tesco case study summary

Tesco Case Study: How an Online Grocery Goliath Was Born

Tesco boasts an impressive history in the UK and abroad. Over the years, the grocery goliath has achieved continued success by remaining at the forefront of retail trends, including everything from self-service shopping to international expansion. More recently, Tesco has made its mark with a sophisticated online grocery strategy that enables seamless digital shopping. There’s a lot that can be gleaned from Tesco’s eCommerce efforts. In this Tesco case study, we highlight the retailer’s long-term emphasis on customer service, which can be seen not only in its physical locations but also in its eCommerce strategy.

Table of Contents – Summary

A Brief History of Tesco

Tesco’s and world’s first virtual store, tesco and scandals, how tesco became a retail case study favorite, tesco’s ecommerce website, interesting technologies that tesco’s uk site uses, impressive tesco stats you may not know, faq on tesco.

• The Tesco Success

To understand current growth and successes and why they warrant a Tesco case study, it helps to understand the retailer’s history. Founded in 1919, the company initially consisted of a group of high-performing market stalls. Founder Jack Cohen conceived the idea shortly after leaving the Royal Flying Corps as World War I drew to a close. He used demobilization funds known as “demob money” to purchase surpluses of fish paste and golden syrup.

Tesco’s initial success could largely be attributed to Cohen’s understanding of mass-market sales. In a time of strict austerity, he employed a rigid business model of “stack ’em high, sell ’em low.” The brand also set itself apart by embracing a self-service approach, which, at the time, was rare in the UK. Following the introduction of its first supermarket in 1956, the retailer entered an era of rapid growth.

After emerging as the UK’s preeminent grocery chain, Tesco released the revolutionary Clubcard. During the 1990s, the chain expanded to include thousands of international locations. This was quickly followed by investments in internet retailing, which led to the chain’s current status as a top eCommerce grocer, netting  £1.3 billion in pre-tax profits  for the year ending in February 2018.

In 2011 Tesco was the first-ever retailer building the world’s 1st virtual grocery store in South Korea. The experiment took place in a subway station and the results were tremendous: the number of new registered members rose by +76%, online sales increased by +130% and Tesco became South Korea’s no1 online grocery retailer, outranking its rivals e-mart, so this experiment was one of the first key steps towards Tesco’s digital transformation.. After this phenomenal success, Tesco opened its first European virtual grocery shop in Gatwick Airport, UK. See how they did it in this brilliant video:

Tesco has occasionally suffered controversy in the last several decades, with 2 shocking moments that everyone remembers:

• The Horse Meat Scandal: Back in February 2013, several products believed to consist entirely of beef were found to contain horse meat. The Food Safety Authority of Ireland tested a range of cheap frozen beefburgers and it found that Tesco’s sample contained 29% horse instead of beef .  The retailer made every effort to appease concerned customers. One of which included a notable promise to tighten up its supply chain and purchase a more significant share of its meat from the UK. Such efforts have likely played into the grocery chain’s recent logistics successes.
• The Accounting scandal: It was 2014 when the news dropped like a bomb: an FTSE 100 firm could get away with “cooking the books”. The company admitted submitting overstated profits by £250 million . The results? £2 billion off the supermarket’s share price in one day.

How Tesco thrived in the COVID-19 area

During Q1 2021, Tesco reported that the sales from its online store were “remarkably higher” than before the Covid-19 crisis. As Internet Retailing mentions , Tesco’s sales increased by +22% in 2020, even though the physical stores and hospitality re-opened at some point. It is believed that this success was a result of Tesco’s recent delivery enhancements and doers mentality, implemented during the first lockdown. 

It’s revenue analysis shows that 1.3m online orders were conducted only in spring 2021. This means that the total number of transactions was 81.6% higher than the same period in 2019 (a before Covid-19 year), proving that Tesco actually turned COVID-19 into an opportunity for its business, achieving memorable results by quickly adjusting its business model to the pandemic’s needs.

Despite the horsemeat scandal, Tesco remains a customer favorite throughout the United Kingdom. The Tesco case study has become a common phenomenon, as the chain boasts several unique strengths worth emulating on a broad scale.

Over the years, the retailer has shifted its original “stack ’em high, sell ’em low” approach. While affordability remains a priority, Tesco did not pursue it to the detriment of quality. Instead, it combines reasonable prices with exceptional convenience and customer service. This can be seen in physical stores and eCommerce alike.

Excellent Customer Service

Strong customer service lies at the heart of Tesco’s sustained success. The retailer employs a variety of initiatives to keep consumers happy. Customer-oriented product development, for example, ensures that all stores are stocked with the items visitors actually want. This development process includes rigorous consumer testing to ensure that new products and services are well-received. Customized stores lend further appeal; each is designed based on carefully analyzed demographics.

Quality customer service means making accommodations for all consumers—including those with special needs. Tesco accomplishes this through the use of sunflower lanyards, which allow customers with hidden disabilities to secure additional assistance discreetly. The chain also provides induction loops for hard-of-hearing customers, as well as helpful visual guides for consumers with autism.

Ultimately, Tesco’s impressive customer service derives from its top-down approach, in which a commitment to customer satisfaction permeates every element of the company’s culture. Insight Traction’s Jeremy Garlick tells The Grocer that the key to large-scale retail success lies in “ understanding your customers, anticipating their needs, and giving them what they will value.” Tesco checks off all these boxes. This is true both in stores and with its website, which uses an intuitive layout to ensure that customers can quickly access the products and services they desire.

Product Diversification

Tesco may be best known as a grocery chain, but the retailer provides a surprising array of products and services. It aims to serve as the ultimate one-stop-shop for those who prioritize convenience and quality above all else. Customers can expect to find a collection of produce, dry goods, frozen products, and more. Toiletries, household products, pet food, and even apparel can also be located within Tesco stores and on the retailer’s eCommerce website.

Beyond its many product offerings, Tesco also provides a few key services to enhance customer convenience. Tesco Bank, for example, offers everything from credit cards to pet insurance. These digital offerings play largely into Tesco’s eCommerce strategy, with banking customers capable of accessing their account information online.

Fine-Tuned Logistics

Quality customer service is not possible without an effective logistics and supply chain strategy. Strong relationships with suppliers are essential, especially as Tesco seeks to diversify its already vast product collection further. Efficient routes ensure that produce and other time-sensitive products arrive promptly in stores—and are quickly distributed to customers taking advantage of the chain’s affordable home delivery program.

Ongoing investments in telematics promise to further improve Tesco’s already fine-tuned supply chain. New monitoring tools offer greater insight into the trip status and real-time decision-making—and how these elements play into both profit margins and long-term customer satisfaction.

Digital customers, in particular, appreciate Tesco’s tight supply chain. When they order items online, they can rest assured, knowing that their favorite products will consistently be in stock. What’s more, online customers feel confident that delivered items will be fresh and of exceptional quality.

Insane International Expansion

Tesco may currently dominate the UK grocery market, but it’s also an international force. While the retailer pulled out of the United States in 2014, it has enjoyed sustained growth in Eastern Europe and Thailand.

Just as Tesco targets its international in-store efforts to reflect local populations, it designs its global eCommerce strategy around a diverse consumer base. Different websites are offered in each target country, with text provided in both English and the respective region’s primary language.

Customer Loyalty

Brands such as Costco and Amazon prove that customer loyalty can pay dividends for a company’s bottom line. Tesco demonstrated this long ago with the Clubcard, which encourages customers to prioritize the chain over competitors.

Today, the Clubcard continues to play a crucial role in Tesco’s success. Further transformation is in store, as Tesco recently unveiled a £7.99 per month subscription service called Clubcard Plus . Subscribers will receive significant discounts above and beyond those offered through the traditional Clubcard, including a permanent 10 percent off many of the store’s most beloved brands. Given the current popularity of subscription services, this could prove an excellent opportunity to get existing customers even more enmeshed in the Tesco ecosystem and more responsive to eCommerce marketing automation efforts.

Tesco’s eCommerce strategy reflects the brand’s commitment to value and convenience. These priorities are evident in everything from the logo to the images and even the general layout. Website visits are just as efficient and orderly as in-person purchases at Tesco’s physical locations. Tesco’s website, like its stores, may not be fancy—but it gets the job done. In this Tesco case study, we’ve analyzed several of the key eCommerce strategies that help Tesco’s page stand out in a competitive digital marketplace, as well as a few areas that warrant improvement.

Analyzing Tesco’s Homepage

What We Liked

• Easy to navigate . Today’s impatient customers demand easy-to-navigate websites that almost instantly get them from point A to point B. Tesco’s homepage appeals greatly to convenience-oriented online shoppers, who can quickly find desired products via a simple search tool. Headings highlight main categories, including groceries, clothing, banking, and even recipes.
• Visually-appealing fullscreen displays . Rather than distract website visitors with several separate visuals, Tesco’s website maintains a single, but decidedly bold display. This impactful background stretches across the entire screen and is layered behind text and customer prompts. The homepage, featuring fresh produce, has eye-catching graphics that reflect the commitment to quality that emerges in every Tesco case study
• Minimalist, but not dull . Minimalist displays dominate modern web design. Sometimes, however, white space feels excessive. Tesco strikes an ideal balance by keeping clutter to a minimum without relying on a bare-bones approach.
• Easy logo identification . Customers can always spot the Tesco logo in the upper left-hand corner, surrounded by just enough white space to ensure that it stands out.

What We Didn’t Like

• Customer testimonials . Reviews from happy customers may prove desirable in some contexts, but there is a time and a place. These particular testimonials take up the page’s most prominent space, which could be better served by showcasing exciting deals or products.
• Tabs that open into new pages . Ideally, when clicking on a link that appears to be a tab (such as the Delivery Saver tab), the new content should open in the same page, instead of loading an entirely new page.

Analyzing Tesco’s Category Page

• Sticky cart functionality . As shoppers browse the website and add items to their carts, they can keep track of these intended purchases on the right side of the screen. This intuitive design allows for a seamless Tesco checkout process , thereby increasing the likelihood of conversion.
• Variety of filters . A wide array of filters are provided to allow customers to browse through products based on brands and categories. Furthermore, customers can customize their browsing according to specific dietary filters such as vegan or Halal. This plays into Tesco’s overarching emphasis on personalized shopping.
• Usually bought next . Situated at the bottom of each category page, this helpful section makes it easy to pair similar grocery items. This increases customer convenience while also helping to improve sales and final revenue on Tesco’s end.

What We Didn’t

• Difficult filter navigation . There’s a lot to be said for the variety of filters at customers’ disposal, but the actual process of navigating them can prove complicated, particularly compared to competitor websites.
• Navigating to different items within categories . Navigation can prove surprisingly difficult for those browsing various items within categories. The constant need to return to the homepage could quickly grate on otherwise amenable customers.
• Lack of search functionality within categories . Items cannot be sought via keywords within specific category pages. All searches must be completed using the main search bar on the top of each page. For many users, this may represent the website’s greatest weakness, as keyword category searches are an expected feature among competitors.

Analyzing Tesco’s Product Page

• Time-limited delivery notice . Produce delivery is inherently time-sensitive, as are several other services that Tesco provides via its website. The retailer harnesses the power of time-limited delivery notices to ensure that consumers use products when they’re freshest and most appealing.
• A wealth of product information . Product pages contain a wealth of relevant information, including everything consumers could possibly want to know about each item’s nutritional content, country of origin, and even preparation instructions.
• Customer reviews . Shoppers on the fence about a particular product can read customer reviews to get a better idea of whether they actually want to invest in said item. With a wealth of alternatives available, they can take solace in knowing that other options are always on hand.
• Nondescript Add to Cart button . Tesco’s approach for adding options to its carts may get the job done, but this could be an excellent opportunity for adding a bit of visual flair without detracting from the website’s minimalist approach.
• Too much text combined with too small product images . Many shoppers regularly purchase items without actually knowing their names. Rather, they focus on packaging. Tesco’s small pictures make it difficult for these shoppers to identify the elusive products they want. Some may end up with unexpected and unwelcome surprises upon delivery.
• Too much information . While it’s useful to know the origin of each item, including the exact address may seem like overkill to some users. This detailed information detracts from Tesco’s otherwise streamlined product pages.

Analyzing Tesco’s Checkout Process

• Numerous delivery slots are available . A variety of helpful slots for receiving grocery deliveries are provided on an hourly basis throughout the day. This dramatically improves customer convenience, particularly for those who work long hours and might not be available for the limited delivery times provided by some of Tesco’s key competitors.
• Automatic Click+Collect locations . Those who opt to collect deliveries at Tesco stores can look to this feature to automatically display a variety of nearby locations. This makes in-person delivery collection nearly as convenient as Tesco’s impressive delivery setup.
• Several Delivery plans are available . Shoppers who aren’t in a big hurry can elect to have their orders delivered mid-week for a reduced charge. Meanwhile, demanding customers are asked to pay extra for same-day delivery. Customers love options, particularly when they believe those options prompt significant savings.
• Oddly unavailable Click+Collect hours . Shoppers who plan their grocery pickup several days out will be surprised to find that some collection times up to a week out are unavailable. Hence, while Click+Collect provides exceptional functionality for last-minute pickups, it’s not always ideal for those who prefer to schedule in advance.

Eager to learn more about Tesco’s strategy and the technologic functionalities that make Tesco’s website so easy to use, we harnessed the power of BuiltWith to scan the website. A few of the notable technologies we spotted include:

• Omniture SiteCatalyst . Tesco’s web analytics are provided by Adobe’s Omniture SiteCatalyst — an expensive, complex system when compared to its main competition (Google Analytics). If set up correctly, however, Omniture SiteCatalyst provides excellent customer support.
• Hotjar . One of the world’s most famous screen recording and heatmaps tools, Hotjar offers a range of behavior analytic services ideal for businesses such as Tesco, which aim for a targeted approach based on actual customer behavior.
• Optimizely . This top experimentation platform plays significantly into modern web innovation. Despite its name, however, Optimizely may increase page load times throughout the Tesco site.
• OpinionLab . OpinionLab does an admirable job of collecting customer feedback on every aspect of Tesco’s webpage. This allows Tesco to customize better its web offerings based on actual customer opinions
• SendinBlue . User experience is a huge point of contention for SaaS provider Sendinblue. Clients regularly struggle with forms, automation, and APIs. ContactPigeon may prove a more customer-oriented alternative.

Some of these eCommerce tools are also used by John Lewis, UK’s homeware giant , so we do realize that these technologies play also an important part in a retailer’s business model and online success.

• As of 2019, Tesco boasted over 6,800 shops worldwide.
• Tesco currently employs over 450,000 employees around the world.
• Tesco had a 26.9 percent market share in the UK in 2019.
• Of the UK shoppers who primarily visit Aldi, 45 percent highlight Tesco as their main secondary store.

Breaking Tesco News:

• Tesco changes bonus rules after Ocado success hits pay – Read more here
• Coronavirus: The weekly shop is back in fashion, says Tesco boss – Read more here
• Tesco launches half price clothing sale – but some slam the company as ‘irresponsible’ – Read more here
• Tesco, Sainsbury’s, Asda and Aldi put restrictions on items amid stockpiling –  Read more here
• Tesco sells its Thai and Malaysian operations to CP Group.   Learn more here
• In September 2021 Tesco launched a zero-waste shopping service, providing customers with containers. – Learn more here.

When did Tesco begin?

Tesco technically began in 1919 but did not receive its current name until 1924. The company originally consisted of market stalls, with the first shop that might be recognizable to modern consumers not opening until 1931.

What made Tesco successful?

Tesco is popular in the UK and abroad due to its combined emphasis on quality, convenience, and affordability. The Clubcard plays a huge role in the retail chain’s continued popularity, as it keeps customers coming back for deals.  So why is Tesco so successful? It is because of its customer-centric approach, that it gradually helped Tesco to develop a very loyal customer base and equity and a very powerful multinational brand.

Who is Tesco’s owner?

Tesco is currently experiencing a shakeup in leadership. After serving as CEO for several years, Dave Lewis announced his resignation in 2019. He will be replaced by Ken Murphy in 2020. John Allan currently serves as the chain’s non-executive chairman.

What is Tesco industry sector?

Tesco PLC is a retail company. Its core business is grocery retail but they also are in retail banking and assurance industries as well, as part of their product diversification strategy.

How many stores Tesco has?

Tesco has 6993 stores in 12 countries

How profitable is Tesco?

Tesco’s revenue grew by +12% YoY in 2019 hitting  £63.91 billion.

Is Tesco in the public or private sector?

While Tesco was initially a privately-held company, it became a public limited company (PLC) in 1947 and has continued to operate under this approach. However, despite Tesco’s status as a PLC, it remains firmly part of the private sector.

Discover more resources about FMCG retailers

• Sainsbury’s Marketing Strategy: Becoming the Second-Largest Supermarket Chain in the UK
• ASDA’s marketing strategy: How the British supermarket chain reached the top
• The Marks and Spencer eCommerce Case Study: 3 Growth Lessons for Retailers
• The Ocado marketing strategy: How it reached the UK TOP50 retailers list
• ALDI’s marketing strategy: The key growth ingredients of the FMCG titan
• Walmart Marketing Strategy: Decoding the Success of the US Multinational Retailer
• Analyzing Lidl’s Marketing Strategy: How the Discount Supermarket Leader Scaled
• FMCG Marketing Strategies to Increase YOY Revenue

The Tesco Case Study: An overnight Success?

As our analysis showed, a variety of factors play into Tesco’s success. The retailer has a long history of using cutting-edge practices (like the virtual store mentioned above) to set itself apart from the competition. Much of its current success, however, relies on its perception as a convenient and affordable chain.

Tesco’s success is not a matter of luck. On its website and in its stores, the retailer emphasizes customer-oriented practices designed to make every shopping experience as seamless and as enjoyable as possible. This simple yet effective approach promises to keep the retailer at the forefront of the grocery industry in years to come.

If you’re looking to emulate the qualities evident in this Tesco case study, don’t hesitate to get in touch. Contact us today to book a free marketing automation consultation.

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9.38 tesco plc.

Though still still essentially UK-based, Tesco has diversified geographically and into widely-separated market sectors: retailing books, clothing, electronics, furniture, petrol and software, financial services, telecom and Internet services, DVD rental, and music downloads.{10}

Competition

Tesco is an aggressive company benefiting from Internet technologies, as indeed are its main UK rivals. {9} Sainsbury's and Morrisons cater for more affluent customers, and Asda focuses on the more cost-conscious. Market share as of 2008 was: Tesco 30.5%, Asda 16.9%, Sainsbury's 16.3, and Morrisons 12.3%.{10} A cost breakdown is given below. {9}

Tesco has built its fortune on two business elements: an unrelenting drive to provide value to customers, and continued investment in the latest technologies — today customer relationship management, Internet and mobile phone shopping, and supply chain management (probably a private industrial network, though details are not available).

Back in 1995, however, Tesco was losing market share, causing Terry Leahy, the new CMO, to reexamine its market position and propose a three-pronged solution: {11}

1. Stop copying Sainsbury's and develop its own strategy. 2. Listen to customers throughout the company, at every level. 3. Offer goods and services as the customer valued, not what Tesco could do (i.e. adopt an outside-in strategy).

Customer Relationship Management

Tesco went to extraordinary lengths to understand its customers and add value to their lives.

1. Marketing was aimed at sensible, middle-class families, from its slogan 'Every little helps' to its no-frills website. {11} {14} 2. A loyalty card ('Clubcard') was introduced in 1995, and data subsequently fed into Customer Management Systems. {10} 3. American preferences were studied by embedding staff with US families prior to launching its USA operation in 2007. {11}

Internet Technology

Tesco has been particularly forward-looking. It was one of the first to: {10}

Outlook: Pestel Analysis

A Pestel analysis identifies the forces with most impact on Tesco performance.{9}

Tesco benefited from access to the world's most profitable market of 1.3 billion people, notably by:

1. Britains' joining the European Union, and the inclusion of 10 more countries in 2004. 2. China's entry into the WTO.

The continuing recession has made supermarket customers:

1. More cautious and cost-conscious. 2. More inclined to eat in that go out to restaurants.

As the UK's population changes (especially ages), customers:

1. Tend to eat (and therefore buy) less food. 2. Have become more health conscious, met by Tesco's increased stocking of organic foods. 3. Have been retained by Tesco loyalty programs.

Technological

Tesco were early leaders in Internet shopping, supply chain management and customer relationship management. These continue to be vital today with:

1. Customer loyalty cards and Internet shopping records providing CRM information. 2. Growth of Internet use and broadband access fueling growth in Tesco online shopping. 3. Mobile phone shopping, introduced with Cortexica Vision Systems for Tesco Wines, etc. 4. Supply chain management: rumored to be the world's best, still being extended. {4}

Environmental

Tesco has responded to Government environmental initiatives by:

1. Encouraging reuse of plastic bags. 2. Rewarding bagless deliveries with Tesco's green Clubcard points. 3. Providing practical advice of environmental issues. 4. Adding carbon footprint data to its products.

1. European VAT increases will affect nonfood sectors like clothing. 2. Increase in the UK's minimum wage will increase Tesco operating costs.

Outlook: Swot Analysis

The SWOT {9} analysis regards the UK concentration of business as a weakness, though this is a market Tesco knows well, and which saw further expansion in 2011. {13}

Outlook: Value Chain Analysis

As defined by Lynch (2006), {19} the value chain is the value added at each link in a company's key activities. For Tesco, the values are: {9}

1. Use of leading market position and economies of scale to achieve low costs from its suppliers. 2. Constant upgrading of their ordering system, approved vendor lists, and in-store processes.

Operations Management: 30%

Sources and Further Reading

TESCO – British Retailer that redefined Grocery Shopping

The first time I visited a ‘Tesco Extra’ store was at midnight, making an emergency run for next morning’s breakfast. The store seemed to occupy the area of an entire football field in Ashby-De-La-Zouch, UK. Even at an ungodly hour, Tesco was well-lit with visiting customers.

Inside, there were never-ending aisles lined up with groceries, food items, clothing, electronics, and whatnot. It was easy to lose way and lose track of time in the colossal supermarket.

I thought to myself that this would be the only store of its kind in the county, but I was wrong.

Tesco has 4008 stores across the UK and Republic of Ireland , with 7005+ stores and franchises across the world. In Europe, Tesco has established itself in Hungary, Slovakia, Czech Republic, Poland and Turkey. In Asia it has stores in Thailand, South Korea, Malaysia, Japan and China.

TESCO is much more than a chain of supermarkets selling a million products. It’s a giant conglomerate, spanning across so many verticals. It’s the equivalent of one of the FAANG companies but in the Grocery & Retail sector. It becomes imperative for business enthusiasts like you and me to understand the business model of this retail giant called Tesco.

It’s considered a part of the ‘Big Four’ supermarkets alongside ASDA, Sainsbury’s, and Morrison’s in Europe.

The Birth of Supermarkets in Britain

Founded in 1919 by a war veteran – Jack Cohen , Tesco began as a grocery stall in the East End of London, making a profit of £1 on sales of £4 on day one. Tesco’s first store was launched in 1929, selling dry goods & its own brand of Tesco Tea. A hundred more Tesco stores were opened in the next 10 years.

With 100+ mom-and-pop stores in Britain, Jack wanted to expand his product range. He traveled to the US in 1946 and noticed the self-service system, where customers would select different products on the shop floor and finally checkout at a counter. Jack brought this concept back to Britain, giving birth to Tesco Supermarkets and changing the face of British Shopping. His motto was to “stack ‘em high, and sell ‘em low (cheap).”

Tesco has a wide range of supermarkets depending upon their size, range of products, and location. This also helps regulate their Supply Chain to reduce wastage.

Tesco Business Model is based on various verticals

Tesco has deep-rooted its businesses in the European market so well, it’s difficult to miss out on the Tesco hoarding anywhere. Its Businesses and subsidiaries are:

A glimpse into the Complex Supply Chain

A supply chain is one of the critical aspects of the business model of a giant retailer like Tesco. Tesco has its priorities set when it comes to procuring products from different parts of the world:

• Use expertise to offer a better range of products at reasonable prices
• Use economies of scale to buy more for less
• Leverage and maintain relations with global branded suppliers
• Grow the brand

It procures goods from over 44 countries, majorly China. A stock of up to 90,000 different products (30% are food & beverages) is transferred via the global sourcing office located in Hong Kong. Keeping wholesalers out of the loop, Tesco procures directly from suppliers. The conglomerate has developed and maintained long-lasting relations with suppliers’ world over—the main ones being General Mills, Kellogg, Mars, and Princes.

Tesco has set up a separate division to regulate its supply chain, “the machine behind the machine” – Tesco International Sourcing (TIS). It can be compared to the East India Company of the 18 th -19 th Century, catering to only one customer – Tesco.

TIS is connected to over 1000+ suppliers across 1200+ factories . It’s responsible for over 50,000 Tesco product lines in terms of quality control, sourcing, production, designing, timely delivery, and sorting trading/customs documentation.

All activities are coordinated centrally at TIS, with just 533 staff members. These staff members undergo rigorous training to detect & analyze Supplier-violations and conduct Auditing.

Tesco coordinates with TIS on a daily basis to procure products in the following ways:

• The local team uses customer insights to create a Product Brief (new or modified) specified for each region.
• TIS analyzes the product brief and develops a Product Sourcing Plan depending upon – stores that need this product and figuring out minimum transport time and cost, as per the region.
• The Plan is executed, and specific demands are handed out to Suppliers all over the world. Expert TIS Buyers make sure the best deal is made.
• Inbound logistics are consolidated at specific Tesco Depot to receive the product efficiently from Suppliers.
• Local teams then make sure the product is distributed to different Tesco stores from the Depots.

Tesco adding eCommerce to the mainstream business model

Being in the Top 50 retailers globally as of 2021 , Tesco’s annual revenue worldwide in 2020 was £58.09B , a 9.1% decline from 2019 (due to the Pandemic & disposing of its Asia operations , to focus on the core business in Europe).

It shifted from Brick & Mortar to Brick & Click stores. The Click+Collect functionality on its website accounts for 43% of E-grocery sales in the UK. The Click+Collect concept enables customers to place their orders online and collect their orders a few hours later at the nearest Tesco Depot. Tesco created these specialized Depots for online orders only.

Despite shutting down most its mall operations, Tesco survived 2020 through its online retail store Tesco.com , with double the orders. Its E-commerce net sales had shot up by 31% from 2019-2021.

A Global Operations & Technology Center in Bengaluru was also set up in 2004. This center serves as the backbone of distribution operations for Tesco worldwide. Its business functions are- Finance, Property, Distribution Operations, Customers & Product. The employees at this Center are Engineers, Analysts, Designers, and Architects.

Tesco’s Marketing Strategy

Tesco has always believed in acquiring loyal customers and regaining stakeholders’ trust. It aims to reach customers from all financial backgrounds. So it launched 2 of its own sub-brands – Tesco finest for the affluent customers and Tesco Everyday Value for the rest of the crowd.

Tesco also launched the Club Card in 1995 as a Membership card, to maintain customer loyalty and keep them coming back. The Card operates on a point-based system with discounts on products, & other subsidiaries like double data on Tesco Mobile. With 5 Million subscribers in the first year , Tesco finally overtook its competitor – Sainsbury’s to become No.1 in the UK.

The Club-card strategy was used to obtain customer data and observe buying habits. This data was analyzed, allowing Tesco to put the right products on shelves while eliminating unpopular ones. Tesco realized that the Club Card isn’t just a quick fix & temporary promotional tool; it’s a promotion in itself. This made the Tesco Club Card unique and long-lasting.

Tesco also realized that spending Billions on traditional marketing efforts and maintaining a ‘one-size-fits-all’ brand image wouldn’t work. It decided to hyper-target specific customers and to earn their trust. For starters, thousands of head-office staff and senior executives were sent to work in stores – to demonstrate how Tesco values its customer. Customization became key for its new marketing strategy; sending out discounts on birthdays via Emails and campaigning from door-to-door.

Tesco also made a partial shift to Digital Marketing which costs much lesser and has a wider outreach. It created well-tailored profiles on all social media platforms. On Twitter, it has more than 15 accounts, separate for each of its business units. The online customer care account on Twitter is active 24-7.

All supermarkets commonly advertised themselves to have quality products at a reasonable cost; Tesco wanted to differentiate itself as a unique brand. It introduced step-by-step Recipes prepared from ingredients available at any Tesco store, with Chef Jamie Oliver as its Health Ambassador . Tesco Food and its variety of recipes were a massive hit. Later on, the monthly Tesco Magazine as a food & lifestyle magazine was also launched, with 4.65Million readers worldwide.

The beginning of the pandemic in March 2020 left people apprehensive about visiting a physical store to buy groceries. To deal with customers’ concerns, Tesco came up with an instructional advertisement in April ‘20. With crisp instructions similar to that of an in-flight safety video, this ad showed customers how to physically shop and behave at Tesco stores. It was considered to be the most effective advertising and communications campaign of 2020 as per YouGov BrandIndex .

Competition

Tesco’s earliest competitor has been Sainsbury’s since the 70s. The Tesco Club Card strategy in 1995 helped it overtake Sainsbury’s to become the No.1 Retailer in the UK, but not for long. The ‘Big Four’ supermarkets in Europe have been in close competition throughout the years. Tesco has acquired a 28% majority stake in the UK market.

The horse meat and accounting scandals were a real setback for Tesco, letting competitors take over the European market. The newest German entrants – Aldi and Lidl had caught customers’ attention and market share in a short span of time.

With a combined market share of 12%, these German retailers posed a threat to Tesco. So much so that Tesco began the ‘ Aldi Price Match ’ campaign to curb the growth of the German discounter and win back customers. Tesco started price-matching thousands of its products with that of Aldi, offering better quality and branded products at Aldi’s prices.

Tesco has a majority market share in Britain, with Sainsbury’s and ASDA in tow:

Tesco Adding Sustainability to its business model – The Little Helps Plan

It’s a well-known fact that giant conglomerate retailers are one of the major causes of rapid climate change and increasing carbon footprints. Tesco realized its impact on the planet and launched the Little Helps Plan as a core part of business in 2017. This plan serves as a framework to attain long-term sustainability. Its four Pillars – People, Products, Planet, and Places are aligned with the UN’s Sustainable Development Goals.

Until now, the Plan has enabled Tesco to:

• Permanently remove 1 Billion pieces of plastic from its packaging
• Redistribute 82% of unsold food, safe for human consumption
• Remove 52Billion unnecessary calories from foods sold

Apart from this, it also aims to increase sales of Plant-Based Meat alternatives by 300% by 2025. At present, it has 350 plant-based meat alternatives on the shelf.

Apart from partnering with various other organizations, Tesco entered a 4-year partnership with World Wide Fund for Nature (WWF) to address one of the biggest causes of wildlife loss – the global food system. It aims to eliminate deforestation from products, promote recyclable/compostable packaging and minimize food waste.

Tesco is one of the few successful retailers in the world, with a compelling history. Tesco has overcome numerous issues across its supply chain, faced global criticism, and still stands undeterred in the European market with its rock-solid business model. It has always adapted to its unpredictable consumers and continues to do so while caring for the planet.

The business is healthy. We said we would rebuild the relationship with the brand and consumers; you will see that in every measure of customer satisfaction we do that. The business is healthy, vibrant and there is a lot of optimism of what we can do going forward. CEO Dave Lewis, who took over Tesco in 2014 (during the struggle years) & stepped down in September 2020

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An Engineering grad, currently working in the fields of Big Data & Business Intelligence. Apart from being immersed in Tech, I love writing and exploring the business world with a focus on Strategy Consulting. An ardent reader of Sci-Fi, Mystery, and thriller novels. On my days off, I would spend time swimming, sketching, or planning my next trip to an unexplored location!

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Tesco Change Management Case Study

Change is a necessary part of any business’s growth and success. However, managing change can be a challenging task, especially for a company as large as Tesco. 

The UK-based retail giant faced numerous challenges during its journey of growth, including increasing competition, changing consumer preferences, and economic uncertainties. 

To overcome these challenges, Tesco embarked on a change management journey that transformed the company and enabled it to become one of the world’s largest retailers. 

In this blog post, we will delve into Tesco’s change management case study, discussing the strategies the company employed to manage change, the challenges it faced, and the results and achievements of the change management program. 

We will also examine the lessons learned from Tesco’s success story and provide insights into best practices for effective change management

Background of Tesco 

Tesco is a British multinational retailer that was founded in 1919 by Jack Cohen. Initially, the company started as a market stall in London’s East End, selling surplus groceries from a stall. 

In the 1920s, the company expanded its business by opening its first store in Burnt Oak, North London. 

The company went public in 1947 and continued to expand its business throughout the UK in the following years. 

By the 1990s, Tesco had become the largest supermarket chain in the UK.

However, despite its success, Tesco faced several challenges in the early 2000s. Increasing competition from discount retailers such as Aldi and Lidl, changing consumer preferences, and economic uncertainties had a significant impact on the company’s growth. 

Tesco’s sales started to decline, and the company’s market share was shrinking. To address these challenges, Tesco’s management team realized the need for a change management program that would transform the company and enable it to regain its position as a market leader.

History and growth of Tesco 

Tesco’s success story began in the early 20th century when Jack Cohen, the founder of Tesco, started selling groceries from a stall in London’s East End. By the 1920s, Cohen had established his first store in Burnt Oak, North London, under the name Tesco. 

The name “Tesco” was derived from the initials of TE Stockwell, a supplier of tea to Cohen, and the first two letters of Cohen’s surname.

In the following years, Tesco continued to expand its business by acquiring other retailers and opening new stores throughout the UK. 

By the 1970s, the company had become one of the largest supermarket chains in the UK. In the 1980s, Tesco introduced new products and services, including Tesco Metro stores, Tesco Express, and Tesco Clubcard, which enabled the company to enhance customer loyalty and increase sales.

In the 1990s, Tesco’s growth continued, and the company expanded its business beyond the UK by entering new international markets such as Poland, Hungary, and the Czech Republic. By the early 2000s, Tesco had become the largest supermarket chain in the UK, with over 2,500 stores worldwide.

However, the company faced several challenges in the early 2000s, including increasing competition, changing consumer preferences, and economic uncertainties, which had a significant impact on the company’s growth. Tesco’s management realized the need for a change management program that would transform the company and enable it to regain its position as a market leader.

Key Reasons of making changes at Tesco 

There were several key reasons for the changes at Tesco, including:

• Increasing competition : The rise of discount retailers such as Aldi and Lidl had a significant impact on Tesco’s market share and profitability. These retailers offered lower-priced alternatives, which attracted customers away from Tesco’s stores.
• Changing consumer preferences: Consumer preferences were shifting towards healthier and more sustainable products, which Tesco was slow to respond to. This led to a decline in sales and customer loyalty.
• Economic uncertainties: The global economic recession of the late 2000s had a significant impact on Tesco’s financial performance. Consumers were more price-sensitive, and there was increased pressure on retailers to reduce prices.
• Internal issues: Tesco’s rapid expansion had resulted in organizational complexity, which made decision-making slow and inefficient. There were also issues with employee morale and engagement, which impacted the company’s ability to deliver high-quality customer service.

Steps taken by Tesco to implement change management 

To address the external and internal challenges, Tesco’s management team realized the need for a change management program that would transform the company and enable it to regain its position as a market leader. The changes that were implemented included a focus on cost reduction, improving customer service, and enhancing employee engagement.

To implement the change management strategy, Tesco took several steps, including:

• Leadership commitment: The company’s senior leadership team was fully committed to the change management program and provided clear direction and support throughout the process.
• Communication : Tesco developed a comprehensive communication plan to ensure that all employees understood the rationale for the changes and their role in implementing them. The plan included regular updates, town hall meetings, and training sessions.
• Cost reduction: Tesco implemented a cost reduction program to improve efficiency and profitability. The company reduced its product lines, renegotiated supplier contracts, and streamlined its supply chain.
• Customer focus: Tesco implemented a new customer service strategy, which included improving the quality of its products, enhancing the in-store experience, and increasing customer engagement through loyalty programs and personalized marketing.
• Employee engagement: Tesco recognized the importance of employee engagement in delivering high-quality customer service. The company implemented initiatives to improve employee morale, including training programs, recognition schemes, and improved working conditions.
• Technology: Tesco invested in new technologies to improve its operations and enhance the customer experience. This included the introduction of self-checkout machines, mobile payment options, and online shopping platforms.
• Measurement and feedback: Tesco established metrics to measure the success of the change management program and solicited feedback from employees and customers to identify areas for improvement.

Positive outcomes and results of change management by Tesco 

The change management program implemented by Tesco resulted in several positive outcomes and results, including:

• Increased profitability: Tesco’s cost reduction program resulted in improved profitability, with the company’s profits increasing by 28% in the first half of 2017.
• Enhanced customer experience: Tesco’s focus on improving the customer experience led to increased customer satisfaction and loyalty. The company’s customer satisfaction ratings improved significantly, and it was named the UK’s top supermarket for customer service by consumer watchdog Which? in 2018.
• Improved employee engagement: Tesco’s initiatives to improve employee engagement resulted in increased employee morale and motivation. The company’s employee engagement scores improved significantly, and it was recognized as one of the UK’s top employers in 2019.
• Streamlined operations: Tesco’s focus on improving efficiency and reducing complexity resulted in streamlined operations and faster decision-making. The company was able to reduce its product lines and negotiate more favorable supplier contracts, resulting in improved margins.
• Strong financial performance: Tesco’s change management program helped the company recover from a period of declining sales and market share. The company’s financial performance improved significantly, with revenue increasing by 11.5% and profits increasing by 34.2% in 2018.

Final Words 

Tesco’s change management program is an excellent example of how a company can successfully transform itself in response to external challenges and changing market conditions. The program was comprehensive and multi-faceted, addressing the company’s challenges from multiple angles. Tesco’s leadership commitment, communication strategy, and focus on cost reduction, customer service, and employee engagement were all critical factors in the program’s success.

The positive outcomes and results of the program demonstrate the importance of change management in driving organizational success. Tesco was able to recover from a period of declining sales and market share, and become a more efficient, customer-focused, and profitable organization. The lessons learned from Tesco’s change management program are applicable to businesses of all sizes and industries, highlighting the need for organizations to remain agile and responsive to changing market conditions.

About The Author

Tahir Abbas

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Tesco Case Study: Analysis Of Relevant Theories And Its Application

Task: Through completion of this assessment you will develop your case study skills through undertaking research and analysis on a targeted organisation. If applicable, you may refer to this case study in your essay to support your arguments.

Where to start (1) You will first need to identify an organisation that is of interest to you AND for which you are able to examine, through research, its work-related management strategies, practices, processes and/or outcomes and be able to analyse and assess these in relation to the topic/s identified at point 2.

(2) You will be expected to analyse your case using theories/concepts/frameworks from the following topic/s that we cover early in this unit:

• Diversity and People Management

Background : Tesco, one of the largest retailers in the United Kingdom was incorporated in 1950 with the launch of its first supermarket store in London (Tesco plc, 2019A). The company has more than 34000 stores in the UK with approximately 300000 colleagues working for them. The management of the company is making their best efforts to strengthen their foundation each day so that they can offer improved quality, wider product portfolio, better services and sharper prices to their consumers (Tesco plc, 2019B). The core purpose of the organization is “Serving shoppers a little better every day”, which boils down to them being a champion for their customers by assisting them in having an easier life. On average, the stores serve 66 shoppers every second, making them adopt a consumer-centric approach of business and marketing (Tesco plc, 2019C).

As per the annual report published by Tesco which is referred in this Tesco case study, their group sales were £49.9 billion with statutory revenue of £55.9 billion (Tescoplc.com, 2019). Despite the frequent changes in the business environment and stiff competition, Tesco has managed to maintain their leading position in the retail industry. One of the key factors making the company market leaders is their workforce. The company employs 460000 people in their company and consider them as colleagues signifying equal position for all workers rather than using the terminology of employees. With appropriate motivation techniques and workforce diversity measures, the human resource department of Tesco has managed to create motivated and engaged workforces who are dedicated to attaining the company goals. The Tesco case study would contain a detailed discussion on the motivation techniques used by the company along with their approach to diversity and people management. Several theories and models would be evaluated in order to understand the effectiveness of the strategy used by Tesco.

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Management Strategies and Practices: As per the article published in Campaignlive.co.uk (2019), Tesco has been regarded as the best performing supermarket in the retail industry with regards to its growing sales figure. The management of the organization credits their success to its motivated, well-trained and flexible workforce (Misra, Jain & Sood, 2013). The human resource management of the company is robust and provides support to all their employees irrespective of their position. However, in order to understand the motivation techniques used by the company, the meaning of the term has to be understood. As per Nscpolteksby.ac.id (2019), motivation is defined as direction provided and influence cast on individuals in order to persuade them to achieve a certain goal. The three important components of motivation are – direction, effort and persistence.

The management of Tesco understands the need of having a motivated workforce due to which they use several means to maintain positive employee relations and high levels of employee engagement. Apart from that, the management of the company has realized the need to use diversity management tools to manage their staffs as the company has workers belonging to different age group, gender, religion, background and ethnicity. One of the methods of motivation used by the supermarket giant is treating the employees with care and making them feel important. The employees are regarded as “colleagues” and treated with trust and respect (Tesco plc, 2019C). The company believes in working in teams ensuring that every employee is included in the decision-making process and valued.

Another motivation technique used by the company is the reward management system. The human resource department understands the need of using monetary and non-monetary incentives of retaining their staff in the increasing dynamicity of the labour markets (Shields et al, 2015). The company has formed reward objectives that are – attract, motivate, recognize, align and remain (Tesco plc, 2019D). The individual contributions of every employee are tracked, and the best performance is rewarded, which motivates the employees to work harder and deliver their best performance. The reward packages include – annual bonus and share incentives along with recognition and appraisal.

Employing a large workforce comes with the responsibility of caring for the health and safety of the employees, which Tesco executes meticulously. Recently, in order to protect the health of its workers, Tesco has forged a partnership with three UK based health charities – Cancer Research UK, British Heart Foundation and Diabetes UK, so that they can develop new workplace health programmes (Scott, 2018). These partnerships would allow the company to focus on their pillars of a healthy body, healthy mind and nutrition along with campaigning for mental health issues. This move has helped the company to motivate its employees further as the workforce is overwhelmed with the fact that the management cares about their health. Moreover, the company also provides its employees with training and development opportunities so that they can grow and develop their skill set and expand their expanse of knowledge. By introducing the apprenticeship program, the company has managed to improve its existing workforce (Tesco plc, 2011).

The human resource management of the company lays equal emphasis diversity management techniques also as the workforce of the company is extremely diverse. The company abides by the principle of – equality, diversity and inclusion and abide by the principle of providing equal opportunities to all their colleagues (Tesco Careers, 2019). This has helped the company to hire people of varied backgrounds providing more insights about the market and customer thought process (Hunt, Layton & Prince, 2015). Diversity in the workplace improves the decision-making process of the company and makes employees from all walks of life feel welcome.

Despite working towards creating a motivated and diversified workforce, Tesco is facing certain issues. Recently in one of the articles published, it was highlighted that the company is not being able to motivate their young staff (aged between 17 to 24) properly leading to high attrition rate for that demographic (Peacock, 2008). The company was not being able to understand the needs of the young staff and communicate with them properly due to which issues were arising. Moreover, a worker dragged the company to court also over the charge of gender and age discrimination concerning pay structure (Topham, 2016). Although these issues have not caused a stir in the workforce, it is important for the company to mitigate these problems in advance and resolve it soon to avoid unnecessary glitches in employee performance.

Analysis and Relevant Theory Application: The effectiveness of the human resource strategies and techniques used by Tesco can be judged by aligning and analyzing the theories of motivation and diversity management along with the practices of the organization. Abraham Maslow had stated that five essentials needs that motivate an individual to deliver the best performance. He demonstrated those five needs in the form of a pyramid, which came to be known as the hierarchy of needs. Basic needs such as food, shelter and clothing formed the base of the pyramid that could be met by providing proper pay and remuneration. This is followed by safety and security needs, which includes – health and safety requirements at the workplace and conducive working conditions (Taormina & Gao, 2013). Post this came, the social needs or esteems needs where the individuals demand to be recognized for their effort and want to feel a certain sense of belongingness with the environment. The last section of the pyramid was self-actualization need, which includes – interest, creativity and challenge. As per the theorist described in this Tesco case study, attaining of one need led to another and motivated the workers to deliver the best performance.

The management of Tesco understood all these and worked towards satiating the needs of the employees. As described in this Tesco case study the company provided handsome salary to their employees as per the industry standards and also partnered with three health charities so that they can protect the health of their workers, leading to the satisfaction of physical and security needs (Is.muni.cz, 2019). Tesco believes in working in groups and mentions inclusion in their mission statement leading to the satisfaction of social needs. The company has a robust reward system and provides its staffs with the opportunities to take part in the decision-making process, which help them in achieving the last two needs of the pyramids also (Refer to Appendix 3).

Another theorist named Frederick Herzberg proposed the two-factor theory of motivation, which stated two factors cast an influence on the motivation of employees – satisfiers or motivators and hygiene factors (Alshmemri, Shahwan-Akl & Maude, 2017). The hygiene factors were – pay and benefits, working conditions, work-life balance, job security, status and others, which caused dissatisfaction. However, the management of Tesco provided good pay and work-life balance to their employees leading to high satisfaction. Moreover, the company ensured that employees get equal growth opportunities and recognition for effort, which boosted their morale (Refer to Appendix 4).

The aim of the management of Tesco as discussed in this tesco uk case study is to motivate their employees by paying attention to both satisfiers and hygiene factors. For instance, the company intends to empower their employees by delegating responsibilities and providing them with the opportunity to take decisions and communicate with senior management. Additionally, the company holds an open forum every year where the employees are encouraged to participate and discuss regarding pay rises and reward systems (Is.muni.cz, 2019). Through the forum, the employees are rewarded and recognized as an important asset of the company making them feel valued.

Another criterion that the human resource management of Tesco has to consider is managing the diversity in the workforce as it also motivates the employees to perform better and feel like a valuable part of the company. Therefore, Tesco manages its diversity through – recruitment, employer branding, training and performance appraisal systems. For instance, in case of any vacancy, the company first looks into its internal Talent Plan to fill up the vacancy by means of promotion or departmental shift (Colbournecollege.weebly.com, 2019). Therefore, this step the employees get the opportunity to get promoted or venture into new departments that help them to gain knowledge and hone new skills. Therefore, through proper recruitment methods, the company ensures that the employees feel valued and get equal opportunities irrespective of age, gender, background, race or ethnicity.

Additionally, the company follows the inclusion criteria to eliminate any kind of discrimination to take place in the work premises. The company welcomes people belonging to different religions, sexual orientation, age, disability and gender, as they believe in embracing diversity. One of the management practices adopted by Tesco for managing diversity is forming UK Colleague Networks, which are – Black Asian Minority Ethnic Network, The Armed Forces Network, Women in Tesco Network, Out at Tesco (Transgender, gay, lesbian, Bisexual and Intersex) Network and Disability Network (Tesco plc, 2019E). They have a separate provision for young people, other groups and retirement, which have helped the company to incorporate different people in their workforce.

Furthermore, despite efforts of keeping the staffs motivated and managing workplace diversity, the company is facing issues. As mentioned, few workers sued the company over pay cut and pay discrimination based on age and gender discrimination grounds. Although the company has proper management practices, they are lacking in some areas. Similarly, the organization fails to motivate the young people in the workforce despite having a separate network for young people. Hence, the company needs to take steps to rectify these areas to ensure that they have a dedicated workforce.

Recommendations Therefore, based on the discussion above in this Tesco case study, it can be stated that the human resource management of Tesco, post-consultation with the senior management uses a variety of effective strategies and techniques to keep their colleagues motivated and encouraged. However, owing to the continuously changing business environment and dynamicity of the labour markets, the management of Tesco has to amalgamate their existing strategies with new policies. They need to conduct surveys among the employees to understand their future needs, job inclusion criteria, future threats to job security and decision-making needs. Using the results of the survey it is recommended in this tesco uk case study, the management of Tesco would be able to prepare contingency plans for the future and ensure that their workforce is always motivated. Additionally, the company needs to involve their employees more in the decision-making process and even impose equal pay criteria more strictly to avoid discrimination of any sorts. Tesco case study assignments are being prepared by our online management assignment help experts from top universities which let us to provide you a reliable online assignment help service.

Reference List Alshmemri, M., Shahwan-Akl, L., & Maude, P. (2017). Herzberg’s two-factor theory. Life Science Journal, 14(5), 12-16.

Colbournecollege.weebly.com. (2019). Retrieved 3 April 2019, from http://colbournecollege.weebly.com/uploads/2/3/7/9/23793496/tesco-recruitment__selection.pdf

Diversity and Inclusion | Tesco Careers. (2019). Tesco-careers.com. Retrieved 3 April 2019, from https://www.tesco-careers.com/explore-our-world/everyone-is-welcome/

Hunt, V., Layton, D., & Prince, S. (2015). Diversity matters. McKinsey & Company, 1, 15-29.

Is.muni.cz. (2019). Retrieved 3 April 2019, from https://is.muni.cz/el/1451/podzim2013/np2330/tesco_15_full.pdf

Misra, P., Jain, S., & Sood, A. (2013). Compensation: impact of rewards and organisational justice on turnover intentions and the role of motivation and job satisfaction: a study of retail store operations in NCR. International Journal of Human Resources Development and Management, 13(2-3), 136-152.

Nscpolteksby.ac.id. (2019). Retrieved 3 April 2019, from https://nscpolteksby.ac.id/ebook/files/Ebook/Business%20Administration/ARMSTRONGS%20HANDBOOK %20OF%20HUMAN%20RESOURCE%20MANAGEMENT%20PRACTICE/19%20-%20Motivation.pdf

Peacock, L. (2008). Tesco failing to motivate its young workers - Personnel Today. Personnel Today. Retrieved 3 April 2019, from https://www.personneltoday.com/hr/tesco-failing-to-motivate-its-young-workers/

Scott, K. (2018). Tesco partners with UK health charities to inform workplace health programme. Employee Benefits. Retrieved 3 April 2019, from https://www.employeebenefits.co.uk/issues/january-2018/tesco-partners-uk-health-charities-inform-workplace-health-programme/

Shields, J., Brown, M., Kaine, S., Dolle-Samuel, C., North-Samardzic, A., McLean, P., ... & Plimmer, G. (2015). Managing employee performance & reward: Concepts, practices, strategies. Cambridge University Press.

Taormina, R. J., & Gao, J. H. (2013). Maslow and the motivation hierarchy: Measuring satisfaction of the needs. The American journal of psychology, 126(2), 155-177.

Tesco group employees United Kingdom 2018 | Statistic. (2019). Statista. Retrieved 3 April 2019, from https://www.statista.com/statistics/490882/tesco-group-united-kingdom-uk-number-of-employees/

Tesco plc. (2011). Tesco is developing the skills and training of Britain's largest private sector workforce. Retrieved 3 April 2019, from https://www.tescoplc.com/news/news-releases/2011/tesco-is-developing-the-skills-and-training-of-britains-largest-private-sector-workforce/

Tesco plc. (2019A). History. Retrieved 3 April 2019, from https://www.tescoplc.com/about-us/history/

Tesco plc. (2019B). Tesco in the UK. Retrieved 3 April 2019, from https://www.tescoplc.com/about-us/our-businesses/tesco-uk/tesco-in-the-uk/

Tesco plc. (2019C). Core Purpose and Values. Retrieved 3 April 2019, from https://www.tescoplc.com/about-us/core-purpose-and-values/

Tescoplc.com. (2019). Retrieved 3 April 2019, from https://www.tescoplc.com/media/474803/68336_tesco_ar_digital_interactive_250417.pdf Tesco is best performing big supermarket in latest sales figures. (2019). Campaignlive.co.uk. Retrieved 3 April 2019, from https://www.campaignlive.co.uk/article/tesco-best-performing-big-supermarket-latest-sales-figures/1435036

Topham, G. (2016). Tesco workers take company to court over alleged discrimination. the Guardian. Retrieved 3 April 2019, from https://www.theguardian.com/business/2016/oct/16/tesco-workers-take-company-to-court-for-discrimination

Appendices Appendix 1 Financial performance of Tesco

(Source: Tescoplc.com, 2019)

Appendix 2 Average number of employees at Tesco in the United Kingdom from 2012 to 2018

(Source: Statista, 2019)

Appendix 3 Maslow’s Hierarchy of Needs theory – Tesco

(Source: Is.muni.cz, 2019)

Appendix 4 Two-Factor Theory of Motivation – Tesco

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How Tesco virtually created a new market on a country's lifestyle

South koreans have amongst the longest working hours in the world. uk's giant retailer sought to turn this to its benefit..

• Print Edition: Feb 15, 2015

Executive Summary

South Koreans have amongst the longest working hours in the world, with young, upwardly mobile executives often too busy to go shopping for grocery at a traditional store. The UK's giant retailer, Tesco, sought to turn this disadvantage to its benefit. It introduced "virtual stores", which are essentially a display of products on walls of metro stations and bus stops. Commuters, especially the tech-savvy, ultra-busy lot, could scan the QR codes of the products on display with their smartphones, and place their orders even as they waited for their trains or buses. This case study looks at how Tesco "virtually" created a new market based on a country's lifestyle.

In 2011, when domestic sales of the UK's retail giant Tesco slumped, it fell back on its second-largest market, Asia, which accounted for 30 per cent of its total profit. Tesco's success in Asia, and specifically in South Korea - currently its largest market outside the UK - is based on its ability to adapt to the local consumer.

Tesco's expansion into Asia has been an important focus for the company since the late 1990s. Following its acquisition of Thailand's Lotus in May 1998, the company announced a 142-million investment in South Korea in March 1999 by partnering with Samsung to develop hypermarkets. Through its tie-up with Samsung, Tesco made a localisation effort to adapt its Homeplus stores to the local consumer.

The latest example of this localisation was the launch in 2011 of its first virtual store, located in a Seoul subway station, an idea based on the observation that the typical Seoul commuter did not have the time to shop at her nearest brick-and-mortar Homeplus store.

The Virtual Store

The virtual stores are set up in public spaces, most often in subways and bus stops with high foot traffic and frequented daily by tech-savvy commuters. This is how such stores work:

- Interested customers download the Homeplus app into their smartphones.

- They then use their smartphones to scan the QR codes of the products they want to purchase. The posters in the virtual stores are designed to resemble the actual aisles and shelves of a regular Tesco store, making the experience very user-friendly.

- The scanned products are stored in the customers' online shopping basket, who pay online once their order is completed. Homeplus reported that the majority of the orders are placed at 10 am and 4 pm, when people are commuting to and from work.

- Customers schedule a time for home delivery. Same-day delivery is the norm, so that customers can get their products by the time they get back home from work.

The virtual store has been a huge success with commuters and drove over 900,000 app downloads in less than one year, making the Homeplus app the most popular shopping app in South Korea. Online sales increased 130 per cent since the introduction of the virtual stores and registered app users increased by 76 per cent. In February 2012, Tesco Homeplus announced it was extending the virtual store concept to 20 new locations across the country. Today, there are 22 Homeplus virtual stores in South Korea, and the brand is the country's No. 1 online retailer.

Understanding the Consumer

South Korea, a country of around 50 million people, is the fourth-largest economy in Asia and the 12th largest in the world. Compared to other Asian countries, South Koreans generally have higher levels of education, higher average household income, and better living standards. Over the past few decades, the country has built itself up with its largest resource - people - and has achieved rapid economic growth through exports of manufactured goods. It is now a major producer of automobiles, electronics, steel and high-technology products such as digital monitors, mobile phones, and semiconductors.

Over the past decade, South Korea has advanced tremendously and has been shaped by constant innovation, technology and westernisation. In today's world, shopping habits and behaviour of South Korean consumers are impacted by several key factors.

Extensive use of technology/connectivity: According to a report by McKinsey & Co., South Korea is one of the most advanced countries in terms of broadband penetration, and has more than 10 million smartphone users. In other words, one in five South Koreans use a smartphone. Additionally, according to Nielsen, households in South Korea are making six per cent fewer shopping trips. When they do shop for products, an increasing number of South Koreans go online.

Long working hours/busy lifestyle: Although the average annual hours worked per person in South Korea is declining, the country still comes out top among OECD countries with 2,193 hours. This is perhaps unsurprising, as the work ethic and lifestyle of South Koreans get shaped at a young age. According to the BBC, South Korean parents spend thousands of pounds a year on after-school tuition on an industrial scale. There are just under 100,000 hagwons or private academies in South Korea and around three-quarters of Korean children attend them.

Travel time on public transportation: South Koreans spend a significant amount of time on public transportation, predominantly between home and work. What has helped is that public transportation is reliable and inexpensive, and is the fastest and most efficient way to get around.

The introduction of Tesco's virtual stores in subways made use of time spent by commuters waiting for public transportation, allowing buyers to use the little time they have available for grocery shopping. Not only did this change the way buyers shopped, it also increased the potential market for Tesco. These buyers may not have otherwise had time to go grocery shopping between their personal and professional lives, opting to buy take-out instead.

All of this implies that grocery customers in South Korea are more time-poor and less price-sensitive. They value convenience and technology to accommodate their busy lifestyle.

Tesco's Value Proposition

Customer segmentation: When you enter a new market/geography, companies need to understand and analyse consumer behaviour trends, including shopping habits and purchasing behaviour, to identify who the valued customers are and how they behave.

Adaptation of value proposition: If the needs, attitudes and lifestyle of the company's "value customer" are different in the new market/geography, the company needs to adapt its value proposition and value network across the entire supply chain.

Power of technology in traditional industries: Technology has a disruptive power in traditional industries, such as retailing. In this case, the predominance of smartphones in Korea allowed Tesco to boost its revenues through an innovative approach.

Innovative marketing: The way marketing can be used innovatively to target captured audiences (such as commuters waiting for the next train in a station).

Brand Extension: One option that Tesco Homeplus may have considered in order to take advantage of is to create a new brand for the virtual stores that would have remained independent from the Homeplus brand and, therefore, limited the risk to the Homeplus brand by increasing prices.

EXPERT VIEW

RETAILERS STRUGGLING TO DEVELOP COMPETENCIES TO SUCCEED GLOBALLY

Despite the popularity of globalisation in retailing, most retailers are still struggling to develop competencies to succeed in global markets. To what extent should the "original" format and merchandise be adapted is a major issue. Walmart learnt this the hard way when its initial entry into China had the wrong merchandise. On the other hand, Mexican customers were disappointed when they did not find enough imported US merchandise in the Walmart stores. Toys R Us has learnt that there are differences in consumption patterns. The Japanese demand electronic toys, other Asian consumers demand educational toys, Europeans favour traditional toys, while American kids prefer television- and movie-endorsed toys.

The Tesco case in South Korea demonstrates that despite the company's many problems, it has been a leader in developing multichannel solutions. With consumers preferring the convenience and selection of e-commerce, traditional brick-and-mortar retailers are challenged to address how to serve this customer profitably. The home-delivery option is much valued by consumers but cannot be as profitable as the traditional store. Therein lies the dilemma.

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Case Study: Tesco

Tesco is a British multinational groceries and general merchandise retailer with its headquarters in the United Kingdom. Not only is Tesco one of the most valuable brands in the UK, but it is also the sixteenth most valuable retail brand worldwide as of 2021. In the UK, Tesco is the leading grocery retailer with a consistent share of over 27 percent of the market and is classed as one of the ‘big four’ supermarkets.

​The executive team for Tesco is based across Ireland, Asia and Europe with all functional team leads reporting to CEO, Ken Murphy. In 2018, Natasha Adams, then CPO and now CEO Tesco Ireland, attended Wavelength’s immersive learning study tour, Wavelength USA 2018 alongside 20 other exec level leaders from different sectors/continents, and in 2019 attended our bespoke ‘Silicon Valley Immersion’ with fifteen members of the Tesco Executive team.

Between 2014-2021 under the leadership of Sir Dave Lewis, the Tesco leadership team orchestrated a spectacular turnaround, resulting in a 34% surge in profits. However, then, as now, the retail landscape was under intense pressure as consumer behaviours changed, which has had a profound impact on the way in which people shop and eat.

Mindful of the pace of change and increasing customer demand, Tesco needed to pay serious attention to how it was innovating to remain relevant in this fast-paced, disruptive environment. How could they create the necessary conditions to use innovation as their catalyst for growth?

Wavelength were delighted that Tesco thought of us as their ideal partners in their journey towards embedding innovation in their strategy and outlook.

Silicon Valley Immersion Trip

“As a leadership team and as an organisation as a whole, we had to ask ourselves some tough questions. How could we collectively open our minds to innovate in a different way and think about innovation in the longer term? We needed to understand and feed off the big disruptions happening globally and specifically within the retail market,” commented Natasha Adams, former CPO and currently CEO, Tesco Ireland.

“Having attended the Wavelength USA trip the year before, I saw very clear synergies between that experience and the experience we wanted to create in the Tesco Silicon Valley Immersion trip. It was an opportunity to do something bespoke to focus on strategically important key themes.”

Tesco were seeking some very clear outcomes – namely, to change individual leaders’ frames of reference, mindset and expectation of innovation in their individual areas of the business. They wanted to stimulate a collective disruption around what the business was doing – and still needed to do – to fulfil their overarching strategy; all whilst remaining relevant and at the forefront of retail innovation.​

“We wanted to answer the question: ‘how do we become an innovative business where innovation flourishes to the advantage of our customers?’ This trip was about getting the stimulus to start that journey,” added Natasha.​

The bespoke Silicon Valley Immersion trip that Wavelength created for Tesco in 2019 was a world-class, unique three days packed with stimulus and encounters with the innovators, the disruptors and the enablers from across the Valley. The trip was curated around Tesco’s key strategic themes: food, loyalty, data, future of payments and AI.

Hosts included Silicon Valley Bank, Salesforce, Grove Collaborative, Starship Technologies, Andreesen Horowitz, Mayfield and a unique special event with a range of Silicon Valley entrepreneurs, commentators and thought leaders.

Tesco Leaders' Event - Bringing Silicon Valley To London

Following the success of the bespoke Silicon Valley trip, Wavelength supported the next stage of the Tesco Innovation journey by designing a bespoke experience for the group which would recreate and build upon their Silicon Valley Immersion. This formed part of the Tesco October 2019 bi-annual two-day Leaders’ Event, which brought together 50 top global Tesco leaders.

Natasha was keen to involve elements from across the Silicon Valley programme in the Leaders event, with the aim of broadening the level of awareness for the need to innovate differently.

Experience and Results

For Natasha, the highlights of the Silicon Valley Immersion programme were in its breadth and diversity of content, and the top-notch quality of conversations.

“The openness and willingness of the host companies to engage with the Tesco Group meant that the brief for the trip was 100% met. And the real highlight was that the trip stimulated the disruption conversation and challenge we wanted and needed to move forward with our strategic plans” she said.

The participation of the Tesco top team in Wavelength programmes ignited serious change across the company.

As a direct result, Tesco completely re-examined and relaunched their approach to innovation – culminating in September 2020 with their launch of ‘Tesco Red Door’, their new approach to disruptive innovation. They invite innovators with new products, ideas, or emerging technologies with the potential to cause disruption in the future to contact this Group Innovation Team.

This team is now a single point of contact, responsible for quickly evaluating ideas, supporting partners to access Tesco, and helping them to develop and implement their ideas.

This team enables start-ups with products and services that could step change Tesco’s business to partner with them whilst the ‘mothership’ focuses on incrementally increasing service delivery to 24 customers every week. Current pilots include partnering with:

• Manna to deliver groceries by Drone,
• Turing to use AI to transform product development,
• WhyBuy offering the opportunity for customers to access products and services without the cost of ownership.

A new role has also been created – Group Innovation Director. This role reports directly to the CEO and has a small working team with 100% backing from the executive team.

Smaller outcomes, but no less important, are that the executive team now have a markedly different perspective, connecting with entrepreneurs with whom they have built – and continue to build – key strategic partnerships.

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You managed to do that difficult thing of getting people to think more broadly about their profession, sharing fresh thinking from other companies and weaving this into a stimulating and entertaining narrative – great result!

Ala’a Eraiqat Group Chief Executive Officer & Board Member Abu Dhabi Commercial Bank

Dave did a thorough job of understanding ADCB journey towards Service Excellence, where we were, and what our ambition is. Dave tailored his speech in line with ADCB’s Service Ambition and illustrated the service road map beautifully to the audience. His speech was a catalyst that has reignited our leaders passion for service excellence, which is clearly evidenced by the increase in the number of change initiatives that have been kicked off and successfully implemented since the event. Would definitely recommend Dave as a speaker to help put to the customers and the employees back at the top of the agenda where it always belongs.

Alain Moffroid, Regional Managing Director Europe, Rentokil

Thank you for the brilliant session you delivered. We have received extremely positive feedback and it was a key contribution to the success of the two days. Both content and delivery were truly excellent, congratulations!

Alan Webber, Former Managing Editor, HBR & Co-Founder, Fast Company Magazine

If you have a chance to work with Steve Cadigan - for any reason at all - grab it! You will learn a lot. You will enjoy the experience. You will benefit from knowing and working with Steve in ways large and small. And it’s not just about the work. It’s about what kind of person Steve is. Trust me: you want to work with Steve.

Alexandra Humphries, Group Learning and Development Manager, Rentokil Initial

Working with Wavelength and their speakers was really easy. Sarah helped us shortlist a number of different speakers that were suitable for our event. Tokunbo was a great speaker, he listened to our needs about the event and what we wanted to achieve. His delivery was fantastic and we received great feedback on the session. Tokunbo spoke about the importance of embedding a long-term strategy that celebrates difference, of developing a culture of mentoring, championing and sponsorship, and that excellence is everywhere - and how employees should find it and then nurture it.

Alexandra Pierce, Group Head of Organisation Development & Culture, Aldermore Bank

I feel grateful, inspired and humbled by the incredible work of Alder Hey Innovation led by Iain Hennessey and his team. Their customer obsession, outside the box thinking and bravery in pushing the boundaries of technology to save the lives of children faster and better is refreshing and inspiring. Aldermore Bank shares a unique connection in the name, which symbolises strength, confidence and determination. I’m really proud to be part of this business and am filled with hope for how we can take and implement learnings from Alder Hey to create more value for our customers.

Alice Webb, CEO & Co-President, Mercury Studios, Universal Music Group

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Case study 27 | Tesco: use of IT and information systems

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Tesco PLC Case Study Analysis

Introduction.

Tesco PLC is the largest food retailer in UK with a market share of 30.6%. It has expanded its operations across fourteen nations in Europe, Asia and North America (Telegraph media group (2011). It is the third largest retailer globally in terms of revenue earning after Wall-Mart and Carrefour and in fact, the second-largest in profit making after Wall-Mart (Nwagbara, 2011, p. 56). According to Nwagbara (2011, p. 56), Tesco’s commercial portfolio comprises of 450 superstores which offer both food and non-food items such as DVDs, phones and books, 170 metro stores which offer a variety of food products in towns and city centers and over 950 express stores offering more than 7,000 food products. Tesco has also been engaging in online retailing recently through Tesco Direct and Tesco.com. Tesco was established by jack Cohen in 1919 and launched its first store in 1929 in London (Nwagbara, 2011, p. 56). However, this company has evolved to become the market leader in the UK food retailing industry over the decades. This paper examines the impact of Tesco’s vision, mission and stakeholders on its overall success. Secondly, it examines six segments of Tesco’s macro environment that affect its performance. The Porters five forces analysis is conducted in order to determine the competitive advantage of this corporation.  The paper also assesses the strengths, weaknesses, opportunities and threats posed by the internal and external environment of this firm. The unique strategies adopted by this firm in order to attain a competitive edge are evaluated. The paper briefly examines the effectiveness of corporate governance mechanisms and leadership within the company. Finally, it looks at the ethical conduct of this company and assesses its impact on the performance of this corporation.

Role of Tesco’s Vision, Mission and Stakeholders

According to Besanko et al (2009), a firm’s vision and mission statements play an important role in developing consumer royalty. Tesco’s vision statement reads “Our vision is for Tesco to be most highly valued by the customers we serve, the communities in which we operate, our loyal and committed staff and our shareholders; to be a growth company; a modern and innovative company and winning locally, applying our skills globally” while the vision statement reads “creating value for customers, to earn their lifetime loyalty.” Clearly, the vision and mission statements of Tesco focus more on the target market and not the products. They focus on the benefits that the customers are going to derive from the company and its products. According to Besanko et al (2009), such statements highly touch on the emotions of the consumers. Consequently, they contribute to building of loyalty among the consumers of the firm’s products. Apart from the vision and mission statements, some primary stakeholders of this company namely, particularly the leaders and the employees have played an important role in enhancing the successful performance of this company. After Philip Clarke took the leadership of this company, it started marketing itself using the phrase “”The Tesco Way.”  This played a great role in displaying the firm’s values, purposes, principles and goals.  This helped the company to expand internationally. Also, the firm changed its strategies to focus on technology under Leahys leadership, which has marked a lot of success. The employees of this company have also contributed to the development of consumer loyalty by being hard working and always being positive to customers.

Tesco Macro Environment Analysis

The environmental or external factors that affect the decisions taken by Tesco are grouped into six categories as discussed below:

Political factors

The current political issue affecting Tesco are the changes in corporate tax rate. The government of UK announced in the 2012 budget that it would reduce corporate tax by 1% for two consecutive years (2012 and 2013) from 24% to 22% (Tesco, 2012a). This will save this company a lot of funds and make it more financially stable.

Economic factors

The major economic issues affecting Tesco currently are high unemployment causing a reduction in aggregate consumption. This has further restricted the growth of this company in UK (Tesco, 2012a).

Social factors

The main social issue affecting Tesco currently is the change in consumers’ lifestyle, leading to a change in tastes and preferences. Tesco has responded to this by developing a new product range called “Clubcard” in order to suit different customer groups with different preferences (Tesco, 2012a).

Technological

Technology has a huge impact on the way business enterprises in all industries operate in the recent years. It has been playing as big role in shaping consumer spending habits. The internet, in particular, has opened a channel through which enterprises in the food retail industry distribute their products to customers (Tesco 2012a). The new technology has also led to the introduction of self-service checkouts in the food retail industry, hence enabling enterprises to reduce long-term staffing costs. Therefore, if well implemented and utilized, the new technology will support Tesco’s activities and ensure long-term sustainability.

Environmental

In its corporate responsibility initiatives, Tesco has indicated that it recognizes its role of “creating sustainable ways of doing business.” In this regard, Tesco established a ‘zero-carbon supermarket’ in 2009 and aims at becoming a zero-carbon business by 2050 (Tesco 2012a). Additionally, this company has reviewed its supply chain to ensure that at least £1bn of its products sales are sourced from local suppliers in the UK.

According to Tesco (2011), competition law is the major legal issue affecting Tesco in the recent years. In 2011, Tesco, with other companies was fined £10.4bn for collaborating with other retailers in the UK to increase the prices of milk and cheese, an act that cost consumers £270m. Tesco’s competitors, Sainsbury, and Asda were also fined and this highly affected the industry’s ethical standing. Clearly, this act goes against the ideas of “responsible trading” set out by Tesco in its Corporate Responsibility Report. It goes against its responsibility of selling goods “ethically” and “responsibly” and this negatively affected credibility with its customers (Tesco 2011).

Porter’s Five Forces Analysis

As Porter (1985) explained, the purpose of analysis on a firm’s structure is to understand the effectiveness of its sources of competitive advantage. Below is an analysis of the five forces of competition that have an impact on the overall performance of Tesco:

Competitive rivalry

There are three major competitors for Tesco in the UK food retail industry namely; Sainsbury, Asda and Morrison. These enterprises utilize different business strategies to attract customers. According to —, Sainsbury’s strategy involves providing premium services while Asda’s strategy involves providing value for consumers through appealing prices for different products. According to Tesco (2011), Tesco has changed its business strategy from that of “pile it high, sell it cheap” to a strategy that involves balancing both quality and price.

Power of Buyers

According to —, Tesco’s buyers have little power in regard to the company’s overall corporate strategy. However, customers in the food retail industry are able to switch easily from one retailer to another due to the low cost involved. This enables the consumers to wield much power as a collective. Tesco has responded to this by identifying the tastes of the customers and establishing the “Clubcard.” Since this product range was established, Tesco has been able to track any changes in behavior of customers and devised appropriate ways to respond (—). Consequently, Tesco has enjoyed a significant increase in customer loyalty recently.

Power of suppliers

According to —, Tesco suppliers are relatively weak or have quite little power in regard to working with this company. For instance, when it becomes necessary for Tesco to lower prices for its products, they share the pain with the suppliers by forcing them to cut prices for their supplies. According to —- this is largely caused by the fact that Tesco works with many suppliers, rather than a single large supplier. Tesco is usually able to change suppliers with relative ease and to adapt to the supply chain. In comparison with the suppliers, who often rely on this company for their survival, it means that the suppliers have little power to determine the products they offer and the prices for their products.

New Entrants

According to —, the “big four” supermarket chains (Tesco, Asda, Sainsbury and Morrisons) dominate the food retail industry, making it extremely difficult for small, new entrants to survive in the industry. However, according to –, the new entrants have recently changed the way they do business and are forming co-operatives which enable them to support each other and to become strong competitors. The threat of new entrants is increasing due to the increasing role of co-operatives and will be a key factor of consideration while determining competitive strategies in the future.

Substitutes

The current substitutes for Tesco’s business model are online retailing and discount stores. According to Tesco (2012a p. 15), Tesco has been putting efforts to extend into online retailing but maintains its focus on the physical store format. Secondly, the importance of discount stores has risen in the recent years, mostly due to the current situation facing customers. Tesco was using this model in 1990s but has recently expanded its strategy to include them. Alongside its “value” products, Tesco has added the “finest” quality-based product range which is aimed at fulfilling the demand of a market that is less price sensitive (Tesco 2012a).

Tesco SWOT Analysis

The following are the Strengths, weaknesses opportunities and threats facing Tesco Company:

Tesco commands the largest share in the UK market, reducing threat from new entrants. As mentioned, it is the third largest in globally and has international presence in over 14 countries. It enjoys strong financial power and brand name.  This company has been able to take advantage of development in technology and as — explains, its usage of technology in marketing and distribution surpasses that of competitors.

Tesco has increased its geographical spread in the recent years and as – explains, this has made it difficult for this company to focus on specific markets. It has a high dependency on the UK market, making it vulnerable in case unfavorable conditions hit this market. According to –, the level of consumer satisfaction for Tesco in the international market is poorly rated, in comparison with the close competitors.

Opportunities

As mentioned, development in technology has opened an opportunity for business enterprises in the food retail industry to increase sales and reduce costs. Secondly, the popularity of this firm is increasing rapidly in the international market. This has opened an opportunity for this company to attract new customers. The company has an opportunity to expand into untapped markets especially in Asia through strategic alliance with local companies in those markets.

One of the major threats facing Tesco is the fierce competition that Tesco is facing in the UK food retail market. The UK competition law also poses a threat to Tesco as it limits its growth opportunities. For instance, this law was used by the European Commission to block Tesco from acquiring the British retailer Safeway (—). The reduction income rates and rise in unemployment in UK may lead to low purchasing power by consumers, leading to reduced sales by the company.

Recommended Strategies

There are various strategies that Tesco can apply in order to maximize its competitiveness and profitability.  The first strategy is to look for new opportunities in new markets or to expand into other industries such as banking. This will help to hedge on the risks associated with concentrating on one industry or market. Alongside the latest investment to increase consumer convenience in the UK market, Tesco will need to work towards ensuring consumer satisfaction, which is currently poorly rated in comparison with close competitors in other markets. This will enable this company to ensure that customer loyalty is maintained in the long-run. Further, Tesco should make maximum use of the “Clubcard.” The “Clubcard” can be used to gather information that can be utilized in various ways including improvement in customer convenience, improving layout of stores and reducing shopping times. Finally, it will be essential for Tesco to implement a dual delivery stream by implementing an effective online retailing system. Most of Tesco’s competitors have specialized products in either in-store or online retailing. Tesco should consider broadening its delivery stream by offering all of its products in online and in physical stores.

Corporate Responsibility

According to Boeger (2008) it implies ensuring that all business activities carried out within a firm meet or exceed the interests and the requirements of staff, customers, shareholders, suppliers, the surrounding community and the natural environment.  According to Boeger (2008) this firm offers competitive products and services their customers to get the most out of their money. They give paramount importance to minimize the waste they emit, in order to conserve environment. They engage in charitable activities by giving donations to various institutions in the surrounding community. In addition, they treat their employees fairly and make them feel to be essential part of the enterprise. According to Tesco (2011), this is one of the key factors that have enabled the firm to increase earnings over time. However, the recent case in which Tesco was involved in increase the prices of milk and cheese goes against the corporate responsibility requirements and as mentioned earlier, it tainted the image of this company and the grocery industry.

In conclusion, the vision statement, mission statement and key stakeholders of Tesco, particularly leaders and employees have play an important role in developing consumer loyalty and hence contributed to the successful performance of this firm. The macro and micro-economic factors play an important role in shaping the decisions taken by this company and developing competitive edge of Tesco, as noted in this report. The SWOT analysis conducted on this firm indicates that the company has a bright future in case it employs appropriate strategies to invest in the available opportunities. Finally, Tesco is widely known to adhere to corporate responsibility requirements, though a recent case of misconduct threatened to destroy its reputation. , Tesco should always avoid engaging bad acts or in conflicts with legal bodies, which usually leads to loss of credibility before all stakeholders

References;

• Boeger, N., (2008), Perspectives on Corporate Social Responsibility , Edward Elgar Publishing, Cheltenham
• Humby, C, Hunt, T. & Phillips, T., (2008), Scoring Points: How Tesco Continues to Win Customer Loyalty, Kogan Page Publishers, London
• Nwagbara, U, (2011), Managing Organizational Change: Leadership, Tesco, and Leahy’s Resignation, e-Journal of Organizational Learning and Leadership , 9(1), pp. 56-75
• Tesco (2011). Corporate Responsibility Report . Retrieved 10 March, 2013, <www.tescoplc.com/media/60113/tesco_cr_report_2011_final.pdf>
• Tesco (2012a). Annual Report 2012 . Retrieved  10 March, 2013 From, https://www.tescoplc.com/files/reports/ar2012/files/pdf/tesco_annual_report_2012.pdf
• Tesco (2012b). Our Brands . Retrieved 10 March, 2013, https://realfood.tesco.com/our-food/our-brands.html

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• Ensuring the availability, development and effective deployment of people who have both the skills and energy/passion to meet planned goals and tackle new challenges with enthusiasm, resourcefulness and competence
• Ensuring high levels of confidence and resilience to deal with the rapid rate of growth and change which inevitably leads to increased work demands and pressures

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Corporate Governance – A Case Study of Tesco Accounting Scandal 2014

Disclaimer: This is not a sample of our professional work. The paper has been produced by a student. You can view samples of our work here . Opinions, suggestions, recommendations and results in this piece are those of the author and should not be taken as our company views.

Type of Academic Paper – Case Study

Academic Subject – Governance

Word Count – 1700 words

Introduction

In present times, the subject of corporate governance is the most crucial one and a large number of corporate scams have recently been reported. This is due to a lack of attention paid by the board of directors, auditors, and other regulatory bodies, making it problematic for shareholders and stakeholders of a company to think strategically for the betterment of the company.

According to Bebchuk, Cohen, and Ferrell (2008, p.783), corporate governance is defined as the set of rules and regulations, and practices that can be implied on the company so as to control the business operations. The corporate governance of a company is mainly concerned with maintaining a balance between the company operations and the interests of stakeholders and shareholders of a company (Bhagat and Bolton, 2008, p.257).

However, there are recent additions in the corporate governance scams amongst which the accounting scandal of Tesco PLC 2014-2015 is the most prominent one. The aforementioned UK retailing business came under the regulatory scanner because of the scandal of overstating the profits of the company; where nearly around £263 million worth of profits were overstated (TheGuardian.com, 2014).

This essay highlights the lack of corporate governance while exploring major loopholes in the corporate structure of the company which resulted in this major accounting scandal. A conclusion is presented in the end while summarising major findings of the essay and effective recommendations are presented in this essay for the companies to avoid such corporate governance failures in the future.

Overview of the case

In the year 2014, Tesco, UK’s largest retailing giant, was plunged deeper into the crises which resulted in the suspension of four senior executive directors of the company. The suspension was followed by the scandal of overstating the company profits by £250m (TheGuardian.com, 2014). Tesco had overstated the first-half profits of the company to be £1.1bn, but later on, it was revealed that the company had experienced a profit of £263m. This overstatement of the profits in the forecasted profit figures was to attract shareholders and to increase investments and funds to the retailer (FinancialTimes.com, 2014).

After the accounting scandal in Tesco PLC, the legal authorities and board of directors significantly took this matter under consideration and wiped off £2bn of the net value from the UK’s biggest retailing company. Following the accounting fraud, Tesco PLC was alleged to pay a £500m fine by the end of the year and more than 125 investors filed against the accounting fraud made by Tesco PLC and claimed that the company had been lying to gain funds and investments (TheTelegraph.co.uk, 2014).

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Failure of Corporate Governance

Tesco PLC has been known for its corporate governance framework and its commitment to safety and ethics towards the environment as well as the people. However, the accounting scandal of Tesco PLC in 2014 has been reported to be one of the influential events that declined the overall reputation of the company. Because of this corporate governance failure, several people of the company were suspended including four executives as well that were engaged in the accounting fraud (Awolowo, 2016, p.23).

Moreover, the audit committee and company (Deloitte) were also reviewed and brought under the consideration after the incident. The major corporate governance failure, in this case, is because of the massive process failure of Tesco PLC. More importantly, the resignation of the Chief Finance Office just before the accounting scandal brought the headlines left the company with no CFO (TheTelegraph.co.uk, 2014).

Additionally, the resignation of the CFO followed with the resignation of several other great senior executives which is the case of pure poor corporate governance. The board of directors and the non-executive directors paid no attention to the inflated and overstatement of profits to grab the attention of shareholders.

Similarly, the external audit committee, PwC, and the internal audit committee of the company were equally responsible for their lack of activeness in this matter. However, the EU Audit Directive and Code of Ethics pose a strong push on the internal audit committees of the company, including their role on financing, reporting, and disclosing of honest information to the shareholders and stakeholders of the company (Müller, 2015).

It is evident that the role of the board of directors to have vigilant corporate governance is the prominent one which implies that in order to establish excellent corporate governance, it is necessary that the company board of directors are the key players in maintaining effective corporate governance (Bhagat and Bolton, 2008).

The Board of directors of the company is responsible to establish the key vision and mission of the company while setting strategies to obtain a nominal position in the market (Woods, 2007). However, this is not in the case of Tesco PLC. The board of directors was ignoring the Code of Ethics and EU Audit Directives which led to accounting fraud. Moreover, the board of directors of the company failed to take strategic decisions and raise their voice against the irregularities while focusing their recognition on revenue generation.

According to Ismail (2017), the UK Code of Governance provides provisions for the audit committees as well which ensures that the audit committee of the company is responsible for maintaining integrity in the financial statements of the company, along with reviewing the financial controls, judgments, and operations of the company so as to avoid the mishaps or misstatements in the financial statements.

However, in the case of Tesco PLC, the audit company of the company PwC paid no attention to the misstatement hence this led to the removal of PwC from the external audit committee of Tesco PLC (Müller, 2015). According to Courteau et al. (2017, p.1), the internal and external audit committee of the company is responsible to manage the financial activities such as reporting, external and internal audit, disclosure, and monitoring the regulatory operations of the financials of the company.

However, the audit committee of Tesco PLC has long been avoiding their responsibilities which resulted in the accounting scandal of Tesco PLC in 2014. According to Kukreja and Gupta (2016), the disqualification or resignation of the potential board members also results in the failure of corporate governance. This may be in the case of Tesco PLC. The accounting scandal in 2014 broke out soon before the resignation of the CFO of the company and left Tesco with no supervision of the CFO, however, the scandal led to the dismissal of three responsible board members which included the chairman, Richard Broadbent, and CEO Phillip Clarke as well.

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Corporate governance – a theoretical perspective.

In the light of stakeholder theory, corporate governance can be seen as the collection of policies and principles that are necessary to maintain the morals and ethics of conducting a business while valuing the stakeholders and their interests. According to Courteau et al. (2017, p.1), stakeholders theory is known for its managerial side and declares that the company and the board of directors are responsible to value the interests of the stakeholders while valuing the morals and ethics of conducting the business (Alpaslan, Green and Mitroff, 2009).

In the case of Tesco PLC, the company has failed to value the stakeholders’ interests during the governance process. The board of directors failed to value the interest of their shareholders while disclosing the fake information and overstated the company profits to gin investments and profits from the investors. Similarly, the company audit committee of Tesco PLC also paid no attention to the values of its stakeholders which led to the fraud (TheGuardian.com, 2014).

Lessons Learned

The weak corporate governance structure of Tesco PLC and no attention to the overstatement of profits results in such fraud which not only penalizes the company with extra charges, but it also affects the overall market reputation of the company in the eyes of the shareholders and customers. Because of the accounting fraud of Tesco PLC, it has been evident that the internal and external board of directors of the company are responsible to make strategic decisions for the avoidance of such mishaps in the reporting or disclosure of financial statements (Kukreja and Gupta, 2016).

Moreover, it is also recommended that the company must be including effective regulations and viable accounting practices so as to avoid such fraud. Similarly, good leadership and governing practices should also be incorporated within the corporate governance of the company in order to keep the employees on track to meet organisational goals while meeting and valuing the stakeholders’ interests and legal rights. If the corporate structure and board of directors of Tesco PLC could have valued the stakeholders’ values and concerns while keeping the personal gains for the company aside, the company might not have indulged in such serious accounting fraud.

As a concluding statement, it has been observed that Tesco PLC has been known for its misstatement of profits in accounting books to grab the attention and investments of the shareholders to increase profits. This has occurred because of a weak corporate governance structure and a lack of attention from the board of directors and audit committee to this issue. Hence it can be recommended that the company should have an effective corporate governance structure with the inclusion of Governance Code provisions and potential board members in order to avoid such frauds and scandals.

• Abdullah, H. and Valentine, B., 2009. Fundamental and ethics theories of corporate governance.  Middle Eastern Finance and Economics ,  4 (4), pp.88-96.
• Alpaslan, C.M., Green, S.E. and Mitroff, I.I., 2009. Corporate governance in the context of crises: Towards a stakeholder theory of crisis management.  Journal of contingencies and crisis management ,  17 (1), pp.38-49.
• Awolowo, I.F., 2016. Financial Statement Fraud: The Need for a Paradigm Shift to Forensic Accounting.  system ,  7 (10), p.23.
• Bebchuk, L., Cohen, A. and Ferrell, A., 2008. What matters in corporate governance?.  The Review of financial studies ,  22 (2), pp.783-827.
• Bhagat, S. and Bolton, B., 2008. Corporate governance and firm performance.  Journal of corporate finance ,  14 (3), pp.257-273.
• Courteau, L., Di Pietra, R., Giudici, P. and Melis, A., 2017. The role and effect of controlling shareholders in corporate governance.  Journal of Management & Governance , pp.1-12.
• FinancialTimes.com, 2014. Available at:  https://www.ft.com/content/71118e80-4a20-11e4-bc07-00144feab7de
• Ismail, I.N., 2017. The Roles of Corporate Governance and its Influances on Risk and Performance: Tesco Plc.
• Kukreja, G. and Gupta, S., 2016. Tesco Accounting Misstatements: Myopic Ideologies Overshadowing Larger Organisational Interests.  SDMIMD Journal of Management ,  7 (1), pp.9-18.
• Müller, M., 2015. Critical Analysis Of The Financing Policies of Tesco plc.
• TheGuardian.com, 2014. Available at:  https://www.theguardian.com/business/live/2014/sep/22/tesco-launches-inquiry-after-overstating-profit-forecasts-by-250m-business-live
• TheTelegraph.co.uk, 2014. Available at:  https://www.telegraph.co.uk/finance/newsbysector/epic/tsco/11181686/Tesco-crisis-what-you-need-to-know.html
• Woods, M., 2007. Linking risk management to strategic controls: a case study of Tesco plc.  International Journal of Risk Assessment and Management ,  7 (8), pp.1074-1088.

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