Tesco 2014 Annual Report Download - page 4

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The future: strategic
developments in retail
The backdrop of technology-driven change
in the retail sector becomes a more insistent
drumbeat every day. Boundaries between
the online and offline world are becoming
blurred. The challenge, and opportunity,
for retailers is not just to have (and be able
to operate across) multiple channels. It is
to meet the rapid changes in consumer
behaviour that we are seeing as technology
opens up new horizons for them. The capacity
for consumers to communicate instantly with
each other, with us and with other retailers
is driving completely different expectations
for service levels, choice, convenience,
indeed the whole shopping experience.
A level of customisation and personalisation,
unthinkable a decade ago is becoming
the norm.
Consequently, being a leading retailer
today is not a guarantee of value creation
tomorrow. We need to ensure that we are
tomorrow’s leading retailer. We had already
set ourselves on the path to becoming a
leading multichannel retailer to meet this
challenge. The accelerating evolution of
customer behaviours reinforces us in this
choice of direction and has led us in the
past year progressively to intensify our actions
to deliver this end. This includes not only
ensuring a more seamless service for
customers but also a business which matches
more closely what they want, for example by
making our larger stores more compelling
destinations in their own right as well as
ensuring we offer more convenience stores.
Strategic change requires investment.
Our task is to allocate resources to compete
effectively in today’s market while giving
priority to ensuring that we emerge as
winners in the coming multichannel,
customer-centric market. Your Board is
extremely focused on the need to manage
this balance between current and future
returns with great care, optimising both
without imperilling either. The business
is taking decisive steps to free up capital
and operational resources, but for the
time being the imperative of securing the
longer-term future means that our current
financial performance remains constrained.
Other business priorities
In my foreword last year, I said:
“ Our strategic choices are defined by
three parameters: the strength of the
Tesco brand; the internet and all the
associated developments it is driving;
and the potential to leverage our skill
and scale internationally…”
I have remarked on the fundamental
re-orientation of the business to meet
the changes being driven by the internet.
Let me say a word about brand; and about
how we view our international businesses.
Sir Richard Broadbent
Chairman
Continuity and change
This has been an important year for Tesco.
There has been a great deal to occupy us in
relation to current trading as weak markets
and intense competition persist. At the
same time, we continue to reshape the
business to address the fundamental
changes taking place in the retail market.
The challenging trading conditions of
the past year have impacted profits and
necessarily remain a focus of management
attention. We continue to devote a lot of
energy and creativity to creating products
and services which customers want to
buy at prices they find attractive, through
whichever channel they choose and
which leave them wanting to visit us again.
We have continued to focus on improving
the experience for customers with
continued investment in colleagues,
a big programme of store refurbishment,
significant investment in quality and a
renewal of product ranges, including
the entire
finest*
range, and a continued
emphasis on Building a Better Tesco in
the widest sense of the term.
More broadly, however, it has been a
year when your company has moved
from addressing existing business issues
to driving our strategy for future growth
and value. There is never a year in which a
business focuses solely on one or the other.
But it is fair to say that at some point in the
past year the balance of where our energies
and resources are focused tipped from
addressing past issues to investing in the
future. We remain focused on the present
but we are starting to quicken our pace into
the future.
“ Being a leading retailer
today is not a guarantee of
value creation tomorrow.
We need to ensure that
we are tomorrow’s
leading retailer.”
Visit www.tescoplc.com/ar2014
to hear more from Sir Richard Broadbent
and other members of the leadership team
Other information
Governance Financial statementsStrategic report
Tesco PLC Annual Report and Financial Statements 2014 01
Chairman’s statement