New strategy at Tesco – implications for operations

Alongside Tesco’s six monthly trading report, the new CEO has announced plans to arrest the decline in sales.  These neatly illustrate the interrelationship between business strategy, financial strategy and operations strategy.

  • With regards the overall business, Tesco plans to sell off Tesco Broadband and Blinkbox in order to focus more on its retail operations.
  • Financially, the company needs to strengthen its balance sheet because its pension deficit and level of debt are rising.  It therefore plans to close its staff pension scheme and not open 49 new stores.  This will reduce its capital expenditure by £1 billion.
  • Linked to this, 43 existing stores will be closed.  These operations, which are predominantly TescoExpress outlets, are “unprofitable”.  Likewise it is closing one of its two head office operations and rationalising this at their base in Welwyn Garden City.  Overall it is planning to cut £250 million in operating costs.  This, along with the financial plans, will enable it to cut its prices for consumers – directly aimed at combatting the significant growth of low cost supermarkets such as Lidl and Aldi.

Source: Reuters, BBC News

 

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