Long-term strategy

Tesco has a well-established and consistent strategy for growth, which has allowed us to strengthen our core UK business and drive expansion into new markets. The rationale for the strategy is to broaden the scope of the business to enable it to deliver strong, sustainable long-term growth by following the customer into large expanding markets at home – such as financial services, non-food and telecoms – and new markets abroad, initially in Central Europe and Asia, and more recently in the United States.

The strategy to diversify the business was laid down in 1997 and has been the foundation of Tesco’s success in recent years. The new businesses which have been created and developed over the last 12 years as part of this strategy now have scale, they are competitive and profitable – in fact we are now market leader in many of our markets outside the UK.

The Group has continued to make good progress with this strategy, which has five elements, reflecting our four established areas of focus, and also Tesco’s long-term commitments on community and environment. Importantly, the momentum which it has given the business has allowed the Group to continue to grow well through the economic downturn.

The objectives of the strategy are:

• to be a successful international retailer;
• to grow the core UK business;
• to be as strong in non-food as in food;
• to develop retailing services – such as Tesco Personal Finance, Telecoms and tesco.com; and
• to put community at the heart of what we do.

In 2008/9, Tesco has again delivered a good performance, with all parts of the strategy contributing. We have sustained solid growth in the UK and coped well with the challenges of recession and improving competitors. In our international operations we have made good progress, completing a large programme of new store openings and carefully adjusting our businesses locally to the effects of the global economic slowdown. We have also acquired 36 hypermarkets in South Korea, our largest market outside the UK, in a move which has significantly strengthened our market position there, and begun the groundwork for a wholesale cash & carry business in India.

In non-food, we continue to grow sales and market share and maintain profitability, against a background of a declining general retail market, and we have seen excellent growth from Tesco Direct, which extends our reach in selling a broad range of products on the internet and via a catalogue. Our retailing services have delivered another good year, with tesco.com growing strongly, Tesco Personal Finance making good progress and Telecoms continuing to build its customer base strongly and grow profits. Finally, our work on community and environment continues – we have recently opened our latest blueprint green store at Cheetham Hill, Manchester, which has a carbon footprint 70% lower than a normal store.

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