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Tesco's Strategic management

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Introduction

I.0 INTRODUCTION The food and drink retail sector represents the largest industry in the UK, providing employment for over three million people in primary production, manufacturing and retailing. In 2003 retail accounted for 9% of gross domestic product (Datamonitor, 2003). In recent years UK supermarkets have come under increased scrutiny over their treatment of suppliers, particularly of own-label products, yet the development of strategic supply networks has been an integral part of most supermarket strategies for the past decade. The report below provides an insight into the supermarket company, Tesco, with emphasis on its external environment analysis and company's analysis of resources, competence and culture. Two future strategic options are suggested in regards to the resources based strategies. Tesco is one of the largest food retailers in the world, operating around 2,318 stores and employing over 326,000 people. It provides online services through its subsidiary, Tesco.com. The UK is the company's largest market, where it operates under four banners of Extra, Superstore, Metro and Express. The company sells almost 40,000 food products, including clothing and other non-food lines. The company's own-label products (50 percent of sales) are at three levels, value, normal and finest. As well as convenience produce, many stores have gas stations, becoming one of Britain's largest independent petrol retailers. Other retailing services offered include Tesco Personal Finance. 2.0 INDUSTRY ANALYSIS: PESTEL FRAMEWORK 2.1 Political Factors Operating in a globalized environment with stores around the globe (Tesco now operates in six countries in Europe in addition to the UK; the Republic of Ireland, Hungary, Czech Republic, Slovakia, Turkey and Poland. It also operates in Asia: in South Korea, Thailand, Malaysia, Japan and Taiwan), Tesco's performance is highly influenced by the political and legislative conditions of these countries, including the European Union (EU). For employment legislations, the government encourages retailers to provide a mix of job opportunities from flexible, lower-paid and locally-based jobs to highly-skilled, higher-paid and centrally-located jobs (Balchin, 1994). ...read more.

Middle

5.3 Cultural Web Cultural web theory application (The cultural web theory is also an effective analysis for management in order to represent the underlying assumptions linked to political, symbolic and structural aspect of the company) is a useful tool in considering the cultural context for Tesco's business. Culture generally tends to consist of layers of values, beliefs and taken for-granted actions and ways of doing business within and outside the company. Therefore, the concept of cultural web is the representation of these actions taken for granted for understanding how they connect and influence the strategy (Veliyath and Fitzgerald, 2000; Johnson and Scholes, 2003). It is also useful to understand and characterise both the company's culture and the subcultures in adaptation of future strategies. Culture can be analysed through the observations of how the company behaves, including routines, rituals, stories, structures and systems. This presents the "clues" about the taken-for-granted assumptions. Tesco has a very friendly and supporting approach in the routine ways that staff at Tesco behave towards each other, and towards those outside the company that can make up the ways people do things. The control systems and measurements are constantly under the management review to monitor the efficiency of the staff and managers' decisions. The rituals of the company's life are the special events, corporate gatherings, which Tesco emphasises what is particularly important and reinforce the way things are done. On-going meetings and communication at every level of the company's hierarchy represent a strong internal environment. 6.0 TESCO'S STRATEGIC OPTIONS: GENERIC STRATEGIES Generic Strategies are characterised by an individual retailer's response to the industry structure. For a giant retailer, such as Tesco, to obtain a sustainable competitive advantage they should follow either one of three generic strategies, developed by Porter. The first strategy of cost leadership is one in which Tesco can strive to have the lowest costs in the industry and offer its products and services to a broad market at the lowest prices. ...read more.

Conclusion

Part-time workers in the multiple retail sector: small change from employment protection legislation?, Employee Relations, Vol. 16 Issue 7, pp.43-57; Clarke I., Bennison D. and Guy C. (1994) The Dynamics of UK Grocery Retailing at the Local Scale, International Journal of Retail & Distribution Management, Vol. 22 Issue 6, pp.11-20; Datamonitor Report (2003) Food retail industry profile: United Kingdom, January; Datamonitor Report (2003) SWOT Analysis Tesco PLC, July; Datamonitor Report (2003) Company Profile: Tesco PLC Analysis, October; De Toni A. and Tonchia S. (2003) Strategic planning and firms' competencies: Traditional approaches and new perspectives, International Journal of Operations & Production Management, Vol. 23 Issue 9, pp.947-976; Drejer A. (2000) Organisational learning and competence development, The Learning Organization: An International Journal, Vol. 7 Issue 4, pp.206-220; Finch P. (2004) Supply chain risk management, Supply Chain Management: An International Journal, Vol. 9 Issue 2, pp.183-196; Flavi´┐Żn C., Haberberg A. and Polo Y. (2002) Food retailing strategies in the European Union. A comparative analysis in the UK and Spain, Journal of Retailing & Consumer Services, Vol. 9 Issue 3, pp.125-138; Graiser A. and Scott T. (2004) Understanding the Dynamics of the Supermarket Sector, The Secured Lender, Vol. 60 Issue 6, November/December, pp.10-14; Johnson G. and Scholes K. (2003) Exploring Corporate Strategy, 6th ed., Prentice Hill: London; Lindgreen A. and Hingley M. (2003) The impact of food safety and animal welfare policies on supply chain management: The case of the Tesco meat supply chain, British Food Journal, Vol. 105 Issue 6, pp.328-349; MarketWatch (2004) Company Spotlight: Tesco, Datamonitor, September; Mintel Report (2004) Food Retailing -UK, Retail Intelligence, Nobember; Myers H. (2004) Trends in the food retail sector across Europe, European Retail Digest, Spring, Issue 41, pp.1-3; Palmer M. (2004) International retail restructuring and divestment: the experience of Tesco, Journal of Marketing Management, November, Vol. 20 Issue 9/10, pp.1075-1101; Porter M. (1980) How Competitive Forces Shape Strategy, The McKinsey Quartely, Spring 1980, pp.34-50; Ritz (2005) Store wars, Business Review, Vol. 11, April, pp.22-23; Veliyath R. and Fitzgerald E. ...read more.

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