LO1 Understand the process of Strategic Planning
The following assignment is basically a report on a chosen organisation which is TESCO and it mostly deals with the importance of strategic management and the components associated with the same which is mostly associated with the company Tesco. Proper analysis of the process of strategic planning has been done by conducting environmental as well as organizational audit on the chosen organization Tesco.
The new strategies that are required to be implemented by the company Tesco as well as the resources required for the same have been identified in the following report. Also implementation of strategic planning has been discussed with explanation of resource requirement and SMART objectives.
Assess how business missions, visions, objectives, goals and the core competencies inform strategic planning (1.1)
Strategic planning can be broadly defined as a process which is mostly used for determining the direction, strategy as well as the resource allocation of the organization in order to achieve its desired objectives successfully (Zhou and Wu, 2010). However in order to ensure effective strategic planning it is very important to analyze the current situation or the condition of the organization and its future requirements must also be determined carefully. Some of the major components of strategic planning include –
- Mission – Organizations basically summarizes their goals as well as objectives in their statements of mission and vision. Mission is mostly considered to be the aim of the business enterprise or the organization. It mostly states the reason for the establishment of the organization as to why it exists, what does it aim to achieve and how. Its importance to the organization lies in the fact that it inspires as well as motivates the employees to work harder and it even facilitates the process of team building within the organization which in turn makes the process of achievement of the company’s vision much easier. However it is the duty of the employer or the top management of the company to ensure that the company’s mission is in harmony with its functioning. For example the mission statement of Tesco involves providing value to the customers so as to earn their lifetime loyalty. Mission statement of Tesco is as follows –
“Creating value for the customers to earn their lifetime loyalty”
- Vision – It determines or rather outlines the where or what the organization wants to be in the near future. It plays a significant role in communicating the values as well as the purpose of the concerned organization or the business enterprise. Vision statement of an organization are mostly directed towards the long term goals of the business as well as the future operations related with the achievement of such long term goals. It proves to be helpful in setting the goals of the organization as well as the allocation of the time period for the same. Vision statement is considered to be emotive as well as inspirational of the concerned business enterprise. For example the vision of Tesco mostly comprises of five elements –
- Having a global approach
- Innovative and modern as well as evolving with new ideas
- Inspiring and earning trust as well as loyalty of the customers
The vision statement of Tesco is as follows –
“To be the most highly valued business by: the customers we serve, the community in which we operate, our loyal and committed colleagues, and of course our shareholders”
- Goals – It is mostly any specific which the individual or the organization desires to achieve within a set time frame Goals can be further classified as individual goals and organizational goals and in order to ensure the success of the organization the individual goals must be aligned with the organizational goals. It is the responsibility of the top management to decide on the goals of the organization and communicate the same clearly to the employees of the organization.
- Objectives – Goals and objectives are assumed to be similar but tend to differ in the certain aspects. Objective is mostly considered to be the measure of the progress which is required in order to achieve the target on time while goals relates to the destination of the ultimate result. In other words objectives can be defined as the steps which are required to be followed in order to achieve the goals of the organizations and hence it can be considered as a part of the goal of an organization.
The goals and objectives of Tesco includes –
- To maintain the number one position in the category of retail markets in the UK
- To handle its competitors effectively
- To maximize profits and to remain the market leader
- To maintain the economies of scale
- Core competencies – It is one of the most essential components for leading the business or the organization towards success. It provides a competitive edge to a company over the other companies or its competitors. A company having competitive advantage over the other companies is expected to penetrate in their desired markets successfully. The core competencies of Tesco includes –
- It provides access to a wide variety of markets across the world
- Development as well as implementation of the supply systems that links the website Tesco.com with the existing shops
Personalization of online shopping
Reliable, timely as well as efficient delivery infrastructure
Hence it can be said that in order to survive successfully in the market or the business world for long it is necessary to design as well as the set the mission, vision, goals and the objectives of the firm as per the needs of the market or the customers as well as the organisation as a whole. Companies also need to have core competencies in order to handle the competitors existing the market efficiently as well as successfully.
The factors that needs to be given importance while formulating strategic plans –
- Engagement of the human resource or the employees of the organization – In order to ensure the success of the process of strategic planning the engagement of all the employees must be ensure by the organization. The engagement of the staff not only generates additional input but their commitment also ensures successful implementation of the strategies. For example the company Tesco believes in the empowerment of its employees and even shares a friendly work culture which help to increase the involvement or the engagement of the employees in the activities of the organisation.
- Communication – The process of strategic planning is successful when there is little or no communication gap between the different levels of management as well as the different departments within the organization. Mostly top down or bottom up communication process is employed the organization to ensure its smooth functioning. For example the flexible work environment as well as the decentralised organisational structure followed by the company Tesco helps to minimises the communication gap between the management and the employees and also minimizes the chances of confusion regarding any task or activity.
- Innovation – It is very important to ensure innovation in the process of the strategic planning as the needs and the expectations of the business world as well as the customers are changing tremendously in the recent times. For example Tesco ensure continuous augmentation in its product range which helps the company to retain its old and loyal customers. It also helps the company to deal with the changing needs and preferences of the customers and hence ensures the sustainability of the company.
- Project Management – Proper management of the project leads to the success of organizational strategies. It mostly involves identification of the relevant goals as well as the prioritization of the projects and the respective goals. For example Tesco ensures high quality project management by making use of advanced technologies.
- Organizational Culture – It is mostly concerned with the values, attitudes, behaviours and the beliefs of the employees as well as the organization as a whole. Every organization has a unique culture which sets it apart from the other organization. Besides a flexible organizational culture helps to ensure smooth functioning of the organization and also helps to reduce conflicts between its employees. For example Tesco follows a decentralised organisational structure as well as a flexible work environment which helps to maintain a healthy work environment within the organisations and also ensures smooth functioning or the activities of the organisation as well. Moreover Tesco even believes in the culture of shared values and beliefs.
The techniques that are used in the development of strategic business plans includes the following –
- SWOT – It helps to provide an insight about internal environment which includes the strengths, weaknesses, opportunities as well as threats of the organization. Further it helps to amplify the strengths and opportunities and to overcome the weaknesses and the threats.
- PESTEL – It gives an idea about the external environment of the organization which includes political, economical, social, technological, environmental as well as legal factors that have an impact on the operations of an organization.
- Porter’s Five Force – It helps to provide detailed information regarding the competitors of the company. It is inclusive of five major components – buying power of the suppliers and the buyers, threat from the substitutes and the new entrants and the rivalry among the competitors.
The advantages and limitations of these three different techniques in the process of developing a new business plan are as follows:
The main advantage of using SWOT analysis is associated with the fact that this method has little or no cost associated with it. It can be performed by anyone who has an understanding of the business. SWOT analysis can also be performed when there is a lack of time to address a complex situation. SWOT analysis helps the company in taking steps towards business improvement without the need to spend money and recruit an external consultant or a business advisor. Another advantage of performing the SWOT analysis is that it allows one to concentrate on the most important issues that affect a business. The advantages of performing a SWOT analysis can be briefed as below:
- It helps in better understanding of the business
- It helps to address the weaknesses and take advantage of strengths
- Threats can be more effectively deterred using SWOT analysis
- SWOT analysis helps to capitalize on opportunities
- It can be used to develop business goals and devise strategies in order to achieve those goals.
SWOT analysis should always be considered as one step in the planning process of business. More analysis and in-depth research is required to be conducted so that it is possible to make decisions on complex issues. SWOT analysis is used to consider factors that can be definitively classified as any of the four categories. It cannot classify those factors that are dicey and hence difficult to categorize as strength or a weakness. The limitations of SWOT analysis are as follows:
- SWOT analysis cannot be used to provide solutions or other alternative decisions
- It does not help in prioritisation of tasks
- SWOT analysis can be used to generate a lot of ideas and this creates difficulty for the management as it is puzzled to choose the best amongst the many ideas
- Not all the information produced by SWOT analysis is useful.
Porter’s 5 forces
- The model is rather simple and easy to use
- The model is a step ahead of SWOT analysis and helps to analyze each important stakeholder in terms of forces.
- The model offers a basic step of analysis which can be used as a landing platform for further analysis.
The disadvantages associated with the Porter’s 5 forces model are stated as follows:
- The globalisation and the pace of change that is encountered today is far more rapid than the time of mode’s creation
- The model is based on the assumption of static market structures where as it is noted that the market structures actually are dynamic in nature
- The model is best at providing just a snapshot of the environment
- Non-market forces are not considered in the model although they are important part of the factors that affect a business.
- Sometimes businesses operate in more than one industry and it is difficult to define industry in certain cases.
- Competition is the idea which forms the basis of the model
- The model can be used for the analysis of market structures that are rather simple in nature.
- It acts as a framework that is simple and easy to use
- Helps in reducing impacts of potential threats on the organization
- Cross functional skills and expertise is required
- Provides a mechanism for identification and analysis of new opportunity
- Enables the organization to access the implication of entering different markets across the globe.
- The information used for making decisions can be oversimplified by the users
- It is often required to regularly conduct the process so as to maintain its effectiveness and companies are reluctant to make this investment.
- As assumptions forms the basis of most data used in the model, decisions based on such information is subjective in nature.
- Time and cost required to collect information restricts the user’s ability to gather quality information.
- Does not consider the competition element of a new market.
Analyze the strategic positioning of a given organization by carrying out an organizational audit (2.1)
Strategic positioning of an organization is mostly concerned with such activities which are different from its competitors in order to position itself uniquely within the minds of the customers or the consumers (Clarke and Fuller, 2010).
The given organization on which the Organizational audit has been carried out is assumed to be Tesco, which is one of the famous as well as powerful retail brands in the world. The brand is famous for its collection of a wide range of products, convenience as well as the value for money.
A SWOT analysis is conducted in order to carry out an organizational audit on Tesco –
· Tesco is the largest grocery retailers of UK
· It is a popular brand and hence enjoys a large number of loyal customers
· It is also the largest online supermarket of the world and hence ensures easy accessibility to its target customers 24*7
· It enjoys a wide range of store formats as well which helps to attracts the customers
· One of the most important facts is that it enjoys economies of scale as well and as such can lower the price range of its products in order to beat the competition
· Tesco has a huge span of control which makes it one of the largest retailers in the world which tend to weaken its power in certain areas
· As Tesco has a wide range of products which is sold across different sectors and hence is less flexible as compared to its competitors who are more focused towards a particular product
· It does not have a sustainable competitive advantage
· It is over dependent on its home market that is the UK
· It can ensure its international growth by increasing its international services
· Diversification of the services or the product range
· It merge or even can form alliances or can go for acquisitions with the global retailers in order to ensure international growth of the business
· It can implement demographic changes as well
· It can ensure market development by going out for new types of store or new locations or niche markets
· Huge competition which includes competition from the developing countries as well
· It is even exposed to numerous political problems in the respective countries in which they operate
· Mergers and acquisitions of the rival retailers which includes Morrisons, Sainsbury, etc.
· The change in the policies of the government in which they operate in
· The increasing cost of operations
Tesco even enjoys the largest market share in the world –
The environmental audit for the given organization Tesco by using the PESTLE Analysis method is as follows –
- Political – As Tesco is a UK based multinational company hence the political laws of the different countries it operates in tends to affect the functioning of the country. The Laws framed by European Union (EU) has a great impact on Tesco and the immersion of the countries into the same has further promoted the trade between the western and the eastern European countries. It has facilitated the expansion of the retail network for Tesco.
- Economical – As the economical factors have a direct impact on consumers’ buying behavior it is considered to be very significant for Tesco as well. The global recession was found to have some positive as well as some negative effects on Tesco. Moreover it was also found that the overall spending of the consumers on the food items are risen significantly over the last few years.
The volatility in the price rates such as the rise in the prices of the raw materials as well as energy has significantly increased the cost of production of the company.
- Social – The changing attitudes of the customers regarding their health and other relevant issues affects the sales of the products. It has been in a survey report that the number of children is less than the number of retired people in the UK which is discouraging for all the food retailers including Tesco as the elderly people often have more tendency towards eating less. However the increase in the dependence of the people on the internet has facilitated the online sales of grocery.
- Technological – It is one of the most valuable variables for the organizations like Tesco because it has a direct impact on the operations or the functioning, supply chain as well as on the other activities of the organization. As per the information provided by the Office for National Statistics, 2010 it is estimated that the internet users will account to about 70% of the total population of UK. Online retail shopping attracts people as it is less time consuming, more comfortable as well as convenient, although the security issues associated with the same remains a matter of concern for the companies like that of Tesco (Noland and Phillips, 2010).
- Legal – The non food sectors of Tesco will be significantly affected by the 20% rise in the VAT which has been implemented by the government in order to balance the huge budget deficit. Moreover the rise in the minimum wage of the employees to 15.5% will also increase the operating costs of the retailers or the supermarkets.
- Environmental – As the government is promoting environmental friendly products as well as services all the companies including Tesco has to abide by such rules and it even helps to achieve the goals of corporate social responsibility of the company. Tesco has even launched Greener Living Scheme which mostly focuses on advising the people on the relevant environmental issues (Elms et al., 2010). It also lays stress on non wasteful as well as recyclable packages.
Stakeholder analysis mostly deals with the appropriate analysis of the attitude or the behaviour of the stakeholders regarding any particular aspect. It mostly done during the initial planning of the project so as to analyze the risk associated with the project and the possible changes required to be made (Freeman, 2010). It can either be done annually or on a regular basis.
The stakeholder analysis for Tesco can be shown in the following figure –
Figure 1: Stakeholder Analysis of Tesco
· Directors/ CEOs/ Managers
The stakeholders can be classified as –
Primary stakeholders – Such stakeholders are directly affected either positively or negatively by the new policies or strategies of the organization.
- Secondary stakeholders – Such stakeholders are also known as intermediaries and are affected indirectly by the strategies of the organization
- Key stakeholders – They may belong to the above two groups as well and influences the activities within the organizations significantly
The major objective of the stakeholder analysis is to enhance the cooperation between the team members of the organization and the stakeholders so as to ensure smooth functioning of the organization.
The factors having an influence on the stakeholder analysis on the activities of the shareholders are discussed in detail below-
- Customer – They play a crucial role in determining the ultimate fate of the business as they are required by the companies to sell their products. For example Tesco will only be able to generate revenue if the customers deicide not to switch over to the alternatives and remain loyal to Tesco. Hence it is necessary for the shareholders or the stakeholders to make strategies in order to retain their loyal customers and to maintain healthy relationship with them.
- Employees – They influences the business significantly as they are major work force involved in the day to day activities of the company and without them neither the business nor the shareholders can exist. They want to generate profits for the company so that their dividend also increases accordingly. Thus, it is essential for the stakeholders to frame such strategies which ensure the welfare and growth of their employees.
In order to ensure international growth, Tesco needs to concentrate on launching its operations in the developing countries having huge potential for growth. Such countries include China, India, etc. which consists of large population and where the government laws are also favourable towards the growth of trade and commerce. As a result Tesco can gain huge amounts of revenue from the markets of such countries. It can further diversify its product range to include leather accessories as well which is very popular among the Chinese people.
In order to start its operations in the developing countries, proper market research needs to be conducted in order to analyze the buying behaviour of the customers, for identifying the target market, for assessing the most profitable locations of the stores as well as to analyze the competitors existing in the market. The culture of the local people must be taken into account to survive in the market for long.
In order to develop a new strategy for Tesco the following steps need to b followed –
- Tesco needs to frame strategies for regaining its core competitive in the business world of the UK
- Tesco needs to shape up the new management structure and a new business model in order to give tough competition to the cheaper substitutes
- Tesco must now expand its business and target the international markets in order to increase its market share as well as to generate profit
- Tesco must bring about a change in its store portfolios as well
Assess the roles and responsibilities of personnel who are charged with strategy implementation (4.1)
It is the responsibility of the top management or the employers of a company to disseminate the roles and responsibilities of the personnel associated with the implementation of strategy appropriate so as to derive fruitful as well as desired results from the same (Leiponen and Helfat, 2010). Human resources play a significant role in the success of the organization and as such it is very important on the part of the management to communicate the goals of the clearly to them so they can work hard towards the successful implementation of the organizational strategies. Moreover it is also very important to involve the employees in the decision or the strategy making process of the company so as to ensure employee loyalty as well as to motivate the employees to work other towards achieving the organizational goals.
Other roles and responsibilities of the employees associates with strategic implementation includes –
- Employees must always be ready or enthusiastic to participate in the activities or th tasks allotted to them so as derive profitable results
- Employees must always make sure that their working styles are cist effective for the company they are working for
- Employees must be creative and provide relevant suggestions for the improvement in the tasks allotted to them by their managers
- Employees must always support their managers and communicate their views clearly to the managers
Analyze the estimated resource requirements for implementing a new strategy for a given organization (4.2)
Tesco aims to spread its market in the developing countries of the world which has huge potential of growth like India, China, etc. and even wants to further diversify its product range. The major sources that will be required for ensuring the successful implementation of the new strategy will include- physical resources, technological resources, human resources as well as financial resources.
Allocation of the resources to the different department of the organization is the first step towards ensuring the successful implementation of the new strategy. However there are certain barriers that exist in the process effective allocation of resources such as overprotection of resources, organizational politics, giving more importance to the short term financial issues or goals rather than the long term goals, insufficient knowledge, reluctance of the employees to take risks which are essential for the success of the organization, etc. The management team of the company must make efforts to ensure the optimum utilization of the resources.
Other than fulfilling the resource requirement it is very important for the companies as well as its management to ensure maximum utilisation of the same to derive the desired outcomes form the same. In order to optimise the usefulness’s of the resources proper research must be conducted and the employees must be provided with adequate knowledge regarding the same so that they can utilise them profitably.
Evaluate the contribution of SMART targets to the achievement of strategy implementation in a given organization (4.3)
SMART objectives are used often to set goals and objectives for the company. The acronym SMART is expanded in the following graphic.
There are several advantages and disadvantages of using SMART targets to achieving strategy implementation in an organization.
The advantages of using SMART targets to set goals
- The SMART goals aren’t vague. As the SMART goals are specific, the company is able to easily identify if it is on track or modifications are needed to be performed in the activities so that goals can be achieved. Since these goals are specific, they are monitored and are not like vague goals which are unmonitored.
- In this process the goals and good and planned. Since the goal is detailed, the company is forced to design specific plan so as to achieve the same.
- When the SMART goals are in place, it is easy to monitor progress. When goals are clearly set, it is possible to identify and measure progress on a regular basis with respect to achievement of that goal. It also helps in identifying the good performers and those who need some assistance.
- Using this approach it is far easy to identify and monitor targets. Thus it is far easy to identify targets that are missed. Whenever, a target is missed, it is easy to react quickly to the situation and make appropriate changes.
- As details are specific, it is far easy to visualize and have a look of success.
- Setting goals that are large and farfetched makes it very difficult for the employees and the company. On the other hand breaking down those goals into smaller ones makes the task should a lot easier.
- Smaller goals that are intermediate are easy to see and achieve. As one achieves smaller goals one by one, the larger goal is automatically achieved.
The disadvantages of using SMART targets for achievement of strategy implementation are as follows:
- Although setting of SMART targets is one of the steps in achievement of strategy implementation it is not sufficient.
- Although SMART targets help in defining the goals, it does not mean that the goals set are the best goals in the process.
- SMART targets only help in setting targets but do not define the process of setting targets.
- It creates a lot of pressure on the company and management to achieve those targets.
- It does not state anything about targets that cannot be measured in any numerical terms.
- It creates a sense of failure on non achievement of targets.
Strategic planning plays a very important in achieving the goals for the organizations. It even plays an active role in determining the mission, vision, core competencies as well as the objectives of the organization. Techniques such as SWOT analysis, PESTEL, Value chain, etc. helps to aid the process of strategic planning.
A detailed view of the process of strategic planning as well as the components associated with the same such as mission, vision, objectives as well as the core competencies of the company Tesco in particular have been provided in the first task of the assignment. The task further deals with the techniques used for the developing the strategic plans for Tesco and the effectiveness of the same by making use of the Porter’s five force model as well as Porter’s value chain.
The task two deals with the environment as well as the organisation audit of the company, Tesco, by using the PESTLE and the SWOT analysis method. Moreover a stakeholder has also been provided for the company Tesco and new strategies have also been formulated for the same.
The last task that is the fourth task deals with the roles and the responsibilities of the employees or the personnel involved in the process of implementation of the strategy. In addition a brief insight has been provide for the resources required for the implementation of the strategies and then the SMART target for the achievement of the same has been identified.
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