Tescos Strategy Management - Essay Example

Strategy management Contents Contents 2 Summary and Critical Review “HBR Article” 3 Selection of Evaluation Criteria 3 Apply Evaluation Criteria to current position of a firm 4 Advantages and Disadvantages of current position 5 Apply Evaluation Criteria to future strategy of a firm 6 Advantages and Disadvantages of future strategy 7 Conclusions and Justified opinion 8 References 9 Summary and Critical Review “HBR Article” The HBR article focuses on the various strategic approaches that can be adopted by an organization in the most uncertain conditions. The article initially comprises of the ways in which the strategic environment of an organization gets affected in a crisis situation and then it considers the ways in which the scenario initiates significant changes in products and markets, supply chain structures, people or talent management, and management of corporate identity and reputation. The key challenge that is faced by companies in today’s scenario is that of integration. Companies which gained economies of scale across the borders have been encountered with a strategic shift where a company needs to adapt to the local conditions. Demand would be low for many years and companies needs to be well aware of the emerging competitors and constantly upgrade its reputation. The developing countries provides the best opportunity for companies but now the companies needs to focus more on customized products for that segment of richer countries that are underserved. This would facilitate more of product innovation at lower prices. The companies would even need to manage a diverse work force that would require more investments in new communication technologies and a powerful corporate identity. Selection of Evaluation Criteria Any strategy formulation is done by a company in order to gain competitive advantage in the competitive business environment. There exits certain criteria’s that needs to incorporated in the process of strategy formulation. These criteria’s are based on market and products, operations and innovation, people and organization, and identity and reputation. The strategy formulated should encompass the factors of identification of emerging market competitors, investment in appropriate positions, and adaptability to the local differences (Clarke, Bennison and Guy, 1994, pp. 11-20). The component of market and products focus on those segments in every other country that is underserved, the price pressures should be recognized carefully so that the strategy do not only encompass premium pricing strategies rather the prices should be set on the basis of competition and the purchasing power of the consumers of the particular market segment, and addition of more innovative varieties in the product offerings (Acur and Bititci, 2004, pp. 388-408). The operations and innovation factor deals with simplification of the supply chain activities, exploring the opportunity of off-shoring activities, shift the R&D activities where there exist the market growth and researchers, and enhance the help from some of the emerging economies for process innovations. The organization and people comprise of relocation of the key managerial functions, effective handling of a diverse workforce and incorporation of innovative communication technologies (De and Tonchia, 2003, pp. 947-976). The identity and reputation component comprise of giving more importance to corporate citizenship and securing the overall reputation of the business. Apply Evaluation Criteria to current position of a firm Tesco is one of the largest food retailers in the world and it operates through 2318 stores. The supermarket chain is UK based and its business operations are executed under four banner names that are Extra, Superstore, Metro and Express. The company offers over 40000 food products as well as a range of non food items and has also expanded into gas stations, petrol retail, finance sector, etc. The company has been able to be the largest food retailer in the world because of its innovative strategies and setting lowest prices for its product lines. As per the strategy and competition evaluation criteria the firm has set strategies to offer the best prices to the customers for its wide product range. The company in order to survive in the competitive environment as also expanded its operations in insurance and financial sectors. The company has set competitive prices and delivers the best quality products. In order to pose an entry barrier to the new entrants the company has highly invested in supply chain and in stores (Luo, 1999, pp. 56-57). Tesco invest more in its trading activities as the company buys materials for its business operations from overseas market. The company offers a wide variety of products for the consumers at a competitive price and it mainly focuses on the UK market. The company has simplified its supply chain activities through extranet systems which enable smooth flow of information between the company and the business partners. The company has also installed RFID systems, self check out machines, wireless devices, and electronic shelf labelling which has helped in the smooth flow of supply chain operations (Lasserre, 2012, pp. 73-74). The company outsources its product from Europe and overseas market and has even extended its supplier base. The company’s management follows more of participative leadership style and encourages the employees to take part in effective strategy making on employment conditions. However the company initiates low salary scale and recruits elderly people, students and disables so that the human capital is low and employee loyalty is high. The company performs corporate social responsibility act by coordinating with various communities and charities. The company secures its corporate position by delivering quality products to the customers and maintaining a healthy relationship with its suppliers, customers, and their employees. Advantages and Disadvantages of current position The company relies on a small range of suppliers which makes the bargaining power of the suppliers high and if the company has to deliver its products at a competitive price then it needs to set best of price deals with its suppliers. The company has wide range of products mainly into food retail but it has restricted its operations to only 6 countries apart from the UK market. Since the major revenue is contributed by the UK market any turmoil in the country’s economy would disrupt the entire operations of Tesco. Since the company has adopted low cost leader strategy it needs to limit on its supply chain activities and this strategy can be easily copied by any other player as that of Asda which is now been takeover by Wal-mart and is a major threat for Tesco. The advantage of its position is its expertise, technology advancements, satisfied customer base, online shopping platform for its customers, and a market leader position in the food retail sector in UK. Apply Evaluation Criteria to future strategy of a firm As per the evaluation criteria that is based on strategy and competition, product and markets, operations, people management, and corporate reputation Tesco has some opportunities that it can explore. The firm can set strategy to diversify into different markets with different product lines. The company in the recent years has been generating more of revenues from the non food items and even it has been expanding its market share through its beauty and health products (Desjardins, 2005, p.6). The strategy of the firm for the future should be focused on entering into more of emerging markets. Such an option for Tesco to expand its operations is China which is one of the developing markets and the second largest economy. The product innovations strategy is adopted by Tesco from its invention and this can form a part of the future strategy in the form of extended product line incorporating more of non food items, organic products, and range of healthy food items and beverages (Finch, 2004, pp. 183-196). For its product lines the company needs to offer cost leadership strategy through which it can control its operating cost ad offer competitive prices to its customers. The other future strategy can be in the form of product differentiation by making the customers perceive the value addition in its products. The other highly emerging markets are Asian countries, Japan, etc. In terms of supply chain the company can focus more of outsourcing, forming strategic alliances with retailers in local market, shifting into integrated information systems with its suppliers and using more of modern technologies for shifting of goods from the warehouses to the supermarket stores. The supply chain operations can be further modified by developing different store formats to provide pleasant and different shopping experience to its customers. In order to improve efficiency level Tesco can adopt the future strategies of incorporating more of diverse workforce which possess the necessary talents to manage the widespread operations at Tesco (Palmer, 2004, pp. 1075-1101). The company can set up innovative social responsibility programs by taking active participation in some of the current issues surrounding the world. This would enable the company to build strong reputation and even it can adopt some promotional techniques by which it can state that they deliver value to the customers. Advantages and Disadvantages of future strategy The advantages of the future strategy are that it would enable the company to obtain a sustainable position in the highly competitive market place. The strategies if adopted by Tesco would help to eliminate some of the loopholes that are there in its business operations. The main advantage is that it would make the company be focused on its operations and aim at expanding its business operations into the new emerging markets through a refined product line. The future strategy would enable the company to grow and not to be dependent on limited markets which are subjected to uncertain risks (Veliyath and Fitzgerald, 2000, pp. 56-82). The disadvantage is that it initiates more of investment as entry into a completely new market would enforce the company to open up its own stores and even to extend on its employee base. If the company forms alliances with the local people then it would eventually lead to sharing of their expertise and skills and hence it may lead to leakage of their competencies to its competitors (Graiser and Scott, 2004, pp. 10-14). The other disadvantage is that if the product line is expanded by the company then the control over the operations will decline and this may even result in compromising with the product quality so as to meet the consumer demand. The extended product line would even encompass a restructuring of the supply chain operation and thus an investment for the entire process. Conclusions and Justified opinion The strategy wheel forms the basis of the strategy formulation by any company. The main factors that forms a part of the strategy making is the areas surrounding product and markets, the supply chain operations, talent management and building reputation in the competitive market place. An effective strategy can make an organization achieve a competitive position and on the other hand if the strategy is not well structured then it can be the reason behind the downfall of an organization. The strategy making needs proper analysis of the external and internal environment on which the strategy can have an impact and the extent to which the implementation of the chosen strategy can meet the long term goals of an organization. Tesco was a chosen organization for this report and the challenges that the company was facing can be resolved by adopting product differentiation and cost leadership strategy. Tesco can extend its product line so that it can effectively meet the changing consumer demand trend in the market. The company needs to focus on the evaluation criteria for choosing the best strategy for future growth and sustainability. 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. Clarke, I., Bennison, D., and Guy, C. 1994. The Dynamics of UK Grocery Retailing at the Local Scale, International Journal of Retail & Distribution Management. Vol. 22 (6), pp.11-20. Desjardins, D. 2005. Tesco strategies turn up competitive heat in UK, DSN Retailing Today. Vol. 44 (4) , p. 6. Finch, P. 2004. Supply chain risk management, Supply Chain Management: An International Journal. Vol. 9 (2), pp.183-196. De, T. A., and Tonchia, S. 2003. Strategic planning and firms’ competencies: Traditional approaches and new perspectives, International Journal of Operations & Production Management. Vol. 23(9) , pp.947-976. Graiser, A., and Scott, T. 2004. Understanding the Dynamics of the Supermarket Sector, The Secured Lender. Vol. 60 (6), pp.10-14. Palmer, M. 2004. International retail restructuring and divestment: the experience of Tesco, Journal of Marketing Management. Vol. 20 (9) , pp.1075-1101. Veliyath, R., and Fitzgerald, E. 2000. Firm Capabilities, Business Strategies, Customer Preferences, and Hypercompetitive Arenas: The Sustainability of Competitive Advantages with Implications for Firm Competitiveness. Vol. 10 (1) , pp.56-82. Lasserre, P. 2012. Global Strategic Management. Singapore: Palgrave Macmillan. Luo, Y. 1999. Entry and Cooperative Strategies in International Business Expansion. USA: Greenwood Publishing Group. Read More