Tap into Tesco's global ambition

It's hard to imagine a Tesco without Sir Terry Leahy, but come March this year it's a situation that investors will need to get used to. And the appointment of Philip Clarke as his successor should comfort investors - just as Sir Terry's elevation to the top job came as reward for masterminding the Clubcard scheme, so Mr Clarke's follows his key input into Tesco's recent moves in Asia. And just as Clubcard proved to be a key initiative in achieving Tesco's domination of UK retail over the last two decades, so Asia will be key to growth over the next 20 years.

Already, Tesco's Asian business is a vast operation, spanning six countries, and generating trading profits of £440m on sales of £8.4bn a year. That's not yet in the same ballpark as the UK business, but at current growth rates it is unlikely to be long before it catches up. Homeplus in Korea - the group's largest business outside of the UK with sales of £4.5bn and profits of around £300m - is currently growing like-for-like sales at 6.7 per cent, and Tesco believes it has the potential to triple grocery market share from the current 9.2 per cent, with further acquisitions likely to help it hit this target.

The group's experience - and, of course, profits - from Korea are also proving useful as the business expands into the £600bn Chinese market. Since it entered the country in 2004, Tesco's sales in the world's most populous country are already at the £1bn mark, and growing at an underlying 8.3 per cent. And although it's been later to market there than rivals including Walmart and Carrefour, it's quickly grabbed the number two position, albeit with just 3.6 per cent share of a hugely fragmented market.

But that means there's plenty more space to expand into, and Tesco plans to double the number of stores in China to 200 by 2015, a quarter of which will be anchor tenants of the Lifespace malls it's building across the country with local partners. So far, four of these 75,000 square foot freehold malls are open, but with China's urban population expected to grow by a third to 420m by 2020, there is scope for many more - high quality retail space in tier 2 and tier 3 cities across the country is in very short supply, and Tesco already has 32 new mall sites approved and 200 further locations identified. That's an opportunity which could add significantly to the £7.8bn of property the group has already built up in Asia and which would cement its position as not just one of the world's largest grocers but one of the largest mall operators, too.

Although it will take many years for Tesco to deliver on this vast potential, there are no signs that the group's domestic dominance is waning. Trading momentum in the UK is strong, with like-for-like sales currently growing at a healthy 3 per cent, and the return of moderate food inflation should offset the what could be a tough year for consumers, as VAT increases and rising petrol costs eat into household budgets. It's winning the war for new space, too - it has won more than twice the number of planning applications over the last two years than its three largest rivals combined, and while some critics suggest this could lead to cannibalisation of sales, an additional 2.1m square feet of new space to be added this year will add 3 per cent to sales.

This could be a milestone year for its banking division, too, which saw sales climb 17.8 per cent in the latest quarter - after launching its own platforms in October Tesco can now offer its own savings and insurance products, and Financial Services Authority (FSA) approval for the sale of mortgages is expected by the summer. And progress in its troublesome US business Fresh and Easy could be the icing on the cake in 2011 - US consumers are said to be warming to its unique format, and that's translating into a sharp rise in underlying sales. This increased scale means investment in distribution is now paying off, with breakeven possible in 2012-2013.