Strategic Position, Mission, Goals, Objectives and Core Values - Tesco - Essay Example

Current Strategic Position Contents Introduction 3 Strategic Position, Mission, Goals, Objectives and Core Values 3 Market Segmentation 5 Organization’s Internal Environment 5 Organization’s External Environment 6 PEST Analysis 7 Porter’s Five Force Model 9 Porters Generic Strategies and Ansoffs Growth Strategies 10 Recommendation and Conclusion 11 References 12 Introduction Strategic management involves implementation and formulation of the major goals and initiatives taken by the management of company based on the consideration of resources, external and internal environment in which the organization is running their business activities. Again strategic environment provides overall direction to the organization and helps to design policies and plans to achieve objectives of the business. Here the selected company is Tesco PLC. It is a British multinational general merchandise retailer headquartered in England. It is the 2nd largest retailer in the global market after Wal-Mart in terms of profit and revenue. It has expanded its business activities and opened its stores in more than 12 countries in the world including Asia, Europe and North America. It is the leader in the grocery market especially in UK, Malaysia, Ireland and Thailand. Tesco is offering food products, beverages, clothing, home appliances, mobile devices and financial services to its customers. The company owns more than 6, 700 stores across the world. Tesco is able to serve more than ten millions of people per week. The management of this company aims to expand business scope in international market and by this way it wants to increase strong and sustainable long term growth. The company’s growth strategy is depending on the diversification strategy which was taken by the top management of this organization. In UK market the organization has established its stable position and in the present days this can be observed that Tesco PLC is a successful international retailer in store and online. Strategic Position, Mission, Goals, Objectives and Core Values As per the annual report and financial statements of Tesco PLC this is clearly observed that number of customers is increasing of this company in each year and they are satisfied from the delivery of services provided by the organization. Number of online shoppers is also increasing by the same way. But consumer behaviour and household budget are pressurized due to the change of economic environment and thus the business has to face several challenges to run its operational as well as business activities. The strategic position of this company is depending on the following factors which are customer intimacy, innovation and quality. Rig mechanization is one of the major strategies adopted by the top management of this company. In this strategy the company is concentrating to implement innovative products after detailed research and development procedure. Again the company has established multi channel leadership in all the markets where the business is running its activities. Mission of this company focuses on the following aspects. The company wants to become customer’s strategic partner by eliminating non productive time. The company’s success is always based on the expectations and needs of customers and for this reason they have to implement innovative ideas in their business activities so that the lives of customers will be little bit easier (Wetherly and Otter, 2014). At first the company took initiative to achieve success in the local market and then expanded its business in the international market. Again if the company wants to launch any new product category then at first it will target the domestic market and after getting success in this market they will expand the sales of that particular product in the global market. Management of this organization is trying to earn trust and loyalty from customers, community and society and also inspires them to purchase their products and services. ‘Creating value for customer and earn life time loyalty” is the mission statement of this company. Objectives and Goals of this company are to be a successful retailer in the international market, increase the market share in UK, to be as strong retailer in non food sector as in food sector, to develop diversification in the offered products and services, to develop retailing services in more efficient way, to build up positive image of the company in front of the community and society after doing proper corporate social responsibilities (Allen, 2012). Core values of this organization are to understand the customers and community in a better way, working as a team; trust and respect each other within the team; share knowledge and experiences among each other, listen to the words of customers and take initiative to support them as far as possible. Service, discipline, team work, safety, ethics, compliance, performance management, customer focus etc all come under the core values of this business. Market Segmentation Tesco generally serves its products in the retail market. Main target market of its business operation is in UK. It segmented its market into three divisions and these are upmarket (24%), mid-market (53%) and less affluent market (23%). Again they categorized the customers under different segments which are traditional, health conscious, price sensitive, convenience, finer foods consumer and mainstream customers. In next three years customers will be more health conscious and price sensitive due to the worst economic condition. Tesco has launched organic food products for serving the health conscious customers. It would lower the cost of operation for offering products at affordable prices in the market. Organization’s Internal Environment Organization’s internal environment generally refers to the strengths and weaknesses of the business. Strengths of Tesco PLC are as follows– It is one of the largest super market chains in United Kingdom. The company has strong brand name in international and domestic market and it has sustainable financial power to handle risk factors which are associated with business activities. Again by strong financial power the company can expand its business activities in international market. Already the company has presence in more than 12 countries in the world which is a big strength for the company. It is recognized as the 2nd largest retailer in the world after Wal-Mart. The management of this company uses the technology in marketing distribution activities in a better and improved way than the other competitors in the market (Böhm, 2009). Weaknesses of this company: The organization is over dependant on the domestic market i.e. the UK market. There is high transportation cost for delivering goods from one store to another and due to this factor the company is facing risk and loss in its business operation. Again the company has launched mobile phones in its offered product category and also delivered insurance services to its customers. But this is observed that there is lack of proper knowledge and experience in the mentioned fields which is one of the greatest weaknesses of this organization. Tesco is not getting sustainable competitive advantages from the market place. The management of this company is facing difficulties to focus on the specific market as the company has expanded its business operation in several geographical regions (Thompson and Martin, 2010). Organization’s External Environment External environment of any organization can be analyzed by observing the available opportunities that the company is getting from the external environment and number of threats that the company is facing to operate its business activities in the market. Now the opportunities which can be accrued by Tesco Plc are as follows: Tesco is increasing its international presence of the business activities in the global market. Recently the company has entered in the Asian markets where it will get several opportunities for the growth of business. Again Tesco is opening new stores in more than one country which will also help to increase the volume of sales as well as the amount of revenue. Diversification in product lines and service category will also be helpful for achieving sustainable growth than the other competitors. The company has comparative advantage than the competitors of market and it is one of the greatest opportunities for business. Online selling and marketing facilities also increase the sales volume of this business (Ferrell and Hartline, 2012). Apart from the above mentioned opportunities the company has faced several threats to operate its business activities in the international market. These threats are as follows: There is very stiff competition in the market and presence of strong competitors like Wal-Mart, Carrefour etc are making the competition tougher. Competition is also increasing in the developing countries where the company has expanded its business activities. For example it has recently entered in the Asian market but there also competition is in tough situation. So it is very difficult to say that the company will get predetermined success in those market places. Again rising cost of operation is also another fact of threat. Cost of transportation is increasing day by day due to the high price of fuel and raw material cost is also increasing at a rapid pace. If cost of operation will be high then profit margin will be decreased as the company cannot increase the selling price. If the company will increase the selling price and other competitors will not change the same then volume of sales will be reduced and the business will face losses. Due to the economic crisis in UK the sales volume of this company will get declined (Jeffs, 2008). Fluctuation in tax rates may also impact the financial position of this company in a negative way. Innovation by other competitor companies and existing super markets are also threats for this business. PEST Analysis PEST analysis is a strategic planning tool which is used to analyze various factors which are related to business environment. These factors are political factor, environmental factor, social factor and technological factor. In case of Tesco Plc the factors are described below in detail. Political Factors – The business of Tesco is diversified in the world and the company is operating its business in more than 12 countries except UK. So performance of this company is influenced by several political factors like tax rate, political stability in a particular country, legislation etc. Employment legislation was in favour of the business activities. Government has influenced the retail sectors to provide job opportunities from flexible, lower paid jobs to higher paid and high skilled jobs. As Tesco is belonging to the labour intensive sector so it has gained advantages from such legislation (Slamanig, 2013). Economic Factors – Some economic factors such as high unemployment rate are negatively affecting the demand of products and services which are offered by this company. Due to the high tax rate and interest Tesco cannot expand its business operation in the present situation as the business activities is majorly depending on the economy of UK which is in a threatening position. Socio cultural Factors – In the busy world people want to get one stop service and for this reason this kind of retail business will be attractive to them. Under one roof they are getting both food and non food products which are required by them to survive in their life. Through this way customers can save their time and energy. In the present days customers are aware about their health and due to this reason demand for food products is changing day by day. After keeping in mind about these particular criteria Tesco has launched organic food products to fulfil the demand of customers as well as to achieve the competitive advantages in the market. Technological Factors – Technology helps to give new trend for Tesco. It has gained the leading position in the market just because of its presence on the internet. Customer satisfaction rises after getting availability of products at the time of online shopping. Again the company has set up self check out points which are providing easy and convenient shopping environment to the customers (Dransfield, 2001). Tesco stores utilize some more technologies which are radio frequency identification, electronic self labelling, wireless devices, intelligent scale etc. Porter’s Five Force Model This model is a framework to analyze the competitive position of a particular organization in a specific industry. This will also help to make strategies for development of business. Here the model will be describes in respect of Tesco Plc. Threat of New Entrants – In case of super market retailing business barriers of entry are high because huge initial investment and fixed costs are required for this purpose. Tesco and other large super markets can provide economies of scale benefit to its customers as they can purchase large volume of raw materials at comparatively low price. Offering this facility to the customers become impossible for the new entrants in this market. Threat of Substitutes – Tesco is facing high threat of substitutes because the same products are being offered by the other retailing shop in the market. So there is wide range of options which are available to the customers for moving one retail shop to others. Bargaining Power of Suppliers – Bargaining power of suppliers is low as because Tesco is placing order to more than one small suppliers rather than one big supplier. Bargaining Power of Customers – In this case bargaining power of customers are high. If they will analyze that Tesco is offering products at comparatively high price than its competitors then they will switch over to the other brands for getting the same quality products at lower and affordable price (Roy, 2011). Competitive Rivalry within the Industry – Grocery market and retailing business has become competitive in the present days. Tesco has to face strong competition in the market with some big competitors such as Wal-Mart. This is the most important factor which management needs to concern for the future of business because if the company is unable to survive in this tough competition then it will lose its market share and amount of revenue also will decrease in future days. Porters Generic Strategies and Ansoffs Growth Strategies Porter’s generic strategy always focuses on three major facts which are cost leadership, differentiation and focus. Cost leadership indicates superior profit through lower cost which Tesco is following to some extent. Differentiation describes the process for providing unique products and services to the customers. The management of Tesco is also concentrating to offer innovative products to its customers. Porter mentioned that focus should be given on a limited part of market. Here Tesco is focusing especially on the UK market for achieving more market share in the domestic field (Sekhar, 2009). Ansoff identifies four generic growth strategies in the business field and these strategies are as follows. Market Penetration – Management of Tesco prefers long term growth strategy based on some aspects which are expansion of international retail industry, outstanding customer services, providing food and non food products to the customers etc. The company uses advertisement and other sales promotional activities, competitive pricing strategies for increasing the sale of existing products in the existing market. Market Development – Tesco has developed new market for existing product and for this purpose they have entered in the market of Asia. Again they are increasing more number of distribution channels for the said purpose. Product Development – Tesco introduces new products or services in the existing market by launching non food products, mobile and financial services. Diversification – It is a process of introducing new product in the new market. Tesco should do proper research in such case as high risk factors are associated in it. Recommendation and Conclusion At the part of recommendation and conclusion this can be highlighted that three key strategic options are available to the mentioned company. These can understand the external environment which may affect the business activities of Tesco, review existing business plans and strategies of Tesco and developing options for strategic planning. External environment includes external factors such as economic and political factors. Analysing external relationship with shareholders, suppliers and customers with the organization is very much important. Tesco should overcome the dependency on the UK market and also should implement clear environmental policies. Management should review the position of this organization on periodic basis. It should develop cost leadership and product differentiation strategies for achieving more market share in the global business context. References Allen, M. 2012. Analysing the Organisational Environment. Cambridge: Select Knowledge Limited. Böhm, A. 2009. The SWOT Analysis. Germany: GRIN Verlag. Dransfield, R. 2001. Corporate Strategy. Oxford: Heinemann. Ferrell, O. and Hartline, M. 2012. Marketing Strategy. Boston: Cengage Learning. Jeffs, C. 2008. Strategic Management. Los Angeles: SAGE. Roy, D. 2011. Strategic Foresight and Porter’s Five Forces: Towards a Synthesis. Germany: GRIN Verlag. Sekhar, G. 2009. Business Policy and Strategic Management. New Delhi: I. K. International Pvt Ltd. Slamanig, M. 2013. Pest Analysis Hungary. Germany: GRIN Verlag. Thompson, J., and Martin, F. 2010. Strategic Management: Awareness & Change. Hong Kong: Cengage Learning EMEA. Wetherly, P. and Otter, D. 2014. The Business Environment: Themes and Issues in a Globalizing World. Oxford: Oxford University Press. Read More