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Background to the Study
This report presents the financial analysis of two non-financial firms, one of which is listed in UK stock exchange (Tesco Plc) and its competitor (Kroger Plc). Tesco Plc is a British general merchandise and grocery multinational retailer founded in 1919 (Brown & Turner, 2008). The company has stores in 12 countries, has total 6814 stores in all the locations and has a 28.4% market share in UK retail market. Tesco is a publicly traded company listed on London Stock Exchange and forms component of FTSE 100 market proxy Index (Palmer, 2005) On the other hand, Kroger Company is an American based retailer founded in 1883 and is the largest supermarket chain in the USA by revenue and is the second largest general retailer. Kroger is ranked as the fifth largest retailer world over (Hopson, et al., 2006). It has more than 2620 multidepartment stores and supermarkets. Kroger has maintained a commanding market share in 34 states of the USA with a wide variety of business models such as supermarkets, Jewelry stores and convenience stores (Oi, 2014). This report evaluates the performance of the two companies with an aim establishing the company with the best company to invest in.
Industry and Firm strategic Analysis of Tesco and Kroger
Tesco Plc has a good understanding of its customers through the use of its Clubcard reward scheme. The company records each Clubcard customer purchases and from there it is bale to analyzes information about each customer that assist in planning for its marketing activities aimed at the Clubcard customer, customers with similar buying pattern and customers in general (Lowe, George, and Alexy, 2012). The way in which the company analysis implements and Clubcard data contributes to its success as a retailer market leader. The market research acts as the main core competence that has ensured Tesco move ahead of its competitors in various markets where it has a presence (Tipples, 2008). Other core competencies include customer-focused strategy, strong Tesco brand name and effective supply systems.
Kroger core competencies are anchored in two capabilities, that is, innovation and high customer orientation. In the innovation Kroger has installed Question that helps top reduce check out time by 30 seconds, has a website that provides up to date information and offers customers a single place where they can find information, and uses Express line Harris Teeter stores offer on-line ordering with the store picks up (Tompkins, et al., 2005). In the customer orientation core competency, the store has a customer oriented strategy that aims at ensuring customers get goods that they want, have a wonderful shopping experience, and the goods prices are fair..
Tesco holds the largest market share in Great Britain compared to other grocery stores with 28.5% followed by Asda that has a market share of 16.2%. Figure 1.0 below shows the market share held by various retailers in Greta Britain (Morningstar 2015e.). Tesco revenue decreased between 2014 and 2015 from 63, 557 million in 2014 to 62, 284 million in 2015. However, the company performance increased slightly in 2015 with the first month recorded a 1.1% growth compared to its close rival Asda that registered 2.1% revenue drop (Morningstar 2015d). The share price of the company has been very volatile, and it ranked a holding company by the stock analyst (Tesco Plc, 2015).
Figure 1.0. Great Britain stores market share (Morningstar 2015d)
On the other hand, Kroger has the second largest market share in the USA after Walmart, which has 24.5% of the market share. The USA retail stores market share is illustrated in figure 2.0 below. Kroger has 12.9% market share (Morningstar 2015c). TO its market share, Krogan acquired its Midwest rival Roundy’s in 2016. The company has a total market capitalization of US$30.49. Over the years, it has developed its marketing strategies which have helped it to open more new stores, acquire more stores and reach more customers (Morningstar 2015a).
Figure 2.0. USA retail market share of top USA retailers (Morningstar 2015a)………………………