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Unit 7 Business Strategy

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Unit 7 Business Strategy

Task One: Report Format

To,

Line Manager,

Tesco, UK

Subject: The importance of understanding a strategic planning process.

Unit 7 Business Strategy

Dear Sir,

To achieve the goals, missions and visions of our company, we need to go forward with our long term strategic planning. We also need to use different methods and tools for making our strategies successful. An assessment of Tesco is given in the following discussion.

1.1 Provide an assessment of the extent to which Tesco’s mission, vision, objectives, goals, core competencies inform its strategic planning.

Strategy:strategy is very much important for any business because it is related to the achievement of organizational goals, visions, and objectives that is set up by the top level management. Strategy is a process that indicates the plan of action through which an organization will be able to reach its stakeholders to satisfy them(Steiner, 2014).

Mission of Tesco

For achieving the goal of an organization, mission statement is a kind of written statement that describes the way through which a company will be able to achieve its long term targets such as Vision. Tesco, like other organizations, has a mission statement and that is “we make what matters better, together.” The company tries to provide the customers better quality products and services to meet their organizational goals.

Vision of Tesco

Vision is the expectedfuture target of a business and it is the dream of the entrepreneurs that “what we want to achieve”. The vision of a company really hard to achieve but the company tries so that they are able to reach as near as possible to their vision. The vision of Tesco is to expand its business all over the world, use modern technology and use innovative ideas to promote its business worldwide.

Mission, vision, goals and objectives at a glance

Figure: Mission, vision, goals and objectives at a glance

Objectives of Tesco

The short terms and specific targets that the company wants to achieve to reach its goals are the objectives. An example, if Tesco wants to achieve a 5% increase of profit in the next 6 months, this specific target is known as objectives. The followings can be the objectives of Tesco.

  • Ensure the customer satisfaction
  • Increasing the rate of profits through taking different kinds of strategies
  • Reduce the employee turnover rate.

Goals of Tesco

The goals of an organization are the targets that are followed by the objectives and that are not much specific as objectives. For example, Tesco may set a goal such as “we want to reduce the cost within two years.” It is a long term target but not a specific one for Tesco.

Core Competencies

Some set of advantages and capabilities that other competitors in the same industry do not have are the core competencies. One organization gets an extra advantage by using the core competencies because achievements of core competencies are not so easy for a company and it cannot be copied. For example, the vast foreign markets in china, Malaysia, India are some core competency that other competitors of Tesco don’t have(Broccolina and Gallas, 2004).

1.2 As an assistant manager of Tesco analyzes the factors you would have to consider when formulating strategic plans.

 

Strategic Plan:

Strategic plan is a systematic and step by step process that helps the managers of a company to take decisions related to organizational strategy. The strategic planning helps to achieve the goal, missions and visions of a company and also helps the higher level authority to identify the potential strengths and threats for the company (Steiner, 2014).

Factors to Consider When Formulating Strategic Plans:

A strategic plan needs to be considered by the following factors to be successful before the formulation of the plan.

1.     Future direction of the competition:the competitors of any needs to be considered while formulating a strategic plan. The managers need to take consideration about the strengths and weakness of their competitors and make the plan to compete with them strongly.

2.     Needs of customers: the main target of any business is to satisfy its final customers, because the profit and success of a business depends on the success of the final customers.Manages should identify the needs of the customers and try to plan to meet their needs.

3.     Gaining and maintaining competitive advantage: there are some set of advantages that gives a company more advantages in any industry and this type of advantages cannot be achieved by other competitors easily. An example of competitive advantage is the good and quality suppliers of raw materials. Tesco also have worldwide recognition with 12 countries, and it is also a competitive advantage to them.

4.     Corporate-level integration and communication of the business plans: the strategic plan that is taken by the organization needs to be communicated with all people responsible for implementation of it. The managers and the leaders of the company need to formulate supporting strategy to achieve the main strategy. A good communication system is also necessary for the successful implementation of their plan. 

1.3 Evaluate the effectiveness of two techniques used by Tesco in developing strategic business plans.

 

The effectiveness of a strategic plan can be evaluated by many methods, and a good method of them is the Boston Matrix method.

Ø  The Boston Matrix:

A good and useful tool for taking the resource allocation decision for a portfolio investment is the Boston matrix. The Boston matrix is given in the following graph(Mooradian, Matzler and Ring, 2012)

Boston Matrix

Figure: Boston Matrix (source: self created)

Cash cow:   the growth rate of cash cow is very slow and the market share is very large. This is the cash generator projects of a company, but because of lower rate of growth, a company should not invest in this segment. Tesco can consider the street stores as their cash cow segments and try to generate as much cash as they can form it.

Star: the most important segment of the Boston matrix is the star, which can generate cash, has high market share and high growth rate. Tesco needs to invest in this segment because the market is highly competitive. For example, the two food brands of Tesco has both market share, high growth rate, and they generate sell £1 billion per year. So, it can be considered as star.

Question mark: the company doesn’t know about the success of this segment and they do not know whether the investment becomes successful or unsuccessful. The share of market for this segment is very low and the growth rate is high. So, the management needs to be very much careful while making any investments in these segments. The new foreign markets of Tesco can be considered as a question mark segment for Tesco.

Dog: the final elements of Boston matrix, which as a lower market share and lower rate of growth. The company fails to recover from these kinds of situation and they need to close down this segment. For example, the US shop of Tesco fresh and easy has lower growth rate and low market share. So, it can be a dog segment for them.

Ø  SWOT Analysis:

The second tool that Tesco can use a tool for measuring the effectiveness of their strategic plan is the SWOT analysis. The SWOT analysis for strategic plan is given below(Composites industry gets SWOT analysis, 2001).

Strengths are some factors which are internal to the organization and managers have control over these factors. These types of strengths can be good quality precuts, loyal customers, good and famous brand name etc. Tesco has trained employees over 530000, loyal customers for their shops and their product quality is high.

The second factor which is very much internal is weakness, and inability to manage these types of weakness can create threats for the company. If Tesco selects bad location for their company, this can be a weakness for their company. Tesco is very much dependent on their UK market, which can be their weakness. Because any fall of customers in this market will reduce their profits in the long run.

 

Figure: Elements of SWOT analysis (source: self created)

Opportunitiesare some factors that are available in the external environment of the organization and the managers do not have the controlling power over the opportunity. They always try to capture all the opportunities. For example, the new foreign market investment in different countries of the world can be a good opportunity for Tesco.

Threatsare the factors outside the organization and they cannot be controlled by the management of a company. For example, political disturbance in any country cannot be controlled by the management by it can have a great impact on the business. If the political situation of foreign countries become worse, Tesco need to think other options

From,

Name of the Student

Assistant Manager,

Tesco,

UK

Task Two: Report

value chain analysis

Before formulating any strategic plan, we need to use tools through which we can know about our strategic positions in the industry. For this reason, we need to take help of value chain analysis, benchmarking and SWOT analysis.

2.1 Analyze the strategic position of Tesco by carrying an internal audit

Strategic Capabilities: 

To achieve long term competitive advantages in the market, strategic capabilities are very much helpful. They are some abilities that the organizations need to survive in the competitive market.

Methods to Carrying and Internal Audit:

The internal audit methods for the analysis of the strategic position of a company in the market are given below.

1.    Value chain analysis:

Value chain analysis is the analysis of the core and support processes which have contributions to prepare a product or service and delivering it to the final customers. The value chain analysis describes the best combination of core and support process and tries to reduce the cost related to production(Walters and Rainbird, 2004).

The first part of value chain analysis is the core process thatdelivers the product or service to the end users with the help of market intermediaries. The core or primary activities are given on the chart.

value chain analysis, support process

Figure: value chain analysis (source: self created)

 

The second one is support activities, and they help the core activities to go on. The support activities are the followings.

PESTEL analysis

Figure: value chain analysis, support process(source: self created)

 

2.    Benchmarking:

One important tool for analysis for the internal audit is the benchmarking method, through which a company can compare their products with the other best product or service of competitions. The benchmarkingprocesses are given on the following points(Benchmarking in total quality management, 2003).

Balancing the best and actual products

Figure: Balancing the best and actual products

Ø  Tesco first needs to identify the best product that is available in the market.

Ø  Then the company needs to compare between their product and the standard one to identify any gap between this two.

Ø  If the manager of Tesco finds any gap, they need to find out the reason and try to solve out the problems.

An example of benchmarking can be price comparison, in which Tesco can compare their products price with the standard product price and taking corrective actions if they find any gap.

3.     SWOT analysis:

The strategic position of a company can also be analyzed by the SWOT analysis. It is a method through which, a company can analyze the strengths, weakness, opportunities and threats that are available in the working environment(Wilkinson and Kannan, 2013).

Strengths: the internal factors that are in the favor of a company are the strengths of a company and they are in the control of the management. For example, the good brand name of Tesco, quality of their products, and large skilled workforce can be good strengths for them.

Weakness: the second factor is the weakness, which is also an internal factor. The elements can create threats for the company if the company fails to reduce the weakness for the company. For example, they need to reduce the investment risks in the new or foreign market.

Elements of SWOT analysis

Figure: Elements of SWOT analysis

Opportunities: some factors are related with the outside environment of the company and they help to increase the strengths of the company. For example, the new investment opportunity for Tesco that is available to the foreign countries is not in the control of management. They need to rely on the better environment for this.

Threats:  the next one is the threat that is available in the environment of the outside of the company. The increasing foreign competitors, the unknown foreign market, the threat from the government or any law can be considered as a threat for the company.

2.2 Carry out environmental audit for Tesco.

The external environment of any business is out of the control of any manager and this environment can affect the business activity of the company. A good tool for this kind of analysis is the external environment is the PESTEL analysis.

PESTEL analysis:the PESTEL analysis is given on the following discussion.

PESTEL analysis

Political factor: the first factor of PESTEL elements is the political factor, and any kind of good or bad political situation can affect the activity of the business. For example, if the political situation of a foreign country becomes worse, it can reduce the profits of TESCO(Kampanje, 2012).

Economic situation: the economic situation such as inflation, deflation, interest rate, loan amount also affects the business activity. For example, if TESCO wants to take loan from any financial institution and the amount of interest is high, they need to bear more cost as interest.

Social factors: the religion and beliefs, the system of the education, buying habit are some factors related to social factors. TESCO needs to take the buying behavior the people of different country and they need to make their plan according to their social factors.

Technological factor: the development of recent new technology also needed to be considered by the management. The availability of new technology can be a good competitive advantage to TESCO. For example, TESCO can introduce their online shopping system, mobile payment system etc to satisfy their customer needs

Environmental factors: strategy need to be taken so that the company can avoid the negative environmental affect by the company such as environmental pollution. For example, TESCO wants to be a zero carbon business within 2050, and this project can be a good way to cope with environmental factors.

Legal factors: the last element of PESTEL analysis is the legal factors, such as law related to environment, workers, factory etc. A company needs to follow the law of a particular foreign country. So, if TESCO wants to continue its business in the foreign market, they need to obey the law.

Porter’s Five Forces:

The elements of Porters five force model are very much useful to analyze the competitiveness in a particular market or industry(Michaux, Cadiat and Probert, 2015). The elements of five forces are shown on the following graph

New entrants

  1. New entrants: the new entrants in any industry can create a threat to the existing business. If a new company wants to enter in the same industry, it may create problems for TESCO. So, when TESCO wants to join in any foreign market, they will also face problems.
  2. Substitute products: the substitutes form the competitors create options in front of the customers. If they have available options, they can easily switch off form one product to another. So, the substitute products form the competitors can be also a source of threat for TESCO.
  3. Bargaining power of customers: the customers have also the bargaining power and they have freedom in making their own purchase decisions. As there are many options for them, they have the bargaining power over different companies. TESCO can exercise more power over the customers if the number of competitors is less.
  4. Bargaining power of suppliers:if the number of supplier of TESCO becomes less, the suppliers can exercise more power over the company. If the number of suppliers becomes more, TESCO can exercise power over the suppliers.
  5. Rivalry: every industry has competitors any they create a competitive environment in the marketplace. The competitors can enter in the market with their new product, good quality services and lower pricing strategy.

2.3 Assess the significance of stakeholder analysis for Tesco when formulating new strategy.

                                                                                                  

Define Stakeholders:

Any person or party related to any business activity that has direct interest on the business activity, and can be affected by the business activity of is known as stakeholders.

Stakeholder Analysis

Stakeholder Analysis:

The stakeholder analyses are the method of identifying the important stakeholders for the business and protect their interest. For example, the customers and the government are the two important stakeholders for TESCO. So, the most priority should be given by TESCO to them to protect their interest for the business purpose(Missonier and Loufrani-Fedida, 2014).

The stakeholder power matrix is the matrix that shows the combination between interest and power and what to be done in different situation. For example, if the interest and power are both lower, the company should use minimal effort and monitoring only.

The Importance of the Stakeholder Analysis for Tesco

 

The Importance of the Stakeholder Analysis for Tesco

The importances of stakeholder analysis are given in the following points.

Ø  They are able to know the most important stakeholders for them.

Ø  TESCO can satisfy the stakeholders by giving importance to them.

Ø  The correct information given is possible by TESCO to the important stakeholders which are required by them.

Ø  TESCO will be able to maintain a good relationship with their stakeholders.

Ø  The important stakeholders, for example the customers, become loyal customers of TESCO.

2.4 Using the case study and the research information present new strategy for Tesco.

TESCO targets to market their business a zero carbon business within 2050, so they should plan for this accordingly. The new strategy is given for Tesco in the following table.



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