The Case of Tesco and Asda

 

The Case of TESCO and ASDA  

In the case of TESCO, their main competitor is ASDA. The competition is tight between the two food retail companies as well as with others like Sainsbury. ASDA is owned by Wal-Mart the largest grocery chain in the United States. They are known for  low priced items. This is one of the reasons why people tend to go to their stores for  their shopping needs. When they expanded in the United Kingdom, they brought with them their cost leadership strategy. This resulted to the same success that they have in the United States. However, TESCO was able to thwart ASDA last year. How was TESCO able to overtake ASDA? 

  According to (1985), a business positions itself based on its strengths and strength are categorized into two ± cost advantage and differentiation. Furthermore, when these strengths are applied in either a narrow or a broad sense, it will result to three generic strategies ± focus, differentiation and cost leadership strategy. Of the three generic strategies, cost leadership strategy played an important role in the achievement of TESCO¶s competitive advantage over ASDA.  

Cost leadership strategy means that the company is the low cost producer or  provider of a certain quality item in a given industry. This kind of strategy is being implemented for two reasons and achieved through two ways. The first method and reason is to sale items at average industry price so that the company will be able to be more profitable compared to rivals. The second method and reason is to sale the products at below average industry price in order to gain market share. According to (1985), a company that has the ability to produce or offer less costly products will be able to remain profitable for a longer period. It is important to note that this strategy targets a broad market. 

These conditions were used by ASDA to their advantage and the results showed that it worked for them. TESCO is operating under the same conditions as ASDA. Theoretically, the cost leadership strategy should work for them too. When TESCO implemented the cost leadership strategy, they were able to prove that the theory is

 

correct. In 2005, The Grocer published that TESCO was able to increase their market share from 26.8 percent to 29.1 percent percent (cited 2005) . However, if TESCO and ASDA were operating under the same condition how TESCO able to overcome ASDA just by implementing implementin g cost leadership strategy? It must must be remembered that TESCO has always been a UK based grocery and they have been operating longer in the region compared to ASDA. This means that have an established market base before the entrance of ASDA. When the latter entered the scene, they were able to capture some of TESCO¶s customer due to cost leadership strategy. Therefore, when TESCO implemented the same strategy they were able to regain their lost customers.  

Conclusion 

Based

on the above discussion, it is clear that competition allows business

organization to plan strategies that will allow the company to gain a lead and thus improve their services or products, which are both, beneficial to the company and the consumers. In order for this to be achieved, the company must know who their  competitors are as well as the strategies that their competitors implement in order to gain profit and market share. Acquiring these details allows companies to formulate their own strategies or copy the strategies of their competitors, which ever is more beneficial. The importance of competition analysis and strategic marketing planning has been illustrated in the case of TESCO versus ASDA, where the former was able to gain competitive advantage by copying the strategy of the competition.  

Read more: http://ivythesis.typepad.com/term_paper_topics/2009/04/strategic-planning-tesco.html#ixzz1GrioFrw4  

 

Executive Summary  This report reviews and discusses the Human Resource policies and practices at Tescos. The organisation has introduced a high commitment model which offers training and development to all employees. They have developed their culture through extending their logo every little helps to prove their  commitment to employees as well as to customers. This has proved a world class model and very successful for the organisation. Organisations are implementing strategic HR as a change agent, not to replace an out dated personnel department. Although there is still evidence within the UK that once these interventions are implemented, they just replace the role of the personnel department. To be effective HR belongs on the board of an organisation. The organisation that will be reviewed is Tesco¶s; during the past decade they have introduced strategic HR with increased training of employees. The role of HR within the organisation has increased in importance. Their practice of training and the importance of HR will be reviewed with the current theory. This organisation was chosen, through their introduction of strategic HR policies, which has led to an increase in business. This has demonstrated they are a first class provider of training to their employees, and has given scope for the organisation to expand into new markets. Tescos¶ operates in a very competitive market; the consumer has a choice where to shop for their  groceries. They have expanded their portfolio to include CD¶s, DVD¶s, electrical goods and clothing. clothi ng. Recently they have expanded into the financial services offering customers products from Credit cards to insurance. All their products are available on the internet 24 hours a day. Their slogan every little helps is used to show their commitment to customers, this has been used to reduce prices and to increase the level of customer service. This slogan is now used in their staff training, that any intervention will increase the knowledge of the work force. The organisation is widely reported in news papers, this is due to the success of the business. They are rapidly expanding in the UK with the opening of their Metro stores and into new and foreign markets. This has taken a great deal of their resources in the planning and implementing stage of expansion. The core units need to remain focused, to retain the reputation they have built. Reinforcing Reinforcing the culture and values v alues through training will focus employees on their roles.

Tescos HR Policy  This section will report on the t he organisations HR policies, the information is taken from f rom current articles and their web site which is outlined in the appendices.

Tesco¶s profits have soared 20% in the last year, taking them to a record 2 billion and setting a new milestone for UK business. The company takes almost one of every three pounds spent in a supermarket,

 

and more than one of every eight pounds spent on the High Street. The supermarket chain is Britain¶s biggest private employer with nearly 260,000 staff (Poulter, S. 2005). The human-resource strategy at Tesco¶s revolves around work simplification, challenging unwritten rules, rolling out core skills to all head-office employees and performance management linked to achieving steering-wheel targets. This highlights the way way in which Tesco¶s business measures are closely cl osely linked to performance management (Anonymous 2003). Tesco ensures that each and every ev ery employee has the opportunity to understand his or her individual i ndividual role in contributing to the Tesco core purpose and values. This requires an innovative induction programme that caters for different cultures, styles of learning and varying commitments to the job. The frontline employees are considered the ultimate reflection of Tesco to its customers, but all employees have a very v ery important role to play in turning core values and customer commitment into reality on a daily basis (Whitelock, N. 2003).  A major Tesco challenge is to ensure that all of its employees em ployees,, wherever they work, are aware of the role they play and that they can clearly see how their actions affect the ³big picture´ of the overall business. The training creates a graphical journey through the history of Tesco, its core purpose, values, business goals, financial aims, operations and marketing strategy and its commitment to customers. All employees are receiving more training than before (Whitelock, N. 2003).  A human-resource-led business strategy has helped Tesco to take the lead over its rivals in the fiercelyfi ercelycompetitive UK supermarket sector. The strategic policy (Future) started in the company¶s supermarkets, where its aim was to free up stores employees so they could c ould do more and improve customer service (Anonymous 2003). Future concentrates on providing a clear way of defining roles, responsibilities and activities. The system guarantees that all employees are responsible, accountable, consulted and informed. A group of 13 key management techniques is used to improve the core skills of the workforce. The techniques include root cause analysis, problem solving, plan-do-review, situational leadership and coaching for high performance (Anonymous 2003). For the first time, people have been made a core element of strategy. The importance of this strand of the project has been recognised by putting a senior director in charge. Quarterly board meetings always review human resource issues. Tesco now tracks t racks human-resource information as closely as financial results (Anonymous 2003). Looking ahead, Tesco intends to continue its emphasis on increasing the skills of its workforce. The firm aims to make learning into a truly integrated part of its culture, as an important way of developing organisational flexibility and remaining one step ahead of its rivals (Anonymous 2003).

 Analysis

Of HR Practices  At Tescos

 

This section of the paper will discus Tescos approach to HR and compare this to current thinking. Recognition of the importance of HR in the UK has increased in recent years; this is a result of  competition from overseas economies. In countries c ountries for example Japan, Germany and Sweden investment in employee development is higher that the UK. This has led to some organisations reviewing reviewing their  policies on training introducing continuous investment in their employees (Beardwell, I et al 2004). There are fundamental differences in the approach to HR. Storey (1987) discussed these as µhard¶ and `soft¶ versions of HRM The µhard¶ version places little emphasis on workers¶ concerns and, therefore, within its concept, any judgments of the effectiveness of HRM would be based on business performance criteria only. In contrast, ¶soft¶ HRM, while also having business performance as its primary concern, would be more likely to advocate a parallel concern for workers¶ outcomes (Storey cited in Guest, D. 1999). The appearance of knowledge based economies, has deep implications im plications for the factors of growth, the organisation of production and its effect on employment and skill requirements. This may call for new directions in industry related government policies. The prime minister mi nister stated that ³education is the best economic policy we have. That through the policy of lifelong learning the UK would have the knowledge to compete in the new economy (Tony Blair PM (1998) DTI White Paper). Tesco¶s have exceeded the government¶s expectations for learning, having introduced training as a strategic advantage. It is argued that organisations require new skills to survive; the new thinking is based on complexity and chaos theory. Organisations are viewed v iewed as self-regulating, emergent, open, whole systems. This contrasts the metaphor of organisations being machines to that of organisations as living systems (Capra (2002) cited in Nixon 2004:58). Tescos have strategically integrated HR into their overall plans. Managers have been to utilise aspects of  HR in their decision making. m aking. This has shown high commitment to HR, attempting to gain acceptance from all employees, and offering to all employees basic and extended training ( Beardwell I 2004). The big picture of Tesco¶s strategic direction is discussed with all employees. This helps the individual employee to understand their role and importance within the organisation. Therefore, they place a high value on their human resource. There has been an increase in training within the organisation; all employees now receive receive more training than before. This is a result of the HR department taking a strategic role. HR is not an administrative department within Tesco; they are proactive and are on the strategic level of the organisation. This increase in training priority has been supported by a rise in i n Human Resource Management. This practice emphasises that increased growth can only be maintained in the long l ong run; by equipping the work force with the skills they need to complete their tasks (Mullins, L. 2005). Strategic HRM has gained both credibility and popularity over the past decade, specifically with respect to its impact on organisational performance (Paauwe, J & Boselie P. 2003). Each employee is considered a

 

part of the overall strategy; therefore they are instructed on the importance of their role. This training is delivered in a way that encompasses all learning skills and allows for cultural difference. There is an increased need for a higher value to be placed on employees, and therefore get the best performance from the employees. According to Delany (2001) successful organisations keep people issues at the fore front of their thinking and at the core of their decision making and planning. Delany adds organisations that get the people things right are the organisations likely to be around in the future (Delany (2001) cited in Mullins, L. 2005:748). Being the largest Private employer in the UK Tesco takes this responsibility seriously, this is demonstrated through their training and development policy. This has exceeded the government¶s recommendations for training of the individual and the move towards a learning society. For HR to succeed it must take on a proactive role within the organisation. Strategic HR creates value by providing opportunities for organic learning, development of intellectual i ntellectual capital and enhances core competencies. This value is crucial to the organisation¶s future success (Treen, D. 2000). Employers are increasing extorting the best possible performance from employees. Best practice will increase the skills of the current workforce, and with recruiting it will reinforce the culture of a highly skilled work force (Mullins, L. 2005). Reinforcing learning within in an organisations, requires what Hawkins Hawkins (1994) called ³a change at the heart this change is in the understanding of learning, a shift from viewing learning as being abrupt facts to learning as a more m ore multi-faceted and dynamic process´ (Hawkins, P 1994:9). This learning environment with Tescos has been extended to encompass all aspects of the work environment. The learning process has been challenged to create a culture that allows continual learning throughout the organisation. As knowledge is what matters, organisations and individuals alike must become continuous learners (Hawkins, (Hawkins, P 1994). The organisation runs an academy that recognises skills in the individual. The training is identified from core, operational and leadership skills. All employees can access the core skills. These development dev elopment programmes are tailored to the individual¶s skill level. The delivery method for the training is varied, allowing for the individuals learning preference. Tesco¶s operate within a fiercely competitive sector, using a human resource led business strategy, has help to place them in the number one position. This is only sustainable if the strategy is on going, with competitors actions monitored for any changes c hanges (Mullins, L. 2005). To fully exploit the wealth of knowledge contained within an organisation, it must be realised that it is in human resource management that the most significant advances will be made. As a result, the human resource department must be made a central figure in an organisation¶s strategy to establish a knowledge basis for its operations (Armstrong, M 2005). The principal function of any organisation is to increase the value of the t he business and therefore enhance the wealth of its Owner(s). This is obtained by efficient use of the limited resources available to them (T Blackwood,

1995). Garrick (1998) discussed that training inextricably linked to t o market economics, that

³knowledge is prized in so far as it can generate a market advantage(Garrick 1998:5). This leads to the

 

assumption that though training and developing employees, it can give the organisation advantage, increasing profit HR and training literatures highlights the organisational benefits to be gained from adopting a systematic approach to HRD, therefore the ongoing development of employees¶ skills underpins the wider business objectives (Keep, E 1989). This systematic approach to training often includes models that identifying needs, planning, delivery and evaluation. Harrison developed an eight stage model to identify monitor and evaluate training. The evaluation stage is possibly the most problematic part of the training process (Reid, M and Barrington, H 1997). The organisation has seen the advantages that training can give, and has fully incorporated this into their business. The process of training is formalised through recognition of the need and continual review. Organisations no longer offer a job for life there is no longer l onger guaranteed employment, with a pension as a reward for loyalty and compliance. The ³psychological contract´ between employer and employee has shifted. Employees are increasingly mobile, changing employment for promotion, reward and job satisfaction; top employees have more choice as to where to work. To retain these key employees the organisations culture needs to allow an environment of personal growth (Harrison, R 2002). With less job security, the best reward an organisation can give an employee is transferable skills (Marchington M & Wilkinson, A 1997). With W ith the changing employment market, employees feel less job security and are taking more responsibility for their career paths. The skills they are taught within Tesco¶s could be transferable; therefore in the long run they could benefit competitors. Although the benefits of  training the work force exceed the disadvantages, this employee mobility should not be ignored. Their every little helps slogan is easily recognised by the customer, but is also built in to the training program. This slogan is part of the ethos and culture that is Tesco. The organisation surveys their  employees to gauge motivation and to identify training which employees require. This goes further than  just identifying organisational benefits of training. Individuals can plan for f or the future career. Career  development is important to the individual employee (Armstrong, M 2005) Harrison (2002) noted this as an organised planned effort comprised of structured activities or processes that result in a mutual career-plotting effort between employees and the organisation. This is a central component of the psychological contract that binds the individual to the organisation (Harrison, R 2002). This further complicates the role of the HRD practitioner, balancing organisational needs with the individual¶s expectations. Some employees will develop their career with one employer, while others require transferable skills. The organisation requires employees with the right skills to ensure and sustain competitive advantage (Armstrong, M 2005)

C onclusions  And  Discussions Tesco¶s long term strategy is to continue to place value on employee training and to integrate this value into the culture of the organisation. They are using this approach to maintain their competitive edge. The value that is placed on HR demonstrates commitment commitment from the top levels of the organisation to training.

 

Tesco¶s intentions are to maintain this increased emphasis on staff training and to integrate this learning fully into the organisation. There is constant reviewing of the intervention, i ntervention, and make adjustment were necessary. The study of Tesco¶s HR policies has demonstrated that by introducing a higher level of training to all employees it has an affect on the bottom line. When the employees are trained and demonstrating a higher commitment to the organisation they feel part of the overall strategy. This leads to employees feeling valued and therefore a more committed work force. This is then felt by the consumer, with a higher  level of service, which gives the organisation added value. The entire organisation is involved i nvolved in training. This training is offered at all levels within the organisation, Managers and facilitators are developed to deliver this intervention. Employees have control on their  training after the initial induction process. This allows employees em ployees control of their career path, with the choice of whether they want to move up the ladder or not. There is conflict within the majority of organisations in the UK as to how much of the resources will be dedicated to training. This buy off for the economic resources, can prove short sighted in the long term. Training has always been the the first cost cuts in times of recession. Yet with todays enviroment, organisations need to train the work force to survive. Whereas organisations that embrace knowledge and learning satisfies the physcological contract and helps to retain and nuture employees. The cost of  not devloping employees in the long term is far greater than the cost of developing them. The HR department in Tesco is proactive, not getting caught in the every day administrati administrative ve function. Their model of HR is one of best practice and high commitment. This has allowed the organisation to focus on the human resource with such practices as training issues. This focus on HR is vital to the success of the organisation, without commitment, commitment, it would amount to a waste of resources. Tescos is a very successful UK organisation. They have increased their market share and retail units over  ov er  the past five years. This has been achieved partly through a fully integrated HR department. Although Although this is not the only factor to their success, it has certainly been a major factor in it. Other organisations could benefit from reviewing Tesco¶s policies. They have demonstrated a model implementation of HR. This has been a contributory factor to their increase in profits. Competitors will need to review their training policies, to reduce Tesco market share. Training as an intervention has been a successful policy in the organisation, the evidence points to increased profits from training.

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