The Use of Balanced Score at Tesco Plc - Case Study Example

Finance CW2 Executive Summary This report is intended for the Board of directors of Tesco Plc. The report deals with non financial and financial indicators with regard to performance of the company Tesco Plc. The report seeks to provide an outline of the organization and also a comprehensive background with regard to performance indicators of the organization Tesco Plc. Balanced scorecard has been used in this regard which comprises of four different perspectives such as learning and growth, internal business, consumer, and financial. The use of balanced scorecard is made with the sole intention of measuring the performance of Tesco Plc. The use of strategy map has also been done to understand the working of various goals and KPIs in the organization such as to achieve diverse results. The retail industry has been majorly dominated by the companies from the United States. But, in recent times, the European retail companies like Tesco Plc. are evolving as successful retailing companies that operate in a multi format manner in different countries across the world. The report also deals with the approach of Tesco Plc. which is considered as decentralized. The approach provides the organization with much needed flexibility which makes the company well equipped to adapt to the local tastes and preferences and thereby retain their brand image, brand control and establishment of new stores in different parts of the world. Contents Introduction 4 Vision and Strategy 4 Balanced Scorecard 5 a. Financial perspective 6 b. Customer perspective 7 c. Internal business perspective 8 d. Learning and Growth perspective 9 Balance of balanced scorecard (BSC) 10 Strategy Map for Tesco Plc 11 Recommendations 12 a. Consumer service 12 b. Innovation 12 c. Green credentials 13 d. Pricing image 13 Evaluation 13 Conclusion 14 References 15 Introduction Tesco Plc is considered as a multinational company which has operations in numerous countries. The company is located in the United Kingdom and is considered as one of the most profitable and largest retailers in the world. The company is considered as a big retail brand in the market of UK. It is considered to be worth £ 2.8 billion. The company currently employs over 500000 people across the globe and is considered to operate in 12 countries. The company has used the term ‘Glocalisation’ in a very efficient manner for its successful global growth. Glocalisation can be considered to be a blend of local understanding and global strength. The company intends to revamp its large ‘hypermarkets’ and also intends a major revamp of its UK based commercial activities. Vision and Strategy The general economic trends affecting the global retail market include the policies related to monopoly and competition levels, land use, the deregulations in foreign investment and the different non liberal reforms that directly affect the trade practices and the consumer markets operating in the global retail industry. In the background of these economic trends, the different companies operating in the global retail segment have started consolidating their resources and expand their operations across different parts of the globe including the emerging economies. The main vision of the company Tesco Plc. is to be a recognized retailer across the globe such that people prefer to shop with the company and also shows significant preference with regard to working for the company. The vision of the company comprises five elements as follows: I) The company intends to become a need and a want to consumers across the globe, II) The business of the company should grow at a rapid pace with plenty of opportunities, III) The organization wants to be innovative having numerous ideas and a modern approach, IV) The company wants to have a global presence while seeking to be a market leader in the local market of UK, V) The company also wants to gain the loyalty and trust of communities, colleagues, and consumers at large. The main purpose of the company is to grow globally by providing high quality retail services to global consumers. The company has also implemented a ‘Build a Better Tesco’ plan with regard to reinvigorate the local UK market (Clarke, Benison & Guy, 1994, pp. 11-20). The company seeks to increase its profitability and sales in the global markets by providing quality services that seeks to add value to global consumers. The importance of a diverse work force is very important with regard to developing future leaders for the organization such that they can contribute in a significant manner to further the growth of the company. Tesco Plc. pursues the activities of corporate social responsibility as strategic responsibilities of an organization in an attempt to maintain its goodwill and stay at the heart of any community. Balanced Scorecard There are various Balanced Score card goals which comprise mainly financial, customer perspective, internal business processes, growth and learning among others. The financial measure includes market share, profitability, and costs and revenues. Customer perspective measure comprises customer turnover or retention, customer value, and customer satisfaction. Internal business processes measures comprise productivity improvement, operation metrics and measures for the assessment of performances of processes. The growth and learning measures comprise level of organizational capability, employee satisfaction, employee retention or turnover, and the nature of the organizational climate or culture. a. Financial perspective Goal KPI/Measurement Target performance level Initiative/Action plan Increase in revenue from sales Revenue Achievement of £ 45 billion of revenue in UK market An increased focus on local market to increase sales Increase sales in global markets Revenue Achievement of £ 32 billion of revenue from international markets An increased focus on those global markets from where revenue can be increased in a significant manner Reasonable return on investments made ROI Achieving at least 10% return in this regard An increased focus on those investments which seeks to maximize returns Increase in revenue from projects Margin, revenue To achieve a 20% increase in this regard An increased focus on those projects that have the potential to generate higher returns The main aim of Tesco Plc. is to increase its revenue from both local market of UK as well as from global markets. The company has also placed a high degree of importance on achieving at least 10% return with regard to return on investments (Dalai and Burrow, 2003, p. 51). The main purpose of the company in this regard is to focus on profitable investments that seek to generate a higher rate of return for the organization. The company has also placed a significant degree of emphasis on undertaking those projects that have the potential to generate higher returns for the company. It seeks to achieve 20% increase in this regard. b. Customer perspective Goal KPI/Measurement Target performance level Initiative/Action plan Employing more staff which leads to better service Better shopping experience of consumers The company wants to set standards for the industry in this regard The company has invested over £ 200 million in this regard Improve Customer Loyalty Increase in number of consumers who shops with the company The company wants to be the main choice for consumers with regard to shopping The rolling out of Tesco Bank in more number of countries as it is said to increase customer loyalty Reduction in prices Consumer feedback on price matching To improve the image of the company by adding value to consumers through price reduction The company seeks to provide quality services at affordable prices Reduction of consumer waiting time at checkouts Customer Feedback score and number of complaints The main aim of the company is to reduce average consumer waiting time by 30 seconds The implementation of ‘Scan as you Shop’ in numerous shops to allow consumers to scan their shopping while they shop to save time at check outs The company intends to provide its consumers with better shopping experiences and as such it seeks to employ more number of staffs which can have a direct influence on the organization’s ability to provide quality services to consumers. The company also has intentions to improve the loyalty of consumers in an attempt to be the main choice for consumers with regard to shopping. In this regard, Tesco Plc. intends to reduce prices while providing quality services to consumers in an attempt to add value to them. The reduction of consumer waiting time at checkout points can also lead to consumers having favourable experiences with regard to shopping (Tesco PLC., 2012). c. Internal business perspective Goal KPI/Measurement Target performance level Initiative/Action plan Innovation Increase in number of consumers shopping with the company Introduction of “Self service checkouts” and innovative business models The launch of Tesco bank by which the company manages its financial activities To improve the relationships with suppliers Supplier viewpoint The aim of the company is to achieve 71% with regard to supplier viewpoint The Launch of new dedicated Commercial Food Support Office and also simplifying the systems which facilitates easier interactions Improve Green Credentials CO2e Emissions Lower CO2e emissions by 50% per square foot by 2020 The company intends to invest in Heat Transfer thus lowering CO2 emissions from gas heater/boilers Product safety Key control factors for safety The company intends to have detailed established procedures to ensure integrity of products The organization intends to have crisis management processes which are considered as clear and tested The company focuses on innovation in a significant manner to increase the number of consumers that are shopping with the company. In this regard, the company introduced “self service checkouts” and innovative business models to improve the performance of the organization in the global market place. The launch of Tesco bank is also an important step in this regard by which the company manages its financial activities (Hino, 2005, p. 67). The company must maintain good relations with suppliers in order to have an efficient internal business process. The organization wants to achieve 71% in relation to supplier viewpoint. The company has also planned to improve its green credentials by lowering CO2e Emissions. The intention of the company is to invest in Heat Transfer which can significantly lower CO2 emissions from gas boilers/heaters. d. Learning and Growth perspective Goal KPI/Measurement Target performance level Initiative/Action plan Increase in employee retention percentage in UK UK employee retention The organization wants to maintain 92% in this regard The organization has invested in a huge manner in training and career development of employees such as to retain best talents in the organization Increase in training of employees Percentage of employees being trained across the organization The company has a target of 6% in this regard The program ‘Build a Better Tesco’ by the organization has the potential to train numerous number of employees Performance of employees Employees coming up with innovative ideas The organization does not communicate its goals to employees and makes its employees responsible for the culture of the organization The organization allows its employees to challenge and improve their performances Launch of new products by the company Number of units sold The organization intends to sell 300000 units of product in the year 2013 The products of the company should have new features The organization has invested in a significant manner in training and development of employees such as to retain the best talents in the organization. The program ‘Build a Better Tesco’ by the organization can be considered as an important step in this regard. The program can be considered to have the potential of training numerous numbers of employees of the organization. Tesco Plc. does not communicate its goals to members of the organization and instead allows them to assume responsibilities for the culture of the organization. The employees of organizations are required to come up with their own ideas in an attempt to achieve the objectives of the organization. Balance of balanced scorecard (BSC) Perspective # Of Metrics Weight Financial 4 25% Customer 4 25% Internal business 4 25% Learning and Growth 4 25% 16 measures 100% The balance of the balanced scorecard shows that Tesco Plc is in a process of providing equal weight to all the four perspectives such as financial, customer, internal business, and learning and growth. The company previously had placed more emphasis on expansion activities and there was less importance placed on the satisfaction of consumers. But currently the organization looks to address the problems of consumer dissatisfaction in a way such that it has a considerable bearing on the performance of the company (Kolb, 2008, p. 87). The equal importance that is placed by the company in each of the four perspectives allows the company to distribute its resources in a fair manner between the four perspectives of the balanced scorecard of the organization. Strategy Map for Tesco Plc A strategy map can be considered as a diagram which seeks to describe the process of creating value by organizations. It facilitates the connection of strategic objectives to the objectives of the balanced scorecard of an organization. It seeks to provide information regarding how large companies such as Tesco Plc. have various goals and objectives that can impact in a significant manner the goals and initiatives of other departments in the organization (Maylor and Blackmon, 2005, p. 77). The strategy map of Tesco Plc. has the potential to provide an understanding of how various strategies are linked such that managers of the organization can plan in a better manner the utilization of other initiatives to achieve other goals of the organization. Recommendations The company Tesco Plc. should focus on customer service, innovation, green credentials, and pricing image as a means to improve its global performance. a. Consumer service The recent drive by the company Tesco Plc. to hire an increasing number of employees and to train them will definitely improve the consumer experiences with regard to the organization. I would like to recommend that the company should focus on social media in a more efficient manner because the company already gains huge amount of profits globally through online sales. The approaches and tools of organizations have changed a great deal with respect to interaction with consumers after the emergence of social media. In this regard it is of utmost importance that organizations learn to apply the uses of social media in a way that would be consistent with their plan of business. b. Innovation Innovation is also considered as an important tool for the organization to increase the number of consumers shopping with the company. The company in this regard should focus more on introduction of “self service checkouts” and innovative business models. The launch of Tesco bank which manages the financial activities of the organization is considered to be an important measure by the organization in this regard. c. Green credentials The company in this regard should focus more on investing in Heat Transfer which can significantly lower the CO2e Emissions from gas heater/boilers. The company has to address the concerns of consumers in this regard which can significantly increase the loyalty of consumers towards the organization. d. Pricing image The company should focus on pricing its products at a low level such that consumers can afford such products that are manufactured by the company. In this regard, it should also focus on providing quality products to its consumers. The company should definitely seek to add value to consumers by providing them quality products at affordable prices. Evaluation The economic factors in the retail market is expected to create an impact on the demands, expenditure levels, profit levels and prices for the retail companies like Tesco Plc. One of the major economic factors affecting the market is the high rate of unemployment which has reduced the demand for many of the products in the market thus causing major problems to the performance of the companies in the retail industry. The economic factors are outside the control of the companies and thus have major impacts on the performance and profitability of the companies. Tesco is expanding internationally and aims at generating higher revenues in the coming years (Tesco PLC., 2013). The balanced scorecard has provided Tesco Plc. with an idea regarding the direction in which the organization must channelize its efforts. The organization already has numerous KPIs in place which allows the company to conduct accurate quantitative research into its performance with regard to the areas of the balanced scorecard. The ability of the organization in this regard to have actual data driven KPIs in place allows for less speculative targets which can have a considerable bearing on achievable goal setting by the organization. It also facilitates in continual monitoring and making suitable adjustments, if needed. Conclusion The global economic trends in the retail segment are arising due to the changing economic scenarios in different countries, the shifting demands of the customers and the increasing use of electronic commerce. The main economic trends affecting the retail market and Tesco as a retail company are the shifting demands of the customers for value, the increasing purchasing power of different consumers and the increasing importance of the emerging countries in the world economy. The balanced scorecard of the organization should be used in conjunction with the strategy map such that the company is able to look at the bigger picture with regard to its global performance. These are considered as the tools through which the company Tesco Plc. can improve its performance in a significant manner in the global market place. References Clarke I., Benison, D. & Guy C. 1994. The Dynamics of UK Retailing at the Local Scale. International Journal of Retail & Distribution Management, Vol.22 (6), pp.11-20. Dalai, L. and Burrow, J., 2003. Business Finance. New York: Engage learning. Hino, H., 2005. The Effects of Economic and Social-cultural Factors on Retail Modernization. New York: Sage. Kolb, B., 2008. Marketing Research: A Practical Approach. London: Sage. Maylor, H., and Blackmon, K., 2005. Researching in Business and Management. London: Palgrave Macmillan. Tesco PLC., 2012. Tesco at a Glance. [Online]. Available at: http://www.tescoplc.com/files/reports/ar2012/index.asp?pageid=15. [Accessed on 21 March. 2014.] Tesco PLC., 2013. Annual report 2013. [Pdf]. Available at: http://www.tescoplc.com/files/pdf/reports/tesco_annual_report_2013.pdf. 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