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1.Introduct ion
Tesco was originated in the

markets of Londons East End, where in 1914,war veteran Jack Cohen began to sell groceries. The brand name of Tescofirst

appeared on packets of tea in the 1920s. Tesco has seen a rapidgrowth an d transformati on over the ye ars to become

the UK mostpr ofitable and giant supermarket and overtook Sainsbury in 1995. In 200, Tesco has captured 15.6

% of the groce ry market in th e UK, whichin creased to 28% in2004 and it currently controls over 34% of the UK grocery

market (UK, 2004). Tesco now operates 2318 stores in twelvecountries and has over 328, 0 00 employees a nd is now

the principalpri vate employer in the UK.In recent years Tescos business growth was based on abroad expansionand

on trading in merchandise other than foods. Tescos success in UK hasbeen mainly been built on low prices, customer loyalty

and expansion intoother markets such as banking, insurance and telecommunicat ion. Thisdiversificati on has been a

great success that 20% of giant market leadersales in 2004 were from non food. Tesco is the largest petrol retailer and itoperates

Tesco Finance in association with Royal bank of Scotland, and Tesco.com services (Tesco .com, 2010). Te sco is the numb

er one foodretai ler in the UK with stores in UK, Europe and Asia. Tesco also offersfinancial services and products,

insurance and banking services and manyvaried services.In 2004, the company announced that it was purchasing

the familyrunchain Adminstore, which operates the Europa, Harts and Cullens grocery
7

outlets in the London area, for 53.7 million. By April 2004, Tesco faced ahurdle in its acquisition of Adminstore,

even though the Office of Fair Trading (OFT) cleared its bid, as the federation of Wholesale Distributions(F WD) attempted

to block the deal. The FWD argue that the OFTs decisionwas flawed since the acquisition would make it virtually

impossible forindependent retailers to open new stores in central London(http://w eb.ebscohost.co m/ehost/detail?vi d=5&hid=112&s

id=04bfca2632d1-4eb2b343c1fe7c1f3b6e % 40sessionmgr10 3&bdata=JnNpd GU9ZWhvc3Qt bGl2ZQ%3d%3 d#db=bth&AN=

36585680) On the other hand, notwithstanding Tescos position as the giant retailer inthe United Kingdom (UK), its performance

in terms of sales was worst in 16years in 2008 which raised fears over its growth and domination of the UK market was seriously

threatened (Thompson, 2008). Although this slowingdown of Tescos growt h was due to st iff competition from its mainc

ompetitors such as Asda, Morri sons (Morrison s, 2010) and Al di (Aldi,2010), much of the cause of the slowdown was due to Tescos

vulnerabilityto the recession and its consequent impact on consumer spending habitswhich has been

completely transformed.Alt hough the overall performance of Tesco is not all gloomy as witnessedby overall global

boost of sales of 11.7% in 2008 and a forecast (in 2008)of profits of 2.9 billion in 2008, its ;local UK forecast was not that rosy

withonly a 2% growth which was its worst for 16 years. In fact in 2008, the 2%sales enlargement of Tesco was below that of

Asdas 6.9% and Sainsburys 3.9% (Thompson, 2008). Unpromisingly, apart from a changing customerspendi

ng and shoppin g patterns due t o the economic downturn, thes lowing down o f Tescos sales was partly du e to them losin g theircustomer

s to their competitors. This trouncing of sales and customers totheir main competitors in the UK was a consequence of

falling food prices,the economic slump and Tescos response to the competition by way of discounts on

many of its brands. This slump in Tescos sales of 2008 was


8

just a blip which spurred the retail giant to fight back. The main purpose of this research is the study and analysis of

Tescoscustome r relationship management, which is an activity that has beensupporting the growth of Tesco assist the giant

supermarket to retain andimprove on its market leadership. Cust omer relationship at Tesco hashelped the

company to retain its customer base over the years and haseffectively enhanced the i nternational in crease as they t

ake theirexperi ence with them wherever they went. This rel ationship with customers saw the development of Tesco products

and services brands,which is one of Tescos premium labels which overtook Kellogg as UKsbiggest grocery brand and posted of

1.2 billion Tesco in 2007.One of the key objectives of this research is the study of the customerrelatio nship

management attached to its success over the years amidstthe fierce competition facing the giant store, and it will study how

Tescowas succ essful despite all odds in the market. This r esearch willinv estigate why customer relationship has helped the giant

store frombeing now here to become the market lea der in 1995, a position itmain tains today. Fo r example, a de cade ago, busin

esses including supermarkets h ave being min dful of the imp ortance of cust omermanageme nt and most businesses thought

customer relationship was notthe reason for driving sales, notwithstanding the kingship of the customer. The o

utcomes of this study are relevant and enable the deri vation of recom mendations that when followed can enable the replicate of this

success. Customer positioning is very important and it will extensively bediscussed. This study will also study and

discuss the positioning of luxurybrands at the same shelves as those of competitors products that has theadvantage o

f consumer me mory due to y ears of awaren ess andadvertis ing that has con tributed the cust omers continuo usly loyalty allo

ver the years to date.

1.1.Scope of Research
Customer relati onship manage ment (CRM) is getting increasi

ngly morepara mount and pow erful as eviden ced by the mov e to creating C RM
9

departments across most businesses with supermarkets inclusive. Thish as and is continuously driving the sales force of

business, for example, Tesco was not the leader the industry but due to organized and plannedmarketi ng relationship

management in dealing with customers across theentire store, their history changed from being a follower to a market

leaderby overtaking its main competitor, Sainsburys in 1995. Due to this, Tescocustomer relationship has

continued to attract strong market penetrationand in roads, and they are establishing themselves as big money

makersfor their companies. Tes co continue to i ncrease market share throughof fering better va lue and providi ng more choice and convenien

ce tocustomers. The scope of this project was the identification of the potential growthareas of the Tesco customer

management, and to learn lessons from of how Tesco was able to make customer relationship management at Tescosuccess,

thereby positioning itself as global leader. The study was notlimited to the critical analysis and observations but

an overall study of the Tesco Custo mer relationship management, fr om conception t o marketdomina tion. This study will enable the

drawing up of recommendation s of value to be made.

1.2.Aims and Objectives


The key aims of this study are

the establishment of the current strength of the customer relationship management at Tesco and to analyse the

keyfactors behind its success. Another objective of this research is to gain anindepth knowled ge of the worki

ngs of Tesco c ustomer relatio nshipmanageme nt. The objective also is what future also holds for relationshipmar keting that saw

the development of Tesco Direct (Tescos online arm)as a result of the feedback the company continued to receive from loyalcustomers

, which has the aim of custom er satisfaction for futureexpan sion and driving sales, thereby u ltimately outstri pping traditiona

lstore sales in future.

1.3. Research Questions


In order to achieve the research objective, it is

necessary to formulateappro priate research questions that n eed answers. Co nsequently, this
10

research aims to provide answers to the following research questions.


1)Why customers continue to be loyal to Tesco

and not changing to theircompetitor?2 )What is it that Tesco does to keep and retain customers and what addonsservices do the

market leader offer to earn their customer loyalty?3)What are customers attitudes towards the supermarket and how does themarket

leaderrelates and manages such attitudinal behaviours?

4)What is the r ole of custome r relationship management in theretention T

escos custome rs and the meth od used to attra ct theloyal customers its competitors such as Marks and Spencers (

M&S),Sainsbur ys and Waitrose?5)Ho w are the online retailing arm Tesco.com and its new Argosstylecatalogue service boosting

Tesco Direct sales and market share for Tesco CRM and how they transform customers habits?

1.4. Significance
The result of this study can potentially ensure the use of the optimum ITsystems that

will enhance performance levels and ensure that financialservice s companies can remain competitive by using the

appropriate ITsystems that are customise d for their nee ds. It will ena ble anunderstan ding of the relationship between IT

technology, it developmentand the impact it has financial services. It will also provide an insight intowhether IT is developing t

oo fast for fina ncial services i ndustry andwhe ther the financi al services ind ustry should ke ep abreast with ITdevelopment s or use the

technology that suits their needs

2.Backgrou nd and Literature Review

2.1.Introductio n
Customer Relationship Management (CRM) has in the main been taken togenerate

a competitive edge for an organisation, as well as to have a


11

positive impact on organisational

performance. Nevertheless, there is stillmuch debate over exactly what the makeup is. This supports the highamount of

research and the focus that the concept has continued toexperience in recent times, more or so the commencement of

thederegulation of financial service s related sectors in the midst 1980. In fact,definition s of CRM are everywhere,

and, different and therefore has no onemeaning in its strictest sense. This study seeks to find out why customers

continued to shop at themarket leader stores amidst the fierce competition that is facing theindustry and to explore the

relationships that keep customers loyal to thestore. The overall reason for the research is to find out how the marketleader

continued to position and reposition its marketing strategies so asto know, keep and maintain customers and how CRM can

continue tocontribute and assist the store to retain its customer base for longtermbenefits for both parties. This

chapter is divided into three parts. The first part examines anoverview of Tesco as a company. It looks into

the fierce competition theindustry is experiencing from competitors and the pricing strategy itadopts to continue win

more customers and customer loyalty. The second part looks at customer relationship management from ageneral

perspective, CRM in business, relatio nship marketing and CRM,CRM at Tesco and the reasons for implementing CRM in

businesses. The third and final part focuses on managing customer relationships, therewards (benefits) of CRM, problems

and challenges of CRM, the CRMsituation in the future and the conclusions drawn from the concept.

2.2.Tesco an Overview
Tesco was originated in the markets of Londons East End, where in 1914,war

veteran Jack Cohen began to sell groceries. The brand name of Tescofirst appeared on packets of tea in the 1920s.

Tesco has seen a rapid


12
Research Management dissertation
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