Organizational Strategy and Structure of Tesco Plc - Dissertation Example

 Organizational Strategy and Structure of Tesco Plc The project aims to talk about the organizational strategy and structure of Tesco Plc, one of the greatest retailers in UK and across the world. Organizational Mission Mission Statement Tesco aims to motivate the staff and providing them with simple objective as about what the employee aim to achieve. It can be said that Tesco wants to earn respect from the customers by providing good service and being loyal towards the customers and staff. As a company Tesco wants to grow and expand themselves in new and emerging markets. However Tesco do not have a mission statement although its vision for Tesco is to become the highly valued company by the customers, communities along with committed staff and the shareholders. To become a growing company with modern and innovative thinking this would help to win locally and by applying the skills it can win in the global market also (Tesco Plc, “About Us”). Criteria for effective organizational mission A good mission statement should be able to explain accurately as to why the organization exists and what it tends to achieve in the future. The mission statement articulates the essential nature of the organization along with its values and work. Effective organizational mission are usually free from jargon and should avoid shorthand to make the people outside the organization understand what it actually wants to portray. Another important criteria for effective organizational mission is that the mission stamen should get reviewed at a regular interval. It should resonate with the people who are working for the organization and also various other constituencies which the organization hope to affect in the future. Mission statement need to answer three key questions-the purpose of the company, the business and the values of the organization (Radtke, 1-2). Environmental Analysis PEST is a useful tool which helps the organization to monitor and detect the weak signals in hope of recognizing the fractures or discontinuities which shapes the environment. PEST refers to political, economical, social and technological factors (Henry, 51). SWOT is another important tool which is used to analyze the internal and external factors of an organization. PEST Analysis Political UK government emphasis on healthy eating habits Healthy school program has been encouraged by the government to generate awareness about importance of diet. Economic Increased global demand for food (Verdict, “2012 – UK retail sector forecasts”) In 2012, retail spending is expected to be 3.2%; in 2013 real sales are expected to rise by 1.6% and in terms of money by 3.9% (Center for Retail Research, “Retail Forecast for 2012-2013”). Social Consumes becoming aware of the importance of healthy eating Avoiding food with high calories Current trend indicates that customers have moved towards one stop shopping centers Decline in home meal preparation Technological New technology tends to provide sophisticated way to mix and make the product new and more demanding. Growth in online shopping Adoption of new technology such as electronic point of sale, fund transfer and others SWOT Analysis Strength Increasing market share with approximately 30% in UK Online stores of Tesco High brand value Market leader in UK Weakness In the present situation, TESCO has been losing its market share Too much dependence on the UK market Opportunity Online market is growing at a steady rate To expand into new and emerging markets Addition made on its product line Future international growth Threats High Competition among the rivalries such as Asda, Sainsbury and Morrison economic uncertainty expansive international expansion Use of old technology Important Issues Important issue detected after analyzing the PEST of Tesco in UK market is to comply with the government regulation as without the consent of the government no company will be able to do business and going against any policies might lead to name and shame for the organization. Secondly, the economic conditions are important as with an increase in the national economy the disposable income is also high giving rise to more spending and profit for the retailers. Third issue is to act as per the demands and needs of the consumers. Consumers taste and preference tends to change and it is essential for retailers to offer products which will suit the demands and needs of the target customers. Analyzing the SWOT, five important issue aroused are, in the recent past Tesco has been experiencing low market share as compared to previous years which might result in threat for the organization. Secondly the company tends to depend heavily on the UK market ignoring the international market span. Third, if Tesco do not adapt to the new technology it might face problem in managing stocks and inventory and timely supply of products to its customers. Fourth issue is economic uncertainty which is an important issue. A fall in the economy will lead to major loss for Tesco and finally a major threat comes from the competitors such as Asda, Sainsbury with respect to price and products. Analysis of PEST and SWOT Summarizing the PEST analysis it can be concluded that the political factors in UK has been in favor of retail stores including food and grocery but stresses on the concept of healthy eating habits and also encourages the teachers to generate awareness about healthy living and importance of diet. Thus it is important for Tesco to comply with the regulation of the government and produce healthy food. The economic factors states that with an increase in the disposable income the standard of living has also increased and consumers are willing to spend more on products and food items. According to Verdict, there exists a global market for food with high demand along with high transportation cost which suggest that price are unlikely to fall also in the current year 2012, retail spending is expected to be 3.2%; in 2013 real sales are expected to rise by 1.6% and in terms of money by 3.9% stating that the main beneficiaries will be the clothing sector, department stores, pharmacy contributing to the economy of UK. This indicates that the consumers are able to afford products across the world proving huge opportunity for Tesco to explore the international market and expand accordingly. Social factors suggested that there has been a shift in demand for healthy food by the consumers and they are demanding more of it. Also with change in preference, consumers prefer one stop shopping along with online shopping. Tesco in order to address the factors has introduced more number of non food items so that consumers can get what they want along with online shopping experience. To comply with the regulation of the government Tesco has added organic products in its product line to enhance healthy eating habits. Technology factors are major variables of macro environment. With adoption of new technology both the customers and the company are benefited as customer satisfaction tends to rise as goods are available, more personalized services and convenient shopping. Analyzing the SWOT analysis it can be summarized that Tesco brand name and value serves as biggest strength for the company. Tesco has a market share of about 30% leading it to be among the top retailers in UK. Through its strength, Tesco can overcome its weakness and again become the top marker share holder in UK retail sector. Tesco online shopping also serves as strength and acknowledges the use of latest technology to tap the current market share and go along with the current market trend of online shopping attracting many consumers. The online market also serves as an opportunity for the company through which it can explore other markets and finally expand in international grounds and reducing the dependence on the UK market. Therefore with the help of SWOT analysis, Tesco will be able to overcome its weakness through strengths and threats by applying the opportunity it has with it. Organizational Strategy Identification of the strategy Tesco has implemented its own strategy which has been successful for over the years. Tesco’s seven part strategy aims to widen the scope of doing business and enables it to deliver a strong and sustainable growth for the long run. The new strategy was incorporated in 2011 by Philip Clarke for five business segments, UK, Europe, Asia, US and Tesco Bank. The strategy adopted complements the vision of Tesco and reflects the changing needs of the consumer along with the global nature of the business. Goal of Tesco is ‘to grow the UK core’ To become successful and excellent international retailer To be strong in every sector it sells as it is in food sector To grow retail services in all markets To be responsible towards communities Creator of highly valued brands. Build team to create more value (Tesco Plc, “About Us”). Apart from Tesco’s seven own strategy, through its corporate strategy Tesco is committed to create value of shareholders through innovative customer focused strategy which is based over the following principles, Value for money by providing the customers with high quality products at unbeatable price Customer service by delivering efficient service to its customers Customer loyalty products which are of highest quality are offered and with a wide range of options Stores, Tesco investment in their existing stores along with development of new format for stores tries to give customers the best shopping experience (Tesco Plc, “Corporate Stratgey”). Example of the strategy In the current years Tesco plans to make a commitment of £1billion in order to improve shopping trip, to drive a strong pace of improvement in products which matter to the consumers which in turn are likely to improve the revenue and capital investment. Thus the changes brought about by the organization will reinvigorate shopping experience for the customers and deliver improved performance for the shareholders. In the year 1997 the international business of Tesco generated only about 1.8% of the profit as compared to 30% in the current market and ranks first or second in eight out of 12 international market outside UK. This indicates that Tesco has already reached its success and aims to become outstanding international retailers both in stores and online market Benefits of the strategy With the help of the customer focused strategy, Tesco has been able to gain a competitive advantage by focusing on the customer and providing them with effective service which in turn helped the organization to gain customer loyalty. Customer focused strategy benefits the individuals as well as the organization. Customers are the king for any organization and delivering effective customer service will benefit the organization not only in the current stage but also in the long run. The potential problems Customer focused strategy usually do not suffers from any sever issues unless and until handle effectively by the management. The whole concept is to keep focused on the needs and desire of the customers and in return gain a competitive advantage from its competitors. Competitors Strategy Tesco’s competitors Sainsbury, Asda in term of competitive strategy aspire to become the market leaders like Tesco rather than market followers or niche marketer. Sainsbury provides quality food at an affordable price but not as low as Tesco and has adopted the differentiation strategy but over the time it has changed it strategy to low cost differentiation strategy so that it is able to compete with Tesco. Sainsbury business strategy aims to focus on five areas like great food, new business, complementary services, clothing and growing space (J Sainsbury Plc, “Business strategy & objectives”). Example(s) of competitors strategy Sainsbury aims to provide great food and it has been revealed that about 21 million customers visited Sainsbury every week. With its low cost differentiation strategy Sainsbury aims to provide good food at a far price and compete with Tesco in terms of price and quality. Organizational Structure Structure of the organization Organizational structure is termed as a formal outline in a company managing managerial relationships. Organizational Chart Organizational structure Features of organizational structure Tesco organizational structure can be said to be flat structure as it contains six levels from the CEO to the front line with five rungs. Tesco do not have hierarchies or any job titles which would complicate things and keep employees at their respective place. The organizational structure is designed to encourage the potential talents to rise at the top. Due to this structure one out of the ten people can come through the bottom rung and stand at the top of the organization. Tesco has a management tool which helps it to keep a track of the work being done through its steering Wheel which helps to steer the business. The steering Wheel is further broken into number of measures to review the performance at a regular basis (Williams & Curtis, 15). Tesco purpose is to serve its main customers and thus in its organizational structure it has placed customers right at the top. Tesco requires people with the right skill and talent at each level of its organizational structure. At present Tesco has six work level where level 1 comprises of frontline jobs such as filling the shelves with stocks, level 2 includes team of employees who deals with the customer directly, level 3 deals with operating unit, level 4 supports the operating units and also recommends any strategic change, level 5 employees is entirely responsible for the performance and as such requires the ability to direct and lead others and level 6 is involved in creating the value, purpose and goal of the organization (The Times 100, “Recruitment and selection”). Benefits of the Flat Organizational Structure A flat organizational structure tends to have fewer layers of management and the employees are empowered and are expected to take on full responsibility. Flat organizational structure serves many benefits such as ‘cost savings’ because the structure features fewer layers and thus smaller expenses are incurred on salaries as flat organization avoids salary hikes instead focuses on career development. Promotions which are based on the performance of the employees are said to be cost wise as it is relative to greater productivity. Adaptability is another major benefit in a flat organizational structure. The employees in the flat structure are more adaptable in changing environment due to small layers. Open collaboration and communication are encouraged in flat organizational structure. Responsibility is placed on the employees through which innovation; collaboration excels and attracts employees who encourage work structure that requires team work and self motivation. Finally flat organization helps a company to become more customers centric as it moves everyone closer to the customer. Problems of Flat structure Flat structure has its own disadvantages like it complicates the lateral communication process among the subordinates. It has also been criticized that it puts high pressure on the subordinates by proving them with responsibility along with penalty resulting from failures. Other issues with regards to flat organizational structure includes, limited structure, less or nil motivation as there is very little room for the employees to move up and both the role of the employee and the manager is said to be confusing. Conclusion Therefore it can be said that Tesco with its flat organizational structure has been able to become the market leader in the UK retail sector and with its customer focused strategy it has gained a competitive advantage as against its competitors. However it cannot be denied that competitors like J Sainsbury and Asda, with its strategies are able to attain the market share as that of Tesco and with high potential growth rate of the retails sector the chances are all high. Therefore Tesco needs to differentiate and add value to its customer centric focused strategy to overcome its weakness and threats and convert them into strength and avail all the opportunity available to the organization. Reference Center for Retail Research. “Retail Forecast for 2012-2013.” Retail Research. 2012. Web. 6 October 2012. Henry, Anthony. Understanding Strategic Management. USA: Oxford University Press, 2008. Print. J Sainsbury Plc. “Business strategy & objectives.” J Sainsbury, 2012. Web. 8 October 2012. Radtke, Janel. M. “How to Write a Mission Statement.” TGCI, 1998. Web. 6 October 2012. Tesco Plc. “About Us.” Tesco Plc, 2012. Web. 6 October 2012. Tesco Plc. “Corporate Strategy.” Tesco, n.d. Web. 8 October 2012. The Times 100. “Recruitment and selection.” BusinessCaseStudies, 2012. Web. 8 October 2012. Verdict. “2012 – UK retail sector forecasts.” SAS, 2012. Web. 6 October 2012. Williams, John and Tony Curtis. CIM Coursebook 06/07 Marketing Management in Practice. UK: Routledge, 2012. print. Bibliography Agarwal, R. D. Organization and Management. India: Tata McGraw-Hill Education, 2008. Print. Read More