New Leadership - Can the Soap Man Save Tesco?

This will be a dynamic business story that will be essential for business students to follow closely over the coming months. Tesco has announced the appointment of Dave Lewis to replace Philip Clarke as CEO with effect from 1 October 2014.This decision is significant for many reasons, not the least that Dave Lewis has never been a retailer, nor has he ever been a CEO. Nevertheless, Lewis was the man that Tesco wanted (he was headhunted) and he has a superb track record at Unilever, one of the world’s leading multinationals in the FMCG sector (“fast-moving consumer goods”).

Lewis will start work at the beginning of October 2014 and his first task will be to undertake a thorough strategic review for Tesco. He replaces Philip Clarke who has struggled throughout his three year tenure as CEO following the retirement of Sir Terry Leahy. The Chairman of Tesco has asked Lewis to think “laterally and broadly” in identifying the new strategic direction for Tesco. Lewis’s background as a strong marketer at Unilever (with superb international experience too) suggests that Tesco shareholders and stakeholders might be in for an interesting future!

In addition to his impeccable track record at Unilever (he was considered a likely successor to CEO Paul Polman), Lewis has two other key background strengths: he is a Yorkshireman, and he studied Business Studies at university!

Lewis is Tesco’s first external appointment as CEO. All the previous CEO’s had worked their way through the Tesco management structure - they were Tesco born and bred! Lewis has only worked for Unilever, although as a major supplier to Tesco, he is well known to the business.

Where does Lewis start with Tesco’s strategy?

There has been plenty of media commentary on the strategic challenges facing Tesco. Some point to the rapid growth of the German discount retail chains Aldi and Lidl which continue to take market share from Tesco. Others point to the excess space and costs of Tesco’s supermarket portfolio, which it has tried to address by cutting back on spending in new locations and providing other retail brands in the spare space.

This article in Management Today provides an accessible analysis of six key issues facing Tesco.

This “shopping list” of strategic choices from the Telegraph, based on discussions with retail analysts, is also an interesting example of the varied options facing Dave Lewis. Here are the suggestions.

1. Rebrand Tesco stores as Tesco Value, Tesco Finest stores, and midmarket

2. Cut prices

3. Consider scrapping Clubcard

4. Take the Tesco brand back to basics

5. Negotiate better deals with suppliers

6. Develop Tesco’s online operations

7. Revamp the senior management team

8. Reposition out-of-town supermarkets

9. Sell underperforming international businesses

10. Reduce the margin below 5pc and cut costs

However, I suspect there is something more fundamental that Lewis and his team need to address with Tesco.

In my view, the most important challenge for Lewis is to define and communicate what Tesco stands for. Is it a low-cost retailer? Can it differentiate the shopping experience in another way that builds and sustains customer loyalty? And what kind of organisational culture does Tesco need to be able to deliver on this vision?

One thing is for sure, though. Dave Lewis is about to undertake a significant change programme at Tesco. It will be an essential case study to follow.