Schools of Thought on Strategic Management
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Strategies are among the most crucial key of an organization in order to accomplishing their specified goals and objectives. According to Mintzberg H Quin B (1997, p39) "Strategy is the pattern plan that incorporates an organizational goal, policies and action successions at large." Hence, managers or the top level of an organization require to be very deliberate when choosing the strategy for them to put through in the market, to endure and to win their Rivals. In this assignment, the school of strategies which include planning school, culture school and positioning school of Minztberg will be examined to show these strategies were put into action to help organization be more active in the global market. This assignment also exemplifies some international theories which are Porter's diamond, five forces and product life cycle of an organization by analyzing Tesco Plc 'case.
School of Strategies overview
It is undeniable that strategical evolution is the fundamental element for the endurance and success of every business. Evidently, each organisation ought to have appropriate strategies and conform it to the conditions that come up in a competitory market. Turner (2003) stated that "in an attempt to channelize those whose task it is to put strategy into exercise, Henry Mintzberg, el at (1998) Depicted the process of a 'strategy campaign' and has keyed out ten schools of thought in respect of strategy evolution. These schools have changed in popularity overtime". The ten different schools were separated into the groups of prescriptive, descriptive and synthesis. The difference point between the prescriptive schools and the descriptive ones is that the former concentrate on strategy preparation while the latter emphasize strategy development. The three prescriptive schools are considered the efficiency and constancy foundations which make directions as well as objectives for the growth of organisations. According to Stacey (2007), the three prescriptive schools are "the design school, the planning school, the positioning school .These three schools become both profound and preconditioned factors of strategic development for each organisation.expanded to these schools, the different descriptive schools which are entrepreneurial school, the cognitive school, the learning school, the power school, the cultural school and the environmental school give deep insights in strategy preparation. All strategy views Acknowledge the relevancy of entrepreneurship. The last group is synthesis that comprises of the configuration school, "which incorporates the aspects of all the other schools in terms of configurations or in term of transformations" (Stacey, 2007). This school corresponds an attempt at integration which definitively recognizes the complexness of strategy.
This assignment will take three schools which are the plamiing school, the culture school and the positioning school to analysis and apply to Tesco to show these models work and how an organisation apply these models to achieve their targets, objectives and be successful in global market.
2.1- The Planning School
The planning school is a member ofthe prescriptive school which is normally more refer with how the strategy should be articulated instead of how they should be constituted. This model deals with consequences such as budgeting, scheduling and programming. Every business Demands to have program for them so to emergence and development, thus this model can be Implemented in many firms such as Tesco to help them be the global organisation.
Tesco was fotmd 1924 by Jack Cohen. Over many years, today, Tesco become one of the Biggest retailers in all over the world. How they become successful like they're at present? They need to have a effective plan which is establish on predicting how the economic is going to be, what they prefer to be, what will be the market and so forth. The answer for these questions should be the planning school.
Ftuthermore, the planning school retrospects the Ansoff Model which Tesco used to analyse their market and products. They want to be globalisation so they open Tesco in many countries of the world where they set up their products to acquire new markets. For example, Tesco opened stores in Japan where people prefer to buy fresh food each day, Hence, the existing hyper market formats don't meet the needs of local buyer. Tesco also has inducted big amount of money on product development. In following Ansoff marketing strategies, Tesco is attempting to increase number of customer and number of sales.
This school also aspects intimately at the SWOT model, the internal strength weakness as well as the external opportunities and threat as mention in Marko Makipaa (2004). Tesco applied SWOT model which can tell them their strength such as branch name, national store network to evolve and win their challengers. It also shows them their weakness such as deficiency of Worldwide scale or menace of takeover to assist them find the way to tix it and to change it in near ihture. They recognised the extemal opportunities of Tesco can be beyond the sea growing market in Eastern Europe and Asia and financial service which might be a good opporttmity to focus on and to become progressively participate in global market. In addition to that, the threat of Tesco is the entry of Walt Mart, the evolving of local Sainsbury, etc.
So by using the planning school which relates to Ansolf Model and SWOT analysis, an
organisation will know the theories , plan for their new product and market , manage their budgeting, schedule, programme, select the best choices and methods to fit their aim and objectives. This model also antecedences its strategies by hierarchy. The long-run strategies is the ones, which are at highest order, accompanied by the average and then by short-term plan.
Nevertheless, while applying this model,company may be confronted by some disputes as this model comprises some issues which can impact on organisation. First of all, planners may focus too much on rendering newer strategical concepts, thus directing the current aims at sub standard level, amusing the attention from the original purpose directing to false beliefs. Risk is major issue in this model as people who apply these concepts could decide to try and Vie against rival challengers and therefore bring forth new strategies, which could be very risky as in Sadler P(2003). Second, planning school is all out forecast and anticipating future based on some strategies and current trend of economy, even so, it will be very diflicult and risky to make the decision and put through it before. Establishing strategy and decision on Supposition and doubts could due to the diverting the organisation' original strategy and also disregard the organisations necessity of strategy.
2.2- The Culture school
The cultural school is one of subclasses of descriptive schools. This school ascertains strategy Constitution as a corporate process. "The approach of this school attempts to involve the several groups and sections within the company: strategy establishment is deemed a fimdamentally collective and combined process. The strategy that's formulated is a manifestation of the corporate culttue of the organisation". . This model centers on the all-important role the social procedures, opinions and values are playing in decision making and in strategy establishment. ln addition to this, it not only explains opposition to strategic change but helps to deal with paramount values in organisations or in regions also.
The culture of Tesco plays a critical part in the company; this is a great deal of concerned about the way in which people in the organisation interact with one another. If people didn't interact Comfortably with one another, this could be bad for decision making; this could also lead to poor decision being induced. Tesco have a positive culture. The type of culture of Tesco is a customer ridden culture. Customer driven culture is everywhere in the business and makes a real effort to improve customer service, marketing research, hiring right people, and training. The business is trying to update the teclmology e- commerce. It also has a positive culture where staff and workers communicate well. They also respect change as chance than not a treat. Furthermore, the culture of Tesco is seen as a dynamic one. This is proved in the way a business is looking for a change how they work better, and always anticipating new ideas to attract more customers.
A apportioned dedication to beliefs encotuages consistency in an organisation's behaviour, and Hence by admonishes changes in strategy. It's culture that profoundly accommodated opinions and understood asstunptions that act as powerful internal barriers to fimdamental change. Also, the vague of this model is main reason leading to opposition to change. It can be missed to justify the status-quo. Consequently, each organisation's attention has also been addressed at how to overcome the strategy limitation of organisational culture.
2.3- The Positioning School
The Positioning school is where the organisation can formulate its strategic position within the industry. Put differently, positioning is oneself in competitive strategy. This model ascertains strategy structure as an analytical development. Porter (1980) was the founder of the positioning school; he revolved around the formation of industries and their effect on strategies. The positioning approach looks at the company's place in the economic market lay whose goal is to differentiate the organisation from others within the same field. (Steward C, el at ,2005)
This model has been applied in many firms such as Tesco to help them to positioning itself in the market so that they'll situate out amongst the rest, and how to accomplish high profit than other firms through market position. Tesco use Porter's five force analysis to empathise the competition. Porter's Five Forces Model implies that business are being acted upon by five forces i.e. supplier power, threat of replacements, customer power, barriers to entry and competition. This model also entails that business requirement be able to be well aware of the industry Condition in which they function. For TESCO, their main challenger is ASDA. The competition is firm between the two food retail companies as healthy as with others like Sainsbury. ASDA is possessed by WalMart which is the leading grocery succession in the United States. They are famous for low priced items. This is among the reasons why people lean to go to their stores for their frequent shopping necessitates. When they expanded in the Great Britain, they brought by way of them their cost leadership strategy. This led to the similar success that they've in the United States. All the same, TESCO was competent to preclude ASDA last year. How Tesco conquer ASDA using Porter strategy is explained as follows: According to Porter (1985), a business position is based on its strength and strength is classified into two - cost advantage and distinction. When these strengths are applied, it Leaves aftermath to three generic strategies - focus, distinction and cost leadership strategy. Out of these three generic strategies, cost leadership strategy plays a important undertaking in the achievement of TESCO's competitive benefit over ASDA. Cost leadership strategy means that the business is the low cost producer or supplier of a definite quality item in a Intended industry.
While considering the positioning school, manager or an organisation must aware of some limitation and taking into concern regarding it. First of all, the top level in hierarchy of an organisation will be the one who fonnulate the strategies whilst execution will be done by the lower level. This could induce the problem such as incompatibility. Managers could have sets of the ideal but they fail to interpret these ideal to lower levels and due to the Abortive execution. It also creates the de-motivation for their employees. (Susanne, R 2005). The additional problem of this model is its direction. It's a bit much constrict in that it's just concerned in the information that's either economic or quantifiable. The social, technological or political which is really crucial information haven't taken into consideration. This model also established on the anticipation of succeeding tendency by generalising the present tendency which alters quickly in the time period for variety of reason. If the preceding and present trends are the only reference used to anticipate the succeeding trends, the strategies are really insecure to go wrong in execution.
Whittington - school of strategies
Nevertheless, in notion of Whittington, schools of strategies are of four types and it will be poor if we discuss the strategic management without referring the theories of
Whittington. Each theory presses out the disputes about human capability to think moderately and act more efficaciously. Once each manager straightaway confronts with these conflicts, he will be better able to examine their own action and eventually select which most common theory is most appropriate with their requirements. Hence, these four views are regarded as the crucial tools for strategic management of each business. Lets look at the figure below, we'll see the summary about the four more common theories:
It can be easily to see that Tesco remain in evolutionary part since their strategy is to keep price low, do publicity and their choice open which can appeal increasingly customer come to them. Comparing the cost of Asda, Sainbury with Tesco , it always show that the cost in Tesco is very much lower and they also do more publicity than their rivals.
Furthermore, people who come to Tesco to purchase something cheaper not only buy those particulars but they also buy the other things which they require. Therefore, even do more publicity and the price is cheaper, Tesco still persist their sales and budget. So, using this strategy is the right way for Tesco and they can be progressively successful in the time to come.
All the same, by a systemic view, there's no better way of strategy: "only play by the local rules". It's visible that the four approaches to strategy widely dissent in their advice to management. Realising and know how to enforce each approach in the business system are the fundamental factors which prompt each organisation to participate more actively in the global market.
The succeeding part will be some strategies which Tesco applied or can be applied in Tesco to accomplish their goal and objectives.
Global Retail Strategic Decision
Among the most debatable trends in today's retail industry is globalization. The global arena has proved highly hard for numerous retailers over the preceding two Xs. Retailer's Functioning in local marketplace is extremely acted upon by fluctuation in consumer behaviour. Newcomers in market such as Brazil, Indonesia and Thailand ascertain articulated deviations in consumer testes, purchasing behaviour and expense. Several retailers have tried and failed to establish themselves into Global marketplaces. This part of assignement will help in understanding and the preparation of global strategy for Tesco Plc. The section will use Porter 5 force, Porter Diamond strategy, Porter generic and PLC model analysis to render an penetration into Tesco's position in the intenational market. This will help management in constituting to correct strategical selections in terms of corporate and global strategy to keep off the trouble which could come from unfamiliar of new environment of each countryy that Tesco expand into it, such as new customer, new supplier and new competitor.
4.1- Overview of Tesco's Strategy
The way Tesco PLC raise revenues is by trying to make Tesco more attractive to customers, so that more people prefer to shop with them. They're hading best for one simple reason: globally, millions more customers have chosen Tesco - with 10 million more visits a week to their stores around the world. In 1997, when Tesco first exhibited their four part, strategy; a strong UK business, non-food, retailing services and international . at present they are a truly international retailer, with arising strength in non-food and retailing services.
It appears that Tesco have opted a really beneficial strategy for international marketplace , as a matter of fact Tesco still have trouble when they expand business into some countries , for example in 2002 ;Tesco had went through troubles with expansion in Poland, Tesco faced with the economic problem and that make their cost higher to market presences. Another example in Taiwan (2000), Tesco was facing rivalry from the French titan Carrefour. These days, there are suppositions about Tesco's withdrawal fiom Taiwan. From these abortive experience, Tesco realized that flourishing into new international markets is harder, Hence Tesco should be aware more about market competitory environment. Poter's analysis is nevertheless useful in evaluating the competitive environment of firms these days.
4.2- Porter's Five Force
According to Porter (1980), this model can be applied to many organisations. It postulates the external environment analysing and revolving around the structure of the industry. The objective of this type of analysis is to formulate a strategy that will enable firms to develop chances and protect them from threats. By executing so, can lead business firm competitive positioning. This concept is dividing by 5 force call Porter's 5 force.
The threat of entry of new competitors: In supermarket retailing, barriers to entry are high. High initial investment and fixed costs are likely to preclude many likely newbies. Additional barrier to entry is economies of scale. Tesco and other large supermarket are able to buy large bulks of goods in a lower price. In contrast, smaller new entry parties are more expected to buy smaller volumes of those goods at relatively higher prices. New firms also have to be aware that Tesco already have dedicated customers.
The threat of replacements: Which, Tesco threat of replacements is high because product that Tesco sell same with to the other retailing shop. which is Tesco should examine to what
extent it's conceivable for customers to switch to the replacement. In such cases, Tesco should make certain that buyers gratified on their products or services. On the other hand, other companies in the same industry may choose to vie on price, which will bring down margins of profit.
The bargaining power of suppliers: generally, most people have a option between another supermarket chains, who contend on price and several promotions. This can make supplier have high bargaining power. Nevertheless, Tesco is ascertaining the situation by not just order from one big supplier but by accepting a number of smaller ones. In counterpoint, the bargaining power of Tesco is expanded. If a specific supplier is committing too much, Tesco can switch to another supplier.
The degree of competition between existing competitors: As we seen in the market at present that all main players in Global market as Carfoure and Wal-mart trying so hard for increase their market share. Therefore, the foodstuff market is especially challenging.
Tesco's strategy, structure and competition are established on the framework. It's strategy is authorise, with development being acted on from four areas, the core UK grocery business, non-food, international expansion and retailing services such as financial services, the dotcom business and telecom packages. Essentially, Tesco is using its strong stable core to keep the business ticking over while it contrives new more hazardous areas of growth.
4.3- Porter Diamond strategy
With this strategy, the aim is to become the lowest-cost producer in the industry. Tesco's sections in the industry are provided with the stress placed understating costs. If the accomplished asking price can at the least equal (or near) the average for the market, then the low-cost manufacturer will enjoy the most beneficial profits. This strategy is usually affiliated with mass businesses offering standard products with comparatively small distinction that are absolutely satisfactory to the bulk of customers. At times, a low-priced leader will also give up its product to maximize sales, specially if it has a substantial cost advantage over the competition and, in doing so, it can further step-up its market share. Tesco has established afresh affordable food line in its supermarkets as it gears up to take on discounters Aldi and Lidl. Tesco have to launch its own variants of the discounters products Within its existing stores. This way it hopes it can keep its existing customers happy while hopefully appealing new ones.
As the firm aspects new situations and makes little errors through trial-and-error extending, management form more naturalistic percepts of the foreign market. The need for learning by doing at the local spacial level suggests that learning from the intemationalisation process will often be a gradual, iterative process .Tesco experienced that the opporttmity to grow a mass business in France was improbable to be accomplished under the current envirornnent where planning permit is difficult and accomplishment ratings are high. Consequently, Catteau was becoming less strategically significant. Tesco have leamed that advisors can only advise but that's all. Don't trust any investment bank today, when new decreasing, particularly in European Union or UK marketplaces demand is higher and higher, overall oil price and liquidity crisis will intensify and that will pull demand back. Tesco is foodstuff retailer, so as a whole food and agriculture industry faces hike and even peoples carrying on to feed their natural necessity. Maybe Tesco need to invest more to future food supplements. The other challenge for them is about technology as all major technology today is based on oil, gas or coal. Tesco like companies will close their door like last winter another UK retailer. Even E-commerce could be a focus for Tesco.
4.4- Product Life Cycle (PLC)
The PLC model is useful in explaining production models for some types of products, such as exchangeable consumer goods, but is less useful in anticipating future pattems, particularly in industries commanded by some global players. The framework presents dynamic comparative advantage. The country that's the comparative advantage in the production of the product changes from the innovating (developed) country to the growing countries. Tesco is ever expanding its business in order to keep up the rivalry to a very high level, so consequently, it's critical that Tesco invest in fresh services and products so that customer's demands are fulfilled. Tesco is an example of a large supennarket chain can use their customer dedication to broaden and extend their product array. Foodstuffs are always attending be the core product for Tesco but in their website or in their stores, it can be seen to find information on a range of other products completely unrelated to foodstuffs. Tesco is developing these new products and selling to their existing customer base to be able to enter these new markets. There is Tesco Finance and Insurance where access to apply for the Tesco credit card and savings account, products that in the past you would have approached the bank for. Tesco Direct is a catalogue shopping service and is seen as taking on conventional catalogue brands like Argos. By understanding the product life cycle, Tesco is able to identify new areas to move in. Presently Tesco has an electronic range of goods and services that they offer, but one thing they lack is low-cost laptops. Until now, Dell and PC World are the leading retailers of low-cost laptops. Tesco needs to buy quality laptops at a competitive price to maximize sales and increase productivity.
According to Daniels (2007) because of very rapid innovation, have extremely short life cycles, a factor that makes it impossible to accomplish cost simplifications by moving production fiom one country to another. As it has been told Tesco is a global retail market and still being globalized around the world. Hence, Tesco needs to move some products to a new market and an environment. In this case Tesco challenges it competitions by reducing its cost and removing products. There are plenty of difficulties in this competition such as making good research about environement to make a perfect anticipation about the best products which can be used to beat the competitors in the global market.
Properly speaking, all strategy schools and patterns are looked upon a tool for strategic information from an constitutive view and as a process for comprehending a number of different futurities for a company. This level sets the business firms goals and objectives and decides on its investments and the deployment of its resources. Thanks to applying strategic models in functioning, Tesco has took part more actively in the global market. it has proved by the success and development of Tesco in many countries in the world.
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