Tesco’s Optimal Capital Structure Essay Example

of its strategy.

Through a process of continued, strategic innovation, Tesco has become one of the world’s most profitable retailers. It has developed into a multi-operation model that combines the domestic operation with overseas operation, integrates foreign trade into other trade, and joins the export business and import business together. It has also become a huge successful integrated company that deals with a variety of business such as grocery, general merchandise, fuel and financial service. In October 2003 it launched a UK telecoms division, comprising of mobile and home phone service, to complement its existing internet service provider business.

In August, 2004, it also launched a broadhand service. (http://www. racetothetop. org/results/result8/page_1. htm). With regarding to management strategy, the firm has developed its own strategy for business growth. Tesco underwent a major transformation in its strategy and image over the last two or three decades. Until 1970’s, it operated on the ‘pile it high, sell it cheap’ approach introduced by its founder Jack Cohen. The advantage of this is that the supermarket chain has always provided some cheaper retail food compared with their counterparts.

However, as the decline of industrial entry deterrence, increase number of competitors, growing intense of price war, and increase price of raw material, the cost advantages of Tesco over other retail companies has already started to weaken. It is unlikely to maintain Tesco plc’s position in retail industry by continuing cutting the cost of raw materials and other factors of production. For farmers who are already under pressure due to rising price in world market, the squeeze on farmer’s profit margins is a difficulty.