Wednesday, February 20, 2019

Tesco: The Clarke Era


Clarke‘s early career

Philip Clarke began his Tesco career in 1974 as a 14-year-old stacking shelves in the stores his father managed. He later graduated from Liverpool University with a degree in economics and went on to join the Tesco Management Training Programme. Like Leahy he came from Liverpool and was an internal appointment who graduated through what analysts call ‘the academy for retailers‘. Before taking the top job he held the position of Asia, Europe & IT Director at Tesco and led teams across countries in Asia and Europe.

The Takeover

Clarke became CEO of Tesco in 2011 and there was no denying he had some big boots to fill. The outgoing Leahy had headed Tesco for 14 years and had been responsible for the huge expansion which placed it as the UK‘s biggest supermarket group. During his time as CEO he launched supermarkets in Poland, Turkey, Thailand, Japan and the US and introduced Tesco to the mobile phone and banking industry. He also presided over the introduction of the hugely successful Clubcard loyalty scheme – a database the Wall Street Journal claimed was responsible for thwarting Wal-Mart‘s UK ambitions.


“The Big Price Flop.” Tesco introduced their new price cutting initiative ‘The Big Price Drop‘ in September 2011. The prices of 3000 everyday products were slashed in a bid to compete with the other big supermarkets. However the initiative was nicknamed “The Big Price Flop” after Tesco suffered its worst sales performance in decades. It was criticised for not actually saving customers‘ money and therefore failing to win trust. The group also sold out of Japan after 8 years of trading.


In 2012 Tesco‘s ‘race for space‘ came to an abrupt halt. The first fall in UK profits witnessed in two decades forced it to focus its attention on consolidating it‘s existing customer base. Clarke announced a £1bn makeover of both stores and the website and stated that “We fully recognise that we need to raise our game in the UK.” Offshore Tesco faced bigger problems. Their American dream came to a close after US business Fresh & Easy was identified as the biggest-ever British retail failure in the states after making a loss of £1.8bn in eight years. Deputy executive, Tim Mason, lost his job as a result of the failed initiative.


In 2013 things appeared to worsen for the supermarket giant. December reports showed that Tesco suffered sales falls in every single country that it operated in. Whilst UK sales only fell by 1.5 per cent in the third quarter, sales in Ireland plummeted by a massive 8.1 per cent in the same time. Tesco cited “the effects of an unprecedented period of declining real incomes” and the “higher cost of living” as the cause for the drop. However this excuse was criticised after it was revealed that both Lidl and Aldi saw an increase in profits after introducing luxury ranges. Phil Dorrell, from Retail Remedy, remained positive however. He told The Guardian that “The long-term value and returns Philip Clarke talks about will come but it will take time”.


This year began with a profit warning after poor Christmas sales. News also broke that Tesco‘s market shares have shrunk to 28.7 per cent, the smallest in a decade. So far Tesco have responded with further price cutting campaigns. However the campaigns do not appear to be enough to secure Clarke‘s position as head of Tesco- today his shock exit has been announced. He will stay on until October when he will be replaced by Dave Lewis, head of Unilever‘s personal care business.


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