Stakeholder conflict and strateigic planning for tesco
I am writing this report to talk about the purpose, objectives and responsibilities of organisations. I will also talk about the environment in which organisations operate, the stakeholders of the organisation, their needs and how the organisation deals with their conflicting needs. I will be explaining the importance of corporate strategy, strategic planning and strategic and tactical decision making within organisations, I will look at how they are made, and the purpose behind them. Discussion…
Every business has a purpose for which it exists, some purposes are common to most or all companies, such as making profit, and many purposes can be unique to its specific organisation. The purpose of the business can be found outlined in the organisation’s mission statement which is: “A sentence describing a company’s function, markets and competitive advantages; a short written statement of your business goals and philosophies. ” (Entrepreneur, 2014) It can also be found in their vision statement which focuses on the potential inherent in the company’s future, or what they intend to be.
And the values of the organisation can also help outline their purpose. Also all companies have a clear set of aims and objectives that are designed to reach their goals and fulfill their purpose. All of these help communicate the purpose and the views of the business to its employees to provide some motivation (if they agree with these values and views) and also to their stakeholders. This is important because it can gain the loyalty or support of those stakeholders if they feel that they can relate to the company’s purpose and values. Different types of organisations have different purposes.
One of the largest factors that can have an effect on the purpose of a business is its legal structure and type, for example it can be a private limited company (Ltd. ), or a public limited company (Plc. ). Their main purpose is always to make a profit. However, they should also have other purposes such as providing a good service or product to their target market, or helping their surrounding community in some way. Other organisations such as government organisation, although they still need to make money to survive, their main priority or purpose is to provide a service to the public.
The same goes to most charitable organisations and many voluntary organisations. The company I have chosen to focus on in my report is Tesco Plc. Tesco is a Public limited company which means that it sells its shares to the public on the stock market. Tesco operates in both the secondary and tertiary sectors as it has its own brand of food and other things that are sold in their super markets, which they manufacture and process themselves, which fits in the secondary sector. They also deliver and sell goods to customers and provide them with services such as insurance and home deliveries, which classes as the tertiary sector.
According to their customer service website, their core purpose is to “create value for customers to earn their lifetime loyalty”. This is also their mission statement, they achieve this through their taught values; ‘No-one tries harder for customers’, and ‘Treat people how we like to be treated’. Naturally there is an underlying aim of making profit, but it is clear that customer service is a clear priority at the top level of the company. Tesco also has clear aims and objectives. An aim is a long term goal for an organisation, e. g.
To ensure customer satisfaction or to become the market leader in their industry. An objective is a medium term target that acts as a stepping stone to achieve the long term aims of the organisation. Organisations set aims and objectives for a number of reasons; to provide direction and a purpose for the organisation, to form a basis for allocating resources, to be motivational, to monitor performance and to measure success. For those objectives to be effective they need to be SMART, this stands for Specific, Measurable, Achievable, Relevant/Realistic and Time-based.
Objectives are set depending on the overall aims of the organisation, an analysis of the business performance (e. g. a SWOT analysis), and on the ownership of the business – the public sector businesses’ objectives are likely to focus on providing a service, whereas a business in the private sector is likely to set objectives focusing on profit and growth. A few objectives set by Tesco are: Reduce by 50% the amount of CO2e used in our distribution network to deliver a case of goods by 2012, against a baseline of 2006. Raise €1,250,000 for Make-A-Wish Ireland in 2008
Increase the number of eligible own-brand lines with nutritional or front-of-pack GDA labelling to 80% of the total number of eligible brands, building on the achievement of 100% GDA labelling in Ireland for eligible own-brand products. Tesco’s main aims and objectives are mainly; to maximize sales, to grow and to maintain the status of being the number one retail company in the United Kingdom, to outshine and be better than their competitors and to remain the position of being the market leader, to maximize their profits and to also provide goods and services that are cheap and affordable to customers or the public.
For Tesco to be able to achieve those aims and objectives, they need to identify and understand their stakeholders well, and understand what their needs and expectations from Tesco are as customers of their organisation. Tesco has a large number of stakeholders, the obvious ones being their employees, customers and shareholders. However there are also their suppliers, debtors, financial institutions (banks, mortgage lenders etc. ), environmental groups (e. g.green peace), government agencies and trade unions.
Tesco has a good stakeholder engagement policy that fits into their corporate responsibility management. For example, they understand that their customer group of stakeholders expect things such as having a good shopping trip, a good neighbor, for Tesco to operate fairly and honestly and to provide a choice of products, including sustainable, healthy and affordable options.
Tesco meets their needs by making their stores and staff a friendly environment, by not overcharging their customers for their products. Tesco also organizes meetings called Customer Question Time (CQT) that gives their customers a chance to ask or raise any issues that may concern them, this helps Tesco understand their customers better and enables them to continuously improve their services to them. Another group of stakeholders for Tesco is their employees, who also have many expectations of the company as their employer.
They expect to be paid fair wages, to have fair terms and conditions, to have an interesting and engaging job, to receive guidance from their managers and leaders when needed, to be treated respectfully, to have a safe and healthy working environment and to have opportunities to progress in their careers. Tesco meets these needs by paying fair wages and adding bonuses and pay rises to employees annually, they have routine health and safety checks, they give their staff the training they need and are always giving opportunities for self and career development.
Tesco has all their employees participate in an anonymous Viewpoint survey every year to try to improve themselves as an employer and meet their employees need to a higher extent. The shareholders of Tesco are another important stakeholder group that Tesco needs to meet the needs of. Shareholders expect that Tesco be highly profitable and offer them good returns, they expect the company to be honest with them and to keep them well informed of the business’s activities. Tesco tries to meet their needs to the most of their power by being honest with them and giving them their dividends fairly and in time.
They also keep them well informed by sending regular emails with information about Tesco’s recent activities and latest plans. They also give their shareholders a degree of control over the business by allowing them to vote each year on which members of the board they think should stay, based on their judgment of whether or not they are doing their job competently. Another very powerful stakeholder of Tesco is the government. They expect Tesco to be legally compliant, stable, offer family-friendly opportunities, good quality training for its staff and timely payment of all taxes.
It is extremely important that Tesco meets the needs of the government and keeps it satisfied, because the government has the power to shut Tesco down or at least make practicing their business extremely difficult. Tesco does pay its taxes timely and complies with the law. It offers equal opportunities for women, men, different ethnicities and races and for the disabled. It also offers sufficient training for its staff to enable them to carry out their jobs efficiently and safely.
Different stakeholder groups have different needs and interests in the business, and in many cases there can be a conflict of interest, this is called stakeholder conflict. An example of this is that the customers of Tesco expect it to be easily accessible to them without them having to travel too much, this means that Tesco needs to have many branches of its store. This would also be in the interest of the shareholders of Tesco, because the more branches Tesco opens, the more customers can reach them which means they will likely be making more profit, which will be reflected in the dividends of the shareholders.
However, this can be a concern to many communities who may worry about Tesco causing more pollution and waste to their environment, another issue that often arises is that it can affect local businesses by taking away their customers. Also, if Tesco were planning to build a large supermarket, the process of building can take a lot of time and can cause much noise and disruption. Tesco needs to address all of those issues and try to keep all of those stakeholders happy. To do this they need to decide which stakeholders are their priority and whose needs are more important to fulfill, but still keep the others satisfied as much as they can.
I would advise them to use the Stakeholder Quadrant (aka the power interest matrix). This is a tool that allows them to categorize their stakeholder groups into four sections; the ‘meet their needs’ section, stakeholders who fall into this category have a high influence or power over the business but have a low level of interest. Tesco needs to keep these stakeholders well informed in their areas of interest, and engage and consult them on those areas. The government usually falls into this category of stakeholders.
Tesco should also try to increase their interest in the business, because a stakeholder who has power can be useful or helpful to the business if they had an interest in the success of that business. This brings me on to the next section; the ‘key players’. These stakeholders have a high level of power in the business but also a high level of interest. It is crucial to the success of the business to properly address, or have good awareness of the needs of these stakeholders, because they have the power to make the business a success or a failure depending on how happy you keep them.
Customers, shareholders and employees fall into this category. Tesco needs to regularly engage and consult these stakeholders and involve them in governance or decision making bodies in the organisation, e. g. allowing the shareholders to vote on the board of directors. The next section is the ‘show consideration’ group. Those are the stakeholders who have a high interest but low power or influence over the business. Tesco needs to make use of these stakeholder’s interest and keep them involved through low risk activities.
They should also keep them informed and consult them in their areas of interest because they can act as a goodwill ambassador or a potential supporter. The local community usually falls under this section. The final section is the ‘least important’ category of stakeholders, and these are the people who have no power, influence or interest in the business. Tesco needs to put minimum efforts into these stakeholders, they may or may not keep them informed through general newsletters or emails. However it may be useful to Tesco to try and shift them into the ‘show consideration’ category by gaining their interest in their business.
Businesses who operate in a different industry or in far locations of Tesco, who are not affected by Tesco may fall into this category. Referring back to the stakeholder conflict issue that I have mentioned above, it is clear from the Tesco Stakeholder Quadrant (appendix 1) that the stakeholders that hold the priority in that particular scenario are the customers and the shareholders because they fall into the ‘key players’ category of the quadrant, whereas the local community and environmental groups fall into the ‘show consideration’ section.
This shows me that it is more important to address the needs of the customers and shareholders because they have a greater influence on the organisation. However, because it is still important to consider the needs of the other stakeholders, Tesco can try to satisfy all parties by building their store, making their customers happy and also make more profits, which as well as satisfying their shareholders, will also help the organisation achieve their aims and objectives of maximizing their sales and making more profit, staying the market leader etc.
And to satisfy the local community they can communicate to them that they will be offering more jobs in that area and they can also promise to help or support local businesses by signing on with local suppliers. To satisfy the environmental groups Tesco is attempting to minimize their carbon footprint and many of their product use only recyclable packaging. Tesco promotes Environmental awareness and being green. I believe that this kind of approach can keep nearly all of the stakeholders of Tesco satisfied, simply knowing that their needs and expectations are being considered, even through small gestures.
This is simply one example of how Tesco deals with stakeholder conflict, but there are many other conflicts that Tesco deals with similarly. Every organisation has responsibilities that it needs to take on. Responsibilities towards their employees, their customers, the local communities, the government and the environment. These are called corporate responsibility. Tesco has a corporate strategy in place that aids them towards fulfilling those responsibilities.
Their corporate strategy is shown in a diagram (appendix 2) that shows the goals that they would like to achieve. A strategy is made to clarify the direction and scope of an organisation, it helps that organisation use its resources efficiently n a changing business environment, to aid the organisation in meeting the market’s needs and fulfilling their stakeholders’ expectations. A clear strategy helps the stakeholders understand the purpose of the company, and what the company is aiming to become.
I believe that the corporate strategy wheel that tesco has come up with is very useful in communicating what they want to be to their stakeholders and what they want to give them, for example they have included the community in their wheel, and one of their aims is to become a good neighbor. They have included their people (employees) in the wheel and stated that they want to give them an opportunity to advance in their careers. This not only communicates what they want to do, but it also helps motivate their stakeholders to support them.
There are many aspects that need to be considered when making a strategy, such as what you want to achieve through this strategy. A strategy should be based on the aims and objectives that are specified by the business. You should consider how you wish to communicate this strategy to your stakeholders. A corporate strategy is formed of the company’s mission statement, vision statement, aims and objectives, strategic plans, statement of values and their social responsibility policies, all of which aid in communicating to the stakeholders what the company is about, what it stands for and what it aims to achieve.
An example of this is the corporate strategy wheel for Tesco that is included in the appendices. The corporate strategy is then broken down into the business strategy. This involves smaller, more specific strategies on how the business can allocate its resources to achieve the aims and objectives. A business strategy is more about consumer/market dynamics, core technology dynamics, competitor activity and financial constraints. Different types of business strategies include competitive advantage, cost advantage, market dominance, new product development, contraction/diversification, price leadership and many others.
An example of a business strategy for Tesco can be a decision to become an international retailer. The business strategy can then be broken down again into functional strategies. These are the simplest form of strategies and they exist within different departments or functions of the business, they are meant to contribute to the strategic objectives. These strategies revolve around the skills of the staff in that function, and the recent performance of the function. An example of a functional strategy can be the IT department in Tesco introducing a new technology to be used and training the employees on how to use them.
Tesco has a responsibility towards its employees to be a fair employer, to treat them without discrimination, to allow them equal chances to progress in their careers, to treat them respectfully and to provide help when they need it. Tesco also has a responsibility towards its customers to give them a pleasant shopping trip, clean isles, helpful staff and a safe place to shop. Tesco’s responsibilities don’t stop here, they also have ethical and legal responsibilities.
For example the company must understand and adhere to the consumer legislations, employee legislation, equal opportunities and anti-discriminatory legislation, environmental legislation and health and safety legislation. The ethical responsibilities of Tesco include taking care of the environment that they operate within, ensuring that all of their trading operations are fair trade, being aware of and trying to reduce global warming, and charter compliance to ensure that they give back into the economy. Tesco’s seven part strategy (appendix 3) shows how they plan to fulfill those responsibilities. Conclusion…
In conclusion, I believe that having a clear vision and mission is key to Tesco’s success. By effectively communicating their values and their aims, they encourage the support of their stakeholders, including their employees, customers and investors. They deal with stakeholder conflict effectively, so that in the end everyone’s views and concerns are taken into account and that Tesco still comes out of the conflict winning something whilst making their stakeholders happy. Tesco devises the correct strategies and plans to ensure that it meets its goals, and they gain the loyalty of their people to ensure their commitment to their cause.
At the heart of all Tesco does is a commitment to being a responsible retailer. This is demonstrated through its focus on its ‘Three Big Ambitions’ and ‘The Essentials’ to show how it is using its scale for good. Every decision taken considers these areas to ensure customers, communities, suppliers and staff are treated fairly and with respect. Tesco’s values underpin all that Tesco does and, in turn, keeps customers satisfied with their shopping experience and loyal to the brand