Strategic Management Of Tesco: An Essay.

About Tesco PLC Company

Discuss about the Strategic Management of Tesco.

This report is aimed to provide a comprehension of strategic management of an organisation. Strategic management is a very vital part of strategy which is used by a company to attain the competitive advantage in the market (Varbanova, 2013). The competition in the industries and various markets’ are intense due to globalisation and highly volatile technological environment.  For this reason, every company is enforced to adopt the pivotal unique strategic structure in the organisation to deal with the external and internal environmental challenges (French, 2011). Thus, this report highlights the management of Tesco PLC Company that represents the strategic management integration for success of the company.

Moreover, the report critically examines the generic business strategy that has been adopted by the Tesco PLC which enhances the knowledge associated with the strategic dimensions of an organisation. Similarly, the study investigates organisational culture in the Tesco featured by various parameters such as motivational theory and leadership style in the internal environment regarding individual and group behaviour. The report also explores the organisational structure entailing managerial, divisional and functional structure of Tesco PLC Company (Tesco PLC, 2017). Hence, this study emphasised to discuss about the strategic management dimensions that are generic business strategy, organisational culture and structure of Tesco PLC. 

Tesco PLC Company is one of the largest supermarket chains in the world. It was founded by Jack Cohen in 1919 and now it is one of the biggest retailing stores in retail industry of UK (Tesco PLC, 2017). Tesco is situated in 11 more countries and headquartered in England, UK. At present, more than 476,000 employees in Tesco PLC work around the world. The company has various subsidies like Tesco Kipa, Tesco Ireland, Mobile, Bank, Tesco Stores Ltd. Dunnhumby, Spenhill and Tesco Family Dining Ltd. There are around 6553 stores in 2017 worldwide. In 2017, the company has generated £55,917 Million revenue and earnings before interest and tax of £1280 Billion (Tesco PLC, 2017). The company basically deals in all types of grocery including products including clothing, electricity, books, toys, furniture, software’s and  other products for example petrol, financial services, internet services and telecoms (Tesco PLC, 2017). Tesco implements strategic approach to attain competitive advantage and cover the market all around the world. The company is focused to incorporate a simple and effective organisational culture and structure to operate the internal business functions conveniently.

Tesco’s Generic Business Strategy

Generic strategies are very useful and essential part of the operation and business function in any organisation (Morden, 2012). Porter’s generic strategic enhances the strategic management an organisation with its effective and consistent ways to achieve the beneficial position in the market to compete with the opposition organisation in the industry. Porter’s generic strategy is focused on the industrial aspects and determines three successful ways to attain competitive advantage through it that is cost leadership, differentiation and focus (Wilkinson and Kannan, 2013). These following strategies are described as follows:

Cost leadership is the most integrated strategy in the huge and popular companies of the industry. It aims to facilitate products and services of good quality with a lower cost and higher profits (Ansoff, 2016). Along with this, it also standardise competitive prices in the market. This strategy is applied on the undifferentiated goods in the industry. Porter’s generic strategy is mainly procured with the help of effective and efficient supply chain management or value chain (Tesco PLC, 2017). Moreover, the higher profits earned by the company is also being invested in the business operations focused on reducing these prices even more. It is one of the oldest approach used by the organisations, nonetheless it emphasis on the analysis of external and internal environment to depict its optimum utility.  

Tesco also incorporates cost leadership strategy by pricing its products and services with low cost than any other competitor and with quite a higher margin (Hitt, et al., 2012). The company implies an effective and advanced value chain in the business operations that gives additional benefits to the company. There is a practice of cheap manufacturing and sales in Tesco which ensures the less working capital requirement in the business operations. Tesco also ensures manufacturing of good volumes of products in its own brand so that per product cost can be minimised apparently (Tesco PLC, 2017). Thus, the lower cost advantage helps the company in capturing UK market in wider area and with a higher profit.

Differentiation in the products by the company is another strategy to offer unique and qualitative products and services from other competitors. This strategy assists the organisation to earn extra and exclusive prices pattern of an inimitable product provided to the customer by the organisation (Benett, et al., 2009). Furthermore, products and services of the company are highly qualitative and excellent performer that brings the market standards for other competitor. The differentiation strategy is based on the unusual idea, theme or technology by research and development department of the organisation. Differentiation strategy employs extra cost in the process of research, manufacturing and marketing of the products and services (Cummings and Angwin, 2015). These products are unique and hence needs more sales and marketing to promote its features and utility in a large scale. And once it launched with higher image and brand name it gives the huge revenue through premium pricing.

Organisational Culture

However, it is a short term strategy because it attracts other competitors in the market with the same concept or technology in the same market with different prices. Sometimes it involves different concept for the same utility but with advanced and better features in the products. But this is also an essential part to provide sustainability to the company and retain customers in the market (Harrison and St. John, 2013). Besides this, Tesco also employs the differentiation strategy by providing various types of products in the same product line and segment. In addition to this, the company also offers unique and special features in the product and services along with the advanced technology and customised customer services.

Focus is the third strategy that highlights the integration of any one of the strategy that is cost leadership or product and service differentiation (Cummings and Angwin, 2015). The organisations choose any one of the strategies at a time in its product and service operation. This helps the company in maintaining its competitiveness with single direction and building a strong brand image through one factor for competitive advantage in the long run. Likewise, there is a hybrid strategy that embroils both differentiation and lower cost strategy in the business operations to facilitate benefits of both the strategies (Schein, 2016). In the context of Tesco, it amalgamates both the strategies to access internal and external opportunities and reduce the industrial challenges.  

On the other hand, Tesco also deals with the supplier sector of the environment and frequent interaction of governmental or regulatory bodies in this process. Apart from this, Tesco also incorporates these strategies with the different geographical area in different forms like specific product in the specific market strategy (Cummings and Angwin, 2015). Thus, it can be identified with the discussion that Tesco is effectively operating its business functions with the hybrid strategy entailing cost leadership and differentiation strategies in UK retailing market.

Organisational culture is a valuable aspect of the company that shows the direction to its employees and top management to achieve the projected target and objectives (Cummings and Angwin, 2015). Tesco aims to provide effective products with great values to the great Britain. It is very essential to ensure the development of the company internally that the culture implemented in the organisation benefits it’s all stakeholders equally and not being biased. It is fundamentally pertaining with the vision and mission of the organisation aligned with the beliefs and values to determine the direction and standard control (Benett, et al., 2009). Cultural web theory provides insight about the followed culture in an organisation incorporating the symbolic, structure and political aspect of the organisation. It is a very effective tool to analyse the cultural management in the organisation. Cultural web theory explores the way of doing business operation and function of Tesco PLC Company internally and externally (Tesco PLC, 2017). It entails the belief and layers of values and behaviour to control and manage the staff and operations.

Cultural web theory facilitates the understanding on how strategies of an organisation affects with actions that are taken for granted (Morgan, 2011).  It stimulates the characteristics and understanding between the subculture and culture of an organisation regarding the upcoming strategies adopted by the organisation. It is structure system routine ritual and stories of an organisational behaviour to analyse the organisational culture. The taken for granted assumptions are being illustrated with the help of ‘clues’. In addition to this, Tesco integrates an extremely supportive and friendly approach to handle its top management employee to low level employee (Morgan, 2011). They are very humble to deal with the customers and share friendly approach is being used in the organisation. Furthermore, top level management always keen to help its lower hierarchy. The management reviews are being arranged every now and then to mark the performance and quality of the services by the staff members. It ensures the constant efficiency of manager’s decision and staff performance in Tesco (Curtis, 2012.). It is one of the most prominent tools to measure the performance of the staff and effectiveness of strategies implemented in the organisational culture.

organised as a ritual in important days and social events which promotes motivation and understanding between the workers and management of Tesco. For communication purpose, the company coordinates meeting time to time to explore new opportunities and reduce hurdles in the staff level or management level (Tesco PLC, 2017). Tesco has a very strong internal environment system comprised with the hierarchy system. Flexible environment in the organisational culture brings gradual and effective changes in the policy and performance of the organisation. Shared culture and belief enhances the loyalty of the employees towards the organisation and provide strength to achieve goal and objective appropriately. Decentralised structure of Tesco helps in the involvement of the employees and also reduces misunderstanding of the management and staff (Tesco PLC, 2017). It helps in changing the relationship of employer and employee positively as it loses control of command conveniently.  Decentralised structure also accumulates coordination in inter departmental transaction. National culture influences the management practices of the organisations which is comprehend by the cross culture management. It helps in unfolding the uniqueness and uniformity in various cultures countrywide to help the organisation in growing and developing.  Due to globalisation and outsourcing practices in the organisation it is one of the most crucial aspect to cover the cross culture in the cultural environment for effective management globally (Mason and Evans, 2015). Thus, the company is focused in adopting same level of reassurance with cross culture management in the organisation because Tesco has been expanding its business worldwide. 

At the same time, the company executes organisational theory which emphasise on the psychological connection between employer and employees and enhances their relation. It fortifies the strong organisational culture and focus on fair treatment of employees with effective management. Along with this Tesco use different management approaches in the organisational culture that helps in renewing and well-building the system (Tesco PLC, 2017). The management approaches involves system, contingency, social system and human relation approach which helps in improving the organisational culture. Apart from this, leadership styles such as directive as a transactional leader which examines the synchronisation of employees in unclear job duties and responsibility has been used in Tesco. Along with this, implementation of new strategy to achieve growth and development in the organisation also implemented as an effective leadership style (Varbanova, 2013). The leaders and top management also believes in motivational theories incorporation in the organisation culture to motivate and inspire staff members. Maslow’s hierarchy system as a need theory is applicable in Tesco that boosts the enthusiasm of employees to perform better and productive. Herzberg’s two factor theory also encourages a hygienic work environment and conducted in Tesco as an international standard (Hensmans, et al., 2012). Thus, all of these behaviour belief and values of the organisation defines the organisation culture.

The organisational structure of the company is based on the sector of the company that is public/ private sector plus the size of the company is also an important factor that determines its organisational structure (Blenko, et al., 2010). It also depends on the goals and motivation of an organisation which is associated with the profit earning purpose or welfare/ charity purpose (Leahy, 2012). Moreover, size of the company involving staff and physical resources is also criteria that differs the organisational structure of the company. 

Apart from this, functional organisational structure is based on the operations and technological implementation in the organisation (Aaker and McLoughlin, 2009). It is designed with the focus of organisation that deals in the higher skilled and technical knowledge based product or services sales. The responsibility of allocation of resources is on one of the functional manager but whole product comes under the group of senior executives or manager. It is a well structured and systematic structure to operate the business functions effectively with coordination between different individuals through meetings, detailed specification exchange and systematic organisational procedures (Haerifar, 2011). Divisional organisational structure is separated with the different departments for distinct activities which further divided into small units of operations. The operations and activities that divide the department are HR, finance, marketing, production and sales. Departmental managers are responsible for each division and operation related with that function (Haerifar, 2011). However, there is also hierarchy as top to bottom reporting and responsibility in this organisational structure.

In Tesco, organisational structure has some pivotal feature that diverse it from other organisations such as Tesco’s culture is shared friendly, high employees empowerment, it depends on geographical area, decentralising decision making and structure, flexible work environment plus shared value and belief among employees and top management (Aaker and McLoughlin, 2009). Now, the organisational structure of the company is as follows. At this time, ten members of the company are in the board of directors list of the company. John Allan is the chairman of the board with the new CFO Alan Steward and new appointed CEO Dave Lewis. In 2015-16, four Non-Executive Directors are being retired with three new appointments of Non-Executive Directors. 30% with the direct repercussion on the top management of the organisation is being announced by Mr Lewis by reducing costs in the head office functions (Tesco PLC, 2017). There are five committees in the Tesco that reports the board in its governance structure which are Audit committee, nomination committee, disclosure committee, corporate responsibility committee and remuneration committee.

Figure 1(Tesco organisational committees)

The organisational structure of Tesco is based on the large size of the business and highly hierarchical. In large or mega stores, there can be even four other layers of management (Seth and Randall, 2011). The organisational structure of the company changes with the size of the store such as Metro, Superstore, Extra format along with the location, range of the products, price and other store specific factors (Tesco PLC, 2017). Thus, following figures in the organisational structure do not represent a rigid structure.

Figure 2 (Tesco Department organisation Structure)

Conclusion 

The above discussion presents the three dimensions of strategic management implemented in Tesco entailing generic business strategy, organisational culture and organisational structure of the organisation. Along with this, the report is illustrating the connection between these strategies to provide an effective implementation of system and smooth operation of business functions. The Porter’s generic business strategy in Tesco helps the company in achieving the competitive advantage in the market. The company executes hybrid strategy to achieve the benefit of cost leadership and product differentiation simultaneously. In addition to this, the organisational structure is based on the hierarchy from top level management to lower level of management comprising of the five committees. The organisational culture of the company is depended on the beliefs, values and behaviour of the management towards employees. Transactional leadership style and motivational theories are being implemented to provide the direction to employees and employers relationship.

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