The Fall of Tesco Plc 4
Introduction 4
The aim and objectives of the research project 4
Rationale 5
Literature Review 5
Research Methods 7
Research Questions 7
The chosen methods for primary data collection 7
Findings 8
Manipulation of suppliers 8
Accounting Scandal 8
The rise of discounting stores across the United Kingdom 9
Horsemeat outrage 9
Failure to add customer value 9
Discussion and Analysis 10
Conclusions 12
Recommendations 12
Directed at the organization 12
Areas for future research 13
Reflection 13
References 14
The Fall of Tesco Plc
Introduction
A Statement of the Problem
The choice of this research owes its motivation and driving force from the fact that Tesco Plc has undergone rather unexpected decline over the past few years. Despite once being the king of retail, Tesco’s sales and profits have been plummeting consistently. The company has gone from one disaster to another, where it continues to close stores. Astonishingly, Tesco’s shares have been plummeting as it continues to experience more accounting scandals. As if those are not enough, Tesco has attracted criminal investigations in more than one instance. Besides, the company continues to receive junk-rated credits in a market that is becoming more competitive with each passing day. Tesco has until recently been a great success tale but is currently the ugly side and impression of the modern capitalist views and ideas.The conditions leave the once giant of supermarkets negotiating for survival and existence in the wake of a highly competitive and vibrant era.
The aim and objectives of the research project
The research seeks to unravel the factors behind the rise and sudden fall of Tesco Plc, a British multinational grocery, and retailer headquartered in Hertfordshire, the United Kingdom. Ranging from human resource, financial and operational factors, the paper sheds enough light on the issue that has since many people across the world in disbelief. Thus, the primary task and objective of the paper are to collect secondary information on the rise and collapse of Tesco. The paper will use the figuresnot to review but also analyze in an attempt to understand the descending of Tesco. The analysis will transpire about the findings in the paper’s literature review. The paper also seeks to provide all the possible advice and recommendations that could ultimately be of great help to not only Tesco but also other companies that are on the brink of collapsing. Ultimately, the paper will provide its reflections on the issues it covers throughout the paper.
Rationale
One of the biggest and most successful British retailers has undergone a shocking decline not only in the United Kingdom but also across Europe and in other parts of Asia. Moreover, the retailer continues to undergo the decline, two years since the beginning of the fall. Thus, the condition is not set to change in the wake of technologically vibrant and competitive era. The investigation below aims to illustrate and explain all the possible forces that have driven Tesco down the ladder of success. The paper also owes its motivation from the fact that Tesco’s fall has rather serious impacts upon other parties such as employees and businesses that have since been depending on the retailer for survival.
Literature Review
In the year 20, BBC’s Kamal Ahmed reported on Tesco’s plummeting profits during a time when the revival of the company struggled to achieve its mandate (BBC, 2008). The author noted that the firm’s profits for its first fiscal year had gone down by half as compared to the same time in the preceding year. The profits arereportedly reduced from 779 million Euros in the year 2014 to 354 Euros in 2015. The Financial Times also reported on Tesco’s fall early the same year, when it noted that the firm sought to close more than forty-three unprofitable stores not only in the United Kingdom but also across Europe and Asia (Financial Times, 2016). The author asserted that the move would save sums of up to 250 million Euros in a financial, fiscal year. The restructuring process would involve selling of Tesco’s subsidiaries such as the Blink Box that had continued to make losses. The firm would also get rid of the Tesco Broadband, a move that would also increase the overall revenues of the company.
In April 2015, Mike Bird together with Dina Spector reported of huge losses that Tesco had undergone amounting to more than 6.4 million Euros for the 2014-2015 fiscal year (Mike, Dina, 2015). The losses were the highest losses that the firm had encountered in more than a hundred years of trading and existence in the United Kingdom market (Wilkinson, 2000). The Telegraph in an article on Tesco also reported that the company started experiencing profit warnings early in the year 2012, after the retirement of Sir Terry after a long period of service for the conglomerate (The Telegraph, 2016). Later the same year, the company had to sell its subsidiary supermarkets in Japan due to huge losses amounting to 60 million Euros. Gabi Thesing together with Noah Buhayar in their Bloomberg article also wrote and documented Tesco’s success and fall story that had caught the world unawares (Gabi & Noah, 2014). The pair noted that Tesco’s conduct about both the managerial conduct and customer relationship underwent a series of falls and sudden deteriorations in the years preceding the fall. In September 2014, Tesco’s sales reduced by a 4.5 percent about the preceding year.
The 22nd day of April in 2015 also saw Stephen Scott and Billy Ehrenberg report of Tesco’s decline that came at a time when European rules had greatly improved and favored large businesses that sought to increase their scope and reach (Stephen, 2015). The pair reported of Tesco’s shocking 6.38 billion Euros loss that was the highest amount that a British company had ever made in history. The authors also reported on Tesco’s efforts to revamp the firm’s profits through activities that include theclosure of stores and changing of executives in the United Kingdom. The plans also included failure to open more than forty-nine stores that the company had initially planned to unfold. The authors also reported of a cut in more than ten thousand jobs as part of a recovery process of the then chief, Lewis. The Economist also reported on Tesco’s crisis that had hit a record high in the midst of accounting fiascos that continued to rock the company (The Economist, 2014). The BBC also came to the rescue of Tesco after it reported that the rate of decline of Tesco’s sales had greatly reduced in the month of June 2015 (BBC, 2015). Sky News also hinted on Tesco’s sudden fall in its sales by a sensational 55 percent in the first quarter of 2015 (Sky News, 2015). OnOctober 28, 2014, Michael Schrage reported on Tesco’s demise as he hinted that the firm’s fall was a warning to retailers that prominently relied on data (Harvard Business Review, 2014). Besides, Jermaine Haughton reported on Tesco’s fall when he noted that the company had seen a 6.3 billion Euro loss (Jermain, 2015).Lastly, Will Hutton reported on Tesco’s fall as an aspect that measured the extent to which capitalism continued to fail (Hutton, 2015).
Research Methods
Research Questions
The research seeks to explore whether the company manipulated other parties in its quest to rise into supremacy. The paper also aims to understand whether Tesco has involved in rather fraudulent and criminal activities as it sought to achieve success. Besides, the paper also seeks to determine the condition of customer relationship that the company has held in the past few years.
The chosen methods for primary data collection
The research integrated a case study approach in the collection of data that was key to drawing the findings below. A detailed study of Tesco’s history and internal processes that propelled it to greatness would be instrumental in developing significant conclusions regarding its rise and fall.
Findings
Manipulation of suppliers
During Tesco’s rise, it apparently abused the trust that the suppliers had initially entrusted in it through inappropriate and irrelevant manipulations. The firm started by paying its suppliers late in almost all the instances. Tesco could pay its suppliers even six months late, according to a report by the Telegraph. The driving force behind the delayed payments was the fact that the company held the money to accumulate interest. Moreover, Tesco started charging its suppliers for every product that Tesco stocked (Proud, 2015). Suppliers would also pay the company to place their products in a strategic place where customers would easily see. Also, Tesco started demanding extra payments from its suppliers for the extending of contracts despite the fact that the company would, extend them. Tesco also charged its suppliers of the free products that used to accompany the “buy and get an extra free” promotions. The move would soon develop into a disaster that left its operations in wrangles.
Accounting Scandal
Early 2015, Tesco experienced a scandal that stunned people across the world. Lewis reported that the company had earlier overstated its profits by more than 263 million Euros. The statement gave rise to criticisms from concerned parties across the United Kingdom. After subsequent investigations by the British Serious Fraud Office, it emerged that there were widespread errors in the accounting and audit processes of the company. The group revealed the company cooked books for its benefit, starting from the very top of the firm’s management. The scenario ultimately prompted the then chairperson Richard Broadbent to resign. Later, the company had to pay sums of up to 2 million Euros The scandal greatly damaged the already distorted company image. The event added further disaster in the existing decline that was damaging the company’s performance. The scandal further reduced the company’s profits, increasing the decline rate.
The rise of discounting stores across the United Kingdom
Over the past ten years, British retailers have increasingly integrated discounts in themajority of their products, an aspect that has always been absent within Tesco. Retailers such as Aldi and Lidl have been increasing their market share at a constant rate over the past seven years due to higher discount rates on themajority of household items. However, Tesco’s failure to integrate discounting measures in more than 30,000 products that it offers has since seen it loose preference to its competitors. Ultimately, Tesco competitors improve their customer loyalty and increase the market share, outdoing Tesco in the end.
Horsemeat outrage
Tesco’s once-great and trustworthy name in the food industry took a drastic turn when quality is enforcing officials found horsemeat traces in its meat products across the country. The condition not only attracted ridicules from disgusted customers but also animal wellbeing nominees. The condition was so serious that it attracted the attention and condemnation of the country’s Prime Minister David Cameron. The horsemeat scandal greatly reduced the company’s image not only in the United Kingdom but also across Europe and Asia. The condition contributed immensely to the ultimate decline of the retail giant.
Failure to add customer value
Initially, Tesco was the pioneer of Corporate Social Responsibility campaigns not only in the United Kingdom but also worldwide. However, the Tesco started going wrong when it started failing to add customer value (Mike, 2014). The condition cost the company’s image in the wake of a competitive era.
Discussion and Analysis
The above findings have shown that Tesco’s decline owes its origins to the manner in which it handled its operations since its rise. Ranging from the manner in which it manipulated its suppliers to the customers, the company integrated inappropriate measures that would soon cost its overall performance (Barnes, 2011). The manipulation of suppliers was the starting point of Tesco’s fall. The condition significantly contributed to the firm’s ultimate decline that has since placed the company on the brink of a collapse. The move also contributed to the rot in the organization’s top management that caused the accounting scandal. Besides, the supplier manipulation resulted in mistrust among the various stakeholders responsible for ensuring a smooth running and operation of the company. Ultimately, the condition damaged the company’s brand not only in the United Kingdom but also across Europe. The poor brand in turn greatly reduced the number of sales; a condition that resulted in slimmer profits that would soon prompt the company to close stores and halt the expansion processes across Europe.
The company’s management was also responsible for the sudden fall in the revenues and profits over the past three years. Tesco’s accounting saga further worsened the situation by increasing fears and untrustworthiness in the firm’s capability to fulfill customer’s needs. The saga unraveled the rot in the organization’s top management that had since been showing great elements of dishonesty and unprofessionalism. The scandal covered a considerable number of employees, ranging from accountants to auditors. It later emerged that the company’s chief officials were also part of the case, a condition that shocked the world and also raised questions about the role of the government in controlling similar occurrences in such an era. The scandal also damaged the company’s reputation among several parties including the suppliers. The condition also greatly reduced the organization’s ‘good image’ in the midst of customers that had started losing trust on the company’s operations and trustworthiness.
The resignation of the top management officials also sparked numerous discussions that questioned the manner in which the company handled the matter in general. Ultimately, the accounting scandal introduced a new dawn of attention and focused on the company’s operations that in turn resulted in the unraveling of the horsemeat scandal. The scandal further weakened the company’s customer base in the wake of a highly competitive era in the supermarket arena. The company’s total sales continued to shrink, leading to low volumes of revenue (Seth & Randall, 2005). The high reduction in the company’s profits resulted in a serious decline in the firm’s overall performance. Besides, the horsemeat scandal also propagated Tesco’s further decline through the damaging of the company’s brand name. The presence of the horsemeat in pieces of meat had rather serious and vital impacts on the company’s overall picture not only in the United Kingdom but also across Europe.
The condition attracted enormous attention and focused throughout the world including the UK’s Prime Minister, David Cameron. The condition destroyed Tesco’s brand name that had suffered serious and brutal setbacks and flaws in the recent past. The scandal, therefore, contributed to further reductions in the company’s sales that resulted in lesser amounts of revenues. The move ultimately resulted in reduced profits that consequently led to a decline in the company’s performance. Moreover, the increase in the number of discounting stores in the United Kingdom contributed to the overall decline of Tesco’s performance in a relatively short period. The company’s policies that prompted it to integrate minimal discounts in its products resulted in low customer loyalty. The reduction in the loyalty levels, in turn, reduced the customer base.
The reduction in the customer base consequently resulted in low amounts of sales that produced fewer profits. The fewer the profits depict a poor performance (Tse, et al. 2016). The reduced performance ultimately resulted in Tesco’s decline.The managerial failure to inspect the meat contributed to the scandals such as the horsemeat issue that greatly cost the company’s image. Management failures also contributed to the ineffective rules where it could not offer its customers the requisite discounts that would increase customer loyalty and ultimate market share.
Conclusions
The research has unraveled the reasons behind Tesco’s failure that continues to shock the whole retail world. The research has revealed that inappropriate and ineffective management patterns are mainly behind the demise of a once king of retail. Tesco’s management failures sparked the manipulations of suppliers during its rise to supremacy. The failures also contributed the horsemeat and accounting scandals that completely killed the company’s image.
Recommendations
Directed at the organization
The research conclusion shows that the organization has a lot to mend and change for revival and recovery processes. The company should change its management system through the integration of relevant and effective workforce that will streamline the firm’s performance. The newly integrated management system should ensure that every individual carries out his or her task without breaching the company’s codes of conduct. The move would greatly reduce or completely prevent the occurrence of scandals within the company. The company should also integrate stringent and punitive measures for persons who apparently break the existing standards.
Areas for future research
Considering the high number of failing businesses not only in the United Kingdom but also all over Europe, there is aneed to conduct detailed studies on the matter. There is aneed to relate the connection between customer experience and business performance. Besides, there is aneed for a detailed study on the most efficient managerial techniques that greatly reduce the organizational scandals regardless of the type of company or region.
Reflection
The research has been not only a success but also a great learning session about research and other related techniques. The definition of the problem is short, precise and clear in such a manner that is easily understandable. The aims and objectives are also direct and to the point, stating the complete purpose of the whole research mission. The literature review also brings together enough variety from disparate authors in the business and politics arena. All the various contributions greatly simplify the whole research process. The paper also presents the research findings in the clearest and understandable approach, making it not only effective but also efficient. Ultimately, the research discussion and conclusion cover the requisite analysis and comments that would be helpful for both the organization and the retail industry at large.
References
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