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Tesco History Essay

Custom Student Mr. Teacher ENG 1001-04 27 May 2018

Tesco History

First self service Tesco, St Albans, EnglandJack Cohen founded Tesco in 1919 when he began to sell surplus groceries from a stall in the East End of London. [4] The Tesco brand first appeared in 1924. The name came about after Jack Cohen bought a shipment of tea from T. E. Stockwell. He made new labels using the first three letters of the supplier’s name (TES), and the first two letters of his surname (CO), forming the word “TESCO”. [5] The first Tesco store was opened in 1929 in Burnt Oak, Edgware, Middlesex.

Tesco floated on the London Stock Exchange in 1947 as Tesco Stores (Holdings) Limited. [4] The first self service store opened in St Albans in 1947 (still operational in 2007 as a Metro),[6] and the first supermarket in Maldon in 1956. [4] During the 1950s and the 1960s Tesco grew organically, but also through acquisitions until it owned more than 800 stores. The company purchased 70 Williamsons stores (1957), 200 Harrow Stores outlets (1959), 212 Irwins stores (1960), 97 Charles Phillips stores (1964) and the Victor Value chain (1968) (sold to Bejam in 1986). [7] Management and strategy changes

Founder Jack Cohen was an enthusiastic advocate of trading stamps as an inducement for shoppers to patronise his stores. He signed up with Green Shield Stamps in 1963, and became one of the company’s largest clients. [8] In 1973 Jack Cohen resigned and was replaced as Chairman by his son-in-law Leslie Porter. Porter and managing director Ian MacLaurin abandoned the “pile it high sell it cheap” philosophy of Cohen which had left the company “stagnating” and with a “bad image”. [9] In 1977 Tesco launched “Operation Checkout” with the abandonment of Green Shield stamps, price reductions and centralised buying for all stores.

The result was a rise in market share of 4% in two months. [9] 1980s In May 1987 Tesco completed its hostile takeover of the Hillards chain of 40 supermarkets in the North of England for ? 220 million. [10] 1990s Tesco at Seacroft, Leeds. This was built as a redevelopment of the 1960s Seacroft Civic Centre. In 1994, the company took over the supermarket chain William Low, successfully fighting off Sainsbury’s for control of the Dundee-based firm which operated 57 stores. This paved the way for Tesco to expand its presence in Scotland, which was weaker than in England.

In 2006 Inverness was branded as “Tescotown”,[11][12] because well over 50p in every ? 1 spent on food is believed to be spent in its three Tesco stores. [13] Tesco introduced a loyalty card, branded ‘Clubcard’, in 1995 and later an Internet shopping service. As of November 2006 Tesco was the only food retailer to make online shopping profitable. [14] In 1996, the typeface of the logo was changed to the current version with stripe reflections underneath. Terry Leahy assumed the role of chief executive on 21 February 1997, the announcement having been made on 21 November 1995. 15][16] On 21 March 1997 Tesco announced the purchase of the retail arm of Associated British Foods which consisted of the Quinnsworth, Stewarts and Crazy Prices chains in the Republic of Ireland and Northern Ireland, as well as associated businesses for GB? 640 million. [17] The deal was approved by the European Commission on 6 May 1997. [18] This acquisition gave it both a major presence in the Republic of Ireland, and a larger presence in Northern Ireland than Sainsbury’s which had begun its move into the province in 1995.

In 1997, Tesco Stores Limited and Esso (part of Exxonmobil ) forged a business alliance that included several petrol filling stations on lease from Esso, where Tesco would operate the store under the Express format. In turn, Esso would operate the forecourts and sell their fuel via the Tesco store. Ten years later, over 600 Tesco/Esso stores can now be found across the United Kingdom. 2000s Trolley shelterIn July 2001 it became involved in internet grocery retailing in the USA when it obtained a 35% stake in GroceryWorks. [19] In 2002 Tesco purchased 13 HIT hypermarkets in Poland.

It also made a major move into the UK convenience store market with its purchase of T & S Stores, owner of 870 convenience stores in the One Stop, Dillons and Day & Nite chains in the UK. [20] In October 2003 it launched a UK telecoms division, comprising mobile and home phone services, to complement its existing Internet service provider business. In June 2003 Tesco purchased the C Two-Network in Japan. [21] It also acquired a majority stake in Turkish supermarket chain Kipa. [22] In January 2004 Tesco acquired Adminstore, owner of 45 Cullens, Europa, and Harts convenience stores, in and around London. 23] In August 2004, it also launched a broadband service. In Thailand Tesco Lotus was a joint venture of the Charoen Pokphand Group and Tesco but facing criticism over the growth of hypermarkets. CP Group sold its Tesco Lotus shares in 2003. In late 2005 Tesco acquired the 21 remaining Safeway/BP stores after Morrisons dissolved the Safeway/BP partnership. [24] In mid 2006 Tesco purchased an 80% stake in Casino’s Leader Price supermarkets in Poland. They will be rebranded into small Tesco stores. [25]

On July 14, 2007, fourteen Tesco stores across the UK were temporarily closed after a ‘bomb scare’ and a criminal investigation launched after threats were made. [26] A ‘suspect device’ was found in one store on July 16, 2007 causing the store and surrounding area to be sealed off while the Army Explosive Ordnance Disposal unit disposed of the package. [27] In 2007, Tesco joined forces with O2 in Ireland to form Tesco Mobile, using the 089 prefix. Tesco owns 50% of the network, with O2 owning the remainder. Tesco has not built its own network in Ireland, but uses the O2 infrastructure already in place, similar to the arrangement in the UK.

By doing this, Tesco has saved money and already has 99. 6% population network coverage and 95% geographical coverage. In 2007 Tesco was placed under investigation by the UK The Office of Fair Trading (OFT) for acting as part of a cartel of five supermarkets (Safeway, Tesco, Asda, Morrisons and Sainsburys) and a number of dairy companies to fix the price of milk, butter and cheese. In December 2007 Asda, Sainsburys and the former Safeway admitted that they acted covertly against the interests of consumers while publicly claiming that they were supporting 5,000 farmers recovering from the foot-and-mouth crisis.

They were fined a total of ? 116M. Tesco, which maintains that it was not a part of the cartel, is still under investigation by the OFT. Corporate strategy According to Citigroup retail analyst David McCarthy, “[Tesco has] pulled off a trick that I’m not aware of any other retailer achieving. That is to appeal to all segments of the market”. [28] One plank of this strategy has been Tesco’s use of its own-brand products, including the upmarket “Finest”, mid-range Tesco brand and low-price “Value” encompassing several product categories such as food, beverage, home, clothing, Tesco Mobile and financial services.

Beginning in 1997 when Terry Leahy took over as CEO, Tesco began marketing itself using the phrase “The Tesco Way” to describe the company’s core purposes, values, principles, and goals[29] This phrase became the standard marketing speak for Tesco as it expanded domestically and internationally under Leahy’s leadership, implying a shift by the company to focus on people, both customers and employees[30]. In order to protect its brand image, and given its expansion plans in Thailand, Tesco has recently been employing a policy of launching defamation proceedings.

In November 2007, Tesco sued a Thai academic and a former minister for civil libel and criminal defamation. Tesco is claiming that the two pay ? 1. 6m and ? 16. 4m plus two years’ imprisonment respectively. They have been alleged to have misstated that Tesco’s Thai market amounts to 37% of its global revenues, amongst criticism of Tesco’s propensity to put small retailers out of business. [31] Tesco’s main advertising slogan is “Every little helps”.

Its advertisements in print and on television mainly consist of product shots (or an appropriate image, such as a car when advertising petrol) against a white background, with a price or appropriate text, e. g. “Tesco Value”, superimposed on a red circle. On television, voiceovers are provided by recognisable actors and presenters, such as James Nesbitt, Jane Horrocks, Terry Wogan, Ray Winstone, Neil Morrissey, Martin Clunes, David Jason and Kathy Burke among others. Corporate tax structure In May 2007 it was revealed that Tesco had moved the head office of its online operations to the tax haven of Switzerland.

This allows it to sell CDs, DVDs and electronic games through its web site without charging VAT. [32] The operation had previously been run out of the tax haven of Jersey, but had been closed by authorities who feared damage to the islands’ reputation. [32] In February 2008 a six month investigation by The Guardian revealed that Tesco had developed a complex taxation structure involving offshore bank accounts in the tax haven of the Cayman Islands. [33] Tesco is in the process of selling its UK stores, worth an estimated ? 6 billion, to Cayman Island based companies set up by Tesco.

These companies then lease the stores back to Tesco. At the time The Guardian claimed that this arrangement would enable Tesco to avoid an estimated ? 1 billion tax on profits from the property sales, and also to avoid paying any tax on continuing operation of the stores, as the rate of corporation tax in the Cayman Islands is zero. Tesco defended this arrangement, saying it has a duty to organise its affairs in a tax-efficient manner, and pointing out that the corporation already pays a lot of tax, including VAT on behalf of its customers, and PAYE and National insurance contributions on behalf of its employees.

Following these revelations, several MPs called for an inquiry into Tesco’s tax avoidance schemes. [34] Tesco issued a libel writ against the Guardian five weeks later. Tesco denied that it had avoided paying ? 1 billion corporation tax, but refused to answer further questions, or to clarify the purpose of the complex artificial tax structure they had created. Further investigations by the Guardian discovered that the tax structures were aimed at avoiding Stamp Duty Land Tax, and not corporation tax as originally thought. SDLT is leveled at 4%, and corporate tax at around 30%, so the figure of ? billion tax avoided by Tesco has been revised to an estimated ? 90-? 100 million. [35] According to the Guardian “Tesco has been involved in a game of cat and mouse with HM Revenue & Customs since 2003. On three occasions when the government has closed a loophole to prevent avoidance, Tesco has taken advantage of ingenious schemes to get around it. Tesco still has 36 stores wrapped up in UK limited partnerships – with Cayman Islands registered partners – which were established in 2006 before the latest loophole was closed. “[35]

In June 2008 the government announced that it was closing another tax loophole being used by Tesco. [36] The scheme, identified by British magazine Private Eye, utilises offshore holding companies in Luxembourg and partnership agremeents to avoid a corporation tax liability of up to ? 50 million a year. [36] Another scheme previously identified by Private Eye involved depositing ? 1 billion in a Swiss partnership, and then loaning out that money to overseas Tesco stores, so that profit can be transferred indirectly through interest payments.

This scheme is still in operation and is estimated to be costing the UK exchequer up to ? 20 million a year in corporation tax. [36] Tax expert Richard Murphy has provided an analysis of this avoidance structure. [37] Corporate social responsibility Tesco has made a commitment to corporate social responsibility, in the form of contributions of 1. 87% in 2006 of its pre-tax profits to charities/local community organisations. [38] This compares favourably with Marks & Spencer’s 1. 1% but not well with Sainsbury’s 7. 02%. Will Hutton, in his role as chief executive of The Work Foundation recently praised.

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