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Unit 7 Business Strategy Assignment - TESCO
Diploma in Business
Unit Number and Title
Unit 7 Business Strategy
Business strategy is the long term action plan of any organization generated to achieve a set of goals or objectives. In other words, business strategy is generally a document which coherent the direction a business will seek and the measures it will take in order to fulfill the goals. A classic business strategy is matured in three stages: analysis, integration and implementation.
In the report the business strategic tools and techniques has been applied for Tesco, a UK based company. The report includes critical presentations in which the mission visions, objectives and competencies of Tesco have been provided. It has also engaged critical information on the strategic planning and reliable issues related to it. The report has also provided different business strategy tools and techniques in the presentation. The study has been continued with proper implications of reliable strategies for market development of Tesco in the United Kingdom. The SWOT analysis evaluates as the organizational analytical strategic tools been adopted by the business entities. It has been assessed that this strategic tools enhance the internal environment and external forces that effects the business operations. As per the analysis the Tesco’s, strengths, weaknesses, opportunities and threats are been assessed as following: The PEST analysis is the strategic tools that is been introduced form, measurement and evaluations of the external environment of the company. It has been assessed that the proper audit and evaluations enhance the industry scenario, performances and effecting forces in which the Tesco is been operating. The report has engaged critical assessment of the roles and responsibilities of Tesco management and employees to execute the selected strategies. It has also assessed the resource requirement, target and time scale planning for the market development strategic implication for Tesco.
1.1Explain strategic contexts and terminology-missions, visions, objectives, goals, core competencies
Tesco Plc is a British multinational grocery and general commodity retailer with its head quarters in UK, England, Chestnut and Hertfordshire. The company is also ranked the third largest retailer in the world marked on the basis of profits and second largest measured by the revenues. It was founded in the year 1919 and currently has its stores in 12 countries across Asia and Europe and is the market leader in UK in its sector. Tesco Plc has diversified its business globally in the areas of books retailing, clothing and electronics, financial services, telecom and internet services to name a few. The company is listed in the London Stock Exchange and is also an essential part of the FTSE 100 index. In the year 2014, Tesco has launched a ‘healthy living’ brand which features a range of healthy foods in order to help its customers lead a healthy lifestyle. Also in the same year Tesco finest, UK’s fastest growing premium food brand was re -launched and over 400 products were announced. In 2012, Tesco’s UK sales figure was £42, 248 million, making up over 60% of its group sales of £64, 539 million which indicates that UK is the company’s core market amongst other markets in the world. In the UK market, the retailer owns the largest market share of 34.4% in the grocery retailing sector, competing with other retailers such as Asda (17.9%), Sainsbury’s (16%), and Morrisons (11.9%).
Strategic planning at Tesco is an organizational management exercise which is used to set priorities, focus on the energy and available resources, strengthen the operations and ensures that employees and other stakeholders are working towards a common goal. It is an acclimatized effort that produces fundamental decisions and actions which shapes and guide what an organization is and who it serves, what it does and why it does, with a focus on the future. In other words, Strategic planning is a methodical procedure of visualizing the future and converting the same into well decrypted goals in a broader way and a set of related events in order to achieve them. It requires a systematically graphed plan for how to distribute the available fund, workforce and time.
The main purpose behind strategic planning is to help in determining its priorities and to fulfill the needs of its electorate. The plan should be crisp and flexible but still serve as a guide in the implementation of various programs. Strategic planning, execution, monitoring and evaluation are essential for Tesco as it is fundamental to developing result based accountability system in the organization.
The strategic context and terminologies of Tesco are:
Mission- it is an integral part of the Tesco as it emboldens the employees to work together as a team and achieve the company’s vision. It defines the critical goals and performance objectives of an organization in context for development and is described within the framework of organization culture, vision, values and principles.
The Mission statement of Tesco:
- It believes in generating the capability of their enterprise in a global competitive environment by delivering superior and sustainable value for their stakeholders.
- They aim to deliver world class customer partnership by strengthening best operational system and control.
- They aim to build transparency on long term sustainability.
Vision - the vision statement explains the reason for Tesco’s existence and reflects their aims that they intend to achieve in future. In other words, it is basically the blueprint of Tesco. Generally, vision statements are generated on the basis of long term goals of the company and its future operations. Vision statement is very effective and developmental for the organization.
The Vision statement of Tesco is as follows:
- Tesco aims in holding its market leadership in UK by incorporating quality in performance, their product portfolio and their delivery network.
- They aim to create growing value in the UK economy.
- They aim to create efficient supply chain network to strengthen delivery system and raise their standards of customer service and operational transparency
Goals- it defines the general idea at Tesco of becoming the world’s premium grocery retailer company. It is usually the harbor of the firm and also is the circumstantial planning in order to achieve the predefined target. The senior management at Tesco Plc decides the goals of the company and every employee will chase the planning to complete the goals.
The goals of Tesco are:
- Tesco’s efforts to create multiple drivers of growth by developing excellent business portfolio and capabilities.
- Their effort to create technological expertise to build benchmarks in their fuel quality.
- Their effort to strengthen and refine their corporate governance by building accountability.
Objectives- are the steps to attain goals that means objectives are the part of a goal but goals are not a part of objectives. The company’s objectives define the critical issues, business goals and to build a common trust source with its customers, partners and governing bodies.
Tesco’s objectives are as follows:
- Tesco’s objectives defines the outline to meet their core desired outcomes of developing a customer focused and high performance oriented company that creates value for their stakeholders.
- It defines it’s strive for excellence and innovation in creating better process, products, services and management practices.
Core competencies-The y are the critical factors that are used by Tesco to deliver competitive advantage over other competitors. These are important to reflect their strengths in the industry and build confidence of their suppliers as well as their customers in their capabilities.
The core competencies of Tesco are:
- Expertise in technological and functional knowledge
- Strong commitment to strengthen supply chain efficiencies by cutting cost and delivering quality in their products and services
- Their efforts to drive their business forward by applying diverse skills and expertise to deliver growth and performance
- Their dedication to offer competitive edge in the market (Martin, 2005)
1.2 Review the issues involved in strategic planning
Strategic Planning is a systematic process of visioning a desirable future and translating the same into well defined goals and objectives. It paves the road map to consistent success and performance in the dynamic market. It helps to stimulate the changing business environment and formulate realistic and achievable business objectives to satisfy suppliers, stakeholders and customers. Thereby ensuring progressive growth and continuous improvement in their critical thinking as well as strategic operations.
The key issues of strategic planning that can arise in Tesco are:
- Lack of effective planning-The business should focus on building efficient systems, enhancing staff expertise, optimizing the resources and reflecting a positive image in the market.
- Lack of effective response- The business should be dedicated to deliver their promise towards their stakeholders to ensure desired outcomes.
- Lack of communication-The business planning should be simple and easy to understand to ensure better performance in delivering the respective roles and responsibilities.
- Lack of control- The business should focus on evaluating their process and performance measures by ensuring efficient monitoring system in their functions.
- Lack of participation- The business should motivate an environment which adapts inclusive growth model and encourages involvement in critical decision making.
- Lack of leadership- The business should be capable to drive performance and productivity by strong leadership.
Strategic planning is a very integral part in the success of Tesco. The company had faced issues in applying the innovative cultures as the workforce was not comparatively stronger but later on the efficient understanding of business and the increasing competition has helped them in emerging as market leader. The inability to adapt to the changes affects the profit ratio of any business and this can also lead to its end. In case of shortfall of the resources and focus on the problems related to the business environment, negative outcomes might be generated which again can bring an adverse affect to Tesco. (L.Draft, 2008)
1.3 Explain different planning techniques that facilitate strategy formulation.
The strategic planning at Tesco focuses on better operational efficiency, safety and performance. They focus to deliver value in their supply chain and customer network to ensure competitive advantage at lower price. They ensure valuing their shareholders to maintain capital inflows and allocation of resources. They focus on developing their research initiatives to grow their exploration and innovation projects. They are committed to ensure high quality in their products and services. They are also focused to strengthen their relationships with their suppliers, partners and customers.
Strategic planning techniques can be used to gather and interpret the information required to structure the process in Tesco. They are used to structure the resources that are needed to improve the performance and productivity of business. It also helps to analyze critical issues and develop creative and effective solutions for addressing the concerns. It also helps to measure the impact of performance and strategic planning to maintain sustained growth and positive business outcomes.
Mentioned below are key strategic planning techniques:
- The Boston Matrix
- SPACE matrix
- PIMS strategy
- Directional Policy matrices
Boston Matrix- it was initially developed in the early 70’s to assist the managers in deciding which business unit one should invest. However, in current times it is also used as a deciding factor for getting an idea on which product line an investment should be made and the ones which should be get ridden off. The BCG matrix has these categories:
In cash cows the business meets their profit targets easily and has high capital generation. So, they can reinvest in product portfolios that have entered maturity stage.
- In dogs the business struggle for growth as the investments are low. There can be expensive turn around plans to generate cash flows and revive the business. Even the business runs at a high risk of liquidating their assets if there is low cash generation.
- Question mark -In this stages the business has affected cash flows due to increased demands and low returns. So the business focuses primarily on cash generation and ways to increase their market share.
- Stars- In this the business generate large cash flows and are market leaders.
The BCG matrix will help Tesco in the efficient allocation of available resources and will also act as a scientific tool in marketing the brand, product management, strategic and portfolio analysis. The aim of BCG matrix is to indicate high growth plan by groping the company’s products or services as per its growth and market share. By the escalation of positive cash flows into a highly potential product or service, Tesco Plc can gain advantage on the growth opportunities.
The effectiveness of the BCG matrix at Tesco can be evaluated as follows:
- It helps the manager to evaluate balance in the company’s ongoing case of Stars, Cash Cows, Question Marks and Dogs.
- It is applicable to company which chases volume and experience effects.
- The model is quite smooth and easy to understand.
- It caters a base for management to decide and prepare for future actions.
- Tesco is able to use the experience curve to its advantage and be able to create and sell new products at a price that is lower in order to get market share leadership. Once it becomes a star, it is designed to be profitable.
PIMS strategy -function of PIMS is to highlight the relationship between key strategic decisions and its results. When analyzed adequately, the data can help the manager gain a better understanding of their business environment and identify analytical factors in improving the position of the company and develop strategies that will facilitate them to create a continuous advantage. PIMS principles and the data are widely used in academic research. As a result, PIMS has influenced business strategy in companies around the world. PIMS pursues to address three questions in general what is the typical profit rate for every business type, as per the current strategies of a company, what are the future operating results likely to be and which strategies are likely to help in developing the future operating results.
The effectiveness of the PIMS at Tesco can be evaluated as follows:
- It helps to identify the relationship between key strategic decisions and their impact on business environment.
- It helps to develop critical factors that can improve market position and help to gain from competitive edge over other competitors.
- It evaluates performance and measures quality to capitalize on new market opportunities.
- It helps in better utilization of resources to create business outcomes that are achievable and measure (Grieves ,2006)
SPACE Matrix – The Strategic Position and ACtion Evaluation (SPACE) matrix is a strategic planning tool that determines strategic thinking focusing on to the competitive position of a business strategy. The SPACE matrix is divided into four principal components like aggressive, conservative, defensive and competitive.
The SPACE matrix has two dimensions: internal like financial strength and competitive advantage. External dimension like environmental stability and industry strength. The evaluation of SPACE matrix for Tesco:
- Tesco uses aggressive strategy to maintain its competitive position and rapid market growth by enabling strengths to develop market penetration and market development strategies such as product portfolio development, acquisition of competitors etc.
- Tesco has strong financial stability in terms of high return on investments, turnover, working capital and cash inflow generation.
- They have excellent utilization of innovation and creativity in their strategies that has ensured customer loyalty, product and service quality, market share and strong competitive edge over others.
- They have favorable environmental stability like economic conditions, price elasticity, technology, competitive barriers and industry growth potential.
Directional Policy Matrices – It evaluates the market conditions and the strengths of a business to sustain in the changing conditions by outlining the strategies for future investments like decisions related to invest, grow, harvest or divest.
The evaluation of Directional Policy Matrix for Tesco:
- Tesco can make decisions related to invest if their market attractiveness and business strengths are both higher by directing the utilization of resources to increase their strengths.
- They can make strategic decisions to build strong competitive advantages such as product portfolio development, creativity and innovation of store design to facilitate customer convenience or experience, strong delivery system etc if the market attractiveness is higher in comparison to their business strengths to maintain their market leadership and sustainability.
- Tesco can maintain profitability with their strong market position and core competitiveness if market attractiveness is lower in comparison to their business strengths.
- Tesco can focus on their product line segment, overhead costs to remain profitable if both the market attractiveness and the business strength are low.
2.1 Produce an organizational audit for chosen organization.
The organizational audit serves as a program that helps organization operate by aligning the internal structure, processes, and systems to strategy in accordance with the rapidly changing business environment. The audit process can help Tesco by identifying and verifying the organizational strategy and key business units, identifying and designing core business processes with the support of competent team, identify and allocating resources to optimize the system, designing co-ordination and development schedules with the support of management structure and efficient planning and implementation of new design strategies. (Mackenzie, 1986)
The various approaches to organizational audit that can be adopted by Tesco are:
SWOT Analysis of Tesco:
Value Chain analysis for Tesco: It describes their internal processes such as product design, market segments, delivery system and strategic after sales support. It even includes warehousing, outbound logistics and operations activities that reflect their desired outputs condition. Moreover, it includes support activities like technology, human resources and infrastructure development decisions.
The value chain analysis of Tesco outlines strong customer satisfaction and loyalty, high product quality, differentiated product offerings, timely delivery and improved customer benefits that illustrates high value and strong financial stability that is primary for Tesco’s growth and survival. (Phillips, 2003)
Product Position analysis for Tesco:
- Developing an understanding of the Tesco’s product positioning process and external perception to measure success is critical to create strong customer perception and market identity relative to other competitors in the market.
- Evaluating by organizational analysis to accurately design services and capacities that offer unique experiences to their customers for sustainable competitive advantage in long terms.
- Facilitating initiatives for high performance at Tesco by communicating their unique selling proposition and compelling benefits for their customers. (J.Leo, 2007)
2.2 Carry out an environmental audit for chosen organizations.
Environmental Auditing is a tool which includes a systematic and objective assessment of how smoothly a firm, the management and equipments function in context of the environmental safety. The sole purpose of conducting this kind of audit is to provide safety to the surrounding environment as well as reducing the risks that might be generated to humanity. By including environmental auditing in its program, Tesco has adopted its international responsibility and agreements on keeping the environment protected.
The environment audit guidelines regarding Tesco’s operational by PESTEL analysis process include:
- Efficient use of energy, water, fuel resources and transport at the manufacturing terminals of Tesco
- Effective management of waste water and other wastes generated in their production facilities
- Guidelines to prevent polluted emissions and hazardous substances at their facilities
- Measures to prevent land use contamination and groundwater pollution
- Effective prevention measures to control major incidents and their management at Tesco’s facilities
- Providing training and awareness programs in the internal processes of Tesco’s to create environmental best practices (Kim, 1996)
The environmental impacts that were highlighted in the environmental audit report of Tesco include Political, Economic, Social, Technological, Environmental and Legal impacts.
The key Political, Economic and Social impacts include:
- Concerning impact in the land use pattern like agriculture, fishing, unplanned exploitation of natural resources etc
- Changes in local population levels due to increased immigration
- Increase in uneven socio economic patterns due to income differences of local population levels
The key technological impacts are:
- New ways of producing goods and services
- New ways of distributing goods and services
- New ways of communicating with target markets
The key environmental impacts are:
- Exploration and production operations result into harmful atmospheric emissions like carbon dioxide, carbon monoxide, methane, sulphur dioxide, hydrogen sulphide etc
- Depletion in ozone layer due to substances like halon
The key legal impacts are:
- This act regulates the formation and proceedings of cartels by the firms in their activities.
- It prevents the abuse of inherent market position of a firm at national or local level.
- It prevents intentional practice of collusion of firms and promotes healthy competition.
- It prevents price fixation or sudden rise in prices altogether by firms independent decision.
Implementation of Porters Five Force Model for environmental audit in Tesco Plc:
The Five Forces include
- Capacity of the supplier-This includes the number of suppliers in every essential input, size and strength of the supplier and the cost of changing one with another.
- Capacity of the buyer- It includes the number of potential buyer in open market and the ultimate cost affected in switching them.
- Healthy rivalry- The main source is the number and the capacity of the surrounding competition, providing attractive services.
- Risk from substitutes- A consumer has a tendency to bend towards the substitute of a product in case of price increase and this result in the reduction of the power of suppliers.
- Risk of a new entrant- A new entry is always attracted towards a profitable market which gradually destroys the profit margin. (Roy, 2011)
2.3 Assess the significance of stakeholder analysis when formulating new strategy
The key stakeholders for Tesco are:
- Shareholders- The shareholders play a critical role in Tesco’s capital inflow as they are the major investors to set up and run the business. Also they contribute in strategic decision making process and play a crucial role in their implementation. They are represented by board of directors in Tesco.
- Employees- Both Tesco and their employees influence each other. The standard of work, health and safety concerns and excellence are the priority factors of Tesco. This has a positive influence over their employees which helps them to sustain market leadership.
- Suppliers- are Tesco’s partners in the distribution network and is crucial to their business operations. They believe in core values which are reflected in their supply chain management.
- Customers- Tesco offers their customer’s value for money in terms of quality in product or service, lower prices, high safety needs and eco- friendly environmental impact. Their R& D functions are constantly striving to improve their core functions. This helps them retain satisfied and loyal customer base.
- Local Communities- Tesco believes in giving back to society for the inclusive development of communities along with their business growth. They are committed to the well being of community and sponsor various developmental initiatives.
- Interest groups- Tesco work collaboratively with various interest groups like government, NGO’s, business leaders, academic group and financial community to promote the need for more effective regulation and positive image in market. (Freeman, 2010)
The significance of stakeholder analysis at Tesco is as follows:
- Helps in building transparent and critical strategies to ensure customer satisfaction, product development and positive reputation
- Helps in building strong employee relationship and co-ordination at work by meeting their expectations and needs
- Helps to integrate corporate social responsibility to maintain a favorable image
- Helps in building better collaborations with strategic partners and suppliers to maintain efficiency in supplies and distribution network for hassle free operations (W.Wessis, 2014)
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