Corporate Governance of Tesco - Case Study Example

convenience has also been one of the keys of Tesco's strategic management plan. Moreover, they have developed several market designs to keep their customers satisfied. For instance, they created different types of stores that seek to cater to the different needs of the UK market. They have four different store formats in the UK: Extra, Superstore, Metro and Express. Further, they Tesco does not rest on just building these types of store but also strives to maintain and expand it. In 2002, Tesco have invested over 150m into the Refresh programme to help serve customers better and improve availability, operations and store environment. A quarter of Superstores have received the customer-focused improvements in key areas including car parking, trolleys, signage, counters and availability. Express offers customers the chance to stock up on shopping at their convenience at a diverse range of locations, from inner city stores such as Maida Vale, London, to villages like Yateley in Hampshire. Although on a smaller scale than larger supermarkets, it will provide a broad but carefully selected range of essential everyday products. In the stores that convert to Express, customers will benefit from lower prices, improved service, better fresh food ranges and store environment, as well as better availability, quality and choice. This will also allow Tesco to accelerate their growth in the 20bn convenience market while continuing to run the remainder as OneStop Shops. However, the profitability and growth always goes with the development of the human resource personnel. The human capital after all, continues to be the single most important capital in businesses. Thus, recognizing that they are an essential element to the success and future of providing quality differentiated services at affordable prices, Tesco had also a set of principles that promotes the growth and convenience of its employees. The Tesco Values are a set of principles that describe two work ethics such as: 'Treat people how we like to be treated' and 'No-one tries harder for customers'. Also, employee benefits such as childcare voucher scheme and Shares in Success, where staff with more than a year's service will be eligible for free shares has been devised. Customer Value is what Child (2004) would define as "the difference between the values the customer gains from owning and using a product and the costs of obtaining a product" (pp. 9). Customers usually weigh values and use the product with the best perceived value among the rest and also the product and service that will deliver them the best value. It is what makes a product and service important to them and what will eventually convince them to go ahead and avail of the service or purchase the product. It is thus the responsibility of these firms and organization to be the firm that consumers or customers believe to offer the greatest and highest customer perceived and delivered value. If firms' total customer values are perceived and delivered the best from the combination of "product, sources, personnel and image", more customers will decide to opt for them (pp. 669). Companies now face the challenge of making its target consumers respond accordingly to their marketing efforts. Those who understand its consumers' responses will have a great competitive advantage. The starting point towards this is through the stimulus-response model of buyer behaviour which involves examining the marketing and other stimuli in the consumer's black box that translates into buyer responses (Child, 2004). Marketing stimuli often consist of the four Ps of marketing: product, price, place and promotion while the other stimuli may include economic, technological, political and cultural factors which exist in the marketing environment. Child (2004) explains that the practical application of learning to most companies is that they can build a demand for a product through association with strong drives, motivation cues and positive reinforcement. Lastly, beliefs and attitudes are acquired through learning and doing. Beliefs correspond to how consumers formulate their thoughts about a specific product or service because they affect buying behaviour. Wrong beliefs about the product or service may be countered through a campaign; therefore, companies need to be regularly updates on the beliefs of its target market. On the other hand, attitudes refer to the consistent evaluations, feelings and tendencies to an object or idea which may either put consumers in the frame of mind of liking or disliking the product or service. Suppliers Many suppliers provide raw materials to the commercial and industrial business. Moreover, companies in the industry are not likely to backward-integrate. On the other hand, it could also be posited that the companies in the industry are the primary source of revenues for the suppliers. This makes the competition among suppliers more rigid. Likewise, if raw -material costs get out of line, companies in the industry would be able to have a hard time using a different type of raw material to produce the product. The industry is also characterized with the quality and costs of raw materials having a significant impact on the quality and price of the products and services produced by the industry. Moreover, the raw materials provided by suppliers are not essentially interchangeable and indistinguishable. The raw materials are essentially commodities. Likewise, in an industry where loyalty is also considered necessary, there is also the possibility for the suppliers to forward-integrate. Community The community where Tesco operates greatly influences the company's strategic planning. The management takes means of identifying of the stakeholders, the priorities of the stakeholders; understanding of the stakeholders' perspectives and incorporating the stakeholders' perspectives to the future plans of the company (Smith, 2003). Moreover, the company should cultivate growing consumer markets to promote growth and development of the business organization. This will address the expansion possibilities of the organization to serve not only the locale consumers but also provide services to a larger customer base. As such international relations and the overall business practices and trends all over the world should be investigated so as to make sound decisions that will realize the goals of the company. Furthermore, the company continues to cultivate community relations and environmental efforts to increase market visibility and improve brand strength. These will be realized through community programs that will advertise the humanitarian causes of the company in the form of public releases (Gurdijian et al, 2000). Charity and scholarship programs are good examples for the management to promote and improve community relation. Advertising messages that translates the environmental concerns that the company shares to the public is likewise advisable to take into account and undertake. The company uses their products to be used as gift vouchers to specific civic organization within a community. In this strategy, one could deduce that Tesco focuses more in the perception of the community in general on their store. It appears that the company surmised that with their store name associated with socially appealing reputation will attract more customers but more importantly maintain a loyal relationship among them. Government Since Tesco is an international company, they need to have a good relationship to the local government where they operate. Another strategic action that the Tesco have undertaken is what they labelled as Regeneration. (Turnbull. 1997) This process is similar to instituting a store with the help of the local community and the local government in accordance to the generation of jobs and commerce in specific areas. Among the areas where Tesco have "regenerated" includes Seacroft in Leeds, Dragonville in Durham, Beckton in London, and Alloa in Scotland. In this strategy, the company places a store in specific areas which they consider as deprived and in dire need of employment. This way, they have instituted a store in a location where there exists little competition and in the same time increases their reputation on the area by providing jobs for people in the community. Moreover, this strategy also moves their commodities closer to the public. Shareholders Shareholders in Tesco are not the only route to this oversight. They play an important part in making sure that accountability means something -though even so every country we know has its share of commercial disasters. For various legal and historical reasons in Tesco stakeholders play little part in the corporate governance of their commercial clients. Shareholders have other powers in the company, such as annually appointing auditors, and approving various alterations to the capital structure or articles of association (Wint, 1995). The most important function is to ensure that the company's board is satisfactory, in other words, approving the 'government' of the company. Politics are a poor comparison for many reasons, but there is a parallel with the democratic process. The electorate seldom considers separate issues through referenda, though these may be important on constitutional issues (such as devolution), or major economic decisions (such as entry into the European Union). Tesco utilizes the value chain management strategy also consider increasing the companies' relationship with its shareholders by separating the business system into a series of value-generating activities, namely: (a) inbound logistics, (b) operations, (c) outbound logistics, (d) marketing and sales, and (e) customer service. In effect, from the receiving and warehousing of raw material from the suppliers, all through out the manufacturing and production process, as well as in the entire the distribution and sales of finished goods, the value-generating activities are supported by the infrastructure of the firm, its human resources management, and the technology it uses (Porter, 1990). Staff The staff of Tesco, just like in any organizations exhibits a vast array of cultures, ways of thought, philosophies and approaches to life in general, and to problem-solving in particular. Given this mixture, a very basic, unwritten rule of the staff of the organization is to avoid conflicts. This is achieved by finding common denominators that everyone can agree upon (Child, 2002). Conclusion After the thorough analysis of this study, it can be concluded that the major stakeholders of Tesco such as the consumers, suppliers, government, shareholders and staff have different degree of influence to the competitiveness of the company. Each stakeholder may have different expectations, satisfiers, and perspectives. Employees might be looking for an employer they can trust, customers for a reliable company, investors for a company that is credible and the community as a whole for a business that is responsible. The challenge of the stakeholder approach of Tesco is to reconcile the different views and different priorities of each group. The tolerance zone that exists, that region of operating where not every stakeholder will be satisfied but no one stakeholder will feel that the organization is acting in an unacceptable way (Child, 2002). The management of corporate reputation is about more than just how companies should approach the management of any one stakeholder's perception of reputation; it is about how the perspective that has been evolving in this field can be usefully applied to managing the business as a whole. References Child, P. (2002) Taking Tesco Global: David Reid, Deputy Chairman of the United Kingdom's Largest Grocer, Explains the Company's International Strategy. The McKinsey Quarterly. .Gurdjian, P., Kerschbaumer, G., Klinger, M., Waterous, J. (2000) Bagging Europe's Groceries. The McKinsey Quarterly. Porter, M. (1990) The Competitive Advantage of Nations. The Free Press: New York. Turnbull, S. 1997, Corporate Governance: Its Scope, Concerns and Theories, Corporate Governance, vol. 5, no. 4, pp. 180-205. (http://cog.kent.edu/lib/turnbull4.html) Wint, Alvin. 1995, Corporate Management in Developing Countries: The Challenge of International Competitiveness. Quorum Books. Read More