FINAL PROJECT

OF BUSINESS
POLICY

RANA M SHOAIB
SHOAIBS_SPIRIT@YAHOO.COM

COMSATS INSTITUTE OF
INFORMATION
TECHNOLOGY ISLAMABAD

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TABLE OF CONTENTS

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FINAL PROJECT OF BUSINESS POLICY......................................................................1
...........................................................................................................................................1
RANA M SHOAIB..............................................................................................................1
shoaibs_spirit@yahoo.com...............................................................................................1
COMSATS INSTITUTE OF INFORMATION TECHNOLOGY ISLAMABAD.............1
Table of Contents.................................................................................................................2
INTRODUCTION...............................................................................................................4
HISTORY............................................................................................................................4
IMPLEMENTATION OF TRADE THEORIES:................................................................5
1: PORTER’S DIAMOND THEORY:............................................................................5
THEORIES NOT IMPLEMENTED...............................................................................7
1: NEW TRADE THEORY:............................................................................................7
ENVIRONMENTAL SCANNING.....................................................................................7
ECONOMIC ENVIRONMENT:.....................................................................................7
LEGAL ENVIRONMENT:.............................................................................................7
POLITICAL ENVIRONMENT:.....................................................................................8
CULTURAL ENVIRONMENT:.....................................................................................8
COMPETITIVE ENVIRONMENT:...............................................................................8
MODE OF BUSINESS........................................................................................................8
SELECTION OF LOCATION:...........................................................................................8
HUMAN RESORCE STAFFING POLICIES:....................................................................8
JOB EVALUATION & COMPENSATION.......................................................................9
MARKETING STRATEGIES.............................................................................................9
PULL STRATEGY:.........................................................................................................9
SEGMENTATION:.........................................................................................................9
MODES OF FIANANCING:..............................................................................................9
MILESTONES:....................................................................................................................9
Reference:..........................................................................................................................10

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INTRODUCTION
Tesco is basically a Public limited company. It was founded in 1919 in
East London by Jack Cohen. Its Headquarters is in Delamere Road, Cheshunt,
and Hertfordshire, England. The chairman of Tesco is David Reid and chief
executive is Sir Terry Leahy. Tesco’s major products are Groceries, Consumer
goods, financial services, telecoms. Its Revenue is £59.4 billion (Year ending
28/02/2009)) and Operating income £3,128 million (Year ending 28/02/2009)).
It has approx 440,000 till 2008 employees and it has almost 3,729 stores till
2008.

HISTORY
Tesco was founded by Jack Cohen, who sold groceries in the markets of
the London East End from 1919. The Tesco brand first appeared in 1924. After
Jack Cohen bought a large shipment of tea from T.E. Stockwell, he made new
labels by using the first three letters of the supplier's name and the first two
letters of his surname forming the word "TESCO". This information was
verified by the TESCO press relations on BBC Radio in the South on December
10th. In the late 1990s, the typeface of the logo was changed to the current one
shown on the top of the page with stripe reflections underneath the typefaces as
Tesco used them on their carrier bags.
The first Tesco store was opened in 1929 in Burnt Oak, Edgware,
London. The firm was floated on the London Stock Exchange in 1947. The first
Tesco self-service store opened in 1948 in St Albans and is still trading in 2005.
The first Tesco supermarket was opened in 1956 in a converted cinema in
Maldon, Essex.
It has been said that it began own-label canning at the former
Goldhanger Fruit Farms factory, sited a few miles from Maldon in the village of
Tolleshunt Major, despite Goldhanger being another nearby village. The factory
has since been sold. It is now a transport depot, with several other business units
on the site.
Tesco's first "superstore" was opened in 1968 in Crawley, West Sussex.
It began selling petrol in 1974 and its annual turnover reached one billion
pounds in 1979. Also In 1975 Tesco opened one of its first Hypermarket's in
Irlam. The first Hypermarket under the "Extra" name opened in 1997. It
introduced a loyalty card branded 'Clubcard' in 1995 and later an Internet
shopping service. During the 1990s it expanded into Central Europe, Ireland and
East Asia. In July 2001 it became involved in internet grocery retailing in the
USA when it obtained a 35% stake in GroceryWorks. In October 2003 it
launched a UK telecoms division, comprising of mobile and home phone
services, to complement its existing internet service provider business. In
August 2004, it also launched a broadband service.
In addition to opening its own stores, Tesco has expanded by taking over
other chains, including:

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 Victor Value, England, 1968 (sold again in 1986)
 William Low, Scotland, 1994
 Quinnsworth, Stewarts and Crazy Prices stores, Republic of Ireland and
Northern Ireland from Associated British Foods, 1997
 13 HIT hypermarkets in Poland, 2002
 T & S Stores, owner of the UK convenience store chains One Stop and
Day & Nite, 2002
 C Two-Network in Japan, 2003
 A majority stake in Turkish supermarket chain Kipa in 2003.
 Lotus in Thailand
 Hilliard’s, North of England 1984
 21 remaining Safeway/BP stores in late 2005, when supermarket chain
Morrisons dissolved its Safeway/BP partnership (entered into when acquiring
Safeway).

IMPLEMENTATION OF TRADE THEORIES:

1: PORTER’S DIAMOND THEORY:

 FACTOR ENDOWMENTS:

Basically Tesco has gained competitive advantage through advanced factors

that is through communication infrastructure, sophisticated and skilled labor,
research facilities and technological know-how. Examples of these are
entertainment and digital services, finance and insurance and phones and
broadband, clothing to consumer electronics to health and beauty to media
products. Tesco sells an expanding range of own-brand non-food products,
including non-food Value and Finest ranges. It also has done quite well in non-
food sales in Ireland. CDs are one of the best examples etc all these show that
without advanced factors the achievements of Tesco would not have been
possible like these which are result of technological know-how, research
facilities and communication infrastructure.

 DEMAND CONDITIONS:

The major factor in porter’s diamond theory is the demand factor with
respect to production scale. The production scale depends on the demand for the
products or brands like in London 70% Tesco’s own brand is highly appreciated
and demanded by the people due to its low cost besides having the “Finest”
quality in food items (like bread, cakes, etc) and non food items (like in Tesco
Ireland CD’s are of 14.95 euro compared with HMV Ireland or Golden Discs
(competitors) selling the same for just over 20 euro.

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 RELATED AND SUPPORTING INDUSTIES:

The third attribute of national advantage to Tesco is that it has related

industries that are internationally competitive like Wal Mart, through advanced
factors like communication infrastructure, sophisticated and skilled labor,
research facilities and technological know-how.

 FIRM STRATEGY, STRUCTURE AND RIVALRY:

This is the fourth attribute. Tesco has gained competitive advantage

because firstly, the main success and expanding of Tesco is due to its advanced
technology for checkouts and stock control systems. Secondly, domestic rivalry
also plays an important role for Tesco to gain competitive advantage.

 STRATEGY:

Tesco's growth over the last two or three decades has involved a
transformation of its strategy and image. Its initial success was based on the
"Pile it high, sell it cheap" approach of the founder Jack Cohen. was overtaken
by Tesco in 1995. Key reasons for this success include:
1: An "inclusive offer". 2: Customer focus

Diversification: The Company has a four-pronged strategy:

1: Core UK business 2: Non-food business

3: Retailing services 4: International

 STRUCTURE:

Tesco’s UK stores are divided into 6 formats according to their

structure, differentiated by size and the range of products sold.

1: Tesco Extra 2: Tesco Hypermarket 3: Tesco Metro

4: Tesco Express 5: One Stop 6: Tesco Home plus

 RIVALRY:

Asda, Sainsbury’s and Safeway are the domestic rivals which compete
with Tesco and this had allowed Tesco to become better international
competitors as it runs internationally as well.

2: ABSOLUTE ADVANTAGE THEORY:

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 The only absolute advantage which Tesco has that it has a variety of
goods available under one roof for the convenience of its customers.

THEORIES NOT IMPLEMENTED

1: NEW TRADE THEORY:

This theory is not implemented because of the following reasons:

1: No new innovations in products.

2: Rivalries/ competitors already exist in the market like Asda, Sainsbury’s and

Safeway are the domestic rivals which compete with Tesco and this had allowed
Tesco to become better international competitors as it runs internationally as
well.

2: COUNTRY SIZE AND FACTORS-PROPORTIONS THOERY:

These two theories are also not implemented due to the following reasons:

 Does not produce natural products which need climate, location, factors
of production etc.

 Tesco uses advanced factors such as engineering, technological know

how, so the factors of production like land, labor, capital and climate do not
matters.
Tesco does not export goods and products.

ENVIRONMENTAL SCANNING
ECONOMIC ENVIRONMENT:
As the per-capita income of Pakistani national is high so that they can
easily afford the products offered by the TESCO, and thus it helps to increase in
the employment rate. The GDP rate is 5.8% in Pakistan. Those people, who
receive monthly salaries, will prefer to buy variety of goods under one roof in
reasonable price.

LEGAL ENVIRONMENT:
As Pakistan is an Islamic country, so it allows TESCO for sales except
for alcoholic products which are legally banned.

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POLITICAL ENVIRONMENT:
Political environment is favorable for tesco in Pakistan because it will
help to generate government revenue (i.e. Tax) and also the government
intervention will play the major role in progress of TESCO.

CULTURAL ENVIRONMENT:
Day by day it is becoming the culture of Pakistani nationals to get their
work done in minimum time so the TESCO will provide the variety of different
products (from food, grocery and clothing to consumer electronics to health and
beauty to media products) under one roof.

COMPETITIVE ENVIRONMENT:
As there is only one competitor for TESCO in Pakistan i.e. METRO
having small market share so TESCO has an edge to capture more market share
as compared to METRO because TESCO will target all the customers having
different income levels.

MODE OF BUSINESS
 TESCO will use Greenfield Investment as a mode of International
Business to enter in Pakistan.

 As TESCO has to start from scratch in Pakistan so the Greenfield

Investment should be adopted.

SELECTION OF LOCATION:
Tesco will start its business initially in Islamabad (F-6 Super Market) then
in the following cities of Pakistan.

 Lahore
 Faisalabad
 Karachi

HUMAN RESORCE STAFFING POLICIES:

 The management in Pakistan will be held by host country nationals and
the home country nationals will hold positions at headquarters i.e. Polycentric
Staffing Approach.

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JOB EVALUATION & COMPENSATION
 The job evaluation will be done semi-annually on the basis of goal
achievement and employees productivity.

 Employee’s behavior is also an important conduct of job evaluation.

 The employees will be compensated on the basis of job evaluation.

MARKETING STRATEGIES
PULL STRATEGY:

 Tesco used Pull strategy because it depends on mass media advertising

to communicate the marketing message to potential consumer.

SEGMENTATION:

 According to age, gender, education and income level, the Demographic

Segmentation will be applicable to TESCO.

 On the basis of social class, values, and lifestyle choices, the Social-
Cultural Segmentation is also applicable on TESCO.

MODES OF FIANANCING:
The following modes of financing will be used in order to establish business
in Pakistan.
 Equity Financing
 Debt Financing

70% of financing will be done by Equity Financing and the rest 30% percent
will be done by Debt Financing.

MILESTONES:
 To expand business all over Pakistan

 To capture the most market share by being the cost effective service
provider and by being the low cost leadership.

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REFERENCE:
 International Business by Charles W. L Hill
 www.tesco.com
 http://en.wikipedia.org/wiki/Tesco
 International Business: Environments and Operations
(9th Edition) by John D. Daniels & Lee H. Radebaugh

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