Organisational Strategy and Decision-Making - Tesco - Essay Example

?Organisational Strategy and Decision Making The business organisations generally intend to devise and implement effectual organisational orbusiness strategies in order to accomplish their predetermined business goals. Tesco is regarded to be one of the biggest retailers throughout the globe, which serves millions of customers weekly. The company had employed numerous significant strategies, such as diversification, acquisition and global business expansion, in order to expand its business in the international markets. However, the company had faced certain strategic issues, such as extreme market competition in the industry. It has also been observed that the company had set certain strategic directions for future, such as enlarging business in growing economies and empowering its competitive positioning among others. In order to mitigate the strategic issues and successfully attain the strategic directions for future, certain recommendations comprising both short and long-term have been provided. These include adopting, as well as utilising, the strategy of cost leadership and making substantial investments, especially in developing the performances of the entire workforce. Table of Contents Abstract 2 Introduction 4 Internal Audit–Strengths and Weaknesses 5 Strengths 5 Weaknesses 5 External Audit – Opportunities and Threats 6 Opportunities 6 Threats 6 Discussion 7 Evaluation 9 Conclusion 11 Recommendations 12 References 14 Introduction Strategies are fundamentally described as the ways that a particular organisation selects to compete with its key business market competitors or to comply with the requirements of the customers. In this similar context, organisational strategies are often defined as a pattern of effective policies, decisions, performances or programmes that support an organisation to accomplish its predetermined business goals and most significantly to attain significant competitive position over the major business market contenders (Rothwell, 1998). It has been apparently observed that the organisational strategies adopted as well as implemented by the organisations affect their decision-making procedures by a significant level. This is owing to the reason that the organisations deeply rely upon formulating effective strategies for the purpose of controlling as well as coordinating the information flow amid different parties such as the employees, stakeholders, investors and the customers (Fairholm, 2009). Tesco PLC is regarded as one of the biggest retailers in the entire globe which performs its business functions in 14 nations. The company employs nearly 5, 00,000 personnel and serves significant portion of customers every week (Tesco, 2013). The visions of the company are to attain utmost value from the customers that it serves and also the communities where it operates its different operational functions. Moreover, the other major vision of the company is to flourish itself as a pioneering as well as a modern company and grow its business in every region throughout the globe (Tesco, 2013). In this discussion, the internal audit of Tesco in the form of strengths as well as weaknesses and the external audit in the form of opportunities along with threats will be taken into concern. Moreover, a comprehensive analysis about the different strategic directions of the company will also be portrayed in the discussion. Internal Audit–Strengths and Weaknesses Strengths One of the major strengths of Tesco is that it is a leading organisation in the business market of the United Kingdom and is known as one of the best retail chains across the globe. Moreover, the other strengths of the company are strong brand recognition, increased business reputation and deliverance of superior quality products in accordance with meeting the requirements of the customers. In addition, the execution of e-retailing activities while conducting business is also regarded as the other crucial strength of the company. In this similar context, the company has acquired success due to its formulation as well as implementation of effective organisational strategies that include generating greatly valued brands and developing the performance of the entire workforce by introducing enhanced training programs. Moreover, the customised strategy of the company has also supported them to stay much focused upon product affordability that has resulted in attaining greater satisfaction level of the customers (Scribd Inc., 2012). Weaknesses The aspect of geographical diversification has been recognised to be one of the major weaknesses of Tesco. This is owing to the reason that the company i.e. Tesco performs its major market operations within the retail sector of the UK that ultimately raises its market systematic risk by a considerable level. The other vital weakness of the company was observed in the year 2009 when a substantial part of the products of the company were recalled which resulted in huge financial loss along with broadly affecting its brand image by a greater extent. Another crucial weakness of the company is regarding price. It has been viewed that the certain key competitors of Tesco offer low prices for the products that they present to the customers as compared to Tesco (Scribd Inc., 2012). External Audit – Opportunities and Threats Opportunities Tesco has every probable chance to expand its business in the international market due to its adoption of effective organisational strategies as well as innovative approaches. Moreover, the company has been recognised to attract its new customers due to its growing popularity in the global business market. This particular feature would ultimately support Tesco to lessen the overall product cost as well as increase its profitability in future by a considerable level. In relation to identify its opportunity to enlarge its business in the international market, it has been viewed that the company i.e. Tesco has adopted the organisational strategy of entering into franchise agreements with certain retailers in future (Scribd Inc., 2012). Threats One of the significant threats of Tesco is regarding its competitors. There are certain major contenders of the company that include Sainsbury’s, Morrisons and Asda that have proved to be quite strong as they offer low prices for the offered products to the customers as compared to Tesco (Dransfield & Needham, 2005). Apart from the threat of the competitors, the transformation in the international regulations as well as in the technologies has also resulted to be the significant threats for the company. Furthermore, due to the recent occurrence of global recession, the unemployment rate as well as the income level of the customers have declined that would ultimately affect the pattern of consumers’ behaviour towards buying different products such as non-food items (Scribd Inc., 2012). Discussion Tesco, one of the biggest retailers in the world, conducts its business operations in 14 different nations and employs in excess of 5, 00,000 people who serve a number of customers every week. The company possesses every probable chance to flourish its business in future due to its innovative strategic approaches as well as due to the adoption of effective organisational strategies. One of the inferences which can be made is that the company can enhance its productivity as well as profitability by a greater extent due to its pioneering approach as well as pertinent execution of organisational strategies. However, in this similar context, it has been apparently observed that Tesco had faced both major as well as minor issues while conducting its different business activities. A major issue that is faced by the company is regarding the spending power of the customers. Especially, in the UK, it has been viewed that the rise in petrol prices and the drop in real incomes ultimately have affected the spending power of the customers by a significant level. As a result, the sales of the company i.e. Tesco increased by 6.2% during the year 2011-2012 but the trading profit reduced by 1% (Tesco PLC, 2012). This particular issue can be considered as quite a major concern for Tesco as the issue can affect the profitability as well as the competitive position of the company at large. A minor issue that was faced by the company was in relation to competition and the threat of competitors (Ho & Temperley, 2009). In this regard, it has been observed that the company faced financial problem or issue of higher costs in the year 2002 when it decided to enter into the business market of Poland due to the presence of a large number of existing competitors. This problem or issue can be considered as a minor one as the company possesses the opportunity to expand its business in the international markets due to its innovative approach as well as execution of well organised organisational strategies (Scribd Inc., 2012). In order to mitigate the major issue concerning the effect in the spending power of the customers due to fall in the real incomes as well as increased fuel prices, the company needs to adopt certain strategic theories or methods. In this connection, the company should make substantial investments in different vital areas that include services, business stores, product quality and marketing among others. Tesco should use the strategic method of supporting its workforce in order to deliver superior quality of products or services to its valuable customers by investing particularly in introducing training and development programs. Moreover, the company must employ the strategic method of establishing its several stores in such locations where the customers can easily visit and shop without any inconvenience. By implementing these strategic methods, the company can enhance its profitability and can also increase its trading profit by a greater extent. Conversely, in order to cope up with the minor issue concerning the threat of competition due to the presence of competitors that was faced by Tesco, the company also needs to devise certain strategic theories or methods. In this regard, the company needs to adopt as well as to implement the policy of cost leadership. This policy generally refers to the view that the businesses are focussing upon low-cost manufacturing procedure (Stonehouse & Snowdon, 2010). As one of the major competitors of the company i.e. Asda is quite famous due its deliverance of low priced products to the customers, it is thus necessary for Tesco to compete with this major rival by executing the approach of cost leadership method or policy (Scribd Inc., 2012). This particular practice would ultimately support Tesco to accomplish significant competitive position over its one of the major market contenders i.e. Asda. Evaluation In order to determine the strategic direction of Tesco, it has been viewed that the company intends to enlarge its business in the international markets. In this similar context, the company desires to substantially invest in the emerging economies especially in the Asian region that include Thailand as well as China by attaining profits from its existing business operations. One of the imperative reasons for the company to target the aforesaid nations within the circumstance of diversifying its business is that both the countries possess huge population base. Moreover, the other reason of Tesco to target the economies of India and Thailand is that the middle class people of both the nations are growing significantly along with possessing greater purchasing power. In this connection, the environmental factors can broadly influence this particular situation of the company by offering superior quality of products exercising healthier technologies that can affect on developing effective interrelation with the customers in a positive manner. The technological factors are also significant that can influence this situation i.e. the strategic direction of Tesco by generating several innovative products along with pioneering service offerings for the customers. The market factors can also be quite important for influencing the strategic direction of the company as these would support the company to recognize its target customers as well as business markets at large (Gregory, 2000). Apart from technological, environmental and market factors, social as well as political factors that have been missed can also broadly influence this situation by a considerable level. In this regard, the social factors can aid the company to attain a general idea about the purchasing habits as well as the product preferences of the customers. Nonetheless, the political factors can also influence this situation by demonstrating the legislations as well as the regulations relating to the different business operations of Tesco (Omosebi, 2012). By taking into concern the strategic direction of Tesco, it can be stated that the factor with regard to individual behaviour might be an issue for the company in comparison to group behaviour. This is owing to the reason that the spending power of the customers depends largely upon individual income levels rather than group. It can be stated that the different effective organisational strategies which are deployed by the company encompass strategic alliances, generation of in-store brands, acquisition and international expansion that appear to be the most responsible aspects for the situation experienced by Tesco and also for driving change in the organisation. The limitations to strategic change relating to Tesco can be altering preferences of the customers regarding products or services, large presence of the competitors and alterations in the different business environmental factors such as financial, social, technological or legal. It can be stated that the principals or the factors considering by Tesco are broadly assuming responsibility for strategic management by a considerable level. This is owing to the reason that the company intends to expand its business in the international markets by enhancing its innovative approach and adopting as well as implementing effectual organisational strategies. In addition, the company also desires to compete with one of its key market competitors i.e. Asda and also to accomplish superior competitive position at large by following the policy of cost leadership. All these significant aspects broadly represent that the principals or the intentions of the company are assuming responsibility for strategic management (Omosebi, 2012). Conclusion Organisational strategies play an imperative part in determining the success of a particular organisation. It facilitates an organisation to take effective decisions while conducting its major business operations in the business market whether national or international. In this similar context, it has been apparently observed that Tesco has employed several significant organisational or business strategies such as diversification, strategic alliances, acquisition and international expansion in order to attain its predetermined business targets. Moreover, the company has executed the aforementioned strategies for the motive of attaining significant competitive position over the major market participants. The current strategic situation of the company has been recognised to be quite stable as it has enhanced its productivity along with profitability with its innovative approaches and appropriate execution of different business strategies. The company had set certain strategic directions for future that include expanding business particularly in the growing economies, conducting strategic alliances internationally and most importantly making competitive positioning much stronger. However, it has been observed that the company had faced certain major as well as minor strategic issues while operating its business functions concerning the spending power of the customers and the presence of large competitors. In order to mitigate the major along with minor strategic issues and successfully execute strategic directions for future, the company needs to adopt and implement certain effective measures. Recommendations It has been viewed that Tesco, being one of the biggest retailer in the world, had faced major as well as minor issues while performing its different operational functions. In order to cope up with these issues, Tesco needs to devise as well as to implement certain effective measures. In this similar context, Tesco should make substantial investments particularly in the area of developing the performances of its entire workforce by introducing efficient training and development programs. This measure would support the company to offer enhanced and class products or services to the customers and thus can attain significant profits (Tesco PLC, 2012). Most importantly, in order to compete with its one of the major market contenders i.e. Asda as well as to accomplish superior competitive position, the company should follow the organisational approach of cost leadership. The perception of cost leadership strategy intends to make superior financial value by having lesser costs than competitors (Barney & Hesterly, 2012). This particular strategy would aid the company in attracting the customers towards buying different products of Tesco by a considerable level. In relation to the strategic issues that were faced by the company, certain short along with long-term recommendations can also be made for Tesco. From the perspective of long-term recommendation, the company should focus upon building its entire workforce in such a way so that it can generate superior as well as high quality brands and can create greater value for the customers. With regard to short-term recommendations, it is required for the company to pay much more attention to its different international business markets rather than focusing only upon the UK retail market (Tesco PLC, 2012). All these suitable recommendations or suggestions can assist the company to mitigate its different strategic issues and successfully attain effective strategic directions for future by a greater extent. References Barney, J. B. & Hesterly, W. S., 2012. Cost Leadership. Pearson Education, Inc. Dransfield, R. & Needham, D., 2005. GCE AS Level Applied Business Double Award for OCR. Heinemann. Fairholm, M. R., 2009. Leadership and Organizational Strategy. The Innovation Journal: The Public Sector Innovation Journal, Vol. 14, No. 1, pp.1-16. Gregory, A., 2000. Planning and Managing Public Relations Campaigns: Texte Imprime. Kogan Page Publishers. Ho, C. & Temperley, J., 2009. Consumers Reactions To Tesco`s Market Entry In Taiwan A Comparison With The UK Experience. Proceedings of the 5th Asia Pacific Conference on Retailing, pp.24-50. Omosebi, O., 2012. Longitudinal Strategic Development Study of Tesco. Documents. [Online] Available at: http://www.scribd.com/doc/76071856/Strategic-Planning-Assignment-Tesco [Accessed January 04, 2012]. Rothwell, W. J., 1998. Linking HRD Programs With Organizational Strategy: Twelve Case Studies From The Real World Of Training. American Society for Training and Development. Scribd Inc., 2012. SWOT Analysis of Tesco. Documents. [Online] Available at: http://www.scribd.com/doc/50739770/8/SWOT-Analysis-of-Tesco-success [Accessed January 03, 2012]. Scribd Inc., 2012. Weaknesses. Documents. [Online] Available at: http://www.scribd.com/doc/54331762/TESCO-SWOT [Accessed January 03, 2012]. Scribd Inc., 2012. Tesco Strategy Overview. Documents. [Online] Available at: http://www.scribd.com/doc/51120144/tesco-plc1 [Accessed January 04, 2012]. Stonehouse, G. & Snowdon, B., 2007. Competitive Advantage Revisited: Michael Porter on Strategy and Competitiveness. Journal of Management Inquiry, Vol. 16, No. 3, pp.256-273. Tesco, 2013. About Us. Our Businesses. [Online] Available at: http://www.tescoplc.com/index.asp?pageid=8 [Accessed January 03, 2012]. Tesco, 2013. About Us. Our Vision. [Online] Available at: http://www.tescoplc.com/index.asp?pageid=13 [Accessed January 03, 2012]. Tesco PLC, 2012. Annual Report and Financial Statements 2012. Reports. [Online] Available at: http://www.tescoplc.com/files/pdf/reports/tesco_annual_report_2012.pdf [Accessed January 04, 2012]. Read More