Balance Scorecard and Strategy Map of TESCO - Coursework Example

? Write Balance Scorecard and Strategy Map of TESCO Contents Contents 2 Executive Summary 3 Balanced Scorecard Approach 5 Financial 6 7 Internal Business Process 7 Learning and Growth 7 Strategy Map 8 Recommendation 10 Evaluation and Conclusion 10 References 11 Executive Summary Kaplan and Norton formulated the balanced scorecard strategy and the strategy map in the 1990s. Since then many businesses have implemented this strategy and management tool and have witnessed success. This report tries to look into the ways in which Tesco Plc has implemented this method in the day to day business and the management decision making process. The areas where the implementation has been done and how the company has achieved the vision and the objectives have been analysed in this essay. The report has been concluded with a set of recommendations for the Tesco board of Directors and also an evaluation of the Balance scorecard and the strategy map as a management tool. Introduction The balanced scorecard strategy is one of the most accepted management and strategic planning tool. The balance scorecard is delivered in a structured format with different design methods as well as tools that would help the company in the decision making and strategy formulation. Robert S. Kaplan and David P. Norton has laid the foundation of this balanced scorecard method which takes into consideration not only the financial aspects but also the non financial strategies that are essential for the success of an organisation. Tesco plc is one of the leading grocery retailer based in Britain. In terms of profits the company is second largest in the world. As many as 6351 stores cater to the customers. Tesco has a global presence and has diversified into the financial services, telecommunication services as well as media and entertainment industry. The diversification was not only confined to product but was also done geographically. In order to achieve the success that the brand has got, various strategies had to be taken in the entire life of the brand. This report is an analysis of the different strategies that Tesco had taken in order to maintain it consistent growth and to maintain a competitive advantage among the other brands in the industry. Vision and Strategy The customers occupy a pivotal position in the formulation of the vision and the strategy of the company. The company aims at providing the high quality products and services for the customers. The vision of the company is to get the value for the customers so that the customers become loyal to the brand name of Tesco for their life time. Some of the goals of the company which are ingrained in the minds of the employees include the ideal of doing the best and trying in the hardest way to deliver the services to the customers. Another important aspect of the ideal of Tesco is that the company treats the customer in a way in which the company itself would like to be treated (Tesco Plc, 2011, pp. 4-5). The company from time to time renews and reconstructs the vision. The vision of Tesco is to be the most superior valued company in the global scenario. This high value would not only be confined to the customers but also would be applicable for the employees as well as the communities which Tesco serves. The contentment of the shareholders is also another important point that the company takes care of. For achieving the goals and the vision Tesco implements various strategies that help the companies fulfil the ideals. The company applies the strategy of winning the share of each local market. This strategy is implemented throughout the globe to get a global dominance of the brand. In other words instead of an integrated unique strategy, each of the target markets are captured through taking various strategies in the different markets. The company believes that the retail businesses vary across the globe and a each of the markets have a different characteristic. Thus the local market of Europe would be different from the local market of Asia. Tesco uses the variety of capabilities and the scale of operation to manage the businesses spread across the globe and to maintain a dominant position in the competitive environment. The company also want to incorporate novelty and innovation in the company processes and the environment. The company aims at remaining at an leading position in the growth curve. In the changing business environment Tesco would formulate the strategies in such a way which would be conducive for the benefit of the employees as well as the other stakeholders. Increased automation and use of new technology would speed up the growth process for the company. Thus from a holistic point of view the company intends to be growth oriented not only in terms of the revenue but also from the point of view of the brand name, global presence, the employee development and the contribution to the environment and the community. Balanced Scorecard Approach The Balanced Scorecard Approach which was originally formulated by Kaplan and Norton seeks to analyse the performance and strategy of a company both from Financial as well as non financial perspectives (Kaplan and Norton, 1992, pp. 71–80). There are basically four aspects from which the entire strategic decisions of the company is being analysed. In order to be a sustainable organisation that intends to contribute to the community, Tesco adopts the balanced scorecard approach conducting the day to day business. Financial The company has delivered very good financial performance each year. This has provided Tesco with a very good history of performance over the years. This also implies that the growth of the company has been on the rise consistently over the years. Compared to the competitors Tesco had been able to deliver very good financial performance. This is presented in the graph below (Tesco Plc, 2011, pp. 52). The return on capital employed and the profit margin compared to the other brands like Asda, Sainsbury and Morrison is much higher in case of Tesco Plc. The higher rate of return and profits has helped the company in investing the funds for the expansion of the brands through new stores, channels as well as to the other untapped markets. Thus the company takes this strategy of using its surplus for the financing of the future projects and ventures. Tesco would also venture into the other types of businesses in the UK market where the company has a dominant presence and there is enough opportunity for growth. Thus the shareholders of the company would find it a very good company to invest into. The financial control systems are continuously monitored and audit programs are being conducted for the benefit of the organisation. Customer The company puts the customers first in their list of priority. The company intends to make the duration of shopping a very good experience for the customers. Tesco tries to attract the customers through the formulation of a proper pricing strategy, attractive store location as well as a wide range of product offerings for the customers (Papalexandris, Ioannou, Prastacos and Soderquist, 2005, pp. 214-227). The scheme and reward systems are formulated in such a way that the customers are lured away from the competitors. Internal Business Process The company has introduced the Every Little helps philosophy which is the introduction of the world class systems into the various stages of the retail business process including the acquisition of the raw materials, the ordering system of the products, the developed distribution channels as well as the efficiency of the store operations. The company encourages the employees to work hard and are committed to help the customers in getting the best services out of the internal processes. Since the company pays the highest salary to the employees, the employees in turn are encouraged to deliver the best of their services. Tesco has also incorporated the controlled emissions systems which has made the manufacturing processes environment friendly and have positively contributed to the climatic changes. Learning and Growth Tesco considers that proper communication of the strategy to the persons who are involved in the process is the key to the success of the company. The company aims at diversification as the best strategy to grow in the long run. This is done to avoid the risks that would lie ahead of the company for relying on one particular business. The company stakeholder engagement programs which is structured for the growth of the organization. The company intends to build a very good IT infrastructure so that there is no information gap relating to the customers or the suppliers or the entire markets. Tesco would make an effort to continuously develop the IT environment so that it remains up to date with the necessary information. The development of the skills and expertise of the employees is done through the training programmes. Strategy Map The strategy map is the visual representation of the Balanced Scorecard Strategy of a company. Figure 1: Balanced Scorecard and Strategy Map In the map, it can be seen that the broad objective of the company has been put in the rows which includes the achievement of the different goals in the areas of Finance, Customers, Processes, as well as the Learning and growth. There are the main areas around which the mission and vision of the company revolves. These horizontal bands are the areas of focus for Tesco and separate strategic decisions revolve around there areas. Now the short run immediate objectives of Tesco are listed in the vertical columns of the map. Specific strategies are also taken in order to integrate into the common broader objectives. For example the singular objectives of the company in the area of Finance like the growth of the revenue or the improvement in the EBIT would all together contribute to the development of the financial position of the company. Thus the smaller objectives would lead to the accomplishment of the mission of Tesco plc. Now there is an inter-relationship between each of these objectives which have been shown with the help of the arrows (Kaplan and Norton, 1996, pp. 53-79). In the figure it can be seen that the final objective is the satisfaction of the shareholders of the company. Again at the most basic level, the company needs to develop the talents of the employees, provide the best IT infrastructure etc which would lead to the developed processes of business. The efficiency in the operations would cut the cost and make the products and services lucrative to the customers. This would add on to the revenue and finally the profit of the company would increase. Thus there is a deep linkage between the different short term objectives and the hard and soft elements of the organisation. Thus it is important for the company to ensure that all the strategies are in tune with one another. Discrepancy in one strategy would have an effect on the other smaller objectives and it would prevent success. Recommendation From the above analysis it is clear that the company has to be consistent in its financial performances and have to maintain a competitive advantage as it has been maintaining over the years. For the successful implementation of the balanced scorecard system an efficient team has to be employed to ensure that each of the processes are operated and monitored in the right manner. Time to time audit and scrutiny is required for this and any loophole that is pointed out has to be filled up so that there is no chance of policy failure in the company. The employees have to be trained and their remuneration has to be reviewed so that the company is able to retain the right talent. The board has to take the most prudent steps to ensure that the shareholders of the company get the right value for the funds they have invested for the company. Evaluation and Conclusion Balance scorecard help the business managers take the right decision at the right time and thereby helps in adopting the proper strategy choices. The process of perceiving the company form a 360 degree point of view would help the company in achieving the long term as well as the short term goals. One of the key to the proper implementation of the balance scorecard strategy is the proper communication process. Tesco plc has been able to achieve success by implementing this method. The relationships across the different segment of the balance scorecard have helped the managers in understanding the flow of the process and the dynamics of the channels. It was possible for the company to maintain the balance between the various stakeholders through the proper implementation of the tools and through the assessment of the stakeholder map. Thus from the success of Tesco and the way the company has been able to align the short term objectives with the long term goals with the help of this tool it is clear that all the businesses should implement this tool in order to make their businesses sustainable. References Kaplan, R. S. and Norton, D. P., 1996. "Linking the Balanced Scorecard to Strategy." California Management Review, Vol. 39 (1), pp. 53-79. Kaplan, R. S. and Norton D. P., 1992. "The Balanced Scorecard: measures that drive performance". Harvard Business Review, Vol. Jan – Feb 1992, pp. 71–80. Papalexandris, A., Ioannou, G., Prastacos, G.P. and Soderquist, K.E., 2005. “An integrated methodology for putting the Balanced Scorecard into action.” European Management Journal, Vol. 23(2), pp. 214-227. Tesco Plc, 2011. Annual Report and Financial Statements 2011. [pdf] Available at http://www.tescoplc.com/media/417/tesco_annual_report_2011.pdf [Accessed on 23 Dec 2013] Read More