Economic(Lee):

Stage of a business cycle and economy condition: TESCO faces the business cycle from trough to expansion, and is still stay in the growth stage from the worldwide perspective. Economic factors are a matter of concern for Tesco since they impact directly on the buying behaviour of customers. Although the UK economy was declared officially under recession in 2008, the governments substantial reduction in interest rates helped to minimise further rises in unemployment during 2009 (Euromonitor, 2010). As a result of this, the spending power of consumers is again on a steady rise as they are more confident about their current financial situation. However, there is still a lot of financial uncertainty meaning that consumers are likely to spend less on premium products, encompassing organics and ready prepared meals, which will adversely affect both sales value and margins (Keynote, 2010). However, the positive aspect of recession is that the customers eat out less and eat more at home which provides opportunities for grocery retailers like Tesco to increase their output (Guardian, 2010). It must be noted that food is the last thing that customers will cut back on. The percentage of overall consumer spending on food has risen considerably over the years, as shown below (Euromonitor, 2010):
Fig 1: UK Spending on Food as % of Overall Consumer Spending 2004 to 2008.

Fig 2: UK GDP Growth 1989-2009

CPI&Inflation The Consumer Price Index for the United Kingdom economy came in at 120.9 for the month of September 2011. The inflation rate year over year was 5.2219% (compared to 4.5257% for the previous month). Inflation from August 2011 to September 2011 was 0.6661%
Fig 3: Recent Consumer Price Index(CPI) for UK: Year Jan Feb Mar Apr 116.9 117.8 118.1 119.3 2011 May 119.5 Jun 119.4 Jul 119.4 Aug 120.1 Sep 120.9

Current UK Inflation Rate:(September 2011) 5.2219% Previous Inflation Rate: (August 2011 ) 4.5257% Inflation rate has increased by : (5.22%-4.52%)/4.52%=15.5%

Interest rate: Bank of England's Monetary Policy Committee UK has kept interest rates at the record low of 0.5% again. Sales and Employment: UK TESCO: Revenue:40,766m Number of stores: 2,715 Employees: 293,676 Employment: (whole world) 2008: 444,127 2009: 468,508 2010: 472,094 2011: 492,714 TESCO hires more and more people as the years go by, with increased revenue and market shares.

Labor costs : labour costs covered: Stains Cover* Structural Defects Cover* Rips, Tears and Burns Cover* Accidental damage Cover* TESCO maintains lower labour cost. (Recently, TESCOs 216,000 employees shared a record 105.5 million through our shares in success scheme. ) Levels of disposable income and income distribution: Dividend per share: Over the past decade TESTOs total shareholder return (TSR) has outperformed the FTSE100 by 53.2% and they are delivered dividend growth for the past 27 years the longest record of consecutive increase by any FTSE 100 company. The chairman of TESCO,David Reid, is delighted to report that the Board has proposed a final dividend of 10.09p per share, taking the full-year dividend to 14.46p. This represents an increase of 10.8% on last years full-year dividend, which is in line with the growth in underlying diluted earnings per share at constant tax rates.

Impact of globalization : TESCO built successful, diverse businesses across the world, yet the journey is only just beginning. They are already developed market-leading, highly profitable businesses in a number of countries. In South Korea, our largest international business, Homeplus, already generates 5 billion revenue. Yet, if Homeplus were to grow to have the same proportion of the total retail market that Tesco has achieved in the UK, the business would be more than three times as large as it is today.

During their first decade of international expansion TESCO proved that they are able to develop profitable and market-leading businesses in many of theirs markets. Over the next decade, in addition to further expanding their established overseas businesses, TESCO now focused on delivering growth in three of the worlds largest economies: china, India and the United states, which between them offer decades of future growth. TESCOs strategy will now have seven parts. Much of it will be familiar but with some important new additions around being a multi-channel retailer, creating highly valued brands globally, and building their teams: To grow the UK core To be an outstanding international retailer in stores and online To be as strong in every thing we sell as we are in food To grow retail services in all our markets To put our responsibilities to the communities we serve at the heart of what we do To be a creator of highly valued brands To build our team so that we create more value As introduces two new services, banking and telecoms, TESCO will increase their market shares in more areas, and thus will affect global market more deeply. (Tesco Bank in the UK now has over 6.5 million customer accounts and generates annual profits of 264 million. Weve made particularly good progress in credit cards. In February, one in eight of all Mastercard and Visa credit card transactions in the UK were made on a Tesco credit card. As we broaden our offer with mortgages launching this year we aim to become the best choice for all our customers banking needs. We have also established a successful Telecoms business. Tesco Mobile now has over 2.5 million customers. By focusing on value and good service and through our 194 phone shops we are changing the way that customers buy phones, services and accessories.)