For 
years Tesco (LSE: TSCO) has ruled the UK grocery market. The supermarket giant grew its market share from 7% in 1971 to an incredible 31% in 2007 and itssuccess rewarded shareholders handsomely.
If you had bought Tesco shares in 1997 and held them for ten years, you would have been sitting on a total return of 345%!
The good times, however, seem to be over. Tesco overreached itself in its international ventures, while neglecting the jewel in its crown its home market.
This, combined with the rise of discount retailers, has seen Tescos UK market share slideto 29%. The share price has fallen too shareholders have lost 44% since 2007.
Back to basics
With such a rapidly falling market share, the investment thesis for Tesco firmly depends on its ability to retain its customers, but is it too late for the fallen giant to do so?
The challenge for new CEO David Lewis is to go back to basics and revive the core offering of the UK business selling high-quality groceries at affordable prices. If Tesco can return to providing the best value offering, its market share, and share price, should stabilise.
Lewis has not yet announced a strategy to take Tesco forward, but he must be more aggressive than his predecessor. Phillip Clarkes 1bn Build a Better Tesco recovery strategy had a negligible impact on sales and market share. A business as large as Tesco requires a lot of investment and time to turn around, and anything other than a precise plan of attack will not protect market share.
Encouraging
Lewis has already cut the dividend to fund his plans, and I find his decisiveness encouraging. He is not afraid to make big changes and that is exactly what Tesco needs.
The recession has sharpened consumers awareness of price, butTescos offerings have not kept pace with the discounters. The supermarket needs to invest significantly to provide competitive prices, whether this be through sourcing cheaper suppliers, removing product lines or simply accepting lower margins.
Although the quality of stores must also improve, Tesco is well established in the online market, which delivers 2.5bn in sales each year. Investment into its click and collect and online network will allow Tesco to offer better services than rivals, offering a route back to growth.
While I believe it is possible for Tesco to arrest itsfall in market share, I wont be investingunless I see a clear and decisive strategy from Mr Lewis.
However, if the strategy is strong enough to make a significant impact, the forward PE of 10 and yield of 3.3% mean there could be considerable upside in the shares.
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Zach Coffell has no position in any shares mentioned. The Motley Fool UK owns shares of Tesco. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
