UK: Britain's most admired companies - Piling the plaudits high.

For the second time in three years, supermarket chain Tesco has won the Most Admired crown.

1. TESCO

2. CADBURY SCHWEPPES

3. SCHRODERS

4. BP

5. SMITHKLINE BEECHAM

6. GLAXO WELLCOME

7. UNILEVER

8. SHELL

9. LLOYDS TSB

10. BOOTS

Flattery is all too common in business, making it difficult sometimes to distinguish self-serving praise from objective respect. One problem is that we all like to hear good things about ourselves. Another is that, even in the unsentimental business world, there are no comprehensive measures of success.

Against this background, the judgment and views of competitors are of real value. Rivals are often aware of how well a company copes with its failures as well as it successes. They sense the strength of its foundations and planning procedures; how it deals with soft issues, such as staff recruitment and development for the future; as well as the hard facts of its financial performance and market share. The praise of bitter rivals is the highest praise of all.

The research was once again headed up by D Michael Brown, of Nottingham Business School, assisted by Stuart Laverick of Derby Business School and Professor John Saunders of Aston Business School. They canvassed the top public companies by market value, in 26 sectors, to establish the rankings.

Tesco's being named Britain's Most Admired Company in 1998 - for the second time in three years - is therefore an enormous achievement. This is no public relations exercise or broker's sales pitch. The grocer has been chosen, by its peers and by experts in the investment community, as the model enterprise other British businesses look up to.

Tesco's dominant trading position is still startling to the older generation of consumers who find it difficult to forget founder Sir Jack Cohen's 'pile it high, sell it cheap' philosophy. But for younger generations, Tesco is synonymous with leading-edge ideas, high-calibre management, and the quality of its expanding range of products and services. A culture has been created within the organisation that inspires and enables its workforce to meet, and anticipate, the needs of its 12 million weekly customers.

Shoppers started voting with their feet under the powerful leadership of Lord McLaurin, a charismatic figure who came out from under Cohen's knee to drive the chain upmarket. Many doubted whether the organisation would continue to flourish after his retirement nearly two years ago.

But Terry Leahy, the Liverpudlian grammar-school boy who stepped into those shoes, has opened up the gap between Tesco and its rivals.

Those who believed Tesco had 'only borrowed Sainsbury's clothes' have been forced to concede that Britain's supermarkets have a found a new champion, better equipped to take advantage of the opportunities available to powerful retailers in the late 20th century.

Leahy is easy to underestimate. On first meeting, many in the City and the media have been disappointed by his apparent lack of dynamism and pizzazz. He blends anonymously into the surroundings at Tesco's dowdy HQ in Cheshunt, Hertfordshire. Even when he talks, he fails to ignite the atmosphere with his measured, non-committal response to the problems thrown at him.

But this masks a discipline and openness that do not often go hand-in-hand. In the City he has a reputation as 'the hard man of groceries'; internally he is credited as a skilled listener who is receptive to good ideas.

As he worked his way to the top, via the marketing department, he became associated with most of the notable successes of Tesco's recent history: the loyalty card, the Metro small-store format and the move into financial services. Credit for these innovations lies with a large team within the company - as Leahy is quick to point out - but the tone is set by a small group of people at the top which includes David Reid, the deputy chairman, Tim Mason, the marketing director and Andrew Higginson, the finance director recruited from Burton.

'Terry Leahy is so highly rated', says one retail analyst, 'because he has a clear strategy based on a philosophy that employees can understand and that customers can see in the stores. He understands the behaviour of customers. It sounds very simple but it's very hard to execute.'

Crucial in this, the analyst believes, is that Tesco's senior managers have a clear vision of what they want to achieve but leave implementation to operating directors and their people at store level. Activity in most of the 600 stores is characterised by innovation, opportunism, and a commitment to surpassing customers' expectations.

The 'grey market' sales of designer clothes, such as Calvin Klein, at a 20% or 30% discount is just one example of how the business is fighting to please the customers. This initiative formed part of a much broader non-food strategy that has seen Tesco leading the way into areas more associated with French hypermarkets.

Having established the company at the top in Britain, Leahy aims to make Tesco a world force. Unfazed by economic turbulence, the store has already moved into Asia and central Europe and continues to expand internationally.

'We point out to people who tell us we are number one in Britain that we are only about 12th in the world,' Leahy says.

This clear-sightededness has helped single out Tesco in the Most Admired Company analysis. The Nottingham Business School's survey takes in traditional criteria, including companies' value as a long-term investment, financial soundness, quality of management, use of corporate assets and quality of products or services. But it also assesses less hard-edged issues such as the ability to attract, develop and retain talent; its capacity to innovate, the quality of its marketing and its community and environmental responsibility.

Several star players have emerged in this year's survey. Cadbury Schweppes, under the command of John Sunderland, is particularly respected for the quality of its products and long-term performance.

Win Bischoff's Schroders investment bank is highly rated for the quality of its management and services and its ability to attract and develop top talent. Anita Roddick's Body Shop is still believed to lead the environmental field. But for all their qualities, none matches Tesco's all-round strength.l

The survey Britain's Most Admired Companies 1998 is available from Management Today for £55. It contains full results of the research, including a detailed analysis of each sector. Contact Alison Thompson on 0171-413 4203.