Strategic Sustainability of Tesco Plc: The Expression of Organisational Values and Vision

Background Information of Tesco, PLC

Founded in Hackley, London, in 1919, Tesco Plc is one of the oldest international retailers based in the U.K. The country operates 6,809 stores across the world in several countries across the World including England and Whales, India, Malaysia, Lotus, Czech Republic, Hungary, Ireland, Poland, Slovakia, the U.S.A., China, etc. (Tesco, 2018) The company deals with the distribution of food products as well as household appliances and goods.

The company began as a grocery retailer, but it has diversified into other consumer commodities such as apparels, books, electronics, furniture, toys, and financial services. The company serves all customers of consumer goods, which practically the entire neighbourhood. In the recent past, the company has found a market niche in organic food. As the concern for healthy living and lifestyle diseases such as obesity and hypertension increase, Tesco has refocused its business to provide healthy food with little fats and cholesterol to meet the rising demand for healthy food.

Focus on CSR

One of the unique characteristics of the company is that it is highly concerned with corporate responsibility and sustainable business. On its website, the company states: “our core purpose is to serve Britain’s shoppers a little better every day” (TESCO Plc., 2018). The mission of the business is to be the customers’ champion and help them to enjoy an easier way of living and improved quality of life every day. As a result, the company produces consumer goods of high quality to achieve consumer value.

Core Values of Tesco PLC

The core values of the business are: trying harder for customers, treating people the way they want to be treated, and offering help in little ways to make a difference (Tesco 2018). These values are reflected in the company’s CSR which includes providing charities, supporting communities and farmers, and participating in community development projects.

Moreover, the business makes life healthier and easier for customers by offering healthy and quality products that can be easily accessed online and in various physical stores. Tesco also treats employees fairly to create a culture of trust and respect, which is essential in achieving effective customer experience because employees are responsible for serving customers.

Concern for People

The company has been consistent in its commitment over the years, with senior leadership demonstrating willingness to give back in times of organisational stress. For example, the non-executive chairman stated in 2016 strategic report that the company has gone through tough financial situations in the recent past, but it maintains it remains committed to its responsibilities to customers, shareholders, and colleagues (Tesco 2016a, p.3).

The company matters significantly in the local communities and national growth. For instance, Tesco Plc employs over 460,000 colleagues across the world, who depend on the company for their daily lives. Thus, if the company would go bankrupt next year or any time in the near future, local communities would lose not only employment, but also support for various charities and development projects.

Strategic Intent of Tesco: Focus on Customer Needs

Tesco has an internally focused strategic intent characterized by a keen focus on customer needs. The strategic intent of an organisation refers to the ability and willingness of an organisation’s management to develop unique strategic decision making mind-set to achieve competitive advantage and achieve long term sustainability.

Tesco collects feedback from customers to identify what they need in every shopping experience. Based on the results, the company develops strategic actions to meet the identified customer needs. For instance, the company identified the following customer needs from its customer survey: easier shopping trip, availability of basic products, and lower and stable prices.

As a result, the company simplified its store structures, reduced product lines by 18%, and making shopping easier for customers through additional space as part of turnaround priorities to regain competitiveness (Tesco 2016a, p.6).

These efforts have helped the company to increase on-shelf availability and reduce the shelf-life of commodities. Tesco uses shopping experience as the essence for future decision making. Hamel and Prahalad (2005) argues that a strategic intent creates the conditions necessary for a winning strategy.

In this regard, the company has a strong strategic intent posture because it looks into its core capabilities to meet customer needs with the intention of increasing customer satisfaction and loyalty.

Implications of the Strategic Intent

The implication of the strategic intent posture is that it enables the company to achieve sustainable competitive advantage for the future. As suggested by Hamel and Prahalad (2005), strategic intent creates stability over time by lengthening the company’s attention span as well as consistency in short-term action.

Tesco’s intent to improve customers’ shopping experience allows the company to build competitive advantage progressively using short-term efforts to improve access to basic varieties of consumer products.

The strategic intent also sets a target for individual and team commitments of managers and employees within the organisation. Thus, employees and the top leadership focus on achieving superior shopping experience in every little thing they do, including, but not limited to, arranging stock appropriately on the shelves.

Strategic Approaches to Innovation on Performance Frontier

Strategic Approaches to Innovation

Over the last ten years, the Tesco has expanded from its traditional stores to create blue oceans in form of online stores. For example, the company offers shopping apps on iPhone, iPad, and Android. Through the apps, consumers can shop for products online, achieving the company’s mission of promoting good customer experience through easy and convenient shopping. The company also provides information regarding existing product features through online apps, including sizes, benefits and prices; hence the digital technology enables consumers to make informed choices of when shopping.

Given the increasing number of online users in social media, the company has a great potential, and is prepared to respond to competitors’ innovations. With the development of new forms of digital media, the company has come up with an online store called Tesco.com which offers customers the option to buy food and non-food products online.

Although other competitors provide online shopping, Tesco’s focus on shopping experience and consumer needs enables the company to offer personalized services to meet consumer preferences and lifestyles (Emond 2015, p.3). For example, the company established a ‘Click and Collect’ online service in 2011 to allow customers to pick up items frequently without having to go through the process of visiting physical store and search for items physically.

Accordingly, the company’s innovation techniques are able to overcome competition by offering customers a unique and differentiated shopping experience.

Performance Frontier Analysis

TESCO has identified environmental, social and governance issues are important for its success. For example, the company’s the chairman says that their corporate governance forms the basis for rebuilding trust and transparency, and the company’s commitment to employees’ needs leads to the development of new and innovative products that enhance quality and affordable prices for customers (Tesco 2016a, p.6).

Bailey and Peck (2013, p.131) suggest that board chairs provide a conducive environment for strategic decision making in organizations. Thus, the statement made by Tesco chairman regarding governance in the company reflects commitment for the chair to promote a good environment for strategic decision making.

In its sustainability report, the company states that Tesco is committed to the UN Global Impact initiative which it joined in 2015 (Tesco 2016b, p.3). The firm’s CEO said that the enterprise has responsibility to create a positive impact by taking small steps to create opportunities for future generations (Tesco 2016a, p.6).

The company’s chairman also suggests that the sustainability initiatives of the company have an impact on the financial position of the company because it leads to improved customer experience and thus helps them gain trust from customers, leading to customer loyalty, increased market share, and increased sales. However, the company has not quantified how much the sustainability initiatives will contribute financially.

A decision that may affect long-term performance and sustainability of the organization may depend on internal and external forces including competition and key competences; quality of leadership; the nature of the decision; and characteristics of the decision process (Pitt and Koufopoulos 2012, p.56).

Tesco has carried out innovative processes, products and business models to achieve long-term sustainability. For example, the company has a network of online suppliers called Tesco Supplier Network to give the company innovative ways to drive sustainability (Tesco 2016a, p8).

Recently, Tesco has used innovative technologies to support farmers who supply new products to the company. For example, in 2014, the company supported a nineteen year-old British watermelon grower in Herefordshire to produce quality fruits using artificial heating (Tesco, 2018b).

The heating technology used a biomass woodchip burner during germination of the seedlings. Apart from improving the quality of food products, such technologies also use renewable sources of energy, which reflects the company’s commitment to environmental sustainability.

Marketing Communications

Tesco also communicates its innovations to stakeholders. As suggested by Collis Rukstad and (2008, p.83), information is an important asset for managers to make decisions and execute effective strategy. Therefore, the company communicates its sustainability innovations in various ways to give stakeholders the power of information to engage positively with the company. For instance, the company has introduced an e-newsletter and supplier website to communicate with the company and access information about sustainable practice.

According to Emond (2015, p.1), Tesco has played a leading role in using multi-channel marketing approaches in the 21st century, thus helping customers to get an easy access to products and information. Nonetheless, the apps developed by the company allows investors and customers to access information about its annual sustainability reports online, in which the company shows the initiatives and achievements of social, governance and environmental sustainability.

Promoting Change

Tesco also breaks barriers to change, and provides incentive systems to promote change, showing strategic intent. For instance, the business regularly introduces healthier changes to its products including reduction of salt, fat and sugar. In 2011, the company reduced sugar levels in its products by 20%.

Such initiatives help customers and colleagues to live healthier. They also reflect a strategic intent because they try to make the customer experience and work environment better for employees and customers. Thus, the implications of these sustainability approaches include: improved customer satisfaction, supplier relationships, and employee satisfaction.

Strategic Position Statement Analysis

Tesco’s strategy is consistent, and all elements are aligned to support each other towards a common mission of improving the customers’ shopping experience. According to Hart (1992), the strategy decision-making is an organization-wide phenomenon in which different managerial roles interact, and the decision making process is linked with the firm performance.

Commitment to customers

The company’s strategic position statement is based on a simple commitment – to be the champion of customers, putting the interests of customers first and taking small steps to make bid differences. This strategy is integrated across various departments to create a synergy from operations and processes to building relationships with suppliers, and serving customers effectively. For example, the company’s commitment to provide healthy food is supported by a positive relationship with suppliers who supply organic food for the benefit of customers. Therefore, the company’s decisions are integrated and synergetic across various departments.

Tesco’s leadership shows consistency in decision making. Due to financial losses experienced in 2014, the company’s CEO Dave Lewis made decisions to close none-performing stores and sell the company’s non-retail subsidiary at Blinkbox, and open up new stores in convenient locations. This decision is consistent with the strategy of making shopping experience easy and convenient for customers. According to Mitchell et al (2011, p.82), managers make erratic decisions in hostile environments; but managers with metacognitive experience make more consistent decisions.

Tesco’s CEO had a long experience in Unilever, and his decision seems to be consistent in dynamic retail environment, always focusing on the needs of customers and other stakeholders regardless of the financial performance. Thus, the company’s strategy is consistent and aligned across departments to improve the firm’s performance.

Customer Experience

Tesco’s activities, capabilities, skills, and competences are tailored towards the company’s customer-focus strategy. For example, the company’s online store is designed with appealing features and easily navigable sites to provide customers with easy and convenient shopping experience, and this approach achieves the strategic objective of improving the customers’ shopping experience.

Nonetheless, a team of 476,000 dedicated colleagues (employees) use their competences and dedication to make customers’ experience better. In the 2016 strategic report, the CEO commented that the company has added extra hours for colleagues on the shop floor to improve customer service.

Commitment to Partners and Suppliers

The company has also improved its supply chain in collaboration with partners and suppliers to increase on-shelf availability so that customers can get what they want whenever they want it. Therefore, the business decisions are feasible considering the current and future investments, and meets the current future needs of external ecosystem and stakeholder needs.

The investment in communities, partners, and suppliers enhances long-term viability of the business. By supporting local communities and participating in charities and reduction of carbon emissions (Tesco, 2014), the company meets the needs of stakeholders and local communities to enhance strong relationships, and reinforces its commitment to responsible business. These actions encourage improved public image and market position, leading to improved triple bottom line of the business – social, economic and environmental.

Commitment to Change

The company’s strategy to focus on sustainability and customer experience through innovation leads to an incremental change as well as fundamental change in the industry. According to Kim and Mauborge (2004), business innovation can be used as a strategy to improve the company from within rather than trying to compete with other firms.

Blue Ocean v Read Ocean Strategy

In the traditional forms of innovation, defined as red oceans, the industry operates within clearly defined boundaries where the rules of competition are known and accepted by all players (Kim and Mauborge, 2004).

On the other hand, the blue ocean represents all the industries that do not exist; the market space is unknown and each firm creates its demand without fighting for existing demand. The blue ocean strategy allows the business to expand its industries while the red ocean strategy enables the business to compete effectively in existing markets.

Conclusion

Tesco uses its internal processes and customer service innovations to satisfy customers while at the same time expanding its core competences beyond the current markets through collaborations and partnerships with other stakeholders such as suppliers. The strategic scope of the company is appropriate because it focus on stakeholder interests, leading to long term sustainability.

The customer-focus strategy offers competitive advantage to the business because it leads to differentiation and customer satisfaction (Kahneman et al, 2011). With a sustainability and customer-based strategic intent, the company is able to create customer value and attract support from key stakeholders.

The company’s strategy also allows the managers and employees to use available resources and key competencies to outperform rivals in the industry. For example, the use of a dedicated team of colleagues to offer effective customer services and develop innovative products leads to increased customer satisfaction, loyalty, and retention.

Various limitations to the company’s strategy exist, including financial distress experienced in 2014, but with experienced leaders, the company is able to make consistent strategic decisions to overcome such trade-offs. The implication of such a successful strategy is that the company is able to compete effectively and retain its market share even during hard economic times.

Leave a Reply

Your email address will not be published. Required fields are marked *