Strategic Review of Tesco: Challenges, Opportunities and the Need for Change

Tesco's Competitive Position in the UK Market

There are definitely advantages to Tesco’s position, which the board likes to hear and publicise. Apart from the impressive figures in its annual report, Tesco remains the giant of the UK supermarket scene. The company already has a developed strategy which has seen things improve recently. Tesco is proud of its strategic drivers and key performance indicators (KPIs) Tesco’s Group Chief Executive, Dave Lewis, feels Tesco is a winner and promotes healthy living in its food sales, and that customer satisfaction is improving year on year. Tesco has a good image due to its Corporate Social Responsibility (CSR) and has even re-invented its brand image as it rebrands Tesco Finest as ‘good’ ‘better’ and ‘best’ to keep up with the times. However, remember that the UK spends £ 110 billion on supermarket food and another £89 billion eating out each year. (Tesco, 2018) There is a huge market opportunity to go after and change is the only constant!

However, it is tough at the top and Tesco faces threats/ challenges internally and externally. The board also needs to hear a critical review and how to manage change. It is your role to produce a 1500 word report to deliver this news to the board!

Competition from continental budget rivals are reported and this can be seen as a genuine long term threat. Also, Amazon has entered the food delivery market in parts of the UK with its subsidiary Amazon Fresh.

Being the largest supermarket chain in the UK brings a long list of British market challenges. Supplier Unilever publically challenged Tesco for trying to maintain low prices as the pound fell after the Brexit referendum. This conflict has settled, however, similar issues may arise again in the future due to the need to import food to offer a wide product selection.

Issues and debates about executive remuneration have been around since the Cadbury Report in 1991. However, whilst the executives are paid around £4 million annually, most of the staff are paid like the ‘Precariat class.’ (Standing, 2011) Do zero-hour contracts and the living wage make for a happy workforce which Tesco’s management believe exists?

Also, is Tesco’s historical infrastructure a liability? Are the open 24 hours mega stores that Tesco was proud of, now liabilities as the trend is towards smaller, low cost venues?  Tesco launched its own chain of small budget outlets called Jacks which will differ from its present Tesco Metro outlets, but there are many questions remaining about this future line. This summer, Tesco announced that 4500 jobs are to be lost at its Metro stores. (BBC, 2019) Also, are customers really as satisfied as Tesco’s customer satisfaction ratings suggest? Some people complain about the alcohol licensing hours; the requirement to show ID whilst purchasing alcohol; long queues and many customers can remember the UK horse meat scandal.

Internal and External Challenges Faced by Tesco

All the supermarkets made the headlines during the early days of the Covid-19 pandemic. At first there was the concerns about stockpiling and the issues the nation face of empty shelves of soap products and toilet tissue.

Tesco has seen first-half profits rise by more than a quarter (28.7% up on 2019) as customers bought more food during the pandemic and online orders have doubled. With more customers turning to online shopping, Tesco more than doubled delivery capacity to 1.5 million slots a week including serving 674,000 vulnerable customers. While demand for food rose, clothing sales were down 17.2%. Like many of its rivals, Tesco was forced to overhaul its strategy in-store and online amid the coronavirus lockdown.

Next came the implementation of enhance cleaning and face covering policies as a response to the threat of coronavirus. Overall, there was a sense that supermarket staff were now key workers helping society in a difficult time. However, in the background other issues remained, such as, how the company’s financials may have changed during the pandemic. Moreover, what about the leadership and the move to Ken Murphy, chief executive (CEO) of Tesco since October 2020?  Murphy replaces Dave Lewis who had been running the UK’s biggest retailer since 2014.

Your role is to act as a change management consultant to investigate and critically analyse the current situation at Tesco so you can conduct a strategic review in report format.

The ideas stated above are simply to introduce the assessment, and as you start to research you will uncover or discover(?) many more facts and issues.

Please write a 1,500 word report to send to Tesco’s board, and make recommendations on the changes that are required to improve the business.

You must consider the following numbered, specific tasks and include relevant theory:

• Compile a force field analysis of the present situation at the Tesco that considers the pressures and tensions that are for and against making change, and reflect on how you would facilitate change.

• Apply an appropriate diagnostic model (Pestle and SWOT or McKinsey’s Seven ‘S’ model) and consider the wider internal, external and strategic implications of the proposed changes.  

• Please note that Tesco already has a well-developed strategy, so your role is to improve it and generate ideas no matter how big or small.

• Your ideas may be from real events OR they can be imagined/ fictional provided that they are supported by academic theory.

Assessment Criteria

Identify and critically analyse different theoretical approaches to the management of organisational change and their relevance within organisations

Demonstrate an understanding of different theoretical approaches and methods in the implementation of organisational change

Critically analyse the application of theoretical approaches to change to organisational situations

A well-structured report that is clearly presented, with an appropriate depth of analysis leading to well justified recommendations