Introduction
This essay examines the business operations and strategic approaches of Tesco PLC, a leading UK-based multinational retailer. As a student of business management, I have chosen Tesco due to its prominence in the retail sector and the availability of comprehensive data about its operations, despite not having personal work experience within the company. The essay will first provide an overview of Tesco in terms of its type, markets, financial performance, and employee numbers. It will then describe key aspects of its management structure, annual business planning, innovation, employee development, communication, and main risks over the next two years. Finally, the essay critically examines Tesco’s approach to innovation, drawing on relevant module material to propose recommendations for improvement. This analysis aims to demonstrate an understanding of business management principles while offering practical insights into Tesco’s operations.
Overview of Tesco PLC
Tesco PLC is a public limited company and one of the largest retailers in the UK, operating as a supermarket chain with a significant presence in grocery and general merchandise (Tesco PLC, 2023). It serves multiple markets, including the UK, Ireland, and parts of Europe and Asia, with a strong focus on both in-store and online retail channels. According to its latest annual report, Tesco generated a group revenue of £65.8 billion for the financial year ending February 2023, reflecting a robust financial performance with an operating profit of £2.6 billion (Tesco PLC, 2023). Despite economic challenges, the company has maintained steady growth through cost control and digital expansion. Tesco employs approximately 330,000 people globally, with a significant proportion in the UK, making it a major employer in the retail sector (Tesco PLC, 2023). These figures highlight Tesco’s scale and economic significance, providing a strong foundation for further analysis.
Management Structure
Tesco operates under a hierarchical management structure, with clear divisions of authority and responsibility. At the apex is the Board of Directors, led by the Chairman and Chief Executive Officer (CEO), who oversee strategic decision-making (Tesco PLC, 2023). Below the board, senior management includes roles such as the Chief Financial Officer and regional directors, who manage specific operational areas. Middle management, including store and department managers, ensures day-to-day implementation of policies. This structure facilitates efficient decision-making but can sometimes limit flexibility at lower levels, as decisions often require approval from senior tiers (Robbins and Coulter, 2021). Overall, Tesco’s structure supports its large-scale operations while maintaining accountability.
Approach to Annual Business Planning and On-Going Control
Tesco’s senior management adopts a structured approach to annual business planning, focusing on long-term goals such as market expansion and profitability. The process involves setting targets for revenue growth and cost efficiency, informed by market analysis and competitor benchmarking (Tesco PLC, 2023). On-going control is exercised through key performance indicators (KPIs) like sales per square foot and customer satisfaction scores, monitored via regular reporting systems. However, this rigid focus on metrics can sometimes overlook qualitative factors such as employee morale, potentially affecting long-term performance (Drucker, 1999). Nevertheless, Tesco’s disciplined approach generally ensures alignment with strategic objectives.
Innovation in Product, Service, and Process
Tesco has prioritised innovation to maintain competitiveness, particularly through digital transformation. The company has expanded its online shopping platform and introduced services like ‘Click & Collect’ to enhance customer convenience (Tesco PLC, 2023). Additionally, Tesco invests in process innovations such as automated warehousing to improve supply chain efficiency. However, its focus on technology-driven innovation sometimes overshadows product development, with fewer groundbreaking own-brand offerings compared to competitors like Aldi (Johnson et al., 2020). This gap suggests a potential area for strategic improvement, which will be explored later in this essay.
Employee Development
Tesco places considerable emphasis on employee development through structured training programmes and career progression opportunities. The company offers online learning platforms and in-store training to enhance skills, particularly for entry-level staff (Tesco PLC, 2023). While these initiatives are commendable, access to advanced development opportunities is often limited to managerial roles, potentially demotivating lower-tier employees (Armstrong, 2021). Therefore, a more inclusive approach could further enhance workforce capability and retention.
Employee Involvement and Communication
Tesco employs various methods to ensure employee involvement and communication, including regular team briefings and feedback mechanisms like surveys. The company also operates a colleague forum to represent employee views at higher levels (Tesco PLC, 2023). However, communication can be inconsistent across different regions and stores, sometimes leading to misunderstandings of corporate policies. Enhancing digital communication tools could arguably address this limitation and foster greater engagement (Robbins and Coulter, 2021).
Main Risks Over the Next Two Years
Two significant risks threaten Tesco’s performance over the next two years. First, economic uncertainty, particularly rising inflation and cost-of-living pressures in the UK, could reduce consumer spending on non-essential goods (Office for National Statistics, 2023). This risk is grounded in recent economic data showing a decline in retail sales volumes, directly impacting Tesco’s revenue potential. Second, intensifying competition from discount retailers like Lidl and Aldi poses a threat, as these competitors continue to capture market share through aggressive pricing strategies (Johnson et al., 2020). Tesco’s premium positioning may struggle to retain price-sensitive customers unless adaptive measures are implemented. Both risks highlight the need for strategic agility in response to external pressures.
Critical Examination of Innovation
Focusing on innovation, Tesco’s efforts in digital services and operational processes are notable but not without limitations. Indeed, while online platforms have boosted sales—contributing to a 10% increase in digital revenue in 2022/23 (Tesco PLC, 2023)—the company’s approach to product innovation remains underdeveloped. Competitors like Aldi frequently introduce unique, high-value private-label products, whereas Tesco’s offerings often lack differentiation (Johnson et al., 2020). Drawing on module material, Porter’s (1985) competitive advantage framework suggests that differentiation through innovative products is crucial for sustaining market position. Tesco’s heavy reliance on technological advancements, while effective in the short term, risks neglecting customer demand for novel product experiences, potentially weakening brand loyalty.
Furthermore, innovation at Tesco appears driven by top-down initiatives rather than employee-led ideas, limiting grassroots creativity. Studies indicate that organisations fostering bottom-up innovation often achieve more sustainable outcomes (Drucker, 1999). Tesco could, therefore, benefit from a dual approach: continuing technological advancements while investing in product development and employee-driven innovation.
Recommendations for Change
To address these gaps, Tesco should implement two key strategies. First, it should establish a dedicated product innovation team to research and develop distinctive own-brand items, targeting niche consumer trends such as sustainable or health-focused products. This aligns with Johnson et al. (2020), who argue that product differentiation is vital in highly competitive markets. Second, Tesco should introduce an employee innovation scheme, encouraging staff at all levels to propose ideas for products or processes, supported by incentives. Such a scheme could harness untapped creativity, as Robbins and Coulter (2021) note that employee involvement in innovation enhances motivation and organisational adaptability. These recommendations, if implemented with adequate resources, could position Tesco to better balance its innovation portfolio and maintain competitive advantage.
Conclusion
In summary, this essay has explored Tesco PLC’s operations across multiple dimensions, including its financial performance, management structure, and approaches to planning, innovation, employee development, and communication. The analysis identified economic uncertainty and competitive pressures as key risks over the next two years. A critical examination of innovation revealed strengths in digital and process advancements but highlighted deficiencies in product differentiation and employee involvement. Recommendations include establishing a product innovation team and fostering grassroots creativity through employee schemes. These changes could enhance Tesco’s market position and resilience. Ultimately, this case study underscores the importance of balanced strategic priorities in sustaining business success, offering valuable insights for business management students and practitioners alike.
References
- Armstrong, M. (2021) Armstrong’s Handbook of Human Resource Management Practice. 15th edn. Kogan Page.
- Drucker, P.F. (1999) Management: Tasks, Responsibilities, Practices. Routledge.
- Johnson, G., Whittington, R., Scholes, K., Angwin, D. and Regnér, P. (2020) Exploring Strategy: Text and Cases. 12th edn. Pearson.
- Office for National Statistics (2023) Consumer Price Inflation, UK: September 2023. ONS.
- Porter, M.E. (1985) Competitive Advantage: Creating and Sustaining Superior Performance. Free Press.
- Robbins, S.P. and Coulter, M. (2021) Management. 15th edn. Pearson.
- Tesco PLC (2023) Annual Report and Financial Statements 2023. Tesco PLC.
