Accounting

Based on Walmart's success in the United States, many expected the company to quickly dominate the British market after it bought the Asda grocery chain in 1999. That did not happen; Walmart's market share in groceries grew to a little more than half that of its biggest competitor, Tesco. Initially, Tesco's sales and net income rose significantly while Walmart's sales and net income increased at a much slower rate. More recently, Walmart has made small gains in market share, and Tesco has had small decreases.

Walmart found out that Tesco is a formidable worldwide competitor. Tesco operates almost 2,400 stores in Britain in four different formats. It has a very successful operation in Central Europe, and it expanded to the United States with Fresh & Easy stores. In Korea, Tesco's 174 stores thrived while Walmart gave up after an eight-year effort to succeed and sold its 16 stores. One of the biggest reasons for Tesco's success is its use of technology. In 1995, Tesco started a loyalty card program, called Clubcard, and over 80% of its shoppers are members. Shoppers fill out an application in the store and receive a plastic card and a key fob in the mail that is scanned before they make a purchase. Tesco gathers massive amounts of data about its customers' 15 million purchases each week. Sales data are analyzed and turned into information that provides Tesco with a significant competitive advantage.

As traditional advertising loses effectiveness, these large stores of data allow Tesco to find new and creative ways to market its products.

REQUIRED

a. What kind of information do you think Tesco gathers?

b. How do you think Tesco has motivated over 22 million customers to sign up for its Clubcard program?

c. What can Tesco accomplish with the Clubcard data it collects? Think in terms of strategy and competitive advantage.

d. What are some of the disadvantages to the Clubcard program?

e. Do an Internet search to find out how Tesco is doing in comparison to Walmart and other grocers and retailers. Write a few paragraphs explaining your findings.