Competitive retail environment for Tesco

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Teso is the UK’s biggest supermarket chain, and the second-largest retailer in the world measured by profits (after Wal-Mart). Recently, Tesco said profits fell 67% in Europe to £55m, while Asian profits, excluding China, dropped 7.4% to £314m.  

From a overall viewing, the main reasons for this drop come from two aspects: rival competitors and consumers. Although right now Tesco is holds a lagger market share than its rivals in Asia, the total market share has fell from 30.9% to 20.2%, where as rivals like Sainsbury increased its market share from 0.2% to 16,6%. The battle becomes tougher with discount discount supermarkets such as Aldi and Lidl, besides existing competitor. Also, due to  little improvement in consumers’ spending power in UK, there is less pessimism around. As the UK is still recovering from the economic recession, people’s real disposable income hasn’t increased much.

Under this situation, The UK firm decided to combine its Tesco China business, with the 2,986 stores held by CRE’s (China Resources Enterprise Vanguard) business. It is the third-largest supermarket chain in Hong Kong. It operates approximately 450 stores in Hong Kong and the Chinese municipalities.This strategy hopefully would help to pull up Tesco’s overall market share by utilizing Chinese people’s improving purchasing power, and the net profits might cover the continuous loss in tough European market to some extent.

 

 

Video Link: https://www.youtube.com/watch?v=zKrZBW2RRXA

Reference:

http://www.bbc.co.uk/news/business-24361465

http://www.bbc.co.uk/news/business-24374863

http://en.wikipedia.org/wiki/Tesco

 

Business ethics: The Chinese Tainted Milk Scandal

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The tainted milk scandal became public in August 2008 with the disclosure that the baby formula produced by Sanlu was contaminated with melamine, which caused kidney failure among the babies who consumed it. However, until the Chinese Health Ministry officially confirmed on September 12, 2008, that the milk powder produced by Sanlu was contaminated by melamine, neither the government nor the company took any initiative to warn the public. Later, government inspections revealed that the products of 21 other Chinese dairy firms were also contaminated with melamine.

Even as the milk scandal unfolded, many countries like Hong Kong, Taiwan, Singapore, South Korea, Australia, and Indonesia rushed to ban Chinese dairy products. Foreign companies which sold China made products or products which used Chinese ingredients had to recall their products.

There were several shareholders envolved in this case: domestic consumers, domestic milk producers and retailers, foreign milk producers and sellers, and Chiese government. The collapse of reputation in the China’s milk industry dramatically reduced the demand both from domestic and abroad. The market share of Chinese milk quickly became small while the domestic producers suffered a huge loss in revenue and brand loyalty. Most of the demand flew out to the foreign milk market and created more money outflow. At the same time, Chinese government had to put more spending on melamine testing and social comforting job.

The concept of Business Ethics  reflects the philosophy of business, one of whose aims is to determine the fundamental purposes of a company. Although as a profit maximiser, companies sometimes should sacrifice profits because of other moral concerns to the public, instead of being over lucrative. Not only should the companies and entrepreneurs be aware their own moral values and realize their social responsibilities, but he government also  should set more stringent regulations to protect the interests of the society.

 

Linked video:

 

Resource list:

http://icmrindia.org/casestudies/catalogue/Business%20Ethics/BECG092.htm