Discuss about the Report for Business Strategy of a Annual Report and Financial Statements 2015 ?
TESCO PLC has been selected for the purpose of answering the tasks given in the assignment. Jack Cohen founded TESCO in the year 1919 from a small market in London. Gradually, the company has grown and at present operates in 12 different countries including Europe, America and Asia. It is in the retail business of selling grocery through its retail chain-stores. At present, it employs more than 530,000 employees and is engaged in providing best possible service to its customers. With the advent of the internet, TESCO has been engaged in offering its products online in an effective manner. Building trust and penetrating the market by rendering proper and effective customer services has been one of the most important goals of the company. With this objective, TESCO has grown by addressing the requirements of its customers. Along with customer satisfaction, TESCO is also engaged in imparting its social responsibilities to the full extent. Teamwork and providing a suitable working environment to its employees has been the base of the company that motivates for better outputs. The company has a code of business conduct that it adheres to while conducting its business activities.
1. The selected organization in the study is Tesco Plc. It is one of the most common and enlisted company in the British Stock exchange. There are different kinds of organizational goals and organizational objectives of different organization. There are different kinds of organizational goals of TESCO. This part of the study will analyze how the organization has developed its goals, missions, visions, and strategy. The ultimate objective of this particular organization is to develop a proper business plans and operation which will result the organization towards the becoming the leading retail store in the entire United Kingdom. Based on the development process of the recent business plans of TESCO, the company wants to develop its business operations in the BRICS nations. The five developing and emerging country in the world are Brazil, Russia, India, China, and South Africa. TESCO is a multinational company, which operates its business across the major cities of the globe. There are different kinds of mission and vision of this particular organization.
The mission and vision of TESO is to organize its business in the emerging and developing nations of the world, which include BRICS nations. The goals and objective of the organization is to develop a proper business plans and strategies, which will ensure towards becoming leading organization in the entire United Kingdom. The other business objectives of this particular organization are to offer all the products and services to all the customers at a reasonable price. The entire retail sector industry falls under the notion of the perfectly competitive market structure (Smith 2012). The features of the perfectly competitive market structure are very much different and unique as compared with other marketing structure. The entry and exit of this particular market structure are free. There are no barriers in the entry and exit of any particular market. The level of competition always remains high in this particular market structure. In order to develop a proper business structure the organization needs to develop a proper investigation procedure, which conclude about all the important factors towards the development process of a proper marketing plans and operations.
2: The second part of the study will conclude the different elements, which are included towards formulating strategic plans of the organizations. Business sustainability is one of the most crucial parts in the overall business operations. There are certain plans and procedures, which are included in the development process of a proper business, plans. Technology is one of the major factors, which are emphasized in the overall decision-making process. The role of technology towards the development process of the organizational activity is very much significant. The entire trend of shopping has been changed entirely with the application of the modern technology (Johnston and Bate 2013). The main goals and objectives of the selected organization are to analyze the entire situation in order to develop a digital marketing plans and operations. The concept of the digital marketing plan will allow the entire customer to apply the notion of the online shopping. The customers will be benefited in certain ways. It will allow the customers to save time and money simultaneously. Development of a proper digital marketing plan in the organization will allow the company to be benefited in certain ways.
3. There are two kinds of marketing tool, which this particular organization, TESCO develops in the development process of a proper business plans and operations. The application of Ansoff Matrix and the application of the BCG Matrix are the most common and important marketing tool which the organization needs to develop in the process of the organizational plans and procedure. The applications of the two marketing tools have different of utility. TESCO has used the notion of the Ansoff Matrix in the process of developing proper marketing penetration strategy (Short et al. 2013). There are four important factors, which are highlighted in the development process of this particular marketing tool. Market penetration, product development, market development, and diversification are the four important factors, which needs to be highlighted in the overall process of this particular marketing plans and operations. Existing products and new products are the two important points, which need to be analyzed in a proper manner. BCG Matrix is the other marketing tool, which is highlighted in this part of the study. The application of BCG matrix will allow the organization to emphasize towards the development process of modern and new products. It will allow TESCO to organize a strong and proper business plan in order to develop and market new products in the overall business activities.
4. This part of the assignment will help the readers to conclude about the situation analysis process of the selected organization. The notion of the situation analysis procedure will allow TESCO to conclude about the internal environment analysis as well as the external analysis process. With the help of the SWOT Analysis tool, the organization will be able to determine both internal environment analysis as well as external analysis. The four factors, which are included in this particular marketing, are Strength, Weakness, Opportunity, and Treats (Annual Report and Financial Statements 2015 Tesco PLC Annual Report and Financial Statements 2015 Annual Report and Financial Statements 2015 2016). The first two factors in this particular marketing tool will analyze the internal environment and on the other hand, the remaining two factors are used to determine the external environment analysis. The strength of this particular industry is its brand name. Supply chain management, customer service, research and development, product customization are the important factors which are included in the development process. On the other hand, the weakness of this particular industry is to analyze the market size and growing demand. The entire retail sector industry falls under the notion of the perfectly competitive market structure. It maintains a huge customer base and a huge market structure in order to develop a proper business plans proceedings. It is one of the markets, which is at a growing stage. All the firms maintain a good business plans and operations in the overall market structure. However, there are certain weaknesses, which are highlighted in the study, are analyzed in a proper manner. Knowledge of proper culture is another important point, which needs to organize in a proper manner. The threats, which are highlighted in this particular study, are increase in level of competition, market diversification (Importance of Stakeholder Analysis in Management Plans 2016).
5. The section of the study will highlight the importance of the PESTEL Analysis. The application of the PESTEL Analysis includes six different factors in the organization. The six factors are political, economical, social, technological, environmental and legal are the important factor which are included in the development process of this particular marketing tool (PESTLE Analysis for Tesco | PESTLE Analysis 2016). The following table illustrates the analysis:
|
Political |
– Implementation of taxation norms has increased government revenue in the form of VAT – Affect on sales revenue generation – Implementation of tax with respect to obesity |
|
Economic |
– Recovery after the global financial crisis – Increase in GDP – Growth in the supermarket industry – Lack of disposable income results in substitution effect where cheap food products generated revenue for the company |
|
Social |
– Decrease in birth rate increased life expectancy rate and resulted in a shift in the tastes of individuals – Changes in the business environment – Corporate Social Responsibility |
|
Technology |
– Use of online shopping by consumers have increased – Developments in the supply chain management system – Technologies used by its competitors have to be evaluated in order to gain a competitive advantage |
|
Environmental |
– Global warming and its associated effects – Minimizing the use of non-renewable sources of energy – Use of bio- energy |
|
Legal |
– Reforms in the agricultural policy – Reforms in Companies Act – Regulations floated by the Prudential Regulatory Authority (SWOT analysis and PESTEL analysis OF Tesco 2015) |
6. The impact of stakeholder’s analysis on business activities is significant. As an organization is an artificial legal person, it has to depend on its stakeholders for undertaking the required business activities. Stakeholders are key to the success of an organization. They play an active role in the entire decision making process of the concern. Some of the major decisions in which stakeholders play an important role are as follows (Tesco plc 2016):
Investment decisions
Financing decisions
Marketing decisions
Expansion decisions
All the above decisions collectively form the backbone of the business enterprise. Therefore, active participation of the stakeholders in the entire process has become indispensable (Sage 2016). Thus, a proper analysis of the stakeholders is of utmost importance and should be carried on in an effective and efficient manner.
7. TESCO has been actively engaged in expanding its business activities beyond its national borders. Over the years, TESCO has expanded to Europe, Asia, the USA and other southern countries of the globe (Apenko 2014, pp.28-34). In essence, it has become important to address the cultural issues arising out of such expansions. Building trust among these new stakeholders has been one of the priorities of the company along with strengthening of its balance sheet and competitiveness in the UK. Therefore, addressing the issues of the local communities and customers is one of the objectives of the company. In order to address this issue, the company should organize workshops and interaction sessions. Existing and new employees can be trained and informed about the manner in which the company wants to undertake its business activities in a particular company (Strategic Report 2015 2016).
8. Expansion of business has been one of the most important objectives of TESCO. Over the years, the company has resorted to various international market entry strategies and has expanded its business in Europe, the USA, Asia and in many more countries. It has successfully resorted to various inorganic modes of expansion in the form of joint ventures, mergers and acquisitions (Hitt, Ireland and Hoskisson 2012). These strategic alliances have expanded the market share and scope of business of TESCO throughout the world and have helped it to become one of the market leaders in retail industry. TESCO gained entry to the United States through its wholly owned subsidiary called the Greenfield Investment (GI). The table below demonstrates the manner in which different strategies have been used by the company to gain entry to markets beyond its national boundaries (Tesco plc 2016).
|
Country |
Strategy |
|
China |
Joint Venture |
|
Joint Venture |
|
|
Thailand |
Joint Venture |
|
Malaysia |
Acquisition |
|
Japan |
Acquisition |
|
Turkey |
Acquisition |
|
Ireland |
Acquisition |
|
Slovakia |
Acquisition |
|
Hungary |
Acquisition |
|
Poland |
Acquisition |
|
Czech Republic |
Acquisition |
|
USA |
GI (Wholly Owned Subsidiary) |
TESCO directed its international market entry strategies in order to become one of the most important retailers of the present industry. Its activities in Europe and Asia have been successful. However, entering the US market was a daunting task for the company, as it had to compete with some of the biggest retailers of the country like Albertsons LLC, Walmart Supercentres, Delhaize Group, etc. The success of the company lies in its diversification capacity and understanding of the local markets, especially markets that are composed of high cultural mix of the targeted customers (Tesco plc 2016). The other important point of these strategies is sustainable growth and success in the long run. The company has successfully used its diversification capabilities in order to formulate strategies that will increase profits and maximize the wealth of its stakeholders in the long run. The inorganic mode of expansion is the best option chosen by the company as it provides a smoother entry to international markets as compared to conventional methods (Hill, Jones and Schilling 2014). Theses business ventures are transparent and less time consuming. Time is the essence of business expansion. It takes a considerable amount of investment and time to set up a new business in a foreign market and it also carries excessive amount of business risk of setting up a new business. On the other hand, inorganic methods provide a company with the opportunity of expending less of valuable resources and cater to expansion with the help of local logistics. Thus, the alternative strategies adopted by the company are appropriate and beneficial (Tesco plc 2016).
1.1: As mentioned above, TESCO has resorted to various inorganic modes of expansion. Among the various strategies availed, joint venture can be said to be one of the best options for a number of reasons as stipulated below (Tesco plc 2016):
JV’s are a convenient mode of entering into a foreign market
Investments are lower than other modes, viz. mergers, de-mergers, acquisitions, etc.
Lesser compliance requirements
Local support provided by the JV partner
Does not require building of a brand name
Market penetration becomes easy
Development of core competencies by partner firms
Responsibilities are divided
Collective decision making
Better co-ordination that leads to successful marketing activities
TESCO’s joint venture in Asia has led to a successful expansion of the market share for the company. South Korea is one such country where the company successfully penetrated the market by collaborating with Samsung Corporation (Tesco plc 2016). TESCO acquired the distribution unit of Samsung along with its managerial rights. This gave the company a suitable opportunity to reach extreme corners of the company by utilizing the existing distribution channels. Acquiring managerial rights gave TESCO all the required decision making powers that helped it to achieve its pre-determined objectives.
TESCO experienced same amount of success in China. It entered into a joint venture with Ting Hsin International (THI) in 2006 by acquiring 50% of the company’s chain-store shares. This provided TESCO with an unimaginable advantage as it got well established chain of store where it could sell its products. This is considered to be one of the revolutions of the retail industry (Tesco plc 2016). Later in 2006 TESCO increased its stake to 90% that gave a boost to its decision making process. This venture proved to be very successful as the chain-store was one of the leaders in the retail industry. It also gave an added advantage to TESCO, as most of its employees were local including the top brass. Therefore, it can be seen that alternative expansion strategies availed by TESCO has proved to be very successful for the company and increased its revenue generation to a great extent along with an expansion of its overall market share in the international retail industry (Tesco plc 2016).
1.2: Implementation of expansion strategies are very crucial and the decision has to be taken by the management with due care. Any loopholes in a strategy may result in a total failure of a business venture along with severe financial losses (Long 2015). Therefore, the personnel delegated this sensitive task must have the following roles and responsibilities:
Should possess full knowledge of the objectives to be achieved
Should have a proper plan to implement the strategies
Should resort to effective communication within and outside the organization by discussing the plan with all the concerned people
Shall take feedback from all the concerned departments and personnel
Shall segment the entire implementation plan
The plan should be implemented in a phased manner so as to evaluate its success or failures
Proper training of the required personnel
Constant monitoring and performance evaluation
Analyzing and addressing risks in implementing expansion strategies
Comply with the required and relevant rules and regulations, nationally and internationally
Devise a proper internal control and internal check system so that the implementation process progresses in a devised and authentic manner
The above are some of the major responsibilities and roles that managers have to play. Other important and additional responsibilities may arise, as cross border business is a mixing of different cultures (Tesco plc 2016). Depending on the evaluations, alterations might have to be carried out according to the requirement of the situation. These activities are of immense importance as the success or failure of the entire operation depends on proper completion of such roles and responsibilities.
1.3: Implementation is the most important part of a business activity as in this stage a paper plan has to be executed in the practical world. Therefore, implementation activities have to be undertaken very carefully and with all precision (Stevens and Dykes 2013). Implementing an expansion strategy has many requirements. These resources have to be procured in such a manner that they prove to be profitable in the long run for the company. Following are the main types of resources that are required to implement a new strategy (Tesco plc 2016):
An expansion of business cannot take place without sufficient funds. However, before resorting to accumulating funds, an organization has to identify and evaluate investment opportunities are suitable for the business. Selection of a proper investment opportunity involves scanning of various opportunities and selecting the most suitable one. Then comes the financing part of the business activity. Procurement of funds involves a certain cost (Gohel and Gondalia 2013). The return from deployment of financial resources has to be more from the cost of procuring such funds. Otherwise, the business venture will result in a total failure. Financing decisions includes accumulation of funds from external sources and internal sources such as credit, bank overdrafts, issue of shares and debentures and utilization of retained earnings.
The next big important resource is human resource. Business requires skilled and unskilled people to carry out the business activities. An organization has to evaluate whether its present human resource strength enough to handle the business expansion or not (Tesco plc 2016). Some existing and experienced employees are deployed in new business areas in order to provide a right direction. On the other hand, local people are recruited as they provide local logistics and information about the new market. Therefore, both existing and new human resources are important to successfully implement an expansion strategy (Tesco plc 2016).
Physical resources include setting up of new production facilities at the new place of business. Procurement of raw material and storing them in the local warehouse also are vital physical resources that are required to carry on the business in a successful manner (Tesco plc 2016).
2.1 Setting out targets and implementing formulated strategies are common activities of an organization. These strategies have to be planned and implemented successfully in order to achieve sustainable growth in the long run. Strategies can be long-term, medium-term and short-term (Tesco plc 2016). However, if due care is not taken while implementing these strategies, the whole business venture may fail and lead to severe financial looses for the organization (Mentis 2012). In order to prevent such a catastrophe, organizations adhere to SMART targets in order to successfully implement a strategy. The below table shows the true meaning of SMART targets:
|
S |
Specific |
|
M |
Measurable |
|
A |
Achievable |
|
R |
Realistic |
|
T |
Time Constrained |
The following points are to be considered while setting targets while implementing a new strategy:
The goals set by an organization have to be specific in order to make them achievable
The targets set shall be measurable so that the strategy can be evaluated and re-engineered if required
The targets set should be achievable in order for it to be successful
The goals shall be practical and realistic so that they can be achieved in a proper manner
There should be a time limit to achieve the set targets. This provides effectiveness and overall efficiency to the implementation process
Therefore, it can be seen that the above five elements are very important and should be strictly adhered to while implementing a new strategy. This is essential of achieve the overall goal of the entire business project. SMART targets provides a proper structure to the implementation process and helps to achieve the goals in a strategic manner (Tesco plc 2016).
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