Tesco: The People’s Bank?

August 22, 2009

The People's Bank

Tesco continues its advance into the financial sector with announcement of the new Call Centre in Glasgow. But will it ever become The People’s Bank?

This week’s announcement [August 2009] of Tesco’s further move into the finance business comes as no surprise to followers of its corporate activities.

History tells of the rise of Tesco as a latter-day Marks & Spenser, a tale of retailing success from modest beginnings. It also offers a case-study in which competing bits of strategic advice may be relevant.

Both Marks and Tesco are evidently corporations which were Built to Last, consistent with the stories told by Jim Collins in his writings. You will find other examples in earlier posts in LWD of companies such as Coca Cola and Warburtons.

These stories demonstrate that other snippet of consultant wisdom of sticking to your knitting. But strategic success may also said to be a case of not sticking to your knitting, by being fast, flexible, and friendly.

Incidentally, tt was good to learn that these verities were still in good currency in the recent Innovation Summit in Barcelona several decades after the books by Tom Peters and Rosebeth Kanter which popularized them.

But it’s a big departure from one’s knitting to take up piggie-banking. Which is what Tesco proposes to do.

Fast and flexible

Tesco knows more about me than I do about Tesco. My regular purchases and willingness to proffer my Tesco card at checkout provide data for one of the most admired commercial data bases in the world. Increasingly the messages of special offers to me from my friendly giant retailer are customized to what I have bought and what I might be tempted to buy in future.

More evidence of Tesco’s retaining flexibility is the speed at which its stores have adapted to customers’ priorities in the credit crunch. The business seems to be retreating to the maxim of founder Jack Cohen: pile it high, sell it cheap. Let’s call it the Pihsic approach.

This was philosophy which ignited its growth decades ago. Now, shelves which discretely signalled quality now shout value for money, bogoffs, and 50% reductions on wine purchases.

Crystal Balling

Unlike the speed of the re-appearance of the Pihsic approach, Tsco’s move into banking seems more of a well-considered strategy. Whilt it will have been shaped by the conditions created in the recessionary period of the last two years, it is not a reaction to them. Tesco has been developing its financial capabilities for much longer.

But what might the logic be strategically of extending its sphere of influence into Finance? With the help of hindsight its strengths become clearer. It has already that formidable data base and know-how in applying the data for commercial gain.

It will be able to fund its venture prudently, learning from the damaging methods deployed by almost all its financial competitor in recent years. A good time for a fast, flexible newcomer.

The Unfriendly Giant?

International success is often accompanied by international abuse of corporate ethics and responsibilities. In the UK, Tesco has been accused of being a manipulative monopoly. Its acquisition of sites for future activities has been described as establishing a land bank.

While any future government will feel bound to establish a voter-friendly stance to Tesco, it is also likely to be working closely with the firm as it grapples with a range of political issues such as employment and inflation. A process of mutual influence will continue to take place.

Whatever questions remain, Tesco’s actions are addressing that oldest of modern marketing enquiries: what business are you in?