Analysis of the Strategic Planning Issues of the Tesco Company - Case Study Example

Business Strategy Contents Introduction 4 Discussion 4 Task 4 a)Company Profile 4 Mission and Vision ment 5 Goals and objectives 5 Core Competencies 5 b)Analysis of the strategic planning issues of the company using BCG matrix 6 Task 2 7 a)Environmental and strategic audit of the business and application of strategic positioning techniques 7 b)Significance of stakeholders in the chosen business 8 Task 3 9 a)Evaluating possible alternative strategies 9 b)Appropriate future strategy for the business organization 10 Task 4 10 a)Roles and responsibilities for strategy implementation in the chosen organization 10 b)Identification and evaluation of resource requirements to implement a new strategy for the organization 11 c)Targets and timescales for achievement in a organization so to monitor the proposed strategy 12 Conclusion 12 References 13 Introduction Tesco Plc is a well known company in the retail industry and is a British multinational general merchandise and grocery retailer. In terms of profits the company is ranked as the second largest retailer across the world after Wal-Mart and has its headquarters in United Kingdom. Tesco is one of the companies that is listed in London Stock Exchange and is a market leader in the grocery sector in the UK market. The company was founded in the year 1919 as a form of market stalls by Jack Cohen. The company has its business operations presently in 12 countries such as Europe, North America, Asia, UK, Republic of Ireland, Thailand and Malaysia. The company is known for being the largest grocery retailer but has also diversified in wide product range such as books, telecom services, financial services, electronics, clothing, furniture, petrol, music downloads, software, and DVD rentals. The company had chain of stores that grew from 500 to 3,370 stores in the present scenario. Discussion Task 1 a) Company Profile The company is the leading food retailer in Britain and across the globe is the third largest. The company had opened its first store in the year 1929 in London and soon it became a popular brand and by 1960s it became a famous retailer store and was seen everywhere in the streets of UK. The company even invented new store formats such as Tesco Express, Tesco Metro and by 1995 it was able to launch the first loyalty card of UK that is known as Clubcard. The company even formed a joint venture with Royal Bank of Scotland so as to offer financial services to the customers (Acur and Bititci, 2004, pp. 388-408). By 2000 the company had even been able to increase its profit margins through non-food sales through online or through retail stores and has now become one of the largest CD retailers in the UK market. Mission and Vision statement Tesco over the years has not only expanded its business operations to various geographical locations and diversified its product range but also has been able to offer the best quality services to its customers. The mission statement of Tesco aims at creating value through its services to its customer base so as to earn the customer loyalty for a lifetime. The vision statement of the company is to valued by their customer base, even by the communities where their business operations takes place, to be valued by committed and loyal staff and also their shareholders (Flavián, Haberberg and Polo, 2002, pp. 125-128). The vision of the company is also to grow, become more innovative and modern company so as to apply their skills in the global market and win in the local markets. Goals and objectives The major goal of the company is to expand its business operations in all possible geographical locations where it has not been able to reach and to even extend its product range so as to cover more of the market share. The objectives of the company is to maximize its market share, create value for its customers, offer the best quality products to its customers at the best prices, to build a loyal customer base through its quality services and to maximize its revenue margins. Core Competencies The core competency of the company is their position as a market leader in the UK market, and the quality products and services at the best prices. The other competencies also comprise of its loyal customer base and a wide range of products that are available in all of their retail stores that helps them to sustain its business operations in the competitive business environment. b) Analysis of the strategic planning issues of the company using BCG matrix The strategic planning of the company is to offer the best products to its customer base and that too at the lowest cost possible. The company wishes to be the market leader by offering the lowest cost possible for all its products to their customers. The company has all its strategies aligned to providing the lowest cost to their customers. Tesco has even developed its strategies to enter into possible market segment and not only to offer grocery products but also to offer other food products as well non-food products. The company aims at capturing different market segments and to apply its global skills so as to win the local market share. The BCG matrix is a very effective tool that helps in identifying which of the products or units of a business are low or high depending on their market growth and their percentage of market share (Palmer, 2004, pp. 1075-1101).The strategic product that needs to b focused on by the company or needs to be closed by Tesco can be well identified with the help of BCG matrix. The four parts of the matrix has its significant role based on the market share and growth as stated below- (Desjardins, 2005, p.6) The dog’s part of the market denotes that product has a low market share as well as low growth and they are unable to generate much of profit margins for the company. Example of product of the company that falls under this segment is Tesco’s lard. The question mark of the matrix denotes that product has a high market growth rate but occupies a very low market share. The products in this segment consumes considerable amount of resources but returns are very low and more money is spend on such products as the company decides to increase on its market share. The product of Tesco that falls into this category is Tesco mobile. Cash cows indicates those products that fall under high market growth segment but occupies low market share and generates more percentage of revenue in comparison to that what is invested in them for instance is own brand food that is sold by Tesco (Graiser and Scott, 2004, pp. 10-14). Stars of the matrix indicates those products that have a high market share in a market where the growth rate is high and even contributes to the company with high income, for instance Tesco’s Finest range. The product that needs to be closed down by the company as per the matrix is Tesco mobile and Tesco’s lard as they are not able to generate desired percentage of revenue for the company. However the company is able to maintain a balance in its portfolio through which the cash that is generated through cash cows can be utilized for the losses that is created through dogs or question marks and convert them into stars. Task 2 a) Environmental and strategic audit of the business and application of strategic positioning techniques The environmental audit of a company can be well stated through five forces model and Pest analysis. The major factors that governs its business operations in terms of Pest analysis is political, economical and technological factors in various markets where the business operates. The political conditions of Asia are not as stable in comparison to other European countries which make the company to adopt specific measures. Similarly the company needs to offer its products as per the economic conditions that may differ from one region to another and so the company has adopted the best strategic tool of being a market leader by offering low cost products. The company also has to be at par with the new technologies so that it can design its retail stores according to the new technology and give additional value to the customers. The five forces model states that the company faces a tough competition from other players namely Asda and Sainsbury in the UK market (Johnson and Scholes, 2003, pp. 90-91). There are a number of companies in the retail sector offering similar kind of products so the company faces strong bargaining power from customers and even from suppliers. The company offers the best of strategic positioning technique in the form of innovation and product differentiation through diversification. The company aims at delivering the best quality products at the lowest cost possible in the market and in diversified way by offering financial services, telecom, clothes etc., along with its grocery products under different brand of Tesco. The company offers its products range under different names of Tesco brand. b) Significance of stakeholders in the chosen business The stakeholders of Tesco play a very important role in the business operations of the company. These include the staff, suppliers, retail stores staff, and even the customers. They all contribute towards making the company a market leader in the grocery market and also are termed as the second largest player in the market in terms of revenue. The staffs of the company are even given equal opportunity by the management to share their ideas which are beneficial for the company to resolve issues that are faced in current business activities (Macdonald, 2013, pp. 104-105). The company even maintains good relationships with all its suppliers either local or across the borders so that product quality are not compromised. The staffs are even offered the best of benefits and wages so that the company is able to retain the employee base. The most important of all the stakeholders is the customers that drives profits for the company and also help it to survive in the highly competitive market. Tesco gains the loyalty of its customers by offering quality products and services at the most affordable price possible and even implements loyalty program so that it can retain its existing customer base as well acquire new ones. Task 3 a) Evaluating possible alternative strategies There are various strategies that can be adopted by Tesco for its future development and growth. The possible alternative strategies that can be adopted by Tesco are retrenchment, limited growth and substantive growth. Retrenchment is a strategy that is associated with downsizing of business operations of the company. In this strategy the company takes all possible measures to reduce the overall cost and focuses on becoming financially solvent. There are two ways through which retrenchment is usually carried by the companies. The first method is through reducing unnecessary expenses by cutting down on the employee base, reducing wages, reducing additional benefits that are offered to employees and even closing down of superfluous branches or offices (Martinel and Sparks, 2003, pp. 577-590). This strategy for Tesco can be effective but to a certain limit by which it can cut down on additional expenditures but would not be beneficial for long run as the market offers stiff competition. The major advantage of substantive growth for Tesco would be future growth as the wealth of the company would grow exponentially. The current fund from the present products or business units that is achieving success is put to use for future projects so as to acquire gains in the future. This strategy would help the company to utilize its funds in the best possible way and gain market share of their competitors. The major benefit of the limited growth strategy for Tesco is its lower risk level but it has certain drawbacks. The disadvantage is that if other competitors of the company grow at a rapid pace then it would leave Tesco as an unidentified brand in the market. The benefit being is that it does not encompass more costs as recruitment of new staffs or investors which is observed in aggressive growth strategy that reduces the overall profit margins of the company. b) Appropriate future strategy for the business organization The appropriate future strategy for the business would be substantive growth strategy through which it can tackle the intense competition in the market it operates as well as handle the funds effectively. There are certain products like mobiles, financial services etc., are not a very profit making units for the company. Tesco needs to prioritize all its activities and this can only be achieved through substantive growth strategy that would help to generate good revenue margins for the company in the nearby future (Myers, 2004, p.3). This growth strategy is to appropriate for the company as it would enable the company to balance between its wide portfolio of products or services. This strategy if adopted by Tesco would give a platform through which its various business activities can be prioritized and funds can be made applicable to the future projects so that it acquire even the market share of its competitors. As per the current situation of the company there is a need to gain more of market share and also to diversify more into new product segment which can be supported well through substantive growth strategy. Task 4 a) Roles and responsibilities for strategy implementation in the chosen organization The strategy that needs to implemented by Tesco is to diversify into more product segments, or enter into new geographical locations through their chain stores or to form partnerships with other brand companies of clothes which were well known across the globe so that they can offer more number of branded clothes to their customer base. These strategies can be implemented through the management of the company on who would lay the major responsibilities. The role of the management would be to decide on the product market that needs to be acquired and the responsibility of the employees would also to be significant as they need to possess more knowledge of the culture if the company decides to diversify geographically or needs to possess knowledge about the products if the company decides to diversify through expanded product portfolio. The role of the other shareholders would also be significant in terms of entering into new ventures on behalf of Tesco. b) Identification and evaluation of resource requirements to implement a new strategy for the organization The strategy of substantive growth that Tesco can implement in the nearby future requires utilization of resources in the proper way so that the most important activity can be taken into consideration at the initial stage of the strategy implementation. The major resources that would be needed by the company for incorporating such a strategy into business operations would be financial resources, human resources and other resources such as infrastructure, technology and sufficient inventory (Randall and Seth, 2011, pp. 111-113). The strategy would require substantial funds from the most profitable business unit of the company so that some of the future projects can be funded for the overall growth of the company. The employee base of the company needs to skilled so as to support the future projects for the exponential growth of the company. The substantive growth strategy indicates that company can also aim to diversify geographically which would require the company to have sufficient inventory and a strong technologically base so as to give value to the customers. c) Targets and timescales for achievement in a organization so to monitor the proposed strategy The strategy to be incorporated by Tesco can be best monitored when there are proper timescales and targets sets that the strategy should be able to achieve. The company can set a timescale in terms of revenue generation as to within which time frame the strategy would be able to yield the best outcomes for the company. The timescale for Tesco can be of five years in which the substantive growth strategy would be able to increase the revenue growth margins for Tesco through some future projects. The major targets for the company would be to acquire the maximum percentage of the market share of its two important competitors of Asda, Morrison’s and Sainsbury’s. Conclusion Tesco Plc has been able to be a market leader in the retail business in the UK market mainly through its quality products that it offers to its customers and that too at the best prices that cannot be easily duplicated by other players in the same industry. The business strategy of the company is mainly aligned towards gaining market share in every possible product or service segment and being the lowest cost leader in the market. The stores of Tesco are well structured and have advanced technology that provides additional value to the customers. The company even has the major business objective of not only focusing on new market segment or acquire new customers but also to built a loyal customer base who would generate more revenue margins for the company. References Acur, N., and Bititci, U. 2004. A balanced approach to strategy process, International Journal of Operations & Production Management. Vol. 24 (4), pp.388-408. Desjardins, D. 2005. Tesco strategies turn up competitive heat in UK, DSN Retailing Today. Vol. 44 (4), p. 6. Flavián, C., Haberberg, A., and Polo, Y. 2002. Food retailing strategies in the European Union. A comparative analysis in the UK and Spain, Journal of Retailing & Consumer Services. Vol. 9 (3), pp.125-128 Graiser, A., and Scott, T. 2004. Understanding the Dynamics of the Supermarket Sector, The Secured Lender. Vol. 60 (6), pp.10-14. Johnson, G., and Scholes, K. 2003. Exploring Corporate Strategy. London: Prentice Hill. Macdonald, R. 2013. Global Corporate Social Responsibility of Tesco. USA: GRIN Verlag. Martinel, E., and Sparks, L. 2003. Food retailers and financial services in the UK: a co-operative perspective, British Food Journal. Vol. 105 (9), pp.577-590 Myers, H. 2004. Trends in the food retail sector across Europe, European Retail Digest. Vol.41, p.3. Palmer, M. 2004. International retail restructuring and divestment: the experience of Tesco, Journal of Marketing Management. Vol. 20 (9), pp.1075-1101. Randall, G., and Seth, A. 2011. The Grocers: The Rise and Rise of Supermarket Chain. UK: Kogan Page Publishers. Read More