Rapport tesco

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Table of Contents

Terms of reference        2

Introduction        2

Procedure        2

Analysis        3

Lack of accounting, efficiency and management        3

Rising competition        3

Customers’ behaviour        4

Conclusion        4

Recommendations        5

Terms of reference

Tesco requested this report to NARA Consultancy in order to resolve problems in their company. The report was to be submitted to Tesco by 12 December.

Introduction

Tesco is the United Kingdom’s biggest supermarket chain. Its history started with Jack Cohen who started to sell his surplus groceries in 1919. From 1924 to 1990, Tesco had a continuous growth and operates now in 13 countries (The Telegraph, 2014).

However, Tesco’s sales fell during the past few years and started facing a crisis since last month. Thus one of the major problems for the company is the sales drop. In addition, other issues such as competition had created significant problems for the supermarket.

This report will firstly state problems Tesco are facing concerning the accounting scandal. Secondly, the report will analyse the competitors of Tesco and the current customers’ expectations.  Some recommendations will be made to help Tesco in improving its situation.

Procedure

In order to have an overview of the opinion of Tesco’s customers, a survey has been conducted in November in Tesco’s supermarket. Update information was gathered through different online newspapers articles. Data for this report was collected from June 2014 to November 2014 though an online website. In addition, further information was found on the Tesco’s website.

Analysis

Lack of accounting, efficiency and management

In any company, it is necessary to have accurate accounting report in order to secure the company from backlash of the media or even fiscal investigation. By the end of august 2014, Tesco’s head office released a statement informing its investors that the profit expected for the next 6 month will be about £1.1 billion. However, an overstatement of £250 million was discovered one month later. This scandal undermines the credibility of Tesco and the trust customers, suppliers and investors could have in the company. In 2013, Tesco had its first decline in profit for the first time since 20 years ago and in June Tesco reported its worst performance for the past two decades. An incompetent executive team accentuates the accounting scandal.  Two months before the accounting fiasco, the chairman of Tesco has been dismissed. The new chairman stated a very positive profit expectation however this was not the case. The previous chairman’s management of the store deeply damaged the company’s sales. The previous chairman focused on improving the store without controlling the prices of the goods. This price inflation drove away customers according to Wright (The Economist, 2014). Tesco had not taken into account what the customers’ response would be toward its price increase.

Rising competition

Hard discounter such as Lidl and Aldi saw their sales increasing significantly meanwhile Tesco observed a drop of 4.5% on its sales during the 12 weeks.  These hard discounters offer a smaller range of product but at a lower price than usual supermarket such as Tesco or Morrison.  Hard discounters can decrease their price by offering own-label product instead of heavily advertised brands. They reduce the cost of overheads by having product on a “shelf-ready” packaging and a low number of staff. Tesco want to offer luxury items to its customer. Nevertheless, Tesco’s customers are looking more to save money rather than spending money on luxury items since the crisis economic. However, Tesco did not decrease its price during the past few years that may have contribute to its financial crisis.

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