Tesco Company (Case Study Sample)

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Tesco Company Downfall
Executive Summary
Tesco is one of the third largest retailer that deals in grocery. It has more than 600 stores in Europe. Currently, it is offering a variety of products that range from groceries to perfume, from electronics to petroleum products. Its policy is to provide customer-centered services that are of quality and value to their esteemed customers. Their products are of low prices and low cost which is favorable and attractive to clients. Other stores of Tesco are found in Ireland, Thailand and Korea (Euromonitor, 2010).
Tesco mission is to add value to its customers by earning their loyalty in their entire lifetime. That means their prime goal is to win customers long-term sustainability in the market. Tesco Company vision is to help its customers understand how it is running its core business. Their primary aim in marketing is to utilize the 4Ps that are the price, place, product, and public.
In the 2010/2012 financial year, Tesco achieved 41% sales in international markets. It had a market cap of US$51.83 Billion and ranked third after Walmart and Carrefour of France. In Europe, it is reported that for every eight pounds spent one is paid in one of the Tesco outlets.
Brief Introduction
Tesco is a British company which was founded in 1919 by John Cohen. Tesco name is a combination of its founder; Sir John Cohen and a tea suppliers firm’s partner known as T.E.Stockwell, who worked with Cohen. The greatest investment made by Tesco was in 1980s when it used 145 million pounds to invest in the development of a superstore. It went ahead to spend 500million pounds to build over thirty new stores. With an initial share price of 25pounds, the company drifted on its stock exchange around December 1947(Datamonitor, 2010). Alternatively, the annual company’s profits in 2005 ranged from two billion pounds. This propelled the company to announce the opening of new foreign stores soon. This resulted in Tesco operating in 13 countries with over 3275 stores of which 2115 are located in the United Kingdom; which is its largest geographical market (Euromonitor, 2010).Tesco’s products affect and favor all income group of consumers since they provide its products ranging from finest, standard and valuable. The company has its exceptional store formats which include Express, Metro, Extra, Superstore, and Hypermarket.
Analysis of the current situation and the problems faced by the company
Tesco has faced a lot of problems after the accounting scandal that was made on September 22, 2013 and its discounters like Aldi and Lidl took advantage. It was the first downfall of the British biggest grocery to confess publically it had overstated it profits that were dismal for the first half of the financial period. The announced overstated profit was $ 1.4 billion instead of 1.1 billion. The share price for Tesco Company also dropped by 15% from the time of disclosure and stakeholders are worried about their wealth. Tesco’s accounting reporting failure comes after a series of warnings to the top management till when Philip Clarke was replaced by Dave Lewis as the boss. The new administration has pledged to offer a comprehensive investigation that is independent. In addition, it has suspended four top executives for it to undertake a thorough investigation into new management.
Such a downfall in profit is against the odds, and it has risen a lot of questions among its partners. An established company like Tesco is not expected to be in such a mess. Some people blame Mr. Clarke and his top executives who have also left while other fix it to the corner-cutting culture of Tesco. On the contrary, analysts do blame their accounting policy which is more adventurous as compared to that of its competitors.
Investigators have found out the Tesco's problem is far much deeper than it was imagined. Mr. Clarke, who is a much-praised predecessor, was given a chance to lead the company after Sir Terry Leahy, who had concentrated on building big stores. Though Sir Terry Leahy outperformed its rivals analyst asserts that it was ill-judged. They postulate that profits were measured using return on capital that had been employed, and it fell by one-third as from 1998 and 2010. On the coming of Mr. Clarke, he spent a lot on upgrading the state of the stores that caused the prices of Tesco’s products to go up hence sending away customers.
The high prices of Tesco’s products was a killer mistake which gave in to the coming up of competitive competitors who cared about quality and offered their product at relatively cheaper prices. Their standard pricing policy encouraged many customers to buy their products thus gaining customer base while Tesco which was early know was abandon. The family owned, and publicity-shy trio that is originally from Germany are a threat to Tesco Company. The selling of discount grocers is growing at an alarming rate in Europe, and it is forecasted to be at a rate of 4.8% by 2016. Meaning it will own the market share by approximately, one- fifth of European market.
Hard discounters like the Aldi and Lidl revenues are increasing drastically at a rate of 29.1% and 17.7% from 2012 to 2013 whereas Tesco’s sales are red...