Strategic analysis is conducted in order to analyze the internal and external factors that affect the success of the companies. It also helps in revealing the internal and external weaknesses and strengths of the company and making necessary strategic changes to gain competitive edge within the industry (Abraham 2013). The objective of the current essay is to analyse the strategies and changes in the strategic decision of Tesco Company over the past ten years. These changes for the company will be evaluated through analysing the modifications conducted by the company in strategic leadership, culture, structure along with market forces and environment. Moreover, the current essay will also analyse the role of the business functions such as marketing, operations management, accounting/finance management and human resource management in Tesco Company’s success. Tesco Company is a renowned UK based retail organization and is positioned as third largest retailer as indicated by its revenue. The company currently has its business operations in twelve nations all through Asia, Europe and other continents. Tesco Company has strategically expanded its business and recently has 6351 stores and 537,784 employees globally (Tesco plc. 2017). The company attains great business success because of its superior consumer service and efficient competitive strategies in gaining strategic advantages for the company.
Tesco Company recently employs around 600,000 employees all through the world and for this reason, it is extremely vital for the company to maintain highly effective organizational culture. To maintain effective culture within the company, it has advanced its organizational structure over the past ten years and made it simple. Moreover, Tesco Company efficiently uses its labour force for the development and growth of the company along with training their objectives and business goals (Bansal and Sharma 2015). The company has transformed its culture with years to ensure increased implementation of technological improvement and innovation implementation within the provision of service and it has efficiently enhanced the effectiveness of the workforce. Such innovation culture has also facilitated the decrease in human error and for this reason, increased responsibility is provided to the employees for offering consumers with effective service (Ramírez and Selsky 2016). Within all the stores of Tesco Company, the managers are provided with increased span of control with the employees. Moreover, the managers have developed their capability with years to work in an effective manner in managing the business operations along with maintaining positive organizational culture with highly efficient cooperation and communication. Tesco Company’s organizational culture has advanced to maintain an efficient relationship with in the manager and the employees along with offering suitable training to the employees for offering superior consumer service (Barney and Hesterly 2015).
Organizational culture of the company has been changed and the Tesco Company follows the centralised decision-making for the board of directors takes the decisions within the company. One of the major reasons for which the company has attained great success is because of its effective leadership practice within the organization. Organizing leadership that is followed by the company has the capability to affect the strategic decision making of the company. All the major departments of Tesco Company including marketing, human resource, administration, finance along with research and the managers within the respective department manage development (Beynon?Davies, Jones and White 2016). Mr Leahy has been an effective leader in terms of employee motivation and has recognised reliance of the relationship among the employees and the consumers. Moreover, all the departments along with increasing the departmental efficiency sustain effective communication and coordination. In the company management concept by objective is followed which indicates that the managers act as leaders and they lead the workforce in attaining the predefined company goals and objectives (Rothaermel 2015).
Figure 1: Tesco Organizational Structure
(Source: Brannen, Moore and Mughan 2013)
Organizational structure of a company generally relies of the sector type on which it operates its business and the number of employees in the company and the physical resource employed within the process. There are generally two forms of organizational structures, which are followed by Tesco. Two of the organizational structures serve distinct purposes for the Tesco Company but both the organizational structures are less difficult, clean and transparent (Chowdhury 2016). One among the organizational structures is for the Tesco organization as a whole. Within this organizational structure, the board of directors remain at the top level of the company’s management. In addition to that, other organizational culture is followed within the stores all through the world.
Over the past ten years, Tesco Company has changed its traditional organization structure and within it, the board of directors positioned within the top level along with the subordinates and the managers are within the next hierarchical order. In the recent years, the company has modified its organizational structure and has considered offering clear description of the responsibilities and the roles of all the individuals within the organizational structure and for this reason the organizational structure is clearly explained and complex (de Kluyver and Pearce 2015). The employees have an explained idea regarding all the stores considering their duties and to the people they require reporting in some instances and people in charge of all the company’ operations. Moreover, the human resource department of Tesco Company has also changed over the years and has turned out to be extremely effective in managing the diverse employees within the company. It is gathered that human resource serves as the critical factor for the Tesco Company and for this reason, it is essential to manage the resources in a better manner. Considering the same, the HR department of the company has updated the requirement of its new employees (Samantara and Sharma 2014).
Market Forces and Environment
There have been drastic changes in the market forces and business environment of Tesco Company over the past ten years that can be explained through conducting SWOT analysis and Porters five forces analysis of the company (Dess, Lumpkin and Eisner 2014).
SWOT Analysis of Tesco Company
· Tesco is world’s largest retail shop company that has its business operations in several nations with 4331 stores.
· It has more than 30% market share in UK retail industry
· The company has strong financial performance with high revenue.
· It has strong and effective consumer relationship management systems
· Tesco has strong strategy as per its business model structure
· Internal factors generate issues for Tesco Company for competing effectively within the market
· There is lack of geographical diversification that can serve as major weaknesses for the company.
· Prices of Tesco is deemed to be high in comparison to all its competitors
· Another weakness of Tesco is its high transport cost
· Tesco Company has the opportunity to enter within the Asian nations that will enhance area diversification of the organization.
· The recent retail shops sales are generated by online and consumers are highly relied on the online sales and home delivery.
· There are opportunities of increased strategic alliances with other companies so that the company is able to offer superior products and services.
· As the Tesco Company is relied on UK and European nations, the company’s growth is extremely risky as majority of European Union nations deals with financial problems.
· Retail market is highly competitive market in which several giants are competing within the industry
Porters Five Forces Analysis of Tesco Company
Figure 2: Porters Five Forces
(Source: Grant 2016)
- Threat of Substitute Products- In UK retail industry threat for substitute products is considerably low for food products because of increased number of convenience stores and medium for the non-food goods as Tesco Company impose premium price for these products. To deal with such issues Tesco Company is considering opening more stores in remote regions for offering convenience transportation systems to consumers (Harzer and Piller 2013).
- Threat of New Entrants- Threat of new entrants is considerably low within the UK retail industry. This is for the reason that retail companies requires increased capital investments for remaining competitive and for establishing a renowned brand name. Tesco Company is attempting to remain competitive through developing innovative strategies as the new entrants requires making plans and getting regulatory permission that will need to establish in the market easily.
- Competition Among the Companies- The intensity of competition among the existing companies is within the UK retail industry is higher there are several companies with strong policies and increased capital investment. As the competitors offer relatively low priced products, Tesco Company also captures consumer attention to deal with increased competition within the industry.
- Bargaining Power of Buyers- As there is increased number of competitors within the industry the position of the consumers is considerably high in situation of bargaining power. For the consumers these days desire both quality and low price products the companies within the retail industry focus on maintaining rational price with producing high quality products.
- Bargaining Power of Suppliers- This power is low because of the reason that in UK the suppliers’ position is not that strong. This is because of the reason that certain other top supermarket companies such as Sainsbury have contact with suppliers and they do not have strong position in case of bargaining power.
Role of Business Functions in Tesco Company’s Success
Rapidly transforming marketing environment is generating high pressure and challenges to the UK retail industry despite of their competitive position within the market. Considering the fiercely competitive marketplace, the company modernises its marketing strategies over the past ten years and continuously adopts effective promotional strategies for increasing sales every year. Additionally, Tesco Company adopts print, online and broadcast channels for generating effective promotional campaigns (Hubbard, Rice and Galvin 2014). The company also develops effective slogans and logos in gaining increased attention of the consumers towards the fair trade products. The marketing strategy of the company is focussed on positioning within the market. Considering the competition, Tesco Company has developed its brand through adding innovative qualities to position the product to gain increased attention of consumers. This indicates that the company implements highly efficient marketing strategy for attaining long term strategic success (Sparks 2014).
The promotion strategy remains consistent with the business strategy of cost benefits. Over the past ten years, the company has developed effective marketing strategies to attain marketing objectives such as short-term profit maximization and long-term perspectives and enhancing value of the company’s brand image (Jenkins and Williamson 2015). Such objective is attained by the company through media advertisements, event scholarships and charitable causes, point-of-sales marketing strategies along with constantly offering promotional discounts and offers. For instance, Tesco Club-card can be considered as an effective strategy that contributes to effective business strategy of attaining cost advantage. Along with maintaining consumer loyalty through offering enough discount on consumer purchases. Club card is employed by Tesco Consumer as an efficient tool for gathering important information regarding consumer behaviour and such information is further employed by the company for gradually enhancing the value of the brand (Zott and Amit 2013).
Operations management has a vital role in attaining the performance of the Tesco Company. The objective of the company has been to enhance consumer service or to enhance profitability over the past ten years (Martínez-Ruiz et al. 2016). In ensuring effective operations management, Tesco Company considers employing its resources to have significant impact on the company’s business. There has been number of innovative developments within operations management that have intended to make use of Tesco Company’s resources in a better manner for making an effective and huge change in the performance. Over the past ten years, the company has successfully attained superior market position within the retail industry and has considerably developed effective strategies of expanding in international markets, shifting to “high-margin” non-food sector and sustaining strong base in UK retail industry.
Operations management of the company considers satisfying the changing needs of the consumers and helps in maintaining high competitiveness. Operations performance objectives majorly reflect on the quality, cost, dependability, speed and flexibility aspects of the company. With the increasing global competition within the retail industry, Tesco Company must continuously develop its operations ability and address the changeable needs of consumers for out forming its business rivals (Mason and Evans 2015). Tesco operations have also modified and the company has considered providing highest priority to the delivery speed so that it can address the demands and expectations of the consumers. Moreover, in the recent years the online service of the company serves as the way through which the company offers its consumers with effective use of time and money saving by means of all-time online delivery service. Inventory management systems of Tesco Company has also advanced over the past ten years that predicts the purchasing habits of the consumers in an effective manner and also tracks special sale’s effectiveness that is offered to its consumers (Wood, Wrigley and Coe 2016).
Human Resource Management
The human resource department of Tesco Company has turned out to be highly effective over the past ten years in managing the human resource of the company in n effective manner. It is deemed that human resource serves as among the critical success factors of as company and for this reason it is increasingly necessary to manage the resources in an effective manner (Metzger 2014). HR department of Tesco Company has recently advanced and maintains updates on the requirements of the new employees. The company also considers making constant modifications in the employee appraisals, rewards, remunerations, training and development of the workforce so that regular change is effectively managed within the company. In the recent years, Tesco Company have established high labour turnover reduction techniques and for advance planning in order to increase the efficiency of the human resource department. It has been gathered that over the past ten years, Tesco Company has realised that flexibility is extremely vital and for this reason, it is implemented within the HR department for the workforce (Müller 2015).
Moreover, the employees of Tesco are offered with proper training for enhancing the efficiency. Moreover, these days Tesco Company has considered maintaining wok ethics and associated measured within the company in order to offer healthy, safe and highly productive environment to its employees. However, there are certain issues those are dealt with by Tesco Company within the HR department that includes lack of the required capabilities and skills along with the capabilities among the newly hired staff, gaining attention of new staff within the industry (Ndungu 2014). Moreover, through enhancing the human resource department of the company, Tesco Company has attained decreased employee turnover rate as he company is now successful in retaining all it employees. Through developing human resource department with years, Tesco has successfully attained increased competitive advantage by sustaining highly productive and motivated employees.
Accounting/ Finance Management
Tesco Plc has experienced an increase in its gearing ratio from 51.58% to 91.38% within 2000 - 2003 (Tesco plc 2017). The main strategy of the organisation during that time was to increase the cost of debt in order to reduce weighted average cost of capital. The intention was to determine the most beneficial investments available. However, during the global financial crisis of 2007, the organisation has minimised this ratio to 75%. Along with Tesco Plc has adopted a growth strategy, which has helped in increasing its market share from 1.8% in 1997 to 30% in 2012 in the global arena. However, the increase in competition in the UK retail industry has reduced the sales of the organisation by 28% in Europe, 5% in Asia and the gross income by 6.9% in 2014 (Tesco plc 2017).
In addition, the profit overstatement scandal in 2014 due to manipulation in its income statement has negatively influenced the financial performance management techniques of Tesco Plc. Due to this, Tesco Plc has been compelled to restrict its diversification in the huge segment of superstore. The consequences were inevitable, as unfair accounting policies and financial management system of Tesco Plc have resulted in loss of trust of shareholders and investors. Coupled with this, the horsemeat incident happened in the same year. As a result, Tesco Plc has experienced a significant decline in net income, which has hindered its ability to distribute dividends to the shareholders from 2015. However, due to the brand image, Tesco Plc has managed to win the trust of the shareholders and customers, as net income has shown positive figures in 2016.
The objective of the current essay was to analyse the strategies and changes in the strategic decision of Tesco Company over the past ten years. These changes for the company will be evaluated through analysing the modifications conducted by the company in strategic leadership, culture, structure along with market forces and environment. From the analysis it was gathered that the company has transformed its culture with years to ensure increased implementation of technological improvement and innovation implementation within the provision of service and it has efficiently enhanced the effectiveness of the workforce. Over the past ten years, the company has developed effective marketing strategies to attain marketing objectives such as short-term profit maximization and long-term perspectives and enhancing value of the company’s brand image.
Moreover, over the past ten years, the company has successfully attained superior market position within the retail industry and has considerably developed effective strategies of expanding in international markets, shifting to “high-margin” non-food sector and sustaining strong base in UK retail industry. Additionally, in ensuring effective operations management, Tesco Company considers employing its resources to have significant impact on the company’s business. There has been number of innovative developments within operations management that have intended to make use of Tesco Company’s resources in a better manner for making an effective and huge change in the performance.
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