Right number for supermarkets giant

TESCO is the undisputed king of British retail these days and this year's performance over the festive season will undoubtedly confirm that position. One of the group's biggest Christmas sellers in recent times has been mobile phones. In 1999 and 2000, they were one of the hottest items on the High Street. Consumers were hungry for them and Tesco was one of the stores they felt most comfortable buying from.

This feeling of comfort is hard won. Retailers strive for it and once they have it, they are presented with two major challenges - retaining it and exploiting it.

Tesco has customer loyalty in spades. It is popular with the less well-off through its Value ranges, which implies that it is a worthwhile destination for the cost-conscious. It has also won the admiration of the bourgeoisie through the Finest range, where shoppers pay more for what are perceived to be higher-quality products. The group has already begun to exploit its position with a massive expansion into the non-food arena. This now accounts for a large share of Tesco's annual profits and the percentage is set to rise in the future.

Tesco, like other supermarkets, has branched out into financial services. Four years ago it teamed up with Royal Bank of Scotland in a venture that has become reasonably successful and is making money.

One of Tesco's internal mantras is 'follow the customer'. This means stocking the goods and services that consumers most want at the time they want it. As part of this philosophy the food retailer is sizing up the telecoms sector. Mobile phones were a steal when the main operators were trying desperately to win market share. Now prices have rocketed and demand has slackened. Tesco believes the environment could present an ideal muscling-in opportunity. The telecoms industry is highly regulated, which creates difficulties, but Tesco could either buy airtime from a mainstream operator or undertake a joint venture, much as it did with RBS.

Customer behaviour indicates shoppers believe Tesco offers them a good deal. Anecdotal evidence suggests mobile phone users frequently believe they are being ripped off by the networks. If the supermarket came up with a deal that offered Tesco phones and cheaper usage fees, it would almost certainly prove another successful extension of the brand.

Koizumi task

AS travellers leave Tokyo's Narita airport, two men immaculately clad in identical white suits wave vehicles through. In virtually every other developed country, that job would be done by painted arrows. Their continued employment is testament to the Japanese problem.

Personal income as a percentage of national income is extremely high in Japan - which means individuals are much wealthier than the companies that employ them. For Prime Minister Junichiro Koizumi to make real and lasting improvements, swathes of the workforce would have to be laid off and a period of extreme unpleasantness inflicted on the electorate.

As ministers mull over this, Japan is sinking. All three international credit rating agencies have downgraded the country's debt in the past month and further downgrades may be on the cards.

Economists are most concerned by a precipitate decline or, ironically, a precipitate recovery. The negative scenario would have serious repercussions because Japan is the world's second-biggest economy and its tentacles stretch far and wide. A speedy recovery might also prove damaging because it could prompt the Japanese to sell US bonds in favour of their own country's, which would hit America hard. A slow decline may not present too many hardships for the outside world as exposure and expectations could be gently massaged downwards.

Koizumi is described by those who know him as deeply impressive. But if he does not take radical action, his country will be as internationally irrelevant as Switzerland in 20 years' time.