Tesco lays foundations for post-recession success
The current recession is the same as any other he has previously encountered, according to the chief executive of Tesco, who says the company is using it as an opportunity to innovate and place itself in a stronger position for when the economy fully recovers.
Speaking at the IGD Convention 2009 in London this week Sir Terry Leahy, chief executive of Tesco, stated: “This recession is no different from any other that we’ve been through before. We’ve got through them and we’ve thrived.”
He told delegates that the company was following its previous recession strategy of “following the customer”. He adds: “It sounds obvious but truths do. The entire focus of the organisation is on understanding the customer needs and mobilising the whole business to deliver on this.”
Unlike many companies in tough times he says Tesco does not change its tactics nor does it alter its core strategy. What it does do is take what he describes as “survivable risks”. Part of this involves driving innovation in the business, because he suggests recessions present good climates for implementing change.
“They are good times for innovating as management’s need answers to new problems. It also costs less to set off in a new direction at such times, it is cheaper to enter new markets, and the competition finds it tougher to defend their turf,” says Leahy.
He believes recessions typically create a post–recession ‘new normal’ and the job of organisations is to anticipate what this will be. During the previous downturns Leahy says Tesco has made some bold moves to change and cater for customers in the new-normal. These include innovations such as introducing ‘one-in-front’, developing the new Express and Metro formats, launching Tesco.com and introducing the Clubcard loyalty programme.
But he warns that during these times of innovation it is crucial not to lose sight of the long-term trends and suggests that the hopes and values of consumers will likely remain unchanged by the recession. Leahy listed the key trends that he believes will continue to be important to the customer as: climate change; the desire to look good and live forever; the demand for convenience; and the need for things to be simplified.
With a focus on these areas and the company’s continued following of the customer Leahy says he is positive on the future: “Around the world we have passed the low point and some stability has returned. The consumer is feeling a little better about life. And the Asian factories are opening up again.”
However, Leahy suggests the recovery will be “slow and steady” as there will be the inevitable pressure on public expenditure and potential tax increases to enable debts to be paid down. While this might not be an ideal scenario for many sectors he says the food industry in contrast, selling basic goods, can enjoy the benefits of slow and steady growth.
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