The retail and food market of the Tescos is heavily operated by the UK government. The UK has highest obesity rate in the Europe, with about 23% of adults obese, according to the government survey announced in the year 2006 figures that are likely to drive demand for healthy products. In February 2007 the broadcasting regulators announced its plans to ban junk food advertisements during television shows watched by people less than the age of 16. Economical Factors: Demand for the group's products and services in part depend on the general economic and political conditions affecting the countries in which the group operates.
Changes in demand for its products and services can magnify the impact of economic cycles on the group's businesses. For instance, in 2006, an improvement in Tesco's Performance in most of Central Europe, Ireland and Turkey was offset by the effects of continuing weak economy in Hungary. This was a consequence of the strong economic measures taken by the Hungarian government which reduced consumer spending. As result, the group's non food category was particularly affected. Political uncertainty in Thailand resulted in difficult business conditions for the group in the second half of 2006.
Though, the group was able to overcome it due to its strong market position but continuance of the situation may affect the group's performance. Social Factors: Tesco plays prominent role in undertaking important social and environmental challenges. It also makes a significant contribution to communities through its charitable trusts and community based education programmes. Tesco also aimed to provide for disabled customers to the fullest. They will be holding themed customer question times each quarter over the coming year and they launched healthy living club for their customers about four years ago.
Technological Factors: The company has to invest in latest technology across all sectors of the business if they want to remain profitable in the market. One of the most important advances that help Tesco to do things more efficiently is information technology. In 2001 they started a project called Tesco Box by identifying the best practice processes for all areas of the business and designing a standard suite of systems that we can roll out to each and every market. Tesco is spending around 500 million pounds in the next five years to reduce their energy use.
Tesco is one of the largest food retailers in the world. In addition, the group also sells non-food items, including electrical goods, home entertainment technology and clothing. Tesco is the largest retail operating group in the UK. The group's leading market position in the UK enhances its brand, provides economies of scale and makes it easier for the group to launch private label brands. However, intense competition in both domestic and international markets could adversely affect its profitability. Tesco is the largest retail group in the UK.
The group had 26% share of the UK grocery market as of December 2006. It accounted for 56. 1% of all UK supermarket shoppers in 2007. In October 2006, 66. 2% of the online food and grocery shoppers purchased online from Tesco. Tesco operates 3,262stores. The group has 30 distribution centres, of which six are dedicated to non-food and clothing. Strong performance of Tesco. com:Tesco. com is the largest online grocery shopping services in the world. It is the fourth biggest online retailer in the UK, behind Amazon, Dell and Argos. Its revenues grew by 29.
2% in 2007, reachingi?? 1,226 million in turnover. Strong brand image:Tesco has an impressive brand image. It is associated with good quality, trustworthy goods that represent excellent value. Tesco's has innovative ways of improving the customer shopping experience. High dependence on the UK and Europe, Tesco is heavily dependent on the UK market. In fiscal 2007, it derived 76. 6% of its total revenues from the UK, 13% from the rest of Europe and 10. 4% from Asia. One of its competitors, Wal Mart derived 22. 1% of its revenues from its international operations.
Weak returns:Tesco has recorded weak returns in the last few years. Its return on assets, return on investments and return on equity during 2005-2007were 7. 1%, 8. 3% and 16. 8%, respectively. Whereas, one of its competitors Marks and Spencer's recorded return on assets, return on investments. Weak inventory turnover: Tesco has recorded weak inventory turnover in the fiscal year 2007. Its inventory turnover ratio for fiscal 2007 was 25. 1. One of its competitors J Sainsbury recorded an inventory turnover of 29. 4 for the same period.