Tesco Versus Sainsbury: Growth Strategies and Corporate Competitiveness

CASE II

Tesco versus Sainsbury’s

I. Case introduction and questions

Introduction

This case analysis covers the histories of two of British’s most renowned grocery retailers, while the purpose of this analysis is to describe the growth strategies, the concrete growth initiatives and the resulting corporate competitiveness of the two main grocery retailers; Tesco and Sainsbury’s. The rivalry for the top grocery retailer begins in the 1990s when Sainsbury's was clearly the market leader, way ahead of Tesco and ends in 2008, when Tesco reached a market share of about 30% in the United Kingdom, which was roughly the same as its rivals Sainsbury's and ASDA (the Wal-Mart subsidiary) combined. Today, Tesco is no longer a mere United Kingdom retailer but an international business providing telephony, financial services, legal services, books, music and electrical goods.

Tesco’s inception dates back to 1919 when Jack Cohen began selling surplus groceries from a stall in the East End of London. According to “The Telegraph”, Mr. Cohen made a profit of £1 (converted into US dollars would be $1.60) from sales of £4 (converted into US dollars would be $6.41) on his first day (CoinMill). Five years later, in 1924, the Tesco brand first appeared when Mr. Cohen purchased a shipment of tea from Mr. T.E. Stockwell. From this transaction, the initials and letters were combined to form Tes-co; some years later, in 1929, Mr. Cohen opened the “flagship” Tesco Store in Burnt Oak, North London. In the late 1940s, Tesco Stores (Holdings) Ltd floated on the stock exchange with a share price of 25p (converted into US dollars would $40.06) (CoinMill). The Tesco brand was extremely successful over the next thirty-two years and within those years, Mr. Cohen build a headquarters and warehouse and also became a private limited company. Also during this expansion, Jack Cohen’s Tesco bought out his rival stores; Williams’ stores, Harrows stores, and Charles Phillips stores. During the early 1960s, Tesco Leicester was so successful that it actually entered the Guinness Book of Records as being the largest store in Europe and in 1968, the well-known retail store opened its first 'superstore' in Crawley, West Sussex. During the 1970s, a revolution occurred for supermarkets; they (supermarkets) became the way people shopped, which meant that Tesco was building a national store network to cover the entire United Kingdom, which to this day, continues to expand, while also diversifying into other products, namely, retailing of books, clothing, electronics, furniture, petrol and software; financial services; telecoms and internet services; DVD rental; and music downloads (Telegraph).

Sainsbury’s was established as a partnership in 1869 when John James Sainsbury