Diversification strategy : Tesco opts for own-label banking

An excellent article in The Guardian today would provide lots of scope for a good business strategy lesson for the Year 13s…

Tesco is launching its own bank, and it has just opened a customer service centre in the North-East (the heartland of Northern Rock). However, the Board of Tesco Banking has ruled out making an acquisition of Northern Rock, which the UK government has just been given permission to breka up and sell by the EU.

Instead, Tesco is focusing on an organic growth strategy for its fledgling banking division - and who would bet against them making a success of the venture given their dominance of other retail segments in the UK?

The article is here. Lots of useful points in there for students, and scope for discussion. For example:

- Organic v acquisition
- Advantages and disdvantages of buying an existing bank in order to enter a market
- The value of location (Tesco’s existing portfolio of stores) v buying an “outdated bank branch network”
- The strategic rationale of Tesco diversifying into personal banking
- Gaps in the market for banking services that Tesco is hoping to exploit