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Tesco China Presentation
Transcript of Tesco China Presentation
Tesco began in the late 1920s and early 30s and rose quickly from a small business to a company that began to buying out competitors stores and by the 60s Tesco along with other supermarkets began growing more quickly and there stores became bigger and bigger. In 1961 Tesco's Leicester store was the largest supermarket store in Europe. During the 70's Tesco started opening more and more stores and opened it's own petrol stations along side it's stores. Since then it has increased it's number of stores and expanded it's range of products into clothing and even banking.
Start of decline?
In 2014 Tesco overstated it's profits by over 250 million pound and consequently many people who had held management roles were made to leave the company. More recently the new Chief Executive Dave Lewis has tried to restore faith in the brand by lowering prices on customer favourite brands and groceries and has this week (February 10th 2015) announced that it's sales have increased for the first time since January 2014. Shares in Tesco increased by 2.7% after this news so the corporation could certainly be bouncing back.
invests into China
China is one of the worlds largest emitters of carbon dioxide so there is a lot of pressure on China from the rest of the word to try to reduce the amount it emits. This places responsibility on corporations in the country.
Tesco has a distribution centre in Jiashan in the Zhejiang Province and has been awarded the Green Supply Chain Award by the Global Supply Chain Council in China. They were especially impressed that carbon emissions have been reduced by at least 30% and the centre uses 45% less water and electricity than normal factories. This centre distributes to 53 hypermarkets and 12 convenience stores. Tesco having their own distribution centre here makes the process of delivery much more efficient and will reduce carbon emissions from transporting all the produce.
Tesco has recently entered a joint venture with China Resources Enterprise (CRE) which combines Tesco's 124 stores with CRE's 3000. This makes the combined enterprise the largest food retailer in China with Tesco owning a 20% share in the business.
Tesco in China Today
Tesco suffered it's first drop in profits in 20 years in 2013. In 2013 the supermarket went through a horse meat scandal where it was found there was horse DNA in four of their meat products when it wasn't listed in the ingredients so should not have been there.
In 2004 Tesco purchased a 50% share of a chain of 25 stores at the time for 140 million pound. Tesco had invested into the Ting Hsin chain which owns the Hymall chain of stores. Hymall is one of the leading hypermarket operators in the country. Tesco aimed to be in partnership with this chain to gain it's own presence. In 2006 Tesco increased it's share to 90% by investing a further 180 million pounds into the operation. The Hymall chain at that point had 44 stores. Currently Tesco has 39 stores trading in the North region where the Hymall chain is located according to it's website.
Tesco is a smaller cog in the very competitive supermarket industry in China.
Economic and Social Impacts
In 2011 over 100 workers at a Tesco in the city of Jinhua, in Zhejiang province, protested at the building, blockading the entrances from any customers. The store was due to close a few months after and they were worried about their wages and redundancy packages.
At the time there had been an increase in industrial action across the whole country with more and more strikes taking place. It is thought the fact that labour in China is so cheap is causing tensions as the workers become more educated and know that they should really deserve more pay and know they can fight for higher wages. The average supermarket salary in China is less than £70 for a 160-hour month. This works out at 44p an hour. Tesco in China currently employs around 15,000 people. Whether or not they pay them a fair wage is unknown but it is almost certainly less than what is paid in the UK.
The range of products on sale would be completely unrecognisable to a British consumer. There are very few British brands of products sold in the stores at all.
As part of the industry it is creating large revenues and offering almost 1,000,000 jobs for China. This obviously benefits the chinese economy and provides jobs where there is still a relative amount of unemployment in the country. As they are providing jobs they are helping people in the country earn more money who may have struggled to get jobs. There are 2.3 million chinese graduates who as of 2014 are currently unemployed and supermarkets like Tesco could provide work to them and allow them to get onto the first step of a corporate ladder and work their way up the business.
Tesco has however been criticised for selling live frogs, fish and turtles in store which is more common in the Chinese culture but raises questions of animal welfare. In these stores they will actually kill the turtle in front of the customer by chopping of their heads. After this they often even offer the head for you to keep along with the rest of the body.
Obviously there would be an abundance of Tesco Value noodles but the range of products on offer starts to sound very bizarre. There is of course the live animals on sale but there is also...
and dried Jelly fish for sale
In terms of globalisation from a British point of view the movement of Tesco into these asian markets is fairly significant. Tesco, a home grown British company is gaining some presence, a relatively small amount compared to giants such as Wall Mart, in this region and in doing so helps promote unity between the countries.
In 2010 David Cameron visited a Tesco store in China while on a trade mission to the country. He was calling for greater trade liberalisation to reduce the barriers for trade between the UK and China. Companies such as Tesco will certainly increase the likelihood of greater trade. The brand acts as a symbol of the British impact on China's economy and the growing mixing of culture and business between the nations.
By Courtney George-Jones and Ben Stockdale