An Analytical Report of Tesco PLC - Essay Example

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An Analytical Report of Tesco PLC Table of Content Introduction..............................................................................................................3 1.0 Elements of Tesco PLC's Strategic Background................................................3 1.1 Tesco's Core Vision & Organisation.......................................................4 1.2 History of Tesco …...............................................................................4 1.3 Sectors of Operations of Tesco...............................................................5 1.4 Financial Data of Tesco...........................................................................5 1.5 Legal Status of Tesco..............................................................................6 2 Organisational Structure of Tesco PLC.................................................................7 3 Management Systems and Structures of Tesco PLC..............................................8 4 Marketing Strategy of Tesco PLC..........................................................................8 4.1 Product.....................................................................................................9 4.2 Price.........................................................................................................9 4.3 Promotion.................................................................................................9 4.4 Place.........................................................................................................9 4.5 Process......................................................................................................10 4.6 People.......................................................................................................10 4.7 Physical Existence....................................................................................10 5 Human Resource Management Systems of Tesco PLC..........................................10 6 Supply Chain Management System........................................................................12 Summary and Conclusions........................................................................................12 References..................................................................................................................14 Introduction This paper is an analytical report of the strategic structures and marketing systems of a given organisation. The paper therefore focuses on Tesco PLC, a UK based international grocery company. The paper examines some important components of Tesco's business structures and leadership structures. In analysing the components of Tesco, the following objectives will be sought to be attained in the study: 1. The core vision, mission and strategic systems of Tesco PLC 2. The marketing and operational systems for the realization of Tesco's strategic plans. 3. An examination of the human resource, and supply chain systems that link Tesco PLC to its external environment The paper will involve a careful analysis of information taken from various sources that are relevant to Tesco's activities and expansion over the past nine decades that it has existed. The research will focus on some primary sources like the Tesco Annual Report of 2011. The paper also draws insights from the Tesco Website about various elements of the organisation. Additionally, secondary sources like books and journals are used to provide a deep insight into the company. The primary focus of the paper is on the UK operations of Tesco. However, where necessary, the research will cover aspects of Tesco's international operations to give a better insight into trends and ideas of the company. 1.0 Elements of Tesco PLC's Strategic Background Strategy is defined by Johnson, Scholes & Whittington as the “long-term organisationwide plan for a corporate entity that is set by the top level management” (2005). In this context, organisational strategy is a body of plans that are made by an organisation to meet the fundamental objectives of the organisation. In other words, the strategy of an organisation provides the framework within which the vision and mission of an organisation is realised. Strategy is instituted by top level management like the Board of Directors and Chief Executive Officers because of the importance of strategy. Due to the fact that strategy relates to top-level management, it affects the longer term view of the organisation. Strategy also determines the activities of all the departments of an organisation. 1.1 Tesco's Core Vision & Organisation Tesco PLC has a vision of providing top level retail services to customers in the UK and around the world (Tesco Annual Reports, 2011). This vision has led Tesco to put in place an objective of developing good shopping outlets and other related centres to provide the best of retail and other services to consumers in the UK and beyond. Tesco Public Limited Company is a global retailer and operates in 14 countries around the world (Tesco Website, About Tesco Page, 2012). Tesco employs a total of 492,000 consumers around the world. 1.2 History of Tesco What is now known as Tesco PLC with a multi billion pound revenue started in 1919 as a small outlet by Jack Cohen (Tesco Website, History Page, 2012). The main focus of Tesco in 1919 was to sell surplus groceries from other supermarkets in North London. In 1924, Tesco produced a teabag that was branded under the name Tesco. Sales continued modestly until Tesco acquired its first shops in North London in 1929. In 1932, Tesco became a private limited company. With the new capitalisation system, Tesco went on to acquire a new land in London where it built up a warehouse that linked Tesco stores with the distributors. After the Second World War, Tesco was re-incorporated and it became a Public Limited Company. It sold shares to the public in 1947 and through that, Tesco expanded. In 1956, Tesco launched its first self service supermarket. Later on, Tesco acquired a company that had 212 stores in North England and renamed them after its brand in 1960. Between 1964 and 1965, Tesco acquired 144 new stores. In 1974, Tesco added a petrol station and blended the filling stations with its shop system. The 1990s was an era of internationalisation for Tesco. The company opened up branches in Northern Ireland, Poland, Czech Republic and Slovakia in 1996. In 1998, Tesco opened up retail outlets in Asia. It started with Taiwan and Thailand in 1998 then to Malaysia in 2002 and then to Japan in 2003. Tesco entered China in 2006. Tesco entered India and South Korea in 2008. Meanwhile, Tesco opened up an online sales outlet via Tesco.com in 2000. This was to help the company to sell to customers over the Internet. Tesco also added Tesco Bank to its portfolio in 2006. This was to provide financial services to the various customers of Tesco in the UK. Tesco also added Tesco clothing to its operations in 2009. There are other smaller business entities and units of Tesco like the mobile brand and other services that provide some form of income to the company. 1.3 Sectors of Operations of Tesco Throughout Tesco's history, the Retail Unit has been the dominant and main component of the business. The retail service includes the sale of groceries via Tesco's huge chain of supermarkets. There are also units like Tesco petroleum which is considered another retail service to the company. Tesco Bank which provides financial services to customers. This service includes insurance and credit services. Tesco Clothing provides branded clothes for children and adults via outlets around the world. 1.4 Financial Data of Tesco In 2011, Tesco UK made a total of ?40.766 billion in revenue from its 2,715 stores in the UK (Tesco Annual Report, 2011). In the United States, Tesco made ?455 million whilst in Asia, it made ?10.278 billion. Tesco Bank made a total of ?919million in revenue. The Tesco PLC Group declared a profit of ?3.7 billion after tax. UK operations accounted for 68% of the total profits made. 1.5 Legal Status of Tesco Tesco is a Public Limited Liability Company. This means that it is made up of investors who have agreed to pool their resources by purchasing shares in the company. The liability of the owners is limited to the value of the shares that they have invested in Tesco PLC. The company is ran by directors who control the business' operations and activities. Tesco PLC is listed on the London Stock Exchange and the share price as at today February 21, 2012 is 321.20p. Tesco PLC expanded into other parts of the world by setting up new operations and/or the acquisition of shares. 2 Organisational Structure of Tesco PLC The organisational structure of Tesco PLC is made up of the Board of Directors who owe a direct responsibility to the shareholders and the Chief Exectuive officer and his deputies who run the day-to-day activities of Tesco (Fernie 2005). The Chief Executive Officer of Tesco PLC supervises the operations and activities of the various components of the company. There are Regional CEOs who head the affairs of the various operations in other continents around the world. The headquarters also has Offers who head Operations, IT/ECommerce, Corporate and Legal Affairs, Finance, Human Resources and Marketing. In each regional jurisdiction (Europe, Asia & North America), there are functional leaders who head the regional Operations, IT/Ecommerce, Corporate and Legal Affairs, Finance, HR and Marketing. Under each of them, there are specific designated units that run various affairs for the company. 3 Management Systems and Structures of Tesco PLC The Board owe a specific fiduciary duty to the shareholders. They therefore have the duty of supervising the activities of the Chief Executive Officer and his subordinates. The Board of Tesco has a number of committees that play specific roles. The 2011 Annual Reports shows that there is the Risk committee, Nominations Committee, Remuneration Committee and the Audit Committee at Tesco. The Board set standards for performance and other targets. It is the duty of the Chief Executive Officer to ensure that all the targets and expectations are met. Philip Clarke, who is the current CEO of Tesco spent his working life with the company. He acted as Director for the Asian and European operations (2011 Annual Report). Clark is said to blend a series of conservative and aggressive trading tactics to ensure that he gains the growth targets that are set by the board of directors. 4 Marketing Strategy of Tesco PLC Tesco stated in the 2011 Annual Report that its targeted market include the various households. That is why Tesco has shops and supermarkets that are meant to provide a one-stop shopping system for ordinary consumers and purchasers. Tesco also has a corporate wing that provides some of its products for third party entities who order in bulk. This is quite common in its operations overseas (Sople, 2008). The 7Ps of Marketing include some key elements of marketing. It entails Product, Price, Place, Promotion, Process, People and Physical Existence (Worsam, 2003). Each of these factors define the kind of marketing system and strategy that is used in a given business. Product refers to the kind of offering or benefits that a business presents to its customers (Kumar, 2010). Price refers to the kind of actual and notional costs that consumers part with to get their product. Place refers to the environment within which the products are sold. Promotion is about the campaigns and activities that a business undertakes to attract consumers. Process refers to the steps and systems that a business goes through to serve consumers. People is about the kind of employees and staff who serve consumers. Physical existence refers to the kind of evidence that consumers get about the product offering. 4.1 Product In the case of Tesco, the Products offered are mainly home products. These products are everyday items that are sold in retail outlets. In recent times, Tesco has added financial services and other services which they provide as retailers to ordinary consumers in the UK. Most of the products Tesco sells are home brands that bear the Tesco logo. 4.2 Price Cost leadership is at the heart of Tesco's strategy (Annual Report, 2011). Tesco offers cheap and competitive prices to consumers in the UK. They attain this through a system of economies of scale and other methods of controlling production systems. Tesco prices are low and they have some classifications for consumers of different backgrounds. 4.3 Promotion Tesco is involved in various campaigns around the year. They undertake adverts and distribute leaflets and brochures to households to tell them of offers and other activities. Tesco also has an effective promotion system by way of its plastic bags which are branded strongly with their name. Other campaigns and social responsibilities are fairly promoted on the media to create awareness of their activities. 4.4 Place Tesco operates through a chain of shops scattered around the UK and nations it has a presence. Tesco opened up 200 new stores in 2010/11 to provide more opportunities for shoppers around the globe. Tesco shops always have standards that include signage and other safety factors which make it easier and convenient for shoppers to purchase their goods from Tesco. 4.5 Process Tesco's process involves wide diversity of outlets through which consumers can purchase goods for them. Tesco has Mega shopping centres which have large and varieties of products that consumers can purchase from. These shops have convenient checkout systems for each consumer to pay either by cash or by debit card. There are also smaller shopping centres that have products that are in demand in the local community within which they operate. Most of these shops offer a great display system and consumers can shop with their carts and check out conveniently. The online portal for Tesco is also convenient. The usability element of Tesco's online sales outlets ensure that consumers can compare prices and also purchase with a wide diversity of online payment systems. 4.6 People Tesco has 492,000 employees who serve millions of customers each week. The 2011 Annual Report shows that 90% of the employees are committed and 71% are satisfied with their positions. This confirms the fact that Tesco PLC has a stream of motivated and friendly staff members who are willing to help and provide convenient services for consumers. 4.7 Physical Existence The Tesco signage is very popular in the UK and around the world. The Tesco brand is highly associated with groceries and household brands because of the ability of Tesco to display and create strong appeals for consumers. 5 Human Resource Management Systems of Tesco PLC The Annual Report of Tesco PLC identifies that there are 290,000 employees in the UK (2011). This makes Tesco the largest private sector employer in the UK. The report also indicated that Tesco has a programme called the Regeneration Partnership which is a system of recruitment. The Regeneration Partnership ensures that Tesco maintains a long term employment vision. Under the programme, each and every employee that is offered a job in Tesco is given a face-to-face interview with the HR department of Tesco. Additionally, Tesco PLC offers eight weeks training for every new hire. Tesco's Regeneration Partnership is a very productive system. It enables the company to attract and select only the best employees in the country. This means that they have the world class and most productive people at all times and this ensures the best results. Secondly, eight weeks of mandatory training is something that most companies might not be able to do because it has cost implications. On the other hand, Tesco PLC is able to acquire a lot of benefits by training their employees thoroughly. This complements its vision of hiring people to stay with the company for a long period of time. Thus, the face-to-face interview system allows Tesco to choose only the committed members of the public. When they are chosen, they are given a long training which enables the employees to remain commited for a long time. Whilst they work and work efficiently, Tesco gains benefits that cover the costs of the eight weeks of training. Wilton (2003) identified through a survey that there are some key elements of Tesco PLC's human resource successes. He identified that: 1. Employees work as a team 2. Employees trust and respect each other 3. Employees listen to each other and support each other 4. Employees share knowledge and experience. This means that over the years, Tesco PLC has built an organisational structure which allows the employees to interact and co-exist in a very effective and efficient manner. This is the basis for the success and high productivity of Tesco's staff members. 6 Supply Chain Management System Tesco's 3D Logistics Programme is a very fast and efficient supply chain management system that enables Tesco to link up with its suppliers. Under the program, Tesco maintains distribution centres that are linked with primary and secondary distributors (Fernie & Sparks 2004). The distribution centres have real-time connection with Tesco shops as well as the primary and secondary suppliers. The shops always send information to the distribution centres as and when they deplete stocks. Tesco's distribution centre orders the replenishment of stocks in the shops as soon as they reach the re-order levels. The distribution centres also maintain real-time information exchange with the suppliers. Primary suppliers are high volume, regular and close partners that supply to the distribution centres. The Secondary suppliers are low volume and occasional suppliers. So once stocks level are low and primary suppliers do not have stocks, the distribution centres send orders requests to secondary suppliers. Due to this, the Tesco distribution centres which are located strategically around the UK and nations within which Tesco operates are always in custody of sufficient stocks. They therefore supply to the Tesco stores in a timely manner. In staying in touch with customers, Tesco has a wide variety of shops around the UK that are in different formats, ranging from hypermarkets to super markets and downtown stores as well as smaller community based shops (Sople, 2008). This enables Tesco to provide the best of services for customers. Summary and Conclusions Tesco is a leading chain of retail shops that has its headquarters in the UK and branches around the world. Tesco has a vision of providing grocery and every day products and services to consumers and households. Tesco began modestly in 1919 as a sole proprietorship but evolved to become a private company and a UK public company. In the 1990s, Tesco embarked on an internationalisation strategy and utilised e-commerce. Tesco is now a multi-billion pound global business that has outlets around the globe. Tesco is run by a board of directors and supported by the CEO who has other officers under him. The CEO and officers' structure is duplicated in regions around the world. Tesco's marketing systems are based on the use of convenient outlets to sell high quality products at low costs to consumers. It has an enhanced brand image. Tesco maintains a personalised recruitment and selection process as well as an intensive training system. The supply chain management ensures that there are strategic distribution centres around the country and these centres use real-time communication tools and systems to ensure that stock levels are monitored and replenished on time. References Fernie John & Spark Leigh (2004) Logistics & Retail Management: Insights into Current Practices & Trends London: Kogan Page Fernie John (2005) International Journal of Retailing & Distribution Vol 33 Issue 1. London: Emerald Group Publishing. Kumar Singh (2010) Marketing of Hospitality & Tourism Services New Delhi: Tata McGraw Hill Education. Johnson Gerry, Scholes Kevan & Whittington Richard (2005). Exploring Corporate Strategy. London: Financial Times Prentice Hall. Sople Vinod (2008) Supply Chain Management New Delhi: Pearson Education India Tesco Annual Reports (2011) Annual Report & Financial Statements 2011 London: Tesco PLC Tesco PLC (2012) About Tesco Available online at: http://www.tescoplc.com/about-tesco/ Accessed: 21st February, 2012. Tesco PLC (2012) Our History Available online at: http://www.tescoplc.com/about-tesco/our-history/ Accessed: 21st February, 2012. Tesco Price Check (2012) Tesco Price Check Website online at: https://www.tescopricecheck.com/PriceCheck/Pages/Default.aspx Accessed: 21st February, 2012 Wilton Nick (2010) An Introduction to Human Resource Management London: SAGE Publications. Worsam Mike (2003) CIM Coursebook 02/03 Effective Management for Marketing London: Taylor & Francis Group. Read More