Strategic Management Of Tesco: Analysis And Strategies

Strategic Management

One of the most important concerns that are adapting to reach the goal by the business world now days are strategic management, Tesco PLC is one of the biggest groceries headquartered in Cheshnut in the UK. In terms of profit, it is the second largest retailer in the whole world and in terms of revenue, it measured the third largest. The number of Tesco’s stores was 3,751 in 2008, which have increased by 6,966 in 2018. It is also one of the supermarket leading brands in the United Kingdom (Statista, 2018). Property write-downs, an accounting scandal, and heavy competition make 2014 a horrible year for Tesco. In 2014, Tesco has announced £6.4 billion losses (BBC News, 2015). This was one of the biggest losses in United Kingdom corporate history.  Markets responded positively to start with. Tesco stocks were up ever so slightly at 0.5 percent at the opening bell and returned to normal by press time as traders dithered about whether or not Tesco is a good investment. The bad news is out the way, but recovery is still uncertain (Sheffield, 2015). But, ‘Every little help makes a big difference’ this plan was for working with NGO’s, government and other retailers, partnership, suppliers to make a progressive business plan, was good success towards their commitments, outlines, environmental challenges and customers to tackle any business situation (Tesco PLC, 2018). The strategy includes the long-term visibility, direction, and scope of the business.

Strategic management includes five steps i.e. goal setting, analysis, strategy formulation, implementation, and evaluation to achieve the goal and defines the way an organization makes to compete in business. An organization decides to use the strategic management process by implementing few selected strategies along with stakeholders i.e. customers, employees, shareholders, and competitors keeps implementing the plans and evaluating the progress and success through regular assessment (Whittington, Johnson, and Scholes, 2008).

Strategies that are used by Tesco are three different levels of strategies that are associated with the organization. First, the corporate level of strategy that used for the overall purpose and business extend. The second one is the business level of strategy which used for the particular market and to compete successfully in the business, and the third one is the operational strategy which used for the successful organization delivers (Johnson et al, 2008).

Coherent and consistent strategy: In reply to the participants and changes in the microeconomic situations in the working environment it is important to have a coherent and consistent strategy. The ongoing challenges are still there to face a change in competitive landscape and price pressure across the market (Wheatley, 2012).

Strategies used by Tesco

Corporate responsibility: This includes the contribution to the employees, customers, and communities. As a sustainable business leading towards the issues of social importance such as health and food waste, Tesco believes that helping people to develop a successful business and career (Son et al, 2018).

Competitor strategy:  To stable in the market Tesco has to improvise its values to compete in the market. As nowadays there are many other competitors to compete within the market. Tesco runs a campaign and takes the feedback from their customers to get better results and provide the best quality food for keeping a competitive advantage in the market (Wheatley, 2012).

And it also includes the PESTEL analysis; it is a process of evaluating the competitive advantages of the company (Farooq, 2018). It includes six forces that Tesco used to respond to influence its macro environment that evaluates both global and domestic markets to run a successful business strategy. These forces include the following:

1. Political Factors:Tesco operates its many stores across the globe in a globalized environment which is influenced by the political condition of the country. In every country, it has its own political standup or customary which could also be different from the United Kingdom. As the United Kingdom is free from corruption and also it is stable from the political view it has productive grounds which are an important factor from the other competitors (Farooq, 2018).

In addition the Tesco has it store in many countries such as, Japan, Hungary, Poland, Turkey, and Ireland and these countries are providing a good response and environment from a business view as they are also politically stable to handle the other situation and sudden change in the requirements from the customer side (Johnson et al, 2008).

The government of UK encourages retailer or the businesses to provide a mixture of job opportunities that include the high paid, low paid, flexible jobs and those which are locally based. These political factors influence whole the world and just only Britain. Tesco employs every kind of people and provides employment opportunities to citizens.

1. Economic: Economic factors are influenced by demanding the cost and the prices of the product that are offered to the great concern to the company. Economic decline has been experienced by the whole globe hence including Tesco all the companies were greatly affected by purchasing the products without any exception. In 2018, UK Minimum Pay Rate is augmented by 4.4% for 25 years old and onward (Farooq, 2018). And this indicates that the value of money has been increased and the cost has been decreased and the return purchasing power has also been increased. Tesco has its stores in the whole world and not just in the UK, and in result; its business cycle will not be affected heavily as the sales will be there throughout the year. The number of sales that are made by the company is reducing as the current monetary progress as affected by the purchasing power of buyers. In addition, people are able to afford the products that are offered by Tesco hence the level of income in the UK is comparatively imbalanced (Farooq, 2018).
2. Socio-culture factor:There is a strong demographic force across the world and in the local market as the people are making markets in the world. In cities and town, the most interesting thing of marketers is the population growth. But this doesn’t mean the production of goods will also be the as good as the increased population. As the purchasing of the products that are offered by the company is not easy to afford for the many people. There are many people who are increasing the awareness of the customer’s rights by going to school and also make them aware about buying only the good quality food. Location is also one of the important factors marketers are considered about as the good population will provide the potential buyers which are usually found in the cities rather than the villages or ruler area. Every country has different tastes and the culture and this highly impacted on the concept of civilization. Social changes and variety of different trends and tastes of people have forced Tesco to become one-stop shopping place (Wood, Wrigley, and Coe, 2016).
3. Technological factor:The development of technologies and the competition in markets have brought several different kinds of opportunities for the Tesco PLC. Also, the quality of services and facilities are highly appreciated by the customers at Tesco. Updated and advanced technology produces high-quality products and that satisfies to the customers (Simms, 2014). Hence Tesco has also enhanced its technological revolution to make customers satisfy by starting online food services and the self-services at the checkout points for the ease of buyers or customers. Technology has also provided competitive advantages to the company to get better results from across the world (Lee and Vachon, 2016).
4. Environmental factor:In this global market companies are addressed for their environmental issues and it directly impacts on their customers. And most of the people are affected by the environmental problems that are done by the industries. Tesco uses certified leftover clearance services to support sustainable development in the country (Lebersorger and Schneider, 2014). There are many companies that are supposed to save the environment under the environmental campaigns those are increasing globally. Tesco is one of them and working under campaigns to support the environmental issues globally. It has clearly committed that to reduce its carbon footprint by 50% by 2020 (Pestle Analysis, 2014). In addition, using water is also in a recycled form to save the water as it counts as important resources in the United Kingdom.
5. Legal:In every organization, it is important to have legal or government rules and regulations to run the business successfully and in a safe way. This government legislation directly impact on the performance on the Tesco or the routine of the Tesco and it also impacts on the competitive advantages of the company for an example, The FRC (Food retailing commission) in 2004, It recommended a code of practice which includes several current practices that are happening such as change in the price and the expenses from suppliers (Pestle Analysis, 2014). Tesco provides the profits to its customers on the fuel as per their shopping on their grocery, and also several beneficial offers for the customers which include the lower prices and also the other free benefits (Business Jargons, 2018).

PESTLE analysis provides the deep detailed analyzed information for all the factors that are affecting the business environment in Tesco. Also, it provides the long-term value to the company’s stakeholder such as customers, employees and others who come under an organization.

There are six strategic drivers that Tesco has provided to maintain the long-term values to their stakeholder.

A differentiated brand: For the long-term value of the customers or the stakeholders in any business it is important to have strong and distinguished brands. To serve a little better every day to their buyers is the heart of what their brands stand for. Tesco has continued building the trust of their customers by providing the better quality products and to stand on their commitments.  Also, they have improved in their brands and products as per their buyer or customers recommendations (Jurevicius, 2013). They also have launched their finest and the signature core food ranges; also have introduces the exclusive and new brands such as Food Co. ready meals and their Fox & Ivy homeward at Tesco. It also provides unique services to their customers by focusing on the customers need, products, and their services. They also run a food love story campaign at Tesco which is continuing year per year. The quality of food is powerful but the way they make their consumers feel for their brand is well defined by just more than its product (Keane, and Morschett, 2017).  Tesco also cares about the health and concerns of their employees and customers by doing events which are related to the health and reducing plastic packaging that creates the value of the society that Tesco creates. They have produced the “little Swap” which includes the low fat, sugar, salt products which have recorded the highest scores ever from customers (Tesco PLC, 2018).

Drivers Maximizing Long-Term Value

Reducing operating cost: They have continued to simplify their business by reducing their costs, within-year saving of £594m and £820m of saving to date towards their £1.5bn ambition. They have put all the efforts and reviewed all the aspect that could lead to savings at Tesco and identify every possible opportunity by focusing on their model of store operations, and they have delivered £541m of savings, logistics and, with supply £104m of savings, and they have made savings of £174m for the goods those are not for resale. They also encourage a cost-conscious culture and find a way of benefits for the customers by reinvesting the savings (Tesco PLC, 2018).

(Source: Tesco, 2018: ConsumerCast)

Generate cash from operations: To reduce their environmental effects and minimizing the costs of transportation they use to order the full truck of products from the suppliers and this activity calls ‘rounding up’ in order to reduce the stockholding work and it improves the deliveries from their suppliers. They focus on the free cash generations and retail cash from operations which increased by £495m to £2,773m in this year (Tesco PLC, 2018).

Maximize the mix to achieve margin on products: They have continued focusing on the sustainable productivity, product ranges and channels across the business to target the 3.5% – 4.0% margin ambition by the year-end. They have managed the combination of mix and values and also the cost-effectiveness of the business. This was a considered decision that they have taken at the beginning of the year by focusing on the services and their core retail consumers and profitability (Tesco PLC, 2018).

Maximize value from the property: To provide the benefits to customers Tesco looks for better opportunities to use the space and property as the portfolio of property is significant. They have also worked with the communities and the partners to get the beneficial offers to their customers in many of their stores (Wood, 2014).  They also do the creativity by using the available space for the customer’s benefits also to get a positive response from the customer side. They have opened ten new stores with H&M and three with Decathlon (Tesco PLC, 2018).

Innovation: Listening to the customer’s feedback and their needs provides a better way to serve them as per their needs and in a better way every day. This also provides the innovation in offers to their customers and strong ideas to compete in the market. To become the most popular retailer market Tesco focuses on the customers’ needs as the customer always looks for the gradually convenient and variety of options while shopping. It has also started an app that provides the home delivery services with an hour (Tesco PLC, 2018).

Conclusion

To develop its delicate relationships with the shoppers and the other working employees or the suppliers Tesco is now on the way back after a huge loss in 2014 and recovered in 2016.

(Source: Brian Moore, 2016)

Tesco as a leading brand has grown into a giant business by emphasis or focusing on every aspect that is needed for the companies’ growth along with the little things. Tesco business strategy includes the radical, developed an innovative business model (Tesco PLC, 2015). They always have kept their customers on priority and their concept of doing the things for the customers was for their benefits and what all are right for them (Butler, and Farell, 2015).  Now their focus is on their customer’s services by focusing on the three major operational headlines that are:

For creating the best possible benefits it’s important to understand and listening to the customer’s feedback by reaching out to them.

To develop and produce the best quality products it is important to work with the suppliers and the producers across the globe to deliver those products to the consumers in the most possible way. For creating the values of customers Tesco wants to make sure about the efficiency for everything in the business (Tesco PLC, 2015). To get the loyalty of their customers they have uniquely delivered the best offers that they can do by focusing on the capabilities, insights, and skills that they have in their business along with they also focus on the sustainable values of their shareholders too (Tesco PLC, 2015).

Tesco business model is based on the three pillars plan that includes people, products and places.

(Source: Tecso PLC, 2018)

People: This includes 4,40,000 people those work for the betterment at the Tesco, To make Tesco better every day. Tesco wants to give people a great experience while working there. It wants to provide what they want as per their ambitions (Tesco PLC, 2018). And this happens by conducting the training session to develop their skill and build an inclusive culture, also ensured the opportunities available for the employees. By putting these efforts it provides them with the flexibility, skills and rewards that they need to get on (Armstrong, 2018).

Average number of employees at Tesco from 2012 to 2018

(Source: Statista, 2018)

Product: Making sustainable products and reasonable for everyone which includes sourcing packaging, health, and food waste. To help customers for choosing healthy food and to support their employees and colleagues for living a healthy live. Tesco ensures about their packaging of food that this should be not more than this needed and they use the form of sources that can be easily recycled to help and share global food waste (Marr, 2018).

Places: For contributing to the social and economic communities they help them positively for a great response from the global market. Tesco helps over 6000 communities across the world and proud to be a valued part of this. They also get the social and economic profits from the local projects they support and the folks they employ (Marr, 2016).

Depiction of success of Tesco from 2008 to 2018:

(Source: Statisca, 2018)

Conclusion

In order for the Tesco PLC’s Chief Executive Officer in light of their 2014/5 £6.4 Billion trading loss are: to get a better understanding of the requirements of consumer’s changing nature behavior, to minimize the environmental impact and to keep the cost down creating an efficiency in admin and distribution chain system, creating a business model which competes with their own at the time of challenges and emerging of the business, also reducing the waste food’s amount at the stores to make it efficient and beneficial for the consumers and as well as the business. Also, increase in innovation in order to compete in the market.

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