Tesco Nature Scope And Purpose Of Strategic Management

Tesco Nature Scope And Purpose Of strategic ManagementINTRODUCTIONTesco started as a unmatchable-man barter in Londons East End. Tesco was founded by Jack Cohen, son of a Polish Jewish tailor. He sold groceries in the marts of the East End from 1919.The Tesco brand prototypical appeargond in 1924. The recognize derived after Jack Cohen bought a gigantic lading of tea from T.E. Stock good (formerly Messrs Torring and Stockwell of Mincing Lane), he made vernal labels by utilize the out offshoot three letter of the suppliers name and the first deuce letters of his surname forming the word TESCO.The first Tesco store was opened in 1929 in Burnt Oak, Edgw be, and London. The firm was floated on the London Stock Ex form on 23 December 1947. The first Tesco self- military service store opened in 1948 in St Albans and is still trading in 2006 as a Tesco thermionic tube store.The first Tesco super food market was opened in 1956 in a converted plastic film in Maldon, Essex.Tescos fir st superstore was opened in 1968 in Crawley, West Sussex. The host began selling petrol in 1974 and its annual disorder reached ane whizz thousand million tuckers in 1979. Also In 1975 Tesco opened one of its first Hypermarkets in Irlam. The first Hypermarket under the Extra name opened in 1997. expansionIn 1994, the comp any took e verywhere the Scottish supermarket chain William Low. Tesco triumphfully fought hit Sainsburys for control of the Dundee-based firm, which operated 57 stores north of the border, paving the way for Tesco to expand its weakened presence in Scotland. To the present day, Tesco has based its Scottish headquarters at the former Wm. Low offices in Dundee. From sm each(prenominal) beginnings in Scotland Inverness was recently mark as Tescotown, since an estimated 50p in every 1 spent on nourishment is believed to be spent in the three Tesco stores at bottom the city. (Nation utter(a)lyy, it is estimated that 1 in every 8 is the proportion spent) It introduced a truth card mark Clubcard in 1995 and later an Internet shopping service.During the 1990s it expanded into interchange Europe, Ireland and East Asia. In July 2001 it became studyd in pay grocery store sell in the USA when it obtained a 35% adventure in GroceryWorks. In October 2003 it launched a UK telecoms di quite a little, comprising of mobile and home phone services, to complement its existing network service pop the questionr line. In August 2004, it also launched a broadband service.NATURE, SCOPE AND PURPOSE OF STRATEGIC MANAGEMENTNATURETesco opened its first store in Edgw atomic number 18, North London in 1929.It is founded by bathroom Cohen and T. E. Stockwell. Tesco mainly use strategies to build customer loyalty. It reached the billion pound turn over in 1979.It became the first UK business to reach 2 billion pound and became the largest seller in UK.STRATEGYAccording to Johnson and Scholes outline is defined asthe direction and scope of a n government activity over the large term which achieves service for the portray finished it configuration of resources inwardly a changing enviroment,to figure the needs of markets and to fulfil stakeholder expectations.Tescos growth over the last two or three decades has involved a transformation of its organization and image. Its initial success was based on the push-down store it high, sell it cheap approach of the off send away Jack Cohen. The dis profit of this was that the stores had a poor image with middle-class customers. In the late 1970s Tescos brand image was so negative that consultants aw ar the company to change the name of its stores. It did not accept this advice, yet by early 2005 it was the largest retailer in the United Kingdom, with a 29.0% sh ar of the grocery market according to retail analysts TNS Super Panel, comp bed to the 16.8% share of ASDA and 15.6% share of third-placed Sainsburys, which had been the market leader until it was overtak en by Tesco in 1995.Key to success centering on customers.Focus heavily on mensurate for money.Finest and unkept wrong. cell nucleus UK business.Non-food business. sell services. internationalistic Expansion.SCOPEAccording to Mintzberg and Quinn there are five definitions if dodgeStrategy as a planStrategy as a patternStrategy as a positionStrategy as a perspectiveStrategy as a ployTescos growth over the last two or three decades has involved a transformation of its system and image. Its initial success was based on the Pile it high, sell it cheap approach of the founder Jack Cohen.Levels of readying intend of strategy in any disposal is categorised into three levels evanesce level planning this is done by the pop off management and is termed as strategic planning. It is a long rank planning and is linked to long range goals.Second level planningThis is carried out by senior executives and is termed as tactical planning. The plans are devised to achieve the brass instrume nts main objectives. The long-range plans of the organisation are discussion sectioned and are oriented to functions and departments.Third level planningThis is the concern of the departmental managers and supervisors and is c solelyed activity planning or operational planning. It is hold in to short term activities and also individual assignments and establishes performance of the organisation.Corporate strategyIt is concerned with the overall use of goods and services and scope of the business to meet stake holder expectations.It is often demoed as military com flush record of the organisation.The companys mission statement reads, Our core determination is, To create value for customers to earn their spirit loyalty. We deliver this through our values, No-one tries harder for customers, and Treat people how we give care to be continueed. The cardinal aim is of course to make higher profits, but there is a clear focus on customer service at the top level of the company.Bu siness strategyIt is concerned with how a business competes successfully in a particular market.Tescos business strategy is toExpand abroadMaintain a strong uk businessExpand into non-food merchandise working(a) strategyIt is concerned with the trading operations to deliver the corporate and business strategy of the organisation.Tesco has its every little helps strategy to make both its employees and customers happy slice achieving the organisational goals.PURPOSETesco adopts its strategy with a core purpose to create value for customers to earn their lifetime loyalty. This is expressed as two reveal values.No one tries harder for customersTreat people as we like to be treated.Tesco positions all its resources with a purpose to satisfy this strategy plot of land achieving its organisational goals.PROCESS FOR create STRATEGIC MANAGEMENTWhile the corporate strategy of an organisation sets the objectives for diametrical businesses business strategy deals with individual sections of the overall business and the operational strategy directs and determines each function of the organisation.The process of business strategy of Tesco bear be outlined asStating and under stand firming The Companys vision.Stating and understanding The Companys mission.Analysing the business purlieu.Crafting and evaluation of strategy.Implementation, supervise and control.VISIONTescos vision can be clearly understood in the statement of its CEO Terry Leahy we digest got only 5% of the non-food market in Britain, we have got only 6% of the convenience market and we have got only 2-3% of the banking market In all these examples we could be much bigger.This statement clearly presents the idea where Tesco wants to be in the rising.MISSIONA mission statement spells out the central purpose and shared values of a business organisation.Mission of Tesco is To create value for customers to earn their lifetime loyalty which is delivered through two key values no one tries harder for cust omers and treat people how they like to be treated.ANALYSIS OF THE BUSINESS ENVIRONMENTFor the saying of strategy, it is necessary to disassemble the organisational milieu. These would include political, economic, social and technological factors.According to Johnson and ScholesManagers represent difficulties in trying to understand the environment. First, the environment encapsulates many different lures the barrier is making sense of this diversity in a way which can contribute to strategic decision making.A simple compend of the business environment so Tesco involves three looking atsAnalysing Internal capabilities and resources(core competencies)Analysing external environment by chap AnalysisAnalysing the agonistical environment by Porters five forcesCore CompetenciesCore competences relate to those resources and capabilities if the firm which enable toAttain a competitory edge in the marketAccording to Johnson and Scholes core competencies create and go the ability to meet the critical success factors of particular customer groups best than former(a) providers in ways that are difficult to feign.Tesco identifies core competencies by three factorsCreation of new products and services which provides potential rise to power to a wide variety of markets.Skill which makes a significant contribution to the perceived customer benefits of the end product.competitive unique skills which are difficult for competitors to imitate bloke ANALYSISThe external environment of an organisation is analysed by PEST analysis. It helps to identify the key changes that are taking place around the organisation and which square up it in the futurity.A PEST Analysis looks at semipolitical FactorsEconomic factorsSocial factors expert factorsThe fol showtimeing is the PEST Analysis for Tesco policy-making FactorsRisks of potential rival fit out enquiryGM- FoodEU competition legalityEconomic FactorsIntensive hurt competition between the large supermarkets hail of products keep falling because of strengthening buying office facultySocio pagan factors constitutive(a) foods and drinkCustomer concerns about GM food, allergies and additivesAnimal welfare policiesEnvironmental policies and practicesTechnological Factors radiocommunication Frequency identity technology in operation of its preparation chainRadio barcode technology for tagging cases.Self service check-out system.PORTERS FIVE FORCESPorters five forces are used to analyse the external environment of an organisation and to determine the attractiveness of the market. The five forces areThe bargaining power of customersThe bargaining power of suppliersThe menace of new entrantsThe threat of substitute productsThe vividness of competitive rivalryBargaining power of customersThe buying power of customers whitethorn enchant Tesco to force prices down.This whitethorn lead to competition where the some other rivals whitethorn also bring down the prices.Tesco should take the custome r loyalty to taking into custody them from drifting to others.Bargaining power of suppliersDemand of suppliers to pay high prices for their well-nighs. Recently, the hullabaloo by the dairy farmers to get high price for milk is an example. scarcely market giants like Tesco has an overwhelming advantage over their suppliers where they dictate the price they pay their suppliers.Threat of new entrantsSupermarket chains like Tesco manage the threat of new entrants by imposing barriers to entry.This is achieved by paying high price to suppliers and buying large volumes of goods. This makes Tesco to sum up goods at cheaper prices to its customers where it corners the new entrants.Tesco also has the advantage of economies of scale.Threat of substitute productsTesco faces the threat of cutting down the prices of groceries and goods by other giants like Asda and Sainsbury. This may lead to lowering of prices where the buyer gets an advantage.Intensity of competitive rivalryRetail indust ry is the one where the profit margins are low and the competition is high.According to classical economics, rivalry between companies should drive profits to zero.All the above mentioned factors preserve the intensity of competition for Tesco.Asda, Sainsburys, Morrisons and others with their expansion plans and strategies are making the competition tough. Their disciplined approach towards prices setting is preventing the destruction in profit war.Environmental evaluation of TescoThe environmental audit is reliant on the monitoring activity undertaken by the organisation. It includesMarket experienceLargest supermarket chain with a market capitalisation of 26.037bnNew strategies for mergers and expansion plans to USEffective and low pricesContinuous monitoring and direct information on the sales figures in storesEfficient maintenance of customer loyalty.Technical intelligenceRFID technology for supply chain managementEPOs and Bar-coding technologyExtension of RFID technology for tagging the cases through out the supply chain by 2007.Effective implementation of one in front policy at the tills to satisfy the customers.Acquisition intelligenceDecision of receding from the bid to takeover Safeway.Expansion plans for US separate issuesConvenience stores according to the needs of the peopleDecisions regarding the environmental issuesCrafting a strategyBy considering the above factors Tesco clearly crafted a strategy that keeps it in the ahead(p) position in all the aspectsThe selected strategy of Tesco isTo provide all the customers with minute value and choice in UK business which is its biggest market and where Tesco enjoys top slot.Having a six element approach to be an international retailer while focusing on satisfaction of needs of the different local customers.samara FACTORS FOR DEVELOPING STRATEGYThe key factors for an organisation are those which exist within an environment and may generate a need for change. These are triggers for change in the organ isation. The following(a) is a shortened description of the key factors which may lead to strategic change inTesco.EXTERNAL ENVIRONMENTAL FACTORS large environmental analysis increases sentience of the relevant environmental changes at managerial level. This enhances strategic planning.Macro environmental analysis further focuses attention on the primary influences of strategic change and provides anticipation to opportunities and carefully develops responses to change.The following are the external environmental factors which pose challenges to Tesco full(prenominal) energy be luxuriously recovery courtsImproving position of competitorsRisks of the potential competition commission enquiryGrowing cautiousness among consumersSTAKEHOLDERSStakeholders can be defined as As those individual actors and parties, organisations and professions and institutions that have a bearing on the demeanor of the organisation as revealed in its policies and actions on the environment.Stakeholders can be separate into two categoriesThose view the organisation externallyThose have an internal affaireExternal stakeholders for Tesco are competitiors, customers, suppliers, shareholders government departments etc.They judge the efficiency and try to influence its activities. So Tesco invariably determines the outputs required by the stakeholders.Internal stakeholders for Tesco are the owners, managers and employees. In large companies like Tesco there are thousands of shareholders who have a vested enliven in the success of the business.MEDIAMedia plays a very all important(p) role in an organisations strategy. It works in two waysInterest in the success of the organisation and its subsequent positive feedbackInterest in the proposed schoolingsTesco notifies well that the influence of effective public relations on the opinions of a wide range of groups will enhance the likelihood of success for its strategy. So it always maintains good relations with the media. Tescos media centre contain the modish news releases, images and briefing notes. Their latest TV ad campaign can also be viewed from their characterization library. The media people can also access to their media centre for easy access to the latest developments.LEGALOrganisations need to anticipate and prepare themselves for changes in sanctioned procedures. The potential competition commission enquiry and other regulations are important court-ordered factors which can influence retail sector now.Tesco has all the legal resources which enables it to respond to such changes well in advance and as a part of its developing strategy.ETHICALThese are the moral principles that should govern gentleman relations and conduct. These are very important esteems in formulating strategy which involve subjective personal feelings about human behaviour. Tesco identifies as one of the key factors in its strategy and accepts this with enthusiasm and commitment.EDUCATIONALIn the present business scenario, the capacity to transmit knowledge through devices as the internet has mystify formidable. The most important and interesting aspect of the improvement in fostering and subsequent growth of knowledge has been the increasing professionalism of workforces in an organisation. Tesco understand this well and implements it in the improvement of skills of its human resources. It conducts training programmes a least two times a year.POLITICALPolitical factors generally effect the organisation in two ways. One driven by the government pr by the multinational political initiatives and another concerned with the political shifts within the particular business environment.INTERNAL ENVIRONMENTAL FACTORSThe following are the factors that are instrumental to the internal environment of Tesco.Organisational policyThe mission statement of an organisation sets out the purpose of a business The mission statement of an organisation is refined over the time to reflect the developed or compound capabi lities of the business .The following are the purpose statements for Tesco which gives a clear draw of its policyScope of an organisations activities is a fundamental element of strategy. Tescos scope relates to the point of the market into which it sells its products and services. It is already the largest retailer in UK and is planning to expand to US .It has already wide markets in Europe and Asia.A key consideration for a firm is to identify what areas of activity to pursue in its markets. Tesco targets customers of all ages with its products and services ranging from food, household products and retail to insurance and personal finance.An important aspect of strategy is for a company to identify the positions held by their products and services in the market place. Tesco has already built a very strong businesses over the time with very strong market positions. Each and every one of them has huge potential for further growth.Human resourcesTesco is the largest private sector employer in UK. Tesco is the largest private sector employer in UK. It employs 250,000 staff alone in the UK and 367,000 staff worldwide.It has 2365 stores all over the world. Tesco employs about 11,000 employees every year.It recruits about 80 to cl graduates each year to two training schemes one store and one office based. It recruits by in-store advertising, events in local areas. and recommendationsFrom existing employees through an employee referral scheme. These employees are the need for effective communication in the field of management.Financial resourcesAs per the statistics of 2006 Tesco is the fourth largest retailer in the world. Its market capitalisation was 26.035 billion which was the largest of any retailer based outside the united states. Tesco also has got tremendous home portfolio. It does its own development and owns about 85 of all its assets around the world. And always Tesco invests a lot in its situation. According to company authorities over the next five years its property value will be 5 billion and still be a predominantly freehold property company.All these factors are described as the key factors for TescoDEVELOPMENT AND evaluation OF STRATEGIC OPTIONSStrategy whether developed for a whole organisation or for an run department or a team follows the same build process .Its central concern is to create a long-term vision of where we want to be or what we would like to become .Strategy that an organisation adopts should be feasible and practicable. Its pulling power is extremely important to survive in the tough competitive environment where an organisation operates .The art of strategic development involves a set of sophisticated tools to facilitate the process.The following is a brief context of different strategic options for TESCO and their evaluation.PEST ANALYSISTo develop a strategy for an organisation to assure its long-term effectiveness it should carry an analysis about its future. For this PEST Analysis is the best t ool. It carries analysis of four or six major factors which can effect the organisation in future .TESCO which is the largest player in retail sector carries PEST Analysis to analyse the external factors which may affect in the future .The following is the PEST Analysis for TESCOPolitical and legal considerationsRisks of potential commission enquiryTESCO may face the run a risk of the potential commission enquiry in future which aims to curb the unhealthy competition in the retail sector.GM-FoodWith increasing awareness in the consumers all over the world TESCO may face the risk with Green peace workers regarding the labelling of genetically modified foods. .EU Competition LawEU Competition Law constituted to regulate monopoly power may impact TESCO and its expansion in the European Union in the near future.Economic considerationsIntensive price competition between the large supermarketsCost of products keep falling because of strengthening buying powerSocial FactorsOrganic foods a nd drinkConsumers growing concerns about the organic food and drinks may influence in near futureCustomer concerns about GM food, allergies and additivesWith growing cautiousness and discontent about the GM food and use of hypersensitised causing agents and additives in the manufacture of food may show impactAnimal welfare policiesAnimal welfare policies which oppose the testing of the products on animalsEnvironmental policies and practicesGreen peace workers and changing concerns about environmental issues.Technological FactorsRadio Frequency identity technology in operation of its supply chainUse of RFID technology in its supply chain helps TESCO to expeditiously carry its operations and maintain its position.Radio barcode Technology for tagging cases.Use of Radio barcode Technology to tag the cases and extending this technique to the entire chain by the end of 2007 will show an impact on operations in TESCO.self-service checkout systemSWOT AnalysisIT is a commonly used tool .It s main purpose is to locate the organisation in its operating environment and try to assess its internal and external capabilities and vulnerabilities. SWOT stand for strengths, weaknesses, opportunities and threats. Strengths are internal and opportunities are environmental. Similarly weaknesses are internal and threats are environmental. The following is the SWOT analysis for TESCOStrengthsThese are the strengths of TESCOTESCO s Brand nameLoyal customersLargest player in the retail sectorWell completed supply chainExcellent ware housing capabilityLargest online grocer long store locationsSkilled work forceClub card scheme for enhancing customer loyalty.WeaknessesThese are the weaknesses of TESCOVast usage of fossil fuel in transport chain and super market heating systemsLack of integrating between departments at certain timesOpportunitiesThese are the opportunities where TESCO can search in futureImproving customer relationshipsReal growth probability for grocery retailing in the newly enlarged European Union. change magnitude sales through better integration of high street and internet resourcesThreatsThese are the threats that might affect TESCO in the future.High energy costsIncreasing taxes on retail itemsExpansion of low cost supermarkets like LIDL.Recovering competitions like Sainsburys and Morrisons.A weakening economyAn increase in unemploymentPORTERS GENERIC STRATEGIESAfter establishing the strengths and weaknesses of the organisation and analysing the competitive environment, we have to establish the generic strategy of the organisation.No set of the strategic tools will be complete without a look at Michael porters generic strategies. Porter advocates, Gaining and maintaining competitive advantageThe three generic strategies of Porter areDifferentiationThis is a strategy where the organisation offers a product or service which is unique compared with those of its competitors .This eminence must be known to at least a segment of the market.Cos t LeadershipThis is a strategy where the organisation enables itself to provide the products or services at a cost less than any other competitive organisation. It is the ability the organisation has to price below competitors if and when it needs so.FocusThis is a strategy where the organisation targets its products or services at a given sector of the market with great accuracy and with a perspicaciousness of capability and knowledge to support its position in the sector.In the retail sector with a very low profit margin the environment is hypercompetitive .TESCO creation the largest player adopts the Cost Leadership strategy to challenge its competitors. TESCO has all the capabilities to adapt to this strategy. It develops its internal resources and its core competencies to support this strategy.In addition to these a number of generic strategies have emerged to define the modern organisation .The following is a list of the strategies.Reducing cost baseImproving timberlandGett ing closer to the customerShorter cycle timesStrategic partnerships index to change fastOf the above mentioned generic strategies, TESCO adopts the followingReducing cost baseTo cut down the expenses and to increase productivity and efficiency, TESCO adopts this strategy to face the challenges of price war with its competitors, high property costs a and to provide value based products to the customers.Improving qualityTESCO always concentrates on improving quality to rule the existing markets. It adopts new techniques and softwares both in the logistics and in-store operations to consistently serve the customers.Getting closer to the customerCustomers are whimsical, customers are fickle, customers are not loyal. The ability to anticipate this fickleness is a strategic strength.TESCO understands this well and introduced club card schemes which helps TESCO to have millions of loyal customers.THE ANSOFF MATRIXThis is a classic model in strategy building .Its main purpose is to analyse the organisations approaches to its products and to its market to ensure that an appropriate marketing strategy is being pursued .The following is the An off intercellular substance for TESCO modern products New productsCurrentmarketsMarket penetrationImproving servicesImproving quality overlap developmentExpand own brands like The Finest and TESCO Value.Expansion into non-food sectorAdding new products to the existing product lineNewmarketsMarket developmentInternational expansion and globalisation plaza shoppingDeveloping small express storesDiversificationNew servicesUsing the Ansoff hyaloplasm in colligation with the BCG matrix, TESCO conducts a useful review of its strategy to achieve its vision.EVALUATIONThe BCG matrixThe Boston Consulting Group matrix is a valuable tool .Its purpose is to analyse the organisations product portfolio. The definitions used in the BCG matrix are very precisely expressed in terms of the generation and use of cash. This makes this matrix a shar p-edged tool. the following are the definitions used in BCG matrixStarsThese are the products that are performing well .They are generating positive cash and they ordinarily require continuous update to maintain their market share.ProblemsThese are the products which are not performing and not generating sufficient cash to maintain them in their markets.Cash cowsThese are the products which are performing well in markets which are growing easily or are static. They are believably generating more money that can be profitably invested in them.DogsThey have low market share in markets which are growing slowly or are static. They may be consuming more resources to maintain their availability. They need quick decisions.The following is the BCG matrix for TescoMarket shareHigh lowStarOn-line shoppingOrganic foodsLoyalty cardsNon-grocery itemsNew servicesProblemsOn-line shopping with demographic analysisHome delivery of productsCash cowsCash cowsBranded produ