Comprehensive Analysis: Corporate Strategy & Governance at Tesco PLC

This report provides a comprehensive analysis of Tesco PLC's corporate strategy and governance. It begins with an introduction and background of Tesco, followed by an examination of the industry life cycle and Tesco's strategic adaptations within it. The report delves into the structure and effectiveness of Tesco's board, including a board crisis action plan. Furthermore, it addresses corporate governance failures, offering analysis and potential actions for mitigation. Data collection methods relevant to research at complex organizations are also discussed. The report concludes with a summary of key findings and includes a reference list.

Running Header: CORPORATE STRATEGY & GOVERNANCE – TESCO 1
Corporate Strategy & Governance – Tesco

Corporate Strategy & Governance – Tesco 2
Contents
Introduction & Background.......................................................................................................3
Industry Life Cycle & Corporate Strategy at Tesco...................................................................4
Structure & Effectiveness of Tesco Board’s Corporate Governance.......................................10
Board Crisis Action Plan..........................................................................................................16
Corporate Governance Failure – Analysis & Actions for Reduction / Elimination................19
Data Collection Methods – Research at Complex Organizations............................................22
Conclusion................................................................................................................................22
References................................................................................................................................24

Corporate Strategy & Governance – Tesco 3
Introduction & Background
Strategic management represents a domain for the accountability management as well
as social responsibility in being an element of the vision / mission, as well as the interests of
shareholder are effectively highlighted which could interrupted by way of employee interests
or else environmental regulations / responsibilities leading to conflict in interest (Tricker and
Tricker 2015; Filatotchev and Nakajima 2014). The undertaking of business over longer term
forms the essential objective in the context of successfully and effectively managing
achievement which could take place by way of varied possibilities in attracting newer
investors. In this context, corporate governance helps in ensuring that the overall interest
amongst top tier managers are lined up / aligned towards the overall interests of the
shareholders, spanning across the various domains of interests amongst board of directors,
managers, and shareholders and these various domains comprise the electing of the board of
directors as well as chief executive manager, and also other set of stakeholders (Tricker and
Tricker 2015; Filatotchev and Nakajima 2014). At the outset corporate governance refers to
strategic direction and structure, which in turn illustrates corporate governance, possesses
managerial roles by way of varied tools which include legislations pertaining corporate
governance, ethics pertaining corporate governance, as well as responsibilities pertaining
corporate governance both in social and environmental contexts that could aid in achieving
the strategic objectives (Tricker and Tricker 2015; Filatotchev and Nakajima 2014).
Tesco PLC refers to United Kingdom based multinational grocery as well as general
merchandising retailer having its headquarters at Welwyn Garden City in Hertfordshire,
England. Tesco PLC represents third largest amongst the retailers across the globe measured
in terms of profits as well as represents ninth largest amongst the retailers across the globe
measured in terms of revenues (Tesco PLC 2017a). Tesco PLC owns stores across 12 nations

Corporate Strategy & Governance – Tesco 4
in Asia as well as Europe and holds a market leadership position in grocery market across
United Kingdom wherein it holds market share at about 28.4 per cent (Tesco PLC 2017a). As
specified even if originally Tesco PLC was a United Kingdom based grocery retailer, the
company has undertaken geographical diversification starting from early period of 1990s as
well as diversification within domains like that of retailing for internet services, telecom
services, financial services, software, petrol, toys, furniture, electronics, clothing and books
(Tesco PLC 2017a). The period of 1990s witnessed Tesco repositioning itself as the company
transformed from being lower cost / higher volume / down market retailer, to that of a one
appealing to various set of social groups, through the offering of products that range across
the items branded "Tesco Value" to that of items branded "Tesco Finest" (Tesco PLC 2017a).
The broadening of the company’s appeal led to successful outcomes with the Tesco chain of
store growing from about 500 stores to that of 2500 stores over a period of 15 years (Tesco
PLC 2017a). The crucial element of expansion strategy employed by Tesco has been the
innovative application of various technologies (Tesco PLC 2017a).
Industry Life Cycle & Corporate Strategy at Tesco
The business enterprise of supermarkets represents larger and highly intricate
structure that comprises various set of component entities including – A range of repeating
customers who are grouped within varied local regions, the chain of grocery / retailer stores,
various set of systems for transportation, the range of centres for warehouse distribution, an a
range of suppliers for products by way of contracts (Kurnia et al. 2015; Hübner et al. 2013;
Davies and Kirby 2012). Any supermarket prevails and operates within competitive
environments, wherein it shall acts as the value adding intermediary amongst the supplier
companies that are dispersed geographically as well as the various customer individual
scattered across the region who shall eventually purchase their products (Kurnia et al. 2015;

Corporate Strategy & Governance – Tesco 5
Hübner et al. 2013; Davies and Kirby 2012). By way of carrying out the function, the
supermarket enterprise acquires as well as assembles wide range of product assortments
procured from individual set of suppliers, which are later organized as well as distributed as
is required to the retail store chains for purposes of sale towards local customers. This model
of supermarket focuses over the work which are involved to physically handle stocks as the
same makes a journey starting from the suppliers to the end customers (Kurnia et al. 2015;
Hübner et al. 2013; Davies and Kirby 2012). Even though the same references to business
entities which are involved, this model fails to include lifecycle development concerning the
structures of physical housing relating to trucks, stores, warehouses, as well as equipment
which are employed. This model effectively identifies key set of parameters which are
suitably involved, yet the generic version shall not encompass specifics, like that of specific
amount of the product types which the store sells, amount of warehouses/ stores, their
respective sizes, and other such criteria (Kurnia et al. 2015; Hübner et al. 2013; Davies and
Kirby 2012). These shall be determined while this model can be applied towards particular
supermarket business.
The overall supermarket industry is at the approximate estimation US Dollar 492
billion valued behemoth based on the recently available publications (Kurnia et al. 2015;
Hübner et al. 2013; Davies and Kirby 2012). The industry has evolved from that of an
industry characterized by pure competition, wherein many hundreds and thousands of the
smaller sized and independent stores in essence sold same set of goods, each catering limited
region geographically and the concerned customer base. The same represents the initial phase
of this industry’s life cycle (Kurnia et al. 2015; Hübner et al. 2013; Davies and Kirby 2012).
During the course of 21st century, overall industry was dominated with the limited number of
entities comprises larger sized and sophisticated chains that served multiple state regions over

Corporate Strategy & Governance – Tesco 6
more of oligarchy based structure with mature phase of this industry’s life cycle. The
evolution of life cycle from various smaller and independent retailers to that of fewer larger
sized chains could be explained in the best manner by way of the theory termed as Wheel of
Retailing (Kurnia et al. 2015; Hübner et al. 2013; Davies and Kirby 2012). This theory
essentially postulates that any store shall start out by serving limited market by using smaller
product mix, lower prices levels as well as lower margins (Kurnia et al. 2015; Hübner et al.
2013; Davies and Kirby 2012).
With the growth in the store, the same shall expand the relevant product mix,
enhancement to the facilities, as well as increase in services. The same shall eventually add to
overall costs of the operations, with consequent increases in the price margins (Kurnia et al.
2015; Hübner et al. 2013; Davies and Kirby 2012). With the continual growth in the store, the
business shall follow the similar approach concerning increases in product mix, enhancement
to the facilities, as well as increase in services. It shall expand by way of opening additional
set of stores as well as expansion of the marketing areas and all of these shall continue the
overall need for increasing prices as well as margins (Kurnia et al. 2015; Hübner et al. 2013;
Davies and Kirby 2012). If the same could be successfully managed, at an eventual time the
relevant operation could become increasingly sophisticated form of chain serving to the
multi-state regions. Naturally various other entrepreneurs shall endeavour in taking the
market share through opening of stores serving to limited market armed by smaller product
mix, lower prices, lower margins as well as limited set of services within facilities that are
bare-bones (Kurnia et al. 2015; Hübner et al. 2013; Davies and Kirby 2012). As these entities
grow, they shall follow same set of format as compared to their respective predecessors, as
well as at an eventual time become much more effective through learning derived from
experience as well as delivering an effective job, forcing them towards the phase of decline in

Corporate Strategy & Governance – Tesco 7
the overall industry lifecycle (Kurnia et al. 2015; Hübner et al. 2013; Davies and Kirby
2012). Various other entrepreneurs’ later experience the success as well as open the
respective limited stores on setting Wheel of Retailing all over repeatedly.
In the context of United Kingdom and Tesco PLC, there seems to be concrete
evidences that grocery supermarket industry is being dominated increasingly by fewer firms
and in specific being led by Tesco, ASDA as well as Sainsbury (Walton et al. 2017; Tench
and Topić 2017; Souza Monteiro et al. 2017). The overall supermarket industry represents
oligopolistic form as well as strategy for pricing in supermarkets could be noted for using the
approaches of game theory. It is in addition accepted that various farmers as well as growers
undergo suffering on account of the increasing level of monopsony power residing with the
major supermarkets (Walton et al. 2017; Tench and Topić 2017; Souza Monteiro et al. 2017).
Further overall pace in concentration saw acceleration till the year 2012, yet, post that, an
emergence of lower cost retailers like Lidl as well as Aldi have led to the halting of the
growth of largest four entities, and has reduced overall concentration of these firm ratios to
attain 72.3 per cent (Walton et al. 2017; Tench and Topić 2017; Souza Monteiro et al. 2017).
The increases in the large sized supermarket chains have to an unsurprising extent coincided
to the overall decline over independent retailers.

Corporate Strategy & Governance – Tesco 8
Figure 1 – Market Share in Supermarket Industry – United Kingdom in the Year 2016
(Walton et al. 2017)
In a deliberate as well as conscious effort to strengthen, reorient and reframe its
overall strategy, Tesco PLC undertook critical changes to re-energise its business operation
few years back (Tesco PLC 2017b; Tesco PLC 2017c; Tesco PLC 2017d). In accordance to
the same the company set following strategic objectives during October 2014 – (i) undertake
regaining of its competitiveness within core United Kingdom business, (ii) undertake
protection as well as overall strengthening of its balance sheet, and finally, (iii) undertake
rebuilding of overall trust as well as transparency (Tesco PLC 2017b; Tesco PLC 2017c;
Tesco PLC 2017d). On account and in consequent to the same, Tesco PLC has over the past 2
to 3 years undertaken stabilization of its overall business as well as is on its track in attaining
strategic position it aimed to be in (Tesco PLC 2017b; Tesco PLC 2017c; Tesco PLC 2017d).
Naturally, the company has still a lot to attain in its strategic course and yet the company is
already on a course to strategic recovery as well as the gaining of momentum that is gradually
building all across its various business. The overall business of Tesco PLC has at all times
been in its best course whenever the company has its customers to be its absolute and

Corporate Strategy & Governance – Tesco 9
ultimate priority. Over past year or so, the company has restored its overall commitment
for delivering best possible services to its end customers (Tesco PLC 2017b; Tesco PLC
2017c; Tesco PLC 2017d). The same has been reflected within its newer purpose that has
been established for its businesses – serving the shoppers little better on a day to day basis.
The same has been guiding force for each of its action the company has since been taking as
well as has been effectively instrumental to make the overall United Kingdom operations to
be competitive again (Tesco PLC 2017b; Tesco PLC 2017c; Tesco PLC 2017d).
In addition, over the contexts of investments for lower, highly stable form of pricing
as well as enhanced servicing / availability, the company has undertaken review and suitably
simplified each one of its food product ranges as well as undertaken increases in the
additional man hours across the company’s shop floor for enhancing the customer service
(Tesco PLC 2017b; Tesco PLC 2017c; Tesco PLC 2017d). The availability on-shelf has
attained levels never before levels, make sure that its customers could avail what they desire
and at all times they want the same. In a remarkable milestone, the company became first and
till date sole retailer within United Kingdom during October 2015 for offering customers with
immediate price matches in addition to Brand Guarantee, such they never have to pay higher
at the branded shops in case they are cheaper across Sainsbury’s, Morrisons or Asda while
they could purchase 5 or else more different set of products (Tesco PLC 2017b; Tesco PLC
2017c; Tesco PLC 2017d). In terms of recent strategic changes, the company came out with
suite of new and exclusive set of brands for fresh food that are available solely at the Tesco
outlets and offered at attractive prices. The same shall enable the company in giving its
customers much more enhanced choice with greater value and fresher food at one single
outlet (Tesco PLC 2017b; Tesco PLC 2017c; Tesco PLC 2017d).

Corporate Strategy & Governance – Tesco 10
The company’s international sales in addition have strengthened irrespective of its
presence in markets that are challenging, driven largely by various improvements it has been
offering its end customers (Tesco PLC 2017b; Tesco PLC 2017c; Tesco PLC 2017d). The
company has built up a stronger level of positive momentum over sales all through the year
across both Asia as well as Europe (Tesco PLC 2017b; Tesco PLC 2017c; Tesco PLC
2017d). The company’s largest business in international context is Thailand and the same
performed specifically well, resulting in the largest market share ever. The programme for
transformation across Europe for its operations have accelerated in terms of growth as well as
reduced levels of operating expenses. In other aspects of the group’s operations, the Tesco
Bank retains its momentum in giving the end customers with unique set of banking offers
(Tesco PLC 2017b; Tesco PLC 2017c; Tesco PLC 2017d). In addition, Tesco Mobile which
is a joint venture of O2 and Tesco PLC, has attained a successful brand position as well as
business that is recognised to deliver customer service that is outstanding.
Structure & Effectiveness of Tesco Board’s Corporate Governance
The Board as well as the Executive Committee at Tesco PLC undertake their
activities within the overall and wider set of governance frameworks established at the
company (Tesco PLC 2017d; Tesco PLC 2017e; Mena and Waeger 2014; Kukreja and Gupta
2016). The same makes sure that concerning decisions are undertaken across the correct
levels within the overall business through the people who are best placed for taking these
decisions. The various affiliated frameworks at the company offers clear set of direction over
decision making avoiding the creation of any burdensome processes which can lead to the
impediment of the business progress (Tesco PLC 2017d; Tesco PLC 2017e; Mena and
Waeger 2014; Kukreja and Gupta 2016). The company retains the requisite levels of agility
for getting over with the management and operation of the business while ensuring

Corporate Strategy & Governance – Tesco 11
compliance with higher standards with respect to governance which aids the overall aims for
rebuilding the transparency as well as trust. In having suitably and effectively delegated
detailed levels of operation concerning the relevant business with chief executive office as
well as chief financial officer, Tesco Board essentially holds them in account for the
respective responsibilities. For the purposes of effectively undertaking the same, Tesco board
effectively operates by way of various set of committees, with each of these committees
being made of completely from members in the company’s board (Tesco PLC 2017d; Tesco
PLC 2017e; Mena and Waeger 2014; Kukreja and Gupta 2016). Each of these committee
meet separately with the Board in the course of year, offering time for focus in an in-depth
manner over specific and significant matters spanning corporate responsibility, nominations,
remuneration, and, audit (Tesco PLC 2017d; Tesco PLC 2017e; Mena and Waeger 2014;
Kukreja and Gupta 2016). The overall governance framework established by Tesco offers
clear set of parameters for responsibilities as well as delegation from its Board trickling down
by way of overall established structure as illustrated below.

Corporate Strategy & Governance – Tesco 12
Figure 2 – Tesco PLC Board Structure (Tesco PLC 2017d; Tesco PLC 2017e)
The overall responsibilities lying with the board at Tesco PLC possess responsibilities
towards the longer term successes over the Group and yet the management on the day to day
basis are delegated with the chief executive officer, Mr. Dave Lewis as well as the chief
financial officer, Mr. Alan Stewart (Tesco PLC 2017d; Tesco PLC 2017e; Mena and Waeger
2014; Kukreja and Gupta 2016). Mr. Lewis has the Executive Committee for supporting him
with respect to operations on a day to day basis across the overall Group, with all of the