Tesco Plc - the Strategic Potential of a Retail Organization - Report Example

Evaluation of the Strategy Employed by Tesco Plc Table of Contents Evaluation of the Strategy Employed by Tesco Plc Introduction 3 About Tesco 3 Organizational Strategy, intent and purpose in Tesco 3 Strategic Decisions in Tesco 4 Horizons of Strategy in Tesco 5 Three Levels of Strategy in Tesco 7 Statement and Branches of Strategy 8 The Strategic Position of Tesco 10 Strategic Implementation in Tesco 11 Recommendations for countering future challenges 11 Conclusion 12 Reference List 13 Introduction The paper focuses on conducting a research on the strategic position and potential of a retail organization named Tesco Plc. Both empirical and case based discussions would be formulated relating to the above in order to understand the level of competitive advantage generated through implementation of the strategic objectives. Finally, the paper would conclude based on generating effective recommendations to enhance the strategic potential of Tesco Plc so as to counter newer challenges. About Tesco Tesco Plc operates as a leading grocery retailer in the United Kingdom, which aims to deliver enhanced value to its customers, in terms of the products offered in the food and non-food segments as well as of the retail services offered in its different retail outlets. The company by way of operating based on its different branches spanning across 12 markets strives to meet the needs of over 500,000 customers. Tesco Plc conducts its business activities in a large number of emerging markets and also through its Tesco Bank scheme. Multiple formats such as, Superstore, Extra Stores, Metro, Express, Hypermarkets and Homeplus, are created by the management of Tesco in order to contribute in addressing the variegated needs of its retail consumers (Tesco.com, 2014). Tesco aims at serving the customers’ needs in the non-food category in way of providing merchandises related to electronics and stationery equipments and also related to other homeware and home furnishing categories. Apart from offering services in the insurance and finance category segments, the company also provides personal banking products and services. Operating based on its UK headquarters in Hertfordshire, the company works towards developing partnerships agreements with other retail formats spread along the developed countries so as to largely expand therein (Tesco Plc, 2012). Organizational Strategy, intent and purpose in Tesco The strategic intent and purpose of Tesco Plc is to focus on expanding across international markets through the rapid expansion of store formats for generating enhanced value and services to a global consumer force. The company strives to improve and strengthen on its retailing potential by operating on both the physical and online retailing levels. The purpose of Tesco Plc is to help focus on delivering quality services and products to customers in an enhanced fashion by way of closely working with its different stakeholder groups such as, employees and suppliers. Strategic Decisions in Tesco Strategic decisions constitute decisions taken by an organization that contribute in guiding its long-term business and organizational efforts. Further decisions taken at a strategic level are also intended to enhance the scope of organizational activities as well as of gaining advantage over the competitors. Similarly, decision making at the strategic level relate to optimal utilisation of the existing resource base so as to contribute towards meeting the demands of the different stakeholder groups and also overcoming changes in the external business environment. Strategic decision making approach requires effective integration of both the internal and external stakeholders for the purpose of framing effective policies in countering emerging challenges. Hence, strategic decision making mainly focuses on incorporating needed changes in an organisation’s existing operational structure. Similarly, strategic decision-making approach also help to establish a problem solving behaviour in respect of emerging organizational problems, thereby supporting the development of organizational learning (VASILESCU, 2011). Strategic decision making relating to Tesco Plc is observed to be carried out based along seven different parameters that can be enumerated as follows. The management of Tesco Plc aims to enhance the retail market pertaining to the United Kingdom, in terms of not only expanding its store formats, but also boosting productivity and efficiency of the staff while meeting the business objectives. Similarly, decision making related to product and brand development is generated through gaining of inputs by way of conducting surveys on customers. In the second case, Tesco focuses on synchronizing its physical and online resource base in order to deliver exceptional retail services to the customers spread along several international markets. Further decision making approaches related to Tesco constitute extension of the retail assortments in terms of expanding along the food and non-food product segment. Decision making approaches in Tesco Plc also focuses on acting in a socially responsible fashion, thereby meeting the environmental and social responsibilities. The decision making approach facilitates integration among actions of the staff relating to the different departments and levels in taking a concerted step towards meeting the diverse customers’ needs. Differentiation is also enabled as a key strategic decision relating to the development of different brands and product ranges so as to satisfy the growing and changing needs of its customers on a global basis (Tesco Plc, 2012). Horizons of Strategy in Tesco The three horizons of strategy were first introduced by management authors such as, Merhdad Baghai, Stephen Coley and David White, in the book named Alchemy of Growth. The three horizons of growth had contributed towards providing suggestions to the managers for formulating strategies, considering the short, medium and long run business objectives. The model for three horizons of strategy as developed by the authors is reflected below. (Source: Curry and Hodgson, 2008) Strategic actions at the first level relate to development and extension of the core business framework, which corresponds to a lower profit and revenue level on the Y-Axis. With passage of time, strategic horizon of the business activities focuses on the development of new business platforms, which in turn help to generate greater profitability for the enterprise. At the third level, the chief focus is on development of the potential alternatives and selection of different options such that the business is able to diversify into newer products and service categories, thereby endeavouring on improving the profitability and market share levels (Curry and Hodgson, 2008). Tesco focusing on the development of core business functions pertaining to the retail landscape of the United Kingdom aims not only to enhance expertise and efficiency of the staff, but also boost the growth of retail formats throughout the country. Similarly, along the first horizon, the company also concentrates on enhancing quality and existing product assortments so as to help in meeting growing demands of the customer base. Relating to emerging businesses, the retail company is observed to greatly stress on expansion of its retail formats in the key emerging markets such as, China, Malaysia, Turkey, Slovakia and Poland. The growth of formats along the emerging markets is found to largely contribute in growth of the profitability position of the organization during the period 1996-97 to 2009-10 as reflected in the following diagram. (Tesco Plc, 2013) In respect to the third level, Tesco is observed to potentially diversify into newer product and service categories pertaining to the non-food sector. The retail company aims to diversify into newer product segments pertaining to clothing, health and beauty, electrical equipments, while also enticing the customer base by assisting in the development of partnerships with financial organizations so as to generate insurance and other financial category products. On the horizontal front, diversification is enabled by Tesco relating to emphasising on incorporation of the multichannel or digital marketplace in order to facilitate growth of the retail consumers. It is observed that diversification activities carried out in the above scale has helped the company to enhance its profitability along the period of 2011-12 to 2012-13 as reflected below. (Source: Tesco Plc, 2013) Three Levels of Strategy in Tesco Strategies are meant to be formulated by business organizations, based along three essential levels such as, operational, business and corporate. The first strategic level relates to the operational level that involves the synchronization of existing resource base of the organization in order to help fulfil objectives at the business as well as corporate levels. The operational strategic framework aims at integrating the organisational potential related to resources and processes base so as to help in fulfilling the strategic objectives. On the business front, strategic capabilities of the organization are designed to help in deciding on the product portfolio for the purpose of meeting the growing and changing needs of customers and also competing effectively with other competitor firms. It also entails gaining potential to help explore new opportunities both along and in newer business segments. Finally, strategic objectives related to the corporate level involve satisfaction of the needs of different stakeholder groups to the business. Strategic activities at the corporate level are observed to be mainly guided by a mission statement, which helps to direct the organisational actions while generating greater profitability for the investors (Rajput, et al., 2012). On the operational front, the strategic dimension of Tesco Plc aims at integrating the operational elements related to its four operational categories such as, core retailing business pertaining to the UK market, non-food and other financial services and finally the international operations, in order to help generate effective value to the customers. Operating along the above frameworks, the company strives to generate greater value to its different stakeholders such as, customers, employees and other stakeholder groups. The business strategy of Tesco includes expansion based on the product assortments and varieties as well as through development of the multi-channel retailing frameworks, thereby successfully meeting demands of the customers in an enhanced and sophisticated fashion. Innovating on the business framework contributes towards enhancing appeal of the brand to its target customer force. Finally in respect to the corporate level, Tesco aims to enhance the value of its shareholders by way of imparting effective training to the retail staff force in order to help generate the right quality of services to its customers. In terms of value for money, the company provides the right quality of products at an affordable price range. Moreover, the company also desires to generate the right quality of customer services both along the physical and online levels, which in turn enhances its brand image. Similarly, the management of Tesco also focuses on enhancing the parameters of customer loyalty through designing and offering Clubcard scheme that help the loyal customer base to help earn needed discounts and offers. Tesco closely works with its supplier base to deliver quality products to the customers at the right period so as to effectively satisfy the consumer demands on a timely basis. Communicating with its supplier base contributes in helping the latter understand needs of the customers, which in turn helps to act in a responsive fashion. Furthermore, Tesco also aims at continuously opening up new store formats in different regions, thereby generating an enjoyable shopping experience for the customers (Tesco Plc, n.d.). Statement and Branches of Strategy Strategy statement of a company is constructed with the purpose of communicating its strategic objectives to the potential stakeholders such as, employees, customers and the society at large through publication of the same in the press releases and annual reports. The strategic statement of the company is essentially constituted by three main components, namely objective of the strategy, scope of the strategy and competitive advantage that the strategic element entails. The intent of the strategic statement of Tesco is to help the different stakeholders understand their key roles in fulfilling the organisational strategic objectives. Strategic objectives rationalises the key points for which the strategy is formulated and undertaken by the company. It, thus, reflects on mission and vision objectives of the company (Morris, et al., 2005). The scope of the strategy relates to the target customer force for which the product and distribution strategies would be framed. Consequently, scope of the strategy tends to define the parameters for which the strategy is constituted and helps in realizing potential benefits that would be accrued by implementing the same. Finally, relating to the dimension of competitive advantage, the same reflects on the degree of success that can be gained related to the strategic objectives framed (Fairholm, 2009). The strategic direction of Tesco Plc aims at generating spontaneous value and growth for the different stakeholder groups along both regional and international markets. In order to fulfil the above strategic objective, the company’s strategic statement is essentially constituted to define the role of Tesco’s staff and management with an underlying aim to significantly invest and enhance its retail business in the United Kingdom. Thus, the objective of the retail company is to help enhance and sustain its market leadership potential in the UK retail market. The strategic scope of the company is associated with meeting the retailing needs of its customer base in the regional as well as international markets. In order to help fulfil the above need, the company focuses on incorporating and developing on the multichannel and digital retailing platform. Operating based on the multichannel retailing landscape, the company desires to improve its market leadership potential in both developing and emerging markets. Finally, Tesco is able to gain a competitive advantage by emphasizing on governance and monitoring of business growth in the foreign countries. The three main branches, relating to the strategy formulated by a business enterprise, aim to define the context, content and process parameters. The context of the strategic framework is developed by taking into account the internal organizational cultures and resource based framework, while the strategic content is created with the emphasis on choosing an effective strategy so as to help generate required performance. Finally, the strategic choice indicates the strategic planning activities that can help in meeting the stated objectives (Volberda, et al., 2001). Tesco aims to effectively integrate its human, financial and technical resource base to ably deliver effective services to the customers. Furthermore, the culture of Tesco Plc involves development of the needed teamwork in workplace such that people related to the different levels and departments are able to yield the right quality of services and merchandises within a specified period. Strategic choice of Tesco Plc that defines the strategic content is associated with enhancing the Tesco brand to the global customer base with the use of key online and physical resources base. Additionally, strategic choice of the company is also related to the potential in leveraging its skills and resources base so as to instil needed competencies. The strategic planning of Tesco Plc, which contributes in development of the process framework of strategy, essentially concentrates upon building potential of the company. Development of the operational potential of Tesco is conducted by its management by way of making large scale investments in the form of developing store formats and efficiency of the staff. Similarly, it also focuses on the development of product quality and accessibility parameters by enabling customers avail quality products at affordable price ranges. The strategic planning activities also aim to reflect a differentiated image of the company through its advertising and promotional efforts. Also, along with its private label program, the company concentrates upon incorporating needed technology in order to facilitate development of the multichannel retailing platform (Tesco, 2014). The Strategic Position of Tesco Strategic position of an organization tends to evaluate impacts of its strategic activities on the external business environment; on enhancing the internal competencies and utilisation of organisational resources; and on the ability to meet needs and expectations of the key stakeholders (Lees, 2008). The impact of strategic activities of Tesco Plc involves generating large scale employment in the United Kingdom as well as in different regions across the world through creation of a larger number of stores in the various marketplaces. Along with generating potential employment opportunities, the focus of Tesco on partnering with its supply chain arms helps to deliver the right quality of products at affordable prices, which in turn tends to promote healthy living conditions and minimize dependency on the fast and junk food items. Finally, the grocery retailer through its strategic activities also desires to reduce the amount of food wastage on a global scale. Through the above activities, the company is able to create considerable value for the society at large. Tesco aims to enhance the skill and expertise level of its internal members by way of emphasizing upon sharing the needed knowledge and experience so as to help in servicing customers in an effective fashion. Similarly, the company also stresses on incorporating effective technology relating to the incorporation of scanners and a digital platform for the purpose of ensuring an enjoying shopping experience for its customers (Tesco Plc, 2013). In terms of meeting the needs and expectations of its stakeholders, the strategic focus of Tesco Plc is to enable conservation of the natural resource base in the regions. It engages in the development of new store formats that would utilize renewable energy resources for the lighting purposes, thereby saving on both energy cost and use. Tesco also directs greater focus at the use of recycled resources for packaging and also works to effectively reduce the amount of carbon emissions from its different store, warehouse and logistics operations (Tesco Plc, 2014). Strategic Implementation in Tesco The implementation of the strategy in Tesco Plc is performed through generation of the needed investments in enhancing expertise and efficiency of the staff such that a noticeable change is established in terms of services delivered to the customers. Furthermore, continual innovation is being incorporated in order to help in the development of new store formats and also in creation of an effective blend of pricing, promotional schemes, offers and other loyalty programs, thereby enticing the customers successfully. Similarly, strategic implementation activities are carried out by focusing on effectively communicating with the stakeholder groups comprising supplier and target customers (Kukreja, 2013). Communication activity in respect of the potential stakeholders contributes towards gaining better understanding about expectations and needs of the people, which in turn helps to provide the right quality of goods and services to its customers. (Li et al., 2008) In order to build up on effective market leadership both on the regional and international scales, Tesco is observed to stress upon expanding area of the store formats such that a larger store can rightly house both food and non-food merchandises. Tesco also aims to develop its digital platform to help in better marketing of the non-food retail merchandises. The company also concentrates on potentially differentiating its image through development and generation of new category of merchandises and store formats. Finally, the company is also observed to effectively work on the development of different types of private brands and sub-brands by way of improving quality parameters of the merchandises offered (Tesco Plc, 2012). Recommendations for countering future challenges Potential recommendations can be generated for Tesco Plc in order to counter the growing challenges related to changes occurring in the consumer demands both along the regional and international spheres. Recommendations in respect to incorporation of the agile supply chain framework can be generated through the integration of data captured in the POS terminals, thereby transmitting the same to warehouses and supplier chain with the help of an effective ERP system. Integrating data based on the use of above technological domain would contribute in understanding changes in the consumer needs and preferences pertaining to the different product categories. Transmission of data along the supplier arms and warehouse units assist in allocating the right quality and volume of merchandises so as to effectively satisfy needs of the consumers. Moreover, Tesco Plc is also required to direct greater focus on drawing attention of the customers towards procurement of the non-food merchandises in terms of visiting its different outlets and also at the online level. Conclusion The current paper tends to evaluate the strategic potential of a retail organization, Tesco Plc, such that effective empirical models are employed related to strategic management for the purpose of analysing strategic potential of the company in terms of retailing activities conducted in the regional and international markets. The strategic direction of Tesco relates to development of the innovative store formats and also sale of new types of merchandises and services so as to help create a differentiated image amongst the consumers. Similarly, the company also focuses on the incorporation of digital and multichannel retailing framework such that the same contributes in increasing the proportion of its market share and revenue as well as in developing the profitability paradigm. Enhancement of the expertise and productivity levels of the staff in order to generate needed services to the customers also accounts to be an effective strategic activity of the company. Tesco Plc also concentrates upon effectively meeting the social responsibilities by way of performing activities such as, use of recyclable materials and reduction of the carbon emissions, which contribute towards protecting the natural environment. Reference List Curry, A. and Hodgson, A., 2008. Seeing in Multiple Horizons: Connecting Futures to Strategy. Journal of Futures Studies, 13(1), pp.1-20. Fairholm, M.R., 2009. Leadership and Organizational Strategy. The Innovation Journal: The Public Sector Innovation Journal, 14(1), pp.1-16. Lees, G., 2008. Strategic Position. [Online] CIMA Available at: [Accessed 12 August 2014]. Kukreja, D., 2013. Strategic Planning: A Roadmap to Success. Ivey Business Journal. Morris, M., Schindehutte, M. and Allen, J., 2005. The entrepreneur’s business model: toward a unified perspective. Journal of Business Research, 58, pp.726-35. Rajput, S., Singh, S. and Singh, P., 2012. Business Strategy, Change Management and Organizational Development. 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