Critical Analysis of Strategy
In this report on organisation behaviour and global management, the reference of Tesco Plc. has been taken through which critical analysis of the strategy adopted by the organisation will be discussed along with their competitive advantages. Further, identification of significant event which affected the organisation, the methods of mitigating the challenges which they faced through leadership capabilities, organisational culture and communication will be discussed. In addition to that the elaborate discussion will be made on the impact of organisation’s strategy on the challenge management as well as impact of the challenge on the organisation’s strategy (Aiello et al. 2020).
Tesco Plc. is one of the largest retail and supermarket giant in the United States which focuses on general merchandising and grocery retailing. The company aims for an organisation growth which can be witnessed through the number of strategic acquisition which they have conducted as well as expansion of their subsidiaries. Their business strategy is based on expansion through the combination of acquiring new stores, adapting to the demands of the customer as well as providing retail services. Tesco Plc. has further utilised the Ansoff Matrix in order to implement strategies such as market penetration, product development, market development and diversification strategy in order to expand their operations. Tesco expanded their business through market penetration which helped them increase their market share and utilise their current products. They have implemented this strategy through advertisement campaigns and competitive pricing strategy as well as providing additional and special offers on their products (Wood, Wrigley and Coe 2017).
Tesco further implemented market development strategy by selling their products in new markets such as they expanded into different countries. For instance, Tesco expanded through 750 stores in Thailand, however, some of their expansion strategy failed for the United States, South Korea, China and Japan markets. For the implementation of the product development strategies, Tesco Plc. has been offering a wide range of products under their own label as well as other third party products in the existing markets. They even sell and own their different version of the product in order to cater to a wider market segment. For the implementation of diversification strategy, the company initiated their grocery business and further diversified their business into the market of mortgages, credit cards as well as insurance products to the customers (Adjudicator 2016).
The competitive advantage of Tesco Plc. enables them to earn a huge amount of profit margin and growth, where the company can minimise their cost as well as decrease their prices because their services and prices are crucial aspects for the organisation which is the reason why they possess a well-developed logistics and supply chain system. They have the competitive advantage of cost leadership, which is referred to the concept when an organisation projects their products at the cheapest rate in the market as compared to their competitors (Ismail 2017).
In order to maintain such a competitive advantage, they towards achieving lowest cost for their product in the industry due to which they have been able to price the products in a competitive manner. Tesco Plc. has been controlling their operational cost in order to achieve cost leadership in order to able to adopt the pricing strategy where they can price the product low and earn a higher margin of profit. Some of the other competitive advantages which Tesco Plc. possess are diversification of their own brand, efficient supply chain management, making investment into digital program, unique advertisement campaign, and internationally expanding their operations (Awadari and Kanwal 2019).
Competitive advantages of Tesco Plc.
One of the major significant event which affected Tesco Plc. is the COVID-19 pandemic with respect to their profit margin as it has been reduced by almost one fifth compared to the previous year as the higher cost has been related to the COVID-19 pandemic, like hiring more number of staffs and offsets. The company earned a pre-tax profit in the year 2020 was about 835 million pound which is a fall of about 1 billion pound in the past year. There were additional cost which the organisation had to bear due to COVID-19 pandemic such as requirement for new hiring of employees and staffs for the staffs who have been affected due to the virus (Tesco Plc, U.K. 2022).
They hired more than fifty thousand temporary staffs during the COVID-19 pandemic and out of them twenty thousand of the staffs joined the organisation on a permanent basis. Further, the business organisation made promise of repaying the £315 million which they received as business rate relied back to the United Kingdom government and under such pressure where pay a dividend of about £315 million to their investors in the month of October. Other than that Tesco Plc. faces several other challenges such operations related problems where there has been rapid changes taking place within the retail grocery industry as well as technological development (James and Cooper 2022).
Tesco is facing challenges to make sure that quality customer service is provided and since their logistics system is highly human oriented, they are losing their sales values due to lack of effective logistics related strategy. The outdated logistics system does not allow the company to maintain an up to date stock information which further develops organisation complexities as well as conflicts with the management and business of Tesco Plc. In addition to that, Tesco Plc. faces market related challenges, where in the year 2017, they have been ranked as the second worst performer in the United Kingdom grocery and retail industry. They are also losing their market shares as well as revenue within the competitive market because they undertook certain risky international expansion decisions. Further Tesco Plc. faces strategic management challenges because discounters such as Aldi and Lidl are become the acceptable shopping places and in response to that Tesco Plc. has to invest £200 million for price cutting in response to the new entrants which has impacted the profit margin of the business organisation (Adamyk 2019).
Tesco Plc. has been presently undergoing challenges related to the COVID-19 pandemic, operational or logistic related, marketing related and strategic management related challenges. In order to mitigate these challenges, the company has decided to adopt such leadership strategy which will land a significant impact on environment and will make them an eco-friendly organisation. The changes in the leadership strategy had enabled them to achieve a collaborative growth and development for the company as well as the energy amount within the supply chain has found to be higher than their utilisation for their operations (Vitaloni et al. 2019).
Significant Event
Their organisational culture is one of their strongest forefront which supports their shaping of the work process, work relationships and work satisfaction within the company. Such enhancement in organisational culture has been witnessed due to the change in leadership position which is one of the crucial reason which results in long term success of the organisation (Lasserre 2017). Such initiative have helped the company to reduce their carbon emission from their supply chain by almost 30% by the end of 2020 and it even supported a significant growth of the customer franchise value. During COVID-19 pandemic, Tesco Plc. has changed their opening hours for their stores in order to serve the customers better and they have implemented double the number for Grocery Home Shopping during the pandemic and customers could book their shopping hours through their website (Vu 2016).
In addition to that, Tesco Plc. adopted strategies in order to provide safety to everyone who are associated with the organisation such as their colleagues and communities. Lastly, at the Tesco Plc. the manner in which they address their challenges is through board meeting where important information are communicate relating to the challenges which the company is facing as well as on the future plans for the growth and development of the organisation. They utilise the verbal communication as it enables them to communicate the crucial data and information in an easy and efficient manner within and outside the organisation (Monte 2021).
In order to mitigate the challenges of the COVID-19 pandemic, which hampered their sales, revenue and profit margin and the company will have to repay the relief fund which was provided to them. In order to do so they can consider the safety of their colleagues and customers, they have made sure to provide online deliveries as safely as possible where they have provided safety kits to the drivers as well as the self-isolating customers can order the same through their official website (Miao et al. 2020). They have also appointed additional workers during the rush hours in order to increase their sales and revenues. For their operational management, which is one of their critical operational strategies is to ultimately provide benefit to the customers. For the customer focus concept, the organisation has adopted low pricing policies as well as have introduced the Tesco Club Card for increasing the customer loyalty as well as establishment of the company, where they have been competing on the prices. They can further enhance their logistics system by including technologically advanced supply chain management software which will help the company to manage their production system, facilities, products and services, technology and resources (Mullins and McLean 2019).
In order to mitigate their marketing related challenges because of which their brand reputation has been hampered, they have adopted the marketing strategy through which they will appropriately and accurately target their targeted customer which will support them to well position their brand image in the market. Previously Tesco Plc. positioned themselves within the high volume and low cost retailers, although later it changes into providing low cost as well as premium range products under different range. Through their online services as well as e-commerce strategy, they can tackle their lower revenue margin as well as position themselves in the e-commerce market (Collins et al. 2020). Their sophisticated online strategy enables the customers to seamlessly conduct online shopping. Such initiatives from the company portrays their commitment to the convenience and value for the firm. Through their application they have provided the customers with the benefit of direct purchase as well as payment where options are provided them for either shop within the stores by scanning their products through their application or through online website or application, as it reduced the waiting time for the customers (Chumg et al. 2016).
Challenges faced by Tesco Plc.
The COVID-19 pandemic has impacted the business gravely as their profit, sales and revenue margin declined and the shareholder has to be paid with dividend that landed additional pressure on the management. For such a challenges, Tesco has implemented Human Right Due Diligence approach, for the human rights within the supply chain programme from where they source the third party products as well as their own brand’s products. Their framework of due diligence consist of five stages namely, risk assessment, prioritising as well as identifying leverage, mitigating the risk, remediating as well as grievances mechanism along with monitoring and communication (Kotabe and Helsen 2020).
For their risk assessment elements, there are five metrics to be considered which has the potential to enhance the worker’s vulnerability such as their origin country, work type, labour type, industrial, community or cultural issues as well as supply chain capabilities. For their element of prioritising as well as identifying leverage, they consider the risk factors and prioritise them for about three to five years and factors such as modern slavery, workers’ representation, that is, trade union formation, gender as well as sustainable livelihood for the small scale farmers and workers are considered. The third element is mitigating the risks through working in a collaborative manner with their suppliers, civil society, and industry in order to implement policies which will help them to mitigate the risks associated with human rights (Gillam and Cosford 2021).
Further, Tesco Plc. has been communicating their initiatives and brand through their initiatives during the COVID-19 pandemic such as they have changed their opening hours of their stores as per the convenience of their customers and have been stated on their official website. They have also increase the total number of Grocery Home Shopping slots where priorities slot are provided to the vulnerable customers as well as through quieter hours for those customers who prefer shopping in isolation (Somani 2021).
They have ensured online deliveries for the customers who are self-isolating as well as by following the related guidance by the Government, they are providing the necessary services. As a form of communication, the business organisation has been directly supporting the communities where they have donated £60 million worth of food to the charities and food banks for supporting their partners present at the Trussell trust and FareShare. Further, in order to mitigate their strategic challenges, the plan which they have adopted is to become efficient as well as reinvest their savings for the enhancement of the customers’ shopping trips, in order to further improve their sales and revenue margin (Huang 2021).
Conclusion
Therefore, in order to conclude this report on organisational behaviour as well as global management, it can be stated that Tesco Plc. is presently facing several form of challenges such as COVID-19 pandemic along with operational, marketing and strategic challenges which has been directly impacting their sales, revenue and profit margin. In order to improve the same they have adopted the strategies of implementing advantages technology within their supply chain management as well as taking several measures for mitigating the challenges due to the pandemic. They opted for online grocery delivery system through which they can increase their sales and revenue and at the same time ensure complete safety for their customers and colleagues.
References
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