Case Study

Introduction
On July 21, 2014, the management of Tesco Plc. (Tesco), the largest retailer in the
UK, suddenly announced that it was replacing its CEO, Philip Clarke (Clarke), with
Dave Lewis (Lewis), head of personal care at Anglo-Dutch FMCG conglomerate,
Unilever plc (Unilever). Lewis would be the first outsider to head Tesco. For Clarke,
who had succeeded Terry Leahy (Leahy) in 2011, the news was definitely not
unexpected, given the decreasing sales figures. However, it put paid to what would
have been his 40th anniversary celebrations at Tesco.
Leahys 14-year tenure at Tesco had changed the way business was done at the
company. Tesco had become the worlds third largest retailer with 400,000
employees, nearly 5000 outlets worldwide, and a 63 billion turnover in the year
2010. The sudden announcement of Leahys retirement in 2011 came as a shock to
both employees and industry experts. According to Leahy, he had done his job at
Tesco and had made a significant improvement from the time he had been
appointed CEO and he felt it was the right time to leave.
Critics questioned the timing of the retirement as the company was going through a
tough time through the recession period after the 2008 financial crisis and the
losses the company had incurred at its US venture, Fresh and Easy Stores. Philip
Clarke was appointed the next CEO. Clarke had been looking after the international
business since 2004 and had played a pivotal role in the success of the company in
countries like China and South Korea, where Tesco had made huge profits. As Clarke
had spent more than three decades in Tesco, analysts and industry experts gave
him the thumbs up and expected him to carry forward Leahys legacy.
Background Note
Tesco, a multinational grocery and general merchandise retailer, was established in
the year 1919 by Jack Cohen (Cohen). In the initial days, Cohen sold groceries from
a stall within the East End market of Brixton, London. Tesco as a company got its
name when Cohen bought a shipment of tea from T.E. Stockwell. The initial letters
of the names of Cohen and T.E. Stockwell formed the name TESCO, which opened
its first store in Burn Oak, North London.
The company gained momentum in the 1930s in spite of a depression worldwide.
Cohen built a warehouse at headquarters to minimize transportation costs and, by
1932, Tesco became a Private Limited Company (PLC). Over the next eight years,
the company grew rapidly and Cohen opened more than 100 small stores mainly in
the London area. In 1947, Tesco Stores (Holdings) Limited listed with a share price of
25 pence. Over the next two decades, the company expanded quickly across the
country.

Tesco Under Leahy

In the first decade of the 21st century, Leahy played a pivotal role in establishing
Tesco as a major international retail company. He designed an ambitious growth
strategy that directed the companys expansion efforts in its core UK business,
retailing services, international operations, and non-food business. Developing the
non food business was a challenge for Leahy as nothing significant had been
achieved earlier in this segment.
Slowly, he took Tesco into other businesses like electronics, toys, sports equipment,
cookware, and home furnishings. Expanding the international agenda of the
company Leahy established superstores in Thailand in 1998, South Korea in 1999,
Taiwan in 2000, Malaysia in 2002, China in 2004, and the United States in 2007. One
of the significant steps in the expansion of the company was the acquisition of the
convenience store chain T&S Stores plc, which owned 870 stores.
Despite the huge success Leahy achieved at Tesco, he opted for voluntary
retirement in March 2011. According to him, he was leaving the business in a much
better condition than it had been when he took over in 1997. He made Tesco the
only major international retail giant from the United Kingdom and decided in 2011
that it was time for him to leave. However, critics questioned the timing of the
resignation as Tesco was not doing well in its US business.
The Plunge Continues
For the year ending February 26, 2011, same store sales remained flat after
dropping 0.7% during the last quarter. The trend continued and during the next
quarter ending May 28, 2011, they were down 0.1%. Like-for-like sales in the UK had
fallen by 0.9% in the three months ending August 27, 2011. This was the companys
worst performance in 20 years.
Challenges For Dave Lewis
In September 2010, after the Shree Niketan Matriculation School had been
functioning successfully for four years, Vish at his monthly meeting with the
administration and coordinators discussed the feasibility of adding CBSE education
also under the brand umbrella. He had seen that there was a demand for CBSE
education even when he had set up the existing school, and in four years, this
demand had grown many times over.
Discuss the following issues:

Examine the role of leadership in the organization Transactional Vs

Transformational

Explore the managerial challenges that accompany rapid expansion and

growth

Sum up the characteristics of the retail industry in the UK

Building the Adaptive Firm.

Assess competition in the industry
Determine the key success factors in the industry
Understand the strategies of a market leader