Success breeds complacency and even the best-managed companies will eventually take a tumble brought low by delusions of
Success breeds complacency, and even the best-managed companies will eventually take a tumble, brought low by delusions of grandeur and the belief they can walk on water.Yet this executive disease does not seem to have afflicted Tesco, whose steady, low-risk approach to business, its unfailing determination to put the customer first, seems to have created something near to the perfect corporate growth machine. By the end of this year, more than 60 per cent of the group's selling space will be based outside the UK and still growing fast.Carrefour, Ahold, even the mighty Wal-Mart - they've all in one way or another come a cropper overseas, but not yet Tesco, the misadventure in France now belonging to ancient history. Somehow or other, the Tesco juggernaut just keeps rolling along. Internationally, there was a blip in Hungary, but otherwise little sign of the disaster that tends to overtake retailers that spread their message overseas.
First-half profits were even better than expected, while, despite a resurgent Sainsbury's and Wm Morrison, like-for-like sales growth continues to power ahead. Despite the dangers, the outlook for share prices looks a good deal more rosy than when the Dow was last trading at these levels.Tesco juggernaut just keeps rolling onIt was another day of disappointments for those who live in hope of seeing Tesco slip on a banana skin. Yet with corporate profits at record levels, company finances never stronger, and the world economy apparently heading for a soft landing, not the hard landing you might expect after such a prolonged period of monetary tightening in the US, it is perhaps a reasonable guide to the true state of global economic affairs. That assertion is going to take even longer to come to fruition than Mr O'Neill's.The Dow, of course, is not a particularly representative index. The total value of publicly traded shares, both in the US and Europe, remains quite a long way below its turn-of-the-century peak. Nearly all confidently made predictions about the future of the Dow turn out to be hopelessly flawed. In the fevered environment of the late 1990s, a couple of American academics wrote a book arguing that globalisation and technology had removed the risk premium traditionally attached to equities and, in these circumstances, the Dow should be valued at 30,000, not the lowly figure it then stood at.
Mr Enders said these two issues would be dealt with by the end of the year.. As the Dow Jones Industrial Average plunged precipitously on the first trading days that followed the terrorist atrocities of 9/11, Paul O'Neill, the then US Treasury Secretary, ridiculously attempted to reassure investors by predicting that prices would recover and that within a year the Dow Jones Industrial Average would be back in record territory Well, at least he was right about one thing Prices have indeed recovered The Dow is again trading at record levels It's just taken five times as long as he said it would. EADS is also facing a doubling in the cost of its new mid-range jet, the A350-XWB, and worries of cost overruns on the A400M military transporter jet. Tom Enders, co-chief executive of EADS, said: Airbus must change and change quite radically."The crisis at Airbus has forced it to impose a staff freeze across the group and seek further head office savings. Airbus said it expected the A380 to start contributing a profit from 2010.EADS is working on a wider restructuring of Airbus which is likely to see final assembly concentrated on fewer sites and the time it takes to bring an aircraft from drawing board to delivery cut from seven and a half years to six. The first A380 will be delivered to Singapore Airlines in October, 2007 - 20 months after the airline had planned to begin commercial services.After the initial single delivery next year, production will rise to 13 in 2008, 25 in 2009 and 25 the year after that.
