Tesco

Reliance upon the UK market Although international business is still growing, and is expected to bring greater amounts to Tescos profits over the next few years, the bon ton is still highly dependent on the UK market (73.8% of 2003 revenues). part this isnt a major weakness in the short term, all changes in the UK supermarket industry over the next year - for example, the like the Morrisons group success skillfuly purchasing the Safeway chain - could alter the equilibrate of UK supermarket power, and affect share. Debt reduction Tesco is not expected to reduce its debt until at to the lowest degree 2006. Tesco has a large capital expenditure program - mainly due to its huge investment in space for newly stores. Since its expansion is so bellicose, Tesco has little free cash for both other operations. Signs point to serial acquisitions With an enterprise value of £23 billion, Tesco clearly has enormous firepower. Also, its product range is vast and more or less any acquisition can be justified, particularly in the UK.

While fill the gap strategy would be useful to the company, as has been the case with the UK convenience market, there is the danger of Tesco becoming a serial acquirer, as this tends to reduce earnings visibility and quality. UK geomorphologic change could spark a price war The price following in the UK market are about to become aggressive investors in price, Safeway because of new ownership and Sainsbury because of new management. Morrison is reducing Safeways prices by up to 6% and Sainsbury is bound to see lower prices as one of the basic changes necessary to drive its recovery. With both Asda and Tesco move to price leadership, this could result in a step cut out in industry profitability. If you want to get a full essay, order it on our website: Orderessay

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