How Tesco beat Sainsbury - 4

3.7 Lean Thinking
Retailer Share of UK Grocery Market
Year Tesco Sainsbury
1993 18% 19.6%
2000 25% 17.9%
2007 31.3% 16.5%

• The rise of Tesco over its rivals is often credited exclusively to its Clubcard Loyalty program launched in 1995. 1995 was the year when Tesco overtook Sainsbury to grasp the “No 1” supermarket slot in the UK.
• Few column inches have been given over to the fact that Tesco started to employ “Lean” experts earlier in 1995 to review their Supply Chain and Supplier Relationships.
  Insights from these “Lean Experts” were shared as early as 1996 in the book “Lean Thinking” and the techniques used in Tesco’s roll-out of the high street Metro stores are revealed in the publication “Lean Solutions”.
• Sir Terry Leahy of Tesco has even been quoted to this effect: Lean Thinking has been an enormous influence on my Business Thinking. It shows how you can fundamentally transform your business.

3.8 New Technology

• It was expanding Internet Shopping Services while Sainsbury's had just reduced its Online Stores. Tesco had even stolen a march on the Internet - offering free access to its Clubcard Members as part of a plan to create a successful e-Commerce website.
• (Sainsbury, however, was aiming to be first with a warehouse delivering goods directly to Online Customers.)

3.9 Growing Abroad

• Tesco had also broken the golden rule that UK retailers cannot successfully expand abroad. While Marks & Spencer and Sainsbury made a mess of their overseas expansion, Tesco had managed to avoid pitfalls into which so many of its competitors had fallen.
• Since its acquisition of the Quinnsworth chain in Ireland in 1997 Tesco has also expanded into Eastern Europe & the Far East (and, most recently, the United States).
• The cornerstone of its international strategy is exporting culturally customized versions of its marketing formula for hypermarkets, the popular department store–supermarket combination that sells massive amounts of food and household goods in a single store.
  Tesco is opting for depth — dominating in contiguous countries — rather than the global breadth Carrefour (and Sainsbury) had sought.
• By forming clusters of shared costs, Tesco hoped to build regional economies of scale. Geographic proximity maximized efficiency by enabling stores to share resources, even if they didn’t operate in the same country.
• Tesco stores in Slovakia and the Czech Republic, for instance, imported up to one-third of their products from each other.
• The company had also calculated that it needs 15 stores in any single country to be profitable. To offset the costs of localization, Tesco management has focused on standardizing management methodology to achieve gobal economies of scale.

3.10 HR Strategy

• With an enviable track record when it comes to HR and Leadership Development, it was arguably Tesco's investment in its People - its 'Every Little Helps' slogan summing up the sort of mentality it was trying to engender in its staff - as much as its ethos of 'pile 'em high, sell 'em cheap' that had been behind much of its growth in the past few years.
• “What really helped Tesco get off the ground in the 1990s was that it recognised that its staff were not as well trained as those at Sainsbury's,” commented Andrea Cockram, then Analyst at Verdict. “It put a lot of effort into that, and it paid off.”