Strategic_Management

Introduction Strategies are one of the most important proceedings of an organization in order to achieve their goals and objectives. As Mintzberg H Quin B (1997) stated that, “strategy is the pattern plan that accelerates an organizational goal, policies and action sequences as a whole.” Therefore managers or the top level leaders of an organization need to b very careful when selecting and implementing the strategy for them to compete in the market and for their survival. In this assignment, the school of strategies including planning school, cultural school and positioning school of Mintzberg will be studied to show these strategies are helpful for the organization to be more competent in the global market. This assignment also shed light on some international theories such as Porter’s diamond, five forces, generic strategies and product life cycle of an organization in the light of Tesco Plc ‘case. School of strategies It is not negligible the strategic development is the basic factor for the survival and success of each and every business. Infact, each organization should rely on suitable strategies and adapt it to the situations that arise in a competitive environment. According to Turner (2003), “in an attempt to guide those whose job is to put strategies into practice, Henry Mintzberg, et al (1998) described the process of ‘strategy safari’ and has identified ten schools of thought in respect of strategy development. These schools have varied in popularity overtime”. The ten different schools were grouped into three groups, prescriptive, descriptive and synthesis. The basic difference between the prescriptive schools and the descriptive schools is that the prescriptive focuses on strategy formulation while the descriptive as strategy development. The three prescriptive schools are known for the efficiency and stability foundations which direct the organization and create objectives for the development of organizations. As Stacey stated that, “the three prescriptive schools are, the design school, the planning school, the positioning school”. All of these three schools are fundamental for the strategy development and preconditioned element for each organization. More over these schools, the different descriptive schools are entrepreneurial school, the cognitive school, the learning school, the cultural school, the power school and the environmental school, describe how to formulate strategy. All strategy prescriptive relates to entrepreneurship. And at the last configuration school is in the last group that is called synthesis, as according to Stacey, “which integrates the views of all the other schools in terms of configurations or in term of transformations”. In this assignment we will consider three schools which are the positioning school, the planning school and the cultural school to study and analyze in case of Tesco, that how these theories work in case of any organization to achieve their goals and objectives and to win in the global market. The planning school The planning school from the group of prescriptive schools is in fact more concerned about the formulation of strategy instead of other proceedings like comprising. The planning school deals with scheduling, budgeting and programming. For the growth and development purposes every business need to have objectives and then plans to achieve these objectives, so this theory can be applied in a number of organizations and Tesco is one of them to compete globally. Discussion Jack Cohen found Tesco on 1924. Tesco over many years become larger retailer in all over the world nowadays. How is this happened' All that they need to have is a right plan consisting of forecasting about future economic conditions, what are their objectives, what will be the future market conditions and many more. Answers of all these questions are the planning school. Moreover Tesco used Ansoff Model for the analysis of their products and markets as well. Tesco is being globalized by entering in many countries of the world where they start their workings to develop new markets. For example, Tesco in Japan started fresh food daily as the existing businesses do not meet the needs of local customers. As following this Ansoff marketing strategies, Tesco is being focused on increasing number of customers and sales. The planning school is very keen at the SWOT model, the strength weakness as well as the opportunities and threats as described by Marko Makipaa (2004). Tesco used SWOT model and came to know their strengths like band name and very importantly national store network, and also their weaknesses such as lack of scaling globally and threats of takeover. This might help them to overcome now or in the near future. They also came to know that the external opportunity of overseas developing market in Asia and Eastern Europe and this might be a better opportunity for them to compete globally. Although they might have the threats of entering of Walt Mart and local Sainsbury. So by applying the planning school theories relating to Ansoff Model and SWOT model, an organization will better understand the global market, the possibilities, will plan for the development of new product and new market, forecasting about future, estimate their competitors’ strengths, manage their budgets, programs, schedules and evaluate the alternatives and choices of techniques for the attainment of their goals and objectives. This model also leads an organization to maintain the order of strategies, like longer term strategies first then medium and at the end short-term strategies we may called them plans. Limitations However, while implementing this model, an organization might be went through some resistance as this model have some problems which can influence an organization. As according to Sadler (2003), “strategy implementers may focus on making new strategies and plans divert the attention of the organization concerned people from the basic objectives of the organization. Another big issue is Risk in the planning school model as they remain focused on competitors’ strategies hence generate new strategies”. Another problem is strategies might be on assumptions and uncertainties which will result in diversion of organizational original strategy to newer one. The cultural school The cultural school as a member of prescriptive group sees strategy formation as a collective process. This school is an approach of involving various departments and groups within the organization in strategy formation collectively. Strategy made and developed in this model represents the corporate culture of the company. This model is mainly concerned with the social processes, values, and beliefs while making decisions or developing strategies. This model not only explain the resistance for the strategic development but also helps the organization to deal with this resistance in view of dealing with values and social norms etc. Discussion As other globally recognized organizations, Tesco have also different cultures and these cultures play vital part in the organization. This is all about the interaction of people with each other in the organization, and is very harmful for the decisions being made by the company. Tesco have a culture having positive effects, as it is customer oriented. And a customer oriented culture is very helpful to improve their customer services, market research, innovations, hire right people and training them accordingly. Staff and workers communicate well with each other which is very helpful to bring about change. Furthermore Tesco have a very decent culture as they are looking for more and more improved working and more advanced ideas of attracting more customers. Limitations In a well committed culture staff and workers expect a consistency in the organization’s behavior which is very threatening for the strategic change in that organization. Culture is consisting of beliefs, norms and religions which are very harmful internal barriers for the strategic change and might create a conflict that can not be negligible for an organization. So an organization should have a great attention on the organizational culture while developing a strategy. The positioning school Third and last school from the prescriptive group is the positioning school deals with the how an organization can position itself strategically in the industry. In this model we will see the strategy structure in the light of analytical development. Porter (1980) as a founder of the positioning school, focused on the legalities and constitutions of industries and their influence on the strategies. According to Steward C, el at, 2005, the positioning school model analyzes the company’s condition in the economics environment and to distinguish it from the others in the same industry. Discussion This approach is being applied in a number of organizations like Tesco to help them to position them in the competitive environment so that they can win in the global market and gain more revenue than the rests. Tesco also use Porter’s diamond and five forces to analyze and understand their competitors. Porter’s five forces model shed light on the view that an organization’s business is being influenced by five forces which include, threat of substitutes, buyer power, rivalry, supplier power and barriers of entry. The main competitor for TESCO is ASDA. It is owned by Wal-Mart a leading grocery company in the United States. They are very well known for their low prices. People are very attracted to go to their shop for their shopping because of the different reasons; low price is one of it. They enhanced their business in United Kingdom as well as in United States because of their cost leadership strategy. Porter (1985) stated that, business positioning is due to the strength of the organization and strength is divided into two sub classes which are cost advantage and differentiation. When these two strengths are analyzed it will further categorized into three consequences which are focus, differentiation and cost leadership. But in the case of Tesco’s competitive advantage over ASDA, cost leadership strategy plays a vital role. Cost leadership strategy refers to the view that the business is focusing on low cost manufacturing. Limitation One of the basic problems a manager should be minimized while implementing the positioning school model is that there may exist inconsistency because top level of the organization just formulate the strategy and implementation will be done by the lower level managers.(Susanne) The other problem is that the focus of this model is too much narrow as it only keep a view on the quantitative data rather other political and technological aspects. This model is also very risky as it rely on the prediction made according to the past and present situations and trend. Whittington – school of strategies The Whittington school of strategies is of four types, each describes the different human psychologies about their thinking and acting effectively. These four types are considered as an important tool for an organization’s strategic management. Look at the figure below, we will better understand about the four basic theories: [pic] It is obvious that Tesco attracts more and more customers by focusing on evolutionary part because they remained consistent on the strategy of low cost and do promotion. In comparison with their competitors, ASDA and Sainbury, it always be very clear that Tesco have a much lesser price than the others and their promotions are always greater than the others. So by using these strategies they are more and more successful than their competitors. In the next portion of the assignment there are some of the strategies which Tesco implemented or can be applied to achieve their organizational goals and objectives. Globalized Strategic Decision One of the most problematic situations in the retail industry is globalization. Globalization is proved very difficult for most of the retailing businesses around the world over the past 20 years. In local markets their performance is highly influenced by customer behavior. Entrance in the markets like, Brazil, Thailand and Indonesia is seems to have clear differences in buying behavior, spending and consumer tastes. Most of the retailing businesses have tried to establish themselves in the global markets but failed. The next part of this assignment will help us to understand and formulate the global strategy of Tesco Plc. Tesco Strategy Overview Tesco grows its profit by attracting more and more customers, so that more and more people attracted to shop from it. They are doing well all because of one reason that globally millions of more people attract to them. In 1997, when Tesco first showed its four portions theory, non-food, international, retailing services and a strong UK based business. Now they are well known international retailer with a growing margins in non-food and retailing services. It is shown that Tesco have a very better strategy for global market, but they still have problems while they are expanding their business by entering into some countries, for example in 2002, when Tesco was entering in Poland, they face some economic problems and have to face a higher cost. Similarly in Taiwan (2000), Tesco have to face competition from a competitor. Nowadays it is heard that they are near to withdrawal from Taiwan. Because of these crucial experiences Tesco realized that expansion into new international markets is more difficult, so Tesco should be more analytical about the competitive environment. Porter’s analysis is still helpful for them to assess the competitors and the competitive environment of the firms. Porter’s Five Forces Discussion This framework can be helpful for many organizations. (Porter 1980). Its main focus will be on external environment and on the basis of the industry. The basic purpose of this type of analysis is to protect themselves from the threats and built up opportunities. Five forces are as, • The threat of new entrants (new competitors): in this type of supermarket retailing businesses, there are high barriers of entering. High initial investment, economies of scale and fixed costs are the reasons for the prevention of new entrants. Tesco and other supermarket business have a possibility to purchase larger volumes in a low cost. Besides new entrants can not have it. • Substitution threat: threat of substitutes is high in case of Tesco, and it can only be overcome if they analyzed at which level their customer will switch to the substitutes and to satisfy their customer that he has no option to buy other than their products. • The bargaining power of suppliers: Tesco always remains focus on one big supplier as well as a number of smaller suppliers so that they may overcome the problem of lesser bargaining power. • The degree of rivalry between existing competitors: As we are very clear about the fact that all the competitors are trying hard to increase their market share. Challenges Tesco’s most of the strategy and structure are based on the Porter’s model. It has a very clear strategy with growth from the four areas that are UK grocery business, international expansion, retailing services and non-food. In fact, Tesco is using its core we can say a strong stable core to achieve desired goals and growth globally. Porter’s Diamond Strategy Discussion By using this strategy, the objective of Tesco is to be a retailer and lower cost producer. This type of strategy is usually concerned with the large-scale businesses and which are offering perfect items almost acceptable for their valued customers. Tesco have to move towards the launch of discounted products so that it may attain its existing customer as well as attract more and more new customers too. Challenges Tesco analyzed that the opportunity to enhance their business at a large scale in France in unfavorable according to the current situation of the global market where planning is difficult and acquisition is very costly. Tesco have experienced that advisors can just only advise nothing more. Do not rely on any investment bank (www.prnewswire.co.uk). In these days, while a credit crunch and overall oil price increased, people just continue to satisfy just their natural necessity. Tesco as grocery retailer, need to invest more in food items in future. Other challenges for Tesco are about the technological advancements as all technology today is based on oil, gas or coal. Tesco should also focus on E-commerce. Product Life Cycle Discussion The product life cycle model is helpful in explaining the strategies and production patterns for standardized consumer goods and for some types of products, but is not very useful for the prediction of the future patterns, especially in a few global competitors’ industry.(Morrison J., 2003) this model reflects a dynamic comparative advantage. The country having comparative advantage in their production patterns may go through a change from developed country to the developing country. (Hill & Charles, 2007) As Tesco is expanding its business day by day and keeping its competition to a very high level, so it is too important that Tesco should invest in new product and services as well so that they can easily compete and satisfy their customers in the global market. Tesco is understood by its core grocery business but in their store it is found that they also dealt in other products which are very unrelated to groceries. Tesco is developing more and more new products like Tesco finance and insurance, Tesco credit cards and savings account, catalogue shopping service etc. by understanding the concept of product life cycle, Tesco is being able to understand new areas of businesses. (www.accaglobal.com) Challenges Because of very slow innovation, have short life cycles, a factor that makes it unable to achieve cost reductions by moving production in another country. (Daniels 2007) As it is known that Tesco is a global retailer and still expanding all over the world. Therefore, Tesco needs to move to a new environment and new markets. In this scenario Tesco competing its rivals by reducing its cost and removing products. There are a number of difficulties in this competition such as lacking of good research about market environment to make a better prediction about the good products in order to beat the competitors in the global market. Conclusion All strategy schools, theories and models are like the tools for strategic information and as a process for perceiving a number of futures for an organization. Strategy is formulated at the top level of an organization and this level of managers or leaders also sets goals and objectives for the organization keeping in view of the resources. Tesco is growing and participating more in the global market by applying these strategic models. It has been proved through the growth and development of Tesco in many countries around the world. References Books 1. By Marko Makipaa, the role and types of business information in “school of thoughts” strategic management. Frontiers of e-business research 2. Daniels J., Radebough L.H., Sullivan D. (2007) International business: Environment and Operations, 11th edition, pearson/pretice Hall, New Jersy. Pg 221 3. Fernie J (2005), international retailing, Vol 33 NO 1, Emerald Group Publishing, Pg 36 4. Hill C. W. L. (2007)