Tesco Case Study

This morning in the corner of a bleak industrial estate in Cheshunt, Hertfordshire, a little bit of business history was made. After 14 years of running supermarket Tesco, Sir Terry Leahy handed over the reins to his successor and long-time colleague Philip Clarke.

'Man takes job running supermarket chain' is not the kind of headline that quickens the pulse. But this move is meaningful for a number of reasons. Under Sir Terry - Liverpudlian, grammar school, very dry sense of humour, Everton F.C. - the value of Tesco as a company has increased from £4bn to £32bn. It has grown like no other business in the UK. Love it or hate it, Tesco now has a 30pc-plus share of the UK grocery market, it is the world's third largest retailer after Wal-Mart and Carrefour and it has large chains in China, India, the US and nearly 10 other countries.

Profile: Philip Clarke - the man who will lead Tesco

Sir Terry Leahy: his time at Tesco in numbers

The challenge for Clarke - Liverpudlian, grammar school, slightly less dry sense of humour, Liverpool F.C. - is to keep Tesco's momentum going. This is no mean feat given the massive growth that the company has seen under Sir Terry.

Despite their similarities, Clarke will have a totally different management style to Sir Terry. He will need to - he is inheriting a totally different business to the one that Sir Terry took over in 1997.

Sir Terry's challenge was to turn Tesco from a mainly UK-only food retailer into an international player. He has done this. Clarke's challenge will be to build on this and refine Tesco as one of the world's largest retailers, while at the same time increasing its expansion into non-food areas such as clothing and banking. His role is one of consolidator rather than empire builder. He needs to be a Jose Mourinho rather than an Alex Ferguson, a Caesar Augustus not an Ivan the Great.

To reflect this change Tesco has implemented a new management structure. While Sir Terry ran Tesco's UK chain as well as overseeing its overseas arms, Mr Clarke has appointed a UK chief executive to report to him. He has in effect created a new management tier beneath him to better reflect Tesco's vast size. The structure is more aligned to the needs of a globe-straddling company, Tesco says. Management-wise, it is more akin to the shape of global consumer goods brands like Unilever than a chain of shops.

And this is the area that I think could be the big test for Clarke. If Sir Terry's biggest challenge was to push Tesco into the outside world by breaking into new markets and creating a global brand, I believe that Clarke's biggest challenge will be managing the behemoth's new structure internally. He has a lot of plates to keep spinning, a lot of big personalities to manage, and a hell of an organisation to run.

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