Tesco – what went wrong?

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‘Tesco’s board is seriously lacking retail experience’, by Luke Johnson, Financial Times, 24th September 2014

Tesco have been in the news a lot recently, the latest event being the announcement of a £250 million accounting misstatement.

Luke Johnson, the serial entrepreneur, has a very interesting piece in the Business Life section of the Financial Times of 24th September.

He argues that the root of the problem is that the business is trying to sustain margins that are too high in the light of fierce competition from many including the low cost retailers Aldi and Lidl. This brings to mind a much discussed topic (at least whenever I talk with clients about strategic challenges). When companies appear, to some extent, to lose their way is it poor execution or poor strategy? We strongly believe that good execution skills are not enough. Clearly Tesco will need them in large quantities but if they cannot develop a strategy to combat the challenge of the discounters at the same time as competition from high end competitors, including Waitrose, execution skills will not solve their problems.

Another issue Johnson raises is the composition of the Tesco Board of Directors. There is no member of the Board who has executive experience as a retailer. Indeed, one director has experience in government in the Netherlands where, Johnson points out, Tesco have no operations at all. Technical understanding of the business is key for the managers who run it. General business skills, he argues, are not enough. We feel this is very relevant to MTP and the work with our clients. Business education must show the relevance of concepts to the company we are working with, which is why we focus on the development of learning solutions tailored to the business of each client. Open business courses and MBAs have a place but they are not enough on their own.

The final point Johnson makes is that Tesco need a new Chairman. We will see.

Read the full article here

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