Strategic Management and Tesco Essay

Submitted By hunzaking
Words: 4606
Pages: 19

The British grocery sector is one of the most competitive and fierce within the retail sector. It is also increasing becoming less profitable, with demand flat lining and over capacity eroding the big players’ profitability. This is evident from Tesco’s recent losses of £6.4bn for the year to the end of February (Source). Not only are these the worst result in its 96 year history of the company, but it’s also the biggest loss in high street history and the sixth worst loss for any British company. Many have pointed towards the rise of the discount grocers as a leading factor in reshaping the grocery sector, attracting cash conscious consumers away from the established brands of the British market. However, price alone or a competitive environment is not the only factor that is reshaping the grocery industry. Instead, online retailers such as retailer Amazon are leading a paradigm shift in the way people shop. To succeed in this new environment, established grocers such as Tesco will have to take advantage of new innovations, to create customer experiences that deliver true differentiation. Significant capital investment will be required to bring these innovative changes; which could be increasing challenging as Tesco is going through one of the worst years in terms financial performance in its history.
Could a Balanced Scorecard approach enable Tesco to realign its strategy and vision that will allow it to navigate through the challenges it’s facing today. Strategy is the most important component of a scorecard and forms the basis for communicating the organization’s approach for gaining a competitive advantage and for improving mission effectiveness for stakeholders. Before building a scorecard system it is important to understand organization’s customers and stakeholders and equally importantly their needs.
According to Kaplan and Norton (1992), customers tend to concern about four main things: time, quality, service and the cost. At present the customer perspective at Tesco is articulated by taking these concerns into their objectives and is then measuring them through its ‘Steering wheel’ (Tesco CRR, 2012). The main objectives of the Tesco regarding the customer are:
Highest quality
Lowest price
Customer satisfaction through product quality and price
Customer Retention
Tesco's main aim or goal is to earn lifetime loyalty of the customers by giving them highest quality products. It is measures this by the percentage of defective products returned to them by customers. To further improve their quality and decrease their cost, Tesco can use Total Quality Management, which many grocers have successfully adopted. Moreover, customer loyalty can be increased by further lowering the prices and making them even more competitive compared to its closest rivals. The most important objective is customer satisfaction with product quality and price.
Customer retention is another key success factor in assessing repeat purchases by same customers at Tesco. The Tesco ClubCard is a world-leading loyalty card scheme, with over 16 million active cardholders (telegraph). This ClubCard enables Tesco to better understand their customers and say a big thank you for shopping with them. But more importantly, using the data from ClubCard, Tesco can predict consumer trends and react to them.

The main objectives of the Tesco regarding the financial perspective are sales growth and maximisation of profits. Every organisation wants to grow and increase profits; it is no different with Tesco. Tesco measures its sales growth by comparing the sales of the company as a five year summary.
According to Kaplan and Norton (1992), the internal perspective of a balanced scorecard consists of the factors that affect the cycle time, employee skills and productivity of the company. The main objectives of Tesco regarding the internal perspective are:
Employee skills
Improve product quality
Employee skills are one of the main objectives of any company. Tesco…