Tesco Risk Management Case Study
MSc Banking and Finance
Risk Management Coursework (word count:) Group Member:
Tesco was established in 1919 and now it has become the biggest retailer in Britain, ranking as one of the top three global retail enterprises. Tesco also develops its business in 13 countries worldwide, has more than 500,000 employees, and provides services for more than 5,000 customers every week. Its business covers retail, finance, gas station, telecommunications, medicine and other fields. In addition, Tesco also actively expands the online retail business popular among customers.
However, from the beginning of 2013, significant problems appeared in the operation and management of Tesco. In …show more content…
Crockford (1986) defined risk as the uncertainty of expected return in financial market and one of the basic tasks of a listed company is to measure and control risk. Since the collapse of the fixed exchange rate system in 1971, the volatility of exchange rates, interest rates and other external factors have been changing fast, which also means a growing risk to the majority of listed companies. Tesco, as the third largest retailer in the world measured by profits, is predicated and dependent on the investment in global market. In the last few years, it is famous for its aggressive expansion into the large oversea market including Japan and China. That strategy was to bring huge profits since most countries move past the financial crisis of 2008. On the hand, the fast actions of entering new markets is in need of intensive and extensive investment and capital which has brought a growing market risk to the company as …show more content…
S. market. Since it’s entering the U. S. market in 2008, Tesco opened a total of 199 chain supermarkets, however, the real situation was that these supermarkets had never achieved profitability according to the financial statements. Therefore, after five-years struggle, Tesco had to announce a comprehensive withdrawing from the U. S. market. If Tesco's withdrawing from the Chinese market was considered to be a "quick flashing", its withdrawing from the U. S. market was even faster. At the same time, TESCO also announced that it would withdraw from the Japanese market. What's really interesting was that at the moment when TESCO was withdrawing from the U. S. market and the Japanese market, it had announced that it would vigorously develop the Chinese market. TESCO had been recklessly purchasing properties in the urban and rural areas in Britain, and purchased more than 100 land properties. Especially, its action of developing large-scale shopping centers in big cities had been shelved. The idle of these land resources might be one of the main reasons of Tesco's impairment of