Tesco: if only they’d studied Porters Five Forces!

The rise and fall of Tesco is well documented. It is the tale of a retailer who became a victim of its own success.

At one point it made a profit of £4bn on a massive turnover of £64bn. It employed 250K people in the UK alone.  By 2012 it took one in every seven pounds that went through Britain’s retail cash tills.

What happened?

All of Porters ‘five forces’ combined to bring it crashing down.

It became arrogant, a victim of its own success. It controlled so much of the market it failed to see what was happening elsewhere. It disregarded consumer trends and preferences, thinking it had the ability to influence its own customer base.

Sadly, I see this happening on a micro-scale all the time. In the world of engineering, technology and professional services I witness companies becoming so seduced by their own marketing messages that they lose sight of what is happening elsewhere.

I have a file full of once-successful companies and organisations clinging to the wreckage of an out-of-date marketing plan. ‘It worked before,’ they cry in self-justified outrage, ‘so why not now?’

So I bring them back to Porter’s Five Forces (to the un-initiated: the threat of new entrants, the threat of substitute products or services, the bargaining power of customers , the bargaining power of suppliers and the intensity of competitive rivalry).

They normally get it then!

Of course, whether they actually do anything about it is another story…