click
and Collect and mobile both resonating well with our customers.
In conclusion, Woolworths have achieved a solid full year sales growth, which is
particularly pleasing when measured against challenging retail conditions and an economic
environment underpinned by consumer uncertainty and low growth in disposable income. Their
sales especially in food and liquor starts to increase which also increases market share, customer
numbers and basket size. Woolworths said that, The Food and Liquor result demonstrate the
benefits gained from a sharpened focus on its core businesses and the implementation of its
strategic priorities.

18

METRO INC.
1. Introduction

Metro was founded on December 22, 1947 and is headquartered in Montreal, Canada.
Metro Inc. is a food retailer operating in the Canadian regions of Quebec and Ontario. The
organization is located in Montreal, Quebec. Metro is the third biggest food merchant in Canada,
after Loblaw Companies Limited and Sobeys. Super C is the discounted general store division
worked in Quebec with 72 stores. While in Ontario, Metro has 119 general stores under the Food
Basics banners. Metro likewise operates 142 small groceries under the March Richelieu flag.
Metro concentrates on the food and pharmaceutical sector. The organization works
through the following fragments: Food and Pharmaceutical. The Food segment works under
several banners including Metro, Metro Plus, GP, Super C, AMI and Food Basics. However,
Brunet, Clini Plus, Pharmacy and Drug Basis operate under The Pharmaceutical segment. Meat
and frozen foods, fish and seafood, fruits, dairy products and drugstores are included as their
products.

19

Metro entered the Toronto Stock Exchange in 1993 and acquired Loeb Stores from
Loblaws in 1999. Metro holds the second biggest piece of the overall industry in the food
distribution and retailing business in Quebec and Ontario with about $11 billion in sales and
more than 65,000 employees. Metro works its food stores under the flags Metro, Metro Plus,
Super C, Food Basics, March Ami, Les 5 Saisons and March Adonis. Its drug stores work
under the flags Brunet, The Pharmacy, Clini-Plus, and Drug Basics.
The founder of this company is Rolland Jeanneau. Eric R. La Flche is the President and
CEO of Metro Inc while Franois Thibault is a Senior Vice President, CFO, and Treasurer of
Metro Inc. With annual sales over than $12 billion, Metro operates more than 600 food stores
both in Quebec and Ontario. Metro is the only company to have head office in Quebec. Its
mission is to fulfill their clients satisfaction and gain their loyalty parallel with over 65,000 of
employees.

20

2.

Impact of Current Global Economic Uncertainty on Metro And The

Solutions.
Major worldwide economic downturn caused by the financial crisis hit bottom 2008 and
continued to 2010 and beyond. Prior to this, during 1990s recession, Metro is one of the
companies that experienced the economic downturn. However at that time, Metro managed to
survive with a good strategy. A rebuilding arrangement was built up, another logo was made and
changes were brought to administration group. Metro acquired 48 of 112 Steinberg markets
when that organization went bankrupt in 1992. These stores were rebranded as Super C and
Metro store.
There are an impact of recession on Metro Inc. Recession actually gives a benefit to grocery
industry like Metro. It helps to boost Metro profit. During recession, the purchasing trends will
eventually changing. People tend to but to eat more at home and Metro as a grocer, that is what
they cater to. Along with good dose inflation, this country's third-largest grocer generates healthy
profit gains during tough times.
Inflation happens during recession so people become more price conscious and they choose
to head to discount supermarkets rather than conventional ones. This situation benefit Metro
since they have conventional and also discount stores. During this tough time people will be
more budget conscious and discount does well. The location of Metro stores is mostly places
where fewer competitors in which it will benefits Metro from increased pricing power. With
higher prices, it helped Metro deliver improved results.

21

Even though recession most likely gives a good impact on Metro, however during this
downturn, in its food service division it reflects the soft business at many eateries. They suffered
from the declining percentages of consumers eating out. Those divisions sales make up a small
part of Metros overall profits. The competition of private label brands during that time also quite
hard. The Iconic Presidents Choice and Loblaw has a strong private label since they have more
discount stores compared to Metro.
In current economic situation, Metro leads the food industry by helping out customers to save
in every possible way. There are several Metros strategy to gained customers trust and pushing
its private label brands as well. In the midst of recession, Metro offers three programs to help
customers save on groceries; the Red Flag Value Program and its Selection and Irresistables
private label lines.
The purpose of The Red Flag program is to cut prices of all categories of products in 222
Quebec Metro stores. In this program there are lots of opportunities for customers to save up by
providing customers tips on preparing inexpensive meals and money-saving menu tips. The
large-scale program also been organized in order to help customers easier to identify the
Selection and Irresisitibles brands.
Metro Inc. also comes out with new house brands that are less expensive than national
brands. To make it more attractive strategy, the house brands is up to 20% less than normal
prices. Private labels brands tend to generate more gross profit margins compared to those of
national brands.

22

Metro Inc. having a good strategy in order to thrived during recession period. As they know
customers habit will eventually shifting to recession-ravaged, they switch from costly private
label to cheaper private label groceries, develop more discount supermarkets and more prepared
foods rather than restaurant outings.

23

THE KROGER CO.

1. Introduction

The Kroger Company is the main grocery retailer in the United States. It has more than
1,300 grocery stores in 24 states the over the nation, mainly in the Midwest, South, Southeast,
and Southwest. More than 1,050 of these are under the Kroger name, with the rest of under such
names as Dillon Stores, King Soopers, and Fry's. More than 93 percent of the organization's
revenue originates from its basic need operations, with a large portion of the rest of from the
more than 800 accommodation stores under different names of Dillon in 15 states. Kroger
besides that operates 37 food processing facilities that create dairy items, bakery merchandise,
deli things, and other grocery items.
The Kroger Co. or better known as Kroger was founded by Barney Kroger in 1883. He
invested his life savings of $372 to open up a grocery store in downtown Cincinnati. He ran his
business with a simple motto: Be particular. Never sell anything you would not want yourself.
Numerous parts of the organization's business today follow their roots to Mr. Kroger's
initial endeavors to serve his clients. Consider two main divisions that today are standard fixtures
24

in the organization's general stores bakeries and meat and fish shops. In the mid 1900s, most
food merchants purchased their bread from independent bakeries. Be that as it may, Mr. Kroger,
continually seeking after quality as the key element for benefit, perceived that in the event that
he prepared his own bread, he could lessen the cost for his clients and still gain profit. So he
turned into the main merchant in the nation to set up his own bakeries. He was additionally the
first to offer meats and basic supplies under one rooftop.

Mr. Kroger also wished to increase his income by manufacture the product he sold. It
started when he bought cabbage from farmers beyond his customers demand. So he took the
excess cabbage home when his mother produced her own recipe which later was hugely popular
among his German customers.

The manufacturing exertion produced in that back room was the start of what is today
one of the biggest food manufacturing organizations in America. Kroger works 40 food
processing facilities that make a great many items going from bread, treats and milk to soda pop,
dessert and peanut spread. About portion of the 14,400 private-label goods found in the
organization's stores today are made at one of these manufacturing plants. These "corporate
brands" today represent a great 26% of the grocery dollar deals at Kroger, furnishing the
organization with a huge vital point of advantages.

It was a philosophy that would serve The Kroger Co. well throughout the following 120+
years as the general store business developed into an assortment of configurations went for
fulfilling the constantly changing necessities of customers. With almost 2,500 stores in 31 states
under two dozen banners and yearly sales of more than $70 billion, Kroger today positions as
one of the country's biggest retailers.
25

The business rule that made the main Kroger store successful in 1883 was its
administration, determination and worth which keep on guiding the organization's operations
today. From one minor market in Cincinnati over a century back, Barney Kroger established the
framework for what today positions as one of the biggest organizations in America.

2. Impact of Current Global Economic Uncertainty on Kroger And The

Solutions.
The economic downturn has stirred businesses around the globe. The declining of the
global economy and financial market due to some uncertainties such as energy prices,
availability of credit, diminished market liquidity, rising of unemployment rates and so on. As a
result, customers became cautious on their spending. This is how Kroger was affected by the
global economic crisis in 2008.

During the recession, there was a little impact on Kroger as the second largest retail store
in America. They still earned some profit but overall earnings were lower as compared to the
time before the recession. This is because the consumers tend to eat and cook at home, instead of
going for a meal at restaurants. The consumers also want to save fuel during the tough times, and
going for one-stop centre like Kroger might helps decrease their burdens a bit. Therefore, their
consumers still coming back for their goods but more prefer cheaper and discounted grocery
products.

So Kroger came out with several strategies to cope with the downturn. Firstly, Kroger
offered the new online coupons. This new strategy was intended to improve Krogers earnings
by getting more consumers come to their stores and buying more branded products. The way it
26

worked is shoppers download digital coupons from the Kroger app or website onto their loyalty
card, select items and discounts are automatically applied at checkout. Moving to digital
couponing rather than paper couponing made it more convenient for the consumers and moneysaving especially for housewives and consumers that wanted to avoid store traffic during peak
hours.

Secondly, Kroger also market intensely its own private-labels product. Private-labels
products mean brand that owned by a retailer or supplier who gets its goods made by a contract
manufacturer under it own label. Private-labels goods prices are much lower than branded ones,
thus this was very appealing to penny-pinching consumers. Although Krogers sales on meat and
bakery were adversely affected during the recession, Kroger has made a good job on its
perishables and prepared food. This was due to the trend of eating and enjoying life at home
during the economic crisis period.

Besides that, Kroger also opted for initiative such as tamping down its grocery items
price. By using its title as the second largest food retailer to get the best suppliers deals, Kroger
continuously made a shoulder-to-shoulder price with its main rival, Wal-Mart. They continued to
offer lower prices for consumers but within a strict pricing control, by shrinking cost on
advertising and warehousing and as well as fuel costs.

27

TESCO PLC
1. INTRODUCTION

Tesco PLC was a British multinational basic supply like grocery and general stock
retailer headquartered in Welwyn Garden City, Hertfordshire, England, United Kingdom. It was
the third biggest retailer in the world measured by profits and second-biggest retailer in the world
measured by incomes. It had stores in 12 nations crosswise over Asia and Europe and the basic
grocery market leader was in the UK , Ireland, Hungary, Malaysia, and Thailand.
Tesco was founded by Jack Cohen when he began to sell surplus groceries at stall located
in the East End of London. The first own-brand item sold by Jack was Tesco Tea. The
organization was called Tesco after selling those teas. The name originates from the initials of
TE Stockwell, who was an accomplice in the firm of tea suppliers and CO was from Jack's
surname. After that, the first Tesco store was opened in Burnt Oak, Barnet by Jack Cohen in
1929 which sold the dry good and it first owned brand which was Tesco Tea. The business was
grown rapidly and Jack already had hundred Tesco stores across the country by 1939. The
primary supermarket was opened in Maldon, Essex in 1958. The store incorporated a counter
administration selling cheese, butter and meats weighed by sales assistants.

28

Initially Tesco was a UK basic supply retailer. Now, Tesco has expanded geographically
since the mid 1990s and into new zones such as the retailing of books, attire, hardware, furniture,
toys, petrol and software. Besides, Tesco also have subsidiaries in financial services, telecoms
and web administrations. Tesco had repositioned itself in 1990 because it moved from being a
down-business sector with high-volume minimal-cost retailer into the one which advances
crosswise over numerous social groups. This had been done by offering items extending from its
"Tesco Value" things to its "Tesco Finest" range. This event indicated of its successful appeal
and saw the chain develop from 500 stores in the mid-1990s to 2,500 stores fifteen years after the
fact. Therefore, Tesco was recorded on the London Stock Exchange and is a constituent of the
FTSE 100 Index. It had a business sector capitalization of around 18.1 billion starting 22 April
2015 and become the 28th-biggest of any organization with an essential posting on the London
Stock Exchange.
Tesco was built with a simple mission which to be the first choice for customers and help
them to enjoy a better quality of life and an easier way of living. It tries to serve shoppers a little
better every day by delivering great products at great value which they can buy easily as they
want. By referring to the mission, Tescos ambition now is to go further and do even more to
reduce and simplify prices, improve ranges, continue to innovate and deliver excellent customer
service

29

2. Impact of Current Global Economic Uncertainty on Kroger And The

Solutions.
Falling stock markets, low commodity prices, risks of debt crises in developing countries and
risks of deflation have recently become headlines of the year. Some banks have even prescribed
investors to sell everything other than "safe" bonds. At the same time, the Chancellor George
Osborne has discussed a "global threats" to the UK economy. The IMF and the World Bank have
updated their worldwide development desires downwards during the current year. Low growth
will especially influence the countries development which required GDP growth to expand the
living standards.
It can be conclude that a large portion of the risks to the worldwide economy can be
followed back to lack of worldwide demand for supporting current levels of production. This is
because genuine wages are stagnant or diminishing, while most governments are sticking to
austerity policies which contract economic activity and employment in the developed world.
Besides that, the Chinese economic slowdown also diminished the demand for commodities and
energy from the rest of the word and at the same time affects financial investment perceptions
and stock markets. The backing off of worldwide production and trade will put the profitability
of many economic activities into uncertainty. This is one reason why financial sector analysts are
apprehensive because they fear that a large portion of assets like stocks and bond that they hold
will be exaggerated and disposed.

30

Basically, the global economic downturns in 2015 might have hurt the retail industry as
consumer confidence and domestic demand fell markedly. This will lead to the decrease in
revenue and loss of income and at the same time give impact to the performance of annual
reports. Tesco had faced this situation in previous year when it reported a loss before tax of
$6,334 million in financial reporting 2014/2015 even though the revenue in the previous year is
more than current year. This is because the cost of sale was higher than the revenue. Therefore,
the profit becomes lower. This may be cause by the decrease of revenue by 2,492 million to
54,433 million which equal to $79.54 billion. The estimation of decrease in revenue is about
4.4%. The depreciation of revenue indicated the impact of global economic recession toward
Tesco because Tesco had reduced prices for customer in order to increase competitiveness. The
average number of products per range reviewed reduced by 15%, with prices reduced on 10% of
remaining range.
Besides that, the current global economic have made the competitor arise in the market. It
can be a threat to Tesco. Tesco still depending on UKs market until now and the performance in
the uk market is not going well. Due to the ongoing recession UK and American markets have
been affected by economic concerns. Loss of employment and Lower income available will
impact and strategic focus may need to change to lower priced basic products with less focus on
higher priced brands and luxury products suggesting a change in pricing structure. Therefore,
Tesco has to close 53 unprofitable stores in UK. After taking into account the like-for-like sales
performance, the closing of unprofitable stores results in a decline of 0.6% in total of UK sales.
This also made the market share of Tesco decreased from 28.9% to 28%. This is due to lack of
worldwide demand for supporting current levels of production and the affection of financial
investment perception.
31

Sometimes, law and government regulations can be the economic challenges facing by
Tesco. State regulations and laws are aimed at protecting consumers. They also create an
opportunity for entrepreneurs to compete in an economic market based on consumer law. Due to
the current economy, many businesses are failing even before they enter the market. Therefore,
Tesco has not been able to reach out to the markets it desires because of state regulations.
Regulations and laws likewise influence the valuing of items and administrations by Tesco.
There is dependably the risks of paying high prices. Despite the fact that Tesco has never been
assessed if it risks consumer exploitation or not, there are chances that an appraisal will influence
its predominance in the industry.
As a conclusion, the global economic recession had affected Tescos performance. The
revenue had decreased by 4.4% and the profit is in the second lowest place. It can be accepted
since Tesco is in the stage of recovery from the loss of previous year. Besides, high levels of
deflation persisted due to its own price investments in addition to commodity price decreases.
Tesco also have to close 56 unprofitable stores in UK due to the recession and it results in
decline by 0.6% in total UK sales.
In order to react to this phenomena and maintained competitive in industry and market,
Tesco had reduced the prices for customers, with more than 500 additional reductions on key
product lines. Tesco made investments to ensure that customers will receive the most
competitive offer possible when they shopping at Tesco. As the results, the transactions and
volume increased because customers are responding well to improvements in the core offer.

32

Due to a variety of social changes, trends indicate that customers in the UK have moved
towards bulk shopping and one-stop shopping. Therefore, Tesco has increased the number of
non-food items offered for sale. The type of goods and services demanded by consumers is
mostly influenced by their beliefs and attitudes which, in turn, are influenced by social
conditioning. Because customers are becoming more aware of health issues, due to which their
approach towards foods is changing constantly, Tesco is adapting to these changes by
accommodating the demand for organic products.
Tesco also established Tesco Direct in order to coop with current global economic. Tesco
Direct has been one of the recent and great achievements which has been seen as one of the
important tools in increasing the sales margins. The online and catalogue shopping will make the
shopping ativities become easier and give high margin returns and less focus on sales and margin
per foot return to space. The development of such platforms not only help in saving retail space
but reach a larger number of people.
Lastly, Tesco had introduced Tesco Club Card in order to gain customers loyalty. Tescos
Club card program boasted 10 million active households and captures 85% of weekly sales. By
targeting in such a relevant way and treating customers according to their individual behaviors,
needs, and desires, Tesco came to understand that a higher-value coupon is not needed when
youve reached the right person in the right way with a tailored message. In the five year period
following the implementation of the Club Card program, sales have increased by 52% and still
grow at a rate higher than the industry average. Store openings and expansions have increased
Tescos floor space by 150%.

33

SAINSBURYS

1. INTRODUCTION
Sainsburys is the second largest supermarket chain in the United Kingdom, with a share
of 16.9% of the UK supermarket sector. Sainsburys was founded in 1869 by John James
Sainsbury with a shop in Drury Lane, London. The company became the largest retailer in 1922,
is an early user self-service retailing in the UK, and had its heyday in the 1980s. In 1995, Tesco
has overtaken Sainsbury's to become the market leader, and Asda became the second largest in
2003, Sainsbury dropped to third place for most of the subsequent period up to 2014. When it
return to the second largest market leader back, Sainsbury's parent company, J Sainsbury plc, had
divided into three parts which are Sainsbury's Supermarkets Ltd, Sainsbury's Convenience Stores
Ltd (Sainsbury Local), and Sainsbury's Bank.
Sainsburys was established as a partnership in 1869, when John James Sainsbury and his
wife Mary Ann opened a store at 173 Drury Lane in Holborn, London. Sainsburys began as a
fresh food retailers and then expanded into retail packaged goods such as tea and sugar.
Sainsburys first trade philosophy is "Quality perfect, prices lower", as stated on a sign outside
his first shop in Islington. In 1922, when it became the UK's largest grocery group, J Sainsbury
was incorporated as a private company, as 'J. Sainsbury Limited'. At the time of John James
Sainsbury died in 1928, there were 128 stores and he was replaced by his eldest son, John

34

Benjamin Sainsbury. Due to outbreak of World War II, many of those men who worked for
Sainsbury has been called upon to perform national service and were replaced by women. Given
Sainsbury's reputation for quality food at affordable prices, World War II was a difficult time for
Sainsbury's, because most stores that has been trading in London has been bombed or damaged.
Therefore it makes the turnover decreased to half the pre-war level.

In the 1950s and 1960s, Sainsbury was the first adopter of self-service supermarkets in
the UK; which is a cooperative shop, opened in 1942. On a trip to the United States, Alan
Sainsbury realized the benefits of self-service stores and believe the future is self-service
Sainsbury supermarket of 10,000 square feet (930 m2), with eventual additional bonus points
parking for added convenience. The first self-service branch was opened in Croydon in 1950.
Sainsbury's was a pioneer in the development of its own brand products; the goal is to offer
products that match the quality of national branded items but at a lower price. Afterthat,
Sainsburys expanded its operation into Scotland, Northern Ireland, Sprucefield, Lisburn, and
some more. In 1991, the group boasted a record of 12-years increased dividend by 20% or more
and earnings per share have also increased. Besides, the company also raised 489 million in
new equity to finance the development of superstores.
In late 1993, Sainsburys announced discounted price on its 300 most popular own-label
lines. Substantially, this came three months after Tesco launched its Tesco's value line. Several
months later, Sainsburys announced that the margin had fallen, that the pace of construction of
the new superstore will slow down, and it would write down the value of some of its properties.
In 1996 Sainsburys lost its place as the UKs largest grocer to Tesco after the 20th century
Sainsburys has become the market leader in the UK supermarket sector. In order to develop,
35

Sainsbury's unveiled its new corporate identity and making brand re-launch and Making
Sainsbury's Great Again.
Currently, Sainsbury's operates supermarkets and convenience stores. Besides that, it also
operates Sainsbury's Bank, Mobile by Sainsbury's phone network, Sainsbury's fuel forecourts
and Sainsbury's Online internet shopping services; and has a property portfolio worth 8.6
billion (as of March 2007). In fact, since 2014, Sainsbury's is the second largest supermarket
chain in the UK, and it places an emphasis on a higher quality grocery offering compared to its
other large rivals. The group's headquarters of Sainsbury's Store Support Centre is in Holborn
Circus, City of London. Today, Sainsburys operates over 1,200 supermarkets and convenience
stores and employs around 161,000 colleagues. Sainsbury's operates supermarkets that vary in
size from under 10,000 sq ft (930 m2) up to over 100,000 sq ft (9,300 m2).
Sainsburys updated its business strategy and objectives to achieve their goal and reflect
commitment to meeting customers needs. Sainsburys vision is to be the most trusted retailer
where people love to work and shop. By referring to the vision, Sainsburys goal is they will
make customers lives easier, offering great quality and service at fair prices, serving our
customers whenever and wherever they want.

36

2. Impact of Current Global Economic Uncertainty on Sainsburys And

The Solutions.
Economic uncertainty refers to an environment where little or nothing is known about the
future economic situation. There are many sources of economic uncertainties, including changes
in economic policies and financial, different views on prospects for growth, productivity
movement, war, terrorism, and natural disasters. Uncertainty about economic policies in the
United States and the euro area has surged since the 2008 recession. In the United States,
uncertainty has recently been driven primarily by wrangling over fiscal policy, including taxes
and government spending, and long-term structural issues, such as health care and regulatory
policies.
The UK economy, and with it the UK retail sector, faced some interrupted growth since
2013, and the growth fell from 2.6% a year in 2014 to an expected 2.3% pa in 2015. One of the
negative impacts of economic uncertainty to the Sainsburys as underlying sales decline
drastically because consumers need to cut spending. Therefore, it faces increasing competition
from existing and new competitors because of a decline in the economic activity. Sainsburys
retail strategies have been affected by the global economy, with many competitors offering a
range of heavily discounted items. In that case, cash-strapped households became much more
price conscious and altered their shopping habits in a fairly fundamental way. So they switched
their purchases to another retail market that would give them so-called hard discount to save
money. Therefore, the group had suffered a decline in performance relative to its competitors and
was demoted to third in the UK grocery market.

37

Besides that, the recession from Global economic uncertainty also gives strong impact on
Sainsburys financial performance as this factor leads to lower sales, ultimately causing financial
decline. Sainsburys has fallen to its first annual loss in a decade because that underlying decline
sales across the British supermarket industry. Sainsburys shares, after opening higher, fell more
than 3%, making them the second biggest failure on the FTSE 100 index. This group trading
profit fell to deficit of $0.166 billion. So, the earnings growth has slowed as a price war with
rival supermarkets. Therefore, Sainsburys had cut prices on the 1,100 products up 6 per cent
discount to increase their sales.
In addition, rising of interest rates and tax rate also one of the problems faced by Sainsburys,
because of the economic uncertainties. Rising of interest rates leads to increase in loans expenses
as Sainsburys need to pay more than the usual rates and increased their debt. Besides that, the
increased in the tax rate also make It becomes worst.
In order to overcome the economic downturn, Sainsburys took some initiatives such as reorganisation their group. Re-organisation has seen Central Finance Operations move from the
Holborn Head Office to Manchester and Property Division move to Ansty Park in Coventry.
Most of the remaining Holborn operations are likely to move to Coventry in due course, as
Sainsbury's looks to reduce costs by moving out of Central London. The group is also investing
in alternative energy methods. In July 2014 it began powering one of its stores by converting
food waste into bio-methane gas to generate electricity. The group became the first retailer to
come off the National Grid by its own means.
Furthermore, Sainsburys tries to increase their sales by creating customer values.
Sainsburys promised to help customers Live Well for Less is about more than just price. The

38

values also were integral to their relationships with suppliers, colleagues and other stakeholders.
Their aim is to ensure customers can differentiate them from the competitors and give them a
real commercial advantage.
Besides that, Sainsburys also has a joint venture with Dansk Supermarket, to bring Netto
discount stores back to the UK. It opened five Netto stores in the year to March 14, and is
targeting 15 stores by March 2016. So far, so good, said Mr Coupe of Nettos performance.
Every week, week on week, we are seeing sales growth. The million dollar question is will that
continue? If it continues for the foreseeable future, clearly these stores will be attractive
investments.
Although the recession has slowed premiumisation, quality remains an important feature. In
addition, the continuing evolution of many emerging markets has pushed the importance of
segmentation, with mass-market brands venturing into premium extensions in hopes of
noticeable share gains as consumer spending picks up. Sainsburys annually running voucher
scheme for local organizations to redeem equipment for sports and other activities. Customers
get vouchers from their shopping that they donate to organizations of their choice, and then they
may redeem vouchers with Sainsbury, who credit their account with points to spend on items
from the catalog. Sainsbury's also make retail loyalty scheme called 'Nectar'. The scheme allows
customers to earn points on almost everything bought from Sainsbury's and also from other
participating retailers as a return to large range of rewards. For every pound spent on, the
customer gets 1 point which is a reward equivalent to 0.5% of supermarket purchases. Therefore,
this can attract customers to spend more in their retail store.

39

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