Company: Tesco PLC - Assignment Example

Tesco PLC Contents Introduction 3 Balance Scorecard Approach 3 Financial Perspective 4 Perspective 4 Internal Perspective 5 Learning and Growth Perspective 5 Just in Time 6 Conclusion 6 Reference List 8 Appendix 9 Introduction The year 1919 was a landmark year in the food retailing history of the U.K. as this was the year when the first Tesco store was opened. Over the passage of time, the business of Tesco had expanded exponentially and presently it operates in 12 countries across multiple continents. Tesco operates a number of store formats in grocery business like Tesco Express, Tesco Extra, Tesco Superstore and Tesco Metro (Tesco PLC, 2014). The company has expanded its business profile to non-food business as well like electronic goods, toys and books and has recently entered the telecommunication and financial services. The group sales of the company were $70.9 billion in 2014 (Tesco PLC, 2014). However, the overall growth of sales was only 0.3%. The global financial crisis of 2008 has done considerable damages to the grocery and retail industry of the U.K. Tesco had the highest market share of 31.7% in 2007 which had significantly shrunk to 28.7% in 2014 (Wood, 2014). The emergence of competitors like Waitrose, Aldi and Lidl has adversely affected the market share of Tesco as they began to provide heavy discounts to consumers. A slow growth of economy combined with declining disposable income had been driving customers away from Tesco. This paper uses balance scorecard approach and just in time supply chain management to show ways in which Tesco can improve its overall performance. Balance Scorecard Approach Originally developed by Kaplan and Norton (1992 cited in Kaplan and Norton, 2001), this approach has soon become an important tool to measure organizational performance. This approach goes beyond the traditional measures of financial performance and includes three other critical performance indicators which can measure the effectiveness of an organizational performance namely customer perspective, internal organizational perspective and innovation and learning perspective (Kaplan and Norton, 2001). Empirical evidence shows that a number of successful transnational companies in diverse industries are using the balanced scorecard approach in order to improve their performance. For instance, Hilton Group in the hospitality industry, Wal-Mart in the retail industry and Toyota in the automobile industry are already using this approach for gaining competitive edge over their rivals (Weygandt, Kimmel and Kieso, 2009). Overall 57% of global companies have adopted this approach based on the value that they add to the business (Balanced Scorecard Institute, 2014). Financial Perspective Objective Measure To enhance profitability Can be measured by return on equity Reduce the operational costs Can be measured by measuring net profit margin Tesco has been struggling with dwindling sales recently. In the third quarter of 2014, the sales of the company had fallen by 3.7% while the annual profit of the company had fallen by 6% (Wood, 2014). In this scenario there are two options available to the company in order to improve the sales. The first one is to maximize the sales via online and physical stores by attracting new customers or reduce its current cost of operations. Customer Perspective Objective Measure To provide value for money to customers To provide superior quality products at affordable prices. To minimize the grievances of customers By conducting online customer feedback programs Creating value for customers is the ultimate goal for any business enterprise as it helps in enhancing the satisfaction of customers and improves their loyalty towards the brand (Drury, 2006). Tesco had already introduced the concept of Clubcard long back to engage with its customers in a better manner. The “Steering Wheel” program launched by the company aims at improving customer satisfaction for the entire group. Tesco has been voted the worst supermarket in 2014 on account of a number of factors like high price, bad shopping experience and poor quality (The Guardian, 2015). Tesco must concentrate on improving the customer service by focusing on the quality of the products, providing justifiable prices and improving the store ambience. Internal Perspective Objective Measure To revamp the product line according to recent market trends By measuring the ratio of old products to new products sold. To improve the relation with suppliers By measuring the performance of the suppliers Understanding the needs of customers helps in focusing on the internal business insights. This is interrelated to both the customer and financial perspective. This research has also identified that the internal business perspective can be improved by focusing on the process of innovation and supplier relationships (Hitt, Ireland and Hoskisson, 2012). Following this guideline Tesco must bank upon expansion of healthy and organic food products which have become highly popular in the U.K. markets. Also the company should focus on establishing strategic partnerships with suppliers and monitor their standards to improve product quality. Learning and Growth Perspective Objectives Measures To improve the service quality of employees Focusing on employee induction and training programs To create an employee friendly work environment By measuring the employee turnover Quality of customer service can be greatly improved by providing good service to the customers and training of employees is the first step to achieve this process. Also, Tesco employees people of different cultural and ethical origin. This implies that they should devise programs according to the cultural diversity. Just in Time Lean management of supply chain is one of the most popular practices of strategic management. Researchers have established that adopting a just-in-time approach of supply chain management helps in the reduction of the costs of operation, enhances the operational efficiency and makes them highly responsive to the demands of the customers (Bowersox, Closs and Cooper, 2002). The basic process is designed around the effective management of inventory so that it is tailored to meet the demands of the consumers. Researchers have found that if the supply chain is designed according to just-in-time approach then sourcing managers focuses to replenish the final goods in the inventory that is demanded mostly by the customers. The overall aim is to minimize the overall cost which includes the cost of procuring, transportation and storage related costs (Bowersox, Closs and Cooper, 2002). Tesco can improve its lean management of supply chain mainly by improving the inventory management report. According to reports, Tesco has already invested a sufficient amount in management of supply chain. This shows the commitment of the managers to reduce the total cost of managing the complex supply chain of Tesco. The process is designed to replenish the stock in stores as soon as they are exhausted. This process is expected to reduce the stock requirements in stores and free the staff to provide better service to customers (Doyle, 2000). Recently Tesco has launched an online supplier network which is expected to improve the efficiency of supply chain, reduce the waste production in packaging and providing latest information to the shareholders. Tesco is also expected to enter into strategic partnership with companies which provide it with statistical and analytical tools to interpret the supply chain data. This can help the company in forecasting the demand and replenish inventory in a more time-effective manner. Conclusion The competitive landscape of the retail sector of the U.K. is creating huge pressure on Tesco. The fall in disposable income of the consumers have made consumers switch to low priced stores. In this regard, Tesco can use Balance scorecard and Lean management of supply chain to improve its performance. This research has found out that the company should mainly focus on reducing the operating costs, introduce measure to improve shopping experience of customers, create new products according to recent market trends and improve work environment for employees to improve its current performance. This effort should be supplemented by a lean management of the supply chain system to eliminate stock accumulation at stores to free human resources to attend more important functions. Reference List Balanced Scorecard Institute, 2014. The Balanced scorecard - Whos doing It? [online] Available at: [Accessed 24 January 2014]. Bowersox, D.J., Closs, D. J. and Cooper, M.B., 2002. Supply chain logistics management. New York: McGraw-Hill. Doyle, D., 2000. Understanding information technology. Cheltenham: Stanley Thorns. Drury, C., 2006. Cost and management accounting: An introduction. Cengage Learning EMEA. Hitt, M., Ireland, R. D. and Hoskisson, R., 2012. Strategic management cases: competitiveness and globalization. Connecticut: Cengage Learning. Kaplan, R.S. and Norton, D.P., 2001. The strategy-focused organization: How balanced scorecard companies thrive in the new business environment. Boston: Harvard Business Press. Tesco PLC, 2014. Tesco PLC Annual Report and Financial Statements 2014. [pdf] Tesco. Available at: [Accessed 24 January 2014]. The Guardian, 2015. Tesco voted UKs worst supermarket. [online] Available at: [Accessed 24 January 2014]. Weygandt, J.J., Kimmel, P. D. and Kieso, D.E., 2009. Managerial accounting: Tools for business decision making. New Jersey: John Wiley & Sons. Wood, Z., 2014. Tesco market share shrinks to lowest level in almost a decade. [online] Available at: [Accessed 24 January 2014]. Appendix Figure 1: Financial results U.K. Figure 2: Financial results Europe Figure 3: Key financial indicators Figure 4: Key financial indicators Figure 5: Supply chain management Read More