Strategic Planning and Tesco's Success

This assignment requires students to critically analyze Tesco's strategic planning approach. The analysis should be based on Tesco's Annual Reports (2010) and Corporate Responsibility Report (2016). Specific focus areas include: examining Tesco's strategies for sustainability, corporate responsibility, and their overall success in implementing these plans.

Strategic Planning
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TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
1.1 Importance of external factors affecting organization...........................................................3
1.2 The need and expectations of stakeholders of an organization..............................................4
1.3 Major challenges taking place in the external environment that will affect the strategy......4
2.1 Appropriate tools to analyse the effects of current business plan..........................................5
2.2 Review the position of an organization in its current market................................................6
2.3 Evaluate competitive strengths and weaknesses of Tesco current strategies........................6
3.1 Modelling tools to develop strategic options for organization..............................................7
3.2 Comparative understanding of activity from organization in the market..............................8
3.3 Create options to form the basis of future organizational strategy........................................8
4.1 Suitable structure for a strategy plan that ensures appropriate participation from all
stakeholders..................................................................................................................................9
4.2 Criteria for reviewing potential options for a strategy plan...................................................9
4.3 An agreed strategy plan that include resource implications................................................10
5.1 Compare core organizational values with current business objectives................................10
5.2 Develop appropriate vision and mission statements of an organization..............................11
5.3 Future management objectives for Tesco PLC....................................................................12
5.4 Measures for evaluating a strategic plan..............................................................................12
6.1 Schedule for implementing a strategy plan..........................................................................13
6.2 Appropriate dissemination processes to gain commitment from stakeholders....................13
6.3 Design monitoring and evaluation systems for implementation of strategic plan...............14
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16
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INTRODUCTION
The administration of every establishment requires to develop strategic planning for
attaining the growth within the industry. In order to develop any organizational strategies, the
company’s management is required to define their goals and target. Most of the firms are
concentrating on future planning which is the most useful for increasing their growth rate.
Presently, the report focuses on gaining insight knowledge regarding the steps involved in
strategic planning of Tesco PLC so that they may easily sustain in the competitive industry.
Tesco is the giant firm that is operating their services within the retail industry. The report also
discuss the external environment that directly affect their organization as well as their business
activities. The firm will also measures their own as well as strength and weaknesses of their
competitors’ those are operating their activities in the retail industry. Along with this, report will
also provide an insight knowledge regarding how company will be monitoring and evaluating the
implementation of strategy plan as it gives a immense consequence on the overall brand image of
company.
1.1 Importance of external factors affecting organization
The following external factors have great impact on operations and functions of Tesco:
 Social and Cultural Values: It comprises of varied kind of religions, lifestyles and
languages of customers which can affect their buying behaviour. Cultural and social
considerations assist the Tesco to undergone with the market situations, for instance, by
increasing the production of goods and services in accordance to demands of consumers,
the firm has gained trust and loyalty (Fame, 2010).
 Legal Issues: Government legislations and policies have direct impact on the
performance and growth of Tesco. The corporation should comply with all rules and
regulations of merchandising practices so that smooth operations can be attained.
Environment legislations, Employment and health and safety Act, Consumer protection
Legislations and etc. should be adhered by the retailer to enhance its business.
 Economic changes and Political Influences: Political and Economical factors highly
affect the living standards and demands of products, thereby lead to enhance the
opportunities to broaden its business in the emerging market. However, diversification
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and internationalization are two main strategies which should be implemented by Tesco
to prevent itself from the robust changes in economy and government policies.
 Development in Technology: In the realm of technological advancements, Tesco
enabled to come up with new ideas and approaches. It has facilitated self-service
checkouts, bar code systems and introduced the online shopping facilities for customers.
1.2 The need and expectations of stakeholders of an organization
Need and expectations of shareholders of Tesco are stated below:
 Shareholders: The shareholders of Tesco expect their interests and profits in the form of
dividends (Winch, 2013). Thus, it is required to analyse their needs, so that they can
contribute significant portion to the growth of company.
 Customers: Consumers always seek for value of their spent money on the products and
services of Tesco, thus it is required to cater high quality commodities so that
satisfaction level of customers can increased reach to the high extent.
 Employees: It is necessary for Tesco to examine the needs of employees within the
workplace, they should be provided with better working conditions, adequate pay, heath
and security.
 Government: Tesco also contribute to the government, provide tax charges to it so that
its business can smoothly operated and expanded in other developing countries (Yao,
Zhao and Meng, 2014).
 Suppliers: Moreover, it is also necessary to make payment to suppliers on time and
complying with their terms and conditions. If there is good rapport between suppliers and
Tesco then the firm will be able to get their support in the adverse situation.
1.3 Major challenges taking place in the external environment that will affect the strategy
Tesco is the multinational retailer which is undergoing from major economic changes of
extension of market in the competitive business world (Hrebiniak, 2013). Some major changes in
the operations of Tesco due to external environment is given below:
 New Entrants in the market: In the current scenario of competitive global marketplace,
there are many new local supermarkets who have introduced their products and services
at cheap rates, as a result of which customers are diverting towards those and Tesco is
loosing its consumers. Moreover, the retailer has also threat from Aldi, Sainsbury and etc.
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 Legal issues: There are many legal issues which are facing by Tesco in the processing of
business activities. Nowadays, customers are becoming very concious about their health,
as a result of which Government has banned the production of use of harmful elements in
the food products. Thus, Tesco need to comply with these rules and reduce make changes
accordingly.
 Environmental changes: Tesco can also get affected by sudden change in the
environment; natural calamities, like Earthquakes, Tsunami and Cyclones can wipe out
the fields or farms, which will affect the productivity of food items (Balogun, Jacobs and
Vaara, 2014).
 Technological Developments: Advanced technologies have also enabled the Tesco to
enhance the productivity and success of Tesco. It is very necessary to use new
techniques as it will maximize the output.
2.1 Appropriate tools to analyse the effects of current business plan
Porter's five forces of competitive position analysis was formulated Michael E. Porter.
This is defined as a framework that is used to assess and evaluate the competitive strength and
position of a business organisation in the competitive industry (Brennan, J. and et.al., 2014).
Management within Tesco PLC often use this tool to understand whether new products or
services are potentially profitable. By understanding where power lies, the theory can also be
used to identify areas of strength, to improve weaknesses and to avoid mistakes. The five forces
mainly include- Supplier power- The bargaining power of suppliers is quite low as there are large number
of firm in the retail industry that is Tesco, Sainsbury, Asda etc. that mainly negotiates
with the suppliers. Buyer power- In the current business plan the bargaining power of buyers is quite high
as they require standardized and quality products for meeting their requirement (Johnston
and Bate, 2013). Along with this, customers also prefer to purchase low price products
therefore, buyers are in the bargaining position. Competitive rivalry- The key driver is the number and capability of competitors in the
market. Many competitors, offering undifferentiated products and services, will reduce
market attractiveness.
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 Threat of substitution- Where close substitute products exist in a market, it increases the
likelihood of customers switching to alternatives in response to price increases. This
reduces both the power of suppliers and the attractiveness of the market.
 Threat of new entry- Profitable markets attract new entrants, which erodes profitability.
Unless incumbents have strong and durable barriers to entry, for example, patents,
economies of scale, capital requirements or government policies, then profitability will
decline to a competitive rate (Tomlinson and Evans, 2010).
2.2 Review the position of an organization in its current market
The current position of Tesco PLC in the current retail market is that the firm acquire
large market share in the UK and mainly contribute their share in the development and growth of
the retail industry. The retail organization mainly employs more than 470,000 employees within
their stores. Along with this, the retail organization also operates 4331 authorized stores across
13 different countries. Tesco is a £ 54billion turnover company recording an increase of 14.9%
when compared to 2008. The foremost strategy that has been adopted by the company is the
product and services customization in accordance with the market demands ( Annual Report and
Review 2010′, Tesco, 2010). The efficiency in performance of the company over the last decade
can be summarised with the help of growth in following key indicators. Tesco’s strategy aims to
focus on product affordability which ensures that customer gets the product to suit their budget
without compromising on the quality. During 2009 the sales from online non-food retail
company Tesco Direct have increased by over 50%.
2.3 Evaluate competitive strengths and weaknesses of Tesco current strategies
Below is the analysis of weaknesses and strengths of Tesco’s current business strategies,
Strengths
 Tesco has a strong Leadership position
in the United Kingdom
 Tesco has a solid reserve of cash with
sales exceed £72 billon for the financial
year 2011-2012
 Another strengths of Tesco is having
effective marketing strategy (Corporate
Weaknesses
 Tesco’s competitive advantage is not
sustainable because it is challenged
from time to time by competitors, for
example, ALDI, ASDA, Sainsbury’s,
etc.
 Tesco depend more on their home
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Responsibility Report’, Tesco, 2016).
 Another strength of Tesco PLC is that
company uses effective strategy as well
as program for retaining their
employees and staff that is
market which is the United Kingdom
 Over the past years, Tesco has failed to
perform well enough compared to its
competitors like ASDA, Sainsbury’s
and Morrison’s to mention a few.
 Weaknesses of Tesco also include lack
of geographical diversification.
3.1 Modelling tools to develop strategic options for organization
In order to develop the strategic options for Tesco PLC manager must engage in
assessing the modelling tools that is Ansoff matrix. This tool support the manager of Tesco in
selecting or developing the strategic options for succeeding in the competitive environment. The
Ansoff matrix basically include four strategic options that is-
Market development
The key strategic option for Tesco include market development under which the
supermarket chain will focus on the targeting the new market by expanding or setting their new
stores in the new location to capture the new market area (Lynch, 2006).
Product development
Another strategic option that is available for Tesco PLC is engaging in the product
development strategy through introducing new product portfolio for the customers. With the help
of using this strategic option Tesco can easily enhance the range of their products line in the
existing market.
Market penetration
In addition to this, another strategic option that can be used by Tesco PLC include market
penetration strategy under which they improve their products and services as well as uses
competitive pricing strategies, advertising or marketing activities to sustain in the current
marketplace with the existing products.
Diversification
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The last strategic option in the Ansoff matrix is diversification through this company can
easily invest in the new products and services and in the new market. Opting this strategy ensure
presence of high risk.
3.2 Comparative understanding of activity from organization in the market
Through assessing the overall retail industry it has been understood other organizations in
the market focuses on different activities and strategies that enables them to be succeed in the
competitive environment. For instance, Tesco PLC focuses on the different pricing strategy for
their variety of products and services that is penetration pricing as well as skimming pricing
policy for selling their products in market. Along with this, Tesco competitor that is Aldi one of
the leading discounted supermarket chain in the UK focuses on cost leadership pricing strategy
to be succeed in the competitive market. With the help of using this strategy company must
ensure setting low prices for their products that assists the company in generating their profit
margin.
3.3 Create options to form the basis of future organizational strategy
In order to form the basis of future organizational strategy for Tesco PLC there are
certain options available to the retail organization. The future organizational strategy for Tesco
basically focuses on market development as well as product/service development that will
support them in creating various option that is- Mergers and acquisitions: In order to focus on the market development strategy manager
of Tesco must create option of engaging in mergers and acquisitions that will assist in
improving the position of the firm in the new market. It will also act as the advantageous
to the organization in increasing their business with the assistance of different firms.
Along with this creating this option is also useful in accomplishing competitive
advantage as through merger and acquisition it increases the size and gross sales volume
of the retail enterprise in the marketplace.
 Using effective distribution channels: Along with this, for the product development
strategy in the future manager engage in creating option related with implementing new
methods for distributing their goods and services. Using the new distribution of sales
strategy will be helping in proper administration of dispersion of products and services in
the market accordant with the customers needs and demands.
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4.1 Suitable structure for a strategy plan that ensures appropriate participation from all
stakeholders
In order to ensure proper participation from all the key stakeholders of Tesco
management must focuses on adopting the proposed organizational structure that is engaging in
collaborative structure. With the help of this Tesco can take advantage of the followings key
benefits-
 Because key people can be shared, the project cost is minimized.
 There is a better balance between time, cost and performance.
 Authority and responsibility will be shared.
 Stress is distributed among the team.
 Improved ability to access resources across the old functional and geographic silos.
 better coordination on shared technologies across the organization (such as IT).
 Faster decentralized decisions.
 Improved access to a diverse range of skills and perspectives.
 Improved global or regional projects.
 Increased communication and coordination across the business.
 Reflects the needs of regional customers.
4.2 Criteria for reviewing potential options for a strategy plan
The chosen potential option for the strategy plan include using effective distribution
channel within the Tesco PLC so that customers can conveniently acquire the required and
needed products. Implementing this strategic options for the strategy plan management focuses
on specific criteria that is through measuring the satisfaction level of customers regarding the
supply management of their products. Through taking the response from the customers regarding
the delivery of their products
Along with this, company can also engage in reviewing the potential options for strategy
plan through using Balance scorecard criteria. It is the best option for measuring the individual
performances within the establishment. It measures and controls the potentiality of the plan of
action in the effectual manner. Balanced scorecard is a method that assist the establishment in
converting their vision and mission statement into the strategical goals and they also help in
observing the organizational performance that is assessing their financial performance in terms
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of achieving organizational goals (Barnett, Darnall and Husted, 2015). It indicates the future
results of the strategy on business with the use of the analysis of the activities of the strategies.
The company has been setting targets to managers and employees for achieving the objectives of
the firm.
4.3 An agreed strategy plan that include resource implications
Management strategy is an systematic approach which are associated with the internal
and external environmental factors and can affect the Tesco's corporate policies and priorities
(Kornberger, 2012). The key elements of the strategic plan of Tesco can be analysed as follows:
 Human Resources: Tesco will be required human capital to implement the planned
strategies and proper allocation of resources. Moreover, there is also need of other storage
systems internal systems and networks so that company can effectively manage its
resources.
 Risk Assessment and Mitigation strategy: Tesco is also requisite to make risk
assessment plan to address various issues which can affect its operations and functions in
the competitive marketplace (Ebrahimi, Ehsan and Nouri, 2013). With the assistance of
risk assessment strategies, like environmental scanning and etc. Tesco will be able to
mitigate it.
 Financial Resources: With the implication of proposed management strategy, potential
and current resources Tesco will arrange and manage its funds. The company will prepare
adequate budget which will assist it to plan the several activities, like marketing, sales,
promotional and advertising and others.
5.1 Compare core organizational values with current business objectives
Core organizational values concern with the vision as well as mission of the
establishment. The values basically covers all the values related with the ethical, social,
environmental and business aspects for attaining the long term objectives. Some of the core
values of Tesco are as follows-
 To understand and meet the requirement of their customers through providing them
quality products.
 To act responsible towards the community through engaging in the Corporate social
responsibilities activities (Morinaga, Svinin and Yamamoto, 2014).
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 To respect their workforce and staff as well as share required information and experience
with them.
 To offer greater quality products at the affordable prices so that customers can easily
purchase the required products.
 To reduce the wastage of food globally.
The above core values of organization mainly covers the ethical, social, business as well
as environmental aspect through which management of Tesco frame certain business objectives
(Sakieh, Salmanmahiny and Galdavi, 2015). All the core organizational values are linked with
the current business objective of Tesco that assists them to sustain in the long run. The objectives
mainly include targeting new customers through providing them quality products.
5.2 Develop appropriate vision and mission statements of an organization
Through assessing the core organizational values with the current business objectives of
Tesco PLC management engage in developing their appropriate vision and mission statement of
an organization (Brennan, J. and et.al., 2014). The developed mission and vision statement of
Tesco PLC is as follows-
 Vision statement- In order to attain long term success the vision plays significant role as
it provide benchmark that Tesco PLC must attain to succeed in the competitive
environment. The vision statement of giant retail firm is to grow and expand their
activities in the market (Balogun, Jacobs and Vaara, 2014). Along with this, another
vision of company is to earn loyalty as well as trust from the customers through
providing them quality products.
 Mission statement- From assessing the above organizational values the mission of
Tesco PLC is to deliver valuable goods to the customers in order to earn their loyalty. It
is consider as the key aspect of the organization that assists the Tesco in gaining purposes
through which they are directed to attain the success.
5.3 Future management objectives for Tesco PLC
For attaining the formulated vision and mission statement of retail organization manager
must focuses on producing future management objectives that assists them to succeed in the long
run (Hrebiniak, 2013). The future management objectives for Tesco are as follows-
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 Understand customers, competition and industry, and meet specific customer
requirements.
 Improve product, service, distribution channel and customer congruence.
 Provide an effectual environment or store layout to customers so that they may engage in
providing pleasant and easy to shop the required products.
 Grow the company by reaching new markets through new channel partners.
 Develop company values and culture (Yao, Zhao and Meng, 2014).
 Hire the best people.
The above produce future management objectives will support the Tesco to survive in the
competitive retail industry.
5.4 Measures for evaluating a strategic plan
Strategic plan within the organization is termed as a process under which management
focuses on developing the strategy as well as make effective decisions regarding the resources
that are required by the retail firm to attain the objective (Winch, 2013). Therefore, strategic plan
is being implemented to survive among the rival companies. In order to evaluate the
effectiveness of strategic plan there are certain measures that is adopted by the management that
are-
 Measuring profits/return: In order to evaluate the strategic plan within Tesco PLC
management must measures the return/profits that retail organization acquires. It is
defined as relative amount that company gains via investing within the company.
 Measuring financial performance: With the assistance of measuring the financial
outcomes, establishment can assess the effectiveness of strategic plan enforced in the
company to provide their products/services among the UK customers as well as
international customers (Johnston and Bate, 2013).
 Measuring satisfaction level of customers: Another measure that is been develop to
assess the strategic plan of Tesco PLC is through evaluating or measuring the customer
satisfaction levels regarding purchasing the products and services. They can easily
measure the satisfaction level through gaining response as well as feedback from the
customers regarding their products and services.
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6.1 Schedule for implementing a strategy plan
To implement devised strategic plan within the retail organization, the administration
needs definite planning procedure within the organization that assists them in adhering the
market demand in the industry (Lipitakis and Phillips, 2016). There is an effective schedule that
has been developed for implementing the strategy plan within the retail organization that include
different steps such as- Assessing organizational environment/arrangements- The foremost step in
implementing a strategy plan within Tesco PLC is assessing the organizational
environment that is internal as well as external environment (Chao, 2013). With the help
of assessing the environment management can easily develop their strategy plan
accordant with the objective of Tesco. Communication with stakeholder- Another step for implementing the strategy plan is to
communicate the arrangement with stakeholder so that they can render adequate service
accordant to the strategic plan that is developed by the Tesco. Framing time table for implementation- After that management of Tesco would frame
adequate time table for implementing the strategy so that they can properly execute the
strategic plan without any issue or error (Cvelbar and Dwyer, 2013). Scheduling time
table will also support the management in executing their strategy plan in the proper
manner.
 Assessing resources requirement- After framing the time table management would focus
on assessing the requirement of adequate resources within the organization so that they
can easily implement the strategy within the organization.
6.2 Appropriate dissemination processes to gain commitment from stakeholders
In order to gain commitment from the Tesco stakeholders management focuses on the
appropriate dissemination processes (Al-Turki, 2011). With the help of proper dissemination
process management can easily distribute the required informations to their stakeholders. The
processes include- Company website: With the assistance of authorized company website, through which
management can easily disseminate the information regarding their variety of products
and services that are offered in the market. Customers are the key stakeholders of Tesco
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PLC therefore it is essential for management to disseminate the information regarding
their products via their company websites (Allison and Kaye, 2011). With the help of
company website they will ensures covering vast geographical region and diffusing the
information among their different stakeholders.
 Cloud services: With the constant up-gradation of IT systems, management of Tesco
PLC can use video conferencing technique to circulate the information among their
different stakeholders that is customers, suppliers, investors and other stakeholders.
Retail firm can also transfer their video transcription to circulate the information to gain
the sincerity from their stakeholders.
6.3 Design monitoring and evaluation systems for implementation of strategic plan
For implementing the strategic plan within Tesco PLC manager must focuses on
designing proper monitoring system that basically include- Monthly strategy planning: The company must engage in planning the monthly strategies
under which company can perform different team meetings at monthly ground according
to their respective department (May, 2010). This can help management of Tesco PLC in
evaluating the execution of strategic plan so that they can easily identify the gap as well
as loop holes in the plan.
 Annual review meetings: Along with this, for evaluating the implementation of strategic
plan they can also design or implement annual review meetings on the yearly basis so
that they can easily evaluate the effectiveness of strategic plan (Wallace, 2006). With the
help of conducting annual review meetings it also assists them in gaining information
regarding their targets that need to achieved and they may change their plan.
CONCLUSION
Hence, from the above report it has been ended that strategic planning is consider as an
effective procedure of execution of business operations for attaining growth by systematic use of
resources. Above discussion concluded that good strategic preparation provides unique benefit to
the organization in the market, and it increase in attaining competitive advantages in terms of
development and expansion of t heir business activities in future. The firm has also measures
their own as well as strength and weaknesses of their competitors’ those are operating their
activities in the retail industry. Along with this, report also concluded that how company will be
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monitoring and evaluating the implementation of strategy plan as it gives a immense
consequence on the overall brand image of company.
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Online
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[Accessed on 26th August 2016].
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