Strategic Management Assignment Sample
1. Introduction
Tesco was founded in 1919 by Jack Cohen as he started to sell surplus groceries in East London. In 1931 the first Tesco store was opened in Barnet. The grocery company has expanded to the International platform since 1990 and the operation currently prevails in more than 13 countries across the globe. Further diversification of the organization in other areas such as clothing books, electronics furniture, financial services, toy petrol internet services, and Telecom started in 1960 (Moon & Bates, 1993). It is a General Merchandise and multinational grocery retailer which currently is a British-based Supermarket chain operating overseas. However, despite the consecutive success of Tesco, it is the ninth-largest retailer measured in revenues. The issues are also being faced by the companies due to decreasing quality of the products and services and different scandals that are ultimately eliminating the transparency in the operations among the consumer. As a result, the company is unable to understand the culture and trends and their differences in different countries.
2. Discussion
2.1 Poor customer service and the horsemeat scandal at Tesco: Strategic issues 1
2.1.1 Organizational and operational background
Tesco was the first retail organization that primarily focused on products including food and drink. However over the ear in order to satisfy the needs of the customer the organization diversified the services to Electronic clothing Telecom financial grocery and home shopping services and retailing (Hughes &Hodgkinson, 2020). Therefore the organization currently offers both services and products and it is a well-known retail shop for a low price. The don word shift is being faced by the organization due to its compromise in the products and services resulting in the poor consumer experience. It is a well-known fact that an organization can survive without low price maintenance within the market but with a lack of quality, survival is extremely difficult. Therefore for Tesco as well in order to survive within the international platform improvement of the quality is extremely important. It can help the organization not only to gain reputation but can also attract more consumers resulting in a positive effect on revenue generation and profit (Lin et al., 2020).
Whenever any consumer experiences the poor quality of services or products the services or products department of the company is mainly responsible to resolve the issue. With the help of the identification of strategic issues being faced by Tesco and the future implication or consequences, it will be able to build trust with the consumer and fuel the social media platform with positive word of mouth and effective marketing strategies (Rabetino et al., 2021). As the consumer complaints will be reduced the chances of returns and product complaints will also get reduced exponentially. It will also result in paving the way for producing greater revenue later.
2.1.2 Strategic issues of Tesco
The technological environment in the current era of globalization and Technical and hence maintenance is a variable that can be used for evaluating the available alternative technical capabilities of any organization (Brannen et al., 2013). Tesco has introduced RFID technology in order to enhance the in-store experience of the consumer but with the outbreak of the covid-19 pandemic, the in-store experiences tremendously shifted to online experiences. In order to improve the experiences of the consumer the company also made the digital Wallet service and the self-checkout service for making the experience of the consumer faster and more convenient yet the issues being faced by the company is leading to poor consumer services (Wenzel et al., 2020).
For example, the horsemeat scandal of the organization accounted for reducing the revenue generation for several months despite the technological and digital advantage of Tesco bringing greater extent of threat and issues for gaining the trust of the customer. Although the economic and political attributes are beyond the control of any particular organization, the disturbances or instability in such Framework can also affect the marketing mix and performance of any company (del Mar Alonso-Almeida &Bremser, 2013). Therefore the economic and political environment of the UK as well as its relation with the cross-border companies have also profound impact on the business growth and experience of the score contribute into the opportunity generation for the company which is extremely dependent on the current market of the UK.
Another significant strategic issue which the company has so far neglected is the changing trend of the customer with a healthy lifestyle and concerning low-calorie consumption (Rowley, 2007). As the work from home facilities are increasing across the globe due to the outbreak of the covid-19 pandemic and consequent lockdown as well as government restriction there for the calorie intake and healthy lifestyle for the Awareness of the people to have better food intake has increased. Therefore the organization needs to consider the change in the trend and behavior of the customer and the focus on increasing demand for organic food. As the social environment is extremely experiencing the influence of personality, lifestyle, and attitude of individuals therefore in order to proportionately deal with the attitude and belief of the customer the company needs to relate the demand for the services and goods accordingly. The consumer shopping trend is constantly changing and with an increasingly busy schedule of the people, faster delivery or even same-day delivery having efficient goods and product return policy or one-stop shopping is increasing (Direction, 2020).
2.1.3 Reason of strategic issues and implication
The skill of big store issues for Tesco has always underlined to associate with the renting out car parking space hiring Avis. If the organization had convenience store retailing and internet services it could have improved the refurbishment program and had not moved the dial on sale with which the radical surgery for Lewis might have been implemented. Time and again Tesco and management have been questioned about squeezing the supplier and unethical practices such as a repetitious expansion to maintain its prominence in the marketplace (Pitt &Koufopoulos, 2012). The accusation has now increased as the exposure and awareness have also increased with the social media platform. The aggressive growth strategy of the organization has now come back to bite and therefore continuous decrease in consumer trust and reliability has been observed every time Tesco or manager has been asked about the strategies of its expansion.
2.1.4 Overview of the relevant strategic decision taken up by the firm
From the above discussion, it can be identified that the business operation and logistic process of Tesco are facing tremendous challenges and the major challenges are being faced from the Rapid change in the technological development and retail grocery industry. As the organization has been facing to ensure the consumer services are adequate and quality the logistics services of the company are still human-related where other competitors are using advanced technology for improving the logistics services and delivering the products or services to the consumer (Palmer & Quinn, 2003). Comparatively the score is facing 30% fewer sales value than the competitors now and the ineffective logistics strategy and management of the organization are failing to maintain the information for stock appropriately.
As a result, complexity and organizational conflict are being created in the business and management of Tesco. The organization is now considered as the second-worst performer in the retail and grocery industry of the UK and based on the reports of 2017 the company is losing revenue and market share within the competitive marketplace. For example in the year 2016, the company lost 0.8 % of the overall market share and 2.7 % of the national revenue. While entering the US market the organization also made costly mistakes in the year 2006.
For example, the company opened a fresh and easy store in the market on The Wrong Side of the Road which resulted in the company failing in selecting the right and convenient place for the consumer. Similarly, most of the consumers in the UK are opting for discounters and the trend has now also become socially acceptable. In order to deal with the increasing competition the company cut 200 million dollar price and responded to the new entrants. In the current era of digitalization, the growth trend of convenience stores and the internet has extremely impacted the overall performance of the big stores and it can be stated that the big stores of the company are now becoming white elephants that the consumer are turning their eyes to on the internet and looking out for a smaller top-up shop that is more convenient and the relatively easier to opt for the services.
The objective or rather the old-school slogan of Tesco every little help is not now holding the superior position of the brand in the international market and as its competitors are consecutively changing the slogan such has Asda believes in everyday low prices and Sainsbury give the shopper with the ultimate trust of value and values that is reflected the individual business account of the companies. It can be identified that Tesco is neither maintaining the price nor the quality amongst the existing and extremely increasing competitive market place and the club cards of Tesco are also failing to achieve the goals in many cases in the cross-border Nations. As per the preliminary report of the score in the year 2017, the net income and operating income of Tesco decreased from 202 from 1072 million dollars in 2016 to 145 million dollars in 2017.
The challenges being faced by the Organisation in terms of human resource management are also not something to be neglected. The increasing staff turnover and inappropriate management of the organization to deal with the employees and internal stakeholders during the tough time of the covid-19 pandemic has affected the company to face unavoidable circumstances and consequences. Therefore the company has less concentration over the conventional academic qualification as the company mostly focuses on the right set of people to take the right position and providing in-store training and skill improves the performance and productivity.
In many developing nations, the organization has been reported to face skill shortages and gaps as it is unable to retain and attract talented graduates from the Marketplace. Apart from that many talented employees have also reported across different platforms that they are leaving Tesco in a very short period of time just to opt for elite benchmark in the curriculum vitae. The talented employees who are leaving the organization believe that the company is failing to recognize the individual contribution of such a stakeholder and it can be stated that the lack of Management practices and visionary leadership is the biggest weakness of Tesco right now. In terms of lacuna in the human resource management of Tesco, it can also be stated that the staff believe in the political games and land grabbing workplace culture of Tesco enabling the company to operate as an employer within the Marketplace that cannot offer the Employees appropriate environment to work.
2.1.5 Theoretical framework, Tools, and techniques
Agency theory is the principle that is used to resolve and explain issues in the relationship between the Agents of Business and the principles (Shapiro, 2005). The relationship is most common among stakeholders’ company executives as agents and the principal. As the theory attempts to resolve and explain the disputes over the respective priority of agents and the principal, therefore, relying on the transactions of the executive and agency the results however differ in terms of priorities and agreements (Eisenhardt, 1989).
With the identification of common interest in the priorities, the principal-agent problem is identified. Applying the theory to the strategic issue identified for Tesco it can be identified the better the tremendous drop in the share and sales of the score has caused a permanent impact on the share prices and profit of the organization. Concerning the decisions made by the executive and the impact on the internal stakeholder the organization failed in recovering the disappointment figure and a slow process of food retailing has been determined with limited effort to rebuild the stock profit margin and share prices.
2.2 Poor understanding of trend and culture in other countries: Strategic issue 2
2.2.1 Evaluation of the strategic issue
Market trend refers to the customer’s demand and expectations concerning their choice of products and services. The market trend provides information on the needs and wants of the customers in the market thereby defining their choices and preferences from the company. As per the words of Calof, Arcos & Sewdass (2018), it is essential for companies to understand and analyse the trends in the market so as to develop the products and services that matches the demands. In addition to this, it has been mentioned that this is a strategic context for business as trends help companies in positioning themselves in the market thereby attaining the attention of the customers. The view sheds light on an understanding that understanding trend is a strategic move of a company thereby assisting the improvement of the strategic performance and position in the market. Organisations have been observed to set up strategies that can help the firms in matching the trends in the market thereby improving the strategic position in the global market (Van Reenen, 2018).
Figure 2: Ansoff strategic matrix
(Source: Hanlon, 2021)
In this scenario, it has been found that Tesco, being a multinational firm, has failed to establish its market in many countries thereby failing to understand the trends (BV, 2020). Adding up to this situation, it has been found that concerning its establishment in the United States, the company followed the strategy of “fresh and easy” where the organisation decided to open various small and medium scale stores. Moreover, to establish the brand and obtain the attention of the customers, the firm has been found to set up specific strategy. Concerning the elements of the Ansoff matrix such as market development, market penetration, diversification and product development, it has been found that Tesco Plc has followed the strategy of diversification and market development for the expansion in the US as depicted above (Hanlon, 2021). Furthermore, it has been seen that as the expansion in the US has been a new growth strategy for the company, therefore, taking up new market strategies also fell essential.
Upon further analysis, it has emerged from studies that Tesco decided to offer the market consumers with fresh foods at an affordable price as the US had gone through a global financial crisis during 2007 and 2008 (Onikoyi, 2019). Furthermore, the organisation decided to keep low price strategy as the target audience of the firm has been the lower income group people and high poverty individuals. At the initial stage of its operations in the US market, the company had been found to have lower sales as US consumers at that time were found to trying their best to cope up with their financial standards which made them restricting their buying behaviour (Rosnizam et al. 2020). Tesco, in this context, has been found to fail in understanding the market trend in the US, which eventually led the company to close all the stores even after changing the strategy by offering discounts and coupons. Moreover, the company has been found to be overconfident about its strategy thereby neglecting the existing competitors in the US market.
On the other hand, in China, Tesco followed the strategy of understanding the customer base through the introduction of its loyalty programme reflecting the system of club card just like in the UK (Woohyoung, Kim, & Hwang, 2020). The company, in this regard, was found to fail in understanding the preferences of the customers in the market as they have been found to carry similar cards of other companies as well. Moreover, it can be stated that the acquisition strategy of Tesco has been an inappropriate one as the company has been misguided by the companies reflecting the weaker ability to understand customers. This had strategically affected the company thereby impacting its growth strategy which was negatively impacted due to the failure in expanding the business in global markets.
Culture, on the other hand, is one of the most essential elements that a company needs to understand while it is expanding its business to other countries. In the recent times of globalisation, where the global interconnectedness had increased, it has become essential for companies to understand the culture of different countries and plan a strategic move at the time of expansion. As per the opinion of Paul (2019), the element of culture is considered to be strategic as by understanding the culture of various countries, companies can market and develop the products as per the choice of the companies and improve their positions. In addition, it has also been mentioned that by understanding culture, firma are efficient in improving their recruitment and hiring process thereby creating job opportunities in the market they are expanding. This, in turn, can increase the engagement of the foreign employees and increase the number of customers. Following the view, it also came within understanding that if a company is capable of understanding the differences in culture and is able to develop strategy for marketing its products and services accordingly, then it can be beneficial for both the customers of the other country as well as the organisation.
In this area of discussion, it has been noticed that Tesco unlike its operations and strategies in the UK and Ireland, failed to understand the culture of the US and Chinese markets thereupon reflecting the overall failure of business expansion. It has found from several studies that the analysis of the market culture by Tesco concerning US has been found to be wrong reflecting wide cultural differences. As per further information, it has been seen that Tesco has launched its first store in the “west Coast of America” thereby opening up number of fast food outlets (Oniyoki, 2019). In this context, it has been found later that this has been a wrong decision of the firm as the market area and the customers have been highly interested into cars reflecting a car centric culture. This negatively impacted the market of the concerning firm thereupon depicting lower sales and customer engagement.
In addition to this discussion, it can be stated that failing to understand the culture of the US customers, the firm has reflected its inefficiency in the other market thereby decreasing its position. Moreover, this impacted the strategic performance of the company as well, as in the annual reports of the discussed organisation; the company had severely failed to showcase its position as the global firm due to lower market engagement. Furthermore, even in China, the company failed to analyse the culture of the Chinese people thereby not having a proper knowledge about their choices and interests (Dakhli, Ketata, Lifang & White, 2019). Moreover, the launching of the club card system like in the UK also failed in China as the mentioned firm has been weak in analysing the behaviour of the customers. In this situation, it can be stated that being a failure in understanding the overall culture of the two different countries, Tesco plc has been facing immense failure reflecting the strategic issue.
2.2.2 Current position of the firm
Relating to the above discussion of the strategic issue faced by Tesco, it has been found that at present the company has established itself as the leading global organisation thereby setting up the strategies for global expansion. As per the annual reports of the firm, it has been found that at present the company has been found to believe in business expansion through acquisition strategies of retail services and new stores in each of the country (TescoPlc, 2021). Moreover, the company has focused on adapting to the new needs of the customers thereby overcoming the previous challenges. The company has been found to launch its expansion strategy by establishing joint venture in the US, Asia and Central Europe (Tescoplc, 2020). Concerning the present aim of the company, it has been observed that the organisation has become full customer centric thereby focusing on the ways to improve their satisfaction level thereby having an idea on the cultural background.
Figure 3: Tesco stores globally over years
(Source: Bedford, 2022)
As per the above figure, the global stores of Tesco Plc at present have been depicted. In 2021, Tesco has been found to have 4673 stores worldwide, reflecting an increase of 60 stores compared to the year 2020, when the number of stores had been 4613 (Bedford, 2022). Furthermore, concerning the above graph, it can be stated that after 2014, with the closure of stores in the US and China, the company had been facing fluctuations in the global market. Moreover, due to the Covid-19 pandemic, the firm has been adversely impacted reflecting a temporary shutdown of physical stores in many countries. In this context, in 2021, the organisation has been noticed to overcome the market challenges and establish new stores thereby depicting the positive business expansion. Furthermore, the company has been found to presently operate in the US market and Asia apart from the UK and Ireland (Corporate.tesco, 2022). This significantly reflected the assistance of the strategies that the company utilised for reaching the current position in the global market.
On the other hand, the firm has been found to establish its operations in the global market following the strategic approaches of providing with increased retail service to the customers, along with the marketing of the products and services through online channel (). In this respect, it can be stated that due to the lockdown situation all over the UK and other countries, the company has been found to shift its operations to online, thereby connecting the customers through online services. This has significantly helped the firm in improving the experience level of the customers thereby meeting the demands of the customers in the market. Moreover, with the online services provided by the firm, it has been possible for the firm to even reach the customers through different channels such as social media platforms. Furthermore, the company has been found to incorporate digital technology, which has helped the company in evaluating the demands of the customers in other countries. In this context, with the help of machine learning technology, the company has been capable of accurately analysing the customer preferences in other countries, which essentially declined the chances of failure.
In this area of discussion, it can be thus stated that the strategies developed by the firm after its closure of operations in the US and China, has significantly supported the growth of internal stability of the company reflecting the capacity of making proper analysis. Furthermore, the company has been effectively efficient in improving its global position in the market with the implementation of the strategies reflecting its leading position in the global market as a supermarket.
3. Conclusion
The present study brings into conclusion the two strategic issues that Tesco plc has faced reflecting the issues such as horsemeat scandal, and the failure in global expansion. The study reflected that even after having advanced technology implementation and digital presence, the company had been found to fail in providing the customers with good quality products that impacted the firm’s revenue negatively. Furthermore, the firm has also been found to have increased turnover rate of employees thereby reflecting the issues between the management system and the employees. This has also strategically affected the firm thereby declining its performance in the global market. Moreover, the firm was found to fail in understanding the culture and trend of customers of other countries thereby failing in establishing its operations in China and the US market. On the other hand, it has been evident from the study that with the improvisation of the strategies, the firm has been capable of re-establishing its market in the other countries reflecting the opening up of number of stores globally. In this context, it can be stated that compared to the previous position of the firm, Tesco has significantly progressed in recent times thereupon reflecting the leading position in the global market.
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