Dr Steve McCabe, Director of Research Degree Programmes, Birmingham City Business School

If Dave Lewis, the new chief executive of Tesco, is a football fan he will be well aware of the fact that Louis van Gaal, Manchester United’s latest manager, is finding life tough. Only a couple of seasons ago Man United were a club that enjoyed dominance and were the team to beat. Indeed, there was a kind of psychological ‘voodoo’ factor among a number of clubs in which there was a perception that they were second best and pretty  much beaten before a ball was even kicked.

As everyone who analyses Manchester United’s decline acknowledges, the most identifiable factor in their success was the autocratic and somewhat fiery character of Sir Alex Ferguson. Louis van Gaal who replaced the unfortunate David Moyes who took over as ‘the chosen one’ is now realising that restoring the fortunes of a once-great brand is far from easy; regardless of your experience and pedigree.  And whilst any comparison between Manchester United and Tesco is bound to be undermined by the fact that running a large supermarket chain is always going to be far more complicated than winning football games, there is a resonance in the quest to find the ‘great one’. Though Tesco has been around since 1919 when founder Jack ‘Slasher’ Cohen started selling goods from a stall in the east end of London, its most successful period was under Sir Terry Leahy when it became the UK’s most successful retailer.

Under Leahy who became chief executive in 1997 Tesco took on and beat the two big kids of British retailing Marks & Spencer and Sainsbury’s. Using the introduction of the Tesco ‘Clubcard’ Leahy believed that its strategy and operational expertise in terms of stores should not only be based on being as cheap as possible – undoubtedly following Cohen’s exhortation of “pile it high and sell it cheap” – but to use market intelligence from customers to inform its decisions.

The rest, as they say, is history. Under Leahy Tesco’s share of the UK retail market increased from 20 to 30 per cent to make it the largest and most profitable supermarket making annual profits of over £2 billion. Leahy is also credited with having effectively rewritten the bible of what these stores sold; almost literally anything and everything. He also oversaw an aggressive programme of land acquisition and store building. The result is a company that has a market capitalisation of just over £20 billion and is the 28th-largest listed on the London Stock Exchange.

However, many commentators have long argued that Tesco’s success and dominance was not a good thing and, as has been proved in the last couple of years, what you do unto others, others will do to you. Tesco is now under attack from new entrants to the UK supermarket market which are even cheaper, primarily the German companies Lidl and Aldi, and the fact that competitors such as Sainsbury’s and Asda have developed strategies that are taking the fight back to them. As a consequence, Tesco is no longer the supermarket ‘juggernaut’ it once was and its profits are falling. More than £1.3 billion was wiped from its share value on Friday and that its share value has plummeted by a third in the last year (falling another 1.6 per cent today) to the lowest since 2003. Announcing its second profit warning in two months and cutting the interim dividend by 75 per cent has only added to the sense of impending panic manifested by the decision by major investor Harris Associates to cut its stake in Tesco from more than 3 per cent to about 1.4 per cent.

So Dave Lewis has he work cut out if the objective is restoring Tesco’s dominance and profitability to that enjoyed under Leahy. Like vaan Gaal he is facing what many now believe to be a Herculean task and urgently needs to develop a new approach. Given that over the weekend Harris Associates claimed that Tesco was operating an “incoherent strategy” means that Lewis has an extremely limited timeframe for action to ensure that its loss of market reduce from 30.2 per cent a year ago to 28.8 per cent now is arrested.

Lewis’s appointment is fascinating in that in being poached from Unilever as its head of global personal care products such as Vaseline, Radox and Dove (a division worth some £16 billion), he is the first outsider to be in charge of Tesco since ‘Slasher’ Cohen. The fact that Lewis is known as ‘Drastic Dave’ after having cut 300 jobs in 2007 means that he arrives with something of a reputation. It can only be imagined that many Tesco senior managers who have presided over the recent decline which has been criticised for being on the basis of success enjoyed under Leahy, both complacent and arrogant.

So what can Lewis do? Given that Tesco chairman Sir Richard Broadbent made clear on Friday that every possible option to create value for its customers and shareholders will be considered, Lewis will presumably have a pretty free hand to whatever is necessary  to try and win back affection for a brand that many believe became tainted by hubris.  Many managers will be under pressure to sort out problems or risk being sacked.

We can reasonably expect that there will be price cutting across a wide range of goods to make it more appealing to the budget-conscious customers who have deserted Tesco to the likes of Aldi, Asda and Lidl. Apparently the upgrades to stores will be reduced to save money.  There is little doubt that Lewis will focus effort on the UK market and, in all probability, will defer any decisions about its overseas ventures until later.

However, what people probably want is restoration of the human touch in Tesco stores. In the quest to become dominant efficiencies meant that any staff on the shop floor were pushing the trolleys of goods into place as part of what is known as ‘continual replenishment’. Like the bad old ways of motor manufacturing, workers were told to get it to the line regardless of the fact that customer experience suffered. Self-checkouts which are so characteristic of Tesco stores may reduce the wage bill but leave the customer feeling that they are simply interacting with machines. No wonder many prefer to spend more and go to the likes of Waitrose where you will actually meet someone on the checkout.

Like van Gaal at Manchester United, Lewis is operating under the pressure of past glories and an urgent need to produce instant results. How successful either of these managers remains to be seen. There is a belief that in football much can be gleaned in the immediate aftermath of the Christmas fixture list. Though this is probably a bit soon for Lewis the retail analysts will be looking very closely at the impact of any changes he makes between now and then to stop the sense of malaise at Tesco.

It’s all a great deal different to only a few years ago when critics argued that Tesco’s dominance needed to be stopped to ensure it didn’t become the only choice of supermarket available to customers.

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Dr Steve McCabe

Dr Steve McCabe

Birmingham City Business School