Strategic Audit on Tesco plc free essay sample

Introduction: Tesco Plc is a United Kingdom based international supermarket chain. This report examines Tesco strategies, the reasons behind each component and how vision, aims and cultural value interrelate to make the strategies successful. Tesco was founded in 1919 by Jack Cohen from a market stall in London’s East End. Today it is one of the largest retailers in the world. There are currently a team of over 530,000 people, in 12 markets dedicated to bringing the best value, choice and service to their millions of customers each week. This level of success does not happen by chance. Tesco’s leaders have always set high standards and clear goals, never settling for anything less than the best. Today, they focus on doing the right thing for their customers, colleagues and the communities they serve. Tesco have always been committed to providing the best shopping experience. Jack Cohen (1919) Tesco Ireland: The Tesco businesses in Ireland have grown enormously since they entered in 1997; they are now the leading grocery retailer in the country with 142 stores. Revenue for 2012/2013 was â‚ ¬2,317. 5 million. Tesco are a major contributor to the Irish economy with an annual contribution of â‚ ¬2. 7billion. This includes â‚ ¬705. 8million a year exports to the Tesco Group, including shops in the UK, Central Europe and Asia. Irish exports to the worldwide Tesco Group represented 9% of the total value of Irish food and drink exported in 2010. . According to Nielsen market research, Irish customers have switched to cheaper grocery brands to save money, and are offsetting inflation by shopping â€Å"little and often†. In November 2011, Tesco Ireland opened the zero carbon Cabra store, which is the first zero-carbon supermarket in Ireland. Tesco Ireland is committed to supporting good causes across the country and since 2001 has raised more than â‚ ¬10million for its charity of the year. Tesco have also invested â‚ ¬15million in schools and clubs across Ireland through the Tesco for Schools and Clubs scheme (previously Computers for Schools and Sports for Schools and Clubs Schemes). Over half of all schools in Ireland have benefited from free equipment from Tesco since their entry into the market in 1997. Tesco’s ‘Every Little Helps’ philosophy puts customers, communities and employees at the heart of everything it does. It prides itself on providing a great shopping experience for every customer it serves, whether in stores, online or in its many other service provisions. Tesco Ireland is committed to buying local and supporting Irish suppliers. Over 11,000 Irish farm families supply their produce to Tesco, and every drop of our fresh, non-organic milk is sourced from Irish farms. And 100% of our fresh beef, lamb and pork comes from Irish farmers. We also encourage small community farmers via our Local Supplier Programme, which allows local suppliers to provide high-quality product to Tesco stores near them. Mission Statement, Values and Visions: The company’s mission statement reads, â€Å"Our core purpose is, ‘To create value for customers to earn their lifetime loyalty’. We deliver this through our values, ‘No-one tries harder for customers’, and ‘Treat people how we like to be treated’ †. Tesco is recognised throughout the world as the world leader in retailing. From Tesco’s main values, vision and strategy it is clear that the company will be market leaders in their selected markets but this will be done in a sustainable manner â€Å" in the creation of long-term value for all stakeholders on a socially and environmentally basis†. Tesco’s core purpose (mission) is simple: ‘We make what matters better, together. ’ Companies, like Tesco, that enjoy long-term success, are focused businesses. They have a core vision that remains constant while the business strategies and practices continuously adapt to a changing world. In an increasingly competitive global environment, without a clear vision a business will lack direction and may not survive. A vision is an aspirational view of where the business wants to be. It provides a benchmark for what the business hopes to achieve. Tesco is a company built around customers and colleagues. Its vision guides the direction of the organisation and the strategic decisions it makes. Tesco’s vision is: ‘To be the most highly valued business by: the customers we serve, the communities in which we operate our loyal and committed colleagues and of course, our shareholders. ’ Tesco is viewed as a modern, innovative and an inventive company. They are masters of company data, clubcard inventors, no other company has the analysis that Tesco has evolved. In any business, clear direction is vital. Our Vision guides the direction and the decisions we take as an organisation. Tesco is a company built around customers and colleagues, high-quality assets around the world and multiple opportunities for growth – and these characteristics are central to our Vision for the business. Tesco want to be the most highly valued business by: the customers they serve, the communities in which they operate, their loyal and committed colleagues and of course, their shareholders. Tesco’s vision has five elements which describes the sort of company it aspires to be. These are to be: wanted and needed around the world a growing business, full of opportunities modern, innovative and full of ideas winners locally whilst applying our skills globally inspiring, earning trust and loyalty from customers, our colleagues and communities. Tesco’s values are vital to its success, as shown in the quote below from Group Chief Executive Officer (CEO) Philip Clarke: ‘The Tesco values are embedded in the way we do business at every level. Our values let our people know what kind of business they are working for and let our customers know what they can expect from us. ’ Corporate Social Responsibility (CSR): Tesco is a community-focused global business. Corporate Social Responsibility (CSR) is at the heart of its operations. This commitment is referred to as ‘Tesco in Society’. In the competitive retailing world Tesco’s success relies on its values. They are not just a list of ‘good attitudes’ but the means to on-going success. Tesco’s approach to working with communities helps it stand out from its rivals. Its commitment to using its scale for good is demonstrated by Tesco’s ‘Three Big Ambitions’: To create new opportunities for millions of young people around the world. To improve health and through this help tackle the global obesity crisis. To lead in reducing food waste globally. These are underpinned by what Tesco calls ‘The Essentials’: We trade responsibly. We are reducing our impact on the environment. We are a great employer. We support our local communities. Philip Clarke summarises Tesco’s commitment to ‘living’ these values in the following statement: Tesco is an environment based on trust and respect If customers like what we offer, they are more likely to come back and shop with us again. If the Tesco team find what we do rewarding, they are more likely to go that extra mile to help our customers. By living the values we create a good place to work where great service is delivered. ’ These values drive everything Tesco does at every level and help make it different from its competitors. Market Share: An article published in the Irish Times on Tuesday the 1st of October 2013, stated the following interesting figures of the market shares of all retail competitors in Ireland. Tesco saw its dominance of the Irish grocery market slip in the 12 weeks to September 15th 2013, with its market share now standing at 26. 8 per cent, compared to a 28. 7 per cent share this time last year, according to research company Kantar Worldpanel. This is the twelfth successive quarter of decline for Tesco, which has lost significant market share to the discounters over the course of the year, he said. Its Tesco Price Promise campaign is clearly aimed at challenging the view that Aldi and Lidl are cheaper and it will be interesting to see the response from shoppers. (Independent. ie) Dunnes Stores and SuperValu meanwhile bolstered their share of the multi-billion euro Irish grocery market and now hold a 22. 1 per cent share and 19. 7 per cent share respectively. German discount retailer Aldi and Lidl saw respective growth rates of 24. 3 per cent and 13. 1 per cent during the 12 weeks to September 15th. David Berry, commercial director at Kantar and Worldpanel, said the build up to the Christmas period will show if the rival discounters can sustain their strong growth or if a ceiling is starting to be reached. â€Å"Their ongoing growth, combined with the improved performance from Dunnes, has placed pressure on Tesco. Its sales have declined by 5. 6 per cent, leading to a 1. 9 percentage point drop in market share,† he added. These above figures all illustrate a tough trading environment in the grocery market. David Berry, said that retailers own brands continued to appeal shoppers in face of depressed household incomes, growing at 2. 3% year on year, as shoppers focus on saving rather than spending, further demonstrating the importance of price to consumers. Competitors: Tesco is recognised throughout the world for been the world leader in retailing. The Tesco Group has one of the largest market shares in the world with an annual turnover in excess of 72 billion and excess to 14 countries. From these massive figures it is clear that the Tesco Group are in a powerful position in their area of business. The fact that Tesco Group is involved in sale of so many products and services means that the company may not have one main competitor but in fact would have a distinctive set of competitors across different product ranges and service areas in the different countries. Here in Ireland, Dunnes Stores and The Musgrave group, along with Aldi and Lidl would be Tesco’s main competitors in the retail market. On a world scale, Walmark and Carrefour would be Tesco’s main competitors and in the U. K, Sainsburys, Ms and Morrisons. One major strength that the Tesco Group has over its competitors is that they have procurement; they have the ability to source the highest standard of raw materials. Also in comparison to other food firms they have the capital to invest large sums of capital into RD and they have the capabilities to obtain the newest and best technology on the market. Example: In Ireland they have advanced technology in Self Service equipment compare to their competitors. Strategic Decision: Tesco came up with a â€Å"Price Promise Plan† to beat the leading competitors Aldi and Lidl. When you shop at Tesco, they’ll check your basket against the prices at Aldi and Lidl. If the cost of the comparable groceries within your shopping is cheaper at Asda, Sainsburys, Aldi or Lidl, they’ll give you a voucher for the difference (up to â‚ ¬10). This incentive tries to prove the lack of differences between Tesco and its competitors. Tesco also continues to expand its range of non-food items as it moves into higher-margin goods and services. Tesco are trying to stay market leader against Sainsburys in the UK. (Anthony Henry) Tesco mobile was launched in 2007, they were the first Irish supermarket to introduce this new incentive, and it has proved to be very successful. Tesco started creating good rivalry against the other networks, such as o2, Vodafone, Meteor within Ireland. Vouchers: Tesco expects to dish out around 13 million vouchers over the next year to customers, which will be worth between â‚ ¬10m and â‚ ¬13m. (Independent. ie) Core Values: Tesco’s core values include a commitment to using its scale for good by being a responsible retailer. Tesco’s continuing success depends on it reassessing and formulating clear business strategies. Tesco aims to improve customer loyalty and its core UK business in order to help it develop the shopping experience for its customers. It committed ? 1 billion to an investment programme to achieve this. Strategies to improve competitiveness were then developed. The driving forces behind these strategies are price, quality, range and innovation as well as delivering great multichannel customer service, for example, through its ‘Click Collect’ service. Tesco’s continuing success depends on it reassessing and formulating clear business strategies. Tesco aims to improve customer loyalty and its core UK business in order to help it develop the shopping experience for its customers. Strategy: A strategy is a plan which sets out how a business deploys its resources to achieve its goals. The company’s values set the tone for the decision-making process. In May 2011, Tesco committed ? 1 billion capital and revenue investment to improve the shopping trip for customers. It set out a seven part strategy designed to achieve its goals of being highly valued by customers and enjoying strong long-term growth. The table shows the main elements of this strategy. Monitoring and evaluating performance: Strategy, vision, values, aims and objectives are meaningless if their impact is not monitored and evaluated. Tesco uses a range of methods to collect data and evaluate progress against targets. It uses its Clubcard scheme, along with telephone based research and an online panel of customers, to determine what customers want and how satisfied they are with Tesco’s performance. Its Executive Committee assesses the progress of large-scale strategies. All of its business units have ‘stretching targets’ which are aspirational targets for certain KPIs. The performance of all business units is monitored continually and reported monthly to the board of directors. The following table shows how Tesco monitored its performance against targets using KPIs for the 2012/13 period. These KPIs are used to assess current performance, make comparisons with previous performance and help managers respond when targets are not being met. For instance, following investigation, an explanation for narrowly missing the staff training target was given: ‘Although narrowly missing this target, Tesco have also heavily invested in our colleagues in the UK this year through our ‘Building a Better Tesco’ plan. More than 250,000 colleague’s in-store have received customer service training, with additional technical training for 36,000 colleagues. ’ Monitoring healthy options for customers and colleagues supports Tesco’s commitment to helping employees and customers make healthy choices and lead healthier lives. In a revolutionary scheme, using data from its Tesco Clubcard, it has developed a healthy little differences tracker. This measures the health profile of a typical shop by measuring the nutritional value of what customers buy. This will be used to set targets to improve customers health by comparing how the profiles vary across different groups in society and how healthy initiatives impact on customers shopping over time. Macro environment: A SWOT analysis of Tesco shows the strengths, weaknesses, opportunities and threats facing the company. Strengths: Tesco’s strengths in grocery retail allow it to compete easily with companies like SuperValu, Aldi, Lidl and Dunnes Stores. This has led to its brand name and financial power becoming strengths in themselves. The introduction of Tesco Express and Tesco Metro show led to strength in flexibility. Profits for Tesco’s operations in Europe, Asia and Ireland increased by 78% during the last fiscal year. The company has a strong brand image, and is associated with good quality, trustworthy goods that represent excellent value. Tesco’s innovative ways of improving the customer shopping experience, as well as its efforts to branch out into finance and insurance have also capitalized on this. Tesco Personal Finance reached the milestone of one million motor insurance policies, making it the fastest growing motor insurance provider ever in the UK. Long Established history in grocery market. Staff with long number of year’s service with vast experiences. Tesco online: Tesco. com is the world’s biggest online supermarket. With millions of households globally using the company’s online services, the company has a strong platform to further develop this revenue stream. Weaknesses: Some of the products are priced high, compare to competitors, such as Aldi and Lidl. Large amount of fossil fuel used in its transport networks. With increasing oil prices, Tesco need to keep a close eye on transport costs. Opportunities: The main opportunity for Tesco, as for all companies, is in the online arena. Tesco has already had many online successes, having turned the Amazon threat into an opportunity by selling books at lower prices. Tesco biggest problem in pursuing possible opportunities is deciding exactly which ones to pursue. A nice position to be in! Health and beauty: Tesco’s health and beauty ranges continue to grow, and it is currently the fastest growing skincare retailer in the market. The company has a volume market-leading position in both toiletries and healthcare and is number one retailer in the baby goods markets. Across all health and beauty ranges Tesco continues to invest in price to deliver the value customers have come to expect. Threats: Possible threats to Tesco include fluctuations in the stock market and tax increases. Huge competition in the grocery market place – customers looking for savings instead of expense. International expansion: International growth is expensive. Entering new markets with a new brand requires heavy investment and marketing, as well as land prices and extra distribution and operation expense. Tesco’s debt may increase before it begins to decline. Human Resource Management: HRM is regarded as up and downstream activity, covering everything from recruitment to management development. The company aims to increase the number of training schemes and further develop its recruitment programmes so to pass on to the customer the benefits of a well recruited, well trained staff, not the costs. Tesco continues to invest in customer service, where training is also linked directly to pay, so the staff are motivated to learn, and are encouraged to improve their approach to customers and service provision quality. A career at Tesco means working for a company that puts people first –â€Å"be they our customers or our colleagues†. (Tesco. ie) Rachael Jones is the store manager in Coventry Arena, UK. She states how she thinks â€Å"Tesco will never let themselves stand still and will never get to the point when they think its good enough. Tesco will keep continuing to listen to its people. They will keep asking the customers what they want, no matter whom they are or what part of the world they come from. They are constantly trying to raise the bar for themselves†. Marketing and Sales: Marketing and sales are placed under downstream elements of the value chain within Tesco. Clubcard gives further discounts and loyalty for the customers. However, Tesco may also decide to attract more customers by advertising via radio, local newspaper and national T. V. e. g. the â€Å"lower prices† advertising campaign or more discounts offers. With a more customer sophistication and their awareness of ethical business practices, it may give the company some constraints in terms of selling environmentally friendly products. In return, Tesco can take it as an advantage and provide customers with more of the recycling points and include information in their advertisements, adding value for customers who will believe that by choosing to shop at Tesco, people are helping the environment. The Management of Tesco stores: Without the management and their stewardship, Tesco group would not be where it is today. Tesco’s management recognise the key role that its mission, vision and strategies play in its success and use a range of key performance indicators (KPIs) to monitor and evaluate its performance. A company can have all the money in the world but without the right expertise in charge of it, it would all go it waste. On the weekend of the 12th of October, I met Enda Shortt; he is a grocery manger in Tesco Carrick On Shannon, Co Leitrim. He explained to me that the management teams within the Carrick on Shannon store are the most determined bunch of people he had ever met. He continued to say that you can see all their ambition to see Tesco achieve further market success. They are all dedicated and motivated about their jobs. They ensure that the adequate resources are in place to enable the store can meet the needs of their stakeholders (shareholders, employees, customers, etc). They are committed to the company becoming more successful and face the further with confidence. They let their employees have their opinion and reward them for good work. Enda discussed with me that management are spending more time monitoring the financial aspect of the store and cutting down on expenditure where possible. They are getting advice on new technology available and are investigating in new projects which they feel will make the store more competitive and more efficient in terms of saving money and energy. They are budgeting constantly, and carry out stock takes on a weekly basis. Enda finished by stating that, â€Å"the management are doing a brilliant job and are committed to achieving their objectives and getting results. Tesco need strong leadership to continue to develop and successfully face the challenges with competitors and take the right opportunities in the future†. The Board and Executive Committee: The Tesco board currently comprises the Chairman, Sir Richard Broadbent, two Executive Directors and seven independent Non-executive Directors. (See Appendix: Figure 5) Key Facts: Financial Facts: ? 72. 4 billion group sales and ? 3. 5billion trading profit before tax. Global Facts: 530,000 employees worldwide and 6,784 stores. UK Facts: 310,000 colleagues in the UK and 3,146 stores in the UK. Tesco Bank: ? 1. 0 billion revenue and ? 191million trading profit. Europe: ? 9. 3billion revenue and ? 329million trading profit. Asia: ? 11. 5billion revenue and ? 661million trading profit. UK: ? 43. 6billion revenue and ? 2,272 million trading profit. Problems they face in the future: I believe that Tesco will face a massive downturn in profits within the next 3 to5 years. Competitors such as Aldi and Lidl seem to be increasing their market share at a rapid speed. Tesco have introduced the â€Å"Price Promise† to help them match their differences compare to their competitor’s brands but I feel this is not a good, strong strategic plan. To remain the number 1 retailer throughout the globe, Tesco will have to implement expensive marketing tactics and plans. Conclusion: The setting of a clear vision is central to Tesco’s success, supported by a commitment to establishing and monitoring specific objectives and devising strategies to ensure these are achieved. All aspects of the business are regularly monitored and, when necessary, plans are adapted to ensure targets are ultimately met. At the heart of all Tesco does is a commitment to being a responsible retailer.