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It is the aspiration of every organisation in business to maximise profit and also to a large extent make wealth. Tesco, a successful retail supermarket which started its activities in the United Kingdom (UK) in 1919 has gradually saturated the UK market and has launched into the international market with the aim of attaining a global status. After years of grocery trading, Tesco decided to increase its portfolio by adding on-line banking with Tesco personal finance, Tesco Mobile Phone as well as Tesco Broadband. This assignment will look at the overview of Tesco, employ some organisational theories in relation to the discussion and also take a closer look at how Tesco implemented various models to change to attain its objectives.
THE OVERVIEW OF THE COMPANY
Tesco has the largest private sector employer in the UK with over 260,000 employees and over 1800 stores. Jack Cohen, the founder of Tesco in 1919 started selling surplus groceries from a stall in the East End of London from which he earned a profit of £1 from sales of £4 on his first day. Ten years down the line, in 1929, Cohen commissioned his maiden Tesco store in Burnt Oak, Edware, North London. With over 2,500 stores in the UK, the company thought it prudent to go international. The company currently operates in South Korea, Taiwan, Thailand, Poland, Slovakia and the United States. To better serve its teeming customers, Tesco launched a variety of services to its customers namely; on-line banking with Tesco personal Finance, online bookstore, Tesco Broadband, Tesco Mobile Phone and Home Phone. As part of its plan to increase customer loyalty also launched club card deals, the double club card and the 24hour trading. The rest of the plan also included, 'Every Little Helps', computer for schools and 'Would I Buy It' initiative to ensure highest quality for customers.
The focus of Tesco is to create value for customers to earn their life time loyalty. The core values of the company are that 'on-one tries harder for customers and treat people how we like to be treated.' In order to work at these core values to perfection, Tesco is providing its quota in terms of corporate responsibility in the areas of social, economic and environmental. To expatiate on the corporate responsibility, Tesco gives 1% of their pre-tax profits to back to local communities through charity support and the organisation of locally-based educative programmes. The company tries to work hard in hand with its customers by maximising resources, i.e. water and energy.
Tesco as a company has established its base and position which has resulted in the company winning the 'World Retail Awards'. This prestigious award will boost Tesco's global marketing campaign for future growth and sustainability.
In the global retailing environment, most companies are either static in growth or declining, but Tesco Total Group Sales rose by 7 percent to £29.8 billion in a report issued by the company in August, 2010.
As Tesco is geared towards expansion and increasing its portfolio, it has reserved financial credit coupled with income generated from property portfolio development funds.
Tesco being a price leader in UK market could face an adverse effect on its profit margins in an attempt to retain the key price points on its commercial goods.
The financial profit of Tesco had an impact from credit card arrears, household insurance claims and bad debt. These have been infiltrating into the financial base of the company.
The present economic situation suggests that Tesco's value message will succeed, but there is a weakness in non-essential mid to high ticket price items which will suffer from the rising cost of living and lower disposable incomes.
Grocer outlets are not fully established to operate as specialist retailers in specific areas of product which can be capitalised on by other competitors.
Tesco being the largest UK retail giant has opportunity to explore economies of scale.
The international establishment of Tesco will grant it the opportunity to produce from cheap labour sources for example from Asia.
The on-line development of Tesco Direct with its catalogue shopping will eventually see to the usage of technology which will provide the launch pad for larger non-food based products with appreciable margins.
The youth in its mobile phone sector which had attracted around 250,000 customers in 2008 has the potential to expand further as new technologies are introduced every now and then.
With the recent global crunch hitting almost every industry, Tesco one way or the other was hit especially in the UK and the USA Markets such unforeseen threats can hinder the growth of the company.
The escalation of the cost of raw materials for production could impact negatively on the profit margins of Tesco.
The persistent threat of takeover from the market leader, American retail giant Wal-mart hangs around Tesco all the time.
Changes in consumer buying behaviour are a threat to Tesco.
Business dwells in political environment and therefore require stable political environment to thrive. Tesco as it has already been indicated has its Head office in UK. Due to quick growth it has saturated the UK Market and is currently operating in other parts of Europe (Hungary, Poland, Czech Republic, Turkey and Slovakia) Asia and the USA. Outside the UK, Asia is the next biggest market. Tesco has markets in China, South Korea, Japan, Malaysia and Thailand. The political climate in Japan could be described as a stable one as compared to Turkey which is unstable. For the USA, the political climate could be likened to the UK one which is enjoying a fairly stable political atmosphere.
Economically, Tesco has been very strong despite the fact that the recession has hit a lot of retail companies. The UK market is doing very well and the USA with 145 stores is also making economic impact. The Japanese market is becoming highly competitive with the Chinese Market growing to be one of the greatest contenders of global market. Tesco has economic viability in that market.
Anthropology has it that people have different behaviours and different background. Knox and Pinch (2006) articulate that the behaviour of people have been impacted by cultural forces. With regards to the social setting of UK and USA one can find some similarities in that people have become familiar with shopping from the supermarkets as compared to the countries in Asia where this attitude is yet to be fully practised. In matters of social issues one cannot leave out the religious affiliations that transpire in some of these countries that Tesco operates. For instance, countries like Malaysia and Turkey which are predominantly Muslims Tesco has to take into cognisance their religious beliefs and practices.
The 21st century and beyond has been described as era of information and technology. Due to the implementation of technology in the activities of Tesco it has been able to advance tremendously into new markets thereby expanding its customer base. On the international front, Tesco is performing extraordinarily well. Mention can be made of the USA, Japan and Malaysia. Thailand might need some more facilities to catch up with the pace of technology as far as Tesco is concerned. China is far advanced when it comes to technical capability, but even with that it is confined to Chinese cities. But on the whole, one can say that Tesco is technologically performing very well in the various countries.
According to Porter (1996) 'The essence of strategy is choosing to perform activities differently than rivals do.' Tesco's strategy has effectively worked for it over the last two decades, especially within the last 13 years that Sir Terry Leahy the current Chief Executive Officer (CEO) took over a dramatic change has occurred as it has out-performed the then market leader, Sainsbury's.
TESCO'S CORPORATE OBJECTIVES
Cohen's life history was an embodiment of 'pile it high and sell it cheap.' Over the years, Tesco has been working with different strategies so as to achieve its objectives. The objectives to propel the strategies are:
To be a successful international retailer
To grow the core UK business
To be as strong in non-food
To develop retailing services, such as Tesco Personal Finance, Telecommunications and Tesco.com
To put community at the heart of what they do.
As part of Tesco's strategy, it tries to make its goods available to its customer. By this, small and large stores are opened. It also tries to find ways of reducing prices for its customers, hence the introduction of the clubs cards.
THE CORE UK BUSINESS
The UK market being the citadel of Tesco has staff of over 260,000 and more than 1,800 retail stores. Even though Tesco is gradually making impact in the international front, yet 80% of its group sales and profits are virtually earned from the UK business. The growth of the UK market was necessitated by new markets as a result of population growth and increase in its portfolio especially in the non-food sector.
NON-FOOD /RETAIL SERVICES
Tesco realised that it will be economically viable by expanding its portfolio. By this, Tesco entered into online banking with Tesco Personal Finance, Tesco Mobile Phone, Home Phone and Tesco Broadband. So in 2006 Tesco disclosed that 20% of its sales were constituted by the Non-food sector.
After Tesco had saturated the UK market it decided to go international. Tesco penetrated into the overseas market such as South Korea, Thailand, Taiwan, Slovakia, Poland and the USA. Tremendous impacts are being made in the international market of the company bringing in huge sales. After Tesco had gained some experience in international retailing it then came out with six (6) strategies to consolidate its operations. It identified that it needed to:
maintain focus on few countries
CORPORATE SOCIAL RESPONSIBILITY
Tesco has been playing its part in the local communities it found itself. The company expresses charity by giving 1% of its pre-tax profit to local communities. In addition to this benevolence, Tesco also organises locally based educative programmes to enlighten its audience. Tesco as part of the Corporate Social Responsibility engages its customers to assist in the improvement of the environment. Tesco has also provided the role of supplying life-saving equipment and the expertise for people in the UK.
THE STRATEGIC MODEL OF TESCO
The strategy of Tesco is centred on cost leadership. Tesco applies the statement 'Pile it high, sell it cheap.' Notwithstanding, the company's product comes with a reasonable quality and affordable prices for its products.
THE APPLICATION OF THE STRATEGIC MODEL IN TESCO
Tesco products are always priced low with quality as compared to its competitors. Even though Tesco visa-a-avis its competitors receive goods from similar suppliers, Tesco is able to offer good value for money due to management quantity purchases and mark-ups.
Tesco has competitors who are also in the industry to make impact. Competitors like Sainsbury's ASDA and Mark and Spencer are all in the race and have position themselves in a particular way in the market. ASDA for instance sells at a discount, low price whereas Sainsbury's had created its own value. Tesco's focus is on purchasing logistics and supply chain management.
Tesco has its own way to outwit its competitors and win customers by reducing prices of its products. To this end, 'Buy one get on get one free' is used to win the heart and loyalty of customers and non-customers alike. This strategy is useful for cost-leadership.
TESCO AND THE APPLICATION OF TOTAL QUALITY MANAGEMENT
As part of Total Quality Management in Tesco, the company has delivered a consistent way of dealing with the customer by ensuring that product development is undertaken as and when it becomes necessary. In addition to this, Tesco has built a strong relationship with its suppliers for quality supply and on time delivery. To ensure that Total Quality Management is properly adhered to, the hierarchy work hand in hand and in a harmonious manner to achieve the needed results. The hierarchy in Tesco is depicted below
THE HIERARCHY AT TESCO
Customer Service Assistant
From the simple illustration of the hierarchy of authority operated by Tesco, the lower level subordinates are accountable to their superior ones i.e. the Customer Service Assistant is accountable to the Team Leader, the Team Leader is also accountable to the Line Manager and then the Line Manager is also accountable to the Store Manager. Despite this hierarchical system existing among the rank and file of the company, there is no disintegration in the activities of the company, be it local, national or international; they all have a common mindset to achieve the objectives of the company. And the ultimate of this objective is to give the customer the expected goods and services and in return attain customer loyalty.
Todnem (2005) underscores that 'successful management of change is crucial to any organisation in order to survive and succeed in the present highly competitive and continuously evolving business environment. This opinion is supported and expatiated by Ferguson and Jones (2002) who are also of the view that 'many things indicate that we are going through a transitional period'. This statement of Ferguson and Jones enjoins the adage that states that, 'no condition is permanent', hence a change which is inevitable especially in this 21st century should be expected in the life of every organisation which wants to stay in business. It is in the light of this that Reuter (2010) articulates that 'organisations clinging on to static structures will ultimately lose out.' It behoves on management to ask these questions as put forward by Stable (1999) why the change? How is the change going to be effected and the results from the change? Those questions according to Stable should be asked and possibly answered by management before embarking on any change.
Quite a number of models have been propounded by the pundits of 'change'. Mention can be made of the Trist model of change, Lewin model of change and the Nieto Slush Model. But as far as change is concerned, Tesco did not follow any model, but just decided to implement change so as to catch up with the going trends in the retail industry.
A change in an organisation could be triggered by either internal or external factors of the organisation. The internal structure of the organisation could be changed by management's policies, systems procedures and staff attitude. The external triggers of change are basically environmental.
RESISTANCE TO CHANGE AND MANAGEMENT'S PERSUASION
According to Bolognese (2010) 'resistance is an inevitable response to any major change.' To this end, the new development of introducing the technology was strongly resisted by staff as some felt their positions were not secured. It seems the staff shared the view of Ferrie et al (1998) that 'policy makers should be aware of the wider consequences of job insecurity when considering the efficiency of changes in employment policy.' Others were also of the idea that they were going to be laid off. A section of the staff was also under severe panic as they thought they could not use the new technology. Due to the above reasons some of the employees were not in favour of the change, hence decided to resist the change. As Bolognese has stated above, the management saw the resistance as something bound to happen, and therefore prepared adequately for it. The employees were made to accept that they were not going to lose their jobs and therefore should not panic. Again, what management did was to explain the need for the change and the benefits that come with it as Reinerk (2004) articulates that learning creates change and promotes innovation. After clearly spelling out the motive of the change, majority then understood management's decision and therefore decided to accept the change. This gave management the impetus to carry on with the planned change.
TRIGGERS OF THE CHANGE IN TESCO
In one way or the other businesses will be affected by the environment in which they operate and will automatically be called to make some changes in their structures and operations. It is in the light of this that Tesco also effected some changes in its structures so as to be operationally efficient and effective. To this end, the company decided to deliver more services to its customers, but did not want to increase its staff. What the company did was to introduce technology to do the job instead. What happened was that management realised that computers and other sophisticated software were available to do work that ten (10) people might do at a time. The advent of this new technology was triggered by both internal and external factors.
INTERNAL TRIGGER OF THE CHANGE
Better way of delivering quality services to customers
The management of Tesco identified that the inadequate staff could jeopardise the fortunes of the company. It was in the light of this that the management saw that those vacancies could be occupied by technology so as to enhance the efficiency of the company. The company then saw the need to employ technology rather than human capital, because technology had taken the centre stage of globalisation. Management again realised that better services could be provided to the customers instead of human resources and that was also going to give the company an edge over its competitors.
EXTERNAL TRIGGERS OF CHANGE
The business of the 20th century cannot be compared to this 21st century which is witnessing an overwhelming technology drive. The advancement of technology has also caused the society to follow suit, and this has apparently raised the status of the customer in his day to day transactions. With this evolution, Tesco also realised that if it does not move with the pace of technology, business disaster was imminent. To forestall such occurrence, the retail giant had to re-engineer its operations by the introduction of sophisticated technology. Perhaps the management was motivated by Reinert (2004) that 'IT speeds up the process of change in the economy,'
The Self Checkout System
The self checkout system is an automated machine which has been introduced by Tesco to augment the existing cashier-staffed checkout at the till. The system has brought some relief to the customer by reducing the time spent if not wasted at the checkout. In addition to this, the privacy of the customer is ensured as there is no contact whatsoever with a cashier who might know what some customers purchase.
Consequently, the company also benefits from the installation of this technology in that the facility has come to reduce the number of employees required. It can be said that customers are really enthused about the usage of this facility.
ADVANTAGES DERIVED FROM THE CHANGE BY TESCO
The introduction of this technology has brought a tremendous growth to the company as compared to some of its competitors.
Even though the technological change has taken some human activities, yet the supersonic expansion of the company has also increased the intake of employees making Tesco the biggest employer in the retail business in the UK.
The company has also by technology increased its portfolio thereby catering for a variety of customer needs and expectations.
Tesco, keeping pace with technology has surpassed the then market leader Sainsbury's and is now far ahead of Sainsbury's and other competitors in the industry.
The adoption of technology into the company's activities has ameliorated the goodwill of the company not only in the local scene, but also in the international markets. This has made the customer of Tesco become loyal to the company.
This assignment has examined the overview of Tesco by doing organisational analysis by the use of the SWOT and PEST analytical tools. The discussion also zeroed in Tesco's corporate objectives visa-a-avis the portfolio of Tesco and the corporate social responsibility of Tesco. As part of the expatiation of the issues, the strategic model of Tesco, total quality management existing in the company and the hierarchy were also brought to the fore. The focal point of the discussion was change in Tesco. The analysis unearthed the change that Tesco embark upon which was basically technological. It became evident of what triggered the change, how it was managed both internally and externally and the success of the change in meeting its objectives. On the whole it can be said that the change Tesco effected has brought positive results to the company in that it has made outstanding successes as compared to its competitors as more and better customer services are rendered due to the change.
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www.tescocorporate.com accessed on 13/10/2010
www.supermarket.co.uk/news accessed on 05/10/2010 18:00