Strategic Planning Assignment

Assignment front sheet Assessor name

Learner name Ragy Abdel Alim Ahmed Ahmed

Dr. Khaled El-Sakty

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Completion date

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13th of June 2015

25th of July 2015

23rd of July 2015

Qualification

Unit number and title

Level 7 BTEC Advanced Professional Certificate “Strategic Management and Leadership”

Strategic Planning

Assignment title Strategic Planning for Tesco

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Action Plan

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Learner declaration I certify that the work submitted for this assignment is my own and research sources are fully acknowledged. Learner signature:

Date: 23rd of July 2015

MBA ROUTE - ALEXANDRIA

Strategic Planning

Strategic Planning Assignment “Strategic Planning For Tesco”

Assignment Date: 25th July 2015

Prepared By : Student No. :

Ragy Abdel Alim Ahmed Ahmed EGY0514

Tesco is a British multinational company (MNC), headquartered in Hertfordshire, United Kingdom (UK). Tesco was founded by Jack Cohen in 1919, a small stall in East End of London selling surplus groceries. Today, Tesco owns over 7,817 stores worldwide with total number of employees over 517,802, serving tens of millions of people per week (Tesco, 2015). It is the world’s 3rd largest retailer with stores in 14 countries all over the world, including China, India, Malaysia, Korea, America, Ireland and Slovakia (Tesco, 2013). Tesco sells a wide range of products and services, such as fresh foods and groceries items, electronics, clothing, household items and financial services. Tesco aims to expand its business scope and diversify internationally in pursuit of a strong and sustainable long-term growth. Accordingly, its corporate vision and key strategic objectives are; to grow the UK market, and to be a successful international retailer in-store and online (Tesco Plc., 2013). Tesco’s growth strategy is international expansion and diversification, let’s go through the tasks to develop Tesco Strategic plan.

Task 1 Section 1.1: - Explain the importance of external factors affecting an organization. Section 1.3: Analyse the major changes taking place in the external environment that will affect strategy. The word environment means the surrounding atmosphere and conditions for existence. It is very important for organisational leaders to know and understand the environment before they start doing business. -

The environment & the organisation exists in the context of a complex political, economic, social, technological, environmental (i.e. green) and legal world. This environment changes and is more complex for some organisations than for others. How this affects the organisation could include an understanding of historical and environmental effects, as well as expected or potential changes in environmental variables. Many of those variables will give rise to opportunities and others will exert threats on the organisation – or both. A problem that has to be faced is that the range of variables is likely to be so great that it may not be possible or realistic to identify and understand each one. ” (Johnson, Scholes & Whittington, 2008)” Figure 1, Source “leoisaac.com/planning/strat016.htm”

The environmental factors that affect the business plan, and are divided into two main groups: a. External Factors b. Internal Factors Page 1 of 33

Each factor can be divided into several sub factors; I will focus the external factors affecting Tesco’s plans and examine each factor and its importance.

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The Table below illustrates the important aspects of the external environment in which the business operates. The business cannot control these factors and can only respond to them as needed. The main problem for business managers is to be able to respond to changes in the external environment as required and to have the ability to respond and analyse the available data, and this depends on how soon any change is identified.

Factor Economic conditions

Market (competition)

Technology

\

Legal

Media Political

Demographic

Figure 2, Source “leoisaac.com/planning/strat016.htm”

Importance The current economic condition of nations affect the spending pattern of the people, high interest rates and unemployment will reduce the amounts of spending schemes and vice versa. Also the global economic conditions have great influence on organizations. The strength of business competition is a constantly changing factor in the external business environment. Competitors always change marketing strategies, product lines and prices. These changes are always impacting the other competitors and may cause great harm as such managers need to keep eye on rivals’ strategies. Tesco main competitors in UK are Asda, Sainsbury’s, Morrisons, Aldi & Lidl. Technological changes have affected dramatically the designs and packing of goods, the stores presentation the surveys. e-stores are now expanding and Tesco has been involved and developing online services. Climate change will not have the same impact on all businesses. But Businesses that depend directly on a good supply of water such as grocery sector will be adversely effected. Taxes are one of most clear changes through legislation. Sometimes taxes on imported goods or reductions have great impact on strategies and may benefit or harm competitor products. Advertising is shifting from newspapers to online and Tesco is coping with the change. Like law, changes in governmental policies may change with or without warning. As an example of how government policy has an effect, is that many organisations depend on government financial assistance, such assistance can disappear or can increase. There is constant change in the population. Some of these changes include an increasing proportion of elderly citizens, increasing number of two-income families, the age at which people marry is increasing, increasing ethnic diversity, and suburbs which were once dominated by young families now have few. These demographic changes can have a significant effect locally. For example, a sport club which once prospered can begin to decline as the local area has less and less children.

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In order to analyse Tesco’s competitive capabilities in the external environment a SWOT (Strength, Weakness, Opportunities and Threats) analysis is performed:

Strength Weakness High brand value in the UK market, Quality Complete dependence on UK market is products and using new ways to create great one of their major weaknesses for Tesco. shopping experience for customers helped them in increasing brand value Tesco online process- Tesco offers online Serial acquisitions and debt reduction services to their customers and it is one of the best ways to generate revenues. Leader in UK market- Tesco is recognized Low customers switching cost. as the best grocery items retailer in UK markets. Gradually Tesco marketing shares are International expansions depend on UK finance. improving all over the world.

Opportunities Concentrating more on non-food retailing

Threats Strong competitors in market such as Asda Growing as skincare retailer (Health and Expanding its business to the beauty) international level could be very expensive. Focusing on international growth. Overseas profits may fall Price war between UK retailers may impact profits used to finance expansions in international markets.

After reviewing the SWOT analysis is clear that Tesco runs an Open system that interact with other systems in the external environment, unlike closed systems which have relatively little interaction with other systems or the external environment.

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Accordingly we can examine how Tesco responds to major changes in the external environmental factors:

Factor Economic conditions

Market (competition) Technology

Climate change

Legal

Response Stable economic conditions in UK, a slight increase in sales value, Asian markets sees great opportunities as life style and economic conditions improving Tesco is investing and expanding rapidly in Asian markets. Competition in UK is very strong and other players are gaining more market shares and Tesco trying to improve shopping experience and implementing loyalty programs to hold or increase market shares. Developing and enhancing online services to fulfil customer needs and expectations is an essential concern as this sector is seen as a huge area of development. Reducing carbon emissions and wastes is a key target to serve the plant and comply with strict regulations by governments in forth coming years. New tax regulations in Hungary affected Europe net profits are one of most clear changes through legislation. Sometimes taxes on imported goods or reductions have great impact on strategies and may benefit or harm competitor products. As well as opening hours in South Korea, Tesco to develop online services there to make up for constrained opening hours.

So we can see how Tesco as an open system organization is affected and responded to changes in the external environment changes. In my opinion I think that Tesco are trying to catch up with all changes and are modifying strategies according to external factors ahead or inline with changes.

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Section 1.2: -

Analyse the needs and expectations of stakeholders of an organization.

First we need to define the term stakeholder in order to identify their expectations and needs from the organization. A stakeholder is a person, group or organisation that has an interest in the organisation. Stakeholders have needs and expectations and can be internal or external to the organisation.

Figure 3, Source “figures.boundless.com/13782/large/stakeholder-28en-29.png”

I.

Internal Stakeholders

1. Employees & Managers

2. Owners

Influence on Strategic Decision - Significant investment in training, development and incentives, including Executive Committee Talent Cycle, Talent Planning, Leadership Development and succession planning for future needs of the business. - Pay, pension and share plan arrangements help attract and retain good people. - To keep a successful - Expansion plans in new markets. business and achieve - Tactics to increase brand values are sustainable growth. developed. - Create highly valued - Pricing strategies to increase market brands. share. -

Needs & Expectations Secure job. Career Development Annual bonus. Pension plan.

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II.

External Stakeholders

1. Suppliers

2. Shareholders

3. Customers

4. Society

-

Needs & Expectations Long Term relationship Increase Business Good trade Rewards Return on investment

- Meet Customer expectations - Introduce new services - Retain loyalty - Provide new Jobs - Charity

-

-

-

-

5. Government

- Follow regulations

-

6. Creditors

- Collecting loan payments

-

Influence on Strategic Decision Cost of supplied products and taxes incurred to suppliers affect the pricing strategy. Good rewards means good strategy, if not a strategy modification is required. They are the key part in any plan and all strategies are based on satisfying customers and gaining benefits from satisfying there needs. Expansion plans provide job opportunities Participation in local community activities and giving back to community is a part of any plan. Taxation rules impacts the pricing strategies. Opening hour’s regulations will affect profits and accordingly affect pricing and profits. Reduce carbon emissions Amount of debt and ability to pay instalments, gives opportunities for expansion plans through more loans.

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Task 2 Section 2.1: -

Use appropriate tools to analyse the effects of current business plans.

Section 2.3: -

Evaluate the competitive strengths and weaknesses of an organisation’s current business strategies.

There are many tools to be used to in strategic planning process: 1. SWOT analysis 2. Porter’s Five Forces. 3. Boston growth-share (BCG) matrix. The SWOT analysis was conducted at Section 1.1 & Section 1.3, and in order to identify the current competition, so we will conduct five Porters analysis

Tesco Strategic plan was to achieve the following: 1. To grow the UK core: during 2012 & 2013 UK stores continues to increase from 3,146 stores to 3,378 stores and in 2014 a difficult decision to close 43 unprofitable stores and not to proceed with plans for 49 new stores as a result of declining market shares and pressure on profits due to price war between retailers. Page 7 of 33

2. To create high value brands: Continue to introduce new fine product brands. 3. To be outstanding International Retailer: to expand in international markets, stores in Europe and Asia continue to increase. 4. Grow retail services in all markets: Sales values continue to increase despite of decreasing market shares and sliding profits, USA business was totally dropped in light of continuing loss. 5. Build Teams to create more value: Number of employees continues to increase and personal development plans remains in force. Reviewing annual performance indicates sliding market share in UK and drop of net profits on annual basis, accordingly the expansion plans was affected and new expansion halted, unprofitable stores to be closed. Price war continues and losing market share to rivals like Aldi and Lidl which are the largest market share improvers.

Based on these outcomes Tesco changed most of the board members and committee heads during 2014 in order to review strategies and implement new plans to regain market share and boost profits. It is obvious that discounters like Aldi & Lidl are gaining the fastest market share gain while Asda & Sainsbury posted their market shares but at little margins.

Figure 4, Source “i.dailymail.co.uk/i/pix/2014/09/22 /1411373060890_wps_18_Scale_of_challenge_facing.jpg

In my opinion Tesco must slow down expansion plans all over the world, expand only in markets with promising profits, concentrate their efforts to match discounter’s prices and reduce salaries and benefits given to executives. In the following task a detailed review of Tesco market position will be conducted

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Section 2.2: -

Review the position of an organisation in its current market

Tesco position in different markets is reflected from profits at different markets, Tesco has been losing profits in UK, Asia and Europe while USA business was dropped due to several years’ losses, by comparing Tesco revenues and profits we can spot deficiency in both as follows:

Figure 5, Source “Tesco Annual Report 2013”

Figure 6, Source “Tesco Annual Report 2014”

Figure 7, Source “Tesco Annual Report 2015”

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Figure 8, Source “www.cityam.com/sites/default/files/1-custom/content/141022-tesco-empire-3.jpg”

Also Tesco shares value dropped as a direct impact of profits and revenues decline, as extracted from Tesco 2015 report Tesco suffered from decline in all markets in terms of shares “review Figure 4 for UK market” accordingly strategic development for Tesco plans is going by new management. But in terms of leaders Tesco is still leading the market in most markets” refer to Figure 5 & 6”, so in order to review the strengths & weaknesses in current markets.

Strength Weakness High brand value in the UK market, Quality Complete dependence on UK market is products and using new ways to create great one of their major weaknesses for Tesco. shopping experience for customers helped them in increasing brand value Tesco online process- Tesco offers online Serial acquisitions and debt reduction services to their customers and it is one of the best ways to generate revenues. Leader in UK market- Tesco is recognized Low customers switching cost. as the best grocery items retailer in UK markets. Gradually Tesco marketing shares are International expansions depend on UK finance. improving all over the world. In my opinion Tesco in order to regain the profits they have to reduce total costs, reduce investments in all markets, reduce costs incurred by top management “salaries & benefits”

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Task 3 Section 3.1: -

Use modelling tools to develop strategic options for an organisation.

In order to develop strategic options different modelling tools or frameworks can be used, all frameworks have the following characteristics: a. There is no right and wrong framework b. There are many frameworks that may fit any industry c. All frameworks are based on 4 principles (Analysis, formulation, Execution, Evaluation) Applicable Frameworks such as: 1. Porters five forces analysis This tool is more likely used to identify strategic position of an organization against other market rivals, as it accounts for the following: (a) New Entrants: which are considered a new threat that can decrease your market share. (b) Supplier Power: which can impact the organization during her buying of materials and directly impact final product cost which to be supplied to the target customer. (c) Buyer Power: This can impact the firms’ targets if customers decide not to use such product. (d) Competitive Rivalry: this is focused on the competition between big firms, and this also posses how each organization markets her products and how it modifies products to reach customer satisfaction. (e) Substitutes: This accounts for the switching cost between similar products. After describing what this method stands for it is evident that it can be more used when making a qualitative evaluation of a firm's strategic position and is better used at same business levels, and will not be so helpful when generating a marketing plan to ascertain growth based on market development plan. Refer to section 2.1 & 2.3 for the porter analysis carried out for Tesco. 2. SWOT analysis This tool is used to define Strength(S), Weakness, Opportunities and Threats that can face any organization: Strengths and Weaknesses: These are the internal factors within an organization, so it can show strength like good reputation of the organization and wide range of products to sell, weakness can be low switching cost.

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Opportunities and Threats: These are external like the opportunity to be present in new markets or benefiting from a new regime that gives advantage to my products, threats would be the rivals or changing patterns of clients. After describing what this method stands for seems that it evaluates the internal and external parameters affecting the organizational current objectives and current goals, which means it is more useful to be used as a control tool rather as a development tool. Refer to section 1.1 & 1.3 for the SWOT analysis carried out for Tesco. 3. Ansoff Matrix This is a tool for studying growth opportunities, and as Tesco target is to impose growth it is the most suitable tool in order to study the areas of growth, this tool offers four growth areas: (a) Product Diversification: this is achieved by introducing new products in the existing market; this will impose direct costs to introduce this new product to new markets which is the most risky option. (b) Product Development: this is achieved by introducing new products in the same market. (c) Market Penetration: this is achieved by trying to obtain a bigger share for an existing product by increasing the awareness of such product or improving the design or the packing of this product and can be all. (d) Market Development: this is achieved by creating new markets for an existing product and expanding the market. This is a very helpful tool which focuses only on markets and products this is why it is preferred and was a good selection, if a perfect mix between products and markets achieved be certain the growth is achievable. Market Driven SAFEST

Existing Markets

Product Driven

Existing Products

New Products

Market Penetration

Product Development Use the base of existing products to grow. For example once a range of products has been established , new types of products can be developed within that range such as introducing new discounted products to compete with other discounters or new Fine products to competitor with other similar products. Market Development Seeking to create or develop new products, or product ranges for new markets.

Trying to take a greater share of an existing market with an existing product.

This could involve product re-launch or increasing brand awareness. Product Diversification Finding or creating new markets by targeting new New Markets parts of the market or by expansion into different markets.

MOST RISKY

In my opinion Tesco has to develop products within the current markets as well as products diversification and to expand in online sales and to reduce direct costs. Page 12 of 33

Section 3.2: - Develop a comparative understanding of activity from organisations in the market. In order to develop the comparison between organizations in the market we have to bencmark Tesco to other competitor such as Aldi which can be used as a way of understanding how an organisation’s strategic capability, in terms of internal processes, compare with those of other organisations. There are different approaches to benchmarking: Historical benchmarking: Organisations may consider their performance in relation to previous years in order to identify any significant changes. Industry benchmarking. Insights about performance standards can be gleaned by looking at the comparative performance of other organisations in the same industry sector or between similar service providers against a set of performance indicators. Best-in-class benchmarking: Best-in-class benchmarking compares an organisation’s performance against ‘best-in-class’ performance – wherever that is found – and therefore seeks to overcome the limitations of other approaches. So in order to benchmark Tesco against a rival that is grapping market shares from bigger UK retailers which is Aldi, we will consider the following in our comparison:

1. Organization Structure & Management 2. Outlets Location

3. Selection of goods

4. Pricing Strategy 5. Service

6. Supply & Stock

7. Quality 8. Packing

Tesco Shareholders accounts for business direction and drive the company towards profits in focused on short term gains. Open stores at expensive costs to be near and in the heart of cities and towns. Offers in excess of 40 thousand products with 8000 considered as core products Slash prices to compete

Aldi A family-owned business, meaning that it doesn’t have to report to shareholders, allowing them to take a more long-term strategic view. Found it tough to afford suitable sites inside the major cities, limited area shops Offers only about 2500 product

Maintain price differences with major four. Offers shopping experience Limited number of products, No with diversity of products , loyalty programs, Cash only is online shopping ,loyalty accepted programs, Credit cards accepted - Keeps stocks of every thing( - Stock to be minimum (make to make to stock) order) - Fair prices to suppliers - Lowest prices are paid to suppliers Offers quality products Offers low prices Big and Bulky and comes in Minimum packing, standard sizing different sizes depending on for maximum utilization of shelves supplier. and pallets. Page 13 of 33

So it is clear that Tesco offers much more good things in the shopping experience but they are losing on the other hand the prices war, high management costs and expensive expansion plans has impacted the pricing strategy leading to the repetitive loss in market share and profits in UK. Lots of people drops the quality and the shopping experience as long they save money, shopping at Aldi can save up to 35% of the total costs rather than shopping at Tesco. Tesco needs to increase the performance in order to regain market share and to compete in terms of prices, Performance parameters are: 1. Productivity 2. Quality 3. Utilization 4. Efficiency and effectiveness

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Section 3.3: - Create options to form the basis of future organisational strategy In order to identify the options for future organizational strategic options Ansoff analysis for Tesco’s options was performed in Task 3.1 also is presented here: Market Driven SAFEST

Existing Products

Product Driven New Products

Market Penetration

Product Development Use the base of existing products to grow. Trying to take a greater share of an For example once a range of products has existing market with an existing been established , new types of products Existing product. can be developed within that range such as Markets introducing new discounted products to This could involve product re-launch or compete with other discounters or new Fine products to competitor with other increasing brand awareness. similar products. Product Diversification Market Development Finding or creating new markets by Seeking to create or develop new products, New targeting new parts of the market or or product ranges for new markets. Markets by expansion into different markets. MOST RISKY

From the options we can see that the most risky is to start market development, accordingly the feasible options are to start penetrating the market and developing the current products. These options require competing in prices and gaining customers from all other competitors. Accordingly Tesco strategy in 2015 is “to regain that total focus on serving customers. We have refocused our business under three operational headlines: 1. Listening to, understanding and reaching out to customers to create the best possible offer. 2. Working with growers and suppliers to make great products, and helping to deliver the best value to customers. 3. And working across different channels to get those products to customers in the most convenient way possible. Their aim is to make sure everything in the business is set up in the most efficient way to create value for customers. By refocusing on these three areas – and with the capabilities, reach, insight and skills we have within our business – we are uniquely placed to deliver the best offer we can and in doing so earn our customers’ loyalty. By creating value for our customers, we will create sustainable value for our shareholders too.” If we look back to compare to 2013 strategy, the strategy was: 1. 2. 3. 4. 5.

To grow the UK core To be an outstanding international retailer in stores and online To be as strong in everything we sell as we are in food To grow retail services in all our markets To put our responsibilities to the communities we serve at the heart of what we do. Page 15 of 33

6. To be a creator of highly valued brands 7. To build our team so that we create more value The vision was “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” The mission was ‘We make what matters better, together.’ the 2015 mission “To be the champion for customers – to help everyone who shops with us enjoy a better quality of life and an easier way of living.” When we look at 2013 vision and link it to 2013 strategy it focused on expansions through introducing new products and brands as well as increasing number of branches, also the mission focused on achieving goals together with the customers. 2015 Mission and values focus on work to be done b Tesco to keep loyal customers and to offer them the best experience and service which a major shift of Re-Engineering the mission statement to reflect the correct image. The values also focused on customer feed back and satisfaction by offering the best service and products by communicating with customers and suppliers, Tesco introduced the “Tesco Supplier Network” to achieve the most smooth relation with suppliers fulfil the customers satisfaction. As a result of these changes Tesco 1Q results are promising and reveal that Tesco is back on track.

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Task 4 Section 4.1: -

Propose a suitable structure for a strategy plan that ensures appropriate participation from all stakeholders of an organisation. Any strategic plans has to undergo several steps, the following steps are the normal procedure to develop a strategic plan: 1. 2. 3. 4. 5. 6. 7.

Introduction Mission , Vision & objectives Strategy Analysis Implementation Control Conclusion

These steps are formulated through the 3 main stages covering the whole Strategic Plan Process: 1. Strategic Analysis. 2. Strategic choices. 3. Implementation In order to ensure appropriate participation from all stakeholders during the strategic choices that may impact stakeholders, a Stakeholder analysis to identify the level of interest, participation First identify the stakeholders: a. b. c. d. e.

Government Suppliers Customer Investor Employees

Second identify the stakeholders Interest Level: a. Government: Government has low level of interest by the change Tesco brought into service. b. Suppliers: Supplier as internal stakeholder has high level of interest of what change has brought into Tesco. c. Customer: Customer has low level of interest of what Tesco has changed within the organization, and has high level of interest by changes in service and prices. d. Investors: Investor who put the money in Tesco has high level of interest by the change has happened. e. Employees: Employees as internal stakeholder has high level of interest of what change has brought into Tesco.

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Figure 9, Source “https://mpconsulting.files.wordpress.com/2011/02/picture-22.png”

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Section 4.2: -

Develop criteria for reviewing potential options for a strategy plan.

During the construction of any Strategic plan, there are multi options to choose; from the options for any plan could be expansion, retention, change pricing strategy and differentiation, etc. From Tesco 2015 report we found that Tesco strategic direction is based on three major directions: 1. Regaining competitiveness in core UK business 2. Protecting and strengthening the balance sheet 3. Rebuilding trust and transparency In order to assess the options for every direction the following 18 points have to be used each in the relevant area to review the potential options: 1. 2. 3. 4. 5. 6. 7. 8. 9.

Reviewing options Attractiveness to stakeholders; Stakeholder participation; Criteria for judging options; Feasibility studies; Risk assessment; Reviewing additional recent material; Cost-benefit analysis; Consistency with organisational values;

10. Effects on market position and share; 11. Costs and investments; 12. Opportunity costs; 13. Scenario planning; 14. Simulation modelling; 15. Sensitivity analysis; 16. Balanced scorecard approach; 17. Globalisation and internet advantages; 18. Resources issues eg (financial, workforce)

So let’s see how each direction can be reviewed 1. Regaining competitiveness in core UK business This can be achieved by 4 tactics (Service, Range, Availability and Price), accordingly the following measures can be used to identify the improvement in each tactic. a. Service: 4,652 new colleagues in customer-facing roles. These colleagues should be gaining feed back from customers regarding their shopping experience and needs. Measure: Customer feed back, Footfall, earnings. b. Range: Customers get confused due to so many products, the products to be reduced and enhance the packing, this to be performed in conjunction with suppliers. Measure: Customer feed back, inventories tracking, lower prices offered by suppliers. c. Availability: Tesco gave more space to the top 1,000 lines in each store. Measure: marked improvements in product availability at peak times during the day. d. Price: Tesco want to make the most important products to the customers as affordable as they can. Tesco has dropped prices on hundreds of branded products and essential ownPage 19 of 33

brand products. Tesco is also committed to simpler, lower and more stable prices wherever we can. Measure: Customer feed back, Footfall, earnings. 2. Protecting and strengthening the balance sheet In order to improve the balance sheets the following actions to be performed: a. Cost Savings: Tesco have identified cost savings across the Group of £400m. Tesco have also taken a difficult decision to close 43 unprofitable stores in the UK, and not to proceed with plans for 49 new stores. These decisions have been difficult but have been made to put the needs of the business and customers first. Measure: Saving £400 million. b. Spending: Savings in rewards and salaries as well as other spending shall account for £1bn. Measure: Saving £1 billion. c. Pension fund: Tesco have started a consultation to replace our defined benefit pension scheme for all colleagues. Tesco is committed to protecting the pensions that colleagues have earned, and also to continuing to provide a competitive pension scheme for all colleagues. Measure: Protecting and providing competitive pension schemes. d. Property: Tesco have undertaken a detailed review of our property portfolio, including the leases which drive our £1.5bn annual rent bill. As an example of this, Tesco have completed an asset swap with British Land to regain sole ownership of 21 superstores, increasing the proportion of owned stores within our estate. Measure: Savings in leases and increasing properties value. 3. Rebuilding trust and transparency a. New management: who are transforming our commercial model to create long-term, mutually beneficial partnerships, with a greater focus on cost prices than on the commercial income we receive back from suppliers for promoting their products. Measure: Reduction of costs incurred to suppliers. b. New Code of Business Conduct: supported by a company-wide training programme to help colleagues follow key policies. Measure: Number of trained staff. c. A speak-up culture: with a stronger focus on ethics and compliance. Code compliance and ethical leadership are now key factors in performance management and reward. In addition, we now have protector lines for both colleagues and suppliers, so any concerns with business conduct can be raised confidentially. Page 20 of 33

Measure: Raised issues count and feed back from all concerned parties. d. Restoring trust: is not just about process and structure. It’s about culture and individual actions. In the same way that every colleague holds the key to better customer service, so every colleague can help us to be a better active corporate citizen. Measure: Footfall, Loyalty card usage.

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Section 4.3: -

Construct an agreed strategy plan that includes resource implications

Task 5 Section 5.1: -

Compare core organisational values (ethical, cultural, environmental, social and business) with the current business objectives of an organisation

Section 5.2: -

Develop appropriate vision and mission statements for an organisation

Section 5.3: -

Produce agreed future management objectives for an organisation

1. Introduction 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. Tesco’s core business was retailing in the UK, which provides 60% of all sales and profits in 2012/2013 and dropped to 33.60% in2013/2014. Tesco has the widest range of food of any retailer in the UK.

Clearly, for a number of years, the global retail market has been highly competitive. We were losing market share in our critical home market and the growth momentum we had enjoyed internationally had faltered. The channel shift to online and convenience presented both challenge and opportunity, but the bottom line was that we had stopped growing. Alongside these issues is a deeper challenge of trust. For customers to choose to shop with us, they have to place their trust in us – on price, quality, service and brand. But over a number of years, we’ve seen a gradual erosion of that trust for a number of reasons. Earning that trust back is fundamentally important to Tesco. We will do this not by any quick fix or short term initiative, but rather by continuous and lasting changes in what we do and how we behave.

2. Mission , Vision , Goals & Objectives Tesco has set a new Mission statement “To be the champion for customers”, this statement shows strive of the organization to regain customers satisfaction and loyalty. a. What we do? b. For whom do we do it? c. What is the benefit? Tesco has a fixed Vision statement “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” Page 22 of 33

Tesco Vision has five elements – each of them describes the sort of company Tesco aspires to be: a. b. c. d. e.

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: a. No one tries harder for customers. b. We treat everyone how we like to be treated. c. We use our scale for good. Tesco Corporate Social Responsibility (CSR) is at the heart of operations, its commitment to using its scale for good is demonstrated by Tesco’s ‘Three Big Ambitions’: a. To create new opportunities for millions of young people around the world. b. To improve health and through this help tackle the global obesity crisis. c. To lead in reducing food waste globally. These values drive everything Tesco does at every level and help make it different from its competitors. Tesco Objectives are: a. To maximize sales and with doing so increase their profits. b. Decrease their prices. Tesco aim to make shopping cheaper for the average household. They aim to do this by cutting prices and offering more in store deals. c. Introduce more healthy eating products into the wide range of groceries they supply. The advantage of introducing more healthy living products is that Tesco will; attract many more customers that are interested in healthy eating products. d. Tesco aim to develop a large Internet shopping site. Tesco aim to provide groceries, electronics and clothing goods as well as a number of their services online. Tesco are aiming to develop the online shopping experience, if they are successful in doing so they may attract many more customers which will help them achieve objective a e. To provide jobs to their local community. Tesco aim to reduce the unemployment in local areas where Tesco Stores are built. 3. Strategy A fresh start with our reach, our footprint, our skills and capabilities, we are perfectly placed to lead and offer this kind of service. When I look at our business, I see a sea of opportunity. What we need to do now is unlock the potential which exists within Tesco – and to do that, we need to do some key things differently. “Dave Lewis, Group Chief Executive, Tesco report 2015” Tesco has always been a champion for customers. It’s in our DNA. The last few years have been challenging, but we are confident that if we get back to doing an unbeatable job for customers, our best days lay ahead, Tesco set out our three strategic priorities: 1. Regaining competitiveness in core UK business 2. Protecting and strengthening the balance sheet 3. Rebuilding trust and transparency Page 23 of 33

Other strategies are still ongoing 4. 5. 6. 7. 8. 9.

To be an outstanding international retailer in stores and online To be as strong in everything we sell as we are in food To grow retail services in all our markets To put our responsibilities to the communities we serve at the heart of what we do To be a creator of highly valued brands To build our team so that we create more value.

Figure 10, Source “https:// manishabraham.com/documents/controlling/tescoplc-balancescorecardfortheyear-2013

4. Analysis Various analysis tools were used in the previous sections to demonstrate the advantages and disadvantages that leads to the strategic decisions. And then updates the strategy according to analysis findings. 5. Implementation Once strategy is set and finalized, Tactics to be put in action: a. b. c. d.

Pricing Tactics: to offer completive prices. Closure of non profitable stores: in order to strengthen balance sheet. Postpone Expansion plans: in order to strengthen balance sheet. Training of staff: to rebuild trust and enhance the shopping experience.

Resources are assigned in budgets estimation sheets to achieve the previous goals. Page 24 of 33

6. Control KPIs and Balance Score Cards are used in order to evaluate the outcomes after implementation, and continous intervention to update tactics and strategies which can be changed according to changes in the external environment. 7. Conclusion Tesco is committed to delivering an effective business strategy that involves: • • • •

Costs reduction. Strengthen the balance sheets. Regain market share. Reduce debt.

Tesco as a most successful high profile supermarket retailer in the UK and one of the world's leading international retailers has generated its core organisational value with its current business objectives. Ethical value with objectives: Tesco as the one of the giant supermarket has very strong Ethical value with its stakeholder. It has 58% of suppliers around the world say they are satisfied. Tesco works with suppliers as part of the goal of restoring trust and transparency.

Cultural value with objectives: Tesco as most successful supermarket has the objectives of creating a beautiful place to work for everyone, 70% of staff would recommend Tesco as a place to work. Tesco has 23% of board directors are women. Developing more local leaders in each country remains a key priority. Environmental value with objectives: Tesco has more accountability of practising environmental issue. It is very responsible on environmental impact. It has got the plan of reducing carbon dioxide emission decreased by 4.3% compared to last year, and 40.9% since 2006/07, surpassing our 2014/15 annual reduction target. It has set up a target of become zero - carbon business by 2050.

In order to develop Mission and vision statements, I propose a modified mission statement to reflect the care to customers, suppliers, staff, environment & shareholders “To be the best for our customers, partners and environment.” Regarding the vision “To be number 1 in all activities we do and give all stakeholders the most out of the business.”

In reference to future objectives, Tesco future management objectives are: 1. Tesco to be no 1 as a international retailer within 10 years 2. To have 50% of the UK core business by next 5 years 3. To be successful in non-food as successful in food. (Mobile, Insurance, electronics) by 2020. Page 25 of 33

4. To be recognised by community of what we do by regular contribution within next 5 years. Objectives must be SMART: Tesco should implement the objectives with SMART. The SMART stands for Specific: Tesco management future objectives should be based on Specification of what Tesco need to do. Measurable: Appropriate measure must be taken in order to implement the objectives. Achievable: The objectives must be based on the potentiality of being achieved. Realistic: To avoid the unprecedented acts Tesco must place its objective on realistic. Time based: To be competitive in the market locally and internationally Tesco must utilise the objectives on time and should have proper time frame.

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Section 5.4: -

Develop measures for evaluating a strategy plan Tesco as one of the multinational high profile supermarket need to develop some measures for evaluating strategic plan. The evaluation of strategic plan is to be placed on specific elements. The strategic plan for Tesco: The area of strategic plan is consist of Environment, Communities, The responsibility of buying and selling products, Healthy choice for consumer, employees and managers. •

Environment

Tesco sets Carbon dioxide emission to reduce by 2020 30% and 100% by 2050; currently Tesco is ahead of their plan. Figure 11, Source “Tesco PLC “

This is a specific measure & target. Tesco targets to reduce food wastes, and the measures shows that wastes at each category is as follows:

Figure 12, Source “Tesco & Society “ review 2014

•

Community

Tesco need to work for the local community to involve them with Tesco, Tesco provided £18m raised for Diabetes UK, also 685,000 children have learned about food through Tesco Eat Happy Project In the relative time consume. Tesco's community programme needs to carry out in locally in deferent culture in deferent country in order to benefit by the local people while experiencing the international. Tesco need to have a strategy Fair Trade Model when buying and selling the products. •

Job

Tesco need to employ more women at the high level position for not being discriminated In the comparative market time by next five years

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•

Health

Healthy Choice for customer: To carry out the policy of providing healthy choice Tesco need to impose a strict rule of selling Alcohol. It should focus on encouraging customer to eat more healthy food in order to avoid the risk of bad and embarrassing health. KPIs & Balance score cards can be used to assess other levels achievements regarding the balance sheets, profits, market share, footfall, loyalty cards usage and suppliers feed back. Samples of KPIs used by Tesco are extracted from Tesco Plc 2013 Annual report

Figure 13, Source “Tesco PLC – Annual Report 2013

Figure 14, Source “Tesco PLC – Annual Report 2013

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Task 6 Section 6.1: -

Develop a schedule for implementing a strategy plan in an organisation During setting the strategy plan targets time frame must be set and followed to review the progress of each target whether on, ahead or behind schedule. Tesco plans sets some timeframes for different targets, these targets are divided into short, medium and long term targets. Here we will demonstrate some scheduled strategies by Tesco:

Short Term (1 year) -

Lower operating expenses by 20%- 2016 Increase gross profit by 10% -2016 Increase revenue by 15% -2016 Increase profits to £700 million-2016 Increase turnover by 10%-2016 92% capacity utilisation rate – 2016 50% increase in the customer satisfaction index – 2016 Increase average employee training hours to 8 hours annually. - 2016 20% increase in employee satisfaction index- 2016

Medium Term (1 year to 5 years) -

40% increase in the employee engagement level- 2020 15% increase in Return on Investment by 2016/2017 15% in Return on capital employed 2016/2017 £300 million increase in Economic value added by 2018 50% decrease in process waste levels – 2020

Long Term (5 years and more) -

Tesco sets Carbon dioxide emission to reduce by 2020 30% and 100% by 2050

It is obvious from reviewing various reports issued by Tesco that they are responding to external environmental changes and updating their goals, objectives and strategies accordingly to keep their competitive advantages and always showing their attention to the environment, customers and other stakeholders.

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Section 6.2: -

Create appropriate dissemination processes to gain commitment from stakeholders in an organisation We know that we can’t achieve our ambitions alone. We need to work with our stakeholders to make sure we use our scale and expertise to contribute to society, as well as to find out what we are already doing well and where we can improve. (Tesco and society 2013) During 2013 Tesco have stepped up our engagement programme by engaging with over 50 leading stakeholders, both at a national and an international level, to assess our existing work and, using their insight, to shape and steer our strategy to use our scale for good. Many of them had worked with us before, but some we were meeting for the first time. We’ve heard that many stakeholders feel that corporate responsibility has not been sufficiently core to our business in the past. Many others feel that our engagement with them has been inconsistent and that we weren’t always as open and transparent as we could have been. We know our stakeholders want us to be more collaborative, to share more of our expertise and data and look to work more in partnerships with other organisations. (Tesco and society 2013) Accordingly Tesco have taken the following actions to gain commitment from different stakeholders and assure good communication in both directions for the sake of good order. Customers Tesco success is based on serving the customers in the best way they deserve; there are different channels through which Tesco engages with the customers through: 1. Twitter 2. Calling centre 3. Customer question times Colleagues Tesco have a scale for good website where colleagues to stay connected with colleagues where they can submit ideas on how the business be better. Investors There is dedicated investor relation team meets with the investors regularly. Annually Tesco ran an investor and analyst day to share business vision with the investment community. Industry Tesco always get in touch with experts and obtains feedback from campaigns regarding the way to reduce food waste. Tesco collaborates with industry experts to improve the defrosting and CO2 emissions

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Suppliers Tesco have a professional team that deals with the suppliers as well as the new supplier web based network. Suppliers can give feedback through partner viewpoint questionnaire.

Other groups We regularly respond to Government consultations on a wide range of topics and we have given expert evidence to public working groups and inquiries. We also seek the expertise of academics from many of the world’s leading universities.

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Section 6.3: -

Design monitoring and evaluation systems for the implementation of a strategy plan in an organisation Strategic plan must Have SMART objectives. Tesco has set specific objectives that can be accurately measured during the progress. Reviewing various Tesco reports over the past years shows that they had an excellent track of the progress along through the preset monitoring systems. There are many types of monitoring system. Which are: Goal based Evaluation In order to implement the strategic plan set up a goal based on evaluation in Tesco. Goal base evaluation is a way to monitor the progress during implementation. Outcome based evaluation After completing the implementations the outcome of the outcomes are evaluated to assess how the objective was fulfilled. Regular reports Set up a monitoring team those will submit the report on regular based to identify whether the Strategic plan are taking place or not. Meetings Regularly based meetings with different stakeholders to show outcomes of the strategic plan as well as gaining feed back from other parties to update the plans accordingly. In order to remain in the market place implementing and analysing of the strategic plan is very important for Tesco to adapt. The strategic plan is the continuous and gradual approaches of applying in to the company. Tesco as one of the most successful international retailer it should follow the strategic plan to be more competitive among the rivals.

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References 1. Strategic Planning Handouts. 2. Gerry Johnson, Kevan Scholes & Richard Whittington (2008) Exploring Corporate Strategy. 8th edition 3. Tesco Annual Report 2012 4. Tesco Corporate Responsibility Review 2012 5. Tesco Annual Report 2013 6. Tesco and society 2013 7. Tesco Annual Report 2014 8. Tesco and society 2014 9. Tesco Annual Report 2015 10. Tesco Our corporate responsibility update 2015 11. https://www.aldi.co.uk/ 12. http://www.mikeanthony.me/retail/aldi-winning-the-retail-battle/#.VauL4_nzrIU 13. https://www.scribd.com/doc/48002603/Strategic-Planning 14. http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11362881/Tescotries-to-rebuild-relationship-with-suppliers.html 15. http://www.ibqh.org/unit-2-strategic-planning 16. http://www.ukessays.com/essays/business/external-factors-of-environment-affectingorganisations-business-essay.php 17. http://www.ukessays.co.uk/essays/business-stakeholders-shareholders tesco.php#ixzz3fkr4qlkp 18. http://www.ukessays.com/essays/management/strategic-management-and-leadership-attesco-management-essay.php 19. http://www.thegrocer.co.uk/companies/tescos-2020-vision/121683.article 20. http://www.africakibs.com/tesco-balanced-scorecard/ 21. http://www.en.wikipedia.org 22. http://www.leoisaac.com/planning 23. http://www.quickmba.com 24. http://businesscasestudies.co.uk 25. http://smallbusiness.chron.com

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