Tesco Nature Scope And Purpose Of Strategic Management

Tesco Nature Scope And Purpose Of Strategic ManagementINTRODUCTIONTesco started as a unrivaled-man affair in Londons East End. Tesco was founded by jack up Cohen, son of a Polish Jewish tailor. He sold groceries in the commercializes of the East End from 1919.The Tesco brand set-back appe ard in 1924. The name derived after red cent Cohen bought a large shipment of tea from T.E. Stockwell (formerly Messrs Torring and Stockwell of Mincing Lane), he made new labels by using the first cardinal letters of the suppliers name and the first two letters of his surname forming the word TESCO.The first Tesco store was opened in 1929 in Burnt Oak, Edgw ar, and London. The firm was floated on the London Stock transmute on 23 December 1947. The first Tesco self-service store opened in 1948 in St Albans and is still trading in 2006 as a Tesco vacuum tube store.The first Tesco supermarket was opened in 1956 in a converted cinema in Maldon, Essex.Tescos first superstore was opened in 1968 i n Crawley, West Sussex. The group began inter flip petrol in 1974 and its annual turnoer reached one billion pounds in 1979. Also In 1975 Tesco opened one of its first Hypermarkets in Irlam. The first Hypermarket below the Extra name opened in 1997.EXPANSIONIn 1994, the company took over the Scottish supermarket mountain chain William Low. Tesco successfully fought murder Sainsburys for control of the Dundee-based firm, which operated 57 stores north-central of the border, paving the way for Tesco to expand its weak presence in Scotland. To the present day, Tesco has based its Scottish headquarters at the former Wm. Low offices in Dundee. From elfin beginnings in Scotland Inverness was recently branded as Tescotown, since an estimated 50p in e rattling 1 spent on food is believed to be spent in the three Tesco stores in spite of appearance the city. (Nation on the wholey, it is estimated that 1 in e truly 8 is the proportion spent) It introduced a truth card branded Clubca rd in 1995 and later an Internet shopping service.During the 1990s it spread out into Central Europe, Ireland and East Asia. In July 2001 it became involved in internet grocery selling in the USA when it obtained a 35% stake in GroceryWorks. In October 2003 it launched a UK telecoms division, comprising of mobile and home phone services, to complement its existing internet service provider business. In August 2004, it alikewise launched a broadband service.NATURE, oscillo oscilloscope AND PURPOSE OF STRATEGIC steeringNATURETesco opened its first store in Edgw are, North London in 1929.It is founded by John Cohen and T. E. Stockwell. Tesco mainly employment strategies to build customer loyalty. It reached the billion pound turnover in 1979.It became the first UK business to reach 2 billion pound and became the largest retailer in UK. dodgingAccording to Johnson and Scholes schema is furbish upd asthe direction and scope of an placement over the long term which achieves adva n drop behinde for the organisation with it configuration of resources within a changing enviroment,to meet the needs of markets and to fulfil stakeholder expectations.Tescos growth over the last two or three decades has involved a transformation of its schema and image. Its initial success was based on the Pile it high, sell it cheap approach of the founder jacklight Cohen. The disadvantage of this was that the stores had a poor image with lower-middle-class customers. In the late 1970s Tescos brand image was so negative that consultants advised the company to change the name of its stores. It did not accept this advice, yet by early 2005 it was the largest retailer in the United Kingdom, with a 29.0% share of the grocery market according to retail analysts TNS Super Panel, compared to the 16.8% share of ASDA and 15.6% share of third-placed Sainsburys, which had been the market attracter until it was overtaken by Tesco in 1995.Key to successFocus on customers.Focus heavily on value for money.Finest and low price.Core UK business.Non-food business.Retailing services.International Expansion. mountain chainAccording to Mintzberg and Quinn there are five definitions if dodgingStrategy as a planStrategy as a patternStrategy as a positionStrategy as a perspectiveStrategy as a ployTescos growth over the last two or three decades has involved a transformation of its dodging and image. Its initial success was based on the Pile it high, sell it cheap approach of the founder Jack Cohen.Levels of planningPlanning of strategy in any organisation is categorised into three levelsTop level planning this is done by the top focus and is termed as strategic planning. It is a long range planning and is linked to long range goals.Second level planningThis is carried out by higher(prenominal)-ranking executives and is termed as tactical planning. The plans are devised to achieve the organisations main objectives. The long-range plans of the organisation are segmented and are oriented to functions and parts.Third level planningThis is the uphold of the departmental managers and supervisors and is called activity planning or operational planning. It is confined to short term activities and also individual assignments and establishes performance of the organisation.Corporate strategyIt is concerned with the boilersuit break up and scope of the business to meet stake holder expectations.It is often expressed as mission statement of the organisation.The companys mission statement reads, Our core purpose is, To create value for customers to earn their lifetime loyalty. We deliver this through our values, No-one tries harder for customers, and Treat people how we like to be treated. The underlying aim is of course to make higher profits, but there is a clear focus on customer service at the top level of the company.Business strategyIt is concerned with how a business competes successfully in a especial(a) market.Tescos business strategy is toExpand ov erseasMaintain a strong uk businessExpand into non-food switchOperational strategyIt is concerned with the operations to deliver the corporate and business strategy of the organisation.Tesco has its every little helps strategy to make both its employees and customers happy part achieving the organisational goals.PURPOSETesco adopts its strategy with a core purpose to create value for customers to earn their lifetime loyalty. This is expressed as two key values.No one tries harder for customersTreat people as we like to be treated.Tesco positions all its resources with a purpose to satisfy this strategy while achieving its organisational goals.PROCESS FOR DEVELOPING STRATEGIC MANAGEMENTWhile the corporate strategy of an organisation sets the objectives for different businesses business strategy deals with individual sections of the overall business and the operational strategy directs and determines each function of the organisation.The do work of business strategy of Tesco can be outlined asStating and understanding The Companys vision.Stating and understanding The Companys mission.Analysing the business environment.Crafting and evaluation of strategy.Implementation, monitoring and control.VISIONTescos vision can be clearly understood in the statement of its CEO Terry Leahy we induct got only 5% of the non-food market in Britain, we have got only 6% of the contrivance market and we have got only 2-3% of the banking market In all these examples we could be much bigger.This statement clearly presents the idea where Tesco wants to be in the future.MISSIONA mission statement spells out the central purpose and shared values of a business organisation.Mission of Tesco is To create value for customers to earn their lifetime loyalty which is delivered through two key values no one tries harder for customers and treat people how they like to be treated. abbreviation OF THE BUSINESS ENVIRONMENTFor the formulation of strategy, it is infallible to study the organis ational environment. These would include polity-making, economic, social and technological factors.According to Johnson and ScholesManagers tone difficulties in trying to understand the environment. First, the environment encapsulates many different yields the difficulty is making aesthesis of this diversity in a way which can contribute to strategic decision making.A simple analysis of the business environment so Tesco involves three aspectsAnalysing Internal capabilities and resources(core competencies)Analysing external environment by PEST AnalysisAnalysing the war-ridden environment by porters five forcesCore CompetenciesCore competences relate to those resources and capabilities if the firm which alter toAttain a competitive edge in the marketAccording to Johnson and Scholes core competencies create and sustain the ability to meet the critical success factors of particular customer groups better than other providers in ways that are difficult to go after.Tesco identif ies core competencies by three factorsCreation of new products and services which provides potential accession to a wide variety of markets.Skill which makes a significant contribution to the perceived customer benefits of the end product.competitive uncomparable skills which are difficult for competitors to imitatePEST ANALYSISThe external environment of an organisation is decomposed by PEST analysis. It helps to identify the key changes that are taking place around the organisation and which influence it in the future.A PEST Analysis looks atPolitical FactorsEconomic factorsSocial factorsTechnological factorsThe following is the PEST Analysis for TescoPolitical FactorsRisks of potential challenger commission interrogationGM- FoodEU arguing rightEconomic FactorsIntensive price competition in the midst of the large supermarkets terms of products keep falling because of strengthening buying powerSocio cultural factorsOrganic foods and drinkCustomer concerns about GM food, al lergies and additivesAnimal welfare policiesEnvironmental policies and practicesTechnological FactorsRadio absolute frequency identity technology in operation of its come forth chainRadio barcode technology for tagging cases.Self service check-out system.PORTERS FIVE FORCESPorters five forces are used to analyse the external environment of an organisation and to determine the attractiveness of the market. The five forces areThe bargaining power of customersThe bargaining power of suppliersThe threat of new entrantsThe threat of reservation productsThe intensity of competitive rivalryBargaining power of customersThe buying power of customers may influence Tesco to force prices down.This may lead to competition where the other rivals may also bring down the prices.Tesco should maintain the customer loyalty to stop them from drifting to others.Bargaining power of suppliersDemand of suppliers to pay high prices for their goods. Recently, the agitation by the dairy farmers to get hig h price for milk is an example.But market giants like Tesco has an overwhelming advantage over their suppliers where they dictate the price they pay their suppliers. panic of new entrantsSupermarket chains like Tesco manage the threat of new entrants by imposing barriers to entry.This is achieved by paying high price to suppliers and buying large volumes of goods. This makes Tesco to render goods at cheaper prices to its customers where it corners the new entrants.Tesco also has the advantage of economies of scale.Threat of substitute productsTesco faces the threat of cutting down the prices of groceries and goods by other giants like Asda and Sainsbury. This may lead to profound of prices where the buyer gets an advantage.Intensity of competitive rivalryRetail industry is the one where the profit margins are low and the competition is high.According to classical economics, rivalry between companies should drive profits to zero. each(prenominal) the above mentioned factors impact the intensity of competition for Tesco.Asda, Sainsburys, Morrisons and others with their expansion plans and strategies are making the competition tough. Their disciplined approach towards prices setting is preventing the decease in profit war.Environmental evaluation of TescoThe environmental audit is reliant on the monitoring activity undertaken by the organisation. It includes grocery store intelligenceLargest supermarket chain with a market capitalisation of 26.037bnNew strategies for mergers and expansion plans to USEffective and low pricesContinuous monitoring and direct information on the sales figures in stores cost- efficacious maintenance of customer loyalty.Technical intelligenceRFID technology for supply chain managementEPOs and Bar-coding technologyExtension of RFID technology for tagging the cases through out the supply chain by 2007.Effective implementation of one in front policy at the tills to satisfy the customers.Acquisition intelligenceDecision of receding from the ask for to takeover Safeway.Expansion plans for USOther issuesConvenience stores according to the needs of the peopleDecisions regarding the environmental issuesCrafting a strategyBy considering the above factors Tesco clearly crafted a strategy that keeps it in the leading position in all the aspectsThe selected strategy of Tesco isTo provide all the customers with excellent value and choice in UK business which is its biggest market and where Tesco enjoys top slot.Having a six element approach to be an international retailer while focusing on satisfaction of needs of the different local customers.KEY FACTORS FOR DEVELOPING STRATEGYThe key factors for an organisation are those which exist within an environment and may generate a need for change. These are triggers for change in the organisation. The following is a brief description of the key factors which may lead to strategic change inTesco.EXTERNAL ENVIRONMENTAL FACTORSMacro environmental analysis increases awareness of th e relevant environmental changes at managerial level. This enhances strategic planning.Macro environmental analysis further focuses attention on the primary influences of strategic change and provides anticipation to opportunities and carefully develops responses to change.The following are the external environmental factors which pose challenges to TescoHigh energy costsHigh recovery costs amend position of competitorsRisks of the potential competition commission enquiryGrowing cautiousness among consumersSTAKEHOLDERSStakeholders can be defined as As those individual actors and parties, organisations and professions and institutions that have a bearing on the behaviour of the organisation as revealed in its policies and actions on the environment.Stakeholders can be divided into two categoriesThose view the organisation externallyThose have an knowledgeable interestExternal stakeholders for Tesco are competitiors, customers, suppliers, shareholders government departments etc.They judge the efficiency and try to influence its activities. So Tesco always determines the outputs required by the stakeholders.Internal stakeholders for Tesco are the owners, managers and employees. In large companies like Tesco there are thousands of shareholders who have a vested interest in the success of the business.MEDIAMedia plays a very important role in an organisations strategy. It works in two waysInterest in the success of the organisation and its concomitant positive feedbackInterest in the proposed developmentsTesco notifies well that the influence of effective public relations on the opinions of a wide range of groups will enhance the likelihood of success for its strategy. So it always maintains good relations with the media. Tescos media sum total contain the latest news releases, images and briefing notes. Their latest TV ad campaign can also be viewed from their video library. The media people can also access to their media centre for easy access to the latest d evelopments.LEGALOrganisations need to anticipate and prepare themselves for changes in legal procedures. The potential competition commission enquiry and other regulations are important legal factors which can influence retail sector now.Tesco has all the legal resources which enables it to respond to such changes well in put on and as a part of its developing strategy.ETHICALThese are the moral principles that should govern human relations and conduct. These are very important friendships in formulating strategy which involve subjective personal feelings about human behaviour. Tesco identifies as one of the key factors in its strategy and accepts this with enthusiasm and commitment.EDUCATIONALIn the present business scenario, the capacity to transmit knowledge through devices as the internet has become formidable. The most important and interesting aspect of the improvement in education and subsequent growth of knowledge has been the increasing professionalism of workforces in a n organisation. Tesco understand this well and implements it in the improvement of skills of its human resources. It conducts learn programmes a least two quantify a year.POLITICALPolitical factors generally effect the organisation in two ways. One driven by the government pr by the multinational political initiatives and another concerned with the political shifts within the particular business environment.INTERNAL ENVIRONMENTAL FACTORSThe following are the factors that are instrumental to the internal environment of Tesco.Organisational policyThe mission statement of an organisation sets out the purpose of a business The mission statement of an organisation is refined over the time to reflect the substantial or enhanced capabilities of the business .The following are the purpose statements for Tesco which gives a clear picture of its policyScope of an organisations activities is a fundamental element of strategy. Tescos scope relates to the extent of the market into which it se lls its products and services. It is already the largest retailer in UK and is planning to expand to US .It has already wide markets in Europe and Asia.A key consideration for a firm is to identify what areas of activity to pursue in its markets. Tesco targets customers of all ages with its products and services ranging from food, household products and retail to insurance and personal finance.An important aspect of strategy is for a company to identify the positions held by their products and services in the market place. Tesco has already built a very strong businesses over the time with very strong market positions. Each and every one of them has huge potential for further growth.Human resourcesTesco is the largest private sector employer in UK. Tesco is the largest private sector employer in UK. It employs 250,000 staff alone in the UK and 367,000 staff worldwide.It has 2365 stores all over the world. Tesco employs about 11,000 employees every year.It recruits about 80 to 150 gr aduates each year to two training schemes one store and one office based. It recruits by in-store advertising, events in local areas. and recommendationsFrom existing employees through an employee referral scheme. These employees are the need for effective communication in the subject area of management.Financial resourcesAs per the statistics of 2006 Tesco is the quadth largest retailer in the world. Its market capitalisation was 26.035 billion which was the largest of any retailer based outside the united states. Tesco also has got frightening property portfolio. It does its own development and owns about 85 of all its assets around the world. And always Tesco invests a lot in its property. According to company authorities over the next five years its property value will be 5 billion and still be a predominantly freehold property company.All these factors are described as the key factors for TescoDEVELOPMENT AND evaluation OF STRATEGIC OPTIONSStrategy whether developed for a w hole organisation or for an operating department or a team follows the same building process .Its central concern is to create a long-term vision of where we want to be or what we would like to become .Strategy that an organisation adopts should be feasible and practicable. Its pulling power is extremely important to survive in the tough competitive environment where an organisation operates .The art of strategic development involves a set of sophisticated tools to facilitate the process.The following is a brief context of different strategic options for TESCO and their evaluation.PEST ANALYSISTo develop a strategy for an organisation to assure its long-term effectiveness it should carry an analysis about its future. For this PEST Analysis is the best tool. It carries analysis of four or six major factors which can effect the organisation in future .TESCO which is the largest player in retail sector carries PEST Analysis to analyse the external factors which may affect in the future .The following is the PEST Analysis for TESCOPolitical and legal considerationsRisks of potential commission enquiryTESCO may face the risk of the potential commission enquiry in future which aims to curb the unhealthy competition in the retail sector.GM-FoodWith increasing awareness in the consumers all over the world TESCO may face the risk with Green peace workers regarding the labelling of genetically modified foods. .EU Competition LawEU Competition Law constituted to regulate monopoly power may impact TESCO and its expansion in the European Union in the near future.Economic considerationsIntensive price competition between the large supermarketsCost of products keep falling because of strengthening buying powerSocial FactorsOrganic foods and drinkConsumers growing concerns about the organic food and drinks may influence in near futureCustomer concerns about GM food, allergies and additivesWith growing cautiousness and discontent about the GM food and use of allergic causing a gents and additives in the manufacture of food may show impactAnimal welfare policiesAnimal welfare policies which oppose the testing of the products on animalsEnvironmental policies and practicesGreen peace workers and changing concerns about environmental issues.Technological FactorsRadio Frequency identity technology in operation of its supply chainUse of RFID technology in its supply chain helps TESCO to efficiently carry its operations and maintain its position.Radio barcode Technology for tagging cases.Use of Radio barcode Technology to tag the cases and extending this technique to the entire chain by the end of 2007 will show an impact on operations in TESCO.Self-service checkout system grind AnalysisIT is a commonly used tool .Its main purpose is to locate the organisation in its operating environment and try to assess its internal and external capabilities and vulnerabilities. SWOT stand for strengths, weaknesses, opportunities and threats. Strengths are internal and opport unities are environmental. Similarly weaknesses are internal and threats are environmental. The following is the SWOT analysis for TESCOStrengthsThese are the strengths of TESCOTESCO s Brand nameLoyal customersLargest player in the retail sectorWell established supply chainExcellent ware housing efficiencyLargest online grocerGreat store locationsSkilled work forceClub card scheme for enhancing customer loyalty.WeaknessesThese are the weaknesses of TESCOVast usage of fossil fuel in transport chain and super market heating systemsLack of integration between departments at certain timesOpportunitiesThese are the opportunities where TESCO can explore in futureImproving customer relationshipsReal growth opportunity for grocery retailing in the newly enlarged European Union.Increasing sales through better integration of high street and internet resourcesThreatsThese are the threats that might affect TESCO in the future.High energy costsIncreasing taxes on retail itemsExpansion of low co st supermarkets like LIDL.Recovering competitions like Sainsburys and Morrisons.A weakening economyAn increase in unemploymentPORTERS GENERIC STRATEGIESAfter establishing the strengths and weaknesses of the organisation and analysing the competitive environment, we have to establish the generic strategy of the organisation.No set of the strategic tools will be complete without a look at Michael porters generic strategies. Porter advocates, Gaining and maintaining competitive advantageThe three generic strategies of Porter areDifferentiationThis is a strategy where the organisation offers a product or service which is unique compared with those of its competitors .This differentiation must be known to at least a segment of the market.Cost LeadershipThis is a strategy where the organisation enables itself to provide the products or services at a cost less than any other competitive organisation. It is the ability the organisation has to price below competitors if and when it needs so. FocusThis is a strategy where the organisation targets its products or services at a given sector of the market with great accuracy and with a depth of capability and knowledge to support its position in the sector.In the retail sector with a very low profit margin the environment is hypercompetitive .TESCO being the largest player adopts the Cost Leadership strategy to challenge its competitors. TESCO has all the capabilities to adapt to this strategy. It develops its internal resources and its core competencies to support this strategy.In addition to these a number of generic strategies have emerged to define the modern organisation .The following is a list of the strategies.Reducing cost baseImproving qualityGetting closer to the customerShorter cycle timesStrategic partnershipsAbility to change fastOf the above mentioned generic strategies, TESCO adopts the followingReducing cost baseTo cut down the expenses and to increase productivity and efficiency, TESCO adopts this strategy to face the challenges of price war with its competitors, high property costs a and to provide value based products to the customers.Improving qualityTESCO always concentrates on improve quality to rule the existing markets. It adopts new techniques and softwares both in the logistics and in-store operations to consistently serve the customers.Getting closer to the customerCustomers are whimsical, customers are fickle, customers are not loyal. The ability to anticipate this fickleness is a strategic strength.TESCO understands this well and introduced club card schemes which helps TESCO to have millions of loyal customers.THE ANSOFF MATRIXThis is a classic clay sculpture in strategy building .Its main purpose is to analyse the organisations approaches to its products and to its market to ensure that an appropriate marketing strategy is being pursued .The following is the An off matrix for TESCOCurrent products New productsCurrentmarketsMarket penetrationImproving servicesImprovin g qualityProduct developmentExpand own brands like The Finest and TESCO Value.Expansion into non-food sectorAdding new products to the existing product lineNewmarketsMarket developmentInternational expansion and globalisationHome shopping create small express storesDiversificationNew servicesUsing the Ansoff matrix in conjunction with the BCG matrix, TESCO conducts a useful review of its strategy to achieve its vision.EVALUATIONThe BCG matrixThe Boston Consulting Group matrix is a valuable tool .Its purpose is to analyse the organisations product portfolio. The definitions used in the BCG matrix are very precisely expressed in terms of the generation and use of cash. This makes this matrix a sharp-edged tool. the following are the definitions used in BCG matrixStarsThese are the products that are do well .They are generating positive cash and they usually require continuous update to maintain their market share.ProblemsThese are the products which are not performing and not generat ing sufficient cash to maintain them in their markets.Cash cowsThese are the products which are performing well in markets which are growing tardily or are static. They are probably generating more money that can be profitably invested in them.DogsThey have low market share in markets which are growing slowly or are static. They may be consuming more resources to maintain their availability. They need quick decisions.The following is the BCG matrix for TescoMarket shareHigh lowStarOn-line shoppingOrganic foodsLoyalty cardsNon-grocery itemsNew servicesProblemsOn-line shopping with demographic analysisHome delivery of productsCash cowsCash cowsBranded produ