Strategic Management - Tesco - Essay Example

Strategic management Contents Contents 2 Strategic capabilities 4 Core competences 4 Resource-based view 5 Organizational culture 6 Global and/or sustainable operations 8 Methods to succeed in different strategic options 9 Diversification 9 Internationalization 10 Innovation 10 Strategy in action 11 Strategy development 11 Strategic change 12 Tichy’s four main triggers for change 12 Kanter, Stein and Jick’s three dynamics 13 Perspective approach 14 Levis Model 14 Emergent Approach 15 Different frameworks 16 VRIN 16 Valuable 16 Rare 16 Inimitable 16 Non-substitutable 16 Benchmarking 16 Value chain 17 Stakeholder analysis 18 SWOT 18 Strengths 18 Weakness 18 Opportunities 19 Threat 19 Generic strategies 19 Differentiation 19 Cost Leadership 19 Focus 20 Cultural web 20 Reference 21 Strategic capabilities Tesco has huge amount of resources and it has great capabilities in its overall business process because of which it has been able to become one of the global leader in the retail business. The company has grown at a huge pace because of the good utilization of the resources and also making its capabilities work in the most productive way. The strategic capabilities for the company is been analyzed using its core competencies and also through the analysis of resource-based view model. Core competences The business operation of the company does operate in a very efficient way and they make sure that they get maximum competitive advantage over the other competitors present in the global market. It does use all its operational activities in a very effective manner. The biggest positive advantage that the company has is that the way in which the company has understood the requirements of the customers in different locations. The way they have been able to achieve the customers satisfaction is an incredible achievement for the company. Tesco is passionate and also successful in building and developing the skills and talent among the employees from their own resources itself. The organizational culture followed in the company has allowed each employee to work in a very efficient manner and also as a single team. All the employees do work towards a common goal and objective. The company has also got a huge competitive advantage in the way it adapts itself to the changing market environment and thus the business process is very flexible in Tesco. The huge capital that the company has in its balance does provide Tesco with lot of stability and also take decisions which have lots of risks involved but with their success the company gets lots of benefits. Thus these core competencies for the company does help the company in a huge way as these factors cannot be imitated by the other competitors in the same market. Resource-based view This model of resource-based view does puts lots of focus on the way the internal capabilities of the organization is been utilised by the company for achieving its goals and for getting competitive advantage in the global competitive market. The internal capabilities of the company shows the way the company can make its strategies that can provide the company with lot of competitive advantage over the competitors. These internal capabilities of the organization do help the company to create value chain for the stakeholders and also for the customers. In Tesco the internal resources are the employees, equipments, cash flow and other resources. The company does make sure that all the internal resources of the company are been utilised in the best possible way and in most efficiently and productive way. This helps the company to get a lot of competitive edge over the competitors as the amount of wastage is less and thus the cost is also been reduced by a huge extent. In UK among the top food retailers, TESCO is the largest one. The company has approximately 2,320 stores across the entire world spreading in different countries. In UK itself TESCO has around 1,870 stores and rest of the other stores is been located in Asia and Europe. The company has a wholly owned online service Tesco.com which is been operated by the company itself providing the online buying service to the customers. It has its headquarters in UK and the company operates both in offline and also online mode for providing good service to the customers. The company operates under four brand names having its presence in the global world. The four brands under the company are Superstore, Extra, Express and Metro. It sells around 40,000 varieties of food products, non-food products and also clothing. The company not only has other brand products but also has products labelled with its own brand name. It does offers to the customer’s products labelled under its own name at basically three different levels of finest, normal and value. The prices of the products are been set based on the category. The company gets 50% of its revenue from the sales of its own brand products. In UK, the company has net revenue of £43.6bn with a 1.8% growth from the previous year. The company over the years since the time it was been formed has kept growing at a good pace and has now become one of the leader in the supermarket and food retail industry in the competitive global market (Johnson, Scholes and Whittington, 2005, pp. 45-50). Tesco has continuously adapted to the chaining market demand and also to the technological changes that take place from time to time. It has adopted the latest technology in their business operations that can help the company to have a continuous growth in their business. It has spread its presence and has continued to explore new markets looking to attract more number of customers and grow in global market creating a huge market opportunity for itself. Tesco thus utilises all its internal resources in the best possible way to make sure that it achieves maximum productivity and also maximum customer satisfaction. Both these factors will give a lot of competitive advantage to the company over the competitors present in the same industry. Organizational culture Tesco has got its presence in many countries across the world and has huge number of employees. Having a proper balance among all the employees and also maintaining a good control over them to see that all the employees work in the most productive manner is very important for the company. The organizational culture maintained in the companies is very important as the company needs to see that all the employees are highly motivated and inspired to work effectively and in most efficient way. Tesco has maintained a separate Corporate Steering Wheel which is been shown below. In Tesco the organizational culture been maintained is very friendly and also a flat structure is been used which allows all the employees feel very involved with the company’s business operations. The decision making process is also very good as all the employees are actively participated in decision making and this results in getting many innovative and creative ideas for the company’s growth. All the individual employees are been treated with lots of respect and the job is been made very interesting for the employees which makes them work without any pressure and also in an efficient manner. They have a separate framework for calculating the performance and the employees are been provided the rewards based on their performance which does create a lot of motivation for the employees as they are been motivated and thus enhance their level of work limit. In Tesco the employees are been provided with extensive training and development programs to enhance the skills of the employees and increase their productivity by a good level. Looking at the case it can be seen that Tesco in UK over the last two years has sold huge amount of products and most of the products that have been sold are been the own labelled products. The company has even entered 10 more countries and also eyes to explore the market of China. The company has around 20% of the grocery market in UK and only 5% of the non-food market, thus the total share of total retail is just 12.3% of the total grocery market in UK. The journey for the company has not been as smooth as it has faced many problems along its whole journey. Around 10 years ago the company did face a lot of problem related to decline in its sales and also slow growth because of the new low costly food retailers did enter the market of UK from Europe. Thus made Tesco to make new plans and also come up with new strategies which became a big success for the company. Global and/or sustainable operations Tesco has grown at a fast rate in the overall global market and has got its presence in most of the countries in the entire world. The company has been able to maintain sustainable operations in the entire global market by using the latest of technologies in its business operations. It has been using the concept of cloud computing to make sure that it has got control over all the stores and the flow of information is also been done very easily. The cloud computing has helped the company to convey and spreads across the message from one place to other in a quick time and also calculate the amount of sales of each and every particular items. The use of other information system in its business operation has allowed the company to maintain a good record of the stock of items and also make it possible for the company to see that there is no shortage of any kind of item in any of its store across the entire globe. The company looks forward towards growing its core business of food-retailing in UK and also keep expanding its non-food retail businesses in other parts of the globe so that they can continue to have a constant growth in their business process. The company operates based on the steering wheel that is been shown above. It has basically 5 factors towards which Tesco has got its main focus. Among the five factors the operations is the major factor as in this the company makes sure that all the activities that the company does are been accomplished successfully on the first attempt only and makes attempt to see that the they are able to save time and also money in every step by making sure that they have a very efficient and high productive operation process. Tesco thus make sincere efforts to see that they have very efficient and good operations to make sure that they are able to achieve maximum customer satisfaction. This also enhances the company to grow their business in the global market and expand its business exploring new markets. Methods to succeed in different strategic options Diversification Tesco has looked to diversify its business towards non–food items retail and Tesco finance service also. It has made attempts to grow its business in different markets by including clothing and non-food items along with food items in its product list. Tesco has looked to maintain its core business of food –retailing in UK and has diversified into other sectors in the stores in different parts of the world. The company had to diversify into other sectors because it had to explore new markets in the global market. With the increasing competitive market environment the threats for the company has also increased, thus it had to diversify into other business sectors like non food items and clothing to get a competitive advantage over the other retail stores. Internationalization The company was been started in UK and now it has got its stores located in many other countries. It has looked to explore new market and also expand its business across to other markets. Tesco has explored its business in many new countries in Europe, Asia and other parts of the globe. It has looked to start its business in France and also other countries and has explores the market by creating its market share in the country. Tesco is looking to enter into China market as it sees huge opportunity in China. The increasing demand of supermarkets among the customers in the whole world has influenced Tesco in a huge manner to expand its business across to all the different countries. Innovation Tesco relies heavily on the new innovative and creative technology developed in the external market. It does encourage all its employees to come up with new and innovative ideas for making the improvement in the company’s business operations. It has inbuilt cloud computing system in its business operation to make sure that the information flow is been done successfully and also without any loss of information. It has kept improving its website on a constant basis to make sure that they are able to satisfy the customer’s needs in a better way. The innovative strategies do allow the company to get huge competitive advantage over the competitors as it is able to satisfy the customer’s needs in far better way than the other supermarkets present in the global market. Strategy in action Strategy development Tesco has developed the various strategies related to diversification, internationalization and innovation and competitive in a very successful manner to make sure that they are able to capture a huge market share in the overall global market in the retail industry. The strategies that7 are been developed by the company are been made after a stringent re4search over the current performance of the company and also with a focus of achieving the goal and the objective that is been set by the company. It has looked to diversify its business into other segments of non-food items and also towards finance services to explore new markets in Asia and Europe. This diversification has allowed the company to explore new market and also get more opportunity to expand its business. Tesco has continuously made attempts to enter new markets in new countries after having a clear understanding of the liking and the needs and demands of the customers. These strategies have helped the company to expand its business in new directions and thus get more opportunity to grow. It has continuously implemented many competitive and innovative strategies over the years by bringing the latest technologies in its business operations to make it more efficient and also to increase its productivity. These new technical growth has provided the company with lots of competitive advantage but has also helped the company to over achieve the customer’s satisfaction level. The three main strategies were Clubcard loyalty scheme, the Value range and a redefined marketing focus. Since the new strategies the company has kept on increasing and growing, it did overtook Sainsbury and then it became the global leader in the competitive market of food–retailer industry. The strategies thus developed by the company after the slump it got 10 years before has helped it in a huge way to become the global leader in the retail business and also has provided the company with lots of opportunities to make sure that they continue to be a leader. It has made the company to grow in such a manner and create such a nice brand image in the minds of the customers and also help them to capture huge market share in the entire global market in this industry. Strategic change To see how the companies have made the strategic changes few of the models and approaches are been used which are been analysed below. Tichy’s four main triggers for change According to Tichy, there are mainly four main factors which lead to make the changes in the companies exiting practices. Changing environment, such as increasing competition and changes in economy This is an important external factor that does affect in the way company’s strategies become successful or a failure. Tesco has looked to adapt to this external factors in an easy way by being very flexible and has made the changes based on the customer demands and also on the economy and presence of competitors in various parts of different countries. The strategies been built by the company are totally different in different countries and they are been made based on the needs, demands, economic conditions and the presence of competitors in that particular location. Business relationships, such as alliances and new business lines Tesco has maintained good relationships with it suppliers making sure that they get the products fresh and in good quality in time and also at the right place. This helps the company to provide good and fresh food items to the customers and also in maintaining the stock as per the changing demand of the particular product. The employees are been trained in a proper way to make sure that they behave well with the customers and make sure that the customers get maximum satisfaction from the service they get from Tesco. Technological development Tesco has continually made improvement in the type of technology it has been using in its business operations. All the latest developed technologies that can help the company in improving their business level is been incorporated in the business operations. In recent times the company has implemented cloud computing in its business operations for good information flow and also for having a good control over the entire business across the entire globe. People, such as new entrants to the organisation Tesco has an extensive training program to make sure that the employees are able to cope up with the change that has been incorporated in the business operation. This helps the company to make its business process more flexible and also make the changes in a proper way based on the changes in the demand in the market. Kanter, Stein and Jick’s three dynamics This model explains the reasons for which the company makes certain strategic changes to its existing strategies. Environment Environment refers to the work environment that is been maintained in the company and also the external market environment that to does affects the way the company operates. Tesco has looked to maintain a good corporate culture inside the company thus keeping the work environment very nice. In case of the external environment the company has maintained a very flexible business process and thus makes the changes rapidly to cope up with the changes in the market. Life cycle difference Tesco is in the maturity stage of its life cycle and has implemented many strategies that have helped the company to keep growing at a good rate. The company even being in the maturity stage is looking to diversify and also make strategic change so that it keeps growing and continues to enjoy the position of being the global leader. Political power changes inside the organization Tesco has got a dynamic leader in the form of Sir Terry Leahy who has got a good control over the entire business process and has made sure that the company is able to implement the new strategies and also adapt to the changes quickly which has allowed it to have a good and also continuous growth. Perspective approach Tesco has been able to make the changes even based on the perspective theory where three main factors are been explained for the strategic changes. The company is highly flexible to the changes and the employees work as a team with high level of co0operation making sure that the change is been implemented successfully. The leader of the company has got a good control over the entire business process enabling it to work in an efficient way. Levis Model Based on the Levis model on the way to bring the change in the system it can be seen that Tesco does implements the new strategies and moves to the new level after which it does trains its employees with the new system and make them adapt it in an easy manner. Thus allowing the employees to adapt to the change without any problems been raised. Emergent Approach Learning Theory Analysing the business process of Tesco based on this theory it can be seen that the culture maintained in Tesco is very good and the flow of information is also very friendly. All the employees are involved and made to give ideas and views regarding a particular situation and thus many innovative and creative ideas come out. The employees are been trained in a proper way to enhance their skills and the company’s vision is been clearly explained to all the employees. Tesco makes all the employees to think about the process in which the company can look forward towards achieving a good and continuous growth in future. Pettigrew and Whipp According to Pettigrew and Whipp there are five integrated factors responsible for the change. Tesco looks to bring changes in its strategies to have a continuous growth and improvement in its business operations. These changes are been brought in the company based on the changes in the external market environment and also based on the certain improvements that are to be brought in the company’s business to make it more efficient and also for increasing its productivity. Different frameworks VRIN Valuable Tesco creates a lot of value for the customers by providing goods at low price and also in best of quality. Rare The amount of resources that Tesco has is very difficult for any other company to have such huge amount of resources and such a huge business. Inimitable It is difficult to imitate the business process of Tesco as it has such huge amount of resources and also a good supply chain network thus allowing the company to get the food items in highly fresh and in good quality. Non-substitutable Other small retail shops can act as a substitute for Tesco as they are in the local areas for the customers and also custom2ers prefers to go to local retailers for buying small amount of good than preferring supermarket like Tesco. Benchmarking In Tesco high standards are been set as benchmark related to the quality of food that is been provided to the customers. For Tesco the main focus is towards the satisfaction of the customers and it looks to provide the best quality product to the customers. The company maintains good standard in such a way that they do provide the customers the exact thing that is been displayed to the customers. It does benchmarks its quality maintenance, supply chain and also operations to the way Toyota maintains quality for its products and the just-in –time supply chain that it follows and also a perfect operations process without and defects arising in any step of the entire business operations. Tesco always looks to achieve the best operations process to make sure that there is no defect or wastage in any step and all the resources are been utilised in the most optimum manner. Value chain The primary and the secondary activities of the organizations is been explained in the value chain which does help the company to create value for its customers and also for its stake holders. The primary activities are inbound logistics, out bound logistics, operations, marketing & sales and service. The percentage contribution of each activity is been shown in the diagram. The supporting activities are the infrastructure, human resource, technology and procurement. All these primary and secondary activities do perform in an efficient way and as a team to make sure that the company gets maximum profit and also for achieving maximum customer satisfaction. Thus in Tesco all the departments and all the employees do work as a team and as a single unit to make sure that the company as a whole continues to grow its business at a good pace and also is able to explore more markets capturing more market share. Stakeholder analysis Tesco dopes help the stake holders in a huge way. The stakeholders for the company are the employees, government of that particular country, suppliers and employees. Tesco does makes sure that the suppliers performance is also been enhanced and they are also able to work in a very6 efficient and effective way so that they can have a good process to provide the company with good quality of products. It does help the government also in a huge way as it recruits huge number of people as in UK it is the largest recruiting company thus increasing the employability index of the government apart from doing various corporate social responsible activities allowing the society to also grow. The employees are been trained in a very good and specific way such that they can improve their skills and also work in more efficient and productive manner. SWOT Strengths Increasing global market share Huge capital that the company has does help the company to have a good stability. Tesco also has online service for the customers through its online website Tesco.com. The huge brand value that the company has created in the global market. Market leader in the UK market. Weakness Over reliance on the UK market thus not able to concentrate on the global market. Has huge amount of debts, thus reducing it is a big responsibility for the company Because of its over acquisitions the company can lose a lot of visibility. Opportunities Non-food retail and finance sector for the company. It can also enter health and beauty products. Explore more in the unexplored areas in the global market. Threat The structural change in UK could lead to price war in the entire market. The returns from the investments made in overseas might fail because of the already existing retailers. Competitors in the same industry like Wal-Mart are a big threat. The expansion in the international market can affect the company in a huge way if they are not able to analyse the market in a good manner. Generic strategies Differentiation Tesco has maintained a good and different process from others as it has allowed online buying service for the customers and also makes sure that the customers are been provided with the best quality and fresh food items. It provides the products to the customers at an affordable rate thus getting a huge competitive advantage over the other competitors. And also is completely different from other retailers. Cost Leadership Being a global leader in this business the company is able to set price on its own and it makes sure that the prices are highly competitive and very much affordable for the customers. This allows the customers to buy the goods in good quality and at a good price which the customers can afford. Focus The company focuses more on the quality of the products and also on the factor of providing best quality service to the customers. It has looked to expand its business across in different parts of the global market and thus cr4eate its own market in every location. Cultural web It has in approximate of 307,000 number of total employees working across the entire globe and out of those huge number of employees 227,000 are been working only in UK. Thus the organizational culture maintained in the company does allow the employees to work in an efficient manner and thus the company does get a lot of competitive advantage over the competitors. Thus all the six factors in the cultural web for Tesco are been combined together and they all work as a single unit allowing the company to grow on a constant basis. The rituals, control systems, the symbols and also the power of the leaders is been all focused towards the growth of the company and for providing good service to the customers. Reference Johnson, G. Scholes, K and Whittington, R. 2005. Exploring Corporate Strategy: Text Only (7th Edition). America: Prentice Hall. Read More