Tesco is essentially the european example of Walmart. Their strategy was simple and was best described by the company's motto, "Pile it high, sell it cheap". This statement can actually give you a picture of how a Tesco store might look like without even stepping into a store. The company focused on high turnover and economies of scale as the way to turn profits.
Tesco was ambitious from the get-go expanding in the UK as fast as they could and aggressively trying to increase their market share by taking away customers from the industry leaders like Sainsbury and others in the market. Initially this competition took the form of price wars and trying to provide added value features to customers. Some stores would fare better than others in quality and variety of food and others would focus on price.
Tesco's Competitive Advantage
By the late 90s Tesco had past its competitors and crowned itself the market leader in the industry. The clear differentiator between Tesco and the competition was its Clubcard or its loyalty program as the case refers to it.
I disagree with the case in this point of view because the customer loyalty is not a consequence of pampering customers through more discounts, but of leveraging information. The clubcard was essentially Google's business model in its most rudimentary form. Provide attractive discounts(free service in Google's case) to clients in exchange for their purchasing information. Before the clubcard Tesco and the rest of the market participants based their strategies on assumptions of customer behavior or surveys which are not always the most reliable sources of information.
The clubcard was an IT generated competitive advantage. It provided a huge amount of data to Tesco which allowed them to make accurate business decisions such as identifying price sensitive products. They realized that there was no need to slash prices on certain products because they were not price sensitive and reduce other products that were. The number of items with discounts was reduced from 700 to a merely 350. They also received data on customer demographics and their specific buying patterns which allowed them to provide the customers the products they wanted and the discounts that would actually bring them to the store. This invaluable data allowed Tesco to be always one step ahead of the competition identifying trends and changes in consumption much faster than the rest. The information was so large that in no time they were investing in a NCR Teradata data warehouse to increase or refine customer profiles.
Tesco's success was driven by the fact that they were able to give customer's the products they wanted and the discounts in the products they most bought. Though substantial at the time, the IT investment platform for the clubcard proved to be a tremendous success.
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