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Strategies are the stepping stone for the achievement of goals. Mintzberg H. Quin B. (1997, p39) "according to plan strategy pattern that organizational goals, policies and action sequences integrates as a whole." Therefore, managers or the top levels management of an organization must to be very careful when choosing strategies to implement them in the market, to survive and need to win their rivals.
In this report, planning school of thought, school of thought of culture, school of thought of porters and Minztberg position are put into action to help more organizations to participate in global market strategy analysis will show how does does these school of thoughts work together. This report also include some strategic principles that Tesco uses to compete globally.
Different schools of thought on strategies
It is undeniable that the strategic development and survival is the key factor to the success of every business. Obviously, each organization should have appropriate strategies and the conditions that originated in a competitive market so organization must cater with them. Turner (2003) stated that "in an effort to guide those whose job is to put into practice strategies, Henry Mintzberg, L (1998) 'A Strategy Safari" and the process described with respect to identified ten schools of thought in strategy development. These schools have varied in popularity overtime. Ten different schools descriptive prescriptive, and synthesis are divided into groups. Prescriptive differences among schools and descriptive point strategy are focused for emphasis on the former latter strategy development. And three school foundations which are mandatory efficiency and stability as well as directions for the development of the organization is supposed to make objective. (2007), according to Stacey three prescriptive schools "design school, planning school , positioning schools, three schools each organization's strategic development of both basic and become preconditioned element ..
Along with these schools, different schools the enterprising schools are descriptive, cognitive, school education, schools, electricity, school, cultural school environment, school and give deep insights into strategy formulation. All recognize the relevance of entrepreneurial strategy approach. Synthesis of the previous group that the configuration school, (Stacey, 2007) "in the context of the configuration or changes in the term of all other schools integrated the ideas of" are. The school integration efforts in recognition of the complexity of the fixed strategy represents.
The work of three schools which are planning school, culture and situation analysis of school to take Tesco to implement school work, these models will show how to apply these models on an organization for targeted goals which are to be achieved and proceed into the global market.
The Planning school of thought
Planning school which is an important school of thought which is more targeted toward how the strategy should be formulated rather then getting the consensus. Each and every organization has to make strategies in order to achieve its objectives and in this report we are going to apply this model on the Tesco a leading retailor of UK.
Tesco was found in 1924 by Jack Cohen. Many years, nowadays, Tesco one of the world's largest retailer, (http://www.Tesco.co.uk) is. How they become successful as they are now? They have a good plan which is the base on which Tesco has achieved the strategic position, based upon these strategies they want to be, and so will be in the market.
In addition, Tesco uses Ansoff Models to analyze their markets and products position. They therefore are always in search to develop new markets for their products in many countries to introduce Tesco and want to be global player. For example, Tesco has opened stores in Japan where people buy fresh food every day, so the current hyper market format to meet the needs of local customers do not want to. Tesco also Ansoff marketing strategies on product development later, the number of customers and sales for Tesco are increasing in numbers and the demands have pushed to invest large amounts of money.
The school also looks closely at the SWOT model, the inner strength as well as weak external Marko Makipaa (2004) refer to as risk and opportunities. Tesco's swot model indicates that company is captalizing on its strengths and opportunities to overcome its weaknesses and the threats in the environment more optimally then their rivals.
Tesco is entering into more and more global markets and with them the Wal-Mart and other giant retailers are entering into to those markets which are posing pressure on the strategic decisions of Tesco.
Planning school and the Ansoff model using SWOT analysis related to the one organization to market their new product, potential plan know their budget program. The long-term strategy, is more important then the medium and short-term plan
However as, this model is introducing, enterprises have challenges to be confronted could affect, while this model contains many problems, that organization can face. First of all planners can direct too much attention towards the development of the newer strategic concepts and set the present objectives on the executive committee may be undermined and which misdirect the attention from the original purpose, which leads to mistakes. Risk is important topic in this model as people, which can themselves judge these concepts, against rivaling competitors which could be very risky as in Sadler P (2003). Secondly the planning school is dependent upon predictions and forecasting any data upon which prediction is made is if wrong then all the strategic decisions can be misleading and therefore the core purpose would not be achievable for the organization.
The cultural school of thought
The cultural school is one of subclasses of the previously described school of thought schools. This school sees strategy arrangement as collective process. The approaches of this school are: Strategy arrangement is regarded as fundamentally collective and cooperative process. The strategy, which is developed, is organisation" a reflection of the organisational culture; (http://www.12manage.com). This model concentrates on the substantial role, which the Social processes, plays faith and values in the adoption of resolutions and in the strategy arrangement. Additionally to this it does not only explain to resistance to the strategic change however it also gives assistance, in order to employ predominating values in the organizations or in the regions.
The culture of Tesco plays a vital role in the it success this is involved over the way very much, in the people in the organization interactingly with each other. If people did not concern well each other, this could be bad for adoption of resolutions; this could be poor decision which also lead destruction of strategic position. Tesco have a positive culture. The kind of the culture of Tesco is customer driven culture. Customer driven culture is everywhere in the business and undertakes a material effort, customer service, to improve the market study and uses correct people and the training.
It has also a positive culture, in which personnel and workers are well in connection. They do not regard also change as opportunity as a festiveness. In addition the culture of Tesco is seen as dynamic. This is proven in the kind, which looks, a business, to appeal in order to change, as they work better, and after new ideas, more customer always seeks.
A divided obligation in relation to faith moves agreement because of a organisation's behavior and therefore discourages past changes in the strategy. It is culture, which held deeply faith and tacit assumptions, which appear as efficient internal barriers for fundamental change. Also the vague of this model is the principal reason, which leads to resistance to the change. It can be missed, in order to justify Status Quo. Therefore each organization's attention is also focused on, how to control the adverse affect of strategy of the organizational culture.
The positioning school of thought
The organization can develop its strategic position within the industry. In other words itself the positioning is in the competitive strategy. This model sees strategy structure as analytic development. Porter (1980) was the founder of position school of thought; it concentrate on the constitution of industries and their effect on strategies. In position approach the strategist look at the market position and the market situation to establish the strategies. (Manager C, EL on, 2005)
This model was used in many enterprises such as Tesco, in order to help them for positioning in the market, so that they set up under the remainder, and like one high income as other enterprises as market position reaches up. Tesco use Porter' supplier, substitutability, customer, market entrance barrier and rivalry.
This model is necessity, industrial conditions are to be considered, under which the organizations function. For TESCO its main competitor is ASDA. The competition is between the food items, which are so healthy as with others like Sainsbury. ASDA is possessed by wall Mart, which is the prominent grocer's shop sequence in the United States. They are famous for cheap grocery items. This is one of the reasons, why people like to go to these stores for buying necessities. When they extended into the united kingdom, they got in through their cost leadership strategy. This resulted to the similar success, which they have achieved in the United States. However TESCO was able to compete ASDA last year.
Porter (1985), a success is based on strength and strength is classified into two - cost leadership and differentiation. If these strengths are applied, then consequence to three generic strategies - focus, distinction and cost advantage and differentiation. From these three generic strategies cost plays an important task in the completion of TESCO' s-competitive use over ASDA. Cost leadership means that the business of the manufacturers of the low costs or the supplier.
First of all the first side is in the hierarchy of an organization the persons who formulate strategies, while implementation takes place next. This can cause the problem such as inconsistency. Managers who make the strategies without the involvement of the lower staff could face problem while implementing the strategies because they could face the opposition from the lower staff or their subordinates. (Susanne, R2005) the other problem this model is facing can be focus. It is too much narrow by the fact. The problem is with data which is solely dependent on the data and the forecasting is done if there lays any problem in the data then there shall be misleading strategies. If the past and present tendencies are the only source, which is used, in order to forecast the future tendencies, the strategies are very likely to fail in the implementation.
Whittington - school of strategies
However in the opinion of Whittington, schools of strategies are kinds of four and those are insufficient, if we speak about the strategic management, without mentioning. Each theory expresses the differences over the human capacity to think and effectively function appropriately. Once faces of each manager directed with these differences, he is better able to examine and finally decide their own activity. Therefore these four perspectives are regarded as the important tools for strategic management of each business. In the illustration down, we see the summary over the four fundamental theories:
Tesco is at competitive position, because their strategic costs is to be kept low and there must be vast choices for the customer to choose from, which can attract customers ever more. ASDA always is comparing the prices of Sainbury with Tesco, for them to appearance do that the price is many lower in Tesco and it also more promotion than their competitor. In addition people, which come to Tesco, do not only buy somewhat to buy those individual parts, but them also the other things, which need her to more inexpensive purchase. Thus you do even to more promotion and the price are more inexpensive, remain Tesco further their sales and budget. Therefore using this strategy is the right way for Tesco and it can ever more be successful future. However of a body perspective, there is no best way of the strategy: straight play by the local rules". It is obvious that the four beginnings at strategy differ far in their advice to the management. Understanding and you can use each approach in the business system are the key factors, which motivate each organization, in order to participate in the global market more actively. The following part is something strategies, the Tesco would use or can be used, in order to obtain their goal and objectives.
International retail strategic decision
One of the most problematic tendencies in today's retail trade is globalization. The global arena examined extremely difficult for many retailers in the last two decades. Retailer's achievement in the local market is affected to a high degree by change of the consumer behavior. Entering the markets such as Brazil, Indonesia and Thailand portraits many difficulties for the organization, the shopping behavior and the expenditure of the consumer affect strategies. Many retailers tried and, around itself into global markets to manufacture not skillfully.
In this section we shall see how Tesco is able to formulate its pricing strategies and able to compete into global market.
The Tesco has developed the pricing strategy in such a manner that more and more customers are attracted towars it and its prime emphasis is on generation more revenue and reducing the profit margins while increased revenue reduces the gaps for small profits.
Porter's Five Force theory and Tesco
. Discussion According to Porter (1980), this framework can be applied to many organisations. It involves the external environment examining and focusing on the structure of the industry. The aim of this type of analysis is to develop a strategy mat will enable firms to build up opportunities and protect them from threats. By doing so, can lead firms competitive positioning. This concept is dividing by 5 force call Porter's 5 force.
â€¢ The threat of entry of new competitors (New Entrants); In supermarket retailing, barriers to entry are high. High initial investment and fixed costs are likely to prevent many potential newcomers. Another barrier to entry is economies of scale. Tesco and other large supermarket are able to purchase large volumes of goods in a lower price. Li contrast, smaller new entry companies are more likely to buy smaller volumes at higher prices. New firms also have to be aware mat Tesco already have loyalty customers.
â€¢ The threat of substitutes; Which, Tesco threat of substitutes is high because product that Tesco sell same with to the other retailing shop, which is Tesco should analyse to what extent it is possible for customers to switch to the substitute. In such cases, Tesco should make sure that customers Satisfied on their products or services. On the other hand, other companies in the same industry may choose to compete on price, which will reduce profit margins.
â€¢ The bargaining power of suppliers; In general, most people have a choice between different supermarket chains, who compete on price and various promotions. This can make supplier have high bargaining power. However, Tesco is controlling the situation by not just order from one big supplier but by having a number of smaller ones. In contrast, the bargaining power of Tesco is increased. If a particular supplier is charging too much, Tesco can switch to another supplier.
â€¢ The degree of rivalry between existing competitors; As we seen in the market in nowadays that all major players in Global market as Carfoure and Wal-mart trying so hard for increase their market share. Consequently, the grocery market is particularly competitive.
With more than ten years of experience overseas, Tesco has evolved a strategy based on five elements(www.Tesco.com):
1. Be flexible - each market is unique and requires a different approach.
In Japan, customers like to shop for small amounts of extremely fresh food, every day. Existing hypermarket formats don't meet the needs of local customers, so Tesco's entry into the Japanese market was through the acquisition of a discount supermarket operator.
2. Act local - local customers, local cultures, local supply chains and local regulations require a tailored offer delivered by local staff.
In Thailand, customers are used to shopping at traditional wet markets, interacting with vendors and rummaging through piles of produce to choose what they want. Rather than adopting the Western approach of neatly packaged, convenient portions, our Rama IV store in Bangkok tries to meet local customers' expectations.
3. Maintain focus - we understand that customers want great service, great choice and great value. To become established as the leading local brand is a long term effort and is not about planting flags in map.
4. Use multi-formats - no single format can reach the whole of the market. A whole spectrum from convenience to hypermarkets is essential and you need to take a discounter approach throughout.
Our experience of trading a mix of stores means we can now move to multi-format quicker and we have recently opened Express stores in Hungary and the Czech Republic.
5. Develop capability - it's not about scale, it's about skill - so we make sure we have capability through people, processes and systems.
We believe that investing in our people is the right way to live our values and brings sound business benefits, too. Developing individuals at every level means that we have home-grown managers who understand our culture and can effectively develop our business.
The rationale for the strategy is to broaden the scope of the business to enable it to deliver strong sustainable long-term growth by following the customer into large expanding markets at home - such as financial services, non-food and telecoms - and new markets abroad, initially in Central Europe and Asia, and more recently in the United States.
The strategy to diversify the business was laid down in 1997 and has been the foundation of Tesco's success in recent years. The new businesses which have been created and developed over the last 12 years as part of this strategy now have scale, they are competitive and profitable - in fact we are now market leader in many of our markets outside the UK.
The Group has continued to make good progress with this strategy, which has five elements, reflecting our four established areas of focus, and also Tesco's long-term commitments on community and environment. Importantly, the momentum which it has given the business has allowed the Group to continue to grow well through the economic downturn.
Overall Distribution strategy of Tesco
Mindful of the factors affecting distribution decisions (i.e., marketing decision issues and relationship issues), the marketer has several options to choose from when settling on a design for their distribution network. We stress the word "may" since while in theory an option would appear to be available, marketing decision factors (e.g., product, promotion, pricing, target markets) or the nature of distribution channel relationships may not permit the marketer to pursue a particular option.
For example, selling through a desired retailer may not be feasible if the retailer refuses to handle a product. The main reason why Tesco is able to reduce its cost is due to the reduction of the participants in the distribution of goods to customers as any of the layer is reduced the price that can be charged to customer can also be reduced.
Figure: Potential channel structures
For marketers the choice of distribution design comes down to selecting between direct or indirect methods, or in some case choosing both.
DDS for effective cost leadership
With a direct distribution system (DDS) the marketer reaches the intended final user of their product by distributing the product directly to the customer. That is, there are no other parties involved in the distribution process that take ownership of the product. The direct system that is further divided by Tesco through the method of communication that takes place when a sale occurs. These methods are:
Direct Marketing Systems
With this system the customer places the order either through information gained from non-personal contact with the marketer, such as by visiting the marketer's website or ordering from the marketer's catalog, or through personal communication with a customer representative who is not a salesperson, such as through toll-free telephone ordering.
1. Direct Retail Systems
This type of system exists when a product marketer also operates their own retail outlets. As previously discussed, Starbucks would fall into this category.
2. Personal Selling Systems
The key to this direct distribution system is that a person whose main responsibility involves creating and managing sales (e.g., salesperson) is involved in the distribution process, generally by persuading the buyer to place an order. While the order itself may not be handled by the salesperson (e.g., buyer physically places the order online or by phone) the salesperson plays a role in generating the sales.
3. Assisted Marketing Systems
Under the assisted marketing system, the marketer relies on others to help communicate the marketer's products but handles distribution directly to the customer. The classic example of assisted marketing systems is eBay which helps bring buyers and sellers together for a fee. Other agents and brokers would also fall into this category.
Product Life Cycle (PLC)
The product life cycle through its trends and graphs are good indicator for the non-customized homogeneous goods and these graphs indicate the demand for the goods in the market and the overall pattern of how the organization is able to achieve its objectives. (Morrison J., 2003) These graphs show how the organization is performing and determine the strategic position of the organization. It is the competitive advantage that distinguishes a innovative and cost leaders from others and a prospective competitive advantage is indeed can be innovation. (Hill & Charles, 2007)
Tesco is constantly expanding its business in order to keep competition at a very high level, therefore it is vital for Tesco to invest in new services and products to meet high customers demands. Tesco is an example of a large chain of supermarkets that use customers loyalty to diversify and expand its product range. Food products are always be the main product of Tesco, but in theirr website or in their stores, we can find information on a range of other products that are non food items.
Tesco is the developing new products and the selling based upon customer loyalty and also using loyalty to enter these new markets. There Tesco Finance and Insurance, where access to apply for Tesco credit card and savings account products in the past that have come to the shore. Tesco Direct is a catalog shopping service and is seen as having established catalog brands as Argos. Understanding the product life cycle, Tesco is able to identify new areas to to diversify (www.accaglobal.com)
Tesco is offering the food items at a competitive range but one thing that they cannot control is the price of electronic items sucah as latop. As it is very diffcult to develop a laptop in the competitive market in which there are big giants such as dell and Compaq are competing. Tesco will be required to purchase the computers ate the competitive prices to be competitive (www.bizcovering.com).
According to Daniels (2007) due to very rapid innovation, have short life cycles, a factor that makes it impossible to achieve cost reductions by shifting production from one county to another. As said Tesco is in a global retail market and still the competitors are going global. Therefore, Tesco has to move some products to a new market and environment. In this case Tesco face challenges from rivals that they are reducing their cost and disposal of products. There are a lot of difficulties in this competition, such as making a good research environment to make a perfect prediction on the best products that can be used to beat the competitors in the global market.
In fact, ail schools strategy and models are considered as a tool of strategic information from an ecological perspective and a process for receiving a number of different prospects for an organization. Strategy is built on the highest level of an organization. At top level the goal and objective are set and also the ways for achieving them are set which are known as strategies. Through the application of strategic models in performance, Tesco has participated more actively in the global market. It has been demonstrated through the success and development of Tesco in many countries.