Tesco Company Structure and Leadership - Assignment Example

1.0 Company Structure and Leadership Tesco supermarket is headed by the Group CEO Phillip Clarke who is charged by the Tesco board to run the affairs of the multinational retail chain (Tesco PLC 2014). Tesco has one fully owned subsidiary called Tesco bank. Tesco top management is organized geographically and functionally. Under the CEO comes the Chief Executive Office Asia, The Managing Director-Central Europe & Turkey, the Chief Information Officer, The Chief marketing officer, The Company secretary who is also the Secretary of Tesco Bank, the Group Business improvement Director, the Group Business Planning Director, the Group Commercial director in charge of Sales, The Group Corporate Affairs Director, The Group General Counsel, The Group Multi-channel director, the Group Personnel Directors, The Group Property Director, The Managing Director developing business and the Managing Director UK (Tesco PLC 2014). All these executive staff report to the Group CEO and the Board of Directors. TESCO has very many executive positions a fact that reflects the group’s complex operations. Tesco is organized hierarchically with and its organizational structure takes the shape of a very tall pyramid. The Tesco could not have chosen a better leader that Philip Clarke to head the world second largest grocery chain in the competitive business environment. Clarke began his career at Tesco in 1974 and has developed his leadership skills in the Tesco management training programme (Tesco PLC 2014). His wide experience in Retail management is one of his greatest strengths as the CEO of Tesco. Since his appointment as the CEO in March 2011, Tesco revenue has grown substantially and the supermarket has overtaken Carrefour to occupy the position of world largest retail chain by revenue collection and profitability. 2.0 Tesco’s Products and Services Tesco offers its customers a range of products and services and has come with several new Store concepts in the UK and in other locations where it operates (Lowe and Wrigley 2009). Tesco today offers cheap alternative and premium quality good in its own-label product range. Tesco’s finest line of food labels offers the best quality products at the highest level (Humby, Hunt and Phillips 2008). Tesco’s main revenue bases have been mainly food items but they have recently diversified to the non-food market. Recently, retail chains have realized that non-food items have higher profit margins than food items (Seth and Randall 2001). By 2004, Tesco was earning 20% of their sales revenue from non-food items (Humby, Hunt and Phillips 2008). Clothing are among the fastest growing Tesco revenue streams with Cherokee, Florence and Fred capturing more than 4 per cent market shares in their first year of introduction (Ma, Ding and Hong 2010). Tesco now operates Petrol Stations on the same grounds with their Express stores (Clark 2008). Fueling at Tesco has become popular as the chain does not always pass price increases in oil to consumers (Seth and Randall 2001). Tesco has become the number one retailer of CDs in the UK and also among the biggest wholesaler of newspapers in the UK (Humby, Hunt and Phillips 2008). Most Tesco stores have in-store pharmacies while a few have Nutricentres which offer alternative medicine. In 2005, Tesco added real-estate into its growing list of products; the new products are referred to as Tesco homes (Humby, Hunt and Phillips 2008). 2.1 The Future of Retail In 1990s, Tesco diversified into retailing of services such as personal finance, home insurance, pet insurance, motor insurance and travel insurance (Seth and Randall 2001). By August 2003, Tesco Personal Finance had reached over 4 million accounts. Tesco has also excelled in e-commerce and is now considered the world largest e-grocer by customer orders and revenue collection. Tesco looks set to take on the future with e-commerce and diversification into financial services. 3.0 Tesco History Tesco was started by Jack Cohen in 1919 as a stall for selling surplus grocery (Clark 2008). Tesco was born out of the combination of the word Cohen and T E Stockwell a tea supplier (Ma, Ding and Hong 2010). In 1936, Tesco Stores limited was incorporated starting the Journey to becoming Britain’s leading retail store (Roberts and Berg 2012). When Cohen visited the US in 1935, he brought the self-service systems used in US supermarket to Britain. In 1947, Tesco started its first self-service store in Small Shop of about 200 square meters in St Albans (Tesco Plc 2014b). In 1960, the Retail Price Maintenance (RPM) act remained a huge barrier to Tesco’s ambition. Cohen lobbied for the abolition of the act since it gave manufactures and suppliers the power to control prices (Clark 2008). In effect, large retailers could not take advantage of economies of scale and undercut smaller retailers (Palmer 2005). Finally, RPM was repealed by the passing if the Resale Price Act. In the 1960s, Tesco started buying grocery stores across the UK and using price undercutting techniques to force their way into foreign markets (Tesco Plc 2014b). Even today, aggressive price undercutting is used by Tesco to penetrate new markets. In the 1970, Tesco was struggling with its image as a result of applying the ‘Pile it high, sell it cheap’ formula (Clark 2008). Margins had also become thin due to aggressive price undercutting. In 1973, Tesco came under the leadership of Ian Maclaurin who started off his tenure by closing 500 stores that were not turning profits and started “operation Check-out” with triggered a price war with rival Sainsbury(Tesco Plc 2014b). Tesco strategy focused on large out-of-town stores like 40,000 ft Superstore in Crawley, Sussex established in the 1960s (Clark 2008). In 1974, Tesco started opening stores on the grounds of Petro station after striking a deal with Esso (Tesco Plc 2014b). Tesco rode on the success of this strategy and opened petrol station next to most of their retail stores. By 1991, Tesco was the largest petrol distributor in the UK. In 1985 was a great year for Tesco as they opened their 100th Superstore in the UK (Tesco Plc 2014b) Tesco is well known for its innovative approach to business. Tesco made its own-label products popular in the 1980 and was among the first stores to computerise their systems (Child 2002). In 1993, amidst an economic slowdown, Tesco introduced a lowly priced range of its own label products referred to as “Value lines” (Tesco Plc 2014b). Sales soured as a result of this strategy. In 1994, Tesco introduced a system where a new till opened whenever the checkout queue was more than two trolleys (Tesco Plc 2014b). Innovation continued with the introduction of the first customer loyalty cards by supermarket (Clark, 2008). 4.0 International expansion Tesco main operations are in the UK where it has more than 25 per cent market share. The retailer’s headquarters are in Chesthunt, Hertfordshire in the UK (Child 2002). Tesco is also the leading retailer in the Republic of Ireland, Thailand and Malaysia. Tesco is among the FTSE 100 index of the London Stock Exchange and is the 15th largest company in the Stock exchange (Tesco Plc 2014b). As of 15th January 2012 Tesco’s market capitalization was reported to be $24.4 billion (Tesco PLC 2013). Starting in the 1990s, Tesco started expanding into the international market as the UK retail market became increasingly saturated (Child 2002). From its UK base, Tesco expanded into Ireland and the rest of Europe. In Ireland, Tesco has over 82 stores and is the leading store in the country (Child 2002). In Eastern Europe, Tesco operates in Czech Republic, Slovakia, Hungary and Poland. Tesco operates over 60 stores in the Hungarian market (Palmer 2005). After taking HIT stores in Hungary, Tesco has 66 branches spread out throughout Hungary. In Slovakia and the Czech Republic, Tesco owns 23 and 22 stores respectively. Recently, Tesco took over stores in Turkey run by local retailers. Tesco has also diversified into the Asian market (Child 2002). Thailand has been credited as Tesco’s fastest growing market with over 64 stores. In Taiwan and Malysia, Tesco has established a foothold with several stores (Peterson and Balasubramanian 2002). Tesco has also established stores in the Japanese market and plans to enter the expansive Chinese market. In 2007, Tesco forayed into the United States retail market dominated by Wal-mart the largest retailer into the world (Lowe and Wrigley 2009). However, Tesco preferred an innovative approach with smaller stores called Fresh & Easy. Tesco started by operating numerous small format stores which have expanded rapidly in the US West-Coast. Fresh & Easy stores use an ultra-low price strategy while offering high quality products (Lowe and Wrigley 2009). 4.0 Tesco Financials Tesco is a publically listed company at the London Stock Exchange. It had an estimated market Capitalization of 24.25 billion sterling pounds (Tesco Plc 2013). In the period ending 23rd February 2012, Tesco had collected 64.539 $ billion in revenue and recorded a post-tax profit of 2,814 $ billion, in the same period last year, Tesco raked in 64.826 $ billion in revenue; profit after tax rose to 3.452 $billion (Tesco Plc 2013). For the last 10 years, Tesco profits have been increasing every year at the rate of about 10 per cent. However, most of the revenue collected by Tesco is owed to its overseas operation as the UK market has recorded the lowest revenue figures in recent years. 5.0 Tesco training and Employee Development Tesco offers various training programmes for its employees and outsiders. The Tesco management training program is one of the company flagship training programs. The Tesco trainee management program is offered to fresh graduates who have just joined Tesco from University or College (Tesco Plc 2013b). Tesco selects the best performing students therefore ensuring that it secures the best minds to use in its future operations. In a world where competition for talent by organizations has intensified Tesco gets an edge by recruiting straight from college. The Tesco Trainee management program last for 12 months. In these 12 months, trainees are taught all there is to know about the practical side of retail management. The training program has been around for a while since Tesco current CEO joined the program in 1974 (Tesco Plc 2013). The Tesco trainee management program has produced some of the most talented leaders including Steven Clarke the current CEO of Tesco. Tesco also involves young entrants in the retail business in the School Leaver Programme which aims to equip recent school leavers with relevant retail management skills. The trainees join Tesco as full time employee and both existing Tesco staff and External Applicants can join (Tesco Plc 2013). 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