Business Strategic Process: An Overview of Tesco Company - Essay Example

? Business Strategic Process: An Overview of Tesco Company Business Strategic Process TASK Demonstrate your understanding of the strategic planning process QUESTION 1.1 Explain vision(s), mission(s), objectives, goals and core competencies of your chosen organization. An Overview of Tesco Company Tesco was established in 1919 and inaugurated its first store in London, UK in the year 1929. Nevertheless, over the years, the company has evolved to lead the market within the United Kingdom retail food segment. Presently, Tesco is one of the principal food retailers in the globe, running 2, 318 stores while creating employment for over 326, 000 people. It makes available online services via its subsidiary called Tesco.com. The United Kingdom constitutes the company’s major market where it is run under four banners of Superstore, Extra, Express, and Metro. The corporation sells approximately 40,000 foodstuffs. The business’ own-label merchandise (50 percent of sales) exist at three levels including, normal, value, and finest. On top of convenience produce, countless stores have gas refilling stations, making Tesco to be one of United Kingdom’s independent and largest petrol retailers. Other vending services obtainable include Tesco Individual Finance (Palmer 2005, pp. 24). Vision statement A strategic vision statement describes the course a business intends to follow during the development and strengthening its operations. It sets out the company’s strategic route in getting ready for the future. Tesco’s vision is to be the largely valued corporation by customers, the surrounding community, the employees as well as other stakeholders that the company works together with while doing business. It envisions itself as an expanding company that succeeds locally while employing its skills globally (Hammett & McMeikan 1994, pp. 4). Mission statement A mission statement ascertains the general intention of a business. It assists employees to work towards realizing a common purpose. Tesco’s mission statement is to generate value for its customers for it to earn their unending loyalty. To ensure that Tesco achieves this mission statement, the company needs to be acquainted with who their devoted customers are. It is this reason that has prompted Tesco to launch a Clubcard service, via which the company can award customers by issuing them with special tickets and additional points (Hammett & McMeikan 1994, pp. 5). Corporate objectives Objectives refer to business’ performance targets – that is, the results management wishes to achieve. They act as yardsticks for assessing how well the company is doing. Tesco’s objectives include the following: bidding customers the most excellent value for their money at the most reasonable prices; meeting customer needs by continually seeking, and implementing their views regarding product quality, innovation, store facilities choice, and service; providing stockholders with better returns on their funds; improving productivity through implementing investments in distribution depots and efficient stores, in productivity enhancements and in new technologies; developing peoples’ talents through effective management and education practices, while remunerating them fairly with equivalent opportunities for everybody; working hand in hand with suppliers with the aim of building long-term business associations based strictly on quality as well as price criteria; taking part in the crafting of national food manufacturing policies on vital issues such as hygiene, health, safety, nutrition, and animal wellbeing; and supporting the best interests of the society and the safeguarding of the environment (Hammett & McMeikan 1994, pp. 5). Goals The organization is focused on achievement of certain degrees of its activities in a bid to maintain their full realizable potential. There first goal is growth in the local scene in a bid to realize the firm’s limits. The second goal is to come into to terms with the international market and the utilization of technology in communicating and conducting business. This is to increase the international audience and improve in terms of services being rendered to them. Another goal of the Tesco is to be the best in whatever they undertake with the aim of outshining potential competitors in the market (Hammett & McMeikan 1994, pp. 5). Core competencies of Tesco Company Branding. Tesco is a household name in the UK a fact that serves as the business’ principal strategic advantage. The company’s standing has spread like a wildfire whereby it has undergone transformation from a generic to the specific brand that it is today. Tesco has a powerful brand image, and is connected with trustworthy products, that are of good quality, and which represent exceptional value (Palmer 2005, pp. 24). Integration of IT. For the company, activities have become a must and not luxuries. Systems that manage stock, keep records of all the inventory and deliveries, are employed in the analysis of business dealings in the company. Extranet installations employed by the business, have enabled the use of the Internet in order to design customized and proprietary flow of information between Tesco and its business partners. The system links business associates online through virtual firewalls, thereby bringing about more flexibility, extensibility, scalability, and integration across the channels of distribution (Palmer 2005, pp. 24). Supplier management. As a key retailer that engages in the selling of diverse range of merchandise, Tesco works with numerous suppliers all over the world, as well as employees from dissimilar cultures and nationalities. Therefore, it is the policy of the company’s to have unique interaction with the said suppliers. By employing superior technology in its infrastructure while dealing the suppliers, Tesco aims at controlling their work hence improving work efficiency (Palmer 2005, pp. 25). QUESTION 1.2 Which issues should be involved in the company’s strategic planning process? Issues to be considered by Tesco Company during strategic planning A strategic plan refers to an instrument that is used to provide guidance in gratifying a mission with utmost efficiency and influence. To be useful and thus effective, it should speak about specific goals and depict the action steps as well as the resources needed to attain them. The foundation of any winning strategic plan entails proper comprehension of the company’s strengths and capabilities together with the limitations and weaknesses. Information must be collected from a many sources, including the clients, staff, community leaders, board members partner, and funders, among others (Palmer 2004, pp. 1075). SWOT (Strength, Weaknesses, Opportunities and Threats) analysis is an important, effective and tested tool to employ in the process of strategic planning. It entails an audit of the company and its surrounding environment. Strengths are company characteristics which it does better compared to competitors. Examples of such strengths to be considered by Tesco during strategic planning include: financial resources, reputation, geographic locality of the company relative to customers, market segments, geographic locality of the business relative to that of its suppliers, marketing support levels, management experience in the business as well as management information systems. Weaknesses are the attributes which if substantially enhanced would provide the business with additional chances for success. Key issues to be kept in mind by the Tesco in this case would include: lack of qualified expertise in specific growing markets, lack of a clear direction, high external sales turnover, lack of direction on profit margin management, inadequate advertising /marketing, too many market and products segments, a lot of stock, serving unprofitable segments, lack of investment in information technology systems, and failure to utilize potential market and product opportunities (Palmer 2004, pp. 1078). Opportunities include the presence of fundamental conditions emerging or appearing outside the business. Examples of company opportunities that Tesco should consider include: regional growth patterns, growth via market segmentation, shifting of key management tasks, optimization of inside sales through training, and the mastering of information technology. Threats are obstacles which a company faces in seeking to realize its vision, mission, and strategic goals. Examples of threats that Tesco should consider looking into are: maturing of distribution channel, competitor strength and consolidation, miscalculations regarding trends in segmentation of the market, changes in market gas prices, and dying/maturing markets in spheres of key competencies (Palmer 2004, pp. 1081). QUESTION 1.3 Which planning techniques should be used in strategic planning process? Strategic planning techniques to be employed by Tesco Company They include: competitor intelligence, environmental scanning; forecasting; global scanning; and benchmarking. Environmental scanning entails screening of detailed of information sources in anticipation of environmental changes. Competitor intelligence is an activity entailing scanning activities taking place in the environment, with the aim of identifying the company’s competitors, their operations, how these activities will influence the business. Global scanning relies on the extent of the business global operations. Forecasts entail making predictions regarding the future, with reference to the organizations’ operations. Benchmarking entails the quest for the finest practices among business competitors and which lead to their excellent performance (Johnson & Scholes 2002, pp.45). In light of this, the best strategic planning technique that Tesco should adopt includes benchmarking. This process would involve the following steps: forming the benchmark planning team, gathering of internal and external data, analyzing the collected data to identify performance gaps, and finally preparing and implementing an action plan. TASK 2 Initiate the strategic planning process by formulating a strategy and considering approaches for its evaluation QUESTION 2.1 Produce an organizational audit for your chosen organization. Organizational audit of Tesco Company Organizational audit of the company involves analyzing the internal environment of the firm in order to uncover its areas of strength as well as weaknesses. In this case, the audit deals with Tesco’s strength s and weaknesses. The following is a discussion of the company’s strengths. Tesco’s increasing market share Tesco currently holds about 13% retail business market share in the UK. Its multi- design capability signifies that its share will keep growing. Additionally, increasing space input from various hypermarkets will permit it to drive the share even higher in the non food stuffs sector (Palmer 2005, pp. 33). Human resource management at Tesco Company Competent workforce is among Tesco’s key competencies. One of the company’s rule targeting employees is the ‘every little helps’ benefit, in which the staff have to be near customers in order to enhance their daily shopping activities. The company has in addition developed a variety of loyalty schemes to widen their employees’ loyalty and thereby motivate them. Furthermore, the staff usually benefit from reductions on all the available products sold in their stores (Palmer 2005, pp. 34). Overall growth and ROI improvement The company’s investment into a company called West midlands based expediency store group (T&S) was touted as the smartest move into the potential neighborhood segment of the market by a big name vendor in the history of retailing. The deal turned Tesco into the country’s second largest convenience chain store after the Co-operative Group. The company also intends to open up some 59 new stores all over the UK in the coming years (Palmer 2005, pp. 35). Insurance In 2003 fiscal year, the company’s Personal Finance attained the landmark of one million motor indemnity policies, making it the greatest growing motor assurance service provider. The Group’s immediate travel insurance policy allows Clubcard holders to purchase their holiday policies at their convenience at the checkout (Palmer 2005, pp. 36). Brand value Profits for the company operations in Asia, Europe, and Ireland have dramatically increased over the years. The company has a robust brand image and is connected with good quality, dependable goods that symbolize excellent value. Tesco’s pioneering way of enhancing the clients shopping encounter has immensely contributed to its success (Palmer 2005, pp. 38). Market leadership in the UK Since the company acquired number one position in 1996, it has developed a winning multi-design strategy that has hastened its advantage. Its sales in the UK have increased tremendously compared to those of Sainsbury’s. Additionally, the report by the Competition Commission’s has made it very hard for a competitor to dispute its scale and has thus successfully scuppered Wal-Mart’s probability of stealing the UK market leadership (Palmer 2005, pp. 40). Tesco on-line Tesco.com is the global largest online superstore with continuous registration of increased sales every year. Tesco.com as of now operates in well over 270 stores countrywide thus covering 96% of the Britain. With well over a million homes nationwide having utilized Tesco’s online services, the platform has become more stronger leading to further development of a stream of revenue (Palmer 2005, pp. 41). The company’s areas of weakness are highlighted in the following section. Reliance upon the UK market Although the global business is still rising, and is expected to add greater amounts to the company’s profits over a couple of coming years, Tesco is still largely dependent on British market. While this may not be a main weakness in the short span, any adjustments in the UK retail industry over the coming years may cost it dearly (Palmer 2005, pp. 42). Debt reduction Tesco has a huge capital outflow program chiefly due to its enormous investment in space for emerging stores. Since its rate of expansion is so belligerent, the company may be left with very little cash to cater for any other operations (Palmer 2005, pp. 42). Acquisitions dangers With a venture valued at over ?23 billion, the company, indeed seem to have enormous firepower. Also, its range of products is immense and almost every acquisition process can be justified, and more so in the UK. While the plug the gap tactic would be useful to Tesco, there is that danger of becoming a perennial acquirer. This tends to decrease the earnings visibility as well as quality (Palmer 2005, pp. 43). QUESTION 2.2 Carry out an environmental audit for your chosen organization Environmental audit of Tesco Company using the PESTEL framework Political factors Tesco is working in a globalized environment with numerous stores scattered all round the world – Hungary, UK, Slovakia, Turkey, Poland, Czech Republic, Malaysia, South Korea, Japan, Taiwan, Thailand, and India. Its accomplishment is thus highly predisposed by political settings of these countries (De Toni & Tonchia 2003, pp. 946). Economic factors High level of unemployment is the most significant aspect of the economy because it reduces demand for services and products. In addition, this state of affairs also adversely shapes the demand requisite to produce such services and products. However, these fiscal factors are beyond the control of the company. However, in the promotion mix and their influence on performance could be intense (De Toni & Tonchia 2003, pp. 947). Social/cultural factors Due to numerous social changes, customers in the UK have adopted an emerging pattern of shopping called ‘one-stop and bulk kind of shopping. Therefore, the company has increased the quantity of no-food goods available in all their stores. Demographic drifts have also highly affected the retail industry in the UK. For example, a decline in the preparation of home meals, the increase in the aging population, and an increase in the number of female workers has seen retailers in Britain shift their focus on value-added products and services. The services and products demanded by clients is a function of the company’s social taming and their subsequent attitudes and beliefs. Furthermore, the attitude of customers towards food is swiftly changing given that they are becoming aware all the more of health implications (De Toni & Tonchia 2003, pp. 949). Technological factors Technology factors have affected the development of the company’s products at many levels. The new technological changes have benefited both the company as well as the customers. In order to facilitate convenient and enjoyable experience during shopping, Tesco stores use technologies including as intelligent scale, wireless devices, electronic shelf labeling, self-check-out machine, and radio frequency identification, etc. (De Toni & Tonchia 2003, pp. 950). Environmental factors Environmental aspects constitute a key area for businesses to act in a communally responsible way. Therefore, Tesco has recognized this trend and has therefore crafted an elaborate ethical stance as well as an effective corporate social responsibility program that is concerned with the finding ways in which the organization can give back to the society or community at large. Furthermore, Tesco is currently willing to avail support to relevant government agencies to minimize climate alterations. Furthermore, Tesco has set up strategies to reduce waste. It is a key element of the management of every store to routinely strive to achieve a balance between the availability of a product and waste (De Toni & Tonchia 2003, pp. 952). Legislative factors Given that Tesco is a global entity, various government regulations and policies have a direct effect on the performance of the company. The government’s policies for lessening of consumers’ power and cartel controls could reduce new entry in the retail business segment. Furthermore, with such controls including imposing limits on access to raw materials as well as license requirements will greatly affect the company’s activities. Also, Tesco has previously supported the British professionals by encouraging branded suppliers to craft exclusive manufacturing and distribution facilities (De Toni & Tonchia 2003, pp. 960). QUESTION 2.3 Explain the significance of stakeholder analysis for chosen organization Significance of Stakeholder analysis by Tesco Without involving internal and external stakeholders, the company cannot successfully implement any strategic change. Tesco needs to begin by first identifying who their stakeholders are, as per the strategic plan to be implemented. Tesco needs to fully understand what financial concerns that these stakeholders have. The most effectual way to engage them is by crafting an effective strategy for communication. Customer satisfaction should be prioritized by making self check out methods easy and understandable to all the users. The company should also understand staff needs as well as their feelings and thoughts (De Toni & Tonchia 2003, pp. 964). TASK 3 Approaches to strategy evaluation and selection QUESTION 3.1 What strategies can be used to achieve substantive growth, limited growth or retrenchment? Growth strategies for Tesco Company In order to realize a sustainable competitive edge Tesco should follow either one of following three Porter’s generic strategies. Tesco offers its services and products to a broad market at the cheapest price and hence, one can authoritatively state that the company does follow the cost leadership strategy to attain competitive advantage. It could be also be said that the strategy assists the company to take control of their costs of operations so well such that the company can manage to price their products so competitively and yet still be able to generate high revenues. It can also be claimed that if a new competitor is to gain entry into the same market with lower prices than those of Tesco, then it would be very difficult for the company to sustain its production costs and profits. Furthermore, if Tesco uses differentiation strategy, then it must continuously strive to offer new services and products with unique features (De Toni & Tonchia 2003, pp. 967). QUESTION 3.2 Select an appropriate future strategy for your chosen organization While differentiation and cost leadership strategies are aimed at the broadening the market, Tesco may decide to offer a smaller line of services and products to the large market or confine their services and products to specific market segments thus pursuing a strategy called focused or niche strategy. Given that Tesco is entering in emerging markets e.g. China and Japan, it can as well serve as a key development driver of the company’s revenue and expansion strategy. Tesco’s interest in Japan is expected to continue growing given that Asian markets are proving to have a potential courtesy of an increased trend retailing and consumer spending. Another strategic option available to Tesco would be in crafting international alliances with the existing local retailers in the penetrated Asian markets (Palmer 2005, pp. 47). TASK 4 You are required to discuss the implementation process for the chosen strategy QUESTION 4.1 Compare the roles and responsibilities for your new suggested strategy implementation process Roles and responsibilities during strategy execution process The crucial departments to be concerned in the implementation of strategy at Tesco are the marketing as well as human resource departments. Roles and responsibilities of the marketing department: (1) Retain present customers and draw new ones through exhaustive needs assessment process. (2) Review marketing activities with the management. (3) Prospecting new sites for premises and then reporting on the chosen ones. (4) Develop annual promotion plans with each department. (5) To increase sales by analyzing market demand. (6) Acquaintance with goods on sale. (7) Investigate new products. Roles and responsibilities of the finance department: (a) Control of inward and leaving cash flows. (b) Payment of wages, invoices, and salaries. (c) Undertake budgeting as well as performance appraisal. (d) Preparation of financial statements. (e) Giving advice on prospective investments. (f) Expenditure control. (g) Calculation of financial needs of Tesco Palmer (2005). QUESTION 4.2 Evaluate resource requirements to implement the suggested strategy Resource allotment is an integral ingredient of implementing strategy. At Tesco Company, resources require to be prioritized with the finest opportunities in the most valuable way. The key resources during the allocation process include: (1) Finance: a budget can aid setting out of the finances needed for the strategic plan. (2) Human resources: this resource will only be successful if personnel are considered as a key factor by the company. (3) Materials: in order to carry on with operations, an organization requires a regular input of materials. (4) Time: it should be apportioned in a well-organized manner (Johnson & Scholes 2002). QUESTION 4.3 Discuss targets and timescales to achieve new strategy in your chosen organization and how they will monitor the progress of new strategy According to Palmer (2005) it is imperative to have monitoring measures when implementing any strategy as the feedback can be used to: assess resource allotment choices; scrutinize implementation progress; appraise performance of staff in achieving execution of tasks; monitor environmental modifications from those which were projected; and finally provide a response mechanism. A strategic control framework can be utilized to monitor the key elements of a give strategy plus its objectives. To acquire the best from any strategic control mechanism the following rules can be followed: focus on key performance pointers; differentiate between business, corporate, and operating levels of information and then check where relevant; and finally, avoid relying so much on quantitative data. Following is an explanation of how Tesco can use targets and timescales during the process of implementing an innovative advertising strategy: Strategic objective 7 – to launch a novel advertising campaign for Tesco online company. The marketing division will especially take on most of the duty for implementing this strategy. Key activities: identify three advertising companies for the new campaign; ask them to submit proposals; interested firms present their proposals to Tesco’s marketing manager; the best proposal is chosen and the competing firms are informed of the decision; the chosen agency submits its proposal to Tesco’s management; ads start appearing on TV and in store; measurement of the success of the campaign in terms of viewer recall as well as increase in sales. Target – timeframe 1 – Review of previous programs - 1/2/2012; deciding on three companies - 2/2/2012 2 – Preparing campaign specifications - 7/9/2012; contacting three firms - 10/9/2012 3 – The firms work on proposals - 14/9/2012; the then present their proposals – 11/3/2012 4 – Selection of best proposal -14/3/2012; meeting the winner – 16/3/2012 5 – Fine tuning the proposal – 17/3/2012; present proposal to management 28/3/2012 6 – Promotion displays availed in stores - 2/5/2012; ads aired on TV - 2/5/2012 7 – Gathering of recall measures of campaign - 4/7/2012; sales data evaluation - 8/7/2012; preparation of campaign report – 1/8/2012. Through breaking down the original strategic objective into more convenient steps, it becomes easier to the progress of the strategy implementation process. References De Toni, A & Tonchia, S 2003, ‘Strategic planning and firms competencies: traditional approaches and new perspectives’, International Journal of Operations and Production Management, vol. 23, (9), pp. 947-976. Hammett, S & McMeikan, K 1994, ‘Tesco competitive management development’, Executive Development, vol. 7, (6), pp. 4-6. Johnson, G & Scholes, K 2002, Exploring corporate strategy, 6th Ed, Prentice Hill, London. Palmer, M 2004, International retail restructuring and divestment: the experience of Tesco’, Journal of Marketing Management, vol. 20, (9), pp. 1075-1101 Palmer, M 2005, ‘Retail multinational learning: a case study of Tesco’, International Journal of Retail and Distribution Management’, vol. 33, (1), pp. 23-48. Read More