CIMA where business + finance meet
Tesco makes strides in banking using CIMA strategy planning to double profits Tesco evaluates its business units according to a ‘steering wheel’, which parallels CIMA’s strategic scorecard.
Andrew Higginson, Chief Executive of Retailing Services and Group Strategy Director at Tesco Behind the transformation of Tesco Personal Finance from a successful but straightforward joint venture into Tesco Bank, a key part of the supermarket’s growth strategy, lies a CIMA based approach to planning and benchmarking. Tesco Personal Finance was set up by Tesco and Royal Bank of Scotland in 1997. Today, Tesco Bank is poised to become a significant player in retail banking. Since buying out RBS in 2008, the supermarket has invested £350m, recruited 1,100 people and set targets of doubling profits. While the joint venture performed well and contributed a £70m post-tax profit by 2007, growth had plateaued. Both RBS and Tesco had evolved since 1997: RBS had become a global operator, while Tesco’s profits had grown from £700m to £3bn. ‘The feeling was it needed to be more strategically important to one or the other of us,’ says Andrew Higginson, Chief Executive of Retailing Services and Group Strategy Director at Tesco. ‘We concluded that we needed to buy it out, push it harder and put in a management team who could meet more of our aspirations,’ he says.
and risk to Tesco of covering regulatory and infrastructure requirements such as call centres, treasury, IT, audit and legal support. The move represented significant risk at a time of straightened credit availability, and the supermarket needed scale in order to compete. Reaching profit target would, says Higginson, represent a decent return on capital, but the supermarket aspires to exceed that and establish a business that shareholders and customers will view as stable. Tesco evaluates its business units according to a ‘steering wheel’, which parallels CIMA’s strategic scorecard. The steering wheel has five components: customers, people, operations, community and finance and the supermarket seeks to achieve balanced performance across each of those segments. As the joint venture banking and insurance interests migrate to Tesco’s new stand-alone bank, Higginson’s team will be carefully evaluating progress across those measures.
Higginson and his team carried out a business case to value the bank and establish the investment required to go it alone. That exercise drew, he says, on his background as a CIMA qualified accountant and on the CIMA training of key members of his staff, as they modelled the cost
CIMA value: Tesco Bank A CIMA evaluation and strategic plan aimed at doubling profits. A c.£20m pa investment in 1,100 new recruits. T. +44 (0)20 8849 2251 E. cima.contact@cimaglobal.com
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