Tesco's 'Steering Wheel' Strategy

The company's driving force was the idea: "Pile it high and sell it cheap." In 1947, Tesco went public and a year later, Tesco self-service stores were started, initially through small stores. In 1956, the first Tesco self service supermarket was opened. In the 1960s, Tesco went on an expansion spree and acquired several store chains. The Retail Price Maintenance (RPM) Act⁴ in Britain prohibited large retailers from pricing goods below a price agreed upon by the suppliers. To overcome this obstacle to price reduction, Tesco introduced trading stamps which were given to customers when they purchased products, and which could be traded for cash or other gifts. RPM was abolished in 1964, and from then on, Tesco was able to offer competitively priced products to its customers in a direct manner.

Tesco's image took a further beating when Imperial Tobacco Company which had considered acquiring Tesco as a part of its diversification strategy, did not go in for the deal as it felt that Tesco might damage its image. To arrest the downslide in its fortunes, Tesco's management went in for an overhaul of its stores during the decade. Several stores were closed down to concentrate on the superstores. The smaller stores that still remained were refurbished to make them more customer-friendly. Tesco diversified into operating petrol pumps in 1974. As its trading stamps were proving a hindrance to the premium image Tesco wanted to project, they were discontinued...