Case Study: Tesco's Corporate Governance Failures and Privacy Concerns

This case study analyzes Tesco, a major retail company, focusing on its corporate governance failures and privacy violations. The study begins with an overview of Tesco's background, including its structure, key scandals, and the specific issue of tracking a female journalist, which highlights the violation of customer privacy. The analysis delves into the core issues related to corporate governance regulations, exploring legal, academic, and professional perspectives. It examines Tesco's response to the issue, evaluates the potential for similar occurrences in the UK, and discusses accountability measures. The study concludes with lessons learned regarding governance, risk, and ethics, and assesses the implications for potential investment in the company. The case study emphasizes the importance of customer satisfaction, the impact of privacy breaches, and the need for robust corporate governance to maintain customer trust and brand reputation, especially in the context of an oligopoly market.

CASE STUDY ANALYSIS
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Executive Summary
The case study starts with the background and profile of Tesco, which has been chosen as the
company. The case study focuses on the issue about violating customer privacy. The exposure of
excessive information to the employees of the company has lead to the tracking of the activity of
a female journalist. The purpose of the case analysis has been briefly described proceeding with
structure of the company and the key scandals. The study on Mate Reality Kicks back further
proceeds with the main issues related to the corporate governance of the chosen organization and
the legal, academic and professional perspectives have been expressed. There are detailing to the
issues that have been portrayed. The study concludes with the possibilities of relevant issues in
the UK and the accountability to control such occurrences, with additional recommendations.
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Table of Contents
Introduction......................................................................................................................................3
Purpose of case study.......................................................................................................................3
Significance of the case and the economy background...................................................................4
Fundamental structure of the case study..........................................................................................4
Company background......................................................................................................................5
The key scandals and events related to the company......................................................................6
Case Analysis...................................................................................................................................8
1. The main issues with the corporate governance regulations related to the case..........................8
2. the legal, professional, academic and theoretical perceptions on the issues of the case...........10
3. The response of Tesco on the case and if the addressing met the issue requirements. The
appropriate response that shall suit the criteria and the reason behind it......................................13
4. The possibilities of relevant issues occur in the United Kingdom and the reason behind........14
5.The lessons collected from the case. The knowledge gathered on governance, risk and ethics
from the particular case.................................................................................................................15
6. The possibility of investment in Tesco and the reasons behind it.............................................16
Conclusion.....................................................................................................................................16
Reference list.................................................................................................................................18
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Introduction
A retail firm has to face several issues in terms of product distribution as well as quality
management. Therefore, such cases can be considered as a context of analysing business
situation as most of the concerns of individuals get engage in such contexts. Trade and
commerce is an amalgamation of both positive and negative problems that might impose threats
upon the execution of business. The following artefact is completely focused on the recent case
that incurred in a very popular organisation named Tesco. It is the fastest growing and emerging
online e-commerce system is on news headline nowadays. The products of Tesco are now easily
available in their online groceries, electrical, groceries and clothing websites. Thus, the modern
society can easily enhance their interaction with it. Tesco which is a leading retailing company
that runs in more 650 cities across the globe is now facing difficulties regarding customer
privacy. In recent times there are few complaints lodged against this company as it could not
maintain the level of commitment it stated and tried to track few personnel without his/her
consent. Tesco is also facing trouble in many cities across the globe. The policy, in which, it
states that ‘MATE REALITY KICKS BACK’ was supposed to use only for legitimate purpose
of the business. The respective study highlights the issue of corporate governance that is
occurring in the venture. If the company enhance its own rules privacy settlements, we can hope
that customers will start stepping in.
Purpose of case study
Zolfani et al. (2013, p.7111) have commented that the sole purpose of an online based company
requires customer satisfaction and profit margin. However; in this case the organisation is
messing up with the customers details regarding their where about and lots of stuff. The
incidences that are taking place now and then, with the company name Tesco need a close look
at the matter. At this point of time, if the company wants to retain back its own position, it needs
take few big and small steps firmly. Firstly the company need to resolve the issue regarding the
recent privacy leakage issue, the company should take some steps against that particular person.
Secondly, the company should work on its system up gradation which gives full privacy to the
user. The company also need to resolve its recent resignation of its CEO issue, which also creates
doubt to so many customers out there. In order to run such a huge organisation both the company
and its employee must share a healthy bonding, which particularly Tesco lacks. The company
does not provide a healthy atmosphere or a spoonful ambience to its workers. Thirdly, it deals
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with the parsimonious service users. It faces lot of pressure from the customers’ due to their
products quality and creditors give pressure to enhance their product quality and profit margin.
Tesco lacks Senior Executive; presently the company is without its Chief Executive Officer,
Senior Vice President (considered to be the right hand of the company), and Chief Operation
Officer which left Tesco in a battle without any general leading from front. Ultimately it
adversely effected on their day to day strategy or operation. Creditors also give fewer funds to
the organisation and this diminishes their budget and recognition in global market. Thus, in
today’s competitive market survival is very tough as because each and every company is busy in
showcasing them best and in such times mistakes committed by the company is totally
unacceptable. Still the company got few positive impacts which still attract its customers and the
company now should start working on its loophole, because to sustain in this form of business
the company has to eradicate its mistake as discussed above.
Significance of the case and the economy background
The company whose motto and sole purpose is customer satisfaction, but fails to maintain such
thing, puts a very worse and adverse effect on the customers as well to the business market.
Tesco falls under an oligopoly markets and every company apart are best in their product, in
such condition Tesco have starting lacking in few areas. In order to maintain higher competitive
force, sometimes, Tesco has to follow cost leadership strategy and based on the same, product
qualities differ. Therefore, customer usually gets an option to place complain or grievances.
However, it is not always evident, but such negative grievances cause negative impact on brand
loyalty.
A principal task of business persons is giving an audit appraisal on budgetary enunciations,
influenced open close by an organization's yearly to report. For untouchables, such an audit
appraisal is routinely not unreasonably helpful since by a long shot the majority of firms get a
"spotless" report, i.e. a deficient audit evaluation. Lacking suppositions consistently come in kind
of systematized content, fundamentally saying that no material slip-ups were recognized. There
was constantly a call for more straightforwardness about the certifiable work of commentators.
This call has been fortified in the present cash related crisis.
Fundamental structure of the case study
Customers avail more of low rate products provided by Tesco, but at the same time the company
follow a price to supply equalising method in which with the increase in demand of more
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products. The suppliers increase the price which results in consumers availing other offered
products as a result it puts an adverse impact on the company. The respective case study has got
a place to explore when continues number of products got negative concerns.
Company background
The Tesco expanded as one of the fastest enlarging supermarket company across the globe. In
today’s century, Tesco is largely known as one of the quality product providers and is used by
more than millions of people. The products are spread worldwide and have eminent customers
using the products. The firm consists of a complex organizational structure and has a remarkable
management and HR team. Most of the eminent decisions making are known to be controlled by
the official board. The Tesco technology Inc is one of the backbones to the standard products
provided by the company. Constant new innovations are being made by the professional’s in
order to make a mark among its valuable consumers in an ever advancing way and also improve
the product quality. Some of the recent advancement in technology by the company involves the,
new offers, discounts and promo codes which have been circulated worldwide for customers to
use. The innovations for improvement also include the advanced Tesco applications which have
made all type of customers to get access to the product easily and are functional in most type of
devices. The Tesco is established in approximately more than 59 nations and earns a revenue
income of approximately 60.7 billion from the countries. The company is chosen by a large
percentage of customers which include the eminent personalities from the media, political field
and celebrities. The business is growing in a rapid manner throughout the globe and the board of
directors is also involved in seeking suggestions from eminent advisors in order to launch new
innovations (Tesco.com, 2017).
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Figure 1: Company Logo
(Source: tescoplc.com, 2017)
The key scandals and events related to the company
Though the Tesco has made a remarkable impact worldwide, the company has also been the
spotlight of certain law violation and scandals. The scandals include various scenarios and has
impacted the reputation and built of the company largely. The possible reason can be, the
business had an exceptional rapid growth which made the products and regulations exposed to
the crowd. Personal information of the users is accessed by the other people and they use their
information illegally. This increases the dissatisfaction and chaotiic behaviour in the organisation
and diminishes their identification in global market. Tesco also experienced allegations on the
product suppliers and the human resource team has been crucially claimed on the recruiting and
hiring techniques.
The widespread surveying rules setter reacted to these stresses by impacting a couple of
recommendation to which to the United Kingdom's Financial Reporting Council (FRC) has
responded at "astonishing pace". Its rethought ISA 700 (UK and Ireland) requires analysts of
certain British firms to uncover the associated quantitative levels of materiality, close by
information on the overviewed threats for material misrepresentations ("key audit matters") and
on the general degree of the survey. The present accounting humiliation at Tesco's, a significant
retailer in the UK, has pulled in open keenness with respect to these new presentation essentials
which associated first for money related years beginning on or after October 2012.
In this scenario, the case related to the Tesco about the misconduct of the tracking application
has been chosen. These issues have put significant impact over the reputation of the company.
The occurrence of the case has impacted the reputation of the company and customers have been
dissatisfied to the invasion of the privacy (tescoplc.com, 2017).
The association issued an advantage alerted on 29 August 2014, surveying trading advantage for
2014/15 to be lower than expected and in an extent of £2.4bn to £2.5bn and trading advantage
for the a half year completing 23 August 2014 to be around of £1.1bn. They incredibly moreover
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communicated that "our new Chief Executive, Dave Lewis, will now join the business on
Monday and will review each piece of the Group's operations." On 22 September, the firm
announced a couple of revelations of this comprehensive overview: "In the midst of its last
courses of action for the expected between time happens, Tesco has perceived a distortion of its
typical advantage for the half year, for the most part in view of the stimulated affirmation of
business wage and delayed amassing of costs." The misrepresentation was assessed to be
proportionate to £250m. Tesco in this way charged an overview by Deloitte and point by point in
its break occurs conveyed on 23 October about the revelations: "The Deloitte examination
concerning the authenticity of the figures has now shut, and has avowed our evaluation that there
was a distortion in our advantage wants of £(263)m. The impact to trading profit is £(118)m in
the principle bit of this present year, with a further c.£(70)m relating to 2013/14 and c.£(75)m
relating to pre-2013/14 viewed as inconsistent things inside these results." All single periods'
misrepresentations show up underneath the quantitative materiality edge PwC has set to £150m
in its report for the 2013 cash related clarifications (for the financial year completing on 22
February 2014). Inquisitively, PwC adequately recognized "business wage (restricted time
monies, discounts and discounts receivable from suppliers)" as one key survey matter.
Specifically, PwC communicated in the free assessor report that the "compensation saw in the
midst of the year is material to the compensation declaration and totals assembled at the yearend
are judgmental". PwC furthermore saw that they "focused on this region because of the judgment
required in speaking to the business wage deals and the threat of control of these adjustments."
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Case Analysis
1. The main issues with the corporate governance regulations related to the
case
Tesco is the most prominent industry which faces lot of controversy due to their poor services
and price related issues. The affiliation's insistence that it had over-conveyed its half-year
benefits by £250m has raised issues about the blueprint of the affiliation's directing body and the
utilization of boorish bookkeeping systems.
Going before the strategy of two new non-official managers on 7 October 2014, Tesco's board
had no non-official heads with retail involvement. This lack in an area information proposed the
board was probably not going to have the crucial learning and strength to agreeably question and
test the affiliation's specialists. The board of director lack the management skill and they appoint
candidate who are less efficient in nature. Thus, it faces a lot of chaotic behaviour in the
organisation. It compels them to give resignation from the company. Lack of adequate managers
and higher hierarchy the lower hierarchy faces lot of problems related to their issues. Without the
brief and clear idea about the task the employee could not perform their task and the enterprise
could not reach their goal easily. Due to lack of systematic strategy it faces the governmental
penalties along with local party’s conflicts. The competitors get the added advantages and they
explore their business in recent market. This decreases the demand of Tesco’s product from
global community. Good product with reasonable price enhances the customer satisfaction nad
profit margin. Due to lack of perfect management team the rules that are created by them does
not follow the governmental business law and policies of the local political parties.
While the outside observers in the affiliation's 2014 Annual Report and Financial Statements
examined the 'danger of control' in the assertion of business pay, this did not keep the affiliation's
first-half figures for 2014 hastily observing pay and suspecting cost wander saves. The
bookkeeping treatment got was, one expect, perceived by the Audit board, and the preferred
standpoint figures hence close around the board. The issue just in this manner climbed when one
of the affiliation's own particular workers inspected the bookkeeping treatment (Misangyi and
Acharya, 2014, p.1681).
Negative impact in the reputation of the organization
Hugh Wilmot writing in the Financial Times recommends the issues of load up affiliation and
pay attestation point to thwarted expectations in the present arrangement of corporate
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association. He rises that the UK corporate association code does not require non-official
directors to have pertinent inclusion, and that the assurance of off centre examinations of
business wage mirrors an 'inability to create tasteful definitive parts for controlling misuse of
corporate power.' He proposes change is basically required.
Tesco is the most prominent retailer in global community. Tesco's' affiliations merge comfort,
insignificant urban stores, hyper-markets and money related associations.
Tesco, which has a significant on-line business, is one of the more globalized relationships in the
retailing industry. Tesco has offered itself to lifted wants of corporate association by applying the
rules set out in the Combined Code of the Cadbury and Greenburg guiding social affairs. In late
2003, the affiliation showed changes in its board structure to stimulate the entire arrangement
movement of board practices. The case examines Tesco's' corporate association hones, with
extraordinary reference to board creation, board commitments, board advisory groups,
authorities'' pay and theorist relations. The case can be utilized for MBA understudies as a
portion of the corporate association educational undertakings. The case goes for helping
understudies understand the frameworks and structures key great association.
Figure 2: The fundamental structure of corporate governance
(Source: Nikoloski et al. 2016, p.180)
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Invasion of privacy through Goodview leading to customer and organization relationship
disputes
As per McCahery et al. (2016, p.2905), there are several applications launched by Tesco, such as
the Greyball, Goodview and more. As the name suggests, the negative aspect can be used the
customers in advanced manner and is mostly used by Tesco employees. Other customers have
been aware after the particular such cases even more, though there was violation of this
application before. The new CEO of the firm have been distinctly aware of the factor and
forwarded apology to the individual and other consumers as well. As per ArAs (2016, p.18), the
common expectation of every customer is security and safety in product, which has been turned
down by the organisation as per the statements of the product users. The stakeholders of the
company have been victims of the occurrence as it leads to huge disputes in the corporate
regulations.
The higher management who recently recruited in Tesco prepare and modify the policy of it buy
flowing the external and internal factors of the organisation in global market. The CEO of Tesco
is highly experienced which help the organisation to face the negative issues of the enterprise
easily. The modification of products depends on the recent customer demands. Recent policy
follows the governmental rules and thus it prevents the governmental issues along with the
chaotic attitude of the enterprise. Training is provided to the employee according to their need
which includes their experience and creativity. It follows the health and safety act along with
discrimination act which help the enterprise to increase the satisfaction level of employers. Good
collaboration along with interaction enhances the disciplinary attitude in the company. Respect
for each other in the organisation decrease grudges and ego from it. Management perform
adequate research before creating the strategy. They perform the competitor’s analysis, customer
demands, and governmental rules in business law and so on. This meets the current demand of
the community. The higher hierarchy discuss the strategy with the employees in order to
diminish the negative issues of the strategy and to create it much more long sustainable in nature.
2. the legal, professional, academic and theoretical perceptions on the issues of
the case
The occurrence of the case have modified the views and functioning of regulations of several
aspects. Some of the sectors are as follows,
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The legal perception over the issue
The violation have mislead the fundamental business regulations and brought in compliance
issues. This has made the entire legal system in the United Kingdom aware about privacy
security and protection. As stated by Martin et al. (2016, p.22) company has been legally
challenged by undergoing quite a number of laws suits. The legal regulations of the United
Kingdom include the 2014 privacy Act that has been evidently breached. The jurisdiction has
introduced additional modifications in privacy laws of business. The Federal trade commission’s
(FTC), has ensured consumer asset and privacy safety through the decisions of the board
members. The emerging legal declarations included the modifications of the privacy notes on the
website of Tesco and selection of the right statements to set customer expectations. Legal
perception focuses on the observation, awareness and the realization of the enterprise. The higher
hierarchy provides adequate training to the employees in order to improve their performance
level and creativity. Systematic strategy and training along with the adequate equipment and
resources help the enterprise to reach its target easily. Bateman et al. (2017, p.178) commented
that campaign is performed by the representatives of Tesco in order to increase their interaction
with the customers. Audio visual campaign attracts more customers and increases their interest
about their products. It launches new products in order to attract the recent customers and the
customers can feedback in the website of the enterprise. The modification of the ptroduct and
stregy uis aloso depends on the feedback of the customers. The main motto is to enhance the
customer’s interaction and interest in their product which will enhance their product demand and
profit level. Good product quality with reasonable price enhance the customers satisfaction and
this increase their recognition of it in recent market. The enterprise prefers the online
advertisement than the other advertisement since it lowers the cost of the advertisement and
increase awareness about their product in recent market. Mobile advertisement helps the
enterprise to increase their identification and product awareness in global market.
The detections of the case on a professional perspective
According to Kato et al. (2017, p.480), the occurring of the case have disrupted the functioning
system and the balance in the management system. Due to the emerging issues in the top
management, the work culture has also been affected along with professional ethics and
capability degradation. Tesco, being one of the largest companies had a rapid fall in terms of
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