Analysis of the UKs largest food retailer

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Tesco is the largest food retailer in U.K, operating around 4,331 stores worldwide. Tesco operates around 2,482 stores throughout the U.K, and also operates stores in the rest of Europe and Asia. Tesco.com is a wholly-owned subsidiary offering a complete online service, including tescodirect.com and tesco.net. The company also offers a range of both online and offline personal finance services. Tesco is headquartered in Hertfordshire, U.K. It has many different type of stores Tesco extra (24 hour), Tesco super store and Tesco metro (located in town centre), Tesco express (attached to garages), Tesco Home plus (non-food store) and Tesco.com (online). The group of Tesco plc sales grocery food, non food items such as electrical goods, books, home ware, sport equipment, clothes, patrol, financial services (Life Insurance Pet Insurance Home Insurance Travel Insurance Motor Insurance Savings Accounts Personal Loans Secure Investment Bonds Online Mortgage) and telecommunications. It also provides online services through its subsidiary, Tesco.com. The U.K is the company's largest market operating under four banners: Extra, Superstore, Metro and Express. Tesco sells approximately 50,000 food products in its superstores, as well as clothing and other non-food lines. The company's own-label products are at three levels, value, normal and finest. Own brand accounts for approximately 50% of sales. As well as convenience produce, many stores have gas stations. The company has become one of Britain's largest petrol independent retailers. Other retailing services offered in the U.K include Tesco Personal Finance and online (Tesco.com). Tesco Personal Finance is a joint venture with the Royal Bank of Scotland. It has over 3.4 million customers, and provides various financial products and services. The company has operations in the rest of Europe, including the Republic of Ireland, Hungary, Poland, Czech Republic and Slovakia. Tesco Republic of Ireland business operates in the region of 82 stores, and around 60 stores in the Hungarian market. Tesco's Polish operations include former HIT operated stores. It operates around 66 hypermarkets and supermarkets in this country. In the Czech Republic and Slovakian markets, Tesco operates 22 and 23 hypermarkets respectively. Tesco also operates stores in Asia, including Thailand, South Korea, Malaysia and Taiwan. The company operates 64 stores in Thailand and 28 stores in the South Korean Market, while in the Taiwanese and Malaysian markets it has three stores in each nation.

Task-1: Construct a management strategy which you feel needs to implemented in the organization.

P-1.1. Propose a suitable structure to ensure appropriate participation in the process.

Organizing, the process of structuring human and physical resources in order to achieve organizational objectives, involves dividing tasks into jobs, identifying the appropriate department for each job, determining the optimum number of jobs in each department, and delegating authority within and among departments. One of the most critical challenges facing lodging managers today is the development of a responsive organizational structure that is committed to quality. (Ivancevich, J. Skinner, S. 1996)

The framework of jobs and departments that make-up any organization have to be directed toward achieving the organization's objectives and goals. In other words, the structure of a lodging business must be constant with its strategy. (Aldag, R and Stearns, T.1987)

Every business to be effective must have an organizational structure. Organizational structure is the form of structure that determines the hierarchy and the reporting in the organization. It is also called organizational chart as well. There are many different types of organization structures that businesses follow depending on a variety of things; it can be based on geographical regions, hierarchy or products. In simple word, an organizational structure is a plan that explains the organization of work and the systematic arrangement of work.

Types of Organizational Structures

There are many different types of organizational structures for example;

Functional Structure

In the functional structure, the workers are working in departments based on what they are doing, for example Tesco have HR department, maintenance department, research department, Faineance department, Sales department, purchasing department and Warehouse department,. This structure develops the experience of each function. For example, all the Sales team are working in the same department and thus they will exchange knowledge and support each other. This is easy structure and saves money because of the economies of scale. This functional structure also makes the coordination between different departments more difficult than other structures.

Divisional Structure

This structure divides, the employees based on the product or customer segment and geographical location. For example, each division department is responsible for certain product and has its own resources such as marketing, warehouse, finance and maintenances etc. This structure is a decentralized structure and thus allows for flexibility and quick reply to environmental changes. It also enhances innovation and differential strategies. But other hand this structure does not support and exchange knowledge between people working in the same profession because part of them is working in one division and other part are working in other divisions.

Matrix Structure

This is a structure, which is a combination of function, and divisional structures. This combines both the best structures make an efficient organizational structure. This structure is the most complex organizational structure. This structure is useful for multinational companies.

Suitable structure for strategy developed building a strategic plan and engaging in strategic planning can construct a difference, Mostly when it has a long-term focus and is used as a management tool, rather than simply being an exercise in forms completion. Strategic planning can be broken down into four chronological steps:

Market research

Strategy formulation

Planning strategy implementation

Results measurement and control

Market research to determine customer wants/needs and recognize future market trends is generally the initial step in strategic planning. Managers use the market research to define organization mission, goals and strategic plans for one, three, and five years. Organization mission statements become refined by identifying financial, market share and product mix goals. Implementation plans generally occurs through official directives and control systems that flow through divisions, sections, departments and finally to individuals. Each individual received a set of objectives that if achieved, allow the organization to attain its mission & goals. Control systems hub of individual outputs and behaviours in the organization. Controlling outputs highlighted results through management by objectives. The strategy formulation and planning process consists of the following main building blocks:

Evaluation of the strategic gap between the two departments

critical issues to be resolved in-order to close the gap

formulation of strategies and action steps to resolve the critical issues

P-1.2. Develop criteria for reviewing potential options

Appraisal of Tesco operating and financial performance

To perform this task, we are using the ratio analysis as a tool to appraise Tesco financial resources and performance. These data are collected from (Annual Report) the annual periods of 2004 to 2009 Source:

Tesco Annual Report Appraisal of TESCO human resources

Recently, during the year 2009, the organization did a survey on the staff viewpoint "I enjoy working for Tesco." And it was found that under 25s, over 45s and female members within the workforce were less happy to come to work than the average Tesco staff. Tesco has put action plans in place to address this problem. Female staff asked for further information on flexible working hours. Therefore, they are now training managers on offering flexible working hours and they doing further to promote such schemes all through the business, which again shows the close relationship with its workers in order to improve employee's commitment and performance.

SWOT analysis of TESCO

The organization strengths and weaknesses with reference to Data-monitor Tesco profile 2007 can be summarised as follows. (Tesco Annul Report 2007)

Strengths

Increasing market shares Tesco holds a 13.1% share of the U.K retail market. Its multi-format potential means that it will continue to grow share in food and non-food. Tesco insurance and Tesco on-line (tesco.com) is the world's biggest online supermarket and this increasing day-by-day. In recent year the Tesco group had sales of over £577 million, an increase of 28.7% on last year. Tesco online (tesco.com) operates in over 270 stores around the country, covering 95% of the UK area. Millions customers nationwide having used the Tesco online services and the organization has a strong platform to additional develop this revenue stream. Brand value Profits for Tesco operations in Europe, Ireland and Asia raised by 79% during the last financial year. The business has a strong brand image and is related with good quality products/services, quality goods that represent excellent value. Tesco modern ways of improving the customer shopping knowledge, as well as its efforts to branch out into finance and insurance have also capitalized on this. UK market leadership reinforced, Since acquiring number one ranking in 1997, Tesco has developed a successful multi-format strategy that has accelerated its advantage. Tesco UK sales are now 70% larger than Sainsbury's. Also the Competition Commission's report makes it very complicated for a competitor to challenge its scale and has successfully scuppered Wal-Mart's chances of stealing UK leadership. So, Tesco is in very much strong position in its domestic market.

Weaknesses

Tesco reliance upon the U.K market, while international business is still growing and is expected to contribute large amounts to Tesco profits over the next few years, the business is still extremely dependent on the U.K market (73.7% of 2004 revenues). Even as this is not a main weakness in the short term, any changes in the U.K supermarket trade over the next year e.g. like the Morrison group successfully buying the Safeway chain could alter the balance of U.K supermarket power, and also affect Tesco shares. Tesco has a huge capital expenditure program mostly due to its large investment in space for new stores. Since its extension is so aggressive, Tesco has very little free cash for any other operations. Also, its product variety is vast and about any acquisition can be justified, mostly in the U.K. Although fill the gap, strategy would be useful to the organization, as has been the case with the UK convenience market, there is the danger of Tesco becoming a serial acquirer, as this be likely to reduce earnings quality and visibility.

Opportunities

Tesco U.K non-food products, health and beauty ranges continue to grow, and it is presently the fastest growing skincare retailer in the market. The business has a volume market leading position in both healthcare & toiletries and also number one retailer in the baby goods markets. Tesco health and beauty ranges products continues to invest in price to deliver the value customers have come to expect and this year invested £26.5 million on beauty and health lines. The business now has 26 stores with opticians and nearly 500 stores with pharmacies. Tesco now operates in 6 countries in Europe in addition to the U.K: the Republic of Ireland, Slovakia, Hungary, Turkey, Czech Republic, and Poland. It also operates in Asia; in Thailand, Chain, South Korea, Malaysia, Taiwan and Japan. Seven years ago, its worldwide sales were £760 million. Now, they are nearly 12 times larger, at almost £7.5 billion, with the profits of £308 million. In the recent year, Tesco will add 3.1 million square feet to sales area and could enter other main markets. Growing worldwide has forced Tesco to become serious about hypermarkets and this has had seriously optimistic implications for growth in the U.K. The organization has produced a strategic relationship with US supermarket, Safeway Inc, to take the online (tesco.com) home shopping model to the US. Telecoms are the newest stage in its strategy to extend popular retail services. It has repetitive its approach in the banking, by capitalizing on its brand.

Threats

U.K structural change could spark a price war. The price followers in the U.K market are about to become aggressive investors in price, Safeway because of new ownership and Sainsbury because of new management. Morrison is reducing Safeway's prices by up to 6% and Sainsbury is bound to see lower prices as one of the basic changes necessary to drive its recovery. With both Asda and Tesco committed to price leadership, this could result in a step down in industry profitability. Overseas returns could fall. The buy case for Tesco is predicated around investment overseas driving higher group returns as each country moves past critical mass. This might not happen, either because of economic conditions, competitor action, or failure in Tesco's business model. It also could come as a consequence of an aggressive move into a larger market, such as China or Japan. Wal-Mart/Asda challenge International expansion International growth is expensive. Entering new markets with a new brand requires heavy investment and marketing, as well as land prices (which are currently low) and extra distribution and operation expense. Tesco's debt may increase before it begins to decline.

PEST analysis of TESCO

Political

Political factors have to do with environmental regulations & protection, tax policies, international trade regulations & restrictions, consumer protection, employment laws, contract enforcement law, government attitude, competition regulation, safety regulations & political stability all related to the industry in which the firms operates. Indeed, the U.K government has regulatory bodies, in addition, there are strong tax policies, restrictions, laws, protections and regulations surrounding the grocery industry which organizations should comply with and follow.

Economic

The economic factors are concerned with the economic growth, interest rate & monetary policies, unemployment policies, inflation rates, government spending, stage of the business cycle & consumer confidence. U.K is facing an economic recession, due to the credit crunch situation; the unemployment rate is considerably growing up & the inflation rate is increasing. This present situation should be considered to assess the present position of the grocery industry as it may constitute a threat.

Social

The social factors include demographics, age distribution, income distribution, population growth rate, education, fashion, lifestyle changes, health consciousness and living condition. This is a very crucial point in this grocery business, because people are becoming more & more environmentally aware and they now care more about tiny details (employee's conditions, animal welfare, the food quality and process of production). In addition, with the current credit crunch situation, the living condition is getting harder & harder as prices are rising, people losing their homes as they are repossessed. This is a very critical point to be taken into consideration as part of the current industry situation.

Technological

The technological factors relate to the application of new IT development and ideas such as R&D activity, technology incentives, automation and the rate of technological change. This country is amongst the richest in the world and heavy funds are invested in research & technological development & once a new technology comes out businesses should be ready to cope with it. This is indeed a massive opportunity for the industry.

Task 2: Develop vision, mission, objectives and measures.

P-2.1. Consider the organizations ethical, cultural, environmental, social, and business background against current standpoints.

Cultural, Social, Environmental and Ethical background of TESCO

As far as the ethical environment is concerned; Tesco focuses on four main different elements. They are includes:

Energy and water

Transport

Waste and recycling

Products

Energy and water

Tesco is committed to dropping the energy consumption and use of green-house gases. In 1998, they made a voluntary commitment to reduce the energy consumption per square foot by 40% by 2007. In 2006 they achieved this target one year early.

Transport

The bulk of our productions come from our transport distribution fleet.

Waste and recycling

Tesco is committed to minimizing the waste production throughout their day-to-day operations.

Products

Tesco is continually working with their suppliers to ensure that they give their customers best quality, competitively & best priced products that are produced to the high environmental and welfare standards they demanded.

Social environment

Concerning the social environment, Tesco focuses on four main elements. They include:

Communities

Staff

Customers

Healthy living

Communities

Tesco has been a member of Business in the Communities Per Cent Club for over 15 years. They give at least 1% of their pre-tax profits to charity in the form of donations, employee time & gifts in kind. This year the total value of their charitable contribution was over £6 million.

Staff

Tesco is the U.K biggest private-sector employer and provides the best overall benefits packages in the grocery industry; including popular profit shares and saves as you earn schemes.

Customer

Tesco's aim to appeal across the economic and social range and are pleased that the profile of our customers reflects this.

Healthy living

Tesco customers tell them that eating healthily needs to be easier and that they need simpler and better information to facilitate them to eat a balanced diet. Publication of the U.K Government Public Health White Paper and campaigns by the U.K Food Standards Agency, have also helped these issues figure prominently.

P- 2.2. Develop appropriate vision and mission statements.

Appropriate vision and mission statements established organization mission. Tesco is the third largest grocery firm in the world. Their success is mainly based on listening and responding to customers.

Company mission

Tesco mission can be established as follows.

To create a values for customers to earn their lifetime loyalty

Responding to customer trends such as healthy eating, fair-trade and organics

Treating our suppliers fairly so they can deliver best products/services for customers

Managing our environmental impacts to help decrease costs and inconvenience

Treating our employees as we like to be treated so they do a great job for customers

Helping our employees and customers to support the local organizations and causes they care about

Company vision

The likely company vision includes:

To be the first largest grocery company in the world

To expand around the world

To create more job opportunities

Smart objectives

The smart objectives can be classified here into five categories. They include

Objectives related to customers

Objectives related to the finances

Objectives related to the economy

Objectives related to the society

Objectives related to the environment

Objectives related to customers

To ensure customers get what they want

To ensure that prices are good

To ensure there is no queue

Objectives related to finances

To maximize company profit

To grow up sales

Objectives related to the economy

To carry out ethical assessment of 100% of our high-risk own brand suppliers

To provide training 100% of our high risk brand suppliers

To make sure all commercial teams have had training on supply chain labour standards

Objectives related to the society

To exceed 75% retention of experienced staff (employee retention)

85% of the retail staff to be trained to bronze level (employee training)

Objectives related to the environment

To develop 90% of new stores on Brownfield sites (New store development)

To reduce energy consumption by 4.6% reduction (energy efficiency)

To reduce water consumption to a 7% reduction (Water consumption)

To achieve a 2.5% increase in the volume of products delivered per litre of fuel consumed (Vehicle efficiency)

P-2.3. Agree appropriate objectives and develop measures for evaluation.

II.3) Appropriate measures for evaluation developed

This will be summarized in a table represented as follows

As set out in paragraph 6, we do not consider that the measures of the retail offer used in Tesco's analysis fully capture the store-level retail offer. As we note, the complex and multi-dimensional nature of the store-level retail offer means that a list of individual measures of the retail offer are unlikely to measure it adequately. We consider this to be a serious shortcoming to identify a relationship between the level of the retail offer and local concentration. However, even putting this limitation to one side, we consider that there are further issues in relation to the individual measures selected by Tesco for inclusion in its analysis.

12. For example, product availability is measured with an estimate of the percentage loss in sales represented by the missing items, rather than a simple count of the number of unavailable SKUs. However, this approach focuses on the impact of product availability on the store rather than capturing the inconvenience caused to the customer, which research by Tesco shows to be one of the key factors in customers' choice of store.

13. Furthermore, the number of customer complaints received by a store might reflect both the quality of the store-level retail offer and the number of competing stores in the area (i.e. the degree of local concentration). Competing stores provide customers with a benchmark against which the store can be judged. In addition, the 'years since store refit' variable is problematic since it does not account for relatively new stores that do not require refits. As such, it appears that in Tesco's analysis, these stores are expected to provide a poor level of quality when in fact they may offer the best.

Task 3: Plan for the implementation of the strategy

P-3.1. Develop outline timetable for implementation

Action plan According to our own case, the action plans to reach the smart objectives will include: optimising shopping trip: that is enabling the customers get what they want at a good price, no queue and great staff to ensure that they are always working hard to make Tesco a better place to shop at home. Invest in new markets overseas, seeking out new opportunities for grows. Act flexible each market is unique and requires a different approach. Act local- local customers, local cultures, local supply chain and local regulations require a tailored offer delivered by local staff. Maintain focus on a few countries. Use Multi-formats no single-format can reach the whole of the market. Develop capability and make sure of having capability through people, processes and systems. Build brands to improve relationships with customers.

3.2 Create appropriate dissemination processes to gain commitment.

Resources allocation considered Organizations successful at strategy implementation consider the human resource factor in making strategies happen. Further, they realize that the human resource issue is really a two part story. First, consideration of human resources requires that management think about the organization's communication needs. That they articulate the strategies so that those charged with developing the corresponding action steps (tactics) fully understand the strategy they're to implement. Second, managers successful at implementation are aware of the effects each new strategy will have on their human resource needs. They ask themselves the questions... "How much change does this strategy call for?" And, "How quickly must we provide for that change?" And, "What are the human resource implications of our answers to those two questions?" In answering these questions, they'll decide whether to allow time for employees to grow through experience, to introduce training, or to hire new employees.

Choice of tools will depend on understanding of the target group as well as on company aims. The aim can also vary depending on where company are in the process which calls for a deliberate, planned variation of methods.

Methods can be used in the dissemination process include:

Informal person-to-person meetings, unrivalled as a way of convincing

Workshops, Seminars, Briefings, conferences, exhibitions also provide opportunities to inform and discuss the staff

Printed material, for example reports

Websites, but don't forget to update the websites

Links to and from other websites

Videos, DVDs, CDs and other audiovisual materials

Mass media, have a strategy for attracting their attention

Attending seminars and conferences presenting your project

Networking, use personal and professional networks

E-mail lists for mass mailing a newsletter, also continuous dissemination of process results

Direct applications in a learning situation, the key aim of dissemination activities

Information officers

Press releases, for example newspapers, magazines

Braille to give access to the partly sigh and other methods specially adapted to cater for various other types of disabilities

P- 3.3. Set up monitoring and evaluation systems.

Framework for communication, monitoring and control

Tesco communicates its new strategy to its workers via a "steering wheel" a simple symbol and metaphor for a tool intended to drive performance and help workers navigate into the future. The Tesco steering wheel has four 90 degree arcs, representing the 4 BSC areas of focus: customer, financial, operations and employees performance. Every store have to gets a monthly steering wheel updates, a summary of its metrics within each of the four arcs, so that all workers in Tesco multiple regions and formats get feedback on their performance. Tesco supplements its steering wheel reports with "shopping lists" that capture key essentials of the strategy in simple forms that workers can follow in their everyday activities. The steering wheel has helped the organization stay focused on its strategy even as it experienced speedy growth over the past two decades. Performance is reported periodical to the Board, and also a summary report is sent to the top 2,000 managers in the organization to cascade to employees. The reward of senior management is shaped by the KPIs, with bonuses based on a sliding scale according to the level of achievement on the Steering Wheel.

Conclusion

Efficient and effective training and development of employees is an essential element for Tesco's continuing growth in an increasingly commercial world. Tesco requires employees who are committed and flexible in order to aid its expansion of the business. The expansion of Tesco relies on retaining existing customers and acquiring new ones. All customers need to be confident and happy in Tesco. This relies on committed and flexible employees delivering the highest standards of service to meet Tesco's objectives. Tesco's structured approach to training and developing its existing and new employees provides a strong foundation for its continuing growth.

Bio:

Ivancevich, J. Skinner, S. Crosby, P and Lorenzi, P., (1996): Management. Quality and Competitiveness. Organizational Structure. p254. Richard d Irwin

Aldag, R and Stearns, T., (1987): Management. Organizational Structure. South-Western Publishing

Organizational Structures. Online available at. http://dept.lamar.edu/industrial/underdown/org_mana/org_structure_george.htm

Irani, K., (2009): Type of Organizational structures. Online available at: http://www.buzzle.com/articles/type-of-organizational-structures.html

Manufacturing Management (2006): Operations, Decisions and Processes. Organizational Structure. Online available at: http://sameh.wordpress.com/2006/05/13/a7/

Tesco, A corporate profile. By Corporate Watch U.K (September 2004). Online available at: http://www.corporatewatch.org/?lid=252

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