Strategic Management: A case study on Tesco Plc.
Strategic management is an effective planning of all the multinational corporate firms in doing their business strategically and expand the business activities across the globe more efficiently (Refer to appendix 1). Through managing strategic planning, the companies try to manage all the stakeholders and improve the organisational capabilities so that it is possible for the managers to meet the organisational objectives in long run (Rosenbaum-Elliott, Percy and Pervan, 2015). The report aims at identifying the strategic management practice in the organisation Tesco Plc, and evaluates their current position in the international retail industry. In addition to these, through this report, it is possible to analyse the sustainability of the business strategic planning of the chosen organisation as well as it further provides a scope to recommend some suitable suggestions for developing the business sustainably in near future.
Background of the organisation
Tesco Plc. is a British multinational grocery and merchandise retailer, headquartered in London. It is a reputed UK based retail chain which is successful in satisfying the customers by providing quality products and services through supermarkets, hypermarkets and superstores. Total number of employees of the organisation is approximately 476000 where they are efficient to meet the customer’s need and deliver high quality service according to the requirements of the people (Tesco Plc., 2018a). It is the third retailer in the international market measured by its profitability volume. On the other hand, by measuring the revenue, it is the ninth retailer across the globe. The main competitors of the company are Asda, Sainsbury’s, Morrison’s Lidl, Aldi etc., who are also efficient in serving the customer in innovative way with a high range of diversified products and quality services. In the last year, 2017, the company was successful in generating revenue which was £55917 million and the net income of the company in the last year was £54 million (Tesco Plc., 2018a).
The company is also proficient in serving their products and services across the globe and recently the organisation serves through more than 6809 stores across the international markets which further provides an opportunity to the company to gain high competitive advantage (Tesco Plc., 2018b). They serve million of customers every week through the online activities as well as physical stores. Innovative products and efficient services of the organisation further provide a scope to the business to secure future sustainable development. The purpose of the business is to serve the Britain’s shoppers a little better every day. The mission of the conglomerate is to be the champion for the customers by helping them to improve quality of life and ensure easier way of living. In the UK, the company is successful in serving 66 shoppers in every second and the goal of doing business of Tesco is to ensure that every customer are experiencing better service on each visit (Tesco Plc., 2018b). creativity of the employees as well as effective technological advancement in the company are helpful to meet the organisational goal where they continuously aim at maximising the values of the customers by delivering better services as per their needs and preferences (Tesco Plc., 2018c).
Current position of the company
SWOT analysis is helpful to analyse the internal strengths and weaknesses of Tesco as well as the external opportunities and threats ion the international retail industry (Refer to appendix 2).
The PESTLE analysis is useful to acknowledge the external environment of Tesco for identifying the circumstances and practices in which the company is operating their business activities (Refer to appendix 3).
Porter’s five forces analysis:
Porter’s five forces are helpful to analyse the competitive threats in the retail industry (Refer to appendix 4).
Current position of the organisation in retail market:
The sales volume of Tesco is increasing approximately by 1.3% which enhances the organisational performance and secures future sustainable development (Financial Times, 2017).
The company is successful in gaining high markets share and strengthening their customer’s base strategically (Reters, 2016). The company Tesco has higher market share in the recent years as compared to Asda and Sainsbury’s (Refer to appendix 5). The quality products of the company as well as efficient service further helps the company for successful branding and retaining more clients by developing strong relationship and loyalty with the customers (The Gurdian, 2016).
As per the above figure, the company is also successful in increasing their revenue up to £55.9 billion in the last years (Gwynn, 2017). The operating profit and net profit are also increasing which further helps the brand to expand their business across the international markets through developing effective strategic planning.
The company also has positive growth in research and development as well as investment program which further helps the managers to improve innovation and creativity to serve the customers in a unique way. The retail operating cash flow is also increasing at 9% which is approximately £2.3 billion (Neilan, 2017). Current position of the company is therefore effective to sustain in the market and secure sustainable development in near future.
In order to analyse the current position in the market and identify their strategic planning, it is useful to evaluate BCG matrix of the company Tesco (Refer to appendix 6). For market penetration, the company increases the market share with the existing products of the organisation. The company also focuses on product development strategy in order to target more customers with new variety of products (Adamkasi, 2016.). Supplying fresh food lies under the cash cows where there is high market share as well as high demand of the customers bit has limited opportunities to grow (Tesco Plc., 2018d). The clothing products and banking services of the company are in Stars with high market share and high opportunity to grow faster.
Sustainability of the current strategy
The organisation develops effective strategic planning in running the business activities strategically. In this regard, the company is at creating values for the customers through understanding customer’s needs and preferences, prioritizes the needs of the customers, taking responsibilities for the social communities as a whole. Through this strategic planning, the company tries to make the business sustainably where it is successful in creating values for the customers by delivering quality products and services at affordable price. On the other hand, the company also develops effective strategy for satisfying the employees by continuous motivation and creativity so that it is possible for them to encourage the staff members in working proficiently and giving their full potential to met the organisational objectives. The managers focus at building effective team as well as listen, support and met the objectives of the employees so that it is possible to encourage them. Providing cultural training as well as induction training for improving the skills and knowledge of the employees is also effective to encourage the staff members to work proficiently (Johnson et al., 2013).
Additionally, the organisation tries to provide appropriate salary, compensation benefits, insurance premium for any accidental cases; performance related pay as well as bonuses which are also effective to meet the requirements of the employees. These are also sustainable business strategy for retaining the employees who are the main stakeholders of the business. In addition to these, the company try to provide return on investment to the shareholders, build strong corporate relationship with the suppliers and distributors for improving business sustainability an running the organisational activities ethically. The strategy of building the team for creating values for all the stakeholders is therefore effective to make the business sustainable. Making strong brand reputation in the retail industry is also another strategy of the brand which can also be possible through managing shareholders and investors as well as improving the quality of the products and services so that it is possible to meet the customer’s requirements (Hill, Jones and Schilling, 2014).
The business sustainability can be fulfilled by the strategic planning of Tesco which further provides a scope to the company to maximise their profitability and secure future sustainable competitive advantage. The strategy of supporting the local communities and improving environmental footprint by reducing green house gas emission, increasing the use of renewable resources, mitigating the resources wastage are also sustainable business planning through which they are successful in talking care of the society and environment.
In order to evaluate the sustainability of the business planning of Tesco, the McKinsey 7s model is effective through which it is possible to analyse the current organisational strategies through which they try to run their organisational operational activities sustainably. The structure of Tesco and business system of Tesco is appropriate to run the activities systematically by handling the employees and other staff members in long run.
The transformational leadership in Tesco further helps to improve relationship among the employees and motivate them through performance related pay and other benefits. The managers continuously encourage the staff members and improve economies of scale for reducing cost of production and maximising profitability. The strategic planning of Tesco is therefore beneficial for the company to meet the requirements of all the stakeholders and create values for the society.
The company needs to focus on the strategic development through more sustainable action planning so that it is possible to target more customers and strengthens their customers as well as maximise the profitability volume of the company. In this regard, the company needs to take initiatives for reducing the issue of food waste as well as develop new products which can meet the customer’s requirements across the international markets. Moreover, the company Tesco also needs to serve quality products at affordable price as well as provides discounts to the customers so that it is possible to create values for them. Apart from that, initiatives for social development as well as charity program are also other strategic planning through which the company can make the business sustainable and improve its brand value in the international retail market. Encouraging the employee’s creativity as well as empowering them in the organisational decision making behaviour are also effective strategies for Tesco in order to increases sustainability. The company also needs to focus on more research and development for product diversification so that it is possible to serve a huge variety of products as per the customer’s requirements. Through product diversification, it is also possible for them to gain high competitive advantage as well as reduce the threats of competition in the retail industry.
The organisation must develop pension planning for the retired employees who is effective for building trust and loyalty among the employees of the company. Managing transparency and accountability as well as developing more disciplined approach for investment are also necessary for the company to make the business strategy sustainable and retain more shareholders and investors in future for brand expansion. The organisation also must focus on regulatory framework as well as business ethics for managing human right and employment laws so that it is easy for them to create values for the stakeholders engaged with the business. Tesco also needs to be concerned about the availability of their products in the outlets, supermarkets and hypermarkets so that the customers can avail them and apart from that tit also needs to be aware about economic pricing for targeting all the customers who can afford the organisational products. Hereby, through managing quality of the products as well as affordable pricing tactics, the company can improve their sustainability in near future and run the organisational activities ethically.
The company is successful in developing effective strategic planning in order to gain high market share and strengthen their customer’s base. Through product development, diversification as well as innovation and creativity, providing performance related pay to the employees and meeting the needs of all the stakeholders, the company can maximise their profitability and improving the market share in the international retail industry.
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