Change is a necessary part of any business’s growth and success. However, managing change can be a challenging task, especially for a company as large as Tesco.
The UK-based retail giant faced numerous challenges during its journey of growth, including increasing competition, changing consumer preferences, and economic uncertainties.
To overcome these challenges, Tesco embarked on a change management journey that transformed the company and enabled it to become one of the world’s largest retailers.
In this blog post, we will delve into Tesco’s change management case study, discussing the strategies the company employed to manage change, the challenges it faced, and the results and achievements of the change management program.
We will also examine the lessons learned from Tesco’s success story and provide insights into best practices for effective change management
Background of Tesco
Tesco is a British multinational retailer that was founded in 1919 by Jack Cohen. Initially, the company started as a market stall in London’s East End, selling surplus groceries from a stall.
In the 1920s, the company expanded its business by opening its first store in Burnt Oak, North London.
The company went public in 1947 and continued to expand its business throughout the UK in the following years.
By the 1990s, Tesco had become the largest supermarket chain in the UK.
However, despite its success, Tesco faced several challenges in the early 2000s. Increasing competition from discount retailers such as Aldi and Lidl, changing consumer preferences, and economic uncertainties had a significant impact on the company’s growth.
Tesco’s sales started to decline, and the company’s market share was shrinking. To address these challenges, Tesco’s management team realized the need for a change management program that would transform the company and enable it to regain its position as a market leader.
History and growth of Tesco
Tesco’s success story began in the early 20th century when Jack Cohen, the founder of Tesco, started selling groceries from a stall in London’s East End. By the 1920s, Cohen had established his first store in Burnt Oak, North London, under the name Tesco.
The name “Tesco” was derived from the initials of TE Stockwell, a supplier of tea to Cohen, and the first two letters of Cohen’s surname.
In the following years, Tesco continued to expand its business by acquiring other retailers and opening new stores throughout the UK.
By the 1970s, the company had become one of the largest supermarket chains in the UK. In the 1980s, Tesco introduced new products and services, including Tesco Metro stores, Tesco Express, and Tesco Clubcard, which enabled the company to enhance customer loyalty and increase sales.
In the 1990s, Tesco’s growth continued, and the company expanded its business beyond the UK by entering new international markets such as Poland, Hungary, and the Czech Republic. By the early 2000s, Tesco had become the largest supermarket chain in the UK, with over 2,500 stores worldwide.
However, the company faced several challenges in the early 2000s, including increasing competition, changing consumer preferences, and economic uncertainties, which had a significant impact on the company’s growth. Tesco’s management realized the need for a change management program that would transform the company and enable it to regain its position as a market leader.
Key Reasons of making changes at Tesco
There were several key reasons for the changes at Tesco, including:
- Increasing competition: The rise of discount retailers such as Aldi and Lidl had a significant impact on Tesco’s market share and profitability. These retailers offered lower-priced alternatives, which attracted customers away from Tesco’s stores.
- Changing consumer preferences: Consumer preferences were shifting towards healthier and more sustainable products, which Tesco was slow to respond to. This led to a decline in sales and customer loyalty.
- Economic uncertainties: The global economic recession of the late 2000s had a significant impact on Tesco’s financial performance. Consumers were more price-sensitive, and there was increased pressure on retailers to reduce prices.
- Internal issues: Tesco’s rapid expansion had resulted in organizational complexity, which made decision-making slow and inefficient. There were also issues with employee morale and engagement, which impacted the company’s ability to deliver high-quality customer service.
Steps taken by Tesco to implement change management
To address the external and internal challenges, Tesco’s management team realized the need for a change management program that would transform the company and enable it to regain its position as a market leader. The changes that were implemented included a focus on cost reduction, improving customer service, and enhancing employee engagement.
To implement the change management strategy, Tesco took several steps, including:
- Leadership commitment: The company’s senior leadership team was fully committed to the change management program and provided clear direction and support throughout the process.
- Communication: Tesco developed a comprehensive communication plan to ensure that all employees understood the rationale for the changes and their role in implementing them. The plan included regular updates, town hall meetings, and training sessions.
- Cost reduction: Tesco implemented a cost reduction program to improve efficiency and profitability. The company reduced its product lines, renegotiated supplier contracts, and streamlined its supply chain.
- Customer focus: Tesco implemented a new customer service strategy, which included improving the quality of its products, enhancing the in-store experience, and increasing customer engagement through loyalty programs and personalized marketing.
- Employee engagement: Tesco recognized the importance of employee engagement in delivering high-quality customer service. The company implemented initiatives to improve employee morale, including training programs, recognition schemes, and improved working conditions.
- Technology: Tesco invested in new technologies to improve its operations and enhance the customer experience. This included the introduction of self-checkout machines, mobile payment options, and online shopping platforms.
- Measurement and feedback: Tesco established metrics to measure the success of the change management program and solicited feedback from employees and customers to identify areas for improvement.
Positive outcomes and results of change management by Tesco
The change management program implemented by Tesco resulted in several positive outcomes and results, including:
- Increased profitability: Tesco’s cost reduction program resulted in improved profitability, with the company’s profits increasing by 28% in the first half of 2017.
- Enhanced customer experience: Tesco’s focus on improving the customer experience led to increased customer satisfaction and loyalty. The company’s customer satisfaction ratings improved significantly, and it was named the UK’s top supermarket for customer service by consumer watchdog Which? in 2018.
- Improved employee engagement: Tesco’s initiatives to improve employee engagement resulted in increased employee morale and motivation. The company’s employee engagement scores improved significantly, and it was recognized as one of the UK’s top employers in 2019.
- Streamlined operations: Tesco’s focus on improving efficiency and reducing complexity resulted in streamlined operations and faster decision-making. The company was able to reduce its product lines and negotiate more favorable supplier contracts, resulting in improved margins.
- Strong financial performance: Tesco’s change management program helped the company recover from a period of declining sales and market share. The company’s financial performance improved significantly, with revenue increasing by 11.5% and profits increasing by 34.2% in 2018.
Tesco’s change management program is an excellent example of how a company can successfully transform itself in response to external challenges and changing market conditions. The program was comprehensive and multi-faceted, addressing the company’s challenges from multiple angles. Tesco’s leadership commitment, communication strategy, and focus on cost reduction, customer service, and employee engagement were all critical factors in the program’s success.
The positive outcomes and results of the program demonstrate the importance of change management in driving organizational success. Tesco was able to recover from a period of declining sales and market share, and become a more efficient, customer-focused, and profitable organization. The lessons learned from Tesco’s change management program are applicable to businesses of all sizes and industries, highlighting the need for organizations to remain agile and responsive to changing market conditions.