A business organisation like Tesco uses strategic management models and theories to make decisions and formulate policies of the company. Based on the nature and the size of the business organisations the higher management or the owners make their policies and decisions. The values and principles of Tesco are also the driving force of the strategic management decisions that are taken by the authorities. The management of Tesco follow the concepts of strategic management in order to be successful and the measurement of the success is based on achieving the goals and objectives of the company (Brown and Bessant 2013). The decisions and policies that are formulated by the authorities running the business are focused on the objectives as well as the principles based on which the business functions of Tesco.
TESCO is a multinational company that was established in the year 1919; the organisation has its headquarters situated in UK and is also listed in the London Stock Exchange. TESCO is one of the leading names in the retail industry and over the years the company has gained goodwill not only among the customers but also among the other stakeholders as well.In 2017, the company had revenue of £55,917 million .TESCO operates in more than 12 countries and has around 6,809 stores around the world.The organisation is focused on providing the customers with the best possible products and the best services not only that TESCO is one of the prominent employers in the home country (Tescoplc.com 2018).
The company has been facing serious competition from the rivals in the market and has not being able to stay in the league of the top retailers in the world and the following are some of the reasons why TESCO has been failing in the industry (Butler 2015).
The company has recognized the potential of E-commerce platform after most of the competitors, there has been several innovations in the retail industry that has provided hints for the management to take the platform seriously and to develop distribution and logistics to reform and improve the e-commerce platform (Wood 2014). The company launched the mobile application and improves the layout of the website after many competitors had already undertaken the strategy (Wood 2014).
The company has been facing issues in the promotional aspect of marketing as well. There is a perception among the people that the low price of the products may be a reflection of low quality as well (Butler 2017).
There is intense competition in the international as well as in the local market. Companies like Amazon who have not operated in this industry have taken the route of innovation and is posing serious threat to the company with the help of their innovative technology.
The marketing strategy of the company is flawed in terms of recognizing the target customer. The target market of the company is wide and is not particular therefore the company has a wide range of service format as well. This in turn also increases the direct competition as well (Butler 2015).
The company has gone through a number of controversies in the past which has impacted on the goodwill and reputation.
There has been a change in the leadership of the organisation, fresh new perspectives and innovations in the process of business are being incorporated in the business. The company has improved the marketing strategies and has been planning on a rebranding the stores. In 2015, Matt Davis was appointed as the Tesco’s new UK and Ireland chief (Butler 2015).
He focused on improving the service in the stores. He had plans on improving the scope of big stores that were facing setbacks due to competition. He also wanted to diversify the services and bring cafe culture in the stores, something that the online stores cannot replicate (Butler 2015).
In order to deal with the controversies the company is using PR and other communication process in order to apologies and reach out to the customers (Butler 2015).
Customers reported to face problems with the delivery system in the company: In early 2017, the company had faced a major feedback and controversy form the customers regarding their delivery system meltdown. The customers used their social networking site in order to complain and state the issue which causes the company to see a setback of 10 percent of orders (Butler, 2017). Some had complained there was order’s missing from the list where others stated that that their orders had been cancelled without notification. It was confirmed in an official statement by one of TESCO’s spokesperson that the company was experiencing a Technological issue in the home delivery service. They had also apologized for the same (Butler, 2017). This had impacted their sales to a certain extent. Therefore the company should invest in technological development as well as logistics associated with the e-commerce platform. This will also help the company be at par with the other competitors as the target market of the company has moved to online shopping more than shopping physically (Chapman, 2017).
Quality of the products: Another reported problem from the people is regarding the quality of the products. As the company deals with both perishable and non-perishable items they have to focus on the rapid refreshment of the perishable goods as the shelf-life of these products are low. The recent incident was reported during the Christmas of 2017, where the people had taken to the social media platform to complain about how the meat was rotten and they had to take other means last moment to get food on Christmas Eve (Badshah 2017). The demand for Turkey meat is high during the Christmas and therefore it should have been the duty of the managers who check the quality of the products when they arrive at the store must pay careful attention to the perishable items.
The major competition of the non-food items are the online organisations: the company has been losing their clients in the non-food product category owing to the growing presence of the online competition in the market (Ruddick 2014). Online products buying is easy for the customers as they do not have to waste time on travelling to the store and stand in the long queue for payments etc. There are a lot of added advantages in the process of online shopping from the perspective of the buyer. This is a major threat of substitute for a company that operates in the brick and mortar retail industry (Ruddick 2014). There has been a consistent rise in the value of internet sales as a proportion of total retail sales from 2.7% in January 2007 to 17.1% in January 2018.The record of more than £1 billion is during 2014 (Rhodes and Brien 2018). This is further eroding the sales of the company. The big stores that are operating under the company have started to show a downward fall of sales. The service mix of these stores have reduced due to the shift in the consumer behaviour which has shifted towards online shopping as mentioned in the above discussion (Butler 2015).
Intensity in competition: The retail industry is crowded and the competitive advantage strategy of pricing has suffered in the past years. Global players like Aldi and Ldli are having been observed to provide the lowest prices of the products. This is also been on the major sales issue in the company. Customers prefer the price offered by these organisations over TESCO (Wood, 2014).
This is a major disadvantage as it has the target market of the company is tech savvy and uses technology to communicate and carry out transactions almost every day. With the help of technology the company can also reach out to the customers better and understand their perspective of the brand. In the sales department technology should be used to improve the e-commerce platform and improve the logistics behind the business model. Strategic management attention to the e-commerce and making the process more customer-friendly and effective will help the organisation to improve the sales in the department. The company should work in the distribution and logistics in order to improve the delivery time as grocery items are also perishable in nature, if the time taken in the transportation is long there are chances of these items to become bad. In this case the company will fail to live up to the claims of the business of providing high quality product to the customer (Wood, 2014). Another issue in the sales department that has been identified is the communication process, communication with the end customer; both the physical and the e-commerce platform require people who can solve problems as well as our understanding towards the customers and their problem. This in turn is going to improve the sales in the long-run (Chapman, 2017).
The company has to maintain a through TQM (total quality management) approach in the business function in order to deal with the quality issues not only in the products but also in the efficiency of the services provided by the company. One of the major objectives of the company that has been observed is to provide the customers with the best quality product. And complains that has been made above impacts the goodwill and creditability of the company. Furthermore, this has a negative impact on the sales (Butler 2015).
The marketing strategies of the company have failed to perform in the competitive market and the organisation is losing its foothold in the leading market. Therefore it can be said that the issue is with the marketing mix, the company has to evolve and employee strategies in order to maintain the competitive advantage and make the brand more likeable for the customers (Butler 2015)
The company should invest in the research and development of the technology associated with e-commerce. In the process of growth and expansion the company just focuses mainly on the motor and brick stores and in various types of formats, this will help the company to reduce that cost of establishing a physical store as well as confusing the customers with a large number of formats of the store (Yu et al.(2014) The company can improve the website and segment it according to the physical format as well. In this way the products will be arranged and will showcase the customers according to their preference (Butler 2017) The technology upgrade will help the company to understand the gap in the distribution and logistics which is one of the major concerns of the customers. TESCO can take service from third party organisation to look after the technology aspect of the e-commerce platform. Apart from that the company should also include technology in Customer Relationship Management (Wang et al. 2015). It is one of the major aspects of success of a business as the process of communication and feedback is rapid and almost on real time basis the company has the opportunity to connect and create valuable relations with the customers in order to transform a customer to a loyal customer.
Furthermore, according to Yu et al.(2014) technology is one of the most progressive aspects that impact any organization. Over the years technology has revolutionized the retail industry with respect to supply chain, CRM, distribution and logistics. Tesco can incorporate technology in the process of TQM in order to improve the quality of the products as well.
From administration, finance to operations technology is used in order to ensure the business functions operate in a seamless fashion Yu et al. (2014). There are GPS system and Radio technology used by the companies in the retail business to track the delivery system (Wang et al. 2015). CRM software is used in order to maintain a valuable relationship with the customers in the long run and also to create leads. Technologies are used in the stores in order to facilitate the process of selecting and buying the goods. There are also other numbers of usage of technology in the retail industry and the horizon is only on the rising trend. Companies use the services of third party organisation to incorporate technology in the business function.
Therefore the expectation of the customers of the company is also high from an organisation that claims to be catering to the needs and requirements of the customers. The supply chain of the organisation is strong therefore the company has a good opportunity and scope of aligning the e-commerce platform with this supply chain.
Tesco business strategy
Like any other business organisation the higher management of Tesco operates under the strategic management decisions taken by the company. According to Hill et al. (2014), Strategic management is a large scope in academic and there have been a number of theories and models relating to various aspect of decision making process of the business unit. Strategies are plans that are devised by the company in order to meet their vision and fulfil the purpose of the company.
According to Gabor and Mahoney (2013), the concept of macro and micro environment is essential in a business organisation as it determines the factors the impact the business. The internal business environment are the ones which are under the control of the authority of the company on the other hand the external business environment are not under the control of the company therefore the organization should use the internal environmental factors to combat the threats and use the opportunities that come across in the external business environment. There are a number of frameworks that are used SWOT, TWOS etc are based on these concepts (Bull et al. 2016). Tesco incorporates these concepts in order to reach a conclusion before taking any decisions.
As the operations of the business are considered the company has evolved with the changing dynamics in the industry to keep up with the competition. The organisation strives to make arrangements and provides better services to the customers at all time. The organisation has recently started working on their e-commerce platform as well.
Following a business model is an essential part of strategic management, TESCO is an organisation the follows the model of Triple bottom line in the operations of the business. The concept implies that the company does not only focus on the financial objective of the business but also gives equal importance to the society as well as the environment. The company issues their CSR report along with the Annual financial report (Tescoplc.com 2018).
TESCO has a wide range of products for the customers to choose from, when the organisation was founded it only focused on grocery products but gradually the management decided to diversify the products range and services and started to offer goods like: books, telecommunications, apparels, furniture, toys, software, electronics, financial services petrol etc (Tescoplc.com 2018). The current market share of the company as of 5thMay 2018 is 240.70p. The organisation value the importance of the employees and respect their contribution towards the success of the company there is a code of conduct that has to followed by the employees as well.
The mission statement of the company states: “Providing a better and easier standard of living for the customers” (Tescoplc.com 2018).
Tesco functions in the retail industry along with diversification in the telecom and finance as well. But the focus is on the retail mostly, according to Rhodes and Brien (2018), Retail industry in UK is one of the major industries that significantly contribute towards the economy of the country. It is also a major sector for employment as well. In 2017, consumers in the UK spent around £406 billion in retail purchases. The retail industry has contributed £194 billion to economy of the country which is approximately 11% of the total value. This value is increased from the last year. Around 4.9 million people (20.5% of the UK total), and contained 374,000 businesses (15.5% of the UK total) refer to appendix 1.With the help and support from the government organisations that operate in this industry have gained encouragement to achieve their objectives (Rhodes and Brien 2018). Therefore, there is opportunity for Tesco in the external environment and the company must use the resources and capabilities to overcome the problems in the sales that have been identified above.
Political: The company has to comprehend with the legal framework of the each and every country in which they have their operations. The UK government is stable and has trade regulations that encourage business organizations to thrive and grow.
Economic: The global economic condition are such currently are also favorable, the country did face considerable set back during the depression but with the stabilization of the dynamics in the economy the company has also revived form the situation.
Society: The countries in which the company operates are developed or developing therefore the standard of living among the people is also high. The company strives to make the process of retail shopping easy for the target market. The market that is targeted by the company is wide in terms of its demographic segmentation, where with every format the demographic changes. In the countries where the company is operating are also technologically advanced and technology plays a large part of their social communication as well as shopping methods. Therefore the company should focuses on this aspect of the consumer in improving their services in every country.
Technology: there is a lot of technological advances that has been innovated by various organisations in the industry posing a threat to TESCO, the company has not adapted to extensive technology in their business function making the business out of league. Amazon has come up with the technology where there will be no billing process or queuing up to check out, thus reducing the time that has been taken to shop for the customers.
Strategic management process of the company
There are mostly two types of segmentation in the product line perishable and non-perishable and TESCO deals with both the stock of goods in a different way. In order to maintain a coordinated operation of the business function effectively, integrated operations among the various departments of the stores are essential. The management has decided the process of store function with the help of following departments: administration, finance and customer service, management of the inventories, managing the receipts, promotional and communication management (Yu et al.2014).
TESCO operates in the retail industry where the supply chain management plays an important role in ensuring the inventories are properly managed (Tao and Hung 2013). In the objectives it has been stated that the company focuses on the customers as one of the major stakeholders, therefore CRM as well as determining the needs and requirements of the target market (Hassan and Parves 2013).
On the other hand the company uses the Just In time approach to deal with the stocks and inventories. This process offers the company flexibility in their operation. Furthermore it also helps in maintaining the quality as well by keeping up with the speed of refreshing the stock and price consistency. Tesco also follows the lean approach in their operation management as one of their agenda is to reduce waste Just In Time approach helps in keeping up with this agenda as well. With the help of the data which is received from the point of sale the manager of the store forecasts the demand and order the inventory accordingly.
In order to keep up with the changing dynamics of the business environment the management of Tesco adapted to managing complexities (Ryle 2013). One of the major changes in the strategic management process that the company has introduced as the various formats of stores, the format is chosen depending The Company has adapted to managing complexities in the recent times firstly the company developed stores with various capacities based on the location and the demand of the geographic segmentation of the target market. E-commerce has developed the facilities, balance score card and steering wheel are some of the approaches that was introduced in order to improve the performance and the measure the outcome of the employees (Sparks 2010).
E-commerce development
First and foremost the company needs to improve the look and the layout of the website. The simplicity of the website is aligned with the values that the company, but if other successful online business websites are compared in terms of layout and their process of communication and information then the gap in the Tesco website can be understood (Verhoef et al. 2015).The company with the help of technology will improve the process of distribution and logistics in order to deal with e-commerce delivery system. This will help the company to serve the wide range of target in an organized way. And this strategy has to be implemented in UK first as it is the home country of the organisation. This will help the company to cater to the requirements of the new market and will also generate sales in the new channel (Yu et al. 2014).
TESCO can undertake the services of a third party in order to deal with the customer relation management of the online as well as the offline. As communication is one of the biggest parts of customer relationship the company has to be inconstant touch with the customers in order to make sure that their needs are being looked after and their services become more and more personalized due to brand loyalty. This is surely improving the rate of sales in the future (Hassan and Parves 2013).
In the process of communication Tesco is a company that has reached its maturity stage in the industry life cycle and the company has to incorporate something fresh in their strategy in order to engage the customers back to the company. The organisation can choose to rebrand or can choose to develop a new communication campaign to communicate better, to engage the customers in to the online segment as well as create interest among the people to avail the services (Yu et al. 2014).
As this is an issue that is directly associated with sales the company can understand the improvement with the help of market survey and the annual financial reports. The head of the sales team will conduct the survey in order to understand the improvements in each segment. A performance evaluation will also be undertaken by the company in order to track the improvement of the people associated with e-commerce, logistics, CRM and marketing (Krittanathip et al. 2013).
Conclusion
It can be concluded form the above discussion that the sales of the company is on the declines as the companies decisions are not aligned with the dynamics of the industry. Use of technology and targeting the right people at the right time with right communication is the strategy that has been recommended in order to deal with sales issue. The company has to invests in online channels in order to cater to the requirement of the customers and the issue of the delivery time has to be eliminated in the process.
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