It may seem highly unlikely but could Tesco be the next big UK business failure?

Even the notion of Tesco failure sounds very far fetched, but there has been much in the press in recent weeks about Tesco following the announcement of its results for the year to February 2015 which resulted in reported losses of £6.4 billion; by far the biggest in British high street history.

Tesco, whose goal in the past few years has been to be the biggest supermarket in the UK, appear to have lost focus.  So do these results signify the start of the end of supermarket dominance by ‘the big 4’?  If so, what impact could this have on other sectors?

What makes a successful business and how can it continue to succeed?

Is it great leadership? Terry Leahy, considered to be one of Tesco’s finest CEOs was replaced by Phillip Clarke in 2011 and four years later he has recently been replaced by Dave Lewis, formerly of Unilever, to turn around its fortunes.

Is it a solid marketing strategy? Has Tesco diversified too far from the original ethos of a national quality grocer which made it great?

It has an established brand, but is the diversification into other non-grocery sectors blurring the clarity of what the Tesco brand stands for?

Does Tesco really have a loyal customer base or are we all fickle to the next bargain, incentive or deal?

Are its employees committed to the business and its strategy?

Is it price, quality or value?  Aldi, Lidl, Waitrose and Marks & Spencer have all reported positive results for their food businesses recently and so “value for money” and quality could well be the key factor for customers.

tesco failure

Going by the last few years, and even more so the last 12 months, it would seem that the formula for success in this industry is somewhat more complex.  Tesco was the first of the major supermarkets to adopt what at the time was advanced technology such as self-checkout and an award winning online shopping portal.  Despite this, it has seen its fortunes take a turn for the worse with sales and profits down as the competition has slowly but surely regained ground. The £263m accounting scandal will surely not have helped.  This comes after dominating the UK supermarket sector for a decade or more.

Business failure, when you least expect it

But Tesco is not alone. Three other major supermarkets in the UK have continued to struggle recently, news of which has probably even come as a shock to the top-tier management, who one would expect to be aware of the turmoil that was around the corner.  The once major forces of Morrisons, Asda and Sainsbury’s are all seeing their market share reduce in the UK and are losing sales to the competition outside of the ‘the big 4’.

This leads to job cuts and store closures and in the case of Tesco, it will be closing 43 loss-making shops and shelving plans for 49 new superstores.  At Morrisons and Sainsbury’s 900 jobs are expected to be axed and store closures are planned.
The interesting observation here is that it has taken these businesses some years to get to the size and profitability that they have and in a short period of time they have slipped back significantly.

Are these the same signs that were seen by the likes of MFI, Woolworths, Blockbuster, Kodak, Jessops, Courts and Comet who were all household names with strong brands and key players in their respective UK markets at one time?

Cashflow problems today, business failure tomorrow?

So which businesses will fail in 2015?  In these uncertain times, only time will tell but if history has taught us anything, no one is safe and no-one can rest on their laurels of past trading or past successes.  This relates to all business not just those with well known brands and unless businesses act now, failure to evolve combined with complacency ultimately can lead to cashflow problems in the short-term, business failure in the long.