Tesco - Losing Ground in the UK?

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Case Details:

Case Code : BSTR421
Case Length : 19 Pages
Period : 2006-2012
Pub Date : 2013
Teaching Note :Not Available
Organization : Tesco Plc.
Industry : Retail
Countries : UK

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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New Leader, New Challenges

Philip Clarke was identified as Leahy's successor. Dave McCarthy, an analyst at investment bank, Evolution Securities, said, "Philip Clarke has to deal with the UK business being more mature and with finding a new engine. There are other issues, such as the losses in the US, and Tesco's UK competitors are stronger than they have been for 15 years." Clarke faced challenges from not only competitors but also from various other quarters - the worsening economic scenario, product decisions that had gone awry, poor customer service levels, and stores that had begun to show the effects of years of underinvestment...

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Plans to Regain Momentum

Tesco announced the 'Big Price Drop' program in September 2011 and presented it as a deal that would rescue customers from the problems they faced due to growing unemployment and increasing living costs. As a part of this program, Tesco reduced the prices of 3,000 items, by a total of 500 million. Tesco announced that the reduced prices on essential items like milk and meat would help the consumers fight the inflation, which stood at over 6% in September 2011. Clarke said, "Sometimes you have to put aside just the pursuit of profit in the market in order to get back in tune with the nation, which is what Big Price Drop and other things that are coming in the second half of the year [are about]."...

Build a Better Tesco

Determined to get Tesco back to its winning ways, Clark announced a recovery plan in April 2012. The plan aimed at helping the retailer regain its competitiveness and address long-standing issues that were plaguing it. The six-pronged strategy, according to Clarke, would "put heart and soul back into Tesco." In April 2012, Tesco announced that it would cut back on opening new hypermarkets and superstores occupying areas of more than 50,000 feet, while concentrating on opening more than 160 Express and Metro stores. Tesco decided to scale back on new store space by 38%, to 1.5 million square feet, to concentrate on the existing stores. Clarke said: “Large stores with lots of non-food space will probably not be as necessary in 10 years time as they are today because of the growth of the internet."...

Will Tesco be Better?

There were mixed reactions to Tesco's plans for change. Jon Copestake, chief retail analyst at the Economist Intelligence Unit, said, “The plans will go some way to silencing Tesco's doubters. To those concerned with the U.K. market, it shows Tesco is committed to clawing back its lost share and maintaining its position as number one." According to an article in the Marketing Week, “Another new strategy, however, is arguably the last thing Tesco needs right now. In contrast with the single minded focus of the Leahy years, Tesco now appears to be a brand increasingly beset by a disabling inability to focus on the core priorities ahead of strategic distractions."...


Exhibit I: Tesco Five-Year Financial Summary
Exhibit II: Tesco around the World - 2011
Exhibit III: Tesco - Competitors in the UK
Exhibit IV: Recession in the UK
Exhibit V: Tesco - Group Retail Statistics
Exhibit VI: Tesco Stock Price Chart

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