Troubles at Tesco, the UK’s leading retailer, are mounting. If round after round of profit warnings was not enough – group operating profits fell 20% between 2011 and 2013 and are likely to fall another 30% in 2014 — the company recently announced it had overstated its first-half profit by about $400 million. The “accelerated recognition of commercial income and delayed accrual of costs” undoubtedly flatters short-term results, but it soon catches up with you, as four suspended senior executives have found out. Tesco, the success story of the British retail scene for the last 20 years, has suddenly fallen from grace. How did this happen?
Successful companies are notoriously prone to pursuing tactical fixes rather than confronting strategic problems. They exhort their people to try harder, introduce overhead cost reduction programs, and reorganize – anything rather than admit that their strategy needs an overhaul. Fiddling the books is normally the last resort, when all else has failed. It is also often a sign of impending bankruptcy, but this shouldn’t happen at Tesco. It is still the biggest player in the UK supermarket scene by a mile, but unless it opens its eyes to its strategic challenges and begins addressing them effectively – i.e., shows a little more Strategic IQ – it will continue to spiral down. [Read more]
– http://wp.me/p4sUqu-Jn – Michael’s Blog