It expanded too fast. The management grew complacent and arrogant. Customers were taken for granted. And suppliers were treated abysmally, while the board was packed with people who knew about as much about food retailing as José Mourinho does about humility.
Ever since Tesco started running into trouble, there have been plenty of articles written about how its problems were well flagged up in advance, and should have been spotted a long time ago.
All of which is very useful. But it is too easy to have 20-20 vision when you are looking in the rear-view mirror. The interesting question is whether there are some other Tescos out there – that is, companies that appear to be unstoppable right now, but which may well be heading for a very hard landing.
Here are three to worry about: Apple, HSBC and BSkyB. Take a look at the other banks as well. All of them have been very successful over the last decade, but have stored up a lot of problems for the future. Don’t be surprised if they end up in trouble.
Only three years ago, Tesco shares were trading at above £4. The company appeared unstoppable. It was expanding fast overseas, and building stores so quickly that one pound in every eight the British spent was running through its tills.
It was lionised as one of the best-run businesses in Britain. And while there was much truth in that, it was also becoming arrogant – and even worse, critically complacent about its core market.
As the problems have emerged, the criticism of the City, and it is a fair one, is that Tesco concentrated too much on the headline numbers, and not enough on the underlying business. So no one asked hard questions about its profit margins, for example. If the company was making so much money, wasn’t it creating space for rivals to come in and under-cut it?
And few people were asking if its success in its core grocery business was really transferable to other industries, or indeed to other countries. Too many people believed in the management’s invincibility, as did the managers themselves.
That, of course, is all in the past. The interesting question is whether the markets are making the same kind of mistakes now and, if so, about which companies. The answer to that is: they certainly are.
The first, and most obvious example is Apple. The gadget manufacturer became the biggest company in the world, much as Tesco became the biggest retailer in the UK.
The iPod, the iPad and most of all the iPhone dominate their markets and have raked in billions for the company, making it the most valuable business in the world. But, even more so than Tesco, Apple has pushed up margins to incredibly high levels.
No one knows precisely what it makes on each phone, or tablet, but there are plenty of unofficial calculations to suggest it is more than 50%. True, Apple has never marketed itself as a value-for-money business in the way that Tesco did. But it may well be making some of the same mistakes.
It has opened up a huge amount of space for rivals to come in and undercut it on price. Many have already done so, and while they don’t have the same cachet as Apple does right now, they may well do one day.
Next, Sky. No one would deny that the satellite broadcaster has been a huge success, dominating the market for pay-TV, and revolutionising the broadcasting industry. But it is also very aggressive on price.
You need to be Stephen Hawking to understand all its different packages and how much they cost, but it was reported in September that some packages were going up by 10%.
That is hardly unusual. Sky pushes prices up every year, and charges a lot for any extras. That is a lot to ask for, in a country where real wages are still stagnant, and also hard to understand in an industry where the marginal cost of an additional subscription is zero once the costs of the dish and the box have been covered. It is great for profits, of course. But it also creates space for competitors – as BT is starting to show with its own range of sport channels.
Or how about HSBC? In fact, it would be possible to choose any one of the high street banks, but HSBC is the biggest, and so probably the most vulnerable. The banks offer rotten service and a poor range of products. They treat their customers mainly as gullible fools to whom they can mis-sell insurance products.
There are already plenty of web-based competitors chipping away at the big banks’ market share. It has not quite reached a tipping point yet – but that doesn’t mean it won’t one day.
Of course, in none of those examples is anyone suggesting any of the accounting irregularities that have since cropped up at Tesco. But they may well be guilty of the same kind of arrogance and complacency about their basic businesses.
Companies that are too aggressive on price, or which aren’t delivering excellent value to their customers, are always vulnerable to attack.
They might get away with it for a long time, but that doesn’t mean they will forever. It happened to Tesco and it can happen to quite a few others as well.