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The retail industry is one of the largest economic sectors in Europe, providing employment to about 17 million people, and services to some 480 million consumers in the European Union. The industry is dominated by large global players and small firms engaging in a wide array of activities. Two types of retail activities are dominant in the EU: the sale of non-food items in stores, and the sale of food items in stores. The recent financial and economic crisis has shown that the instruments for the coordination of the economic policy in the EU have not been fully used and gaps in the current system of governance still exist. In the last quarter of the decade most of Europe struggled . Resulting increases in tax, decreasing in government spending and fear of loss of job. This future resulted into reduction in customer spending. Numerous closures were seen in the UK like Woolworths in year 2008-2009. But more value-focused retailers like Tesco and J Sainsbury's succeeded in growing sales despite the recession. Matter of fact is that growth of Tesco was unaffected by the global economic recession. This was due to Strategic positioning of the company by it CEO and Chair man.
Tesco's strategy is to have sustainable long-term growth through expansion of businesses abroad, mainly in Asia, Central Europe and United States and by expanding local market by service such as finance, non-food and telecoms ( < http://www.tescoplc.com/plc/about_us/strategy >).
The objectives of the strategy are:
To be a successful international retailer
To grow the core UK business
To be as strong in non-food as in food.
To develop retailing services - such as Tesco Personal Finance, Telecoms and Tesco.com
To put community at the heart of what we do.
From the above objective it is very clear that Strategy in action of Tesco plc is Globalisation and increase it's share in market with the non-food product lines. Using it Strategic capability in most efficient way than it's competitor to achieve competitive advantage. According to strategy clock Tesco has been using hybrid strategy, charging lower price than it competitors.
Strategic capability is the core resource and competence a company, which are necessary for the company to survive and progress strategically (Johnson, Scholes & Whittington.p.95 Essex ,England 2008). I will be using SWOT to summarises the key issues from the strategic capability of Tesco plc that are most likely to impact on it Strategic development process.
Key SWOT for Tesco plc.
Leading Market Position( Eurometer.2010).
Strong financial performers (Tesco 2010).
Loyalty Scheme (DunnHumby.2008).
Low cost leadership.
Core concentration in UK market (Tesco, 2010) .
International expansion (Daily Mail, 2010).
Strong portfolio (Mintel, 2010).
Market growth (Euro monitor, 2010) .
Online Presence (Guardian, 2010).
Financial crisis ( Poulter, 2009).
Increase in competitions (Mintel, 2010).
Decrease in income.
The above analysis concludes that Tesco is leading Retail In UK. Company have achieved this by pursuing both cost leadership and differentiation strategies. Lean and Agile supply chain management was mastered by Tesco and made best use of it to competitive advantage over its rival and achieving cost leadership. Tesco has used its Information Technology wisely and strategically. The core competencies of Tesco have been seen to be aligned with the business environment, therefore highlighting a positive future outlook for the company.
People are the very important resources of any organisation in the Retail Industry. Role People plays, the process they interact and the relationships that they built in strategy are crucial in success. According to interview of Sir Terry and Philip Clarke tescoplc.com they both have mention about the people in Tesco, their staff member, customers and shareholders. Philip Clarke believe that if staff is not treated well they may do the same with customer. It's company belief that Success of company depends on people: who shops and work in Tesco. Where else the other resources like Information and Technology are human depended. Finance is other core resource company has, it has managed it finance effectively through good financial performance which will help Tesco in Global expansion. Good financial reserve or earnings also facilitate IT capability of the company.
According to exhibit 13.1 in Text book company should adopt Differentiated Strategy as both technology and market of UK are mature. Where else target market like India has to be addressed by Technological Strategy, as technologies need to known customer shopping pattern in that corner of work.
Company structure is very import part for any organising success. Tesco seem to be using Matrix structure, it is combination of both functional and divisional structure operating in cycle. The CEO of Tesco pls is Sir Terry Leahy, he was appointed in 1997 as CEO and Joined the company in 1979. And non-executive Chairman is David Reid since April 2004. Sir Terry would be stepping down as a CEO later this year and Philip Clarke heading the team. On 27th Jan 2011 he declared it Executive Committee
( < http://www.tescoplc.com/plc/media/pr/pr2011/2011-01-27 >).
Gordon Fryett, who will take responsibility for property strategy for the Group
Alison Horner, the recently appointed Group Personnel Director
Trevor Masters, who is responsible for operations in Czech, Hungary, Poland, Slovakia and Turkey
Mike McNamara, who is appointed today as Chief Information Officer with responsibility for both IT strategy and operations across the Group
Bob Robbins, recently appointed Chief Operating Officer of the UK business
Ken Towle, recently appointed Internet Retailing Director
Laura Wade-Gery, recently appointed Commercial Director for UK Clothing, Electronics and General Merchandise.
The advantage of Matrix Structure is that it integrates the knowledge from separate area, which help in knowledge management. It is flexible too as it allows different dimensions of the organisation to be mixed together and it attracts companies like Tesco globally because of the possible mix between local and global dimensions.
I believe that Tesco should adopt the Transnational structure. Structure follows strategy (Chandler, 1962), implying that a transnational strategy must have an appropriate structure in order to implement the strategy. Just as the transnational strategy is a combination or hybrid strategy between global and multi domestic strategies, the organizational structure of firms pursuing transnational strategies is a structure that draws on characteristics of the worldwide geographic structure and the worldwide product divisional structure. In comparison with Matrix structure, Transnational structure has better control whereas change, knowledge and internationalisation are in same in both the structure (Johnson, Scholes & Whittington.pg.446, Essex ,England 2008).
Other key ingredient need for organising for success, are Process and Relationship. I believe Tesco is using Strategic Control Style for corporate decision making and when it comes to core staff or store managers more of Financial control style is used (<http://www.tesco-careers.com/home/you/finance/our-structure>). Sir Terry Leahy became CEO in 1997 and it was his Vision and Strategic decision make capability lead Tesco to No.1 Position from 3rd in 1990's. After his joining, Tesco started looking for more market across Asia and US.( <http://www.tescoplc.com/plc/about_us/tesco_story/#> ).Financial targets are clearly mention in their Website which clearly indicate the presence of Financial control Style. This can also be assumed by it lower Cost leadership, Finances is controlled at all level to achieve Strategic objective of keeping customer in heart to what we do. As at time of recession spending power went down as people where saving money for any uncertainty in future.
According to Abeysinghe (2010), the Tesco has managed to utilise it current market position and economies of scope to increase their bargaining power from its supplier and achieve low cost. The company always manage to upgrade it all inbound logistics system to increase the efficiency and effectiveness for it operations. In it streamline operations, it is using Digital program of third generation ERP solution. Introductions of this system helped in minimisation of stock levels within company and stores. This is clear indication that company using Planning processes for control processes.
As mentioned earlier, Structure change is required and they are called as Reconstruction type of change. And if this type of changes is not address, it may lead to closure, enter terminal decline or to be taken over (Exhibit 14.2). They need to change to Transnational structure as to achieve objective of No 1.Retailer across the global. But as long as UK's market is concern Evolution is change, because pattern of the people shopping and working in Tesco stores have been affected due to recession. Present Government is conservative and discourage foreigners. UK has gradually sealed it's boundary. European going back to their country and so are the international students, present economic of UK doesn't encourage for new traveller or immigrants (<http://www.universitiesuk.ac.uk/Publications/Documents/EconomicImpact4Full.pdf>). And all this immigrants and international students have great spending power and support economy.
There will be new CEO with new executive committee. I personally believe that company has core recourse like its non executive directors, they will support the change process. I personally believe Tesco to be Learning Organisation as it has hierarchies and bureaucracies in their senior level of management structure. And continues knowledge is passed on from one CEO to another(as mentioned in video on tesco.com ) (< http://www.tescoplc.com/plc/media/board_announcement >).
Still now we have looked at the Structure, Process and Relationship. Enhanced Strategic Capability by influencing strategy in action. Now we focus would be how the Strategy development takes place in Tesco plc.
Strategy development process is the process of developing strategy using capability of organinsation , theoretical concepts, tools and techniques.
To understand the Strategy development processes, it is very important to understand two views: Strategy as intended and strategy as emergent. An intended strategy is planned and deliberate. It is the set of intentional acts that is contemplated and planned to accomplish a goal. An intended strategy is also sometimes called a deliberate strategy, whereas Emergent strategy is a set of actions, or behaviour, consistent over time, "a realized pattern [that] was not expressly intended" in the original planning of strategy (< http://planningskills.com/glossary/153.php>).
Tesco is huge company and i believe that most of the company strategy would be planned. Tesco's International Strategy is Intended strategy. I personally believe that Tesco has Leadership as vision. This comes form the vision of its CEO Sir Terry Leahy and other non-executive directors. Tesco has intended strategy of selling packed goods in UK, where as in Thailand, stores in Bangkok started unpacked goods as local people have a culture of buying goods from wet markets ( < http://www.docstoc.com/docs/17454541/tesco > ) now is not intended it's emergent strategy.
Now after a Vision or Mission by CEO, Strategy to achieve such Vision or Mission are developed. This strategic planning would be for year to come or long time say of 5-10years of planning. Or you can say that is where company wants to be in give period of time. I believe that Tesco would be using Strategic Planning System and Resource allocation process for strategy development at various stages in operations and day to day functions. Now one of them is Intended and other is Emerged. Strategic planning systems helps in formalise strategy, it may take the form of step-by-step, systematised, chronological procedures to develop or coordinate an organisation's strategy. It may be used to negotiating purposes. It play a role in how the future organisational strategy is determined. For example
Helps in structure analysis and thinking about complex problem.
This will help Philip Clarke when he takes over as new CEO of the Company. Tesco need to do lots of work in coming future to achieve the objective of globalisation.
Encourage a longer-term view of strategy.
Any company indented to be successful retailer globally, need lots of time as they meet structure, people, their buying behaviour and patterns and so forth . Strategic planning helps and evaluates strategy for companies like Tesco.
Enhance coordination of business-level strategy.
Facilitate converting an intended strategy in organisational plan.
Communicating intended strategy from the centre to operating units.
Providing agreed objective or strategic mil stone against which performance and process can be reviewed .
Coordinating resources required to put strategy in to effect.
A planning system nay also have psychological role by..
Involving people and strategic development, therefore perhaps helping to create ownership of the strategy.
Providing a sense of security and logic for the origination, not least senior management who believe they should be proactively determining the future strategy and exercising control over the destiny of organisation.
All of the advantages helps Tesco in developing Business level strategy. Tesco is multinational company with operation throughout Europe, Asia and US. Sometimes Tesco has to follow externally imposed Strategy. Like when it wanted to enter China and India. It has to reconsider it strategy of entering into new market. Company always have trend to work independently. But due to competition and culture difference in China Tesco has to go through joint ventures (Straits Times, 2010). Whereas Indian market was concern it political influence that force Tesco to joint with Tata Group (Daily Mail, 2010). This will definitely fulfil the objective of strengthen its global market position. This is how powerful stakeholders imposes strategy on companies indirectly.
Tesco plc can also develop strategy through resource allocation process. Ways resources are allocated to the stores or any level of management, there would be some difference in actual and planned, this would lead to an emerge strategy. Here discrepancy and proposals flow from corporate level to business level and to operating level vice-a-verse, respectively.
I personally believe that Tesco should adopt Multiple strategy development process. In my understanding i don't find right one way in which strategy are developed because strategy development would perform than those of singular approaches. Yes it would be difficult to implement but not impossible for organisation like Tesco plc, it would be night mare for managers to identify the potential benefits of different processes of strategy development. CEOs and middle management have different perception, because according to exhibit 11.5 CEO tend to see strategy development more in terms of intended ,rational, analytic planned process but middle managers find it different they find it as influence of social, economical and political process. Whereas in Tesco plc evey thing going in one direction and people at every level follow the strategic development process it was mentioned in the interview of Chair man, CEO and going to be CEO
(< http://www.tescoplc.com/plc/media/board_announcement >).