Tesco's Pioneering Online Grocery Strategy

HRM 360
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Tesco, PLC from Mouse to
House
In Online Grocery Retailing
1

Tesco at a glance:
Tesco is a small organization that sold groceries to Londons East End
markets. It wasnt until 1929 that Tesco opened its first store in Burnt Oak,
Edgware. Until then, all of its activities were primarily focused on selling to the
retail trade. The company grew over the years and in 1947 was listed on the
Stock Exchange as Tesco Stores (Holdings) attracting a share price of 75p.
As of early 2000 the company operated 225 superstores, 220 supermarkets,
48 neighborhood stores, 42 Metro stores, and 21 Express stores in the U.K.

It had maintained an unflagging focus on delivering the best value possible to
its customers while Tescos strategy had taken various forms over the years.
Taking a leaf from the successful grocery supermarkets that evolved in the
United States in the 1930s, Mr. Cohen instituted a set of core principles that
had served the company well. Tesco introduced a variety of innovative
practices that have increased efficiency and reduced operating cost over the
years.

Tescos experience with the regulatory labyrinth in the retail sector in the U.K.
gave it some important experience benefits. Blanketing the entire country with
superstores was therefore a pipe dream. Instead, Tesco used novel formats
that were tailored to fit area-specific regulation. After 1998 it considerably
slowed down building new stores in the U.K., betting on the growth of its
online endeavors to help sustain growth.

The company grew over the years and in 1947
was listed on the Stock Exchange as Tesco
Stores (Holdings) attracting a share price of 75p.
As of early 2000 the company operated 225
superstores, 220 supermarkets, 48
neighborhood stores, 42 Metro stores, and 21
Express stores in the U.K. It also had operations
in Ireland, the Czech Republic, Poland, Hungary,
Slovakia, and Thailand.

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In 1919 Sir Jack Cohen founded Tesco as a small organization that sold
groceries to Londons East End markets. Tescos experience with the
regulatory labyrinth in the retail sector in the U.K. gave it some important
experience benefits. For example, the regulatory hurdles that made it difficult
to establish large stores drove its multiple format growth strategy. Blanketing
the entire country with superstores was therefore a pipe dream.

Tescos Move into Online Shopping:
It had always prided itself on an excellent information technology (IT) support
network and had leveraged its IT skills to enhance efficiencies in its traditional
brick and mortar stores for quite some time. This emphasis had given the
company a leg up in terms of the experience curve, having provided it the
opportunity to get its internal house in order while meeting the challenges of
conducting business digitally. Although Europe by the turn of the century was
lagging behind the U.S. in all areas of electronic retailing, it did have a
significant lead in one categoryonline groceries.

Tescos IT Prowess
It operated a tri-level architecture anchored by mainframes and assisted by
middle system servers and PC client front-ends. Its private digital network
connected all its stores in real time. The company had integrated its IT skills
into multiple areas spanning both front office operations as well as the
backroom operations. At the customer end, the companys IT infrastructure
provided the backbone for customer service and support operations.

Similar to a frequent flier program, the scheme awarded points to enrolled
customers for purchases made. The awards could then be exchanged for
products. Managing such a large customer base required significant IT
expertise. IT played a key role in the acquisition of scanner data, integration of
the data with the inventory control system, customer accounts, and generating
orders for supplies as needed at the front-end. When a customers purchases
were scanned at the point of sale, the transaction recorded the price on the
bill, relayed the information to inventory control making changes to inventory
levels in real time, and triggered an ordering process with a distribution
request based on current inventory levels sent directly to forklift operators on
the floor of Tescos warehouses.

Distribution Acumen:

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The distribution system was integrated with a supplier extranet that Tesco had
built in partnership with GE Information Services. Called the Tesco
Information Exchange, this system was first introduced for a small set of large
suppliers such as Procter & Gamble (P&G) and Nestle but had since been
expanded to cover a wider range of smaller suppliers as well. It encompassed
400 suppliers and over 2,500 users. Intended as a complement to the EDI
system already in use, TIE was linked to a number of Tescos key systems to
give suppliers access to relevant and up-to-date information such as
Electronic Point of Sale data to track sales and inventory. TIE promised
numerous benefits for participating suppliers as well.

Tescos distribution network was an integral part of its success story. It
operated 13 strategically located warehouses or distribution centers
throughout the country. Contractors operated an additional six such centers
on behalf of Tesco.

The exchange was designed to facilitate trading between suppliers, retailers,
partners, and distributors. Participating companies anticipated that the
interaction on the WRE would be more efficient due to standardized item
information. It also included an auction facility and other features designed to
dovetail with the ERP (Enterprise Resource Planning) systems of participating
retailers aimed at reducing supply chain costs.

Moving into Digital Commerce:
The company had developed two Web sites6 that customers could access
easily. The corporate website provided relevant information regarding online
shopping, specials and promotions as well as corporate information. It had a
comparison-shopping engine that was quite powerful in that it offered real-
time comparisons of prices on select
items including fresh produce. Tesco
used on the-ground market intelligence to
provide comparisons with key
competitors such as Sainsburys, Asda,
and Iceland. The corporate Web site was
linked to the dedicated shopping site as
well.

Tesco Direct, where most online shoppers entered, consisted of a set of
simple, easily navigable pages that offered pertinent information such as
nutrition, use instructions, and recipes to the time-conscious shopper. Over
four years, the offerings at this site increased significantly. By mid-2000 the

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company offered much more than fresh produce and groceries. Customers
could shop for music, books, videos, kitchen equipment, office supplies,
computers, and a host of other products. Unlike grocery sales, which were
restricted to a specific geographic region due to distribution constraints, non-
food products such as kitchen equipment and bed linen were available for
sales throughout the country.

The Way it Worked:
Once the product was picked, it had to be scanned to ensure a match with
the order and for capturing pricing information before it went into the trolley.
Once the picking was completed, the trolley was sent to the delivery van
directly. While all of this seemed to be well orchestrated, there were very
important issues that arose during execution. Thats the strategy TESCO
uses. When an order was received at Tesco Direct, it was routed to a
computer located in the store that was nearest to the physical location of the
customer. The incoming order was assigned to a delivery van at the local
store and then forwarded to a picking trolley manned by store personnel.

The personal shopper who was responsible for picking the order had to
compete with regular, in-store shoppers since the order was to be fulfilled
within a store environment and not a warehouse. Hence, one often saw store
personnel jostling shoppers as they raced to fill orders for delivery within the
two-hour window that Tesco promised. This system of using local stores to
deliver online orders imposed some strain in terms of scheduling, especially
since all the stores in the geographic region required a fleet of vans ready to
deliver. These vans had to be equipped with refrigeration units to ensure that
chilled and frozen products were delivered fresh.

Tesco maintained that its customers could not get any fresher food even if
they went to the store themselves. He delivery fee hardly made up for the
dedicated vans and in-store picking personnel. Further, since most of the
ideal target audience for the service, time-conscious shoppers, were seldom
available at home during the day to receive deliveries, a large bulk of the
orders had to be fulfilled in the evening hours. This meant that the store was a
lot more crowded with regular shoppers, creating delays. All this added up to
higher sales per customer in the form of books, CDs, videos, and house
wares. However, most of Tescos online customers seemed to use Tesco
Direct more for food items, specifically fresh food, than other products. In fact,
they tended to buy more fresh food than they would normally do when they
visited the store. The company reported that 50% of the online sales were
incremental (25% new customers plus 25% higher sales from current

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customers), while the other 50% was cannibalization of current customer
purchases moving online from offline.

The Competitive Landscape:
The picture was quite bleak but encouraging at the same time in terms of
digital preparedness. While this could be interpreted as a sign of untapped
potential, it also signaled the steep climb that lay ahead for online retailing.
Despite the disparity between the U.S. and most of Europe, all accounts
pointed to a leveling of online populations and even an acceleration of
European online retailing sales in the near future. Sainsburys was the storied
granddaddy among U.K.s grocery chains, known for its attention to detail and
quality of produce. It connoted more of an upscale shopping experience than
either Tesco or Asda. The company had recently acquired Shaws, a chain of
grocery stores in Massachusetts, U.S. It had also been dabbling in online
sales for some time. It started with an experimental contract to provide
employees of Hewlett Packards Bracknell plant the option of buying their
groceries online. They could place orders during the day and the goods would
be delivered to their offices in time for their drive home.

The delivery area that the company initially supported was quite small in
comparison to Tesco and that, according to Sainsburys, was by design. The
company believed that Tescos model of clicks and mortar would not be
successful in the long term as demand exploded. Intent on eliminating the
inefficiencies that were endemic to the pick-in-the-store system, Sainsburys
had been building warehouses dedicated to supporting online shopping.
Online customers, weve found, are less tolerant, and fulfillment of orders has
to be perfect. Thats difficult in-store because of the high out-of-stock
situations. Service levels will always be compromised.
Wal-Mart Company, Asda had been offering a service
it called asda@home for 5,000 lines of products
managed from two picking centers in Croydon and
Watford. It was building two more warehouses in the
London area in mid-2000 to increase the scope of its
online retailing offerings. Asda represented one end
of the fulfillment continuum, having chosen to rely
exclusively on warehouses, unlike Tesco that was
using its stores, or Sainsburys that was using in-store
picking and warehouses. It was quite possible that it had chosen the
warehouse route simply because its store network was quite sparse and did
not correspond to high growth online market regions.

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The fourth largest grocery chain in the U.K, Safeway, was betting on a
completely different approach. It offered neither online ordering nor home
delivery. Customers could either fax their orders or call in their orders ahead
of time and drive to the nearest store to pick up their purchases. Waitrose,
another grocery chain of national repute, offered delivery of groceries with a
twist. It would deliver only to offices but not homes! It ran a fairly successful
Waitrose at Work scheme for the purpose.

Across the Pond:
The poor rate of converts was blamed on a variety of factors including the
inability of companies to offer a fail-proof delivery system, the sprawl into
suburbia that required complex math to figure out delivery routes, and the
general lack of a fulfillment infrastructure. However, some of the larger players
were betting that things would change soon. Mr. George Shaheen, who
headed Andersen Consulting before joining Webvan, ran the company. It
prided itself on its customer service and had been rated among the best
online grocers by Gomez.com, an independent e-ratings company.

Peapod was the oldest online grocery retailer in the U.S., having started
operations in 1989 in Skokie, Illinois. Royal Ahold of the Netherlands acquired
a significant interest in Peapod, thus opening up the possibility of leveraging
Aholds U.S. holdings in the form of the Stop and Shop chain of stores that
were widely popular especially in the Northeastern U.S. Peapod also used
centralized warehouses to deliver produce and food items to well-defined
geographic markets. It also had local agreements with smaller chains to
function as picking centers.

Netgrocer, a fairly early entrant to the online grocery business, shipped a
wide range of groceries other than perishables such as milk and fruit
throughout the 48 contiguous states from a warehouse in New Jersey. It
teamed up with Federal Express to offer a shipping service that ensured
fulfillment of orders within 1-4 days.

Streamline was probably the closest to offering its customers a very attractive
package of goods and services targeted at addressing day-to-day needs such
as dry cleaning, clothing repair, film processing, and prescription drug pickup
in addition to fresh produce and groceries. It also installed a keyless entry
system to the garage so that orders
could be delivered even if the

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customers were not home, an important convenience to working customers.

While many of the U.S.-based online grocers were pure plays, Tesco would
possibly enter with a clicks and mortar approach built around store-based
fulfillment. This approach was only now being attempted in isolated U.S.
markets and that, too, only as a substitute for telephone-based ordering
processes. Some analysts believed that population density was a key
performance driver in fulfillment.

The Future Looms:
Mr. Tim Mason settled down to take stock of the days priorities and the
telephone rang incessantly. Mr. Leahy was on the line with significant news.
He had just confirmed plans with the Board that Tesco Direct would be spun
off as an autonomous entity consolidating all the e-commerce and Web-based
activities of the company. The Board felt quite strongly that Mr. Mason should
be given the opportunity to head up the new division as its Chairman since he
had done well in nurturing Tesco Direct. Mr. Mason needed some time to
collect his thoughts about the offer and told Mr. Leahy that he would reflect on
the proposition over the weekend.

Mr. Mason had a lot to think about in terms of future strategy. Given the
current popularity of Tesco in grocery retailing, would it make sense to launch
a pan-Euro-peen offering to encompass regions where Tesco had a bricks
and mortar base (e.g., Ireland, Slovakia, Czech Republic, Poland, Hungary),
or would it help to first shore up the U.K. market by expanding within the
country? Of course, the larger question was really whether Tesco should
continue its foray into non-food products or at least emphasize it much more.

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Tesco has been losing to their competitors after the company started their
online shopping and put emphasis on e-commerce. Even though the company
was making a lot of profit out of their hybrid bricks-and-clicks offerings, the
company was being faced with complaints from some of their customers
regarding the inordinate delays in accessing web pages at certain times of the
day. While one of their competitors Sainsburys was using dedicated
warehouses just for their online shopping, Tesco was relying only on their
regular stores and using those stores as the backbone for its online efforts. So
unlike Tesco, for Sainsburys, it was no longer a hybrid bricks-and-clicks
offering but a structure that had separate facilities for online operations. After
launching online grocery shopping Tesco promised its customers making
home delivery within 2 hours after the order being received. Even though the
entire process is automated from picking up the products to send the products
to the delivery van the entire management system was struggling against time
due to their inadequate number of employees. Moreover, many critics pointed
that the equipment the company used was quite outdated and did not offer the
capacity to scale upwards even though Tesco achieved the name of big
spender due to their huge investments in technologies.

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What Strategy should be taken by HR department of Tesco to recruit the
appropriate employees to solve the problem with online operation and come
up with innovative ideas that can meet customers expectation and compete
with the direct and indirect rivals to have more market share and become
market leader in the industry?

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STRENGTH
Tesco held the largest market share over the brick and mortar grocery
chain in UK and provided services to twelve different markets.
Relatedness:
At the middle of the 90s Tesco overtook their main competitor, Sainsbury who
were the market leader since 1800. Tesco recorded a high sales volume at
the year of 2000, and the after tax profit was 1 billion pound. Their operation
was not only circulated in the south and southeast of UK, but they also served
at Ireland, Czech Republic, Poland, Hungry, Slovakia & Thailand.
Justification:
The company, Tesco overtook such a company which was there in the market
as a market leader for nearly a hundred year. To accomplish such objective,
they definitely had the operational efficiency and managerial skills. As a result,
they held the highest market share in the retail grocery industry which was
also diversified as they had business in other neighbor countries.

Tesco had a planned electronic venture that was initiated in September
1996 and they followed the good work by entering into the cyberspace.

Relatedness:
The Tesco Company used a conventional telesales mail order service which
was followed by a shop-at-home alternative, built on a CD-ROM based
catalog. After that, they went for the direct internet based service and was
successful to attract 500,000 online customers through 100 of its online
stores.

Justification:
As the success story of the company began in the 90s and at that very
moment they introduced the technological staffs in their service providing
chain, so it is pretty obvious that the electronic venture reached its initial
objective and the company was on their way up to become one of the market
leader in the online grocery business not only in the UK but also
internationally.

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Tesco had the online competitive advantage, which was only centered to
their core service of grocery products.

Relatedness:
The E-commerce director Mr. Mason was knowledgeable about the fact that
the company got the competitive advantage through the IT department. As
Tesco showed a tremendous progress by launching a website on a shoestring
budget with a group of Dell servers and standard; they were looking for the
scalability of their system where there would be no complain from the
consumer perspective.

Justification:
The golden time period for the company was the middle of the 90s, where
they not only earned a good amount of profit, but also become the market
leader in their specific business arena removing one of the biggest of all time
from their way. It was only possible by bringing something new strategically,
and that was their relative competitive advantage as they were the most
advance company in the technological perception.

The particular company had the best distribution network at that time
and it was one of their integral part toward the success story.
Relatedness:
The internal environment of the company was effective enough to keep their
employees motivated and in a process they delivered the best distributional
network at that time. They operated 13 strategically located warehouses
throughout the country, where a typical warehouse was good enough to cover
300,000 square feet and handle approximately 50 million units a year.
Justification:
The distribution channel is one of the most important thing in a operational
company among the supply chain management. And the case provided
evidence that the employees and the mid level management were effective
enough to bring out the best and provide the customers with the deserving
service in compare to the charges that they asked from the consumers.
Because of the effective distribution channel, they were successful in the
online delivery procedures which eventually boosted their performance of
becoming the market leader.

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WEAKNESS

Tesco had a disbursement issue where there finance profit was
impacted by bad debt from credit card users and too many discreet
insurance claim.

Relatedness:
Despite the promise of convenience and the fertile landscape of a highly
connected target audience in the UK, many of the companies were facing
serious financial troubles including Tesco, as they were facing a lot of
allowances for doubtful accounts, which was happening because of the credit
card services as people were providing bills with loans taken from various
banks and it was not at all a good practice on behalf of the company.

Justification:
As it is mentioned in the case that, when Tesco was looking for capturing the
US market, they were initiating opportunity for the local customer to make
payment over the credit card, as a result, the on credit sale were forcing the
company to hold a significant amount of allowances for bad debt and the
collection method was ineffective. So financially the company was losing
profit on uncollected accounts receivable.

Tesco was trying to get new markets and customers over the Atlantic,
through other non-food product where they were facing obstacle from
other specializing companies like Amazon.

Relatedness:
As Tesco were trying to go beyond the limit of domestic market, one of the
major invested markets was the US market. On the process, they were in a
direct competition with such a company which was already specialized in that
particular sector. The non-food services were the target that Tesco were
looking for, and which was the competitive advantage for another market
leader, Amazon; and that was one of the major weaknesses of the company
in the operational strategy.
Justification:
Amazon was the market leader in selling non food products, which was not a
zone of specialization for the company, Tesco. As a result, it was a
strategically war between two giants in the market, where Tesco was trying to
stabilize and initiate business competing with Amazon. This strategically
oriented decision was not well thought and it could be considered as one of
the major weaknesses of the company.

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OPPORTUNITY

Becoming the best in the online selling sector of grocery products
would be an opportunity for the company, as they could emphasize
more into the existing strategy and create an enormous value towards
their customer.

Relatedness:
Jupiter Communications, a respected Internet consulting firm, reported that
online grocery shopping alone would grow to 2.5 billion by 2004 in the U.K.,
accounting for 19% of all online purchases. This created an even greater
sense of urgency among the leading companies to introduce new online
models or risk obsolescence fairly soon.

Justification:
Statistically, the evidence was leading to a believe for the company that if they
stuck to the current business strategy and continue to modify it for the
betterment of it, the market share wont fall and it will a significant amount of
profit up to next certain years. It is prove that, this could be an opportunity for
the company to continue what their competitive advantage was and they may
build onto that to become one of the superior in the grocery online retailing
market.

Tesco could target the bigger side of the globe to expand their business
on the basis of their core service and become one of the largest
multinational brand.

Relatedness:
In terms of digital preparedness, the picture was quite bleak but encouraging
at the same time. The Economist Intelligence Unit (EIU) reported that only
30% of the U.K. population was online compared to nearly 50% in the U.S.
While this could be interpreted as a sign of untapped potential, it also signaled
the steep climb that lay ahead for online retailing. Technology Observatory,
although Europe accounted for only 1/8 of all worldwide online sales in 1998,
it was expected to generate 2/3 of the total by 2002.

Justification:
As the materiality level of potential customer was higher in the western side of
the globe, it was a clear indication for Tesco that if they could accomplish to
establish their business in US, they would be able to penetrate 20% more
customer geographically. Not only that, as it was the significant data of all, but
they also could target the Asian countries, as Amazon was the only online
shopping option at that very moment.

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THREAT
Being the number one at that time period could be the threat for Tesco,
as every competitor in the market would naturally target the successful
brand in the industry.

Relatedness:
Sainsburys was the storied granddaddy among U.K.s grocery chains, known
for its attention to detail and quality of produce. It connoted more of an
upscale shopping experience than either Tesco or Asda (the Walmart
company). The company had recently acquired Shaws, a chain of grocery
stores in Massachusetts, U.S. It had also been dabbling in online sales for
some time. It started with an experimental contract to provide employees of
Hewlett Packards Bracknell plant the option of buying their groceries online.

Justification:
The new comers will always look towards the trade efficiency of the most
effective company with the best competitive advantage. Based on the case,
Tesco was the number one in the online grocery selling service and in the
distribution of the goods towards the customers. That could make them
vulnerable to competition and many of the other companies in the industry
could enforce them to commit business failure.

People mostly knew Tesco for their service of fresh grocery items that
they sold to the customers in retails and also via online shopping
stores; this may congested their operations to grocery items only
compare to other non-food items.

Relatedness:
U.K. Retail consultants, Management Horizons Europe and Nelson Sofres,
reported findings from a survey of a large sample of U.K. online shoppers that
showed more than 30% of those surveyed reported that their last purchase
was from Amazon, 3.7% from Bertelsmann, and only 3% from Tesco. Besides
that, Mr. Mason had seen recent sales figures showing that his online
customers shopped at Tesco mostly for fresh food.

Justification:
As the stats represents that, though the Tesco company was on top in the
grocery market, but the growth of their sales through online shopping sites
were falling as Amazon was the overall best in selling products worldwide.
Wal-Mart was there to get the market via the retail store. So, the threat for
Tesco was there that the company may become congested only to grocery
products as their market and product development may face problems. The
employees may lose their motivation in the process.

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Forecasting Demand Considerations
Product/Service Demand
Definition

Service/ product demand refers to the willingness and the ability of the
customer to purchase the service or product. From an economists point of
view demand is the relationship between the quantities of a good or service
consumers will purchase and the price charged for that specific good or
service. The term demand signifies the ability or the willingness to buy a
particular commodity at a given point of time. Businesses often spend a
considerable amount of money in order to determine the amount
of demand that the public has for its products and services.

J ustification
Tesco PLC is a British multinational grocery and general merchandise retailer
headquartered in Cheshunt, Hertfordshire, United Kingdom. In addition, they
are the largest grocery internet retailer in the world. Tesco, being rated as
lowest cost supermarket for food by maintaining an unflagging focus on
delivering the best value possible to its customers makes the demand for
Tesco visible among customers.

Technology

Definition
Technology refers to the development of machineries by using scientific
knowledge. Technology takes place when a person puts his scientific
knowledge into practical use to solve problems or to invent useful things.
Companies use the application of science integrated with the company goals
to create a suitable technology for them. The term can either be applied
generally or to specific areas: examples include construction
technology, medical technology, and information technology.

J ustification
Technology is critical in the success of Tesco PLC as the largest online
grocery store with a possession of superior IT support network. Its debut entry
into the world of cyber retailing in providing the internet based service can be
considered as a revolutionary step towards the triumph. It has its own
Internet Service Provider (ISP) and a transactional Web site where customers
could log in to a central system to purchase groceries online.

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Financial Resources

Definition
Financial resources are the cash funds generated by the company internally
and externally to fill up the deficiencies. In simple words, it is the monetary
amount that is available for a person or organization to spend in the time of
necessities. Financial resources can be in the form of cash, liquid securities or
credit lines. Before going into business,
an entrepreneur needs to secure sufficient financial resources in order to
be able to operate efficiently and sufficiently well to promote success.

J ustification
Tesco PLC is affluent financially which has led them to take innovative
practices into account. It spent between 130 and 150 million every year to
stay abreast with advances in IT. In addition to the financial investment its
innovative practices also focus on increased efficiency as well as reduced
operating cost simultaneously.

Organizational Growth

Definition
Organizational growth means different things to different organizations.
Indeed, there are many parameters a company can select to measure its
growth. The ultimate goal of most companies is profit, so net profit, revenue,
and other financial data are often utilized as "bottom-line" indications of
growth. Organizational growth has the potential to provide small businesses
with a myriad of benefits, including things like greater efficiencies from
economies of scale, increased power, a greater ability to withstand market
fluctuations, an increased survival rate, greater profits, and increased prestige
for organizational members.

Justification
Tesco had grown from stride to stride to become the largest brick and mortar
grocery chain in the U.K. and the growth still continues as the largest online
grocery retailer. In 2000, with sales of 18.7 billion and net income of 1
billion, an increase of 11% shows the growth of Tesco in five years. However,
a control over 15% of the fragmented grocery industry in U.K also indicates
the hold of Tesco in recent days.

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Management Philosophy

Definition
A truly effective management philosophy is a belief system that defines what
is truly important to everyone within an organization, particularly how people
within the organization should be treated in pursuit of best business practices.
An organizations management philosophy is the glue that joins everyone in
an organization together so that they can all focus their attention on the
attainment of excellence. The key differentiator is that a management
philosophy isnt a set of specific business tasks or methods subject to
improvement. Instead its all about how people will be treated, not because
someone dictates it, but because thats the right way.

J ustification
The management philosophy of Tesco comprises the innovative use of
technology by the employees for sake of organizations success. However,
Tesco concentrates more on leveraging its IT skills to increase efficiency in
delivering customers. This emphasis had given the company a leg up in terms
of the experience curve, having provided it the opportunity to get its internal
house in order while meeting the challenges of conducting business digitally.

Forecasting Demand- Techniques

Trend Analysis

Definition:
Trend analysis in Human Resource is analyzing the current practices of HR
according to industry standards. There could be various trends with respect to
number of practices of HR for instance trend analysis of compensation and
benefits in order to have an edge over other organizations or rather to be
competitive in industry. However, a staffing trend analysis is a critical aspect
of developing a work force planning strategy to meet the objectives of a
company. Analyzing staff trends helps the business owner to identify issues
affecting employee turnover, their impact on the company, the qualifications
and experience of staff attracted to the firm, and measures required to ensure
that the companys future staffing needs are met.

Justification:
In 1919 Sir Jack Cohen founded Tesco as a small organization that sold
groceries to Londons East End markets and it was not until 1929 that Tesco
opened its first store in Burnt Oak, Edgware and until then, all of its activities

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were primarily focused on selling to the retail trade. After 1998 it considerably
slowed down building new stores in the U.K. and specifically from 1996,
Tesco concentrated on its online endeavors with the help of different
technologies. Moreover, Tesco expanded its product line through offering both
food and non-food items in order to become an end-to-end solution provider
for all the customers needs.

Managerial Estimates

Definition:
Managerial estimates are the opinions (judgments) of supervisors, department
managers, experts, or others knowledgeable about the organizations future
employment needs. Whether any company is in the position of employee
surplus or shortage it is decided by managerial estimation. Opinions of the
experienced or higher level employees are being taken. It is done for
constructing proper human resource planning model.

Justification:
After launching online grocery shopping Tesco promised its customers
making home delivery within 2 hours after the order being received. Even
though the entire process is automated from picking up the products to send
the products to the delivery van the entire management system was struggling
against time. Therefore it was estimated that recruitment of additional 7000
employees would solve the problem.

Forecasting Supply-Techniques

Succession Planning

Definition:
Succession planning is a process for identifying and developing internal
people with the potential to fill key business leadership positions in the
company. Succession planning increases the availability of experienced and
capable employees that are prepared to assume these roles as they become
available. It can also be stated that succession planning is a process whereby
an organization ensures that employees are recruited and developed to fill
each key role within the company. Through the succession planning process,
you recruit superior employees, develop their knowledge, skills, and abilities,
and prepare them for advancement or promotion into ever more challenging
roles.

Justification:
Initially Mr. Tim Mason was the e-commerce Director for Tesco. But after the
confirmation from the board of directors, Mr. Leahy informed that Mr. Mason

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should be given the opportunity to head up the new division of Tesco as its
Chairman since he had done well in nurturing Tesco Direct. Moreover, Tesco
Direct would be spun off as an autonomous entity consolidating all the e-
commerce and web-based
activities of the company.

Forecasting Supply- External Considerations

Government Policies

Definition:
The word government policy refers to the decisions that are taken by the
elected politicians. These are basically the plans and course of actions that
are being taken by the government of a country in order to ensure a better
state of the country. The policies are also made for the ways of working or any
organization. In other words, government policies are basically what a
government decides.

Justification:
In the pursuit of establishing brick-and-mortar growth strategies, Tesco had to
deal with certain government rules and regulations. In the U.K., town councils
and municipalities had a very strong position of power and in many cases held
the final say on where stores were built, how long they would stay open, and
how big they would be. Therefore, Tesco used novel formats that were
tailored to fit area-specific regulation.

Balancing Supply and Demand- (Shortage) Recruitment

Full-time

Definition:
A person who works a full scheduled as defined by the company is known as
a full time employee. Actually this is a matter generally to be determined by
the employer as the duration of the working hours varies from one company to
another company. A full time employee earns more that a part time employee.
Moreover, a full time employee is able to contribute more to any organization.

Justification:
against time. Therefore, Tesco announced that it would employ additional
7000 employees to man its stores.

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Forecasting Demand Considerations
Product/Service Demand (Strength 5 + Opportunity 5Justification
Tesco PLC possesses a very high demand among its customers due to the
accessibility of grocery store online where both fresh food and non-food items
are available. Being the largest online grocery business, it has a high
opportunity of capturing the market for non-grocery products abruptly. For
instance, 500,000 customers got attracted towards Tescos online service
during the debut of the service indicating high demand of it and for this reason
their service demand is ranked as 5 for both strength and opportunity.

Technology (Strength -5 + Opportunity 5)
Justification
Technology is ranked as 5 for strength because it is the biggest strength of
Tesco in the form of advanced and superior IT operations due to which
Information Week ranked Tesco as the best among British supermarkets in
terms of its IT operations. Tescos IT plays a key role in the acquisition of
scanner data, integration of the data with the inventory control system,
customer accounts, and generating orders for supplies as needed. However,
the success lies solely into the Tesco Direct a shopping site by Tesco IT
expertise which helps in strengthening its position in the industry as well as
opens the door for future growth opportunities.

Financial Resources (Strength 5)
Justification
Financial resources for any company are considered as one of its strengths
and it is of no different for Tesco. Tescos financial resources are generated
mainly from its sales, alternatively profit. However, its reduction in operating
cost and growth in sales let the company gather enough financial resources
for investing in IT sector for upgrading the practices and for this reason
financial resource is considered as its strength with a ranking of 5.

Organizational Growth (Strength 5 + Opportunity 5)
Justification
With an increase in net sales from 12.09 billion to 18.7 billion and increase i n
net income to 1 billion, Tesco shows a tremendous organizational growth in
five years from 1996 to 2000. In addition, as of early 2000 the company
operated 225 superstores, 220 supermarkets, 48 neighborhood stores, 42

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Metro stores, and 21 Express stores in the U.K. and also had operations in
Ireland, the Czech Republic, Poland, Hungary, Slovakia, and Thailand. The
financial escalation as well as the geographic expansion jointly strengthen the
position of Tesco and offer opportunities for future.

Management Philosophy (Strength 3 + Weakness 3)
Justification
The management philosophy of Tesco is ranked neutral and it proposes a
contradictory position in indentifying and ranking SWOT. However, the
philosophy of sticking into leveraging the IT skills has been proved positive for
Tesco generating a high growth and income in the field of online grocery
business and thus ranked as strength-3. On the contrary, focusing into
developing only IT skills and not other management skills limits the abilities of
employees and management itself and due to this the inflexible philosophy is
also considered as Tescos weakness with a rank of 3 again.
Forecasting Demand- Techniques

Trend Analysis- (Strength-5 + Threat-5)
Justification:
After moving into online shopping Tesco achieved a great success with the
help of different technologies, even, A.C. Nielson, a market research company
rated Tesco as the lowest cost supermarket for food in al Europe in 2000 due
to their technological advancements. That was a major strength for the
company and thus rated 5. However, customers started to complain regarding
different issues which eventually became a major threat for the company and
thus rated 5.

Managerial Estimates- (Strength-5 + Threat-5)

Justification:
After establishing the company as online grocery shopping, Tesco promised
its customers making home delivery within 2 hours after the order being
received but even though the entire process is automated from picking up the
products to send the products to the delivery van the entire management
system was struggling against time and therefore it was estimated that
recruitment of additional 7000 employees would solve the problem. However, it
remained to be seen whether the additional manpower would solve the problem but it
can be a major strength if the company succeeds and a major threat for the company
it fails. Therefore, it is ranked as strength 5 and threat 5.

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Forecasting Supply-Techniques
Succession Planning- (Opportunity-5)
Initially Mr. Tim Mason was the e-commerce Director for Tesco. But after the
confirmation from the board of directors, Mr. Leahy informed that Mr. Mason
should be given the opportunity to head up the new division of Tesco as its
Chairman since he had done well in nurturing Tesco Direct. However, Mason
did not approve of the proposal yet and if he does approve it would give a
major opportunity for the company to do well in the future and thus it was
ranked 5.

Forecasting Supply- External Considerations

Government Policies-(Weakness 5 + Threat-5)
Justification:
In the pursuit of establishing brick-and-mortar growth strategies, Tesco had to
deal with certain government rules and regulations as in the U.K., town
councils and municipalities had a very strong position of power and in many
cases held the final say on where stores were built, how long they would stay
open, and how big they would be and therefore, Tesco used novel formats
that were tailored to fit area-specific regulation. As due to government policies
it could not expand its business as anticipated and changes in the
government policies impose threat for any company, it is counted as both
weakness and threat. Therefore, government policies are ranked as
weakness 5 and threat 5.

Balancing Supply and Demand- (Shortage) Recruitment

Full-time- (Strength-5 + Threat-5)
Justification:
against time and therefore, Tesco announced that it would employ additional
7000 employees to man its stores, but it was yet to figure out whether this
additional employment would solve the problem or not. If this solves the
problem then can be counted as a major strength and if this does not do so
then would be counted as major threat. Thus recruitment of full time
employees is ranked as strength 5 and threat 5.

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Problem 1
Even though Tescohad thousands of employees, it doesnot have a proper HR
department to maintain recruit, retain, training and development process.

Recommendation:
Tesco must have a proper HR department for monitoring all of their employees.

Justification:
Since Tesco was founded in 1924, the companyhas continually grown and developed
as thefood retailing market has changed, respondingto new opportunities and
pioneering many innovations.It needed an extreme good distribution channel which it
had and a lot of man power to monitor it. After starting the operation over internet the
need to execute distribution process was very necessary. So in order to do Tesco
must have a Human Resource department to recruit the right person for the right job
and execute the whole operation effectively and efficiently. If Tesco has a proper
Human Resource Department monitoring all of their employees, then the delivery
process run more smoothly with the proper employee who has the proper skillset for
the job and increase the value of the company to the customers.

How it will be implemented:
In order to implement this recommendation Tesco needs to keep in mind their current
employee. Depending on the number of employee, the size of the department of
Human Resources should be determined. There can be several employees to assist
the HR head. They must recruit someone who has previous experience in Human
Resource field. The head of HR must have vast knowledge about distribution channel
at different location. He should also have the technical knowledge and familiar with
the online shopping operation. After developing the Human Resources Department,
the head of HR must start an evaluation process to find out how the current
employees are performing. Since there are a lot of operations of Tesco, e.g.
delivering the product after receiving the online order, maintaining the storehouse
etc. the performance of the employee is very important. Also because of the
expansion of the operation into online, the requirement for recruiting and developing
their skills is very important for the HR department.

Who will implement:

Mr. Leahy, the CEO of Tesco, should implement this recommendation. Also Mr. Tim
Mason, e-commerce Director for Tesco must be present for the selection process for
the head of HR. So the Top Management is liable for establish an effective Human
Resource Department.

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Where it will be implemented:

This should be implemented in Europe where the main operation is occurring. The
HR department must be flexible for the evaluation process as there is a massive
distribution process. The beginning of the process must start in U.K. and after that it
should be done in other country where the operation would be expanded.

When will be implemented:

This process must be implemented as soon as possible. The process should be start
at U.K. after starting the operation in the internet. Then the same process should be
carried on after expansion.

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Problem 2:
Even though Tesco had 500,000 online customers in their debut and even more
after, they did not have proper IT infrastructure and backdated technology which led
to complaining of the customer for delays in accessing Web pages of Tesco.

Recommendation:
Tesco should build up a strong IT infrastructure in order to serve the customer on
internet.

Justification:
Although Tesco had shown tremendous technological savvy in launching its Web site
on a shoestring budget with a group of Dell serversand standard, off-the-shelf
software packages,Just as soon as the site went online, some customers began
complaining about the inordinate delays in accessing Web pages at certain times of
the day. It was ruining the image of the company. The company was able to attract
500,000 online customers, accepting online orders at 100 of its stores, after its debut
in online shopping. Mostly the time conscious people shop over the internet. If they
found delay in the server, it wastes their time as well as destroys the image of the
company. So Tesco should build up a strong IT infrastructure in order to serve the
customer on internet.

In order to establish an effective IT infrastructure, Tesco first need to invest more
money into this sector. The Finance Department must consider the budget for this
development. The top level management of Tesco should take advice from the
experts in this field. Developing an effective and advance IT infrastructure requires
quite amount of time. During this period the Human Resources Department need to
recruit new employees for operating the whole process. There are lot of graduates
and engineers in U.K. This job does not need that type of experience as the process
itself would be latest one. So there has to be a training period for the new recruits.
The advertisement should be there in order to attract graduatesfrom the pool. Tesco
must keep in mind that there are a lot of competitions going on in the online shopping
industry. So they need to select and retain the best employees in their company.

Who will implement:
First, the decision has to be made by Mr. Tim Mason, e-commerce Director for
Tesco. After that, the Financial Department needs to allocate the budget for
improving the IT infrastructure. Finally, HR departments need to find the employees
with the necessary skills to run the IT department.

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Where will be implemented:
This should be implemented in Europe where the main operation is occurring. The
server would be a cloud server so that location is not pinpointed. Then the
infrastructure should be developed in the warehouses and the stores.

This process must be implemented after allocating the budget. The experts opinion
regarding this is also very important. After confirmation from every department, this
should be implemented as soon as possible.

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Problem 3:
The competition was very high for Tesco and it was losing market share.

Recommendation:
Tesco should first shore up the U.K. market by expanding within the country by
opening up more warehouses and increasing the number of vehicles to deliver the
products to the customers.

Justification:
The competition in U.K.s grocery chains was very high. There were Sainburys,
which was the storied granddaddy among U.K.s grocery chains, known for its
attention to detail and quality of produce.There was Asda, the Wal-Mart company,
had been offering a service it called asda@home for 5,000 lines of products
managed from two picking centers in Croydon and Watford. There was Safeway, the
fourth largest grocery chain in the U.K., which became the first grocery chain to offer
2,750 lines over the Internet with free delivery throughout U.K.According to a report
from the European Information Technology Observatory, although Europe accounted
for only 1/8 of all worldwide online sales in 1998, it was expected to generate 2/3 of
the total by 2002 In order to sustain in the market and capture market share Tesco
must expand them to reach the customers more quickly and open up more
warehouses, increasing the number of vehicles to deliver the products to the
customers.

There were 13 strategically located warehouses or distribution centers of Tesco
throughout the country.In order to open up a new warehouse, top level management
should first notify the operational manager to find the suitable location to open up the
new warehouses. Finding the perfect location is a big challenge. Since the deliveries
occurred in waves depending on the nature of goods delivered there should more
vehicles or vans in order to deliver
the product to the customers. The
Finance Department should
allocate the budget for this process.
For the non-food products delivery,
such as linens, office products,
tableware, or kitchen equipment, it
can be outsourced by other delivery
services. That way the company
can spend their budget on vans
with the refrigerator to deliver the
fresh food or groceries to the
customers. Since the transportation
infrastructure around densely
populated areas was not adequate,

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it also meant that Tesco drivers werefighting rush-hour traffic, all of which contributed
to missed and delayed deliveries. If there were frequent physical warehouses and
store along with the vehicles, then Tesco could easily serve more customers within
the country. The vans should be purchased in bulk in order to cut some of the cost.
The CEO and director of Tesco should look over this whole process.

Who will implement:Mr. Leahy, the CEO of Tesco, should implement this
recommendation.Also Mr. Tim Mason, e-commerce Director for Tesco mustwork with
the operational manger closely to implement the strategy. Beside that Financial
Department would look after the total investment of the budget.

This would be implemented in the suitable places in U.K. The new warehouses must
be building up in such place from where it would be easier to deliver the product. In
every warehouse there should be readied vans.

This has to be implemented after through market research. Opening up an effective
facility is very challenging. In order to grow the Tesco should expand their operation
as soon as possible.

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Problem 4:
USA was bigger market than UK and online store like Amazon, Peapod etc. was
already there; so how to penetrate the bigger market in USA.

Recommendation:
Tesco should only focus on groceries items first to the customers from the online
which was their specialty in USA market and implement Total Quality Management
system.

Justification:
If Tesco wanted to sale its non-food business such as books, videos, music,
computers, electronics in USA, it would have to prepare for a frontal assault on
Amazon. Amazon, Netgrocer, Steamline was already in the online shopping
business. The only way to penetrate the USA market is to focus on the strength of
the Tesco which was delivery of the fresh foods on time. Beside that only 2.8 % of
U.S. consumers used the Internet to shop for groceries and it was due to the inability
of the companies to offer a fail-proof delivery system. So it was great opportunity to
prove their efficiency at USA to increase the customer and after building up their
brands by providing the groceries service in USA, then they should focus on
delivering the non-food items to compete against Amazon.com.

In order to implement this recommendation, first the Mr. Tim Mason, e-commerce
Director for Tesco, must make the decision to expand their operation into USA and
discuss it with the CEO. Then they should arrange the budget for this operation.
Finance department must consider the budget and allocate the investment. In order
to open up Tescos operation at USA, firstly they need to have warehouses and Vans
with refrigerator to serve the customers. They need to open up stores but not that
frequently as this is going to be focused mostly on online shopping. Again there has
to be an excellent IT infrastructure. The HR department should be there in order to
recruit the employee locally for the process of the delivery of the goods. Tesco must
focus on Total Quality Management system at USA. Building up their brands to the
customers is a big challenge at the beginning. So Tesco must purchase a lot of
vehicles in order to deliver the product on time.

Who will implement:
Mr. Leahy, the CEO of Tesco and Mr. Tim Mason, e-commerce Director for Tesco
should implement this. Finance department should look after on allocating the budget
for the whole new operation at USA and Human Resources Department should look
after recruiting the new employees at USA. Operational Manager must find the best

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location to open up the warehouses and finally the IT department should focus on
establishing high end IT infrastructure.

The whole decision would be made in U.K. After that this would be implemented in
USA. In different states of America the service should be provided by Tesco.

This strategy has to be implemented after expanding the warehouses in U.K. After
expansion in Europe there would be enough capital to open up the operation in USA.
So after expanding at Europe the expansion at the USA should be start immediately.

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Problem 5:
After entering into market from Europe into USA or Asia how can Tesco build their
brand.

Recommendation:
Tesco must develop a marketing department with the help of HR department and
promote more toput themselves in a good position in the customers mind.

Justification:
The U.S. consumers had not really taken to online grocery shopping in quite the
same way as those inEurope, especially the U.K. According to Forrester Research,
only 2.8% of U.S. consumers used theInternet to shop for groceries.The poor rate of
converts was blamed on a variety of factors including the inability of companies to
offer a fail-proof delivery system, the sprawl into suburbia that required complexmath
to figure out delivery routes, and the general lack of a fulfillment infrastructure. Tesco
had great experience regarding this and since they are going to operate for the first
time in USA market, they will be unknown to most of the potential customers.

First the director of Tesco needs to build up a
marketing department at USA. The marketing
department should be responsible for promotional
campaign. The HR department of Tesco should
recruit locally from USA for marketing department.
For this purpose Tesco needs creative people.
There are a lot of fresher from the art school in USA.
The HR of Tesco should recruit them for crating the
advertisement. Beside that they can offer job
opportunity to the business graduate from USA. For
the promotional purposes they can do TVC,
telemarketing, Outdoor marketing, online ad etc.
Finance department needs to allocate budget for all
of this. If they can expose their brand more
frequently to the customers then customers would
be interested about them and after that Tesco needs
to show their performance to them.

Who will implement:
Mr. Leahy, the CEO of Tesco and Mr. Tim Mason, e-
commerce Director for Tesco should build up the
Marketing Department. The Human Resources

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Department needs to select and retain the finest marketer from USA. Finally, Finance
department should look after on allocating the budget for the promotional purposes.

This will be implemented in the Tesco brunch at USA. The promotion will be carried
out different states of USA. Beside that the ads will be in the internet as well.

This has to be implemented immediately after opening up the operation at USA.
Promotional campaign should be always there in order to expose more of the Brand
to the customers. So its a continuous process.

Tesco's Pioneering Online Grocery Strategy

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