Creating Value Through Business Model Innovation

Question: Understand the process of strategic planning? Be able to formulate a new strategy? Understand approaches to strategy evaluation? Understand how to implement a chosen strategy? Answer: Introduction The report examines the business strategy from the process of strategic planning that explains mission, vision, goals and get an insight into the core competencies, barriers and facilitators using the strategic tools like SWOT, BCG, and SPACE. Further new strategy formulated using the capability matrix, value chain analysis. The environmental audit executed with the help of Strategic management tool PESTLE and Porters five forces (Teece, 2010). The report also examines the importance of stakeholders in the process of formulating new strategy. The various market entry strategies are evaluated to select the appropriate strategy. Finally the report assessed the roles and responsibilities of the human resources in the process of strategy implementation and defining the SMART target. The business strategy is executed in context to the retail major Tesco Plc established in 1919 by Jack Cohen with head office in Hertfordshire, England. The company is third largest retailer by profit and the fourth largest by sales revenue with 30% share in the grocery market (Tesco.com). The company has 6784 stores worldwide served by a strong team of 500,000. Tesco Plc registered revenue of 63.557 billion with a net income of 0.970 billion for the financial year 2014. It operates in the format of supermarket, hypermarket and superstore. Mission, Vision, Goals and Core competencies of Tesco The Mission, Vision and Goals are the strategic guidance that defines the direction of the company and serve as the purpose of the existence of the company. A vision statement of the company explains the long term goal and direction of the company (Teece, 2010). The Vision of Tesco is The Mission statement of the company defines the qualitative aims of the business and the reason for the existence with a strategic perspective. The Mission statement of Tesco is The mission of the company explains why we exist and the vision defines what the company intend to be in the future, the goal of the company short term aims and objectives to fulfill the mission and vision of the company (Teece, 2010). Business goals are integral part of the strategic planning process as it is time bound. The core competencies of Tesco help the company to enjoy 30% market share of the grocery market. The companys core competencies include the The products of the company that are environment friendly in nature. The customer centric strategy of the company like Club Card and Loyalty card. Providing the customer with quality products at reasonable price. The improved labeling of the products that enhances easy retrieval. The self check out process implemented by the company. Environmental scanning of Tesco The environmental scanning of Tesco is conducted to assess the strength and weakness of the company that impact the growth of the company. The major strength of the company is the scale of operation both offline and online platform where every 7 spent in UK retail outlet 1is spent in Tesco enjoying third largest in profit and fourth largest in revenue (Hill, Jones, Schilling, 2014). The companys strength is exhibited in the diversification strategy adapted by the company in verticals like non food items like books, clothing, furniture and petrol and services like software, telecommunication, financial services, internet services and music downloads. Another strength identified is the spread in th 11 countries. The major weakness of the company is the dropping sales since 2012 owing to the competition from Lidl, Netto and Aldi. It is further aggravated by the low prcing strategy adapted by these players. Effectiveness of techniques in developing strategic business plans for Tesco The business strategy of Tesco is evaluated with the strategic tools BCG growth share matrix designed by Boston consulting group that evaluates the market growth against the market share using the four defined matrix Stars, Cash Cows, Question marks and Dogs that can be present four different stages of the product. The Stars are those products of the company that enjoy high market share and market growth like music downloads, clothes, furniture verticals of Tesco (Hill, Jones, Schilling, 2014). The cash cows are products that enjoys high market share but low market growth namely the groceries products of Tesco. The new verticals of Tesco like telecommunication, financial and internet services are the question mark that has high market growth but low market share and the company needs to increasing the advertisement to garner more market share in the future. The book vertical is the Dogs with low market share and market growth and needs to be eliminated. The SPACE Matrix is strategic tool used to evaluate the four dimension of the organization namely financial strength (FS), Competitive advantage (CA), Industry strength (IS) and environmental stability (ES) where the first two define the internal and next two define the external dimension. In case of Tesco the internal dimension namely financial strength is strong with operating income of 2.631 billion, total assets worth 50.129 billion and total equity worth 14.722 billion for the financial year 2014. The competitive advantage is also positive with the company enjoying 30% of the grocery market share and well diversified portfolio into non food and services though the new players like Lidl, Netto and Aldi are diluting the competitive advantage (Hill, Jones, Schilling, 2014). The external dimension namely industry strength is favorable with the company enjoying the number one position in the UK and third largest retailer in the global market but Wall marts acquisition of ASDA is t he main concern to maintain the industry strength. The environmental stability is the area of concern with changing customer behavior, and economic and technological pressure. Produce an Organization audit of Tesco The organization audit of Tesco is conducted with the strategic tool capability matrix to identify the resources capability that enhance the competencies, value chain analysis and strength and weakness analysis that examine the internal capability and limitation of the company. The capability matrix is a strategic tool that evaluates the capabilities of the company in two dimensions namely the width of function and the depth of capabilities (Williamson, 2012). In case of Tesco the company has number of verticals like groceries, books, clothing, electronics, furniture, toys, petrol and software, financial services, telecoms and internet services that is sold thru 6784 stores across 12 countries in Europe and Asia depicting the width of function that is supported by the depth of capabilities both in the financial and human resources team of 500,000. The value chain analysis helps to understand the competitive advantage of the company by defining the primary and secondary activities. The primary activities are related with transforming inputs into outputs and marketing the same to customers supporting it with timely delivery and after sales support. The secondary activities are the support activities handled by the staff of the company and comprise of procurement, technology development, infrastructure and human resources (Williamson, 2012). The value chain analysis of Tesco exhibit that the company has a strong operational and marketing team that handle both the primary and support activities well to enhance the competitive advantage of the company in the retail space. The environment audit further assesses the strength and weakness of the company to understand the internal resource capability and limitation of the company. The evaluation of strength of Tesco reveals that the company enjoys top position in the home market and third largest retailer in the world market with well defined product portfolio and various formats. Similarly the company is the market leader in the online space (Williamson, 2012). Further the organic growth of Tesco by acquiring Safeway and loyalty card program enhance the strength and capability. Finally the presence in the international market in 12 countries including Thailand and Malaysia boost the internal resource capability. The major weakness of Tesco is the drop in the sales post the economic recession and further escalated by new players like Lidl, Netto and Aldi since 2012. Carry out an environmental audit for Tesco The strategic tool PESTLE analysis is conducted to study the external factors impacting the business of TESCO. In addition the opportunity and threat is evaluated to get an insight into the external forces facilitating and acting as barrier in the execution of the business (Doherty Lu, 2012). Further Porters five forces evaluated to understand the competition in the market. PESTLE analysis The strategic tool PESTLE analysis is conducted the external factors impacting the business of Tesco namely Political, Economic, Social, Technological, Legal and Environment. Political factors The operation of Tesco spreads across 12 countries in Europe and Asia that has various political conditions, tax implication and retail policy that needs to be taken into account by the company while framing the business and human resource policy of the company (Doherty Lu, 2012). Retail sector provide employment opportunity to huge people with various skill levels and it needs to frame the recruitment after considering the employment policies in the country of operation. Economic factors The economic factors are very crucial retail players like Tesco and others as it impacts the purchasing power, disposable income, demand, costs, price and profits (Doherty Lu, 2012). The economic factors are external but influence the marketing mix and marketing performance of the company. The slowdown in the UK food market and market concentration enhance the economic impact of Tesco. Social factors The social and cultural trend of the country influences the purchase behavior of the customer. The current trend of the customers is more towards one stop shopping and value shopping. Tesco has to take this trend into account while framing the store format and items sold (Doherty Lu, 2012). This is the reason Tesco has various format like supermarket, hypermarket and superstore that sell both food and non food item. Demographic changes are another factor that impacts the retail business of the company. Technological factor The technology and internet had changed the way customer shop and benefited the customer and company equally by bridging the gap, widening the shopping option by introducing online shopping (Doherty Lu, 2012). Tesco stores use wireless devices, intelligent scales, electronic labeling, self check out and radio frequency identification (RFID) and efficient consumer response (ECR). Legal factors The various laws related with packaged foods retailing in many countries are a major concern for Tesco that has operation in 12 countries across the globe (Doherty Lu, 2012). The food retailing commission defines code of practice that needs to be abided by the company. Environmental factors The environmental factors are a major concern across the globe and the retail company has to maintain the carbon emission policies designed by the government and corporate social responsibilities (CSR) is part of every company including Tesco to conduct ethical business and protect the environment (Doherty Lu, 2012). The opportunity and threat analysis helps to understand the external factors impacting the business of Tesco. The analysis presented the huge potential for the company in the non food, health and beauty products and expansion into the emerging market of India, Singapore and Indonesia. The major threat identified are the growing strength of Wal-Mart in the UK market after the acquisition of ASDA and the price war initiated by the new players like Lidl, Netto and Aldi. Porters five forces This is a strategic tool used to get an insight into industry strength based on the five forces namely Threat of new entrants The new entrants like Lidl, Netto and Aldi is diluting the market share enjoyed by Tesco (George et al., 2012). Further they are also providing tough competition in the price eroding the margin and market share. Bargaining power of suppliers The large scale operation of Tesco helps to enjoy the bargaining power in terms of suppliers and vendors and this helps the company to offer competitive pricing to the customers. Threat of substitute products The products of Tesco and other retail players like Sainbury, ASDA and other supermarket chains enhance the threat of substitute products (George et al., 2012). Tesco explore the differentiation strategy and loyalty card program to retain the customer base. Bargaining power of buyers The bargaining power of buyers is high in the retail market with so many players catering to the same market (George et al., 2012). The customers move to other retail player if they find the pricing of the product expensive. Rivalry among competitors The retail market is attracting new players and increasing the competition. This is escalated by the further by top players like Tesco, Sainsbury, ASDA and other trying to increase the market share. Significance of Stakeholders in the formulation of strategy A stakeholder is defined as an individual or group of individuals that is influenced by the decision and activities of the company. These stakeholders are related with the business of the company directly or indirectly. In case of Tesco the major stakeholders are employees, customers, government local authorities, landowners, regulators, suppliers, business partners and sub contractors, local communities, investors and analysts, and consultants (Sorescu et al., 2011). Tesco has involved the stakeholders interest in the strategy planning and executed fair trade practices to maximize the value creation for all stakeholders of the company. The international operation of the company helps to provide value addition for both customers and shareholders by leveraging the nine decades long retail experience. Suggest and present a new possible strategy for Tesco The company enjoys a leading position in the home market and is the third largest retailer in the global market. The leader in the Global market Wal-mart has acquired ASDA and expanded its business in the UK market (Sorescu et al., 2011). It is suggested Tesco should enter the US market by acquiring the established players like Carrefour, metro group and seven holdings. Strategies related to market entry The market entry is a crucial strategic decision to expand the business, revenue and profit of the company (Hitt et al., 2012). The Ansoff matrix explains the four strategic market entry option to expand the business of the company namely Market penetration Market development Product development Diversification Market penetration This is the market entry strategy that expands the existing market of the company with more penetration into the untapped areas (Hitt et al., 2012). Tesco is able to penetrate further with online marketing to far off places where the company had no reach in the past. Market development This is strategy where the company identifies new market to promote the existing product of the company. Tesco developed new store formats to capture more customers. The major formats are Express, Metro, Superstore and extra, Hyper market. Product development This is the strategy that develops new product to cater to existing market (Hitt et al., 2012). Tesco has identified private label, non food items like entertainment, health and beauty, household and clothing as the new product to expand the business in the future. Diversification This is strategy where the company enters new market with both related and unrelated products. The company is venturing into the related diversification like books, music downloads, clothing and household products and unrelated business like financial services, travel services, ivillage.com, telecom and mobile phones (Hitt et al., 2012). Tesco has identified five key markets for expanding the international business of the company. They are large market, global market, underdeveloped retail market, opportunities for mass market and market leading position. Most appropriate strategy for Tesco Tesco should enter the biggest market for retail US with acquisition of leading players like Carrefour, metro group and seven holdings (Hitt et al., 2012). It should enter the emerging market with huge potential like China and India with the existing product of the company by acquisition of local players or opening 100% subsidiary. Roles and responsibilities of personnel involved in strategic implementation for Tesco The chief executive officer (CEO) of Tesco plays key roles and is entrusted with the responsibilities in implementing the business strategy of the company considering the interest of all the stakeholders of the company (Amit, Zott, Pearson, 2012). He acts as the liaison officer between the board of directors and management and functional head of the company. Once the corporate strategy is devised it serves as the base to design the operational strategy that is executed by the functional head of each departments in line with mission, vision and goal set in the corporate strategy. Resources required for implementing a new strategy for Tesco Once the strategy of the company is prepared and documented the next stage is the implementation that requires resources both financial and human and defined time frame and supported by technology and material to execute the same. The requirement of finance is decided in the budget session of the company based on the nature of the strategy like domestic and international (Hoejmose et al., 2013). The human resource requirement is based on the specific strategy like expansion strategy requires more sales and customer care people while the expansion of supply chain need people from logistic background. Time Scale in implementation using SMART method The SMART method stand for Specific, Measurable, Attainable, Relevant and Time bound and helps the business strategy implementation more concrete with well defined roles and responsibilities for human resources implementing the strategy by defining the time frame (Hoejmose et al., 2013). The business strategic of the company has various stages like discussion of the strategy, approval of the board members, development of the blue print, evaluation of the strategic tools , selection of the appropriate strategy, implementation of the strategy, monitoring and corrective action. Each activity will be evaluated using the SMART Method and time frame for each activity will vary between a months to two with the implementation taking 4 months. Conclusion The report evaluated the various process of strategic planning using the strategic tools like BCG growth share matrix, SPACE after defining the mission, vision and goal and core competencies of Tesco. Further the new strategy formulated with strategic techniques like capability matrix, Value chain analysis, SWOT analysis, PESTLE analysis and Porters five forces with assessment of the stakeholders interest. In the next task the market entry strategy of Tesco is evaluated with Ansoff matrix to select the most appropriate strategy for Tesco to enter new market and expand the business (Verbeke, 2013). It is observed that diversification strategy is selected by Tesco as market entry strategy. In the final task the roles and responsibilities of personnel was eevlauted and it is found that the CEO is sole person responsible for the implementation with approval from board members and support from functional and operational head. 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