Posts Tagged ‘tesco’

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What do you want to do today? How about starting off with a nice coffee and at Harris + Hoole’s coffee shop, a bit of yoga, followed by some shopping at a trendy boutique followed by lunch at a Giraffe restaurant, and then off to the supermarket complete with a ‘Euphorium’ and something called the ‘Bakery Project’. If that all appeals to you, that might mean you would like a visit to Tesco’s new leisure and shopping destination in Watford. But here is some bad news for Chinese shoppers who fancy a similar experience in downtown Beijing. Tesco might be trying to do something big in the UK, but its plans are quite different in China. Is this the company’s opportunity to re-establish itself as an irrepressible force of nature, or is this Tesco giving up on the dream of creating a global super supermarket?

Around a year ago, research firm IGD waxed lyrical about Tesco. Of the world’s four largest retailers, (Tesco sits at number three in that list) IGD predicted the UK company was set to benefit the most from globalisation. It said: “Tesco’s international markets, particularly China, Turkey and India, will be a key element in driving their long-term growth and returns. The company will try to replicate its successful concepts in the UK, such as Express stores and Clubcard rewards scheme, in other countries.”

Well, the quest for world domination seems to be on hold. The company was probably right to pull out of the US. Its Fresh and Easy venture was like a black hole draining it of money. But the timing was awful. It moved into the US just as the world’s largest economy entered its worst recession since the 1930s. It exited just as the US economy appeared to be recovering. Maybe Tesco will be back, maybe it has learnt from its initial foray into the US, and will be back, but this time redoubtable. Maybe…

In China, Tesco has agreed to a joint venture with China Resource Enterprises. It has opted for a 20 per cent stake in the venture, throwing in its 130 stores, to form part of a 3,000 store empire. From a distance of several thousand miles it rather seems as Tesco has chosen to give-up on advancing its brand name; has given up promoting the Tesco business model worldwide, and has opted for a very logical and sensible joint venture rather than trying to create a truly global giant retailer.

As for Blighty, the problem faced by the company is that already has a massive share of the UK retail market. Maybe in creating a retail destination Tesco has chosen the only way it can expand in a market where it already has such a strong presence. Perhaps this approach can translate into other territories, and Tesco will be back in the US and via its partner in China, in the world’s second largest economy but this time as a pioneer of retail/leisure destinations.

But frankly it does rather look as if the dream of creating a global retail super heavyweight is over.

© Investment & Business News 2013

Justin King, Sainsbury’s boss, has done an outstanding job for the retailer, but even so his latest gripe seems a tad unreasonable.

Great, we are paying less corporation tax he said, or words to that effect, but: “For every £1 we have benefited from the reduction in corporation tax we have incurred more than £2 of other taxes, in particular business rates and employers’ national insurance.”

He then turned his ire on online rivals. “There is a difference between bricks and mortar retailers who pay rates, National Insurance and all the other domestic taxes that are due, and online retailers who by virtue of their lack of physical presence in the high street don’t contribute in the same way.” Or so he told the ‘Telegraph’. See: UK tax ‘not a level playing field’, says Sainsbury’s chief Justin King 

One of the big advantages pertaining to online stores is that they don’t need an expensive high street presence paying out high business rates; they don’t need lots of staff smiling and being nice to customers.

Okay, finding ways to avoid paying corporation tax is a different matter, but then again, see: A global corporate tax rate is what we need, but at least we are getting a touch more global cooperation.

© Investment & Business News 2013

They say Steve Jobs used to fire staff in the elevator. So this was the nightmare scenario for you if you worked at Apple. You step into the lift and just as the doors close, a hand reaches in, the door slides back open and there stands the familiar figure of Steve Jobs. At this point you have limited options. You can pray that Jonathan Ive steps in too, and then you will probably be ignored. You can try to hide in the shadows and hope Jobs doesn’t spot you.  Or you can tough it out, look the potential death of your career in the face, and smile. Regardless, what often happened was a series of quick fire questions, about you, your role in Apple and what you thought about this, that and the other. When the lift journey came to an end, you may well have found you were out of a job.

Today, Apple’s CEO is Tim Cook, and the axe has been wielded, although on this occasion no elevator seems to have been involved.

Out goes a Brit. John Browett is a former CEO of Dixons, and a high flyer at Tesco. He was charged with leading Apple’s retail strategy.

Out goes Scott Forstall, the man who headed iOS software.

Browett was the first appointee of Tim Cook. Forstall had been with the company since 1997. He joined Apple along with Steve Jobs himself, and before that was with the special one at NeXT.  In other words, Forstall was a Jobs man through and through, working with the Apple founder during his wilderness years post and pre Apple. He was considered by some to be the Apple CEO in waiting.

It is not hard to see why Forstall has gone – actually he is leaving in a few months’ time, if you want to be precise. The Apple maps on the latest iPhones were a disaster (darling).

Up goes Jonathan Ive. He is now responsible for the look and feel of software. He already held a similar role for hardware.

Ive has now taken on the kind of role once held by Jobs himself.

If Apple is all about design, design and design, then Jony, Jony, Jony is the man.

But how long can it last?

Regression to the mean is a term all mathematicians know about. These days economists understand it too. In the long run it is not possible to continuously do better than your rivals, unless you have some innate advantage.

Microsoft was in danger of suffering regression to the mean when DOS was coming to an end. It avoided a downfall by playing to its size, and experimenting; trying lots of different ideas, Windows being one of them. It seems to have forgotten that lesson, although the new Surface product does seem pretty exciting.

Companies such as GlaxoSmithKline may enjoy long term success by building upon their huge distribution network and financial clout, to market products developed by third parties.

In a funny way, even Facebook has an asset that may provide long term value; after all its network of users provides an inherent asset that is not going to disappear in a hurry

Apple just has to go on being brilliant.

And Jonathan Ive may just be brilliant enough to ensure the success continues. And, by the way, the company’s valuation is surprisingly modest compared to profits, bearing in mind its recent growth trajectory.

But nothing lasts forever, sooner or later regression to the mean occurs. Are the recent departures at the top a sign of this, or merely indicative of a company ensuring it stays at the top?

©2012 Investment and Business News.

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So Amazon’s marketing in on fire, It is literally on fire, for much rests on the success of the Kindle Fire, its answer to the Apple’s iPad. And now a UK launch is imminent.

In the US the product is selling big time, the message is spreading like… well like wild fire.

The thing about the product is its price. The products are cheap, and they are cheap for a very good reason. Amazon sees the products as a means to promote its online shopping experience.

So, in other words sell the hardware as cheap as you can and make money when your consumers start using your hardware, going online and buying from your store.  There is another way of putting it of course, give away the razors, make money on the razor blades.

It is just that Amazon’s boss Jeff Bezos doesn’t like to put it that way. He told Tricia Duryee at Allthings D “We do not like the razor and razor blade model, where you lose money up front and then somehow make it up on the backend. We also do not like the other model, where you make a lot of money on the device, because it doesn’t follow our approach “ see Making Money While Keeping Prices Low: Amazon CEO Jeff Bezos Explains It All (Mostly)

But the real point here is that Amazon’s model is different from Apples’s. Apple is a hardware company and it makes money from hardware, income for the iTunes store is good to have, but it is not core.

But these days we are seeing different business models converge.  So Google makes money from advertising, and promotes its model via the Android. That’s why it can give the operating system away for free.

The Amazon Fire is an Android with the Google disabled, and replaced with an Amazon bit. Incidentally, in the US Amazon is now offering a version of the Fire with the Amazon interface taken out, but you have to pay more for the hardware.

But is there really a difference between online advertising and the online shopping promoted by Amazon?  Well, maybe there is a literal difference, but really what Google does is make money from promoting goods, available from third parties, that you can buy on the Internet. Amazon makes money by selling products on the Internet that are available from third parties.

So Amazon, Google and its family of hardware partners, the Nokia/Microsoft alliance and Amazon are all chasing a similar source for revenue.

But they are not just competing with each other, they are competing with Wal Mart and Tesco too.

But this begs the question, if Apple and Google are using hardware to promote sales of ‘stuff’ why aren’t the big traditional retailers doing the same?

Over the last year or so Tesco has made three acquisitions in this sphere. It has bought digital radio company, WE7 and digital-movie streaming service Blinkbox. Last week it also announced the purchase of online book store, Mobcast  – which was started by ex SAS man not to mention author Andy McNab.

The Tesco deals are interesting, but they are small fry.

In a  few years time, its big rivals will be Amazon and Google, and perhaps Apple. Hardware products, especially smart phones and tablets, will form part of the battle ground.

Tesco has to dig trenches, and lay down fortification in this battlefield.

That’s not easy. Innovators dilemma explains part of the problem here. Market leaders find it very hard to adjust when an industry sees radical change. Such a dilemma explains Kodak’s descent from market leader to Chapter 11, it explains why RIM, the company behind Blackberry is having such a torrid time, and it explains the challenges facing Nokia. It may yet prove to be a problem for the likes of Tesco and Wal Mart.

©2012 Investment and Business News.

Investment and Business News is a succinct, sometimes amusing often thought provoking and always informative email newsletter. Our readers say they look forward to receiving it, and so will you. Sign-up here