Issues of Tesco Performance Outcome - Essay Example

Tesco Five major issues that significantly impact performance outcome I. Background of the enterprise: TESCO Tesco’s history has shown that the dynamic vision of its bosses combined with the creative and innovative approach in strategy and market planning is the key to the success of a business enterprise. Tesco was started off as a small grocery retail outlet in 1924, by Sir Jack Cohen that had rapidly added more than 100 stores in the next ten years. With ‘Pile it high and sell it cheap’ motto, Tesco was able to strengthen its market and in 1956, it opened its first self service supermarket, on the pattern of American supermarkets, selling products at low costs. The aggressive market strategy, based on acquisition, took the total number of stores to more than 600 in 1960s. But 1970s and 1980s saw the rapid decline of Tesco supermarket chain that could be primarily contributed to low quality product and lack of vision. Under the dynamic leadership of Lord MacLaurin, Tesco underwent tremendous change. By 2001 Tesco had become one of three leading online stores with more than 50% grocery online sale in UK and today it has around 7,50,000 registered users and processes 70,000 orders a week! It has a huge network in Europe and America. Indeed, case study of ‘Tesco’ is an exemplary example of managing change to transform its loss making chain of supermarkets into profit making body within a short period (Jelassi & Enders, 2008). II. Main issues MacLaurin had realized early that introducing technology would accelerate the growth of Tesco manifold. His managerial expertise in exploiting the potential of technology and efficient use of information system became the major elements of success. The major five issues that have significant impact on the performance outcome of an enterprise are discussed below. 1. Global MIS/ Risks In the contemporary times, the world is fast moving towards a multicultural environment that has shrunk the world into a small global village. The lack of effective controls vis-à-vis malpractices in accounts and auditing, security of confidential information, corrupt practices in the higher hierarchy of management, etc. have become crucial risks factors that have resulted in huge economic loss for its shareholders and adversely impacted its market credibility. The transparency in the Corporate Governance provides effective control measurements that safeguard the interest of all its stakeholders, investors and business partners. The MIS has been evolved to encompass various spheres of the business including administration, management, productions, accounts and other areas which are intrinsically linked to produce the desired outcome of efficiency, quality and profits (Lauden & Lauden, 2007). 2. Strategy/initiatives Globalization has given a new perspective to the business which needs to look beyond the local interests and operate business on a wider platform based on common goals and universal value system. The world has shrunk into a global village and one needs to accept the challenges of developing new strategies and models of management that incorporate multi-cultural work environment. Apart from technology initiatives, there is need to encourage cross cultural relationship that is based on mutual trust and understanding of each other. According to Montgomery ‘strategy must be a dynamic tool for guiding the development of a company over time’ (Montgomery, 2008). Tesco needed some dynamic leadership with vision that could successfully turnaround the fast declining market. 3. Ethics/ Social issues Global business environment has greatly changed the socio-cultural dynamics. The ethical considerations and social issues have become highly important for the businesses to work amicably across the globe and working in different socio-cultural and political environment. Corporate social responsibility has become an essential part of corporate business strategy which is fast expanding its areas of interests across the globe. ‘The relationship between companies and civil society organizations has moved on from paternalistic philanthropy to a re-examination of the roles, rights and responsibilities of business in society. Corporate Social Responsibility (CSR), defined in terms of the responsiveness of businesses to stakeholders’ legal, ethical, social and environmental expectations, is one outcome of these developments’ (UNIDO, 2002). 4. New technology The firms are creating a definite and advantageous position within the industry by exploiting new technology. They increasingly use the IS/IT services to analyze customers’ psychology through the evaluation and analysis of customer database. IS/IT services have become the most effective collaborating tools to improve networking within the various inter-related units of business operations that might be spread across geographical boundaries. ‘Access to information represents the basic precondition for success of a firm’ (Drucker, 1998). The IT in the businesses has facilitated a better communication among the various economic units that work within the given parameters. 5. E-commerce The e-commerce business activities provide the firms with the wide options to meet the challenges of the customers’ changing preferences and also expand their business across the globe through strategic partnership. Kalakota and Robinson (2002) assert that e-commerce is an economic solvent. It dissolves old business models and changes the cost structure, and rearranges links among buyers, sellers, and everyone in between.The internet based sales and purchase system helps to develop not only database of customers but it also helps to generate huge information regarding manufacturers, dealers, retailers etc. The ecommerce activities are backed by five major factors: aesthetic appeal of the website; the simple and user friendly website; interactive module backed by regular update and prompt response by the firm; high quality product which facilitate trust building; and highly secured online financial transaction. III Viable options An effective managerial leadership that encourages innovative business strategies and creative practices to overcome the challenges of fast changing technologies and dynamics of economy are important ingredient of contemporary business. Tesco leadership judiciously exploited the different contextual factors vis-à-vis size, technology, environment, diversification and globalization to meet the challenges of the times. The technology and e-business played a vital part in rejuvenating the core business activities of Tesco. Tesco managerial leadership has exploited the mentioned five factors to improve its performance considerably. In the fast changing environment of globalization, business compulsions have become more stringent in their nature and factors like accountability, responsibility and reliability have become important pre-requisites for business to create a credible environment for their trade and investment. It needs to be realized that strategies rather than operative planning and decision making, became the main factor of managerial leadership (Ansoff, 1965; Andrews, 1971). Tesco’s leadership has effectively used IS/IT to enhance its performance and efficiency. It’s interactive website is a scintillating example of e-business strategy. Equal opportunity has been the hallmark of Tesco. It has used affirmative actions to demonstrate the genuine intentions of the organization to uphold the global values and inculcate programs and plans to include diversity in the workforce. The motivating factor of managerial leadership that facilitates adaptability to changing equations, which occur due to rapidly changing environment of emerging business processes, have another very important attribute of recognizing the wide scope of emerging opportunities. Ethical consideration and concern for social issues have been part of Tesco’s corporate strategy. While CSR is a relatively new concept that is becoming increasing popular among the multinationals, it already has been intrinsic part of Tesco’s strategic initiatives. Tesco has also used technology to build customer loyalty. It has used its online customer base to analyze the changing habits of the public and accordingly made changes in its business activities to gain competitive advantage. Shultz say that it is the end-users who now control the markets rather than the marketers (Shultz, 2001). MacLaurin realized the vast potential of internet and online business early and has been the first business enterprise to introduce e-commerce activity in UK. The interactive communication between the client and the business house has been utilized to develop a professional relationship between the two, that not only provides opportunity to improve and improvise the quality as per customer’s requirement and demand but customer gets the best deal because of the competitive nature of internet, as a medium of business promotion technique. III Reflection The use of computers and information technology has helped the business houses to evolve new strategies and analytical packages that have improved their efficiency. Through the judicious use of technology within the business operations, the firms are creating have a definite and advantageous position within the industry. In a fiercely competitive business environment, the firm gains the position by leveraging its strengths by improving and improvising its business management and organizational goals. The Internet with its low-cost entry and ease of use quickly changed how information was exchanged and removed the distance barriers for business partners (Gottardi et al. 2004). The firms are increasing using the information to analyze customers’ psychology through the evaluation and analysis of customer database which helps one to know the changing preferences of the customers in the rapidly changing times. In the global business environment, enterprises strive to develop a comprehensive information system that would promote and accelerate the organizational aims and objectives. Dennis et al., (2006) also affirm that firms are increasingly investing in new technology to gain leverage. The various new approaches to ISD like MIS (management information system), payroll, AIS (accounting information system), networking through website development and internet etc, have smoothed the administration and management of the productions and other related processes. The managerial leadership encourages cross cultural understanding and relationship building within the groups. The shared vision promotes better understanding among the employees and provides impetus for improved performance and easy changeover. Tesco leadership ensures that the workforce is looked as resource that can be tapped to improve and improvise the performance of the organization in the fiercely competitive business setting. People are encouraged to share mutual knowledge and ideas and at the same time, they are also involved into collective decision making to work towards common goals. The shared learning has become an intrinsic part of the work methodology in Tesco which is characterized by the stability provided by the system and the integrated approach of the workers. Indeed, it can be said of Tesco that ‘an organization doesn’t have a culture, it is a culture – a unique system of shared meanings’ (Griffin, , 2003, p274). Tesco’s initiatives in the environment conservation through organic food and creating awareness in the public have been laudable. It also promoted computer literacy and internet proficiency among the less affluent class with the long term intentions of making them their customers. It was in fact a really commendable promotional activity that not only built its image as socially conscious enterprise but drew customers from unexpected quarters like old ladies and other persons who hitherto were afraid to use computers. Indeed, Tesco has effectively shown the myriad uses of technology within its business processes to enhance performance outcome. I would have used the same strategy as Tesco to gain leverage against the rivals. The digital technology has revolutionized the communication and has created a whole new segment of market with diverse needs and expectations. As per changing demands of the customers, Tesco has diversified its core business activities to include new areas like insurance, counselling, personal finance, petrol pumps with attached Tesco convenient stores in the format of Tesco Express etc. Tesco’s market strategy was totally focused on the needs and requirements of the people and made continuous efforts to update its products line with that of the changing public demands. This was reflected on its continuously changing website which became increasingly people-centric. It developed a website which was not only aesthetically appealing but efforts were made to make it simple and user friendly so that even a novice could use it without any difficulty. Smith P.R. and Chaffey D. have argued that E-commerce is commonly thought to include e-tailing, online banking and shopping – it involves transactions where buyers buy and shoppers actually shop. Others suggest e-commerce is any transaction such as a support or an online catalogue search (Smith, Chaffey, 2002). The e-commerce has opened new frontiers of market for Tesco that has unlimited scope and opportunities. It has a vast potential that goes beyond the local market and embraces a global vision which could turn out to be economically more lucrative while at the same time, promoting global values. IV Conclusion When one looks deeper into the success story of Tesco, one would realize that technology and e-business played a vital part in rejuvenating the core business activities of Tesco and helped it to rebuild the trust amongst its customers. When home delivery was introduced via phone, fax and online, the concept was new and radical because firstly the home delivery was a new concept which appealed to the working class as it saved their time. Secondly and the major reason was that the online presence of Tesco gave a radical zing to Tesco’s marketing strategy as internet was rapidly becoming popular. The interactive website of Tesco was a novel thing and initiated the process of customer relationship that later became its core strength. Hence, one can claim that Tesco’s initiatives in exploiting the vast potential of technology have significantly impacted not only its performance but they have also ensured long term sustainability of business. Indeed, the five major issues discussed have played a vital role in providing Tesco with the competitive advantage to maintain its market position. (2193) Reference Ansoff, H Igor. (1965). Corporate Strategy: An Analytic approach to business policy for growth and expansion. NY. 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