Tescos Internationalisation - Case Study Example

The Author’s Name] [The Professor’s Name] [The Course Title] [Date] Tesco’s Internationalisation Introduction The Institute for Retail Studies' research (2003) reports that retail industry in the UK is quite competitive, dynamic, and innovative in recent years. And grocery retailers such as Tesco, Sainsbury's, Asda etc. are all compete on price, quality, range, and service in order to strive for business success. Within this intense competition of retail industry, Tesco can stand at market-leading position in recent years has mainly come from its strategies of expanding overseas, shifting to 'higher margin' non-food market and maintaining a strong core UK business. And its UK success has been built on low prices, cultivating customer loyalty, unbeatable quality, offering a range of different store concepts and expanding into retailing services (Tesco Plc Web Source). Moreover, close control of internal resources and diligent monitoring of all expenditures are also the critical aspects for Tesco to maintain its leading position in the market. Therefore, Tesco's business success indicates that effective operations strategies have played a vital part in supporting and driving its whole business objectives which is "to create value for customers to earn their lifetime loyalty". (Solberg, 78-98) Accordingly, the purpose of this report is to investigate and analysis internationalization of Tesco. The report will mainly go through three aspects of Tesco's global operations management: operations management performance objectives, planning and control in use, and measurement and improvement activities. Finally, conclusions and recommendations will be drawn from analysis. Internationalisation Strategy Evaluation According to Slack et al. (122-25), global operations strategy is defined as "the total pattern of decisions which shape the long term capabilities of any type of operation and their contribution to overall strategy". Slack et al. (2004) also states that operations performance objectives relate to the interests of the operation's stakeholders. Applying to Tesco, customer's satisfaction is particularly important to its business. Therefore in order to satisfy its customers and contribute to competitiveness, Tesco's operations performance objectives are mainly reflect on cost, quality, speed, dependability and flexibility aspects. With regard to pricing, Tesco every week check over 10,000 prices in Asda, Sainsbury's and Morrisons stores to guarantee its customers have low prices every day. And it also took steps to reduce cost in order to ensure that the way they work is better, simpler and cheaper. For instance, the reason of Tesco has an effective supply chain is because of implementing an appropriate information technology G.O.L.D. application suite successfully. This software provides Tesco with complete control over warehouse stack. Moreover, the automatic order proposals and warehouse optimisation procedures facilitate a fast and flexible business with minimal logistic costs (Ozsomer, 27-50). Therefore, by doing things cheaply, it will allow Tesco to reduce its price in order to gain higher volumes or increase their profitability on existing volume levels externally. And internally, cost performance is helped by good performance in the other performance objectives. As Slack et al. (2004, p.128) points out that quality is a particular important objective to all operations, as quality is an important aspect of customer satisfaction or dissatisfaction and quality operations could both reduce costs and increase dependability. For a grocery retailer, quality could mean goods are in good condition, the store is clean and tidy, decor is appropriate and attractive and staffs are courteous, friendly and helpful etc., so according to our research with Tesco store manager, he stated that Tesco has put more staff into stores and distribution centres in order to improve its availability and service. Moreover, Tesco also launched Clubcard that the information provided by it enables Tesco to better understands their customers. In addition, Tesco delivered new system of hand-held computers for their staff in all of UK stores, which is to provide key information on the sales floor, simplifying their stock and order operation for customers. And they also have tested self-service checkouts in order to help reduce queuing and congestion. All These system has helped to improve speed, quality and flexibility of their staff response to customers' queries. In general, according to above analysis, the five operations performance objectives are interacted with each other, Tesco need to take account of all of them when they deliver their operation strategies. More importantly, each of these performance objectives is also influenced by the competitive factors, so according to Slack et al., 'order-winning' and 'qualifying' are two factors that could determine the relative importance of competitive factors. (Slack et al. p.129) For Tesco, according to our research, cost and flexibility are two order-winning factors that directly and significantly contribute to their success business. Quality, dependability and speed are qualifying factors for Tesco, as all these factors not the major competitive determinants of their winning business, but they are those aspects of competitiveness where Tesco's operation performance has to be above the particular level that customer perceived. (Hewett, 51-66) Operation planning and control are an important part of the organisation. Planning is a formalisation of what is intended to happen at some time in the future. And control is the process of coping with changes in these variables (Slack et al., 131).Capacity planning and control reconciles the required availability for an operation's products and services with the operation's capacity to deliver them (Slack et al., 132). Capacity concerns with the major facilities, machines, manpower, and supplies of the organisation. These are all the resources which need to be planning and control. Plymouth Tesco Metro store has two store managers. One is store manager, and another is service manager. And there is enough staff work in the store. Tesco recruit and training there staff. Also Tesco encourage staff to become part owners of the company and share in the success. In addition, Tesco offer a save-as-you-earn scheme to enable staff to buy shares at a discounted price as a medium- or long-term investment (Tesco Plc, 2005 Web Source).Tesco does business with nearly 2,000 own-brand primary suppliers in 98 countries. The supply chain is made up of a complex range of relationships - from individual farmers and growers through to processors, manufacturers and distributors (Tesco Plc, 2005, Web Source). Supply chain planning and control Supply chain management is concerned with managing the flow of materials and information between the operations which form the strands of 'chains' of a supply network (Slack et al., 133). Supply chain management needs consider and satisfy end customers. The current Tesco supply chain network is well documented. The operations performance is now much more rigorously monitored, mainly through the 'steeling wheel' approach widespread throughout Tesco. Any distribution centre steering wheel focuses on operations which include safety and efficiency, people which include appointment, development, commitment and values, finance which include stock results and operating costs, and the customer which includes accuracy and delivery on time (Fernie and Sparks p. 116). Also Tesco measure these performance at all levels, quality standards are maintained and enhanced. Quality Planning and Control in Internationalisation Process Quality planning and control seeks to deliver products and services at their required specification or above it (Slack et al., 134). The operation views quality is consistent conformance to customer's expectations. Quality is seen as being so important by most operations (Slack et al., 135). Tesco ask the suppliers to comply with their Nature's choice scheme to ensure their fruit, vegetables and salad are grown to high safety, quality and environmental standards. Also Tesco offer customers fresh and safety and quality seafood and organic foods. Tesco is committed to purchasing timer and timber products only from legal, sustainable sources (Tesco Plc, 2005, Web Source). Measurement and Improvement Activities in Internationalisation Strategy "Performance measurement is a process of quantification and the operation performance indicate the degree which an operation fulfils the five performance objectives in order to meet the customer's needs" (Slack et al., 137). Operation's performance could also change because of the different market's needs of each performance objective. The five performance objectives are quality, speed, dependability, flexibility and cost (Slack et al., 138). According to Tesco Plc's 2005 annual report, currently Tesco use the "Steering Wheel" as their management tool to measure operations performances. And the management tool is with a set of Key Performance Indicators that can help to check whether the operations targets achieved or not. As a retailer, cost, quality and time are more important. Tesco makes both continues and breakthrough improvements in its operation. However, breakthrough improvements take more proportion. (Johnston 189) There are several areas that new technology should be used to improve Tesco's operations, which include price integrity and stock processes at the shelf edge. Tesco has deployed Intermec 700s to change in-store prices, logging stock inventory transactions and producing plan grams of product layout and shelf design. Besides, Tesco used it to check store delivery accuracy, using GPRS connectivity to get data feedback; check the accuracy of deliveries against invoices. Tesco deployed 700s to make sure product prices are updated and correct. Because of 700s ensure a track record of price alterations, Tesco are enabled to improve productivity of the price change. Besides, Tesco are enabled to improve productivity at the stock control routines. Thus, staff productivity has increased. So, it is not a cost saving activity, but also can make them more effective. In addition, the customer query time has been reduced. The staff in Tesco can determine when the last delivery arrived and when the next is expected by scanning and receiving information from warehouse at once. It is not such hard and inconvenient for staff to deal with customers. Tesco has new plan and project for the future improvement, such as X-Dock project. It enables supplier to prepare the goods when they are declared on the distribution lists. Time needed for goods preparation can be reduced because of this type of goods distribution. Tesco complete control over warehouse stock with the help of the G.O.L.D. software suite. Besides, Tesco achieves to a faster and more flexible business with minimal logistics costs by using the automatic order proposals and warehouse optimisation procedures (Lambin, 324-40). Conclusion Overall, Tesco's operations strategy is its long-term goal. It is important for Tesco to have an operational strategy because it establishes the types of goods and services the company will offer its target market, and how Tesco are going to get advantages over its competitors. Tesco made good planning and control in its capacity, supply chain and quality. Besides, in order to make improvements in operation, Tesco measures quality, speed, dependability, flexibility and cost. Although they have made some improvements, there are still some disadvantages in its operation. Tesco is in a rapidly changing dynamics of the retail industry, there are two order-winning factors that made Tesco win over other supermarkets in U.K.: cost and flexibility. For an operation such as Tesco, firstly, the cost objective can be seen as the most important objective, because all of the other performance objectives affect cost. According to Tesco PLC Profile (2005), around 60% of Tesco's costs are the cost of buying materials and services, around 15% are staff costs and 30% are technology and facilities costs. (Tesco Plc, 2005, Web Source) Therefore, Tesco's costs are dominated by the cost of buying its supplies. Tesco makes use of information technology running an effective supply chain to reduce cost. Although Tesco has two factors superior to other competitors, the rest of performance objectives still need to be improved. The quality inside the operation is important. If someone makes a mistake within the operation, time and money must be spent correcting this makes. Speed is also important inside the operation. According to the customers, in Tesco metro, some products are often sold out but it is not as quickly as possible to deliver the materials, so made customer disappointed about the service and go to other supermarkets. Tesco's dependability objective is not satisfactory, in Tesco metro, it is not open 24 hours a day and customers often can not buy the expected food in the evening. There are some drawbacks of capacity planning and control, for example, "they keep output on one level, which means that the same number of staff would operate all the time, so that they produce the same output period" (Krajewski & Ritzman 208-11). For instance, many people are shopping in the store on Friday and weekend, customers are waiting in the long queue and 6 staff serving them, however, Sometimes there are few people in the store, it still have the same number of staff, it would be a waste of resource and influence efficiency of service. Tesco has a wide of operation and wants every one to buy their products. Tesco's aim is to get full time loyalty from their customers and to carry on increasing the value of their goods. Therefore, they should perceived and applied the five performance objectives properly, not only pay more attention to cost and speed, but also quality, speed and dependability. To increase the values and improve service, Tesco should improve and train staffs at all levels. This helps them run operations more efficiently as all staff is fully trained and therefore they will do their best to do their jobs. Works Cited Fernie, J., and Sparks, L. (ed.) Logistics and Retail Management Insights into Current Practice and Trends from leading Experts, 2nd Ed., London. (2004). Hewett, K. and Bearden, W.O. (2001) 'Dependence, trust, and relational behaviour on the part of foreign subsidiary marketing operations: implications for managing global marketing operations', Journal of Marketing 65(4): 51-66. Johnston, R., Chamber, S., Harrison, A., and Slack, N. Cases in Operations Management. London: Prentice Hall. (2003). Krajewski, L. J. and Ritzman, L. P. Operations Management. New Jersey: Pearson education, Inc. (2002). Lambin, J. (2004) 'Godiva Europe', in R.A. Kerin and R.A. Peterson (eds.) Strategic Marketing Problems: Cases and Comments, 10th edn, Pearson Prentice-Hall: Upper Saddle River, NJ, pp: 324-340. Ozsomer, A. and Prussia, G.E. (2000) 'Competing perspectives in international marketing strategy: contingency and process models', Journal of International Marketing 8(1): 27-50. Slack, N., Chambers, S. and Johnston, R. Operations Management, 4th Ed., London: Pitman Publishing. (2004) Solberg, C.A. (2000) 'Standardization or adaptation of the international marketing mix: the role of the local subsidiary/representative', Journal of International Marketing 8(1): 78-98. Tesco Plc (2005) Tesco Plc Annual Review ad Summary Financial Statement. Cheshunt. (updated 2005, accessed November 30, 2007) Read More