How Companies Use Their Structure, Culture and Team Resources to Develop Competitive Advantage - Essay Example

How companies use their structure, culture and team resources to develop competitive advantage Organizational culture is a term that stands for the values, behaviours, beliefs or perceptions that contribute to the well being of employees within an organization. It includes the expectations, values and experiences that hold the entire organization together. Understanding of the organizational culture ensures less internal conflict and enhanced harmony in the organization. The culture of the organization should be designed in such a manner that supports continuous improvement, seeks to improve their employee’s style of job performance and in the long run developing quality awareness. Culture is one of the most important building blocks of an organization and for this reason it is imperative that the organization work very hard to uphold it. Various studies indicate that most of the successful companies have strong cultures embedded in them. However, for them to be this successful, a number of conditions have to be effected. The effect of organizational culture relies partly in how strong the organization is and can be measured by how extensively and profoundly employees hold the company’s governing values and assumptions. In organizations with strong cultures, these values are institutionalized through well-established artefact and this renders them very difficult to alter. Some of these cultures may be traced to the foundation of the company through its founding father’s values and assumptions. Organizations that seek to obtain the commitment of their employees require them to identify with the values, beliefs, attitudes, norms and artefact of the organization, hence the need for organizational culture. Johnson and Scholes (1999) put forth the cultural web as a useful tool to identify the culture embedded within the organization. Figure 1. Culture Web Source: http://www.mindtools.com/pages/article/newSTR_90.htm There are seven elements in the cultural web that are interlinked while the commonly held beliefs, attitudes and values also known as ‘the paradigm’ are at the centre. The seven elements include routine, symbols, power structures, rituals, stories, control systems, and organizational structure. Titiev (1959) asserts that learning and sharing culture is central to culture definition. The culture of an organization can be defined as: “A pattern of shared basic assumptions that the group learned as it solved its problems of external adaptation and internal integration, that has worked well enough to be considered valid and therefore, to be taught to new members as the correct way to perceive, think, and feel in relation to those problems (Schein 1990). In general, as organizations grow they face two basic challenges and these include integrating individuals into an effective whole, and also adapting effectively to the surrounding environment in order to thrive. As organizations find solutions to these challenges over a period of time they learn collectively and develop a set of shared assumptions and beliefs that are jointly called culture. Drucker suggests that managers must be able to communicate information quickly and clearly. They are also obligated to motivate people and ensure the responsible participation of managers, professional specialists and of all other workers (Drucker 1954). Tesco, the UK's leading supermarket group established in 1924 by Sir Jack Cohen in England boasts of a decentralized organizational structure. In this sense, each of the Tesco stores has a store manager who is responsible for making decisions about their particular store. This store manager also has a duty of reporting to a regional manager. Tesco employs this method since it ensures peace of mind for the top managers who do not have to worry about simple decisions that occur on a daily basis in the stores. The store managers also feel a sense of empowerment as they have been put in a capacity of making decisions on their own and required changes in their management styles that they feel would work best for their stores in terms of employee output. Tesco's slogan "Every little helps" was first coined to show the organization’s commitment to customers but is now adopted whilst training staff as well. This is because they have employed a belief that any intervention will lead to increased knowledge in the workforce. Consequently, the management ensures that there is communication by offering weekly newsletters and monthly company videos which sensitize the workforce. By doing this employees become more motivated to work as they know exactly what is going on in the organization and they feel highly valued enough to be considered in making decisions that affect the entire organization. This in itself brings out productivity and better service in workers. According to Drucker, managers of tomorrow will have to develop and obtain a whole new set of tools on their own. They need to create adequate ways of measuring performance and results in order to attain their business objectives. These economic tools will be instrumental in making decisions today that will affect the organization for a long-range tomorrow (Drucker 1954). According to the API Tesco case study, it is Tesco’s goal to have employees who are well motivated and treated in the best way possible to produce an environment that is based on trust and respect. To put this in effect, it has performance indicators to project whether they are on track or not. In Tesco the store managers are given monthly goals from the senior managers to enable them stay on track and achieve results. The organization believes in communicating and clearly defining the objectives to its staff. Discuss the distinction between Mission and Objectives. Illustrate how the mission for Tesco PLC could be translated into strategic objectives. There are several differences between an objective and a mission statement, however subtle they may be. An objective can be defined as a goal/target that is aimed for in a given period of time and can be categorized into general and specific objectives. An objective is more grounded and easily attained as compared to a mission statement. A mission statement is more general and expresses the big picture. It is simply a broad but simple statement that puts forth the business’ defined vision. It includes a number of objectives and puts into words and tone the vision for the business that have to be attained for the whole mission to be realized. Objectives are basically designed to help achieve the mission statement. Mission statements usually do not involve money and are the non-financial achievements that the CEO creates for his company or is employed to help attain. There is no doubt that stakeholders’ interests directly affect the successful operation of the organization. This is well represented in the Tesco mission statement which is to create value for customers to earn their lifetime loyalty. In any organization, two types of stakeholders exist and these include the internal stakeholders who can either be employees, owners of the organization, shareholders or managers. Internal stakeholders are generally directly involved in the financial elements of the organization. External stakeholders include the government, consumers/customers, the general public and pressure groups. Freeman describes a stakeholder as   “Any group or individual who can affect or is affected by the achievement of the organizations’ objectives” (Freeman1984, p.46). The Tesco mission statement can be broken down into objectives since the mission statement is the broad view of what a company seeks to achieve. Tesco's objectives can therefore be put forth in direct relation to its mission statement. In order to create value for customers, the products sold in the stores have to be of good quality and affordable as well. Therefore the first objective can be to maximise profit and to provide goods/services that are of good quality and affordable to consumers. Another objective in line with the mission would be to increase sales, do better than competitors and to cut a niche for themselves as the number one retail company in the whole of UK. This alone can ensure that customers keep flocking the stores as they are assured that they are shopping at the very best store and therefore are receiving the best service as well as quality products. Additionally, Tesco’s mission statement can be broken down into an objective that handles the type of products that would be sold to customers as well as expansion of the retail services in all their markets. In order to earn loyalty of customers one must be endeavour the heart of the community and get them involved in ensuring that they help support the growth of the company. One objective therefore could be to put community at the forefront of everything they do. This translates into corporate social responsibility which in the long run presents a positive image for the company. Analyse the competitive challenges facing Tesco PLC in the UK market using appropriate models and examples from the case study. Porter's five forces framework: Threats of new entrants: Four big supermarkets in the UK make up 75% of the total market. These are Tesco, Sainsbury, ASDA, Liddell. 10% of the total market is taken by Waitrose, Somerfield and Budgens. Research shows that there has been a trend in the way people shop in the UK. Customers now opt to do all their shopping at one place also termed as “one stop shopping”. This has prompted the majority of grocery stores to transform into one stop supermarket. As a result, this poses huge competition for any businesses e.g. butcheries or food shops that may be existent around the environs of the supermarket. It may be very difficult to maintain such a shop business due to the huge capital investment involved. In order to maintain a good position in the UK market, Tesco has had to invest hugely on the development of its existing infrastructure. Bargaining Power of Supplier: This force represents the supplier bargaining power which can be influenced by major grocery chains and the accompanying fear of losing the businesses they own to the large supermarkets. This therefore further strengthens leading positions of big stores like Tesco and Asda. In these big stores, the supplier bargaining power may get affected as the suppliers fear the resulting loss of customers or the inability to operate their business in area if they state their own conditions of bargaining. Tesco is known to negotiate with suppliers in order to get the very best competitive prices as compared to the existing small food chains (Ritz 2005). Bargaining Power of Customers: According to Porter in his theory, the more products that become standardized or undifferentiated, the lower the cost of switching and consequently more power is surrendered to buyers. (Porter 1980). Tesco’s club card scheme is the most successful strategy for retaining customers and significantly increasing the profit margin of the business. In order to successfully meet the customer needs, customize service, make certain significantly lower prices, better choices and assurance of constant flow of in-store promotional products make it possible for Tesco to retain its customer base. In response to the huge changes occurring in the food chain stores as a result of change in the behaviour of customers Tesco has resolved to keep more non food items in the stores. It has also ventured into new markets which include pharmacies, retail banking and phone shops. Threats of substitutes: Porter suggests that substitution can substantially reduce the demand for certain particular products since there is the threat that consumers will switch to the alternative product (Porter M 1980). This trend has been observed in the recent times in the grocery industry where consumers opt for substitute products when they do not get the particular product they were looking for. Small stores have been springing up in the industry and therefore stores like Tesco have had to find ways to take over these small stores and open up big stores in the major towns (Ritz 2005). Bargaining Power of Competitors: Through its loyalty club, Tesco has been able to get a lot of customer information and this has been instrumental in improving customer relations. Opening up stores in markets where growth is difficult and consumers are increasingly coming up with new demands has prompted big stores like Tesco to take further steps and invest huge amounts of money information systems that allow them get the type of information that can help them address this (Ritz 2005). References Drucker, Peter F., The Practice of Management, p. 12, (1954) Freeman, R. Edward (1984). Strategic Management: A stakeholder approach. Boston: Pitman. ISBN 0-273-01913-9. Johnson, G & Scholes, K. (1999). Exploring Corporate Strategy. (5th ed). Prentice Hall. Marr, B (2009) Delivering success: How Tesco is Managing, Measuring and Maximising its Perfomance, Management Case Study, The advanced performance Institute (www.ap-institute.com). O’Farrell, G. (2006) Cultures and Values in the Queensland Public Service, Speech presented at the QueenslandRegional Heads Forum Annual Business Conference, Conrad Hotel, Broadbeach, 29 March 2013. http://www.qrhf.gov.au/04_conferences/georgeofarrell.presentation.pdf. Ritz (2005) Store wars, Business Review, Vol. 11, April, pp.22-23; Schein, E.H.(1990) ‘Innovative cultures and adaptive organisations’, Sri Lanka Journal of Development Administration, 7(2), 9-39. Schein, E. H. (1990) Organizational Culture, American Psychologist, 43 (2), 109-119. Titiev, M. (1959) Introduction to Cultural Anthropology, New York: Henry Holt & Company Watson, T.J. (2006) Organising and Managing Work, UK: Pearson Education Limited. Read More