Sample Case Study on Tesco
Introduction
Tesco is one of the successful companies in the world. For many years, Tesco has been using Balanced Scorecard known as Steering Wheel to measure and manage the performance of the firm. However, this technique could no longer fulfill the purpose for which it was adopted by the management of the company. In 2013, Tesco had reported a 23.5% fall in half year profits. As a result of this, the managers of the giant have to adopt other effective techniques (bbc.com, 2013). Tesco’s managers switched the performance measuring technique to Big 6 KPIs strategy so that the performance of the firm can be measured well and can help them develop efficient strategies.
The purpose of this report is to evaluate if the new strategy taken by the management of Tesco has been able to fulfill the purpose or not. The focus is on assessing the reason for drop of Balanced Scorecard technique and taking up a new and better technique for the organization.
Adoption of ‘Steering Wheel’
Tesco’s success is due to the competency of the managers to take up right strategic tool for evaluating the factors influencing the operations of the business. This has enabled the company to become a giant in the food retailing and grocery industry of the UK (Alam & Raut-Roy, 2019). The management has focused on taking up efficient strategies for its target audience and acquiring its business aims. The company has a wide product portfolio and Is able to cater to the needs of its consumers quite well. The focus of the management of Tesco is on enhancing the products quality and their customer service so that they can get the best they want. The management develops strategy based on the quality, pricing and needs of the customers.
In mid 1990s, there was a strategic change in the company, as per which, the management of Tesco had adopted a strategic technique for catering to the customer needs well and also determining the factors that can influence the business (Mollah, 2014). The management adopted Steering Wheel technique which enabled the company to assess the customer needs and then develop their product portfolio based on it. This enabled the company to win customer loyalty as they could provide customers with exactly, they wanted and got customers’ trust.
Balanced Scorecard Approach is a technique used by the marketers for evaluating the performance of the firms in several areas of the operations. Balanced Scorecard Approach focuses on finance, processes, growth and customers of the company (Nguyen et al. 2017). The steering wheel approach has four quadrants developed by the managers that provide a base to the managers of the company when evaluating their performance. Tesco’s aim is to develop value for its customers to get their loyalty due to which the management of the retailer had adopted Balanced Scorecard Approach. A figure indicating the Steering Wheel of Tesco is as follows.
Fig 1
Source: Mollah, 2014
As per the need of the business and new challenges, another element was added to the steering wheel used by the company as community. The key motive was to encourage the employees of the company to contribute to their community also and not just be concerned with generating revenues. Balanced scorecard technique was adopted with a view of growing in the global market. As the aim of Tesco is to cater to the needs of the business well so the company had to ensure that they are able to understand what their customers wanted. Even the leadership of Tesco ensured that the approach taken should be able to acquire the company aims well (Mollah, 2014). As a result of this, Tesco’Steering Wheel assisted the employees to develop a platform for the company to grow in the global market and not just focussed on the UK industry.
Initially, Tesco’s Steering Wheel focused in four areas. However, the marketers of Tesco managed to add one more dimension to it with time and requirement of the business. Employees got proper training so that they could use this Steering Wheel for evaluating the performance of the business well and then acquire the business aims. But there is always an issue among Tesco’s management. It is to cope with the needs of the consumers that keep changing with changing trends. Back then, Tesco’s employees used the Steering Wheel to record the needs of the consumers. This also helped the managers of the company to provide feedback to the employees (Tesco, 2020). Using this steering wheel, Tesco’s managers could develop a progress report which could have all the key areas of the business and even the weak ones. Therefore, Steering Wheel had assisted the management of Tesco to expand the business operations outside the UK.
As the consumer preferences changed and technology advanced, it was vital for the company to take up a new technique which can help in coping with all the backlogs. There were many reports published in the national publications about the inefficiency of the Steering Wheel to address the business objectives, which has even led to massive decline in the profits of the company. As a result of this, Tesco has focussed on using other effective strategy for the business known as Big 6 KPIs. Besides this, the report in BBC.com has also indicated that the management of Tesco is planning to spend significantly on enhancing the stores in the UK, investing effectively in upgrading the stores, managing the product portfolio and expanding it, recruiting talented people for the Tesco Stores and also expanding the online offering of the company (bbc.com, 2013). These steps can help the firm to gain competitive advantage and also ensure that Tesco can cope with the challenges it had been facing all these years.
It is due to these reasons that Tesco’s management adopted a new technique and scrapped the old one.
Reason for adopting Big 6 KPIs technique
Due to the change in various factors, organisations have to take up new strategic techniques for evaluating the performance of the firm and also catering to the needs of the consumers well. Over time, it become crucial for the managements to consider factors in change in consumer needs, advancement of technology, globalisation etc. when considering new strategic steps. Tesco’s success in all these years is due to the efficiency of the strategic measure it adopted during the 1990s.
However, as there is a massive change in the factors so a new technique has to be adopted. There is a significant drop in the profits of the company in the last few years. This has alarmed the company’s management to look forward to taking new strategies for assessing the company’s performance and consumer needs. As per a report by bbc.com, it was indicated that the profits of Tesco dropped by 67% in Europe significantly (bbc.com, 2013). On the contrary, in Asia, the profits went down by 7.4%. the management of Tesco was unable to get the reason due to which the profits of the firm were decreasing. Out of all the retailers, only Sainsbury experienced an increase in the market share. As a result of this, the management of Tesco decided to scrap the Steering Wheel technique. This was leading to a lot of inefficiency (Alam & Raut-Roy, 2014). With Steering Wheel, the employees were unable to examine the reasons for the failure. This led to downfall of the profits and performance of the firm.
Big Six Strategy was adopted by the company when the management realised that the previous technique could no longer benefit the firm.
The six KPIs of Tesco’s new strategic technique are as under.
Fig 2
Source: Alam & Raut-Roy, 2014
The Big Six Strategy focuses on the availability of data, effective shopping experience, efficient customer service, high productivity levels, increasing competitiveness and developing good relations with stakeholders. The focus of Big Six KPI is to expand in developing as well as developed markets. The Big Six KPI technique enabled the company to get back to its track, focus on its priorities and also evaluate the performance of the firm in an effective way, which was earlier not been done on time. Hence, the management had only one option which is disusing the Tesco Steering Wheel.
The Big Six KPI technique enabled the management of the company to focus on acquiring the mission of the firm in spite of focussing on finances. This technique had all the dimensions of the Steering Wheel only. The knowledge performance indicators helped the organisation to have a focussed vision and strategy (Alam & Raut-Roy, 2014). The appropriate use of Big Six KPI technique can help in establishing effective communication and linking to the strategic objectives. As a result of this, the managers could provide effective feedback to their employees for improvement. There was a dire need to improve certain areas that were not doing any good for the business.
As far as the study conducted on understanding the performance of Tesco is concerned, it has indicated that low performance of the business made it a necessity for the management to take up new strategic techniques. Hence, Big Six KPI technique focuses on the areas that need improvement and priority for the business. Customers have been a priority for the business such that they can develop their products and services based on them. With this new strategic technique, it is easy for the employees of Tesco to focus on different parameters and evaluate their success against them. The change from Balanced Scorecard to Big Six KPI technique might be difficult for the organisation but this is the best performance measurement technique which the business can use (Alexander, 2020). There is a need for all the employees to focus on different strategies and then assessing the customer needs.
Big Six KPI is extremely feasible as it can enable the retailer to cope with its financial losses, expand in global markets and cope with needs of the consumers. The retailer can extend its product portfolio and focus on different business performance. It is expected that Big Six KPI technique will enable the business to manage their needs well and also develop cordial relations with the stakeholders for being a sustainable organisation (Alexander, 2020). Steering Wheel strategy had enabled the company to achieve success in last few years but with changing times, it is always crucial for the organisations to focus on better options. There are problems like shutdown of stores, high staff turnover due to which a better technique like Big Six KPI is always needed.
How Big Six KPI technique is better for Tesco?
The Big Six KPI technique for Tesco focuses on six knowledge performance indicators including sales, profits, customers for the business, cash flow, employees and partnerships. The leadership of Tesco has focussed on decreasing the factors that are leading for the loss of the business. The key focus of Tesco has been on creating high focus and aligning the business with objectives of the firm. The use of Steering Wheel was no longer beneficial for the business as they could not gain any competitiveness (Alexander 2020). Hence, Big Six KPI technique is adopted to focus on six key areas. Tesco’s management focused on gaining competitive advantage with Big Six KPI technique. The use of Big Six KPI technique enabled the management to make the employees feel secure and easy and also adhering to the needs of the customers. This strategy align and ensured that the performance factors can be evaluated (Nguyen et al. 2014). This enabled the employees to get effective indicators for the business to operate in an effective manner. As a result of this, the focus of managers and employees increases and efficiency of achieving business goals increased.
One of the key benefits of using Big Six KPI technique for Tesco is that all the knowledge indicators are simple and not complex. Therefore, the employees can focus on the important things. In the existing Big Six KPI technique, the indicators are limited. With time, there is a need to review the KPIs and add new ones into it (Nguyen et al. 2014). The changing business landscape and rising complexity can help in achieving the business goals effectively. But if the current KPIs are to be believed then in certain cases, these might not be feasible. The financial condition of the organisation has no relevance with inefficient operations. This makes the vision of the employees unclear as they do not have any idea about what should be achieved and what not. There is lack of clarity in the current Big Six KPI technique due to which the managers of Tesco needs to review and amend it with time. There is a need to have better clarity of the business and acquire high efficiency.
As far as Tesco’s steering wheel is concerned, it was clear and had focussed objectives. It could enable the managers to know about the objectives in a visual way and communicate them to the employees. In the case of Big Six KPI technique, there is no visual appeal due to which the quality is low. The focus of management has to be on enhancing the current objectives of the firm and developing new strategies when needed for high efficiency of the business. Overall, it can be indicated here that the use of Big Six KPI technique might provide a certain kind of unclarity to the employees but it’s simple due to which it is feasible. As a result of this, Tesco’s Big Six KPI technique is extremely feasible and it can help the managers of Tesco to cope with business challenges in an effective manner.
Therefore, the report provides with clear reasons as to why the company had to switch to ‘Big Six KPI’ technique and ‘Steering Wheel’ could no longer provide proper analysis to the managers about the performance of the firm.
Conclusion
It can be concluded from this report that the key focus of Tesco had been to manage the customers and cater to their needs well. However, the Balanced Scorecard could not help the managers to examine the reasons for the decrease in profits due to which the company had to opt for a new strategic technique called Big Six Strategy. With the new challenges and increasing business complexity, Steering Wheel became inefficient. The Big 6 KPI strategy emphasised on six principles for assessing the performance. This ensured that the employees are encouraged and motivated. This helps in ensuring that the employees are focussed and the strategy can be useful for success of Tesco in future. But the KPIs needs to be reviewed over time and new indicators must be added to the list so that appropriate success can be achieved. This can help in ensuring that Tesco is able to gain competitive advantage and sustain in the competitive retailing industry of the UK and world. In future, the company might have to switch to a much better option to measure the performance of the firm, as per the need of the business.
References
Alexander, I. N. (2020). The influence of technological innovations on organization’s competitive advantage: Case study on Irish food retail company (Tesco) (Doctoral dissertation, Dublin, National College of Ireland).
Alam, S., & Raut-Roy, U. (2019). Evaluating the Effectiveness of Reward Strategy at Tesco: Evidence from Selected Stores in UK. Indian Journal of Industrial Relations, 55(1).
Bbc.com., (2013). Tesco blames drop in half year profits on Europe. https://www.bbc.com/news/business-24361465 . Accessed on 5/3/2021.
Mollah, A. S. (2014). The impact of relationship marketing on customer loyalty at Tesco Plc, UK. European Journal of Business and Management, 6(3), 21-55.
Nguyen, L. T. T., Jamal, A., O’Brien, J., & Nawaz, I. Y. (2017). The effect of click & collect service in the context of retail atmospherics on consumer buying behaviour in terms of repurchase intention: an empirical study of Tesco UK. In 4th International Conference on Innovation in Economics and Business (Vol. 87, pp. 43-51).
Tesco., (2020). About Us. https://www.tescoplc.com/investors/. Accessed on 5/3/2021