Tesco Strategy Report Essay

7369 Words May 18th, 2006 30 Pages
A07-01-0011
Copyright © 2001 Thunderbird, The American Graduate School of International Management. All rights reserved.
This case was prepared by Professor Kannan Ramaswamy, with research assistance by Mr. Gennady Dikalov, MIM
2000, for the purpose of classroom discussion only, and not to indicate either effective or ineffective management.
Tesco, PLC: "From Mouse to House" in Online Grocery Retailing
We have got a two-year lead over our competitors on the Internet and we intend to exploit that.
We are the largest grocery internet retailer in the world.
Mr. Terry Leahy, CEO, Tesco, PLC. April 2000.
It was a bright sunny morning in May 2000 as Mr. Tim Mason, e-commerce Director for Tesco, was driving through the lush English
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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. If that perception stuck, it could adversely affect the company. While Tesco was using its regular stores as the backbone for its online efforts, competitors such as Sainsbury's were building dedicated warehouses and picking centers to streamline their operations. For them, it was no longer a hybrid bricks-and-clicks offering but a structure that had separate facilities for online operations. With an increasing number of online customers,
Tesco's hybrid model could become inefficient. Should the company switch horses now and jump into the creation of dedicated facilities or forge new ground by continuing to fine-tune its current approach? Perhaps the decisions in the technological and fulfillment arenas were not mutually exclusive like they appeared to be. Scalability in each dimension could soon become critical.
As if local competition were not enough, established e-tailers from the U.S. were making deep incursions in the U.K. market. Amazon.com had recently been rated as Britain's top retail site generating
£31.2 million in sales in the first quarter of 2000. Mr. Mason knew that plans called for stepping up
Tesco's presence in non-food areas eventually rising to 45%-50% of all online sales. This meant that it would have to take on

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