Evaluating Component Parts Of Strategic Plan Marketing Essay

Introduction

This assignment is aimed to review the strategic aims and objectives, analyze progress towards the achievement and evaluation of the alternatives for an organization. For this purpose the organization I have selected is Tesco. Having operations in more than 14 countries, Tesco is the world’s 4th largest and the leading retail and grocery store chain in United Kingdome. Tesco is competing hard in the global market with the other big giants such as WALMART and ASDA. However, in United Kingdome its competition is with Morison, ASDA and Sainsbury. The company has more than 470,000 employees all across the world and the major purpose of the success of the organization is its corporate vision (O’Reilly, 2009).

1.1 Strategic Aims and Objectives

Before going in to the detail of the aims and objectives of Tesco, it is very important to understand some major characteristics of the aims and objectives for an organization

Measureable – The objectives which are set by an organization should be measureable (Fred, 2007). It is not necessary that the measure should be in count rather is can be achievement of certain target for instance to provide the customers a free home delivery service.

Achievable – The objectives should be achievable. Even if the objectives are humanly achievable but it should be achievable considering the current resources and the time duration (Ritson, 2009).

Realistic – The objectives should be realistic. Setting nonrealistic objectives leads the organization towards the wastage of time without any result (Fred, 2007).

The corporate value of Tesco Plc., as also given on their official website is to “create value for customer to earn lifetime loyalty”. This statement indicates that the company focuses majorly on customer satisfaction in order create long term profitable relationship (Datamonitor Report, 2003). The retail store chain does not believes in one time sale and earn the huge profits at the beginning, rather it is aimed to build strong and loyal bond with the customer to ensure long term profits. Tesco provides their customer value for their money which results in the achievement of customer satisfaction.

Moreover, the company also focuses on customer services as it is the major factor in achievement of customer’s satisfaction. The company offers the products to the customers with highly competitive process with the quality customer services (Datamonitor Report, 2003). This proves to be profitable for the company and also pleases the shareholders attaining the actual objectives of all profit seeking organizations. Following are the major objectives of the Tesco:

To be a successful International Retailer

To grow the core UK Business

To be as strong in non-food arena as the food arena

To develop retailing services such as Tesco.com, Telecom and Tesco Personal Finance

To put community at the heart of what they do

1.2 Evaluating Component Parts of Strategic Plan

Strategic plan of an organization contains its desired place or position in the future. Broadly there are three main sections of a strategic plan i.e. Strategy formulation, Strategy Implementation and Strategy Evaluation. These three sections contain the following component parts of a strategic plan.

1.2.1 Vision and Mission Statement

Many organizations develop both vision and mission statement. Vision statement answers the question what an organization want to become whereas the mission statement answers the question what is the business of the organization (Fred, 2007). Vision statement articulates the future of an organization and the community that it serves and mission statement contains the current business of the organization, its products or services, values, markets, philosophy, self-concept, concern for public image and concern for employees (Pearce & Robinson, 2006). An effective mission statement must contain the following attributes:

A declaration of attitude

A customer Orientation

A declaration of Social Policy

1.2.2 External Audit/assessment

In external audit a finite list of those opportunities are developed that could benefit a form and threat that should be avoided. The term finite suggest that external audit or assessment is not aimed to develop an exhaustive list of every possible factor that could influence the business; rather, it is aimed at identifying key variables that offer actionable responses. Organization should be able to respond offensively or defensively to the factors by formulating strategies that take advantage of external opportunities or that minimize the impact of potential threat (Ritson, 2009). Following is the division of key external forces that is assessed in strategic plan:

Economic Forces

Social, cultural, demographic and environmental forces

Political, governmental and legal forces

Technological forces

Competitive forces

1.2.3 Internal audit/assessment

No organization is equally strong or weak in all areas. In this section of strategic plan, the internal strengths and weaknesses are analyzed. The objectives and strategies are established with the intention of capitalizing upon internal strengths and overcoming weaknesses (Fred, 2007). The strengths of an organization which cannot match or imitated by competitors are called Distinctive Competencies.

1.2.4 Long-term objectives

Long term objectives of organization are set by defining timeline for each objective such as growth in assets, growth in sales, increase in market share etc. Long term objectives provide the direction and the basis for the selection of strategies (Fred, 2007). Without long term objectives, an organization would drift aimlessly towards some unknown end.

1.2.5 Evaluation and selection of strategies

This section of strategic plan focuses on generating and evaluating alternative strategies as well as selection strategies to peruse. Strategy analysis and choice seek to determine alternative courses of action that could best enable the firm to achieve its mission and objectives (Maches, 2010). The firm’s present strategies, objectives, and mission, coupled with the external and internal audit information, provide a basis for generating and evaluating feasible alternative strategies (Howard, 2010).

1.2.6 Implementation of Strategies

This section translates the strategic thought in to strategic action. A course of action is developed to implement the selected strategies, to shift the responsibility from strategists to divisional or functional managers.

1.2.7 Strategy Evaluation

In this section the action plan is developed to control and evaluate progress after strategy implementation. Three basic activities are involved in strategy evaluation i.e.

Examining the underline bases of organization’s strategy

Comparing expected results with actual results

Taking corrective action to ensure that performance conforms to plans

1.3 Factors Affecting Strategic Plan of Tesco

There are several factors which can affect positively and negatively on Tesco’s strategic plan. In the following discussion some of the factors affecting a strategic plan of Tesco are evaluated.

1.3.1 Technology Changes

This area is not in the control of the company, as vendors are always going to upgrade and enhance their products which can affect the strategic plan.

1.3.2 Company Management

The mind set or vision of management of Tesco also affects the strategic plan. If the management thinks that it is the time to penetrate in the market then the strategic plan will be aggressive and vice versa (Maches, 2010).

1.3.3 Financial Constraints

Financial aspects are always required to be considered before developing any business plan. All the strategic plans are not able to fulfill the business requirements 100 percent due to budgetary issues.

1.3.4 Regulatory Environment

The change in government policies, procedures and laws also affects the strategic plan (Maches, 2010). In case of some changes in regulations, Tesco has to change their strategic plans.

1.3.5 Competitors

Competitors also play a very important rule in the strategic plan of organization. Tesco has several competitors such as WALMART, ASDA, Sainsbury, so the change in tactics by such competitors requires and immediate responsive change in the strategic plans of the company.

2.1 Audit of Progress towards Strategic Aims and Objectives

Setting strategic aims and objectives and implementing them does not ensure the success from the strategic planning. A continuous evaluation process should be done during the whole tenure for which the strategic objectives are set. Following are some of the strategic tools which can be used anytime to evaluate the progress towards strategic aims and objectives.

2.1.1 IFE Matrix (Internal Factors Evaluation)

IFE matrix is one of the best strategic tools, which is used to evaluate the internal position of organization at any point of time (Adam, 2009). This strategic tool can be used before the development of strategic plan and also at the specified time period to evaluate the progress towards strategic aims and objectives. Table 1 shows the assessment of internal factors and their progress towards strategic aims and objectives of Tesco Plc.

Table 1 IFE Matrix for Tesco

Key Internal Factors

Weight

Rating

Weight Score

Strengths

Market Share

15%

4

0.6

Consistent Performance

10%

3

0.3

Expansion Plans

10%

2

0.2

Diversification

10%

4

0.4

Brand Value

5%

3

0.15

Customer Services

5%

3

0.15

Weaknesses

Bad Debts

10%

1

0.1

Low Profit Margins

15%

2

0.3

Dependence in UK Market

15%

2

0.3

Standardized Rules

5%

1

0.05

Total Weighted Score

100%

 

2.55

2.1.2 EFE Matrix (External Factors Evaluation)

Similar to IFE matric, EFE matric is used to evaluate the external factors affecting the strategic plan of an organization. The external factors of Tesco are accessed below in table 2, which shows their progress towards strategic aims and objectives.

Table 2 EFE Matrix for Tesco

Key External Factors

Weight

Rating

Weight Score

Opportunities

UK Market Leader

20%

4

0.8

Entry in Asian Market

10%

1

0.1

Entry in Middle East Market

10%

1

0.1

Tesco Health & Beauty

5%

2

0.1

Threats

Global Recession

10%

2

0.2

Growing cost

10%

2

0.2

Exchange rate fluctuations

5%

1

0.05

WALMART/ASDA Challenge

15%

3

0.45

International Expansion

15%

3

0.45

Total Weighted Score

100%

 

2.45

2.1.3 Balanced Score Card

Balanced Score Card is another strategic tool to evaluate the firm’s strategy from different perspectives. For Tesco, strategies are evaluated from five different perspectives (Fred, 2007). Below balance score card (table 3) elaborates the objectives categorized in five different areas.

Table 3 Balanced Score Card for Tesco

Area of Objectives

Measures

Targets

Customer

Increase customers Satisfaction

Customer Satisfaction

% Increase

Increased Referrals

Referral Rate

% Increase

Increased Frequency

Frequency

% Increase

People

Increase skills

Training

% increase

Finance

Increase customers

# of customers

% Increase

Increased Sales Frequency

Frequency of sales

% Increase

New Revenue

New Product Revenue

% Increase

Operations

Reduce cost of goods sold

Cost of waste and Rework

% reduction

Reduce cycle time

Cycle time

% reduction

Reduce defects/complaints

Units per million

% reduction

Community

Cutting Energy

Unit consumed per square foot

% reduction

Ensure good neighbor-hood

–

–

2.2 Tesco Stakeholders and their Influence

The term stakeholder refers to the part that can affect and can be affected by the operations, decisions and strategies of the organization (Junnarkar, 2010). Following discussion evaluates that how the four major stakeholders can influence the organizational strategy of Tesco.

2.2.1 Customers

Tesco is one of those organizations who treat their customers with the best possible way. The company’s customer services are the benchmark for the other organizations seeking for quality customer services. The organizational strategies of the company are customer focused and fulfills the needs and demands of the customers (Haydor, 2007). For instance there are customers who want to shop late night after the working hours, so for that purpose Tesco adapted a strategy to increase their outlets by the name of Tesco Extra, which are open 24 hours a day.

2.2.2 Employees

To provide the best quality products and customer services, Tesco need the support of their employees. Employees are treated as the business partner and are involved in defining the organizational strategies. Employees can give their feedback and put forward the innovative ideas to improve the standard of services offered to the customers. Employee involvement is practices in Tesco, which motivates the employees and they put their best efforts towards the success of the company (Haydor, 2007). In this way this major stakeholder influences the Tesco organizational strategy.

2.2.3 Shareholders

One of the most important and the major stakeholders are the investors and shareholders. Their main concern is the return on investment, profit and increase in value of investment. Tesco have to plan the strategies in way that these three objectives are met. In order to keep the investors and shareholders intact with the organization, such strategies are required to be developed which meet shareholder’s objectives (Haydor, 2007).

2.2.4 Suppliers

Suppliers are another important stakeholder of Tesco. Tesco have to consider the bargaining power of suppliers, as if it is at higher side then the company have to change its strategies. Backward integration might be a good option in such scenario. On the other hand if the bargaining power of supplier is low, which is currently the case then Tesco have to design strategies which are supplier friendly as to develop long term relationship with the organization (Curtice, 2010).

2.3 Tesco’s Strategic Position

Strategic position of an organization can be evaluated by using a range of strategic tools which analyses the current position and also the future prospects of the company. Tesco is the leading retail store chain of the Great Briton and the fourth largest in the world. To evaluate the strategic position of Tesco Ansoff Matrix and Porter Five Forces Analysis is conducted.

2.3.1 Ansoff Matrix analysis

Ansoof Matrix is a strategic tool that evaluates the products and market position of the company. Table 4, shows the Ansoff Matrix analysis of Tesco.

Table 4 Ansoff Matrix analysis of Tesco

Existing Markets

Existing Products

New Products

Market Penetration

Introduction of new products

Improved Services and Product quality

Branding “Tesco Value” on products

Introduction of Loyalty Program (Tesco Card)

Advertisement/Repositioning

New Markets

Market Development

Diversification

Online shopping (Tesco.com)

Tesco financial services

Introduction of Self-Check Out

Introduction of Tesco Mobiles & Tesco broadband

Targeting different groups

2.3.2 Porter Five Forces Analysis

Porter five forces look at different external factors which affect the organization and show the position of the organization against those factors or forces. Porter five forces analysis of Tesco is discussed below.

Bargaining Power of Buyers – The customers have the other options such as ASDA, Morrison and Sainsbury, still the bargaining power of Tesco customers is moderate as the low prices of Tesco enables the company to attract the customers.

Bargaining Power of Suppliers – The bargaining power of the suppliers of huge brand names such as Tesco is usually low. The suppliers want their products to be placed at the shelves of Tesco.

Threat of Substitutes – The competitors can offer the products which are substitutes of the products offered by Tesco, and that can reduce the revenue of the company.

Barrier of Entry – Entry in the retail grocery store chain is not easy in UK market. The big fishes operating in the market are itself a barrier of entry.

Degree of Rivalry – Some economist believes that degree of rivalry can lead towards zero profits. Tesco is leading the UK market and its main competitors are big brand names such as ASDA, Sainsbury and Morrison. Rivalry among these organizations is fierce, but still Tesco hold a handsome market share.

2.3.3 Future Outlook of Tesco

With the past experiences and expertise, Tesco’s strategists considers the following aspects before developing strategies.

Steady Growth – Tesco is an organization which does not repeat the mistakes done in the past. After selling 100 Catteau stores to Promodes on loss in northern France (Datamonitor Report, 2003), Tesco focus is to grow steadily.

Starting from Small – Tesco start new venture with full sensibility and responsibility and at a smaller scale, and launches at larger scale if successful.

Focus on Learning – A culture of learning is practiced inside the organization and this culture reflects the Tesco’s organizational strategies.

Go Local – Managing director of food retail store at Citigroup have pointed out the key to Tesco’s success international market is that the company uses a local scale rather global (Datamonitor Report, 2003). This includes the local management, local sources, local products and local workforce.

3.1 Strategic Options available to Tesco

Strategic options are creative alternative action-oriented responses to the external situation that an organization (or group of organizations) faces. Strategic options take advantage of facts and actors, trends, opportunities and threat of the outside world. Strategic options can be identified after an institutional assessment, keeping in mind the aspirations (basic question) of an organization (Pearce & Robinson, 2006). The tool ‘Strategic options’ helps to identify and make a preliminary screening of alternative strategic options or perspectives. Following two strategic options are available to Tesco.

3.1.1 Cost Leadership

Cost leadership strategy refers to that when an organization is offering the same products and services as that of competitors, but at lower cost (Ritson, 2009). Tesco can use this strategy by controlling the operating cost which will enable the retail store chain to increase profit margins without increasing the prices. While following this strategic option, Tesco will have to focus on enhancing the internal capabilities that will increase the ability to sustain in front of external pressure.

3.1.2 Differentiation Strategy

Under differentiation strategy the organization have to offer the products and services with unique features that give value to the customers. Tesco can further enhance the customer services level and use the technology to facilitate the customer for creating a differentiation over the competitors.

3.2 Strategic Options and Strategic aims and Objectives

As the global competition increases, a hybrid of both the strategic options available to Tesco can be used to gain the competitive advantage over the competitors. Due to the addictive benefits of integrated cost leadership and differentiation strategy, Tesco can further enhance the market share in UK as well as internal market. Differentiation will allow the company to change the premium prices in return of the unique features and on the other hand cost leadership will enable the company to offer the products and services at lower prices. Both will attract the customers and will enable the organization to be a successful Internal Retailer which was the major Strategic objective of the Tesco discussed earlier. This will also increase the profit margin and will allow the company to grow the core UK business and also focus on non-food sector.

However to be successful in implication of integrated cost leadership and differentiation strategy, Tesco will have to focus on continuously reducing the costs and adding the unique features in their services.