tag:theconversation.com,2011:/au/topics/tesco-6841/articlesTesco – The Conversation2021-12-06T12:45:38Ztag:theconversation.com,2011:article/1731132021-12-06T12:45:38Z2021-12-06T12:45:38ZAmazon and Tesco’s checkout-free stores are a niche idea that won’t save the high street<p>There have never been so many different ways to shop for groceries. The biggest chains offer customers a choice of vast superstores, smaller branches, and online options to buy from home. </p>
<p>Now some of the UK’s best known supermarkets are experimenting with <a href="https://www.ft.com/content/10523ec5-c470-4800-ba21-839487042210">checkout-free stores</a>. Following Amazon’s lead (it launched in London in March 2021), Sainsbury’s (Pick & Go) and Tesco (GetGo) have recently opened branches which offer a streamlined shopping experience. </p>
<p>The stores are kitted out with machine learning, camera and shelf technology (with weight sensors and motion detectors) to track which items consumers pick up and take with them. There is no need for any scanning or interaction. You simply choose what you need and leave. </p>
<p>This sounds extremely convenient. And for the supermarkets it is a business model which will save on staff costs, and provide valuable information about shoppers and their habits (data which could potentially be made available as another source of revenue). </p>
<p>But is the checkout-free concept necessarily good for consumers and high streets? </p>
<p>It certainly provides what some consider to be <a href="https://www.matt-watkinson.com/the-ten-principles-behind-great-customer-experiences">two key principles</a> of creating a good <a href="https://www.accenture.com/gb-en/insights/interactive/retail-customer-experience-reimagined">customer experience</a>: perceived autonomy and ease.</p>
<p>These modern stores are designed to make people feel that the shopping experience requires less effort, without the need to go through the processes of queuing, placing (or scanning) items at the till machine and making a payment. </p>
<p><a href="https://www.sciencedirect.com/science/article/abs/pii/S0022435900000452?via%3Dihub">Research suggests</a> that when people are able to spend less time and effort in a shop, they may consider this a sign of excellent customer service, making them more likely to return. </p>
<p>But there are elements of checkout-free shopping which are not so customer friendly. To begin with, it is a niche concept which will only appeal to shoppers who are technologically adept. It relies on consumers having access to a smartphone and a particular app, registering payment details, and sometimes using a QR code to enter and leave.</p>
<p>These expectations demand a level of <a href="https://www.sipotra.it/wp-content/uploads/2016/12/The-Digital-Competence-Framework-for-Consumers.pdf">digital competence</a> which is by no means universal, and immediately excludes those, like my elderly mother-in-law, who are more technologically challenged. </p>
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<img alt="An advert for checkout-free shopping." src="https://images.theconversation.com/files/435611/original/file-20211203-17-12zzn4m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/435611/original/file-20211203-17-12zzn4m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/435611/original/file-20211203-17-12zzn4m.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/435611/original/file-20211203-17-12zzn4m.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/435611/original/file-20211203-17-12zzn4m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/435611/original/file-20211203-17-12zzn4m.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/435611/original/file-20211203-17-12zzn4m.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">As advertised by Amazon.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/amazon-go-convenience-store-no-lines-1574790205">Shutterstock/Michael Vi</a></span>
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<p>They may also be less than ideal for <a href="https://www.gov.uk/government/publications/vulnerable-consumers/consumer-vulnerability-in-digital-markets-summary-of-stakeholder-roundtable">vulnerable consumers</a>, who have <a href="https://doi.org/10.1108/JSM-05-2017-0156">accesibility issues</a> related to physical mobility, vision or hearing. If these customers are excluded from this experiment in autonomy, then it becomes an exclusive service. So these stores appear not to be be designed with all consumers in mind. </p>
<h2>Check-out free for all</h2>
<p>It is also worth asking whether the checkout-free store offers an “authentic” shopping experience. Or is it just a slightly different version of <a href="https://theconversation.com/shopping-goes-mobile-13932">mobile shopping</a> which happens to take place in a building? </p>
<p><a href="https://doi.org/10.1108/IJRDM-10-2020-0412">Our research</a> suggests that the convenience of checkout-free stores, like online shopping, will have some appeal. But customers are less likely to enjoy and value the experience because it provides little in the way of discovery (finding new products) or connecting with other people. </p>
<p><a href="https://theconversation.com/five-ways-to-save-britains-struggling-high-streets-90362">Others have suggested</a> that to save struggling high streets, the shopping experience needs to be fun and socially engaging.</p>
<p>For this reason, checkout-free stores are unlikely to be a development which will draw people back to high streets. While convenience has its place, it does not inspire people to spend more time and money in neighbouring outlets in the same way that social shopping – spending time browsing with friends – does. </p>
<p>Instead, the check-out free supermarket will appeal to consumers who prioritise speed and efficiency, like visiting a drive-through take-away. It will be appreciated by those who simply want to top up on a few grocery items on their journey between home and office, when there’s no time to lose, and are comfortable with the requisite technology. But they will not be on everyone’s shopping list.</p><img src="https://counter.theconversation.com/content/173113/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kokho Jason Sit is affiliated with The Chartered Institute of Marketing.</span></em></p>Sainsbury’s is also experimenting with the till-free technology.Kokho Jason Sit, Senior Lecturer in Marketing, University of PortsmouthLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1631892021-06-22T18:02:52Z2021-06-22T18:02:52ZIf Amazon buys Morrisons, it could be a win for consumers and a major threat to other supermarkets<figure><img src="https://images.theconversation.com/files/407720/original/file-20210622-25-1hw6qwx.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">C RGP</span> </figcaption></figure><p>The share price of UK supermarket group Morrisons has <a href="https://finance.yahoo.com/quote/mrw.l/">jumped by</a> over 30% after a US private equity firm made an offer to buy it for £5.5 billion. The bid by Clayton, Dubilier and Rice, which is being advised by former Tesco chief executive Terry Leahy, was rejected as Morrisons believes the business is worth more. But there is speculation that it may prompt others to bid – including Amazon. </p>
<p>Morrisons is the UK’s fourth largest food retailer after Tesco, Sainsbury and Asda, holding a <a href="https://www.statista.com/statistics/280208/grocery-market-share-in-the-united-kingdom-uk/">10.5% share</a> of the market. Founded by William Morrison in 1899, the Yorkshire-based company grew under the leadership of his son, Sir Ken Morrison, listing on the London Stock Exchange in 1967.</p>
<p>Morrisons further expanded in 2004 with the £3.3 billion acquisition of rival Safeway. Now run by former Leahy lieutenants David Potts and Andy Higginson, it has <a href="https://www.statista.com/statistics/382340/morrisons-number-of-stores-united-kingdom-uk/">around 500 stores</a> nationwide. Unlike many retailers, Morrisons did not have to close in 2020-21, but while its <a href="https://www.theguardian.com/business/2021/mar/11/morrisons-profits-fall-2020-covid">sales went up</a>, annual profits have fallen because of costs associated with the pandemic.</p>
<h2>State of the market</h2>
<p>Nonetheless, Morrisons is a perfect target for any overseas company looking to gain a share in the UK’s £230 billion grocery market. The market has seen <a href="https://retailanalysis.igd.com/presentations/presentation-viewer/t/uk-channel-opportunities-2020-2022/i/9951">slow but consistent growth</a> over the last few years and has had to respond to changing consumer demand for more online shopping and new technologies such as automated ordering using artificial intelligence.</p>
<p>Morrisons had previously been reluctant to be part of these changes, preferring to concentrate on traditional principles that always worked well for it. The group did enter the online market in 2014 through a <a href="https://www.bbc.co.uk/news/business-22564676">tie-up with Ocado</a>, but would have been held back by the fact that orders relied on what was in warehouses and not on supermarket shelves. Having started a deepening partnership <a href="https://www.reuters.com/article/uk-morrisons-results-idUKKCN1VX0HD">with Amazon</a> in 2016, it is gradually becoming a more serious online player. </p>
<p>More generally, the Amazon partnership has been a <a href="https://www.theguardian.com/business/2021/mar/11/morrisons-profits-fall-2020-covid">bright spot</a> for Morrisons during the pandemic. The US online retail giant has been selling groceries to its UK-based Prime subscribers through Morrisons’ online platform, for example, and providing lockers for Amazon deliveries in Morrisons stores. </p>
<p>Amazon has also grown its bricks and mortar retail business in recent years with its acquisition of Whole Foods in 2017 and its recent launch of three Amazon Fresh till-free stores in London. Buying Morrisons would give it a much stronger foothold in the UK grocery market, and enable it to swiftly expand. </p>
<h2>The Morrisons attraction</h2>
<p>Morrisons is a trusted and stable contributor to the UK grocery sector, and has invested heavily over the last few years in both its retailing and wholesaling arms. Stores have been refreshed with everything from the local-market-style Market Street counters through to new trollies in car parks. </p>
<p>On the wholesale side, Morrisons is the <a href="https://www.morrisons.jobs/locations/manufacturing-locations">UK’s second largest</a> fresh-food manufacturer after 2 Sisters. By supplying not only its own stores but other retailers such as newsagent McColls in recent years, it has made the whole system more productive. Amazon would therefore be buying into a supply chain that goes well beyond stores – much more so than Morrisons’ rivals – and an estate that covers the bulk of the UK even if it is predominantly in the north of England. </p>
<p>Amazon would add an abundance of cash to invest in the business, which would mean the potential for more stores in the south of England – particularly in the south-east, where Morrisons’ presence is scarce. </p>
<p>Amazon would also bring new technologies through its established online platform. For example, Morrisons would potentially benefit from Amazon’s strengths in using algorithmic stock-ordering. Amazon would also be very likely to further develop the online business and provide a faster and more efficient service across the country as a result. At present, not all areas of the UK have access to Morrisons online, so this would be a big shift. </p>
<p>This all has the potential to shake up a sector where the top four have not been allowed to buy one another, and which has stayed fairly constant for several decades. The main issue in recent years has been the rise of German budget operators Lidl and Aldi. </p>
<p>Any Amazon takeover will raise questions about workers, given the <a href="https://www.theguardian.com/technology/2020/oct/12/uk-must-compel-amazon-to-improve-worker-conditions-say-unions">endless media questions</a> about the conditions in its warehouses. But in terms of shopping experience, consumers will clearly benefit from a takeover. It would help Morrisons to attract a younger shopper base that fully understands the online space. It would be another step towards an Amazon ecosystem in the home, where consumers get whatever they want when they need it from the online giant. The likes of Tesco and Asda might finally have met their match.</p><img src="https://counter.theconversation.com/content/163189/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michael Benson does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Thanks to a bid from a private equity firm backed by former Tesco boss Terry Leahy, the UK’s fourth largest supermarket chain is in play.Michael Benson, Principal Lecturer in Finance, Accounting and Business Systems, Sheffield Hallam UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1364422020-05-07T17:34:29Z2020-05-07T17:34:29ZPlastic and the art of stigmatisation – is something amiss?<figure><img src="https://images.theconversation.com/files/333127/original/file-20200506-49546-huxwoa.jpg?ixlib=rb-1.1.0&rect=0%2C13%2C1500%2C1089&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://ccsearch.creativecommons.org/photos/6fe39c7d-349f-46f6-a54d-b8ebd28cebb9">Cogdogblog/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>“Plastic-free aisle”, “No plastic straws”, “Plastic-free Tuesday”. Social media abounds with anti-plastic messages and chilling statistics about the quantity of plastic in our oceans, food, clothes and bodies flash before us in quick succession. Shocking images that circulate widely provoke emotions and <a href="https://journals.aom.org/doi/abs/10.5465/amj.2017.1488">generate momentum for action on plastic</a>. </p>
<p>While the contrast of a beautiful beach with plastic waste might be striking, focusing our efforts on cleaning the beaches is unlikely to meaningfully impact plastic pollution. Are we missing the bigger picture of plastic pollution? Through a study of traditional media and social media during the most intense period of public criticism of plastic (2017-2018), we observed that stigmatisation – a process of <a href="https://pubsonline.informs.org/doi/10.1287/orsc.1080.0367">discreditation and vilification</a> – has focused on a few symbolic objects and corporations, zooming in on the visible, while leaving the majority of plastic production and pollution unexplored.</p>
<h2>Stigmatizing plastic as a strategy to create change</h2>
<p>Plastic is a general name given to a wide range of chemical compounds that are a mix of monomers and polymers. It is everywhere and modern life would be in some ways unthinkable without it. Durable, lightweight and affordable, plastic has many benefits, but there’s another story being told. A 2016 <em>National Geographic</em> article laid the problem bare: <a href="https://www.nationalgeographic.com/magazine/2018/06/plastic-planet-waste-pollution-trash-crisis/">“We Made Plastic. We Depend on It. Now We’re Drowning in It”</a>. Plastic has become a contentious issue, stigmatised for its environmental and health impacts, and symbolic of our consumption-centred societies.</p>
<p>Urgent action is required and change in both our production and consumption patterns is necessary. Stigmatising strategies can be a powerful tool for change. This has been the case for whole industries such as armaments and tobacco, which suffered reputational penalties, decreased market value, reduced negotiating power and difficulties in recruiting top talent. Singling out a specific industry or organisation may seem straightforward, but stigma is much more difficult to grasp when the target is a material, that crosses a vast range of uses across many different industries. To unravel this complexity, we sought to understand which objects, organisations and industries were the focus of stigmatisation strategies around plastic and to analyse whether the stigmatisation process had the capacity to create change: namely our detoxification from plastic.</p>
<h2>What are the objects and industries that are being stigmatized?</h2>
<p>We analysed data from four mainstream news organisations in the UK and the Twitter accounts of 19 non-governmental organisations and five NGO heads which were highly active in 2017 and 2018 on the topic of plastic.</p>
<p>Our analysis of both the news organisations and the tweets reveal similar results. The top mentioned object is the plastic bag. The focus on plastic use in the food industry comes next, with highly recurring mentions of single-use plastic: bottles, cups, lids and straws that have facilitated our lifestyles yet litter the planet. The most targeted company is Coca Cola, closely followed by Nestlé, Mars, Starbucks, Pepsi and a number of retailers/supermarkets such as Tesco, Morrisons and Waitrose. Companies from the consumer staples and consumer discretionary sectors are by far the ones that are the most stigmatised.</p>
<p>While almost <a href="https://www.plasticseurope.org/application/files/9715/7129/9584/FINAL_web_version_Plastics_the_facts2019_14102019.pdf">40% of the demand for plastic comes from the packaging sector</a> (followed by building and construction 19.8%, automotive 9.9%, electrical and electronics 6.2% and household, leisure and sports 4.1%), the items which have caught the headlines do not tell the whole story. For example, plastic straws have become strongly linked to marine pollution and a symbol of unnecessary, even frivolous consumerism, yet represent <a href="https://earth.stanford.edu/news/do-plastic-straws-really-make-difference">less than 1% of 150 million tons of plastic littering the oceans</a>. At the same time secondary and transit packaging such as the single-use plastic films that protect consumer products through manufacturing, storage and distribution are <a href="https://www.citibank.com/commercialbank/insights/assets/docs/2018/rethinking-single-use-plastics.pdf">abundant but seldom discussed</a>.</p>
<p>Notable is the quasi absence from the newspapers and tweets of the plastic producers and petro-chemicals giants such as BASF, ExxonMobil, Dow and DuPont. All are powerful actors in the plastic ecosystem that see plastic resin production as an opportunity for future growth.</p>
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<img alt="" src="https://images.theconversation.com/files/333128/original/file-20200506-49556-19km8mi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/333128/original/file-20200506-49556-19km8mi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=366&fit=crop&dpr=1 600w, https://images.theconversation.com/files/333128/original/file-20200506-49556-19km8mi.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=366&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/333128/original/file-20200506-49556-19km8mi.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=366&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/333128/original/file-20200506-49556-19km8mi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=460&fit=crop&dpr=1 754w, https://images.theconversation.com/files/333128/original/file-20200506-49556-19km8mi.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=460&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/333128/original/file-20200506-49556-19km8mi.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=460&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Plastic is with us everywhere, not only in plain sight, but also deep in the oceans and even in our own bodies.</span>
<span class="attribution"><a class="source" href="https://ccsearch.creativecommons.org/photos/12a64e0a-29a4-49c6-8282-578216240328">Flickr</a></span>
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<h2>The limits of stigmatisation strategies</h2>
<p>Through the analysis of social media and traditional media’s messages on plastic in 2017 and 2018, we were able to provide an understanding of the stigmatisation processes at play. Stigmatisation, what the industry has named “plastic bashing”, has focused intensively on end-consumer visible symbolic products such as bottles, straws and single-use food packaging. Moreover, the name-shaming has also been concentrated on popular consumer brands such as Coca-Cola.</p>
<p>However, whether stigmatisation strategies have triggered the necessary action to curb the plastic problem is open to question. Plastic production keeps on increasing and industry players are focused on recycling, not on switching to other materials or reducing plastic use. Governments have implemented bans of symbolic targeted objects and legislated on circular economy packages, but recent concerns about Covid-19 have given rise to promotion of single-use plastics as a health-care solution rather than a problem. Indeed, plastic lobbies have asked the European Commission to <a href="https://www.lemonde.fr/planete/article/2020/04/12/a-la-faveur-de-la-crise-sanitaire-le-plastique-a-usage-unique-fait-son-retour-en-force_6036357_3244.html">delay implementation of limits on single-use plastic</a>.</p>
<p>Concentrated and coordinated stigmatisation can result in the ban of a limited range of products. However, research indicates that without education or environmental programs, <a href="https://theconversation.com/getting-rid-of-plastic-bags-a-windfall-for-supermarkets-but-it-wont-do-much-for-the-environment-81083">bans can have limited benefits for the environment</a>. Because stigmatisation focuses on downstream visual and symbolic items and known brands, the reaction is itself visible for the general public and the stigmatisers, but without visibility of the upstream production and supply side, flow of plastic entering our society continues.</p>
<p>Stigmatisation could also be detrimental by causing distraction from the wider landscape of plastic production and the pollution that it creates, which is vast compared to the pollution created by the stigmatized (and now banned) items. While changes in plastic use by consumer brands is a welcome step forward, it will not significantly impact the curve of plastic production and pollution. </p>
<h2>Breaking the link between plastic and society</h2>
<p>Deinstitutionalisation – the eradication of widespread practices and products built around a particular substance – is a much longer process. Asbestos and the pesticide DDT were deinstitutionalized when the link between them and human health became undeniable, triggering lawsuits and wide legal bans. To deinstitutionalize plastic, systems thinking would be required, just as with other complex grand challenges. Today plastic use is deeply intertwined with other problems such as food waste, greenhouse-gas emissions, income inequality, waste, biodiversity loss, and oil production.</p>
<p>Stigmatisation is only one of many tactics that can be used to tackle plastic pollution. While it has succeeded in shining a light on the issue, strategies that are both broader and longer term are required. For example, developing a worldwide plastic treaty through the UN – such as that created for ozone-depleting gases – could be an avenue for consideration.</p><img src="https://counter.theconversation.com/content/136442/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Les auteurs ne travaillent pas, ne conseillent pas, ne possèdent pas de parts, ne reçoivent pas de fonds d'une organisation qui pourrait tirer profit de cet article, et n'ont déclaré aucune autre affiliation que leur organisme de recherche.</span></em></p>A media study of public criticism of plastic reveals that stigmatisation may result in limited bans, it leaves the vast majority of plastic production and pollution unexplored.Céline Louche, Professor, Business & Society, AudenciaDelphine Gibassier, Professeur Associé de Comptabilité du Développement Durable, AudenciaJennifer Goodman, Associate Professor, Business & Society, AudenciaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1113032019-02-19T22:10:32Z2019-02-19T22:10:32ZClimate action helps companies build reputations and attract investors<figure><img src="https://images.theconversation.com/files/259359/original/file-20190216-56208-w0vexd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Investors are starting to demand businesses take action on climate change. </span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/new-york-city-usa-october-30-1065011192">(Shutterstock)</a></span></figcaption></figure><p>This year, climate change topped off the agenda at the annual meeting of the World Economic Forum in Davos, Switzerland — where every January, global leaders and the heads of the world’s largest companies gather to find ways to improve the state of the world. When surveyed, <a href="https://www.reuters.com/article/us-davos-meeting-climatechange/failure-to-curb-climate-change-a-top-risk-davos-survey-idUSKCN1PA13J">experts from government, business, academia and non-governmental organizations said the failure to respond to climate change is a key risk</a>. </p>
<p>Companies committed to tackle climate change are addressing their greenhouse gas emissions (GHGs) via <a href="https://sciencebasedtargets.org/what-is-a-science-based-target/">science-based targets</a>. These voluntary goals are compatible with the global push towards a low-carbon economy that aims to keep the global temperature increase to less than 2°C.</p>
<p>One program that is gaining traction globally is the <a href="https://sciencebasedtargets.org/">Science Based Targets initiative</a> (SBTi), a collaboration between <a href="https://www.cdp.net/en">CDP, a not-for-profit charity</a>, the <a href="https://www.unglobalcompact.org/">UN Global Compact</a>, the <a href="https://www.wri.org/">World Resources Institute</a> and the <a href="https://climatesavers.org/">World Wildlife Fund</a>. This program creates a global community where companies can set targets that align with the <a href="https://unfccc.int/process-and-meetings/the-paris-agreement/the-paris-agreement">Paris Agreement</a>. </p>
<p>Joining a global community like SBTi not only provides a formal framework for measurement and tracking goals, it also signals <a href="https://www.forbes.com/sites/mikescott/2018/07/10/the-worlds-biggest-companies-are-set-to-decarbonize-their-products/#75b8577038f1">a company’s commitment to climate change action</a>. As of early 2019, <a href="https://sciencebasedtargets.org/companies-taking-action/">525 companies</a> have signed on, including 169 with approved targets.</p>
<h2>Big companies at the forefront</h2>
<p>IKEA, Unilever, Tesco, General Mills, L’Oreal, Walmart and McDonald’s are among the large multinational corporations that have signed on to the SBTi. </p>
<p><a href="https://www.ikea.com/us/en/about_ikea/newsitem/061318-IKEA-Group-climate-positive-2030">IKEA Group</a>, for example, has committed to an 80 per cent reduction in GHG emissions in stores and other operations and a 50 per cent reduction in emissions from travel and customer deliveries by 2030, compared to 2016 levels. It will also cut emissions in its value chain by at least 15 per cent, resulting in a 70 per cent reduction in the climate footprint of an <a href="https://www.prnewswire.com/news-releases/ikea-group-commits-to-zero-emissions-targets-for-home-delivery-in-five-major-cities-by-2020-300712424.html">average IKEA product</a>.</p>
<p>Large companies can make change within their own operations and along the supply chain. <a href="https://www.newswire.ca/news-releases/mcdonalds-becomes-the-first-restaurant-company-to-set-approved-science-based-target-to-reduce-greenhouse-gas-emissions-677353923.html">McDonald’s</a> plans to reduce its emissions intensity across its supply chain by 31 per cent by 2030 (baseline 2015) by targeting energy use and packaging waste in restaurants, and streamlining its beef production, which make up more <a href="https://sciencebasedtargets.org/2018/03/20/mcdonalds-has-pledged-to-slash-greenhouse-gas-emissions-its-charting-a-course-for-sustainable-growth/">60 per cent of emissions</a>.</p>
<p>Similarly, General Mills, the packaged food company (Cheerios, Yoplait and Green Giant) set a science-based target to cut its GHG emissions by 28 per cent by 2025 (from a 2010 baseline) across its entire value chain, from <a href="http://www.csrwire.com/press_releases/38222-General-Mills-Announces-New-Commitment-on-Climate-Change">farm to table to landfill</a>. It plans to do this by <a href="https://www.generalmills.com/en/News/Issues/climate-policy">getting its farmers to adopt sustainable practices that reduce emissions and protect at risk water sources</a>, for example. </p>
<p>Companies participate in global sustainability initiatives and set external goals because of their sustainability mindset, <a href="https://www.theguardian.com/sustainable-business/three-reasons-investors-consider-sustainability">strategic gains, external competitive or reputational risk pressures</a> and <a href="https://www.wri.org/our-work/project/mind-science-mind-gap-aligning-corporate-ghg-emissions-reduction-targets-climate-0">recognition of an inexorable shift to a low-carbon economy</a>. </p>
<p>While participation in the SBTi is voluntary, the results are reported publicly. Even though there are few tangible sanctions for non-performance, the absence of achievement or reporting can harm a company’s reputation.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/259360/original/file-20190216-56208-19hbkpy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/259360/original/file-20190216-56208-19hbkpy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=397&fit=crop&dpr=1 600w, https://images.theconversation.com/files/259360/original/file-20190216-56208-19hbkpy.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=397&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/259360/original/file-20190216-56208-19hbkpy.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=397&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/259360/original/file-20190216-56208-19hbkpy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=499&fit=crop&dpr=1 754w, https://images.theconversation.com/files/259360/original/file-20190216-56208-19hbkpy.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=499&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/259360/original/file-20190216-56208-19hbkpy.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=499&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Former U.S. Vice-President Al Gore speaks during the ‘Safeguarding the planet’ session at the annual meeting of the World Economic Forum in Davos, Switzerland, in January 2019.</span>
<span class="attribution"><span class="source">(AP Photo/Markus Schreiber)</span></span>
</figcaption>
</figure>
<p>In Canada, only nine companies have joined the SBTi, and all but one remain at the commitment-setting stage. <a href="https://www.cn.ca/-/media/Files/Delivering-Responsibly/Environment/CDP-2017-en.pdf">Canadian National Railway</a> has promised to reduce its emissions intensity by 29 per cent by 2030, based on a 2015 baseline. </p>
<p>There are several reasons for the low participation in SBTi among Canadian companies. <a href="https://www.cpacanada.ca/en/news/world/2018-12-07-climate-change-and-business">The Chartered Professional Accountants of Canada</a> argues that more than 99 per cent of businesses in Canada are small businesses, with fewer resources, employees and pressures.</p>
<h2>Key benefits</h2>
<p>SBTi and the participating companies, however, see a number of benefits from setting targets. They also provide companies with long-term goals that will be resistant to changes in management and shifts in business priorities.</p>
<p>A major European electric company, EDP, found <a href="https://www.huffingtonpost.com/entry/utility-edp-key-benefits-from-setting-a-science-based_us_595e0944e4b0cf3c8e8d5671">strategic benefits</a> in laying plans to decarbonize — it builds reputation, improves visibility and helps it benefit from innovation, and had a favourable response from investors, employees and customers. </p>
<p><a href="https://www.walmartsustainabilityhub.com/project-gigaton/emissions-targets">Walmart</a> says it is part of their sustainability journey to encourage others to look at emissions as a form of waste with financial value or inefficiency in the value chain. <a href="https://news.walmart.com/2017/04/19/walmart-launches-project-gigaton-to-reduce-emissions-in-companys-supply-chain">In 2017, it launched Project Gigaton</a> to encourage suppliers to eliminate one billion tonnes of GHG emissions from their operations and supply chains by 2030 by targeting one of six pillars: energy, waste, packaging, agriculture, forests or product use. Suppliers achieving goals and communicating performance publicly are recognized as “<a href="https://www.walmartsustainabilityhub.com/supplier-recognition">Giga-Gurus</a>.”</p>
<p><a href="https://www.unilever.com/news/news-and-features/Feature-article/2018/what-are-science-based-targets-and-why-do-we-use-them.html">Unilever</a> looks at science-based targets to boost its competitive advantage in the shift towards a low-carbon economy and to hedge against regulator pressures and the costs related to carbon pricing. In 2017, <a href="https://www.unilever.com/sustainable-living/reducing-environmental-impact/greenhouse-gases/">Unilever</a> reduced energy-related emissions by 47 per cent per tonne of production from 2008 levels, and shifted towards renewable energy in manufacturing. The company also identified a nine per cent increase in GHG emissions from its consumer products since 2010, largely due to the consumers’ <a href="https://www.unilever.com/sustainable-living/reducing-environmental-impact/greenhouse-gases/">hot showers</a> when using their products. </p>
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Read more:
<a href="https://theconversation.com/how-divesting-of-fossil-fuels-could-help-save-the-planet-88147">How divesting of fossil fuels could help save the planet</a>
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<p>The food and beverage sector — considered a <a href="https://www.globalpolicyjournal.com/blog/05/02/2019/will-science-based-targets-save-us-insights-global-food-industry">significant driver of global climate change</a> and the one with the <a href="https://oxfamilibrary.openrepository.com/bitstream/handle/10546/610563/tb-science-based-targets-carbon-emmissions-250516-en.pdf">most at risk from climate change</a> — has been an early adopter of science-based targets. Fifty-nine businesses, including Ben & Jerry’s and PepsiCo, have either set targets or are at the commitment stage. </p>
<p>Other global initiatives to encourage businesses to develop responsible practices and meet climate goals are also on the rise. For example, <a href="https://www.unpri.org/pri/about-the-pri">Principles for Responsible Investment</a> has attracted 2,232 investors who believe in an “economically efficient, sustainable global financial system” and who agree to incorporate environmental, sustainability and governance issues into their investment practice. </p>
<p><a href="https://www.newswire.ca/news-releases/majority-of-canadians-support-more-action-on-climate-change-615563183.html">Eighty-seven per cent of Canadians</a> believe businesses must make a stronger commitment to climate change action. Youth, in particular, are demanding more commitment, and future consumers such as Greta Thunberg are <a href="https://www.theguardian.com/environment/2019/feb/15/the-beginning-of-great-change-greta-thunberg-hails-school-climate-strikes">taking to the world stage and inspiring other students</a> to raise their voices.</p>
<p>It is unlikely that one company or one nation will make a significant impact on reducing emission levels, however, climate change can have significant impact on business.</p><img src="https://counter.theconversation.com/content/111303/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Rumina Dhalla does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Business leaders are beginning to take the global climate issue seriously by setting science-based targets to reduce greenhouse gas emissions.Rumina Dhalla, Associate Professor, Organizational Studies and Sustainable Commerce, CSR/Sustainability Coordinator and MBA Graduate Coordinator, University of GuelphLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/958222018-05-01T11:00:03Z2018-05-01T11:00:03ZSainsbury’s and Asda merger: it’s all about market share<figure><img src="https://images.theconversation.com/files/217020/original/file-20180501-135810-1vxqigp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Ceri Breeze / Shutterstock.com</span></span></figcaption></figure><p>British retailers Sainsbury’s and Asda have agreed to a £13 billion merger. They plan to keep their brands separate so retailers may not notice a difference. But, together, the two will be the biggest player in the grocery market and the move would mark a significant shift for the supermarket industry, which faces a number of challenges. </p>
<p>This merger is all about market share. It follows hot on the heels of supermarket giant Tesco’s £4 billion takeover of Booker, the country’s largest wholesaler <a href="https://www.telegraph.co.uk/business/2018/03/05/tesco-completes-4bn-takeover-booker/">in March 2018</a>. This created a food and drink powerhouse with a market capitalisation of nearly £20 billion. It put Tesco way ahead of its rivals in terms of revenue and market share and clearly acted as a wake-up call to them. Then there is the growing threat of Amazon, which <a href="https://theconversation.com/amazon-dives-into-groceries-with-whole-foods-five-questions-answered-79638">bought Whole Foods last year</a> and is <a href="https://www.theguardian.com/business/2016/nov/16/morrisons-expands-amazon-deal-offering-delivery-in-an-hour">working with supermarket Morrisons</a> to deliver in parts of the UK.</p>
<p>The market has seen rapid growth and changes over the last decade and organic growth for either Sainsbury’s or Asda would be very difficult. Both businesses suffer from a legacy of large out of town stores, which are less popular with consumers. They both need to up their games to improve their products, online services, and capitalise on how and where people like to shop. </p>
<p>The obvious solution is to grow their customer base and revenues, while cutting their margins, through merging. Together Sainsbury’s and Asda have more than 31.4% of the grocery market, making them the market leaders. Their combined revenues are in the <a href="https://news.sky.com/story/sainsburys-and-asda-agree-to-join-forces-11353408">region of £51 billion</a> (based on 2017 figures).</p>
<p>Meanwhile, Walmart, which owns Asda, can let go of its interest in the UK market and focus on its base in the US which is <a href="https://www.retaildive.com/news/walmart-is-streamlining-us-operations/504828/">facing various challenges</a>. Walmart will receive nearly £3 billion in cash and 42% of the combined business, in return for selling Asda. </p>
<h2>Benefits for all?</h2>
<p>Like any merger and acquisition, this will bring strength to the balance sheet through capitalising on the strengths of both businesses. Asda is much more popular in the north of the country, whereas Sainsbury’s is more popular in the south. </p>
<p>Argos, which was bought by Sainsbury’s in 2016, will also benefit. The catalogue retail chain has a strong online offering, which should help Asda in the same way that it has already helped Sainsbury’s. In turn, Asda, which is also big in non-food products, will play host to Argos concessions in its stores.</p>
<p>The merger would give the group more than 2,800 stores. Executives <a href="https://www.telegraph.co.uk/business/2018/04/30/sainsburys-asda-promise-price-cuts-no-store-closures-mega-merger/">have said</a> that none will be shut as a result of the merger but they are planning to save £500m through “operational efficiencies” and by opening Argos concessions in Asda stores. This means that suppliers are likely to be effected.</p>
<p>Customers, however, are likely to benefit from this and see lower prices, more choice and improvements both in store and online. Sainsbury’s CEO, Mike Coupe, who will lead the combined group, <a href="http://www.bbc.co.uk/news/business-43945254">said</a> that prices of common products should drop by around 10%. </p>
<p>By joining forces with Asda, Sainsbury’s will be hoping to compete with the likes of Aldi and Lidl, which have changed the game for supermarkets in recent years. The combined business will be able to up their game on pricing of common products, negotiate for lower pricing with competitive suppliers and improve their online business. </p>
<p>Coupe has <a href="https://www.telegraph.co.uk/business/2018/04/30/sainsburys-boss-mike-coupe-man-become-king-uk-retail/">vast experience in the industry</a> so is well positioned to lead the new supermarket giant. He has experience at Unilever, Tesco, Iceland and Asda so understands the culture of both firms. And he seems confident of the new giant’s prospects.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"991004380018167808"}"></div></p>
<p>But the deal is not yet done. Because of the size of the two supermarkets, the merger requires regulatory approval from the Competition and Markets Authority (CMA). This could be a challenge as both business are closely related which would create a monopoly over the grocery sales. It may well come with demands to close stores. By comparison, the Tesco-Booker deal was <a href="https://www.independent.co.uk/news/business/news/tesco-booker-takeover-deal-cma-competition-regulator-supermarket-wholesale-a8119826.html">approved by the CMA</a>, which pointed out that the two companies did not compete “head-to-head” in most of their activities.</p>
<p>The competition in the retail sector is as fierce as ever. The merger between Sainsbury’s and Asda shows the need to stay competitive – especially following Tesco’s growth and Amazon moving into the industry. To stay afloat, businesses must lower their prices, keep loyalty, improve convenience and innovate to better attract and retain their customers. The latest merger follows industry trends and is a clear indication that other deals are likely as stores seek to keep up with the market.</p><img src="https://counter.theconversation.com/content/95822/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Naaguesh Appadu does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Facing stiff competition, the obvious solution is for Sainsbury’s and Asda to grow their customer base and revenues, while cutting their margins, through a merger.Naaguesh Appadu, Research Fellow, M&A Research Centre, City, University of LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/854972017-10-20T13:53:21Z2017-10-20T13:53:21ZTesco has shown it can do recovery but can it now keep pace?<figure><img src="https://images.theconversation.com/files/190057/original/file-20171012-6540-1lqexr2.jpg?ixlib=rb-1.1.0&rect=144%2C128%2C1900%2C1235&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/tescomedia/14967566046/in/dateposted/">Tesco PLC/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-sa/4.0/">CC BY-NC-SA</a></span></figcaption></figure><p>When supermarket giant Tesco found itself in the <a href="https://theconversation.com/trolley-load-of-trouble-in-store-for-tesco-and-its-bean-counters-32008">grip of an accounting scandal</a> in 2014, it brought in <a href="https://www.theguardian.com/business/2014/jul/21/new-tesco-ceo-dave-lewis-profile">Dave Lewis</a>, an supermarket outsider as CEO, who the company believed could rally the group’s tumbling share price and aid a recovery. It helped that Lewis had been a rising star at Unilever, the shampoo-to-Marmite conglomerate, where he had already shown his ability to strengthen brands. </p>
<p>The question in 2014 was whether Lewis could transfer his skills into an industry where competition, relationships with supplier and customer needs are very different. Tesco probably didn’t have any choice. The company needed to distance itself from a <a href="https://www.sfo.gov.uk/cases/tesco-plc/">Serious Fraud Office investigation</a> into the overstatement of profits.</p>
<p>Lewis has ridden a recovery that was marked by more price-conscious consumers buying <a href="http://www.nielsen.com/uk/en/press-room/2014/uk-shoppers-turn-to-supermarkets-premium-own-brands.html">own-brand products</a>. But he also helped to accelerate it, with cost reductions and the <a href="https://www.tescoplc.com/media/264194/annual-report-2016.pdf">sale of peripheral businesses</a>. Tesco is now on a similar financial footing to direct competitors, Sainsbury’s and Marks & Spencer. Lewis is also challenging the discounters, Aldi and Lidl, in the all-important area of fresh food. </p>
<h2>Priced out</h2>
<p>While this has been going on, however, Tesco has put pressure on suppliers to keep prices down in an <a href="http://www.proactiveinvestors.co.uk/companies/news/179359/tesco-s-sales-rise-as-price-cuts-attract-customers-but-analysts-warn-inflation-may-hit-margins-179359.html">attempt to absorb</a> some of the 3% food inflation <a href="https://tringeconmics.com/united-kingdom/food-inflation/forecast">forecast for the UK</a>.</p>
<p>This is painful for suppliers and it might trigger a price war if competitors also seek to use profits to absorb food inflation, which <a href="http://www.cityam.com/269528/food-price-inflation-cools-retailers-act-protect-shoppers">they appear to be doing</a>. Either way, it seems like a temporary strategy or, if it persists in the long term, Tesco will reduce profitability for itself, M&S and Sainsbury’s. The alternative will be food price rises which drive more consumers to discounters.</p>
<p>Lewis needs some new sources for growth. In anticipation of increasing competition, Tesco’s <a href="http://www.independent.co.uk/news/business/news/booker-tesco-takeover-deal-complete-2018-wholesaler-competition-and-markets-authority-a7995996.html">acquisition of the wholesaler Booker</a> is designed to connect up the value chain and cut costs. And if Booker became exclusively or mainly a supplier to Tesco, that would reduce the options for about 5,000 small, local retailers under brands such as Londis and Budgens. That could help <a href="http://www.telegraph.co.uk/business/2017/10/05/tescos-booker-takeover-must-blocked-wholesalers-tell-watchdog/">drive customers towards Tesco</a>. </p>
<p>Competition is fierce in the UK, and so international markets provide a route to growth. Tesco, however, has had its fingers burned before. It <a href="https://www.theguardian.com/business/2012/dec/05/tesco-american-dream-retreat-us-fresh-easy">pulled out of the US</a> in 2013 after failing to make headway, and under Lewis, the recovery included some retrenchment which saw <a href="https://www.ft.com/content/5499cf8c-5266-11e7-bfb8-997009366969?mhq5j=e7">its activities in Thailand</a> canned. </p>
<p>Tesco says there <a href="http://uk.reuters.com/article/uk-tesco-south-korea/tesco-says-no-more-big-overseas-disposals-being-discussed-idUKKCN0RU2ET20150930">will be no more overseas disposals</a>, but British supermarkets are finding it difficult to make a go of foreign ventures; both <a href="https://www.theguardian.com/business/2013/aug/09/tesco-withdraws-brand-china-joint-venture">Tesco</a> and <a href="https://www.ft.com/content/33935a30-161e-11e7-80f4-13e067d5072c?mhq5j=e7">M&S</a> have stepped back from ventures in China. This means domestic competition is likely to intensify.</p>
<p>Is there room for improvement online, where Tesco was <a href="http://www.telegraph.co.uk/finance/markets/2788089/A-history-of-Tesco-The-rise-of-Britains-biggest-supermarket.html">a first mover in 2000</a>. However, the model is easily replicated and competition is emerging from all sides. Aldi set up its own delivery service <a href="http://www.independent.co.uk/news/business/news/aldi-launches-online-shopping-with-wine-delivery-service-a6822561.html">in 2016</a> and M&S has been <a href="https://theconversation.com/mands-delivers-but-is-it-too-late-79065">lining up its own offering</a> for this year.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/190060/original/file-20171012-31431-1gyze7f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/190060/original/file-20171012-31431-1gyze7f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/190060/original/file-20171012-31431-1gyze7f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=434&fit=crop&dpr=1 600w, https://images.theconversation.com/files/190060/original/file-20171012-31431-1gyze7f.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=434&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/190060/original/file-20171012-31431-1gyze7f.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=434&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/190060/original/file-20171012-31431-1gyze7f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=545&fit=crop&dpr=1 754w, https://images.theconversation.com/files/190060/original/file-20171012-31431-1gyze7f.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=545&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/190060/original/file-20171012-31431-1gyze7f.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=545&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Tills ringing.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/brizzlebornandbred/13619444923/in/photolist-mKvdtV">Paul Townsend/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
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</figure>
<h2>Room for manoeuvre?</h2>
<p>So what issues does Lewis need to get his teeth into now? <a href="http://www.insider.co.uk/company-results-forecasts/tesco-bank-based-in-edinburgh-11286109">Tesco Bank</a> continues to <a href="https://www.tescoplc.com/media/392373/68336_tesco_ar_digital_interactive_250417.pdf">make some advances</a>, however the banking sector itself is becoming crowded as the <a href="https://theconversation.com/apple-pay-no-sure-thing-in-mobile-payments-race-58580">likes of Apple Pay</a> disrupt an already competitive sector. </p>
<p>The effort involved in making Tesco Bank succeed would be considerable and might be a distraction that will take time, focus and talent away from the supermarket business. Tesco Mobile, a <a href="https://www.tescomobile.com/about-us/">joint venture with O2</a>, could though consider a venture with one of the new banking entrants such as Google wallet.</p>
<p>Further cost reductions are dangerous. It leads Tesco into a different type of competition with discounters such as Aldi. Their business model is based on own brand labels, no-frills store design and efficiency. This may be difficult for Tesco to replicate. Tesco’s sheer size has already given it huge economies of scale, but the discounter model adds complexity for which managers are needed and so will increase inefficiency. The number of own-brand labels could go up, but big gains are limited as Tesco brings in so many products from so many different markets.</p>
<p>Another avenue to pursue is differentiation – the only problem is what form that should take. And if Tesco does come up with some distinct advantage, then how long will it last? Much that supermarkets do is readily replicated. The Tesco innovation of one-hour delivery times <a href="http://www.mirror.co.uk/news/business/now-tesco-offering-one-hour-10476408">for certain products</a>, is now being <a href="https://www.retailgazette.co.uk/blog/2017/09/marks-spencer-trial-one-hour-delivery-service/">trialled by M&S</a>.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/190596/original/file-20171017-30406-1vw5i9x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/190596/original/file-20171017-30406-1vw5i9x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/190596/original/file-20171017-30406-1vw5i9x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/190596/original/file-20171017-30406-1vw5i9x.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/190596/original/file-20171017-30406-1vw5i9x.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/190596/original/file-20171017-30406-1vw5i9x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/190596/original/file-20171017-30406-1vw5i9x.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/190596/original/file-20171017-30406-1vw5i9x.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Hot on Tesco’s heels.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/karen_roe/7754159354/in/photolist-cPd6qE-cPdcm9-jYQKna-fpo2tE-cPdgch-cPdBry-cPd3Py-cPdAf3-cPdm4b-cPd2a1-cPd6UQ-cPdQzw-cPdDFJ-cPdL3s-cPdr8d-cPdiQE-cPdosA-cPdfWU-cPddSd-cPdcS1-cPd1HW-cPdkBS-cPdEib-cPdaWf-cPd9PY-cPdryq-cPd8LQ-cPcZDA-cPdfmY-cPdjgo-cPdDcJ-cPdam9-cPd7PE-63x6gv-nmHqgd-3ggYHf-6auXQM-4qRP4d-71dZ3m-cPdq5W-cPdnuA-6RAdLh-cPdgH1-cPd4Lw-cPdkc7-cPdyZq-cPddpu-cPd4m1-cPd1bU-cPd2Jq">Karen Roe/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>It looks like a tricky road from here for Lewis, marked by little certainty about the nature of the competition. Amazon.com is experimenting <a href="https://tamebay.com/2017/10/amazon-fresh-expands-uk-offering-booths-deal.html">with market entry</a> and would bring a huge capacity to analyse consumer data to gain an edge – the very thing that helped Tesco become the largest supermarket in the UK through judicious use of loyalty programs. </p>
<p>It also remains difficult to predict the nature of supermarket consumers. Discounters are still on the march – Aldi’s market share <a href="https://www.managementtoday.co.uk/why-aldi-lidl-will-keep-growing/article/1386497">rose 13.5%</a> in 2016, while the overall market <a href="https://www.statista.com/statistics/375318/grocery-market-percentage-growth-great-britain-uk/">grew by just 0.5% </a>. Continued caution around spending would tend to favour them.</p>
<p>Was it luck or skill that helped Lewis to deliver a recovery for a company that was in a bad way both financially and ethically? Either way, he will probably need both from hereon in. His <a href="https://www.ft.com/content/4e5c7f03-dd55-3194-bcd1-942d17fd90b0">symbolic move to reinstate the dividend</a> will cheer investors and staff, but in some ways recovery is the easy bit. It is keeping pace in a brutal food retail sector that will really set him apart.</p><img src="https://counter.theconversation.com/content/85497/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Harminder Singh does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Dave Lewis has dragged the supermarket clear of an accounting scandal. Now for the hard bit …Harminder Singh, Senior Teaching Fellow, Strategy & Business, Warwick Business School, University of WarwickLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/755082017-04-05T12:42:02Z2017-04-05T12:42:02ZWhy there’s no such thing as a free coffee – even at high-end supermarkets<figure><img src="https://images.theconversation.com/files/163627/original/image-20170403-21950-978bzm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Coffee time.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/stirling-scotland-february-03-2017-waitrose-571474210?src=Eaw0jFd3RsmxjJaYiEzqXQ-1-5">Shutterstock</a></span></figcaption></figure><p>The two most powerful words in marketing are “free” and “sex”. Nothing grabs the attention like an offer that includes one or the other in the strapline – although no one has yet linked the two together in a promotional campaign. Such is their power to elicit a response, both words are handled with kid gloves by the <a href="https://www.asa.org.uk">advertising regulators</a>, whose job is to issue guidelines about what the industry can and can’t get away with.</p>
<p>A “free” offer has to be demonstrably free, even though in marketing terms what passes for free is perhaps not as obvious as it is to the rest of the world. So called “loyalty programmes” are often cited as examples of free stuff being given away in return for customer fidelity. But “free” in this case <a href="https://theconversation.com/why-free-will-eventually-cost-you-31336">comes at a price</a>. The data that companies gather about people’s buying habits from <a href="https://theconversation.com/inside-the-massive-market-for-loyalty-cards-and-frequent-flyer-miles-51329">schemes such as Tesco’s Clubcard</a> more than outweigh the cost of any rewards.</p>
<p>Indeed, Tesco arguably achieved its position as the UK’s largest retailer on the back of its hugely successful loyalty scheme. Such was its success, loyalty schemes are now the “must-have” accessory for any upwardly mobile and ambitious retailer.</p>
<p>By any definition, the British supermarket <a href="http://www.waitrose.com">Waitrose</a> is a hugely successful brand. Over the past 20 years it has gone from being a niche grocery store to a leader in the premium supermarket sector. The success was based on a very clear understanding of their customers and the values of the brand – refined undoubtedly by the introduction of the “myWaitrose” loyalty card in 2011. </p>
<p>In keeping with the aspirational nature of their targeted demographic, myWaitose differed from supermarket loyalty schemes like Tesco Clubcard and Nectar by giving cardholders access to exclusive competitions and offers instead of allowing them to collect points. It later began to give cardholders 10% off selected products, as well as free hot drinks in store. And, as the company has <a href="http://www.dailymail.co.uk/news/article-4374834/Shoppers-fury-Waitrose-changes-free-coffee-rule.html">recently discovered</a>, it is very easy to give things away – but much less easy to take them back again.</p>
<p>The problem with “free” promotions is that they can quickly lose their intrinsic value. Consumers start to look at them in a different way and see them as a right, rather than a reward. Companies always need to be mindful of the way their marketing activities are perceived, and clearly Waitrose came to believe that the offer of a free hot drink needed a bit of repositioning. </p>
<p>Perhaps it was that they felt too many people were taking advantage and that the hurdle of paying for something would deter some of that behaviour. However, there is nothing to suggest that Waitrose was heading for a <a href="http://www.telegraph.co.uk/finance/newsbysector/transport/3047854/Terminal-5-joins-the-list-of-top-PR-blunders.html">Hoover-style promotional fiasco</a>, where thousands took advantage of an offer too good to be true. Most people will still see it as a very good offer, but perhaps look at it in a slightly different way.</p>
<p>Waitrose has found to its (slight) cost that you mess with your loyalty scheme at your peril. Changes to the myWaitrose programme apparently created uproar among some of its customers. At least, that is the <a href="http://www.telegraph.co.uk/news/2017/03/21/customers-dismayed-waitrose-curbs-free-coffee-stores/">story the newspapers</a> have been promoting since Waitrose announced it would be “refining” its free tea and coffee benefits from the beginning of April 2017.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"844308287520673794"}"></div></p>
<p>Now myWaitrose members will be asked to confirm they have made a purchase before picking up their “free” hot beverage. True, it means that the drinks will no longer be free, but thanks to social media, Waitrose’s indefatigable members have already worked out that because there is no minimum spend requirement, it is possible to spend just a few pence in-store and still qualify for a free drink.</p>
<h2>Wake up and smell the free drink</h2>
<p>So is this just a storm in a teacup? And will it harm the Waitrose brand? First, it appears that the media were far more interested in creating the <a href="http://www.telegraph.co.uk/news/2017/03/21/customers-dismayed-waitrose-curbs-free-coffee-stores/">resulting uproar</a> than the members were. A quick scan online suggests that a few die-hard Tweeters were outraged by Waitrose’s decision, but the majority were tweeting about how to buy a mushroom for three pence and still qualify for a coffee. </p>
<p>And will it harm Waitrose the brand? Unquestionably not. Brands such as Waitrose are not built through one-off promotions. They are created by building long term emotional bonds with their customers. So long as the company continues to provide quality, choice and a clear value proposition that aligns with their customers, there is no reason to say it won’t keep on growing.</p>
<p>But one word of caution. Brands are built on trust and once that trust is lost, it is very difficult to win it back. The market is littered with companies that lost the trust of their customers (<a href="http://www.telegraph.co.uk/finance/newsbysector/transport/3047854/Terminal-5-joins-the-list-of-top-PR-blunders.html">Hoover and Ratners</a> to name but two) because they misunderstood that important message. “Refining” the free beverage offer will not harm Waitrose’s hard won reputation, but it should remind even the most esteemed brands that once the customer has developed an expectation, it can be tricky to take that expectation away.</p><img src="https://counter.theconversation.com/content/75508/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Richard West does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Waitrose has withdrawn its free coffee offer to loyalty cardholders – but on what grounds?Richard West, Senior Lecturer in Marketing, University of WestminsterLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/727592017-02-10T12:16:41Z2017-02-10T12:16:41ZWaitrose banks on its middle-class base as supermarkets brace for tough times<p>You would probably expect a middle-aged, middle-class academic to do their shopping at Waitrose, and yes, I do. So there was disquiet in our household at the news that Waitrose is planning to close six stores potentially <a href="https://www.theguardian.com/business/2017/feb/08/hundreds-of-waitrose-jobs-may-go-as-retailer-plans-six-store-closures">putting 600 jobs at risk</a>. Britain’s favourite upmarket supermarket is apparently reining in expansion, but why? By all accounts Waitrose had a reasonable Christmas with <a href="https://www.thesun.co.uk/news/2819256/waitrose-to-axe-nearly-700-staff-and-close-at-least-five-stores-in-huge-shake-up/">sales up almost 5%</a>. </p>
<p>So what prompted this change of heart after considerable expansion over the last few years? There seem to be a lot of factors in the mix, including a <a href="https://www.theguardian.com/business/2015/oct/20/waitrose-boss-rob-collins-affable-john-lewis-graduate-trainee">relatively new boss</a> – perhaps wanting to make his mark – and the introduction of the new minimum wage for over-25s. The company has denied that the latter had prompted it to <a href="http://news.sky.com/story/waitrose-cuts-overtime-and-sunday-pay-10248437">stop paying Sunday and overtime rates</a> to new shop workers. The company is also now operating in a deeply competitive environment – by which I mean there is just so much more choice of where to shop that perhaps we have reached saturation point in terms of how many supermarkets we actually need?</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/156222/original/image-20170209-28716-ig1uj1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/156222/original/image-20170209-28716-ig1uj1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/156222/original/image-20170209-28716-ig1uj1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=353&fit=crop&dpr=1 600w, https://images.theconversation.com/files/156222/original/image-20170209-28716-ig1uj1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=353&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/156222/original/image-20170209-28716-ig1uj1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=353&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/156222/original/image-20170209-28716-ig1uj1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=444&fit=crop&dpr=1 754w, https://images.theconversation.com/files/156222/original/image-20170209-28716-ig1uj1.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=444&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/156222/original/image-20170209-28716-ig1uj1.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=444&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Harsh climate.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/derpunk/3225388191/in/photolist-6VX622-F3aPQ-KYXfi-r7Ufmr-a88bZi-6kc5iS-3L1HVY-iyBXWe-hLPkcs-6apVnY-5V1Xxe-6akMo4-8iBQUt-rDAaSY-e2AXzq-8iF5ZN-5hWPj4-8iBQNM-DTVfp-5hWJQH-7GDqwE-sUxLe-WhY2e-8jzyCZ-adohJ-2woMTQ-nFuJB-e2AWKw-nFuCe-7B215-5Y7BkF-adof9-K9EPx8-nLHWms">Bruno Casonato/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-sa/4.0/">CC BY-NC-SA</a></span>
</figcaption>
</figure>
<h2>German challengers</h2>
<p>Indeed Waitrose is not the first major retailer to reconsider store expansion. A couple of years ago <a href="http://www.mirror.co.uk/news/business/revealed-20-49-planned-tesco-4943747">Tesco started to rethink</a> its expansion plans and bailed out on some new stores. Sainsbury’s also announced that a large number of planned developments <a href="http://www.kentonline.co.uk/herne-bay/news/supermarket-pulls-plug-on-megastore-92199/">will not go ahead</a>; in both cases after prolonged planning battles. </p>
<p>Back in 2014 the previous <a href="http://www.dailymail.co.uk/news/article-2837110/Supermarkets-facing-closure-says-Waitrose-chief-Executive-predicts-bigger-stores-shut-doors-changes-way-customers-shop.html">chief executive of Waitrose had predicted</a> that there would be more large store closures. He argued that a rise in smaller stores and a move away from the single weekly shop revealed a change “as fundamental as supermarkets coming into the UK in the 1950s and reinventing what food shopping was all about”. </p>
<p>But this change is more than a cultural shift in how Britons shop. A more important factor is the acceptance of the German budget supermarkets Aldi and Lidl by all kinds of shopper. In the 12 weeks to January 29, 2017, Aldi had 6.2% <a href="http://www.managementtoday.co.uk/aldi-uks-5th-biggest-supermarket-lidls-not-far-behind/future-business/article/1386497">of the UK grocery market</a>. Lidl wasn’t far behind. Aldi is now Britain’s fifth biggest supermarket by market share, having overtaken the Co-op.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/156223/original/image-20170209-8649-tt2bo2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/156223/original/image-20170209-8649-tt2bo2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/156223/original/image-20170209-8649-tt2bo2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/156223/original/image-20170209-8649-tt2bo2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/156223/original/image-20170209-8649-tt2bo2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/156223/original/image-20170209-8649-tt2bo2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/156223/original/image-20170209-8649-tt2bo2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/156223/original/image-20170209-8649-tt2bo2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Treading on toes.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/ell-r-brown/5234809392/in/photolist-mVGa84-8YzLsm-8YzH5o-nRtSSS-8YzJPW-nB381b-8YwFsk-8YzKBQ-9m8pUV-4qFAtK-9m8pCn-8YwW4t-e3ixSS-8YzMcf-nTrFML-nB2SWs-nTehf6-CWny8-6Xf6f1-BbTzbd">Elliott Brown/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
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</figure>
<p>So-called portfolio shopping has become much more popular. Shoppers may prefer Tesco or Waitrose, but are not averse to ad hoc visits to the “discounters”. Many food shoppers have also found that doing the whole of the weekly shop is pounds cheaper at Lidl or Aldi – and in many cases their stores are located close to one of the big four. That means if you simply must have an item only available at the major players, then it’s not too inconvenient to pop in to grab it. </p>
<h2>Saturation point?</h2>
<p>The importance of these discount stores cannot be underestimated. Economic pressures on the average consumer have led to a shift from offering wide ranges to value. This is now exacerbated <a href="http://uk.reuters.com/article/uk-britain-eu-sterling-manufacturing-ins-idUKKCN0ZO0FB?type=GCA-ForeignExchange">by the weak pound</a> and the subsequent <a href="http://www.bbc.co.uk/news/business-38908652">threatened food price rises</a>. </p>
<p>While the German retailers’ growth has slowed recently, that is not really surprising given the inroads they have already made. And they have not stepped back from their own expansion plans. Financially, the discounters attack existing supermarkets on their balance sheets through forcing down margins. This inevitably means that competitors such as Waitrose will consider closing less-profitable stores to keep the balance sheet looking good, for shareholders and partners. </p>
<p>So while the experience and atmosphere of shopping in Waitrose may be more enjoyable than that of its discounting competitors, price will always be important for food. We may vary the brands we buy, but our demand is fundamentally inelastic. There is a limit to the market. After all we can only eat so much and, with a greater emphasis <a href="http://sustainablefoodtrust.org/articles/global-food-waste/">on reducing food waste</a>, a declining pound and uncertain economic future, many shoppers look to reduce outgoings where they can. Food is an easy target for such savings.</p>
<p>Waitrose can try to expand to other markets abroad, although history and the current political climate in obvious markets such as the US <a href="https://www.theguardian.com/business/2012/dec/05/tesco-american-dream-retreat-us-fresh-easy">don’t bode well for that strategy</a>. I am a great believer in the importance of market share through gaining physical and mental availability – advertising your brand and making sure that your brand is constantly <a href="https://byronsharp.wordpress.com/">in front of potential customers</a>. However, you also need to be distinctive and I think it probably is the right time for Waitrose to be building on its already considerable distinctive assets in terms of quality and service while letting others fight out the space and price wars. </p>
<p>Of course, one strategy Waitrose can adopt is to upscale the products its existing customers buy. That means fewer essential Waitrose products and more exotic, indulgent or healthy products to pander to the tastes of its core middle-class clientele. While other supermarkets have moved into non-food items, Waitrose is increasingly including deli and cafe options such as wine and tapas bars, eat-in bakeries and, in its latest initiative, high-quality, <a href="http://www.dailymail.co.uk/news/article-3313628/Yo-Waitrose-High-end-supermarket-open-SUSHI-bars-stores-feed-health-conscious-customers.html#ixzz4YCARJ2LB">freshly-made sushi</a>. </p>
<p>Whether these offerings provide the best financial margins is open to question but they can promote Waitrose increasingly as a “<a href="http://dictionary.cambridge.org/dictionary/english/destination-store">destination shop</a>” – the kind of place where time-pressed, affluent customers go, primarily for the sushi or half-an-hour’s relaxation over coffee, but come out with the baked beans and cereal too.</p><img src="https://counter.theconversation.com/content/72759/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Isabelle Szmigin does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The upmarket store is reining in expansion but doubling down on value-added for its core clients.Isabelle Szmigin, Professor of Marketing, University of BirminghamLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/670192016-10-13T16:39:59Z2016-10-13T16:39:59ZClash of the consumer titans as Unilever puts price squeeze on Tesco<figure><img src="https://images.theconversation.com/files/141655/original/image-20161013-3953-7idemx.jpg?ixlib=rb-1.1.0&rect=3%2C211%2C1931%2C1263&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Will Marmite shortages drive consumers towards inferior brands?</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/chriswaits/16737827102">chriswaits</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>When companies as large as Tesco and Unilever clash, there are bound to be some sparks. Unilever, the world’s third-largest consumer goods company and producer of <a href="https://www.unilever.co.uk/brands/?page=3">scores of British products</a>, has pulled deliveries to Tesco, the UK’s largest supermarket chain, after Tesco refused to accept Unilever’s 10% product price increases. The result has been that <a href="http://www.bbc.co.uk/news/business-37639518">shelves have been emptied</a> of loved brands, from cleaning products to Marmite and Pot Noodles.</p>
<p>Certainly price increases aren’t unexpected, given the pound has <a href="http://www.tradingeconomics.com/united-kingdom/currency">fallen almost 20% against the Euro</a> since the vote to leave the European Union in June. Suppliers can blame increased costs on the falling value of sterling, costs that must be passed on to the consumer. However, in my view this is more an arm wrestle between Britain’s largest grocery retailer and it’s largest supplier. While the outcome is unknown, it provides an interesting real-life case study of the industry.</p>
<p>Tesco was the unchallenged “<a href="http://www.thegrocer.co.uk/channels/supermarkets/tesco/tesco-to-be-customer-champion-dave-lewis-issues-rallying-cry/371090.article">champion of the consumer</a>”, an image carefully cultivated by chief executive Sir Terry Leahy which helped the company grow from 16% share of the grocery retail trade to more than 30% over ten years. But the economic crash had a devastating effect on Tesco and the grocery retail trade, as consumers switched to discount retailers such as Lidl and Aldi. </p>
<p>Alongside this trend, Tesco lost its way, as consumers <a href="http://www.bbc.co.uk/news/magazine-23988795">turned against its dominance of the high street</a>, while shopping patterns changed from the weekly “big shop” to smaller, more frequent shopping trips. Finally, an accounting scandal revealed how the bonus culture had <a href="https://www.theguardian.com/business/2016/sep/09/sfo-charges-former-tesco-directors-with-fraud">corrupted its business practices</a> and damaged relationships with both suppliers and consumers.</p>
<p>Unfortunately, the arrival of new chief executive Dave Lewis, who moved to Testo from Unilever, came at the same time as Tesco’s largest-ever profit warning, <a href="http://www.bbc.co.uk/news/business-32408661">£6.4 billion</a>, and as investor Warren Buffet made damning comments on regretting investing in Tesco. Lewis has since focused on customer service and trying to get back in touch with the Tesco shopper.</p>
<p>Two years on, Tesco’s new challenge comes from its number one supplier – and there are risks and rewards for both businesses. </p>
<p>Unilever can claim it is protecting the quality and image of its products by nudging prices up – which will of course also help the company’s bottom line. But in some cases consumers have deserted these household brands, switching to “me-too” unbranded imitators from the likes of Aldi, which even uses similar-looking product packaging to reinforce the price comparison. </p>
<p>The risk is that Tesco and other supermarkets instead start to emphasise their own-brand product ranges, which have been repositioned from cheap and cheerful to low price but high quality. While, in some cases, the Unilever brand is difficult to replace (Ben and Jerry’s ice cream, Pot Noodle, or indeed Marmite for example) – for many others, I’m not so sure that anyone would notice if it was missing from the supermarket shelf. </p>
<p>For Tesco, the big risk is that consumers shop elsewhere. This is a gamble that I’m sure it will have considered: its online shop prompts buyers to choose from a range of alternatives alongside the “out-of-stock” message. The second risk is that this prompts other heavyweight suppliers such as Proctor and Gamble, GSK or PZ Cussons to increase prices, too, squeezing already thin margins even further.</p>
<p>If Tesco can ride the storm the benefit is enormous: the firm will be able to exert more clout as a retailer and begin to reclaim the “champion of the consumer” title that it lost.</p>
<p>It doesn’t seem right to blame Brexit for forcing prices up in this case as it’s unlikely that any supply chain costs would have been sufficient to warrant a 10% price hike in the few months since the referendum vote. As Unilever’s chief executive Paul Polman has himself pointed out, a successful business <a href="https://www.ft.com/content/e6696b4a-8505-11e6-8897-2359a58ac7a5">focuses on the long-term</a>, rather than short-term quarterly profits. Watch this space.</p><img src="https://counter.theconversation.com/content/67019/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Joseph McGrath does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Tesco tries to fend off Unilever’s price hikes – and Marmite lovers aren’t happy.Joseph McGrath, Principal Lecturer in Marketing, Liverpool John Moores UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/511532015-11-26T15:42:23Z2015-11-26T15:42:23ZWhatever happened to ‘bans’ on GM produce in British supermarkets?<p>Once upon a time, UK retailers welcomed genetically modified (GM) foods. In the <a href="http://news.bbc.co.uk/onthisday/hi/dates/stories/february/5/newsid_4647000/4647390.stm">late 1990s</a>, Sainsbury’s and Safeway (since <a href="http://news.bbc.co.uk/1/hi/business/3542291.stm">purchased by</a> Morrisons) both offered GM tomato purée, which so far as I recall was the first such product made available in the UK. GM and non-GM cans of purée stood side by side on their shelves, the former <a href="http://www.tandfonline.com/doi/abs/10.4161/gmcr.18041#.VlWJHryoKu4">some 18% cheaper</a> per unit weight. The cans were conspicuously labelled and pamphlets explaining what GM was all about were to hand nearby. But when the stock ran out and it was time to re-order, the anti-GM food balloon had gone up and the product was discontinued.</p>
<p>The late 1990s and early 2000s in Britain was a period of intense back-and forth argument about GM. In 1999 Marks & Spencer <a href="http://www.thefreelibrary.com/M%26S+BANS+GM+FOODS.-a060402770">announced that</a> it was removing all GM foods from its shelves. (In a House of Lords inquiry at that time, M&S said their customers demanded it. When asked by their lordships how many customers that meant, it turned out to have been rather a small percentage. But those who positively wanted GM were, it seems, even fewer in number). </p>
<p>Sainsbury’s, then the second-largest chain in the UK after Tesco, <a href="http://news.bbc.co.uk/1/hi/uk/298229.stm">responded</a> only weeks later by saying it would guarantee that all of its own-brand products were GM-free. All the other retailers followed suit: the UK’s retail industry was to be GM-free – or was it?</p>
<p>In fact some GM products, though not many, were always to be found. Until 2004, when GM labelling became mandatory under <a href="http://www.gmo-compass.org/eng/regulation/labelling/93.new_labelling_laws_gm_products_eu.html">EU regulations</a>, it was difficult to identify them. With a label prescribed by law it obviously became easier, and every now and again, a variety of minor products turned up in this or that supermarket chain but did not last very long. </p>
<p>Yet one product which was always on sale, unlabelled before 2004 but properly indicating its GM source thereafter, was soya cooking oil. It can still be found – I spotted it in one of my local Sainsbury’s stores just a few weeks ago. The distributors told me some years ago that the advent of labelling had had no effect on sales. When I questioned a small shopkeeper selling the product, he had no idea that what he was selling was GM (“What’s that?”). Nor, it seems, had his customers.</p>
<h2>Feed fad</h2>
<p>Then there is the question of GM fodder for animals. Around the time of their own-brand GM-free commitments, retailers said that they would not sell any products from pigs or poultry that had been exposed to GM feeds. </p>
<p>This ban became a distinct red line that remained in place for a decade or so. Until, that is, when Asda became the first of <a href="http://www.telegraph.co.uk/foodanddrink/7852762/Supermarkets-selling-meat-from-animals-fed-GM-crops.html">the leading</a> UK supermarkets <a href="http://www.thesundaytimes.co.uk/sto/news/uk_news/Science/article329472.ece">to abandon</a> its commitment to eggs and poultry fed with GM in 2010. This greatly upset anti-GM campaigning groups, <a href="http://www.gmfreeze.org/news-releases/33/">who demanded</a> that Asda and other supermarkets “respond to public opinion” (as the anti-GM brigade saw it) by pledging to keep GM out of the nation’s meat and dairy. </p>
<p>But by then public opinion on the issue had become almost completely mute so far as I could see. So in 2012, Morrison’s <a href="http://www.thegrocer.co.uk/channels/supermarkets/morrisons/morrisons-gambles-on-gm-chicken-feed-shift/227510.article">did the same</a>: in neither case, as far as I am aware, was there any perceptible consumer reaction. By 2013, all the remaining UK supermarket chains, except Waitrose, <a href="http://www.thegrocer.co.uk/buying-and-supplying/categories/fresh/sainsburys-ms-and-the-co-op-follow-tescos-lead-on-gm-feed/238400.article">had followed suit</a>: GM-feed for pigs and poultry was no longer to be excluded. One or two newspapers noted this at the time but, once more, there appears to have been no noticeable consumer rejection of products from animals fed GM.</p>
<h2>Where we go from here</h2>
<p>And that is (almost) it. In 2014 it was <a href="http://www.dailymail.co.uk/news/article-2826108/Frankenstein-foods-slip-M-S-Anger-store-puts-GM-food-shelves-despite-opposed-engineered-products.html">reported that</a>, while Marks & Spencer still doesn’t use GM ingredients in its own-label products, it sold products from other brands which did contain GM soya or corn – these included teriyaki, ginger and hibachi sauces from the US brand TonTon and three flavours of Moravian Cookie. I checked at the time and found all of them were indeed on sale. Apart from own-brand, of course, GM ingredients can be found across the board in food products and should indeed be labelled as such. </p>
<p>That just leaves cotton – in clothing not in food. Some people have estimated that more than half the world’s cotton <a href="http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a5A1ygCQjxeY">is GM</a>, so this is likely to be the case with products on sale in the UK. There is no obligation to label GM cotton so one cannot be sure, but nobody seems to ask and few seem to care. Every now and again, up pops an ad for some cotton product or other which is said to be made with organic cotton (and so <em>ipso facto</em> non-GM) but such examples are rare.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/102841/original/image-20151123-18233-2frjtg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/102841/original/image-20151123-18233-2frjtg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/102841/original/image-20151123-18233-2frjtg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=421&fit=crop&dpr=1 600w, https://images.theconversation.com/files/102841/original/image-20151123-18233-2frjtg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=421&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/102841/original/image-20151123-18233-2frjtg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=421&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/102841/original/image-20151123-18233-2frjtg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=529&fit=crop&dpr=1 754w, https://images.theconversation.com/files/102841/original/image-20151123-18233-2frjtg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=529&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/102841/original/image-20151123-18233-2frjtg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=529&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Spot the difference.</span>
<span class="attribution"><a class="source" href="http://www.shutterstock.com/cat.mhtml?lang=en&language=en&ref_site=photo&search_source=search_form&version=llv1&anyorall=all&safesearch=1&use_local_boost=1&autocomplete_id=&searchterm=cotton%20clothing&show_color_wheel=1&orient=&commercial_ok=&media_type=images&search_cat=&searchtermx=&photographer_name=&people_gender=&people_age=&people_ethnicity=&people_number=&color=&page=1&inline=263492549">Eyes Wide</a></span>
</figcaption>
</figure>
<p>Though a few stalwarts keep up their anti-GM rhetoric, public interest in this subject has largely waned in my view. UK government policy is now <a href="http://www.theguardian.com/environment/2015/jan/13/gm-crops-to-be-fast-tracked-in-uk-following-eu-vote">openly pro-GM</a>. The devolved governments in <a href="http://www.bbc.co.uk/news/world-europe-34316778">Northern Ireland</a>, <a href="http://www.theguardian.com/environment/2015/aug/09/scotland-to-issue-formal-ban-on-genetically-modified-crops">Scotland</a> and <a href="http://sustainablepulse.com/2015/10/02/wales-joins-total-ban-on-gm-crops/">Wales</a> take a different view (as does <a href="https://theconversation.com/gm-crops-an-uneasy-truce-hangs-over-europe-48835">much of Europe</a>), but England has 87% of the UK’s total population. </p>
<p>Though one can never be quite sure, it does begin to look as though the GM issue will fade away in the fullness of time, in England at least, even if it takes a while. I suspect GM food and crops will become commonplace and the protesting community will veer off in another direction, chasing new demons. </p>
<p><em>Postscript</em>:</p>
<p>Having read this article, a colleague told me that he had in May 2015 undertaken a web search for GM-labelled products on sale in UK supermarkets. His list has been rechecked and updated to find that the five major UK supermarket chains are currently describing on their websites about 60 products labelled as containing GM-ingredients. Nine of them are pet foods manufactured in the UK. All the others are human food products apparently imported from North America or Israel. Several are to be found on the websites of more than one supermarket chain.</p>
<p><em>For more coverage of the debate around GM crops, <a href="https://theconversation.com/uk/topics/gm-food">click here</a>.</em></p><img src="https://counter.theconversation.com/content/51153/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Prof Moses is Chairman of CropGen, a public information organisation in the UK originally supported by the agricultural biotechnology industry. He consults to the Agricultural Biotechnology Council, and has received funding from the EU as coordinator of three projects to explore the public understanding of and consumer attitudes to agricultural biotechnology in a number of countries in the EU and elsewhere.</span></em></p>Since the heyday of retail bans on products containing genetically modified ingredients 15 years ago, the tide has been heading in the other direction.Vivian Moses, Visiting Professor of Biotechnology, King's College LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/419042015-05-18T14:46:35Z2015-05-18T14:46:35ZScandals and regulation lead to an auditing merry-go-round<figure><img src="https://images.theconversation.com/files/81815/original/image-20150515-25417-1ml3h6k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Going round in circles.</span> <span class="attribution"><span class="source">Joseph Kim | shutterstock.com</span></span></figcaption></figure><p>Tesco has <a href="http://www.theguardian.com/business/2015/may/11/tesco-names-deloitte-as-new-auditor-after-accounting-scandal-pwc">parted ways</a> with its auditors of 32 years, PricewaterhouseCoopers (PwC). This decision follows the <a href="https://theconversation.com/trolley-load-of-trouble-in-store-for-tesco-and-its-bean-counters-32008">£263m accounting scandal that engulfed the supermarket last year</a> and it is moving its business to rival accountancy firm Deloitte & Touche. </p>
<p>Regardless of what happened at Tesco, there is a recent trend for companies to rotate auditors on a more regular basis. This has been encouraged by regulators in a bid to ensure the independence and best practice of auditors. But switching to another of the big four accountancy firms may not make a lot of difference.</p>
<h2>The merry-go-round</h2>
<p>Scandals and regulatory pressures have led to a recent merry-go-round of companies switching auditors. As well as Tesco, Barclays Bank recently <a href="http://www.accountancyage.com/aa/news/2332870/barclays-to-end-120-year-audit-relationship-with-pwc">ended its 120-year association with PwC</a>, while <a href="http://www.ft.com/fastft/297713/bat-picks-kmpg-auditor-after-pwc-dispute">British American Tobacco</a> and <a href="http://www.independent.co.uk/news/business/news/hsbc-awards-markets-top-audit-to-pricewaterhousecoopers-8744568.html">HSBC</a> have moved their business to KPMG after 17 years and 22 years with PwC, respectively. </p>
<p><a href="http://www.ft.com/cms/s/0/9f79a346-6377-11e4-8a63-00144feabdc0.html#axzz3a3bj9n3a">Royal Bank of Scotland</a>, meanwhile, ended its 14-year relationship with Deloitte, appointing Ernst & Young instead. These auditor changes are likely to accelerate as many other <a href="http://www.ft.com/cms/s/0/51d56c68-23c8-11e4-be13-00144feabdc0.html#axzz3a3bj9n3a">major companies</a> are putting their audits out to tender. This is welcome.</p>
<p>By <a href="http://www.legislation.gov.uk/ukpga/2006/46/contents">law</a>, company auditors are required to give an independent opinion on a company’s financial statements. In practice, however, auditor independence can be compromised by numerous factors. </p>
<p>A key factor in independence being eroded is when a long-standing relationship leads to fee dependency on the auditor’s side and cosy relationships can develop with company management. This eventually erodes professional scepticism – a key ingredient for an effective audit. </p>
<p>Over the years, numerous <a href="http://visar.csustan.edu/aaba/DirtyBusiness.pdf">scandal-ridden companies</a> received a clean bill of health from their auditors. Critics called for a <a href="http://www.economist.com/node/976011">mandatory rotation</a> of audit firms on the grounds that after a fixed-period auditors would lose the client and thus have little pressure to go along with shady practices. The incoming auditors would look afresh at the corporate financial statements and may be unwilling to support past dubious practices. </p>
<p>Big accountancy firms <a href="http://www.ey.com/publication/vwluassets/ey-the-case-against-auditor-rotation-rules/$file/ey-the-case-against-auditor-rotation-rules.pdf">opposed</a> these changes. But their opposition to reforms was weakened by the 2007-2008 banking crash, which showed that almost all major distressed banks had received a <a href="http://www.parliament.uk/business/committees/committees-a-z/lords-select/economic-affairs-committee/news/big-4-auditors-inquiry-report/">clean bill of health from their auditors</a> and in some cases banks collapsed <a href="http://www.theguardian.com/commentisfree/2008/mar/14/watchingthedetectives">within days</a> of receiving a clean bill of health.</p>
<h2>Lack of competition</h2>
<p>In reality, the market for audit of major companies is dominated by just four firms – PwC, Deloitte, KPMG and Ernst & Young. Between them they audit about 99% of the <a href="https://www.accountancylive.com/ftse-100-auditors-survey-2014">FTSE100</a> and most of the FTSE 250 companies. Successive governments have failed to break up the big four firms to increase competition and supply of auditing services to large companies. As the banking crash raised age-old questions about auditor independence and strengthened calls for auditor rotation, something had to be seen to be done.</p>
<p>The <a href="http://europa.eu/rapid/press-release_STATEMENT-14-104_en.htm">European Union</a> called for listed companies to change their auditors every ten years. Auditor tenure could be extended by another ten years if competitive tenders showed that the incumbent firm is the best option. In response, the UK has not yet amended its legislation. The <a href="http://www.accountancyage.com/aa/news/1932335/frc-steers-auditor-rotation">Financial Reporting Council</a> (FRC), the UK’s auditing regulator, has opposed mandatory auditor rotation but supported <a href="https://www.frc.org.uk/Our-Work/Publications/Corporate-Governance/Audit-Tenders-Notes-on-best-practice.pdf">tendering of audits</a> every ten years, which may result in change of auditors. </p>
<p>While the tendering and rotation of auditors is well-intentioned, it will not address the shortcomings in audits. With the big four firms holding an oligopoly on the market, they are essentially swapping clients among themselves. Rotation also does not address the processes associated with the production of an audit. </p>
<p>As private sector firms, accounting firms will still be dependent on company directors for their appointment and fees. No member of the audit team can afford to alienate an audit client by being robust and ultimately lose that client. Auditor rotation does not address fee dependency and eliminate the commercial pressures to appease company directors.</p>
<p>The market pressures on auditors to deliver robust audits are weak. The market for auditing is unlike any other in that it is guaranteed by the state. In a normal market, producers of poor goods and services can be driven out of the market, but that does not apply to auditors as the law requires companies and other organisations to purchase an audit. Despite all the shortcomings, accountants have retained their monopoly of the audit market. In markets, producers of poor goods or services can be sued and put out of business, but auditors enjoy considerable <a href="http://www.bailii.org/ew/cases/ewhc/comm/2015/320.html">liability shields</a>.</p>
<p>Auditor rotation – though welcome in principle – cannot address the deep-seated problems of the industry.</p><img src="https://counter.theconversation.com/content/41904/count.gif" alt="The Conversation" width="1" height="1" />
<h4 class="border">Disclosure</h4><p class="fine-print"><em><span>Prem Sikka is director of the Association for Accountancy and Business Affairs (AABA), a not-for-profit organisation.</span></em></p>Tesco switched its auditors from PwC to Deloitte – will it do anything to prevent future accounting scandals?Prem Sikka, Professor of Accounting, Essex Business School, University of EssexLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/406732015-04-22T17:29:39Z2015-04-22T17:29:39ZWhat is going on at Tesco?<p>Tesco boss Dave Lewis’ <a href="http://www.independent.co.uk/news/business/news/dave-lewis-tescos-man-with-a-plan-swings-the-axe-as-investors-see-a-new-dawn-9966747.html">big shake-up</a> of the struggling supermarket has hit the company balance sheet. The company reported a <a href="http://www.bbc.co.uk/news/business-32408661">pre-tax loss for the year of £6.4 billion</a> – one of the biggest in UK corporate history. </p>
<p>To be fair, a lot of this was one-off charges: a fall in the property value of its UK stores (constituting about £4.7 billion), paying to fill holes in its pension scheme, restructuring costs, stock readjustments and exiting the China market. There were actually some small signs of recovery with a slowing in the decline of falling sales volumes. </p>
<p>But Tesco still needs a lot of work. Trading profit slashed, market share falling, no final dividend and a potential catalogue of challenges, complaints, possible court cases and investigations all point to a fraught future. Just as well market share is only 28% and trading profit was only £1.39 billion.</p>
<h2>So how did it get to this?</h2>
<p>Tesco has been hit by a structural realignment of the UK grocery market. New entrants at the discount end have <a href="https://theconversation.com/new-problems-posed-for-big-brands-by-discount-supermarkets-32598">proved to be fierce competitors</a>, especially at a time of recession. New technology has changed shopping habits (the advent of online shopping, for example) rendering the past little guide to the future. Consumers have <a href="https://theconversation.com/profits-are-slashed-but-tesco-manages-at-least-one-thing-well-33393">fallen out of love</a> with the biggest out-of-town stores and are now looking more often to local and convenient stores that fit their daily patterns and lifestyles. </p>
<p>The ill-fated forays into the <a href="http://www.bbc.co.uk/news/business-22179255">US</a>, <a href="http://www.bbc.co.uk/news/business-18484159">Japan</a> and <a href="http://www.ft.com/cms/s/0/789306ea-6be8-11e4-b939-00144feabdc0.html">China</a> have also cost time and money. In the UK over-expansion has <a href="http://www.theguardian.com/business/2015/jan/28/tesco-names-43-stores-to-close">cost the company dear</a>; market share has been stagnant since 2007, despite Tesco adding lots of floor space. <a href="https://theconversation.com/trolley-load-of-trouble-in-store-for-tesco-and-its-bean-counters-32008">Accounting scandals</a> and an over-reliance on supplier contributions have added to a sense of an overcomplicated business in a world that wants simplification and solutions.</p>
<p>Dave Lewis’ inherited problems have been some time in gestation (he only took charge in October 2014), so in meeting his stated <a href="http://www.retail-week.com/sectors/food/tesco-boss-dave-lewiss-three-point-plan-the-progress-so-far/5074245.article">three priorities</a> (regaining competitiveness in the UK core business, protecting and strengthening the balance sheet and rebuilding trust and transparency) he will have to be given time. The figures today recognise the start that has been made, and focus especially on the steps to strengthen the balance sheet. Trust and transparency will take more time to rebuild and will only be seen through future actions and behaviours. </p>
<h2>The route to redemption</h2>
<p>In terms of regaining competitiveness in the core UK market, there are six steps Tesco can be getting on with to turn things around:</p>
<ol>
<li><p>The store estate is too large and elements of it are unprofitable. Announced closures and the abandonment of planned developments have begun this process of portfolio review. But more needs to be done to rethink the scale and shape of the store network. It is not as simple as large = bad, small = good. Though this is the trend, a focus on better sites for the smaller stores will be essential.</p></li>
<li><p>Operating costs need to be realigned and reduced further. Again, steps have been made to start this with the closure of the Cheshunt head office and other reorganisations at management and store level. Tighter control and further focus on this will be needed.</p></li>
<li><p>Cost-cutting has to be aligned with a better in-store offering. There has been investment in putting more staff in stores and especially in customer-facing roles. More staff with a clearer idea of what Tesco is about should provide a better service and feel for customers.</p></li>
<li><p>Product ranges are being rationalised – and there is still some way to go on this. A stronger relationship with leading suppliers and a reduction of the clutter of brands and private labels in some categories will see a larger and more focused (and cheaper) offer on key products for customers.</p></li>
<li><p>A focus on the UK core business also means that questions are being asked about some of their activities. Blinkbox and Tesco Broadband have <a href="http://www.pcadvisor.co.uk/news/broadband/3593186/tesco-in-trouble-what-talktalk-sale-means-for-you/">gone already</a>, but could they sell others, including Dunnhumby (the people that designed and analyse the Clubcard) and bring in a substantial amount of cash? Acquisitions that strengthen the core offering are important too and Tesco have just completed the purchase of the upscale Euphorium Bakery.</p></li>
<li><p>Putting all these together shows the need to simplify the business across the board. Scale brought benefits, but also added complexity – which has proved something of a millstone. Scaling down will enable UK stores to be clearer for the customer, have a stronger focus on key elements of the product range and price, more focused promotions and advertising, but also with added value sections (coffee shops, Euphorium bakeries) where appropriate.</p></li>
</ol>
<p>This is not going to be a quick fix – and there is likely to be more pain to come but, for the first time in a few years, there is a sense of clarity as to what is being attempted. The question is whether the British consumer will see, value and patronise the new approach in sufficient numbers and with sufficient spending?</p><img src="https://counter.theconversation.com/content/40673/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Leigh Sparks has received research funding from a number of national and local governments, research council and private and public companies. He is Chair of Scotland's Towns Partnership, Chair of IDS Scotland (the national Business Improvement Districts company in Scotland) and a Board Member of the Centre for Scottish Public Policy.</span></em></p>The supermarket giant has posted a record loss. But this could be the start of something new.Leigh Sparks, Professor of Retail Studies, Institute for Retail Studies, University of StirlingLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/382392015-03-06T14:45:43Z2015-03-06T14:45:43ZBritain’s broken corporate governance regime<figure><img src="https://images.theconversation.com/files/73623/original/image-20150303-31863-18hpe55.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A square deal for the Square Mile.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/mikepaws/10657936013/in/photolist-bjRgMP-qgoH9g-dSxoe6-qheCP3-7kqYHp-bjR2yx-68Anuv-8rFYYK-4RNaNf-bjQUdp-g5kKX-heNH4t-99af8Z-cNx5yf-5xQ96W-bjQcMK-fcZ4RW-bjRGo6-em12BR-hBP4h5-bMv4iM-e4mqqb-dGukor-kedLxg-ehsPZy-r2rn3f-kedZ2e-4BMZ4Q-89nqwS-6dkeiM-4qcj4y-6onnTM-kSezUi-4KGLQR-7LHxLN-8bygip-8UbPbc-p6Nd4M-bGuxq4-qUt4Gn-bjRuFk-729VwH-o587ZE-5Nu4fi-a8E9qf-fMnTUe-dGujkT-9cQnco-d2wD4f-pMyFMV">Michael Garnett</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>Just six days after Britain unveiled its <a href="https://www.frc.org.uk/News-and-Events/FRC-Press/Press/2014/September/FRC-updates-UK-Corporate-Governance-Code.aspx">improved flagship set of guidelines for good corporate governance</a> there was a Tesco-shaped party pooper lurking around the corner. </p>
<p>The supermarket giant <a href="https://theconversation.com/uk/topics/tesco">admitted to accounting flaws</a> that wiped hundreds of millions off its stock price, graphically demonstrating that the flawed accounting and audit culture that <a href="http://www.cadbury.jbs.cam.ac.uk/index.html">provided the basis for the Cadbury Report in 1992</a> is still very much present. </p>
<p>It also shows that the claim to continuous “improvements” underlying the UK Code of Corporate Governance has, over the past 23 years, amounted to little more than a minor face-lift and offers no greater protection for shareholders, employees, suppliers and others exposed to such scandals.</p>
<h2>Investor power</h2>
<p>Of course, the UK is not alone in worrying about this. Major <a href="https://about.vanguard.com/who-we-are/fast-facts/">US investment house Vanguard</a> has put its $3 trillion in assets behind a call for changes in corporate governance which adds to the pressures to revisit and reform relations between directors and stakeholders. The firm’s CEO, Bill McNabb is <a href="http://www.ft.com/cms/s/0/543c3b72-7b4c-11e4-87d4-00144feabdc0.html?siteedition=uk#axzz3L0yMIh7t">reported as saying</a>: “What you hope it leads to is not a lot of short-termism but discussion about important long-term issues.”</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/74052/original/image-20150306-13585-1ns8epf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/74052/original/image-20150306-13585-1ns8epf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/74052/original/image-20150306-13585-1ns8epf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=316&fit=crop&dpr=1 600w, https://images.theconversation.com/files/74052/original/image-20150306-13585-1ns8epf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=316&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/74052/original/image-20150306-13585-1ns8epf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=316&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/74052/original/image-20150306-13585-1ns8epf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=397&fit=crop&dpr=1 754w, https://images.theconversation.com/files/74052/original/image-20150306-13585-1ns8epf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=397&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/74052/original/image-20150306-13585-1ns8epf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=397&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Vanguard CEO Bill McNabb.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/geoliv/3658398911/in/photolist-">Geoff Livingston</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-sa/4.0/">CC BY-NC-SA</a></span>
</figcaption>
</figure>
<p>In the UK, this means taking a fresh, penetrating look at the design and operation of the UK Corporate Governance Code. In the case of Tesco, we were treated to a drip-drip of revelations, from the accounting issues to <a href="http://www.theguardian.com/business/2014/oct/27/tesco-now-on-sale-22m-pound-executive-jet">a fleet of corporate jets</a> and <a href="http://www.independent.co.uk/news/business/comment/james-moore-tescos-golden-goodbyes-leave-the-firm-with-yet-more-egg-on-its-face-10022081.html">“golden goodbyes” to executives</a>. </p>
<p>In an ideal world, all these problems should have been picked up and examined by the board, and more specifically the non-executive directors. In the world of big business, these theoretically independent board members – commonly called NEDs – are the all-purpose remedy for every shortcoming of the governance code. They are responsible for monitoring the auditors whose job it is to monitor the board that of course pays the auditor.</p>
<p>There has been little credible scrutiny of accounts by audit firms partly as a consequence of a collective failure to require auditor rotation (Tesco’s co-habitation with PwC <a href="http://www.ft.com/cms/s/0/98e02452-89c8-11e4-9dbf-00144feabdc0.html#axzz3TDsGRqqm">stretches back to 1983</a>). </p>
<h2>Protection</h2>
<p>In response to governance scandals, new versions of the code we have seen during its 23-year-residency have taken the form of self-congratulatory make-overs. The basic features of the first incarnation were <a href="http://www.icaew.com/en/library/subject-gateways/corporate-governance/codes-and-reports/cadbury-report">hurriedly put together</a> by a self-appointed club of <a href="https://books.google.co.uk/books?id=7nVpAgAAQBAJ&dq=Spira+and+Slinn,+2013">City insiders</a> fearful of the threat of statutory regulation.</p>
<p>Their descendants have repeatedly reaffirmed a narrow and elite-centric idea of corporate governance. It extols the natural superiority of the voluntaristic “comply or explain” principle, market-centric monitoring, and enlightened board responses based on nothing but guiding principles and offering “flexibility”. It notes explicitly: </p>
<blockquote>
<p>Companies and shareholders both have responsibility for ensuring that ‘comply or explain’ remains an effective alternative to a rules-based system.</p>
</blockquote>
<p>It is at heart a celebration of private, voluntary regulation. The code constrains financial accountability to a very limited set of constituencies. Voluntarism is assumed to be effective as well as legitimate, effectively shielding those responsible for corporate governance from the reach of the state and accountability to the public.</p>
<p>While there is little doubt whose interests the code is designed to serve and protect, it is harder to understand how it can “help prevent misconduct, unethical practices and support the delivery of long-term success” as it claims to. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/74051/original/image-20150306-13550-1vvcr2i.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/74051/original/image-20150306-13550-1vvcr2i.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/74051/original/image-20150306-13550-1vvcr2i.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/74051/original/image-20150306-13550-1vvcr2i.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/74051/original/image-20150306-13550-1vvcr2i.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/74051/original/image-20150306-13550-1vvcr2i.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/74051/original/image-20150306-13550-1vvcr2i.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/74051/original/image-20150306-13550-1vvcr2i.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">A tough few months for the supermarket chain.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/otama/366272950/in/photolist-ynfbS-vW59Z-aEHtzs-nshUGM-bw8gGJ-TdcGp-5Rs5Z-7ggzT3-3uDtUx-kBKjkn-efEdZ3-bvw8pc-iPagQM-bsqeSh-efysBP-bsqhYJ-efTKak-efTHJZ-eg1ief-eg1iCY-aydon-ecYR9g-2fiBZQ-j8ebiu-WVpR1-8C8LTt-iPbMAp-74Gdd7-fyqwxH-3281p-3X5YKN-ndsuFw-3eG7K-97f2EM-8w9yhq-5gQHN9-4chzkF-8eqYq1-6vR7fy-6U9i4V-5hmGdi-drFG3H-74CiPX-Pds3j-8h1GmA-bgr5kt-aCGJX7-zuS2x-gARv4-bgQFp4">otama</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>In the case of Tesco, we find that the code continues to make boards responsible for reviewing and monitoring the “external auditor’s independence and objectivity and the effectiveness of the audit process”. It also places its faith in internal procedures for whistleblowers. The claim that the Tesco whistleblower raised concerns with superiors but “<a href="http://www.thesundaytimes.co.uk/sto/business/Retail_and_leisure/article1464572.ece">failed to get traction</a>” demonstrates how such prescriptions are comfortably circumvented.</p>
<p>As successive other scandals have shown, the ineffectiveness of the code as presently constituted and policed is a threat to all stakeholders with a long-term interest in sound corporate governance. </p>
<h2>New broom</h2>
<p>The stated goal of the Cadbury Report, which initiated the code, was “to contribute positively to the promotion of good corporate governance as a whole.” If that is to be achieved, then regulation must no longer privilege short-term shareholders, or executives with salaries and bonuses tied to immediate profits and stock performance. </p>
<p>It is also not enough to put our faith in <a href="https://www.frc.org.uk/Our-Work/Codes-Standards/Corporate-governance/UK-Stewardship-Code.aspx">the capacity of institutional shareholders</a> to provide a normative kind of oversight. And it is certainly not enough to keep putting our faith in the same tired recipes for “good governance” that the code keeps endorsing, such as better information flows in the interest of market oversight, the improvement of board culture and reflection on comply or explain, or the improvement of the functioning of NEDs.</p>
<p>Instead, the long-term interests of company employees, suppliers, investors, pension fund contributors and the British public must be considered. The option of statutory enforcement merits careful consideration. A range of measures, including audit by accredited agents contracted by statutory inspectorates, should be evaluated for their capacity to detect, correct and eliminate abuses by boards, auditors, NEDs and short-term investors.</p>
<p>It is time for the UK once again to take the lead in corporate governance by developing a more inclusive and public spirited model of the nature, purpose and accountability of corporations. The time for make-overs of the code is past. Its replacement is overdue.</p><img src="https://counter.theconversation.com/content/38239/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Scandals at some of our biggest companies have highlighted a painful truth. The voluntaristic governance system put in place by City elites simply doesn’t work.Jeroen Veldman, Senior research fellow, City, University of LondonHugh Willmott, Professor of Organisational Studies, City, University of LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/336112014-10-30T11:40:28Z2014-10-30T11:40:28ZTesco investigation comes amid calls for greater trust in the City<figure><img src="https://images.theconversation.com/files/63216/original/kdwpk7n8-1414604457.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Under investigation.</span> <span class="attribution"><span class="source">46137</span>, <a class="license" href="http://creativecommons.org/licenses/by-nc-sa/4.0/">CC BY-NC-SA</a></span></figcaption></figure><p>The Serious Fraud Office is conducting a <a href="http://www.theguardian.com/business/2014/oct/29/serious-fraud-office-investigate-tesco">formal criminal investigation</a> into accounting practices at <a href="https://theconversation.com/uk/topics/tesco">Tesco</a>. In contrast, the Financial Reporting Council, whose primary remit is to regulate accounting, is still in the process of considering an investigation into the supermarket giant. Tesco has said that it is co-operating with the inquiry. </p>
<p>The SFO investigation comes amid discovery of a £263m black hole, <a href="http://economia.icaew.com/opinion/october-2014/tesco-an-opportunity-for-audit">reported by Deloitte</a>, in Tesco’s profits. Essentially it over-reported by this amount, primarily because of sales that were taken in advance, before they were actually made or the related costs had been booked. </p>
<p>This is a very simple accounting device that any <a href="https://theconversation.com/trolley-load-of-trouble-in-store-for-tesco-and-its-bean-counters-32008">good auditor</a> should be able to spot. These agreements are <a href="http://www.bbc.co.uk/news/business-29716885">common in the supermarket trade</a>, involving large sums of money. But prudence would dictate that profits are taken when earned and not in advance. And it comes at a time when wider accounting practices have been put under the public spotlight.</p>
<h2>Climate change</h2>
<p>At a major speech given at the LSE recently, the deputy governor of the Bank of England, Minouche Shafik, spoke about the need to rebuild trust in financial markets and put an end to <a href="http://www.lse.ac.uk/publicEvents/pdf/2014-MT/20141027-Minouche-Shafik-Transcript.pdf">market manipulation</a>. This comes in the wake of numerous scandals that affected the City of London, including <a href="https://theconversation.com/us/topics/libor">LIBOR</a> and <a href="http://www.independent.co.uk/news/business/news/serious-fraud-office-launches-criminal-probe-into-forex-manipulation-9619661.html">foreign exchange manipulation</a> without anyone batting an eyelid. </p>
<p>It seems what is most significant now is that the political mood to challenge this has changed. There is a new determination to <a href="http://www.bbc.co.uk/news/business-29788270">get rid of the “bad apples”</a>, and to show that the City is tough on fraud and manipulation. No longer is it economically viable for Britain to sweep these problems under the carpet, and ensuring accounts are trustworthy is fundamental to this. The public are rightly angry at the ways in which they have been exploited by so-called experts, including bankers, for so many years, and the need to bail out financial institutions with public funds.</p>
<p>In the past, the City was supported and even favoured by governments. Now, there is a feeling that its reputation has been severely tarnished – and prompt, decisive action is necessary to ensure the strength of London as a global financial centre.</p>
<h2>Better signals</h2>
<p>The public has had problems with greed, ethics and white-collar crime in the City for too long – and the modern corporation has been found to be <a href="https://theconversation.com/bankers-should-look-eastwards-for-ethical-guidance-27747">morally deficient</a>. The issue is rarely addressed by business schools directly and many academics around the globe have long been <a href="https://theconversation.com/its-time-to-put-social-impact-of-finance-on-the-curriculum-21930">complicit</a> in the fraud and manipulation of society. </p>
<p>This is unsustainable. Earnings management is wrong and should be prohibited. Auditors should be genuinely independent and play a critical role in policing giant corporations. Performance and rewards dependent on accounting numbers that incentivise bad behaviour and pay out bonuses for doing so must go. In short, corporate shortcomings should no longer be tolerated by society. </p>
<p>It is this climate that Tesco now finds itself in. Although there is no evidence that Tesco has acted in any way improperly, the announcement of the SFO investigation sends a good signal for business practice. If any wrongdoing has happened, I hope that this investigation will uncover it and punish the wrongdoers.</p><img src="https://counter.theconversation.com/content/33611/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Atul Shah receives has previously received funding from the Institute of Chartered Accountants in England and Wales of which he is a member.</span></em></p>The Serious Fraud Office is conducting a formal criminal investigation into accounting practices at Tesco. In contrast, the Financial Reporting Council, whose primary remit is to regulate accounting, is…Atul K. Shah, Senior Lecturer - Accounting & Finance, University of SuffolkLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/333932014-10-24T11:29:11Z2014-10-24T11:29:11ZProfits are slashed but Tesco manages at least one thing well<p>The decline in Tesco’s fortunes in recent weeks has been staggering. Falling sales and an accounting scandal have caused a <a href="http://www.bbc.co.uk/news/business-29735685">slump in profits</a> and the supermarket’s share price. Pre-tax profits <a href="http://news.sky.com/story/1358594/tesco-profits-plunge-92-percent-in-accounting-chaos">fell 92% to £112m</a> in its first six months while UK trading profit was down 55.9% to £499m. </p>
<p>Commentary has been almost relentlessly negative and critical. Some say the strategy of large out-of-town shops goes against <a href="https://theconversation.com/new-problems-posed-for-big-brands-by-discount-supermarkets-32598">changing shopping habits</a> of “small, local, and often”. Others observe that the <a href="http://www.scotsman.com/news/comment-tesco-lays-out-brand-but-not-strategy-1-3582296">marketing is inept</a> and fails to reach either Tesco’s existing customer base or reach out to potential new customers. Then there was <a href="http://www.theguardian.com/business/2013/aug/11/tesco-retreat-overseas-rotten-returns">failure of overseas initiatives</a> such as Fresh ‘N’ Easy in the US, which is said to have cost more than £1 billion. And the cherry on top – perhaps the worst possible corporate news – the alleged misreporting of accounts by booking profits that didn’t exist.</p>
<p>As the fall-out of the recent scandal continues and Tesco’s bosses are forced to account for the future of the UK’s largest private-sector employer, there is perhaps one thing that upper management can take credit for. The way that the black hole in profits came to light and the fact that the employee responsible for bringing the facts to light appears (so far) to have been treated significantly better than many other whistleblowers.</p>
<h2>The employee in question</h2>
<p>This accounting scandal’s emergence into the public square is being traced to the actions of one employee. The staff member, anonymous so far, is reported to have approached the current chief executive, Dave Lewis, within weeks of his appointment, presenting him with evidence of accounting malpractice which suggested that up to £250m had been claimed as profit when it hadn’t in fact been collected.</p>
<p>The individual action of this employee, one of considerable bravery, is a classic example of <a href="https://theconversation.com/uk/topics/whistleblowing">whistleblowing</a>. In recent years, this term has come to be associated with the social and political activism of Julian Assange and <a href="https://theconversation.com/uk/topics/wikileaks">wikileaks</a>, or Edward Snowden, Glenn Greenwald and The Guardian calling governments to account for their actions. All have faced significant legal and personal trials at the hands of those interests on which they were blowing the whistle. </p>
<p>Perhaps the most famous whistleblower in history was “Deep Throat”, the insider who famously guided Washington Post journalists Woodward and Bernstein as they sought to uncover evidence of then-president, Richard Nixon’s illegal activities in the early 1970s. Deep Throat’s identity remained secret for more than 30 years, known only to the two journalists he dealt with and their editor at the time, <a href="https://theconversation.com/ben-bradlee-scourge-of-the-powerful-but-always-an-establishment-man-33333">Ben Bradlee</a>. This was no doubt for fear of any recrimination or reprisal for his actions.</p>
<h2>Corporate whistleblowing</h2>
<p>Corporations also have an ignominious history of whistleblowing. The coinage of the term itself is usually attributed to Ralph Nader, the prominent American activist who made his name writing about the US car industry’s neglect of safety in automobile design in the 1960s. Nader’s work reached a peak in the mid-70s <a href="http://link.springer.com/article/10.1007/BF00870550">when Ford withdrew the Pinto</a>, a model that had an inherently dangerous design which had clearly caused a series of driver deaths and serious injuries. </p>
<p>Shockingly, it later emerged that Ford executives had commissioned a team of employees to calculate how much it would cost to alter the design, set against how much it would cost to pay compensation to relatives of dead or injured victims. Not only did company executives decide to continue to produce dangerous vehicles because of what this calculation produced, they also felt able to assign a monetary value to human life. It was journalists who traced this decision-making process when they were supplied with internal memos that detailed the discussions Ford employees had.</p>
<p>More recently there was a famous case of corporate whistleblowing by Sherron Watkins who revealed accounting malpractice at Enron. Her testimony to politicians in the early 2000s led to the demise of Enron and its auditor Arthur Andersen.</p>
<p>The details of what has happened at Tesco are, of course, only slowly emerging, and may differ from the illegal practices found at Enron. It is unlikely that Tesco will disappear. Watkins, in common with many whistleblowers in the US and UK, has <a href="http://jlo.sagepub.com/content/11/1/38">not found life easy since she acted</a>.</p>
<h2>Good management</h2>
<p>So far it appears that, in comparison, Tesco executives are managing the whistleblowing process effectively. Of course, they are <a href="http://www.legislation.gov.uk/ukpga/1998/23/contents">legally required</a> to protect employers who do step forward, but past examples show how difficult it can be for employers to step out.</p>
<p>Academic research on the matter is lacking, but sociologists observe that when someone blows the whistle on unethical or illegal practices, the corporate and state response <a href="http://link.springer.com./article/10.1007/s10551-005-0849-1">tends to focus on the individual</a> – not the allegations – to suggest that the person is “trouble” or unstable in some way. Unfortunately this can be successful in deflecting attention from the issues raised, as well as damaging to the person and their family.</p>
<p>Tesco executives seem to be doing something else – taking the allegations seriously, investigating them relatively quickly, clarifying what has happened and who enabled it to happen. The whistleblower, whoever he or she is, also seems to be in a protected position. Anonymity, at least outside the organisation, is crucial to this. </p>
<p>The fact is, social psychologists tell us, the individuals who whistleblow <a href="http://link.springer.com./article/10.1007%2Fs10551-006-9291-2">tend (counter-intuitively) to be rule-followers</a>, conscientious, respected by colleagues, acting as good citizens rather than through a destructive impulse.</p>
<p>The current chief executive would certainly have wished for a different introduction to his new job, but he should perhaps be reassured by two things. First, he seems to have created an opportunity when he arrived for one brave individual to challenge a notoriously <a href="http://www.independent.co.uk/news/business/analysis-and-features/inside-tescos-bonusfuelled-regime-of-fear-and-machismo-9759104.html">closed, intensely macho culture</a> and its associated unethical or deceptive practices. </p>
<p>And second, the corporate response may indicate that there is yet hope, at least to develop an organisation in which social and economic responsibilities are part of decision making process.</p><img src="https://counter.theconversation.com/content/33393/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Scott Taylor does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The decline in Tesco’s fortunes in recent weeks has been staggering. Falling sales and an accounting scandal have caused a slump in profits and the supermarket’s share price. Pre-tax profits fell 92% to…Scott Taylor, Reader in Leadership & Organization Studies, University of BirminghamLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/328262014-10-10T12:09:42Z2014-10-10T12:09:42ZShould we feel sorry for Tesco? The human cost of cheap food<p>The crisis of confidence at Tesco signals a remarkable fall from grace given that it wasn’t so long ago that Britons were spending <a href="http://www.bbc.co.uk/news/magazine-23988795">one pound in every seven in its stores</a>. But should we feel sorry for Tesco? Or should we think a little more about the people who have had to pay a high price for the way Tesco and other supermarkets have monopolised food consumption in Britain.</p>
<p>The difficulties Tesco is experiencing might be solely attributed to some <a href="https://theconversation.com/trolley-load-of-trouble-in-store-for-tesco-and-its-bean-counters-32008">questionable accounting and auditing practices</a> that led to a spectacular drop in its <a href="http://www.bloomberg.com/news/2014-09-22/tesco-says-profit-guidance-was-overstated-by-250-million-pounds.html">share price</a>. But even as this rebounds, supermarkets are being challenged by a more general shift in consumer shopping behaviour, as more and more consumers are <a href="https://theconversation.com/new-problems-posed-for-big-brands-by-discount-supermarkets-32598">migrating to cheaper retailers</a>, such as Aldi and Lidl. </p>
<p>The <a href="http://www.theguardian.com/business/2014/jun/08/supermarket-price-war-britain">price war</a> that they have declared in response might be seen as good news for consumers after a sustained period of <a href="http://www.fao.org/docrep/017/i3028e/i3028e.pdf">increased food costs</a>. Given the alarming number of people using <a href="http://www.trusselltrust.org/foodbank-figures-top-900000">food banks</a>, a decrease in food prices might even be seen as essential in addressing food poverty in the UK. But the impacts of lower food prices go beyond consumers and will be most keenly felt by those who <a href="http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11092262/Food-producers-become-collateral-damage-in-supermarket-price-wars.html">supply</a> supermarkets.</p>
<p>The increasing power of supermarkets in setting prices has played a pivotal role in shaping, for example, the <a href="http://onlinelibrary.wiley.com/doi/10.1111/j.1467-9523.1997.tb00057.x/abstract">production practices</a> within the UK dairy industry over the past 20 years. This in turn has had a negative impact on labour conditions. </p>
<p>The marked and ongoing <a href="http://www.dairyco.org.uk/market-information/farming-data/producer-numbers/uk-producer-numbers/#.VC03wWddXTo">reduction in dairy farmers</a> can also largely be attributed to the dominance of British supermarkets. Often dairy farmers are receiving less than their costs of production. No wonder why they have come out <a href="http://www.theguardian.com/lifeandstyle/wordofmouth/2012/jul/11/british-farmers-protest-milk-price-drop">onto the streets in protest</a>.</p>
<p>More ethical food sourcing might be one way to offer protection to producers and ensure fairer working conditions. There are doubts, however, about the scalability of fairer trade across the food system. The Fairtrade Foundation itself has highlighted the negative effects <a href="http://www.fairtrade.org.uk/%7E/media/fairtradeuk/what%20is%20fairtrade/documents/policy%20and%20research%20documents/policy%20reports/britains%20bruising%20banana%20wars.ashx">supermarket price wars</a> can have on those farming communities producing commodities such as bananas.</p>
<h2>Somebody has to pay</h2>
<p>The value chain of bananas provides a powerful example of how the Fairtrade label, which intends to guarantee better working conditions and fairer prices for producers, is struggling to stand up to market forces. Much like milk, bananas act as a sort of barometer of the value offered by a particular retailer. </p>
<p>Cheap bananas and milk are used to lure people into stores in the hope that they then spend much more than picking up the bargains. But somebody <a href="http://www.thegrocer.co.uk/buying-and-supplying/fmcg-prices-and-promotions/dairy-crest-and-mller-cut-farmgate-milk-prices/372042.article">will have to pay</a> for this endless drive for cheaper food.</p>
<p>Our food is increasingly sourced globally. Right at the bottom of the food value chain are wage labourers in countries such as Brazil who tend to the produce that ends up on supermarket shelves. As Brazilian professor Josefa Salete Barbosa Cavalcanti has shown in her work, <a href="http://ijsaf.org/archive/19/1/bonanno_cavalcanti.pdf">labour conditions</a> of food workers have been deteriorating as quality requirements and certification systems add to cost burdens, reducing the number of permanent positions for workers and increasing more precarious forms of employment. This in turn undermines the political will and capacity of workers to offer any resistance to these processes.</p>
<p>Ethical certification schemes, such as Fairtrade, can offer some protection with a minimum price guarantee for producers, but even this doesn’t necessarily cover <a href="https://theconversation.com/fair-for-who-the-crisis-of-fairtrade-for-coffee-farmers-24254">production costs</a>. Moreover, income realised through Fairtrade products is unevenly distributed amongst producers. The wage labourers at the end of the value chain are not guaranteed any better working conditions or payment than they would receive under conventional production, thereby <a href="http://ftepr.org/wp-content/uploads/FTEPR-Final-Report-19-May-2014-FINAL.pdf">aggravating rural inequality</a> instead of improving it.</p>
<h2>Cost for the producers</h2>
<p>What then of the family facing ever increasing household costs? Should they be glad of cheaper prices in the supermarkets? On the face of things it might seem so, but the reality is that any reduction in the price of food will have far-reaching consequences, particularly on those producing it – at home or in faraway places.</p>
<p>Ironically, further price pressure from supermarkets undermines producers’ ability to comply with quality expectations, as was palpably brought home by the <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/350726/elliot-review-final-report-july2014.pdf">horse meat</a> scandal. At some stage supermarkets and consumers have to put these two things together: you cannot have ever lower food prices and expect good quality.</p>
<p>Tesco’s fall from grace has been astonishing, yet few economic and financial commentators have given much thought to those who actually produce the food we eat. If we are concerned about the <a href="http://foodresearch.org.uk/the-future-of-our-food/">future of our food</a>, then we need to <a href="http://www.eventbrite.co.uk/e/fruits-of-our-labour-work-labour-and-the-political-economy-of-our-food-system-tickets-12931272785?aff=es2&rank=0">value the work of food producers more and make their labour more visible</a>.</p><img src="https://counter.theconversation.com/content/32826/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dave Watson receives funding from the Economic Research Council and the East of England Co-operative Society</span></em></p><p class="fine-print"><em><span>Steffen Böhm has received funding from the ESRC, British Academy, the East of England Cooperative Society and the Green Light Trust.</span></em></p><p class="fine-print"><em><span>Zareen Pervez Bharucha does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The crisis of confidence at Tesco signals a remarkable fall from grace given that it wasn’t so long ago that Britons were spending one pound in every seven in its stores. But should we feel sorry for Tesco…Dave Watson, PhD Candidate - Alternative Food Systems, University of EssexSteffen Böhm, Professor in Management and Sustainability, and Director, Essex Sustainability Institute, University of EssexZareen Pervez Bharucha, Senior Research Officer , University of EssexLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/325912014-10-07T05:15:15Z2014-10-07T05:15:15ZWhat corporate jets can tell us about a company’s fortunes<p>The news that Tesco took delivery of a £31m executive jet, bringing its <a href="http://www.theguardian.com/business/2014/oct/03/tesco-corporate-jet-gulfstream-supermarket">fleet of such aircraft to five</a>, brought fresh embarrassment to the troubled supermarket. Ordered in early 2013 under the aegis of the former CEO, it has rapidly been put up for sale by the new one. But given the company’s recent poor performance and admission of accounting irregularities, the purchase of a new airborne chariot for its executives has gone down like a lead balloon.</p>
<p>Buying a new executive jet during a moment of deep corporate crisis may seem like a quirk, but it seems to be a surprisingly common move. In July last year, Blackberry <a href="http://www.nytimes.com/2013/09/21/technology/blackberry-plans-to-cut-4500-jobs.html?_r=0">took delivery of a US$20m jet</a>. This happened almost precisely when the company rapidly lost market share to Samsung and Apple, had seen its share price tank, issued profit warnings and announced plans to fire 40% of its global workforce. </p>
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<a href="https://images.theconversation.com/files/60931/original/22t4f6rx-1412608766.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/60931/original/22t4f6rx-1412608766.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/60931/original/22t4f6rx-1412608766.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=388&fit=crop&dpr=1 600w, https://images.theconversation.com/files/60931/original/22t4f6rx-1412608766.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=388&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/60931/original/22t4f6rx-1412608766.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=388&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/60931/original/22t4f6rx-1412608766.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=487&fit=crop&dpr=1 754w, https://images.theconversation.com/files/60931/original/22t4f6rx-1412608766.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=487&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/60931/original/22t4f6rx-1412608766.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=487&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Tesco bought a Gulfstream 550 last year.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/levien66/8532173916/in/photolist-dZXC3Q-5VesR7-cNxp8E-fsAGtW-55B6kW-mF7QSs-mF7NBA-bDxrCh-bSsb3i-bDxrMC-fsACFS-doVdm2-ejZ3J6-fUFR7m-bk1a1T-bR8Xca-j1yAxp-c25dwu-dMYN7R-cnnQsh-bMCHSk-dMYMW8-efVQ3n-eeoULS-ejZ3Ze-dN8QFd">RHL images</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
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<p>The decision to splash out on such a luxury when the company is floundering inevitably raises questions about how these businesses are being run. The actual cost of a jet is relatively small compared to Tesco’s recently announced <a href="http://www.theguardian.com/business/live/2014/sep/22/tesco-launches-inquiry-after-overstating-profit-forecasts-by-250m-business-live">billion-dollar losses</a>. But the decision screams that senior managers seem to be more interested in comfortable executive travel than getting their company in order.</p>
<p>One defence that has been mustered was that the decision was made in better times. Others have pointed out that executive jets are vital business tools that allow overstressed executives to use their time in the <a href="http://faculty.chicagobooth.edu/raghuram.rajan/research/papers/perks.pdf">most efficient and productive way</a>. </p>
<p>Perhaps the most generous interpretation is that the new jet was needed in the global mission to divest in many of its far-flung foreign operations. But to most it looks like evidence that the executive team were not focusing on crucial issues. Instead they seemed more interested in enjoying a comfortable ride while the company crashed.</p>
<h2>Part of the CEO package</h2>
<p>The revelation throws light on the wider issue of corporate jet ownership. Corporate jets were once the preserve of senior executives at only the largest companies. Now they are widely seen as a standard part of any CEO package. Corporate ownership of jets has actually soared following the financial crisis. In the US, corporate jet ownership was at a low of about 500 jets in the mid-1990s and <a href="http://edge.marginalq.com/corpJet.pdf">went up to about 1,800 in 2010</a>. </p>
<p>Proponents of the corporate jet suggest this is a good idea because it makes the best use of precious executive time and energy. The argument goes that the cost of running a fleet is insignificant when compared to the value that a fresh and focused CEO can provide. Supporters point out that CEO time is one of the most precious commodities in a corporation, and private jets help to make the most use of it. </p>
<p>Others have pointed out that executive jets are a relatively good way to incentivise CEOs. The cost of running a jet that a team of executives share is relatively small when compared to the hefty cost of many senior executive compensation packages.</p>
<h2>Bad for business</h2>
<p>But recent evidence indicates that corporate jets may do more to destroy shareholder value. Ownership of an executive jet actually seems to be <a href="https://faculty.fuqua.duke.edu/corpfinance/papers/2004.Yermack.pdf">linked with a company’s share price underperforming the market by about 4%</a>. When firms announce the purchase of an executive jet, their share price dips by 1.1%. </p>
<p>Corporate jets also tend to be more prevalent when the owners of the firm <a href="http://edge.marginalq.com/corpJet.pdf">do not closely monitor the business</a>. Privately owned firms, which tend to be more closely monitored by their owners, tend to have fewer executive jets than similar firms which are publicly listed. When publicly listed firms are privatised and become subject to closer owner scrutiny, the number of jets owned by firms tends to plummet. </p>
<p>This suggests that executives take advantage of the fragmented ownership and relatively lax attention given by owners of publicly listed firms to award themselves perks such as executive jets. And, if you were in any doubt that executive jets are just an efficient business tool, one final fact about executive jet ownership might be interesting. It seems that if the CEO has golf club memberships far from the headquarters, then <a href="https://faculty.fuqua.duke.edu/corpfinance/papers/2004.Yermack.pdf">use of the executive jet skyrockets</a>. </p>
<h2>What jets can tell investors</h2>
<p>Executive jets might enrage investors, employees and the broader public, but recent research suggests that by paying attention to where these jets travel may provide investors with some <a href="http://lsr.nellco.org/cgi/viewcontent.cgi?article=1298&context=nyu_lewp">forewarning of big news announcements</a>. A study by David Yermack, professor of finance at New York University, found that executives frequently use their jets not just for business trips, but also for vacations. </p>
<p>By tracking these vacations, it seemed that CEOs tended to fire up the executive jet and head to their vacation home just after they had announced favourable news to the market. Then, when on holiday, the companies tend not to release much news to the market. When the company jet collects them and returns the refreshed CEO to the office, the volatility of the company share price increases. It seems that CEOs, like the rest of us, are less likely to go on holiday when they have a greater stake in the company or the weather at their chosen destination is bad. </p>
<p>In an age when corporations are under continued pressure to not only return value to shareholders, but also show their merits to the wider public, it seems that executive jets are not such a smart choice.</p><img src="https://counter.theconversation.com/content/32591/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andre Spicer does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The news that Tesco took delivery of a £31m executive jet, bringing its fleet of such aircraft to five, brought fresh embarrassment to the troubled supermarket. Ordered in early 2013 under the aegis of…Andre Spicer, Professor of Organisational Behaviour, Cass Business School, City, University of LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/298662014-09-26T13:44:10Z2014-09-26T13:44:10ZThe race for boardroom diversity is falling at the first hurdle<figure><img src="https://images.theconversation.com/files/60163/original/nm77fxc5-1411718725.jpg?ixlib=rb-1.1.0&rect=0%2C555%2C1965%2C1035&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Fellas. Somethings wrong here.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/savidgefamily/7889693678">srv007</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>As Tesco <a href="https://theconversation.com/new-tesco-ceo-might-enjoy-the-benefits-of-a-dramatic-debut-32046">hits the headlines over accounting</a> and fast-falling profits, 11 kempt faces <a href="http://www.tescoplc.com/index.asp?pageid=79">look out from its website</a>. They are the Tesco board members: three of them women and eight of them men.</p>
<p>That ratio puts Tesco just over the 25% target for female FTSE-100 board membership called for by the UK government’s <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/31480/11-745-women-on-boards.pdf">2011 review of “Women on Boards”</a>. It is just under the level demanded by the City’s <a href="http://www.businessweek.com/articles/2012-09-27/helena-morrissey-on-%0Afounding-the-30-percent-club">influential 30% Club</a> and well under the overall 40% mandated by the Norwegian government, and proposed and passed by the European Parliament. So would one more female member have changed things at Tesco? Would the board then have spotted accounting problems or reversed the profit declines of the past few years?</p>
<p>Put like that, the questions sound nonsensical. And they are nonsensical. So why are so many politicians and business people coming out in favour of quotas? Large numbers are, or claim to be, convinced that female quotas on company boards are great for the companies, and great for the economy – indeed one of our best bets as a <a href="http://www.newrepublic.com/article/118596/corporate-diversity-needed-fix-economy">“potential solution to inequality”</a>. </p>
<h2>Diverse views</h2>
<p>The theory is clear enough. It is about diversity and effective management. Group-think is bad and inefficient: if everyone on a board is much the same, they will miss opportunities, ignore dangers, provide an echo chamber for the same old views. Take an all-male board and insert some women – and straight off, you’ll have different views, greater built-in diversity. </p>
<p>The result? The board will be more effective and more innovative. The company will benefit, both directly, at strategic level and longer-term by noticing and encouraging ignored female talent in its ranks. The economy will grow; at a time when governments are desperately searching for higher productivity and higher growth; here is a business case with social kudos attached. And if signing up gains plaudits from the commentariat, well, so much the better.</p>
<p>And the evidence? Well that’s rather different.</p>
<p>Advocates of quotas claim that companies with more women board members consistently perform better. But the evidence cited for consistent success turns out to <a href="http://catalyst.org/knowledge/bottom-line-corporate-performance-and-%0Awomens-representation-boards-20042008">come from advocacy units</a>. Academic research tells a different story. </p>
<figure class="align-left zoomable">
<a href="https://images.theconversation.com/files/60165/original/vmq7nft5-1411721520.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/60165/original/vmq7nft5-1411721520.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/60165/original/vmq7nft5-1411721520.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/60165/original/vmq7nft5-1411721520.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/60165/original/vmq7nft5-1411721520.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/60165/original/vmq7nft5-1411721520.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/60165/original/vmq7nft5-1411721520.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/60165/original/vmq7nft5-1411721520.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Danish diversity flagging?</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/hugovk/158813147/in/photolist-fN8LKh-fN8Tyj-6P86yg-J1EMB-3Dvvv-e7EpoU-68REAc-9QMDAg-nqbxG4-f2XBH-f2WCn-6XeWgb-7o2CT6-4uiYP-o1jM2g-6VoaXA-9BctkC-dsv9j9-3nkB1b-nyxCUf">hugovk</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
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<p>A number of studies using data from the 1980s and 1990s, <a href="http://www.smithers.co.uk/faqs.php">and a “Tobin’s Q” measure of firm performance</a>, come up with conflicting results – some positive, some negative, and a good number which find no evidence of a relationship at all. In Denmark, which prides itself on gender equality but whose private sector boards are highly male-dominated, data showed <a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=972533">no relationship between gender diversity and performance</a>. One large-scale 2009 study, using US data on 2,000 firms and 87,000 directorships and employing a wide range of measures found that, on average, the more female boards members, <a href="http://www.responsible-investor.com/images/uploads/Women_in_the_boardroom.pdf">the <em>lower</em> a company’s performance</a>.</p>
<p>This isn’t very encouraging for people looking for an economic miracle pill. But it is also, predictably, difficult to interpret. Company performance depends on vast numbers of things. Effects apparently associated with the number of women directors might also reflect some other factor which was in turn linked to board behaviour (as, indeed, the academic literature often suggests).</p>
<h2>Data crunch</h2>
<p>That is what makes Norwegian data so interesting. Norway was a natural experiment. After quota legislation was passed, firms had to appoint women or suffer heavy penalties; so appoint they did. Boards changed. Researchers could compare their performance before and after. </p>
<p>And the result? The greater the change companies had to make in order to reach the mandated 40%, the more likely it was, in the years that followed, that <a href="http://webuser.bus.umich.edu/adittmar/NBD.SSRN.2011.05.20.pdf">company performance would <em>decline</em></a>. </p>
<p>This does not, I would emphasise, show that (all) women are worse company directors than (all) men. That is as nonsensical, in reverse, as <a href="http://www.telegraph.co.uk/finance/financetopics/davos/10597233/Quotas-%0Aneeded-for-women-in-executive-roles.html">Christine Lagarde’s</a> suggestion that “Lehman Sisters” wouldn’t have <a href="http://dealbook.nytimes.com/2010/05/11/lagarde-what-if-it-had-been-%0Alehman-sisters/?_php=true&_type=blogs&_r=0">brought banking to its knees</a>. If gender-dependent differences in performance were large or consistent, the evidence on directors and company performance – and on how men and women behave at work – would be hugely clearer than it is. Instead there are two likely explanations. First, just appointing women to boards may be a bad way to get diversity. Second, perhaps diversity isn’t all it’s made out to be anyway.</p>
<h2>False positives</h2>
<p>It has never been clear why replacing three male bankers with three female bankers, three male Oxbridge graduates with three female Oxbridge graduates, or three male accountants with three female ones produces more board diversity. But that is pretty much what growing female representation involves. On the whole, female board members of private companies share the same social and educational experience as the men and, with our changing labour market, more and more of them have similar work histories too. </p>
<p>But female quotas certainly make some women rich. In Norway, there was a scramble to get one of the country’s few experienced female directors onto your board, and what Norwegians called the “golden skirts” <a href="http://sciencenordic.com/golden-skirts-fill-board-rooms">piled up multiple lucrative positions</a>. </p>
<p>However, not everyone could hire them. Researchers found that new female directors were, on average, younger and less experienced than pre-quota men who remained on boards. They suggest that companies forced to make major changes at speed often ended up with less experienced directors, but also that the boards were less effective the more they were disrupted. </p>
<p>That sounds very plausible. But it also blows holes in the case for a simple vision of “diversity”. After all, it is exactly those boards which were disrupted – exactly those boards that didn’t hire only the most experienced, well-connected female candidates that had the greatest increase in diversity. And it didn’t seem to yield the promised dividends. One of the few other aspects of diversity on which we have hard data is education levels. And interestingly, having boards that are more or less diverse on that measure doesn’t show any effects at all.</p>
<p>As more and more women enter professional careers and make it into the <a href="http://www.profilebooks.com/isbn/9781846684036/">top echelons of business life</a> inequality between female workers has increased, and <a href="http://www.breakingviews.com/review-inequality-is-the-dark-side-of-leaning-in/21112917.article">done so faster than male inequality</a>. That is actually a positive development, because it the result of female economic success. But the vast mass of women still do traditional jobs, often for very low rates of pay. And I’ve never found any studies that demonstrate a link between high levels of female directors’ pay and changes in female pay levels further down the company.</p>
<p>It is the women at the top, the highly-paid professionals, who are making board-room quotas the feminist cause of the 2010s. Up there, getting females into the boardroom really may seem like a vastly important cause. But the arguments rest on a highly partial interpretation of flimsy data. They don’t offer a magic bullet for the economy, or the well-being of women world-wide. Or, for that matter, for Tesco.</p><img src="https://counter.theconversation.com/content/29866/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Alison Wolf does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>As Tesco hits the headlines over accounting and fast-falling profits, 11 kempt faces look out from its website. They are the Tesco board members: three of them women and eight of them men. That ratio puts…Alison Wolf, Sir Roy Griffiths Professor of Public Sector Management, King's College LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/320462014-09-23T15:39:12Z2014-09-23T15:39:12ZNew Tesco CEO might enjoy the benefits of a dramatic debut<p>“Never let a good crisis go to waste.” The well-known words of Winston Churchill are probably on the mind of Dave Lewis, the new CEO of Tesco. The company faced what many deemed to be the worst crisis of its 95-year history this week. Maybe though, it has come at the best possible time.</p>
<p>Tesco revealed that it may have <a href="http://www.independent.co.uk/news/business/news/tesco-in-crisis-uk-managing-director-amongfour-executives-suspended-after-exposure-of-accounting-scandal-9749694.html">over-stated profit guidance by £250m</a>, sparking a share price plunge which wiped £2 billion from the company’s value. Four senior executives were suspended, credit rating agencies were considering a downgrade, a law firm has been called into investigate accounting practices and a new CFO <a href="http://www.bbc.co.uk/news/business-29322186">has been helicoptered in from Marks & Spencer</a>. There were even questions being asked about whether Tesco might become a takeover target. It comes on top of a string of profit downgrades which have seen the value of Tesco’s shares halve since 2012.</p>
<p>All this might seem like an exceedingly nasty headache for Lewis, who has only been in the job for three weeks, but it just may be a blessing in disguise. By seizing on incompetence in the past, which might feasibly have been quietly managed over time, Lewis may be trying to create a clean break from “old” Tesco and giving himself the mandate and space to rebuild the company. Let’s look at how he might do this, and what the consequences might be. </p>
<h2>Leahy’s legacy</h2>
<p>The roots of the crisis at Tesco reach back to when the <a href="http://www.standard.co.uk/business/markets/jim-armitage-blame-sir-terry-leahy-not-philip-clarke-for-tescos-demise-9618415.html">legendary CEO, Sir Terry Leahy was in charge</a>. During his tenure, Tesco grew into the second-largest retailer in the world (after Walmart). Part of this was a relentless focus on the core business idea that “every little helps”. By cutting costs at every possible moment, often by applying relentless pressure on suppliers, it was possible to offer customers good prices and keep them coming back for more. But the other aspect was a focus on relentless expansion into every new aspect of retail. At the end of Sir Terry’s tenure, the company sold everything from bananas to bank accounts. It had also expanded from large supermarkets into smaller corner stores, garden centres, petrol stations and all manner of other retailers. </p>
<figure class="align-left zoomable">
<a href="https://images.theconversation.com/files/59792/original/88hgr22z-1411480514.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/59792/original/88hgr22z-1411480514.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/59792/original/88hgr22z-1411480514.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=790&fit=crop&dpr=1 600w, https://images.theconversation.com/files/59792/original/88hgr22z-1411480514.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=790&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/59792/original/88hgr22z-1411480514.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=790&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/59792/original/88hgr22z-1411480514.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=993&fit=crop&dpr=1 754w, https://images.theconversation.com/files/59792/original/88hgr22z-1411480514.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=993&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/59792/original/88hgr22z-1411480514.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=993&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Sir Terry. More woebegone than Wogan.</span>
<span class="attribution"><span class="source">Andy Rain/EPA</span></span>
</figcaption>
</figure>
<p>But Tesco also had grander ambitions than just taking over the British high street. It wanted to expand its reach globally and established operations in eastern Europe, East Asia, Ireland and North America. Those Tesco flags on the map looked impressive, but they came at a cost. In particular, the US expansion through a chain called Fresh & Easy may have looked like a good deal at the time, but it ended in disaster. <a href="https://theconversation.com/tesco-board-must-take-blame-for-errors-which-forced-ceo-out-29517">The company just couldn’t make it work</a>, and the chain was eventually put into bankruptcy. This failed adventure cost the company an estimated £2 billion. </p>
<p>As Tesco pursued grand ambitions abroad, things were not looking good back home. Leahy stepped down to be replaced by Tesco insider Phillip Clarke and immediately, City analysts asked whether he could replicate the success. The firm’s core business back home was under increasing pressure. Commodity prices were continuing to rise, the number of middle-class consumers was beginning to shrink, the public was taking up arms against sugar and salt in their pre-prepared food, cut-price competitors such as Aldi and Lidl were seizing ever-larger chunks of the market and people were abandoning the weekly supermarket shop for online shopping. <a href="https://theconversation.com/a-wicked-blueprint-for-tackling-tescos-woes-31072">The result was that the company’s famously buoyant profits began to sag.</a></p>
<p>A series of cuts to profit forecasts ratcheted up the pressure on senior executives. The analysts were baying for blood. Given this pressure, it would perhaps come as no surprise that some in the firm might turn back to a formula which had served them so well in the past – making every little count. <a href="http://www.telegraph.co.uk/finance/newsbysector/epic/tsco/11112704/Tesco-warns-profits-overstated-by-250m-as-it-uncovers-serious-issue.html">According to reports</a>, Tesco said the source of the potential mis-statement came from both the early booking of revenue and delayed recognition of costs. This means the company was effectively recording money which it had not actually made yet. It is not hard to imagine that the intense pressure Tesco staff felt to turn around the business may have been a contributory factor here.</p>
<h2>New broom</h2>
<p>Lewis has now had a few weeks in the job after taking over from Clarke when the heat from shareholders and analysts became too much to bear. He arrived with the advantage of significant experience at consumer goods firm Unilever and was brought in with a mandate to urgently create change. However, he is faced with a classic dilemma of the outsider CEO -– a well-established culture and set of tight-knit connections which can potentially block or water down most programmes of change. Most of the senior executive team at Tesco have been with the company for many years. This can bring benefits – a consistency of focus, a shared culture and commitment to incremental improvement and exploitation of the firm’s core strengths. However, it also introduced weaknesses – it can breed executives who can’t see beyond the Tesco world which they created. </p>
<p>In other words, the news of possible accounting misstatements may not be entirely inconvenient for Lewis. It has effectively allowed him to place on gardening leaving a large part of the senior management team from the past regime. It has also created urgent external pressure for change from the outside. With a large drop in the share price, newspaper headlines declaring the company is in a deep crisis and a senior management team and boardroom on death watch, it appears that Dave Lewis has been handed all the ammunition he needs to drive through large-scale changes in the company.</p>
<p>There has already been some <a href="http://www.theguardian.com/business/2014/jul/21/profile-dave-lewis-tesco-unilever">speculation about the changes which he hopes to make</a>, including cutting back on costs and complexity within Tesco. Lewis will probably respond by re-jigging governance arrangements, in particular at board level. The <a href="http://eprints.undip.ac.id/3874/1/corporate_governance_2.pdf">research suggests</a> this is a good move as it could lead to re-establishing the share price. </p>
<p>But really getting to grips with the problems that Tesco faces will require much more than this. Senior management need answers to some key questions: are there other ways of making money that don’t just rely on renting shelf-space to suppliers? How should we sell produce if supermarkets become irrelevant? Who will be our customers if the middle class disappears? What do we need to do if supermarkets are put under as much regulatory pressure as banks? How do we deal with increasingly expensive costs of basic commodities? </p>
<p>Lewis now needs to put this crisis to work in order to deliver inspired answers to these questions and to reshape and rebuild a corporate giant.</p><img src="https://counter.theconversation.com/content/32046/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andre Spicer does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>“Never let a good crisis go to waste.” The well-known words of Winston Churchill are probably on the mind of Dave Lewis, the new CEO of Tesco. The company faced what many deemed to be the worst crisis…Andre Spicer, Professor of Organisational Behaviour, Cass Business School, City, University of LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/320082014-09-22T15:43:22Z2014-09-22T15:43:22ZTrolley load of trouble in store for Tesco and its bean counters<p>The news that Tesco <a href="http://www.bloomberg.com/news/2014-09-22/tesco-says-profit-guidance-was-overstated-by-250-million-pounds.html">overstated its half-year profit guidance</a> by £250m has sent the company’s share price tumbling – and poses serious questions about its auditing and corporate governance. </p>
<p>The company has appointed accounting firm Deloitte and law firm Freshfields to investigate the matter and has put a number of key personnel on gardening leave. But the story won’t end here.</p>
<p>In common with other major corporations, Tesco boasts non-executive directors, an ethics committee and an audit committee, but the accounting problems have been highlighted by a whistleblower. The official statement says that the discrepancy is “due to the accelerated recognition of commercial income and delayed accrual of costs”. In other words, the company recognised income which it has not yet made or received, and ignored the costs that it incurred, with the result that profits were inflated. <a href="http://www.telegraph.co.uk/finance/newsbysector/epic/tsco/11113397/Tesco-boss-Dave-Lewis-promises-full-and-thorough-investigation-into-profit-overstatment.html">Tesco’s new chief executive, Dave Lewis</a>, with 27 years of experience at Unilever, said that “he had never seen revenue accounted for in this way”.</p>
<p>PricewaterhouseCoopers (PwC) has audited Tesco since 1983. PwC reported on <a href="http://www.tescoplc.com/files/pdf/reports/ar14/download_annual_report.pdf">Tesco’s accounts</a> for the year to February 22 2014 and gave it a clean bill of health on May 2. It also reports on the company’s interim accounts in accordance with the rules specified by the UK’s accounting regulator.</p>
<p>PwC knew that recognition of commercial income and costs is a key issue for Tesco. In explaining its duties, on page 66 of the accounts, auditors said this:</p>
<blockquote>
<p>Commercial income (promotional monies, discounts and rebates receivable from suppliers) recognised during the year is material to the income statement and amounts accrued at the year end are judgemental. We focused on this area because of the judgement required in accounting for the commercial income deals and the risk of manipulation of these balances. We tested the controls management has in place, focusing on controls over price changes and margin reviews. We agreed commercial income recognised to contractual evidence with suppliers, with particular attention to the period in which the income was recorded and the appropriateness of the accrual at the year end. We compared movements year on year in margins for product categories based on an expectation derived from our sample testing of contracts with suppliers.</p>
</blockquote>
<h2>Scrutiny</h2>
<p>The above statement was made on May 2. Such a statement could only be made after consideration of company accounting policies, including changes, if any, made between February 22 and May 5. However, by August of this year, through whistleblowers the company was made aware that all was not well. How can something go so pear-shaped so quickly? So what exactly did the directors of Tesco check before they signed-off the annual accounts? What did the auditors do before giving a clean bill of health?</p>
<p>PwC is major player in the auditing of companies, but its audit practices have been questioned by the Financial Reporting Council (FRC), the UK’s accounting regulator. <a href="https://www.frc.org.uk/Our-Work/Publications/Audit-Quality-Review/Audit-Quality-Inspection-Report-May-2014-Pricewate.pdf">In its most recent report</a>, the FRC accused PwC of not being sceptical enough and too easily accepting management explanations of contentious matters. Its procedures for checking the robustness of controls at client companies for recognition of income, now an issue at Tesco, were criticised. There is a long standing concern about auditors selling consultancy services to audit clients because this necessarily impairs their ability to objectively report on the resulting transactions. This area is subject to an ethical guideline by the FRC, but its report noted that PwC had a number of breaches, and some were serious. In 2008, the firm was criticised for using audit as a stall for selling consulting services to audit clients.</p>
<p>In principle, shareholders of Tesco and other companies can ask questions about the conduct of audits at company annual general meetings, but the reality is very different. Resolutions relating to auditor appointment or reappointment are rarely accompanied by any meaningful information. No information is provided about composition of the audit team, time spend on the job, explanations received from directors or replies given by auditors. Shareholders approve auditor remuneration, but cannot see auditor’s files and thus are not in any position to make any judgement about the quality of audit work. When things go wrong there is little recourse against auditors because auditors generally owe a <a href="http://oxcheps.new.ox.ac.uk/casebook/Resources/CAPARO_1.pdf">“duty of care”</a> to the company and not to any individual shareholder.</p><img src="https://counter.theconversation.com/content/32008/count.gif" alt="The Conversation" width="1" height="1" />
The news that Tesco overstated its half-year profit guidance by £250m has sent the company’s share price tumbling – and poses serious questions about its auditing and corporate governance. The company…Prem Sikka, Professor of Accounting, Essex Business School, University of EssexLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/310722014-09-01T07:03:59Z2014-09-01T07:03:59ZA wicked blueprint for tackling Tesco’s woes<figure><img src="https://images.theconversation.com/files/57760/original/mb9gf6q5-1409322724.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Leaving a sour taste. Tesco struggles to find a value proposition</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/stefz/196329243/in/photolist-6yroJf-bSfhji-Pm5rX-8QER22-9rsJFP-7yxUsG-qKQJk-imeQX-9RvA88-eigSr7-5qCgt-HiHiP-3fAVRH">StefZ</a>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span></figcaption></figure><p>Imagine taking over the reins of a firm which only a few years ago was regarded as one of the best run companies in the UK, but now routinely posted declining market share, <a href="http://www.bbc.co.uk/news/business-28978540">moribund profits, and mounting negative coverage</a> in the press. Once there were television shows joking about your firm declaring war and taking over Denmark. Today, the company look less like a world beater and more world weary. Your business model looks increasingly out of date. And to add insult to injury, your predecessor tried to turn around the fortunes of this great company <a href="http://www.bloomberg.com/news/2013-08-08/tesco-seeks-to-revive-hypermarkets-with-zumba-classes-nail-bars.html">by offering Zumba classes</a>. </p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/lfSi0D7KESk?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Tesco expansion plans, as imagined by Armando Ianucci.</span></figcaption>
</figure>
<p>This is the situation which <a href="http://www.theguardian.com/business/2014/jul/21/profile-dave-lewis-tesco-unilever">Dave Lewis will face</a> as he takes over as CEO of Tesco. The retailer remains one the largest companies in the UK, with 6,784 stores and 597,784 employees. It controls 28.8% of the UK retail food market. It also operates in banking, mobile phones, insurance and many other areas. Many thousands of suppliers throughout the UK and beyond rely on the stores as an outlet for their goods. It continues to make a sizeable profit. </p>
<p>What is the problem you might ask? Well, Tesco has warned investors that instead of an expected £2.8 billion profit, it would “only” make £2.4 billion while the dividend is cut by 75%. Nearly 8% was wiped off the value of Tesco’s shares when markets opened. They later recovered to a more respectable 4% loss but this still meant the shares were back to 2003 levels.</p>
<h2>A victim of inequality</h2>
<p>But it wasn’t just this profit warning that rankled with investors. Rather, this is just the latest bad news for the company. Alongside declining market share, the firm has recently seen its <a href="https://theconversation.com/tesco-board-must-take-blame-for-errors-which-forced-ceo-out-29517">CEO pushed out after only a few years</a>, a slew of negative comments in the business press, and a widespread sense that something drastic needs to be done. </p>
<p>Underlying all this complaining are some deeper problems. There is the increasing cost of basic commodities such as food around the planet. Tesco’s growth has been premised on the long run decline in food prices around the world as mechanisation has made food more plentiful and cheaper. However, in the past years, there has been a <a href="https://theconversation.com/britains-love-affair-with-cheap-food-could-be-coming-to-an-end-30111">long-run increase in food prices</a> as globe demand out-strips supply, innovations in food production don’t match increasing demands and global warming takes it toll. </p>
<figure class="align-left zoomable">
<a href="https://images.theconversation.com/files/57765/original/447bfghk-1409327606.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/57765/original/447bfghk-1409327606.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/57765/original/447bfghk-1409327606.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=377&fit=crop&dpr=1 600w, https://images.theconversation.com/files/57765/original/447bfghk-1409327606.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=377&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/57765/original/447bfghk-1409327606.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=377&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/57765/original/447bfghk-1409327606.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=474&fit=crop&dpr=1 754w, https://images.theconversation.com/files/57765/original/447bfghk-1409327606.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=474&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/57765/original/447bfghk-1409327606.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=474&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Discout stores are bagging customers.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/danielfoster/14605726217/in/photolist-m7CG7v-mk3Tc-9QV8gU-yKuBM-dnE4YG-NGGKr-9NPd5r-6mHN46-kSgYX9-kkUeZg-ofEaxP-7Wx16T-ejPp2Y-qd193-9Denhp-4fwvvm-5H9Keu-noDazR-3gUod-dm3Tzq-bfm9Le-o3CqBc-h61exC-bqapzT-jykH9K-mNj4xT-s857P-3zvGGD-kjAFj-s9jdS-7dNRBE-nF3ggn-h1HnBd-5qQrmv-4Q3umt-7VK7D9-oPEa-7j6NhD-39mbzN-7yxScM-8NhqTp-izsYFp-8iwsHs-vVMCq-dnE1n3-4oWr4r-2EUtJf-dyvRyr-icwgu8-gXK9LN">Daniel Foster</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>Another fundamental problem facing Tesco is its reliance on a large middle-class. The model of supermarkets emerged following World War Two with the expanding middle class which had more free income to spend on food and other items which went beyond the basics. Today, we see this middle class who has shopped at Tesco (and other supermarkets) for generations <a href="http://www.spectator.co.uk/features/9000951/the-missing-middle/">slowly but surely declining</a>. The disappearance of relatively safe jobs and increasing costs of living mean that many struggle to get by. Those supermarkets which serve the extreme ends of the spectrum (Aldi and Lidl and their struggling consumers, and Waitrose with their wealthier consumers) are doing well. Those stuck with the increasingly desperate middle class find themselves also increasingly desparate.</p>
<h2>Foodie danger</h2>
<p>The third fundamental problem is that what Tesco trades in has become one of the great battle-grounds of contemporary life. The British were once famously indifferent to food; they would even take pride in enduring the excessively disgusting fare served up across the nation. Today, we have seen a sea-change where food has become one of the benchmark topics of cultural life – alongside exercise, and maybe the diets and exercise regimes of celebrities. </p>
<p>It is no particular surprise that a <a href="http://www.bbc.co.uk/news/entertainment-arts-28977618">minor kerfuffle over a baked Alaska</a> on television baking show became national headline news. This should be good news for supermarkets – presumably they could become temples for induldging this new-found gastro-sprituality. Unfortunately this is not the case. </p>
<p>With the rise of <a href="http://www.newstatesman.com/culture/culture/2012/10/foodism-new-form-western-deviance">what Steven Poole calls Foodism</a>, we see supermarkets becoming one of the most important ideological battle grounds of our age. They are constantly monitored by activists, governments as well as food obsessed consumers. They become the focus of constant public debate and scandal. What this could mean in the forseeable future is that supermarkets will become as important a regulatory target as banks are today. The result for companies like Tesco is that they may spend as long trying to avoid scandals as they do serving their customers.</p>
<h2>Shelf life</h2>
<p>The final fundamental problem which Tesco faces is that its basic business model is declining. It has invested heavily in bricks and mortar and is in many ways a real-estate company which is excellent at identifying new retail sites, getting access from councils, developing them, and then renting space out to others. One big income stream for the company is renting out shelf-space to companies which produce food-stuffs. While this model worked well for Tesco, customers had to pay with the awful and alienating experience of the weekly supermarket shop.</p>
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<a href="https://images.theconversation.com/files/57766/original/x2y9wz7w-1409329428.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/57766/original/x2y9wz7w-1409329428.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/57766/original/x2y9wz7w-1409329428.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=372&fit=crop&dpr=1 600w, https://images.theconversation.com/files/57766/original/x2y9wz7w-1409329428.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=372&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/57766/original/x2y9wz7w-1409329428.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=372&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/57766/original/x2y9wz7w-1409329428.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=468&fit=crop&dpr=1 754w, https://images.theconversation.com/files/57766/original/x2y9wz7w-1409329428.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=468&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/57766/original/x2y9wz7w-1409329428.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=468&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Does Tesco need to spice things up?</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/astrolondon/1526011213/in/photolist-Jreiv-7pZPdD-TdcGp-9w9Z9n-bCPSGe-akEwj2-b3KmKM-7V3RPX-bSfhji-b7aAr-7Ag5TQ-gr4rQ-5hp3Vb-bgr4Kp-ckQTaW-2jCPJW-3jRcYa-aCGJX7-7EKU4b-byNS34-6gsrR8-4GYQXA-6gwC7Y-8U99wZ-baMiNi-baMt9H-6nX5F6-54vFvQ-XGTT6-5mJwLT-5W8dBo-5qqXuW-97dBhw-7h9GHS-4BagDE-7b6wzV-7b6xeF-7ofnFp-g2uVDN-G9iiZ-4nsHKe-eYF1JD-4heCzq-97qnJE-5hEesz-bhWv5x-7t1Aga-hxnicK-aCi9tQ-c1Bf1L">Kaustav Bhattacharya</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
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<p>Suppliers had to pay the increasingly high prices to have their goods actually on the shelf. Now this model seems to be breaking down in two ways. Budget retailers like Aldi and Lidl spend less effort on renting out shelf-space and more driving a hard bargain with suppliers once a year. And the rise of online shopping means increasing numbers of consumers are staying home and having their shopping delivered. This makes large stores increasingly useful only for elderly consumers who have nothing else to do but make a visit to the local Tesco. </p>
<p>These are not just run-of-the-mill problems which can be solved with a bit of sustained intellectual effort. They are what <a href="http://blogs.lt.vt.edu/design/files/2013/11/Rittel.pdf">political scientists call wicked-problems</a>: those that are difficult or impossible to solve due to incomplete, contradictory or changing requirements; deep interconnection with other issues; and a lack of a template for solving them. Wicked problems tend to be hard to contain or even understand. It is impossible to know which levers to pull, because pulling one will often solve the problem in one place, but create new problems in another. Classic examples include global warming, conflict in the Middle East, or transport planning in a city like London.</p>
<h2>Over to you, Lewis</h2>
<p>Any attempts to solve Tesco’s problems are likely to create others; there are no obvious solutions. Think for instance of dealing with rising global food prices: you could increase prices to increase profits, but this is likely to drive consumers away which would decrease market share and profits. Selling off stores to make a more whole-hearted move online could future-proof your business, but this is likely to be costly and you are likely to lose customers. These are the kind of almost impossible trade-offs which Dave Lewis now faces. </p>
<p>His first step is perhaps to stop seeing them as tame problems – they cannot be fixed easily using established templates. What is needed are novel solutions which will take some time to work through. The second is to stop trying to fix things with <a href="http://www.ft.com/cms/s/0/f496234a-2f42-11e4-a79c-00144feabdc0.html?siteedition=uk#axzz3Bnot0WON">one-off, big-bang solutions</a> that are likely to be a disaster. What is often called for by wicked problems is incremental experimentation and adaptation. Good enough solutions are likely to emerge in a bottom-up fashion. The third step is to provide some direction which puts a lid on workers’ anxieties. </p>
<p>When facing wicked problems, good leaders provide incisive and <a href="http://hum.sagepub.com/content/58/11/1467.short">insightful ways for understanding the problems</a> the organisation faces. They can also offer assurance that they have the confidence and capacity to find solutions which will work. But perhaps most important, they are able to provide their people with the protection and space which is needed to actually deal with the wicked problems at hand one step at a time.</p><img src="https://counter.theconversation.com/content/31072/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andre Spicer does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Imagine taking over the reins of a firm which only a few years ago was regarded as one of the best run companies in the UK, but now routinely posted declining market share, moribund profits, and mounting…Andre Spicer, Professor of Organisational Behaviour, Cass Business School, City, University of LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/295172014-07-22T05:26:27Z2014-07-22T05:26:27ZTesco board must take blame for errors which forced CEO out<figure><img src="https://images.theconversation.com/files/54459/original/s2yr56r2-1405958201.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Under a cloud.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/isdky/1392697183/in/photolist-cFgXcQ-5ysUYm-69Wym9-fP3tAJ-5TXNaQ-7tGsfM-cVy8Bs-7ooo8G-enw5Xx-6RzHe4-j8ebMW-8bhBgr-8bhBre-384Wmp-4V73Mg-jEAjK-6Wo2q-7d22Vx-5QvQFD-9v8J7b-2QCt9p-33HqQa-4wNcRg-j8bUXG-63DBpS-AqKBX-5MsbX9-5MsbxU-j8bV2j-DY4Lf-L5TF-8j771d-71VkKd-93MPkD-jiA86-8RQDG3-j8bfMH-ajsh6L-93QTtA-rUTLf-j8ebiu-j8bVkA-jEqM9d-9V8B6o-9fQdBs-ajpuen-5qBmM9-4gWTK4-b6kcDt-2RxjX">Brian Barnett</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>Tesco boss Philip Clarke has paid the price for another profit warning from the struggling – though still dominant – retailer. But while his track record is picked apart by commentators, scrutiny should also be directed at a boardroom which laid the foundations for failure. </p>
<p>Clarke will stand down in the autumn after 40 years at the company and three years after taking over as CEO. He will be replaced by <a href="http://www.reuters.com/article/2014/07/21/us-tesco-ceo-idUSKBN0FQ0C920140721">Dave Lewis, trumpeted as a turnaround expert,</a> from consumer goods giant Unilever.</p>
<p>While acknowledging that Clarke was dealt a <a href="http://www.standard.co.uk/business/markets/jim-armitage-blame-sir-terry-leahy-not-philip-clarke-for-tescos-demise-9618415.html">poor hand by his predecessor Sir Terry Leahy</a>, commentators have largely pinned blame on the beleaguered CEO. They point to, among other things, his delay in pulling the plug on the loss-making <a href="http://www.thegrocer.co.uk/channels/supermarkets/tesco/tesco-completes-sale-of-fresh-and-easy-to-yucaipa/352047.article">“Fresh & Easy”</a> venture in the US and a failure to recognize early enough the shifts in UK consumer behavior.</p>
<p>To be fair to Clarke, the seeds for the retailer’s travails were sown by the board years before his ascension to the top of the Tesco tree.</p>
<h2>Break the US</h2>
<p>First, the board countenanced Leahy’s grand – and in my view, misguided – plan to conquer the United States. When Tesco unveiled its US strategy in 2007, I was employed at a large investment firm (which held shares in Tesco) and remember having doubts that the insights the retailer gleaned from the hugely successful operations in the UK were entirely transferable. In effect, the company was trying to use its experience in Britain, a country where people are squeezed into a relatively compact landmass, to guide an assault on widely dispersed populations in the western US states where Fresh & Easy stores launched.</p>
<p>And then we come to an arguably more significant misjudgment by the board which highlights some of the difficulties in motivating corporate leaders. The board decided to devise an additional share scheme – on top of an already lucrative package – for Leahy to grow the international (and particularly the US) business. At the time, I questioned the board about the wisdom of granting the chief executive – who is responsible for the entire company – separate financial incentives for expanding a subset of the firm.</p>
<p>There is a fundamental point here. It is my belief that a chief executive does not need, or deserve, additional financial incentives to explore and pursue growth opportunities. That should be a core part of their job. I was also worried that the design of the incentive arrangements could lead to neglect of the domestic business. Sure enough, a key criticism of Tesco today is that its core UK business has <a href="http://www.theguardian.com/business/blog/2014/jul/21/philip-clarke-tesco-fiddled-while-burned">received insufficient attention in recent years</a> while those international ambitions – and the subsequent retreat – were indulged.</p>
<h2>Star struck</h2>
<p>Third, the board’s generosity to Leahy on remuneration suggests that it may have been too enamoured of the then-feted “superstar” CEO. He had helped turn Tesco into a retail powerhouse and it is easy to see how his strategy in the US might have been afforded too much leeway by the board before they finally decided to reverse course in 2013. It also makes one wonder about the succession planning process that led to the appointment of Clarke as CEO in 2011, particularly after similar issues have made headlines at <a href="http://online.wsj.com/news/articles/SB10001424127887324659404578501673304380076">Procter & Gamble</a> and <a href="https://theconversation.com/dont-blame-moyes-for-man-utd-woes-the-buck-stops-at-the-top-25826">Manchester United</a>.</p>
<p>The change of leadership will not come cheaply. <a href="http://www.theguardian.com/business/2014/jul/21/tesco-boss-philip-clarke-quits-profits-warning">According to reports</a>, Clarke is expected to walk away with £9.6m, including a £1.1m salary and share awards, and will continue to be paid his £1.1m salary for one year after his departure. Lewis, meanwhile, <a href="http://www.reuters.com/article/2014/07/21/us-tesco-ceo-idUSKBN0FQ0C920140721">will join on a basic salary of £1.25m</a>, with bonuses on top of that in lieu of payments from Unilever.</p>
<p>The considerable and mounting costs to Tesco mean the broader background contributing to Clarke’s departure should be instructive. While a chief executive certainly must be held to account for a company’s failures, the behind-the-scenes role of the board also needs to be acknowledged so that lessons can be learned by all relevant parties.</p><img src="https://counter.theconversation.com/content/29517/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Simon C.Y. Wong does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Tesco boss Philip Clarke has paid the price for another profit warning from the struggling – though still dominant – retailer. But while his track record is picked apart by commentators, scrutiny should…Simon C.Y. Wong, Adjunct Professor of Law, Northwestern UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/199982013-11-08T14:53:32Z2013-11-08T14:53:32ZWhy too much privacy is bad for the economy<figure><img src="https://images.theconversation.com/files/34792/original/y8d97tnp-1383911853.jpg?ixlib=rb-1.1.0&rect=26%2C28%2C943%2C627&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Tesco is no longer content with just knowing what's in your basket.</span> <span class="attribution"><span class="source">SFB579</span></span></figcaption></figure><p>Tesco, a British grocer with global status, has this week teamed up with Alan Sugar’s Amscreen to take personalised advertising to the next level. By means of Amscreen’s proprietary facial recognition technology, Tesco is <a href="http://www.theguardian.com/business/2013/nov/03/privacy-tesco-scan-customers-faces">introducing cameras</a> that determine your age and gender when you reach the check out. Advertising targeted at your demographic will then be displayed on screens in front of you.</p>
<p>Clearly this is a lucrative win for Amscreen and a bold strategic move for Tesco, but what are the implications? Shoppers are unlikely to see this development as a good thing. It’s an instinctive reaction to being watched but it also relates to the motivating philosophical values at play, particularly in regard to transparency.</p>
<h2>A philosophy of transparency</h2>
<p>Tesco’s success is in large part built on the Clubcard initiative that started in the 1990s and put it far ahead of the game in assessing customer behaviour and preferences. By handing out reward cards that were swiped every time a purchase was made, profound logistical innovation in terms of stock and pricing strategies became possible.</p>
<p>However, underpinning both Clubcard and face-tracking technologies is something much older, involving what we might phrase as the will-to-transparency that, in this case, is expressed through desire for market efficiency.</p>
<p>There are a number of philosophical sources we could turn to, but discussion of transparency is perhaps most reminiscent of Jeremy Bentham. For Bentham, transparency had moral value. He argued this in terms of the value of journalism, which puts power-holders under moral scrutiny.</p>
<p>However for Bentham, this was not only to apply to society’s leaders, but to all people, since equality is to be found by all of a society’s members living in open view. This led him to <a href="https://archive.org/details/deontologyorthes01bentuoft">picture the world</a> as a gymnasium in which each “gesture, every turn of limb or feature, in those whose motions have a visible impact on the general happiness, will be noticed and marked down”. The term “general happiness” is worthy of remark. For Bentham, transparency and surveillance are a positive way of making all things present in order to generate understanding and make life better for all.</p>
<p>This societal set-up equates privacy with inefficiency. Richard Posner, a contemporary Benthamite, claims that breaking down privacy domains and promoting transparency of the population is economically and morally beneficial. Privacy, on the other hand, becomes a barrier to wealth maximisation.</p>
<p>Paradoxically though, for Posner, wealth maximisation means that businesses should be afforded greater levels of privacy because placing businesses under the public spotlight harms economic growth. Privacy for individuals simply hides discreditable facts and hinders the flow of economically valuable information, but for businesses it is necessary for entrepreneurship and the creation of innovative strategies and techniques.</p>
<p>In this view, for total market efficiency, transparency and net societal gain to be reached, goal-directed systems should be allowed to operate without disruptive intervention. Posner extends this as far as considering the long-term value in fully disclosing sexuality, political affiliations, minor mental illnesses, early dealings with the law, credit scores, marital discord and even nose-picking.</p>
<p>This makes a virtue out of disclosure and forced publicness. As well as being economically beneficial, radical transparency could mean that, over time, irrational shunning and biases (for example, about being gay) would be excluded. Less is said, however, about the outcomes for folk who would make privacy sacrifices in order to enlighten the rest of us.</p>
<h2>Checking you out at the check out</h2>
<p>We now have a better picture of the motivating impetus behind Tesco and Alan Sugar’s Amscreen - that is, total informational awareness. My concern, then, is less about seeing demographically appropriate advertisements but the meta-objectives behind this process.</p>
<p>The philosophical processes that underpin the introduction of these cameras at our checkouts make it unlikely that Tesco will stop at monitoring our age and gender. Without doubt they will have considered scanning customers’ build, skin colour, hair length and style, facial features, facial expressions, language, voice tone, accent, conversations, cosmetic and make-up type, logos on clothing, jewellery type, point of sale behaviour, modes of interaction with others, humming of songs, and a variety of other ways (heat and scent sensors?) of getting at the behaviour and mood of the customer. Then there is the overwhelming impetus to tie this to the Clubcard itself.</p>
<p>While every little helps, we’d do well to balance this against the social and technical scenario emerging from this philosophical logic and decide whether this is the type of society we want.</p><img src="https://counter.theconversation.com/content/19998/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andrew McStay does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Tesco, a British grocer with global status, has this week teamed up with Alan Sugar’s Amscreen to take personalised advertising to the next level. By means of Amscreen’s proprietary facial recognition…Andrew McStay, Lecturer in Media Culture, Bangor UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/182372013-09-19T05:17:10Z2013-09-19T05:17:10ZMortgage price check in aisle four as Coles banks on future<figure><img src="https://images.theconversation.com/files/31501/original/fyvyq4bm-1379459592.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C1000%2C667&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Coles is believed to have applied for an Authorised Deposit-taking Institution licence, which would allow it to take deposits.</span> <span class="attribution"><span class="source">AAP</span></span></figcaption></figure><p>The news that Coles may be seeking a banking licence would, if confirmed, put the supermarket group and its parent company Wesfarmers in direct competition with Australia’s major banks. It would allow Coles to offer its 18 million customers, savings accounts and mortgages. </p>
<p>Coles is believed to already have an application with the Australian Prudential Regulation Authority for an Authorised Deposit-taking Institution (ADI) licence, which would allow it to take deposits under its own name. </p>
<p>The licence may be held by Wesfarmers, which already issues Coles insurance products and in September 2012, Coles trademarked the brand ‘Coles Money’ to facilitate a widening of its consumer proposition to include financial services. </p>
<p>The company’s major Australian competitor is Woolworths, which also has a range of financial service products, such as insurance and credit cards, issued under the brand of Woolworth’s Everyday Money.</p>
<p>The Australian supermarket groups are following a global trend of moving into the provision of services such as Telecoms and financial products, as well as retailing goods such as groceries. </p>
<h2>Supermarket and banking trends</h2>
<p>This trend is well advanced in the United Kingdom. Supermarkets such as Tesco and Sainsbury’s have been playing in the financial services space for over 15 years. Their experience will act as a guide for Coles’ prospects of success, as well as an indication of what threat the existing Australian players may face.</p>
<p>Tesco, in particular, has led the way in gaining a banking licence, and its financial services portfolio has grown from savings accounts, into credit cards and personal loans, then onto insurance products (car, home, pets, travel) and now into offering mortgages. </p>
<p>The supermarket’s Tesco Personal Finance began in 1997 as a joint venture with the Royal Bank of Scotland (RBS). Tesco then acquired the RBS stake in 2008 and launched the re-branded Tesco Bank in 2009. By 2013, Tesco’s customers held 6.5 million accounts and policies with Tesco Bank and the bank employed 3,000 staff. </p>
<p>In August 2012, Tesco added mortgages to its basket of financial services products and they encouraged their customers to take out a mortgage with them, by rewarding them with loyalty points as they repay their mortgages. This launch was described by Tesco as “a major milestone towards offering Tesco customers a full retail banking service”. </p>
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<img alt="" src="https://images.theconversation.com/files/31459/original/p6qprqc4-1379399981.jpg?ixlib=rb-1.1.0&rect=5%2C1%2C994%2C998&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/31459/original/p6qprqc4-1379399981.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/31459/original/p6qprqc4-1379399981.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/31459/original/p6qprqc4-1379399981.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/31459/original/p6qprqc4-1379399981.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/31459/original/p6qprqc4-1379399981.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/31459/original/p6qprqc4-1379399981.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Coles plans to add financial services to its basket of goodies.</span>
<span class="attribution"><span class="source">Imaged sourced from www.shutterstock.com</span></span>
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<p>Tesco Bank has material market positions in two financial services products: credit cards (7% of the total market) and car insurance (5%). Less meaningful market positions are held in home insurance (2%) and savings accounts (1%). </p>
<p>Tesco customers who have savings accounts with the Bank can pay money into their account in any Tesco store in the United Kingdom, seven days a week. The savings can then be withdrawn via the 3,300-strong Tesco ATM network or at the checkout.</p>
<p>In the financial year 2012-13, Tesco Bank’s total revenue was GBP 1.02 billion and the trading profit was GBP 191 million, a margin of 18.7%. </p>
<p>This is one of the attractions for retailers to enter the financial services market as the margins are considerably higher than those earned through the retailing of groceries. </p>
<h2>Making the leap</h2>
<p>Coles is believed to have sold over 200,000 insurance policies, but making the leap to selling mortgages and checking/savings accounts to customers is a big ask. </p>
<p>New entrants to the financial services market should be welcomed as they will offer attractive products and excellent customer service. However, getting customers to ‘switch’ from their current provider of checking accounts or mortgages will be a challenge.</p>
<p>The possible entry of Coles as an ADI into Australia’s financial services arena will concern existing ‘players’. However, it won’t be causing them major anxiety because, as the Tesco Bank story reveals, the timeframe for breaking into this market is long-term.</p>
<p>Customers of supermarket groups are quite willing to change their providers for credit cards or their car or home insurance, but it is much more difficult to get them to ‘switch’ to a new mortgage or checking account provider. </p>
<p>It is these products that are at the heart of the relationship between a consumer and their ‘main bank’. </p>
<p>Switching providers in these key relationship products continues to be fraught with suspicion by consumers, and new entrants into financials services will need both patience and luck if they are to survive and prosper.</p><img src="https://counter.theconversation.com/content/18237/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Steve Worthington does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The news that Coles may be seeking a banking licence would, if confirmed, put the supermarket group and its parent company Wesfarmers in direct competition with Australia’s major banks. It would allow…Steve Worthington, Professor, Department of Marketing, Faculty of Business and Economics, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/173372013-08-22T13:40:26Z2013-08-22T13:40:26ZWill consumers say BOGOF to the Tesco tablet?<figure><img src="https://images.theconversation.com/files/29753/original/qh95n6n9-1377167725.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Unexpected item in bagging area. Tesco is striking out into tablets.</span> <span class="attribution"><span class="source">ell brown</span></span></figcaption></figure><p>When Steve Jobs introduced the iPad in 2010, he argued that unless the device was better at doing everyday tasks than smartphones or netbooks, it wouldn’t deserve to exist. Consumers and corporates embraced the concept and for the next two years Apple maintained at least a <a href="http://www.padgadget.com/2012/02/22/apples-ipad-set-to-dominate-2012-with-60-market-share/">60%</a> share in the tablet market, curtailing Netbook sales and placing the retail PC market into decline. Now every hardware manufacturer has a tablet product – across a range of prices.</p>
<p>The latest entrant into a crowded market will be Tesco, with a <a href="http://www.thetimes.co.uk/tto/business/industries/retailing/article3846563.ece">rumoured release</a> date set to target Christmas. Previous attempts by retailers to brand their own device have been disastrous – two years ago Next and <a href="http://www.wired.com/gadgetlab/2011/07/160-arnova-craplet-features-specs-from-2009/">Asda</a> discovered that the only way to sell a device at £90-100 was by compromising on the build quality and specification, resulting in poor-quality screens, slow touch responsiveness, short battery life and reduced memory, restricting the ability to run applications.</p>
<p>Now things have changed - competition, multiple hardware manufacturers, improvements in technology and increasing demand have driven quality up and prices down.</p>
<p>Apple still dominates the premium device category and is more likely to innovate on hardware specifications and software services, but mid-range devices from a variety of manufacturers that sell for £150-£300 are increasing in market share and have functionality that can match the iPad. </p>
<p>Google’s Android Operating System dominates the mid-range and the low-price sector, but lacks the ease of use and access to the universe of online services that Apple uses to differentiate itself, such as iCloud synchronisation, seamless backup and access to the iTunes store. Android’s developmental model is similar to that of open source, placing code in the public domain for free reuse, although Google has been <a href="http://www.eweek.com/blogs/first-read/is-android-really-open-source.html">criticised</a> for the way it manages this process, giving selected partners early access to new versions.</p>
<p>At the low end of the market, an increasing number of devices are sold for less than £120. These cheaper devices prove to be successful when they are bound to a distinct software services such as Google Play or Amazon Kindle.</p>
<p>But Tesco can differentiate its device from competitor products such as the Nexus 7, next generation Kindle or iPad Mini if it wins in three important areas - price, online services and knowing its customers. It has strong form in all three areas and is something of a leader in the latter in particular.</p>
<p>It seems likely that Tesco will pitch its device just above the low end of the market at around £100-£150, reducing its initial margins, but making money through cloud services that are specific to its own customers. This is a model that works well for Microsoft and Sony with their games consoles. A heavily customised version of Android modified to suggest the Tesco brand could be used to promote pre-existing services such as their own mobile phone network, branded bank account, credit card, mortgage services and online weekly shopping.</p>
<p>Tesco intends to move further than this; having suffered a reduction in the sales of books, DVDs and music to Amazon and the iTunes store, it has been building or acquiring a series of online platforms for media – Blinkbox for Video, an in-house store for eBooks and a <a href="http://www.tescoplc.com/index.asp?pageid=17&newsid=643">streaming service</a> for music that is similar to Spotify. For many years, Tesco has been quietly developing one of the most sophisticated models of predictive shopping behaviour using a combination of its Clubcard, online and store sales, through the company Dunnhumby. This technology enables it to predict the exact sales that will occur in specific stores over time, and ensure that the supply chain anticipates these requirements.</p>
<p>Combining this predictive ability with an always-on mobile device should give Tesco the ability to offer brands, discounts and sales on all its items and services, all without having to bring customers in to physical stores. Consumers have demonstrated that they are willing to sacrifice privacy if they receive products and services specifically targeted at them, so the Tesco tablet could monitor a shopper’s location, habits and purchases and start offering better customised suggestions.</p>
<p>With knowledge and resources like these, it is quite possible that Apple, Amazon and Google could be outmanoeuvred by a greengrocer.</p><img src="https://counter.theconversation.com/content/17337/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Barry Avery does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>When Steve Jobs introduced the iPad in 2010, he argued that unless the device was better at doing everyday tasks than smartphones or netbooks, it wouldn’t deserve to exist. Consumers and corporates embraced…Barry Avery, Principal Lecturer, Informatics and Operations , Kingston UniversityLicensed as Creative Commons – attribution, no derivatives.