Category: Tesco

Executive Summary

The main purpose of this company wide strategic plan for information systems is to provide a 5-year vision of the company development of the information systems. This would be in line with the company’s main aim of integrating the information systems to ensure that the company continues to grow both locally and internationally.

This plan provides a strategy through which the company will undertake to develop its information systems. It entails the improvement of the existing systems to enable it to gather information accurately from the other branches worldwide. The strategic planning of the information systems will help the company in meeting the needs of the information systems in line with its growth strategy.

Through the strategic planning of the information systems, we intend to integrate the newly acquires or opened stores into the organization. The strategic planning of the information systems therefore involves all the branches, which the company currently has and the branches which it intends to open in the future.

Background and assumptions

The top management of different organizations for a long time ignored the idea of the strategic planning for the management systems. They used to undertake the strategic planning of all the other aspects of the business and ignored the strategic planning of the information systems. However, information systems are a very important aspect of any organization.

Tesco usually attaches great importance to the information systems of the organization. It has undertaken many developments in its information systems. The point of sale continues to be an effective and innovative way through which the organization reaches out to its customers needs. Tesco therefore seeks to increase the number of point sale centers so as to reach a wide range of people.

The company also intends to open many other points of sale centers, which are not attached to any of the chain stores. Some of the point of sale centers will be in areas where the company is yet to open its branches. The company intends to use the information on the sales from the centers to determine whether it would be viable to open a branch in the areas or not.

Mission statement

To make Tesco be the leading company in the UK and globally in integration of information systems in all its activities.

Goals and objectives

To improve on the data collection from the point of sale

To effectively analyze and collect data from the sale from tesco.com

To increase the information systems data through installation of necessary hardware to capture the information systems

Remote environment

The remote environment refers to the aspects, which affect the company, but the company has no control over them. These include economic, social, political, and technological factors. The company has to clearly understand the factors and hence make the necessary adjustments to enable it to cope with the situations brought about by the factors.

Economic factors

Economic conditions greatly affect our activities. The UK has recently been affected by the financial crisis that has made many businesses to cut back on their expenses so as to protect its interests. However, even with the financial crisis, Tesco managed to post a nice profit. However, the company continues to be affected by the financial crisis.

Political factors

Tesco has branches in many different countries. Some of the countries are third world countries in Africa. In some of the countries where the company has its operations, the company must factor in the ISSP various political situations.

Social factors

The strategic planning of the information systems tends to capture the different types of spending of different people. The current population of the UK has many people who are aged. The aged usually have much more money to spend as they have accumulated their savings. This phenomenon is expected to increase in the foreseeable future. The company should therefore ensure that it benefits from the situation by creating products that suit these people.

Technological factors

The retail industry is currently faced with stiff technological advancements. Various products are developed by the other competitors. Most of the products and innovations are mainly aimed at retaining the customers. The company therefore needs to be vigilant in the technological development of its products to cope with the stiff competition effectively.

Industry environment

The industry environment is well understood by looking at the porter’s five forces model for Tesco.

The risk of entry by new competitors

For any retailer that intends to enter in the UK market, the retailer must first analyze the risks posed by the retaliation of the other companies, which are already in existence. The recent acquisition of Asda by walmart, a US based retail chain store will have the effect of increasing the competition in the retail market industry (Lang and Heasman 2004 p 165). In addition, the acquisition of Safeway by Morrison is also expected to increase the competition considerably (Griffiths and Bingham 2003)

Rivalry among companies in the retail industry

The UK retail industry is characterized by four major retail companies, which share a large percentage of the market. The companies are Tesco, Asda/Walmart, Morrisons/Safeway, and Sainsbury. Together these companies share over 80 percent of the sales of household goods and groceries (Great Britain: Parliament: House of Commons: Communities and Local Government Committee 2009 p 128).

However, Tesco is the leading company in the industry. The presence of four major retail companies therefore shows that there is a stiff competition in the industry.

Bargaining power of buyers

The customers in the retail industry have the ability to choose the prices of the products from different retail outlets, even the ones that are competing against each other. However, Tesco‘s club card membership ensures that the customers are loyal to the company and do not go to the other companies.

Bargaining power of suppliers

Tesco usually reaches a wider number of customers in the areas in which it operates. The goods in most of the shelves of the company are usually from big suppliers. Tesco usually gives the shelf space to the large suppliers. These suppliers ensure that the company gets maximum profit per unit space in the shelves of the products.

This arrangement usually makes the small companies to face difficulty in ensuring that their products are on the shelf of the company, as the small firms cannot effectively compete for shelf space with the large companies. However, Tesco sources some of its products from small suppliers. Most of these products are mainly farm produce e.g. poultry products, dairy products.

Closeness of substitutes

Most of the products that Tesco offers usually have their substitutes. Therefore, to ensure that the substitutes are not selected by the customers leaving the products of which Tesco sells, Tesco ensures that the products it sells are at a lower price compared to the substitutes that are in the market.

The pricing of the substitute products in the market usually determines the profit margins that the company will get through the sale of the products. If the substitute products are at a lower price, the company is automatically forced to reduce the price of its products so that the product may effectively compete with the substitute products.

SWOT analysis of Tesco

Strengths

The company has the largest market share in the UK. It has a 30.7 percent share in the market (Finch 2009). The market share of the company in the food products segments is expected to grow hence consolidating its market share and influence in the industry.

The company has many customers who are loyal to the company

The company has a recognized brand name that improves its image. The improvement in the brand name is mainly brought about by the financial stability of the company. Tesco became the first UK Company to post 2 billion pounds in the year 2005. In the year 2009, when most of the UK companies were adversely affected by the financial crisis Tesco made a profit of 3 billion pounds. In addition, the company has high growths in its income.

Strong investments in the use of IT and information systems in its operations offer Tesco a competitive advantage compare to its competitors. Club card membership, Tesco online and point of sale ensure that the company attracts more customers (Rainer and Cegielski 2009 p. 327. Tesco online and point of sale provide additional source of revenue to the company.

Weaknesses

The stiff competition from the other supermarket chains

The company also relies heavily on the UK market to fuel its growth

Changing economic conditions in the countries where company has operations

Opportunities

Growth in the markets in other countries

There is fast growth in the non-food retail sector. Tesco mainly depends on the sale of food products. This market segment has experienced rapid growth in recent time hence enabling Tesco to greatly benefit from the growth

Tesco has also diversified the products it now offers in the shelves. Apart from the traditional food products, the company also offers other products such as electronics and beauty products.

Diversification into other products such as financial services and insurance through Tesco.com (Shajahan 2007 p 250)

Threats

Price wars seem to be gaining pace in the UK market. The acquisition of Asda by Wal-Mart is expected to result in stiff competition in the retail industry. In addition, stiff competition in the UK market by the other large competitors is an expected threat, and so is the heavy cost of international investments.

Competitive advantage

Due to the fact, the company is the leading retailer in the UK; this factor may enable it to have better growth than the other companies that operate in the same field.

The information systems of the company also give it a competitive advantage over its competitors. The point of sale and the clubs card system help in increasing the sales of the company. The club card system ensures the personalization of the services given to the customers hence leading to improvement of the consumer loyalty to the company.

Critical success factors

The company should ensure that it stop being over reliant on the UK market. The market in other countries has a higher growth potential than the UK. The UK is saturated by the presence of large retailers who offer stiff competition, therefore curtailing the growth in the UK retail market. Venturing into the developing markets would be of great importance in reducing the over reliance on the UK market as the markets offer a higher rate of growth hence ensuring the financial profitability of the company.

The company should also strive to continuously invest in information technology and information system. These are the main factors that will lead to the growth of the company in the foreseeable future. The diversification into other non-food products will also ensure the success of the company.

By providing a wide range of products, the company will be able to reach out to more people. The diversification also ensures that the company stops being over reliant on one product type and therefore cushion it from any price wars in the food products.

Discussion of strategy

Short term goals

The company intends to improve on the current information systems to ensure that the information derived from it covers most aspects of the business. The target in this financial year is to ensure that the company can ensure that the club card members will account for 50 percent of the sales made by the customers of the company.

In addition, the company intends to ensure the club card members get personalized information regarding what they may prefer to buy once after every two months. The company intends to appoint an independent client to handle the development of it information systems.

Medium term goals

The company intends to set up a department, which will mainly deal with the information system requirements of the company. These will remove the subcontracting of the information systems to third parties who may not effectively undertake the work as required by the company.

Long terms goals

The company intends to diversify its region of operation to other areas in the near future. These branches will be semi autonomous and will not depend on the headquarters for information systems management. To ensure the complete semi autonomy the company intends to locate and set up keys centers from which the information systems of oversees branches will be monitored.

This information will be further relayed to the main headquarters where it will be efficiently stored and interpreted. To facilitate this the company intends to ensure that avails the necessary infrastructure in ensuring that the company sets up an information architecture which will be able to capture all the aspects of the business.

Conclusion

Tesco holds a key position in the retail market industry. It is a market leader in the UK and some of the countries in which it has its operations. The strategic planning of its information systems would therefore greatly benefit it, as it would enable it to cope with the expected future changes in the information systems brought about mainly by its growth.

The strategic planning of the information systems shows that Tesco stands to gain greatly from effective planning of its information systems and this would give a competitive edge over most of its competitors.

Reference List

Finch, J., 2009. Tesco increases market share. Web.

Great Britain: Parliament: House of Commons: Communities and Local Government Committee. 2009. Market failure: can the traditional market survive? Ninth report of session 2008-09, Vol. 2: Oral and written evidence, Volume 2. NY: The Stationery Office.

Griffiths, B. and Bingham, J., 2003. Morrison cleared to take over Safeway. London: The Independent. Web.

Lang, T. and Heasman, M., 2004. Food wars: the global battle for mouths, minds and markets. London, Earthscan.

Rainer, R. K. and Cegielski, C. G., 2009. Introduction to Information Systems: Enabling and Transforming Business. NJ, John Wiley and Sons.

Recommendations to assist Tesco apply constructive conflict strategies

Tesco is a leading supermarket chain company in the United Kingdom. The supermarket should apply constructive conflict strategies in handling both internal and external conflicts. The supermarket has to begin by assessing both the internal and external conflict situation. This will help them to understand the main causes of each conflict.

The management can not get a solution unless they understand the causes. The leadership should engage in a collective bargain and negotiation with employee representatives. The representation should be from all departments within the organization.

This will help it to come to a common ground that is beneficial to both parties. The Company has to come up with a positive conflict management culture that relies on mutual relationships. This will allow for an open discussion between the organization and its employees in case of any potential conflict (Ongori, 2009, p. 16-24).

The company should engage arbitration and mediation when dealing with local retailers and suppliers. Tesco supermarket should appoint an arbitrator to help it mend the relationship with local retailers and suppliers. The arbitration has to be an independent, private judicial determination.

The arbitration process should lead to a binding decision to govern the conflicting parties. The organization should also carry out customer surveys to determine complains from the public. They should come up with the best ways of addressing these conflicts (Ongori, 2009, p. 16-24).

Ways in which fusion leadership can help Tesco manage conflicts constructively

Fusion leadership is a modern way of leading that involves bringing people together to accomplish organizational goals on the basis of shared values and vision. This approach will help the organizational leaders manage the existing conflict constructively.

Fusion leadership encourages communication between the leaders and the employees. This will entail engaging not only the minds and bodies of the parties in the conflict, but also their souls and hearts. Employees will be free to air their concerns, and management will be willing to attend to each of them. There will be less room for murmuring and in the process conflicts will reduce (Daft and Lengel, 1998, p. 194-250).

Fusion leadership will allow the organization to grow together with its employees. Being mindful entails an open mind, personal creativity and independent reasoning. Vision refers to the objective which employees strive to achieve. The heart refers to compassion and caring, which is the positive feeling evident in workplace relations.

Communication affects emotions, values and visions; it also entails discerning and listening. Courage is a motivating factor that enables individuals to be risk takers. Integrity comprises of service, trust and honesty. This goes beyond personal interests to positive organizational contribution.

With a combination of all these leadership factors, employees feel part of the organization. Fusion leadership reduces internal conflicts within the organization (Daft and Lengel, 1998, p. 67-194).

How the organization will benefit by considering these strategies

If the organization implements these considerations, it will reduce the escalated tension and the perception of the company by consumers and employees. The organization will also mend its relationship with the government authorities, human rights groups and small businesses. This will lead to fruitful corporation within the organization and the external environment.

Tesco will achieve its goals effectively due to improved work relations. If Tesco develops a positive conflict management culture, it will reduce these conflicts in the future.

The organization will in turn pay more attention to achieving the set goals, and not solving conflicts. This will mean higher profitability for the supermarket hence recording growth and expansion. This will result to the success of both the organization and employees.

References

Daft, R.L., & Lengel, R. H. (1998). Fusion leadership: unlocking the subtle forces that change people and organizations. San Francisco: Berrett –koehler Publisher, Inc

Ongori, H. (2009). Organizational conflict and its effects on organizational performance. Research Journal of Business Management, 3, 16-24.

Executive Summary

This paper is a market research proposal for Tesco PLC as it seeks to venture into the UAE market. This research is motivated by Tesco’s foreign market expansion strategy which has been successful in most parts of Europe and America.

In establishing if Dubai, UAE is a good market for Tesco, this paper proposes a qualitative research design that encompasses various dynamics of the UAE market. Comprehensively, the paper affirms that Dubai, UAE market is a feasible market for Tesco PLC.

Background Information

It is evident in numerous research articles that, consumers are increasingly complex and do not share a uniform behavioral pattern (Twedt 1983, p. 2). It is therefore increasingly difficult to predict customer reactions towards a given product or service.

However, the use of appropriate market research data enables managers to link internal marketing variables, external business environments and unpredictable consumer behaviors. In this regard, the common feeling of uncertainty regarding the introduction of a new product or service is effectively eliminated (Hamersveld 2007).

Many companies today are increasingly faced with the problem of determining potential opportunities or threats existing within a market (before the introduction of a new product or service). Due to this reason, many companies undertake market research to evaluate the feasibility of a potential market (with regards to the launch of a new product or service) (McDaniel 1998).

From this analysis, we see that, organizations increasingly need to know information relating to a market’s relevance and reliability (with regards to their product or service offing). However, for companies to introduce accurately their products in a potential market, they need to have accurate, reliable and valid information relating to the target market (Bennett 2006).

To undertake a correct assessment of the marketing environment, and to ascertain the best product or service strategies, it is crucial to undertake a comprehensive market strategy to ascertain the right strategy a company should use to penetrate a given market (McQuarrie 2006).

This mode of analysis is supported by the DECIDE model which articulates the managerial decision-making process as a product of six steps (Federal Aviation Administration 2008). The first step is characterized by the definition of the problem (or opportunity) a given market poses (with regards to the market opportunities several regions pose to a company) (Lakhnech 2004, p. 363).

The second decision factor is characterized by the identification of numerous business alternatives, with regards to the product or service strategies to be adopted. These strategies may be based on controllable or uncontrollable factors, but both categories should be enumerated, and information regarding each category availed to determine the possible outcomes expected (after the pursuit of several alternatives) (De Boer 2009).

After the ascertainment of these alternatives, the best criterion should be chosen after considering which alternative poses the best outcome. A feasible marketing plan should therefore be developed to implement the chosen strategy and finally, an evaluation program developed to determine the success or failure of the marketing strategy should be adopted (Mouncey 2009).

These are the motions that characterize the decision-making process, when trying to determine the best strategy to adopt when coming up with the best product or service strategy (Nicosia 2006). These variables require the use of accurate information regarding the market potential of accommodating a new product or service (ESOMAR 2009).

From the understanding of the importance of market research in the introduction of new products and services, this study seeks to carry out a research study to analyze Dubai, UAE market, with regards to its feasibility in accommodating Tesco’s products.

Problem and Motivation

Tesco has had a successful stint of market expansion in most of its European, Asian and American markets. The most recent expansion strategy was in America where the company opened its first outlet in 2007 (Best 2008).

However, the company’s expansion strategy into these new markets is part of its corporate strategy of ensuring the long-term sustainability of the company.

So far, the company has had its fair share of success in its current markets but with the growing competition in the food industry, Tesco is set to direct more of its company resources in staying above its competition if it does not come up with other ways of generating more revenue (Page 2004). This factor has initiated the exploration of new markets in the global scene to sustain the company’s growth.

It is from this understanding that an expansion into the UAE market seems highly necessary for the company. However, UAE has its unique dynamics which are seemingly very different from Tesco’s traditional markets.

UAE bears a lot of potential for Tesco’s market expansion strategy because it harbors a growing middle class which is increasingly wealthy, as a result of UAE’s robust economy which is supported by Tourism and the oil trade (Rehman 2007).

According to the US department of Commerce, the Middle Eastern market (and more specifically, the UAE) is an important market destination for savvy investors (USA International Business Publications 2007, p. 1).

The potential for a thriving food industry is even greater because most of UAE is semi-arid or arid in nature and therefore, most of the food which is consumed in the region is imported. Considering Tesco is a global company in the food industry, this fact poses a tremendous potential for the company because it is a global leader in the supply and sale of grocery items.

Doing business in the UAE is not only fruitful for Tesco, in the sense that it will have access to UAE’s seven Sheikhdoms (Abu Dhabi, Ajman, Dubai, Fujairah, Ras Al Khaimah, Sharjah, and Umm Al Quwain), but it will also have access to other regions of the world including the Persian gulf states, East Africa and other regions of the world because it is a gateway to these regions (Rehman 2007).

This opportunity provides a platform for the company’s future expansion into other regions of the world where it has never explored.

Also, considering most countries in Middle East bear similar social, economic and political dynamics, the recommendations to be provided in the UAE market research can be easily generalized for most parts of the Middle Eastern region. Considering the above dynamics of UAE and Tesco’s lead in the market, a high level of success is expected in Tesco’s venture into the UAE market.

Analysis of Success Factors

The UAE market has changed tremendously over the last few years. Its economy has become highly dynamic and the traditional reliance on oil has significantly decreased because of the emergence of other business sectors such as tourism.

The UAE is now a strong export processing zone for the wider Middle Eastern market and foreign investors willing to invest their money in the region find the market highly lucrative.

Dubai is therefore a gateway to most of the Middle Eastern region and companies which have enjoyed a high business success in this region have equally enjoyed a high level of success in the wider Middle Eastern market (Oxford Business Group 2009, p. 86).

From this understanding, experts recommend that, investors should strive to achieve a higher level of success in Dubai before they venture into the wider Middle Eastern market (Rehman 2007).

Dubai’s shift from a closely-knit economy to a diversified and liberal economy, characterized by liberal market policy is also another success factor for Tesco’s venture into the UAE market. The liberal policies support foreign direct investments in the Middle Eastern country through the reduction of operational costs, bureaucratic requirements and such like foreign trade requirements.

This factor, coupled with infrastructural sophistication, pits Dubai as a lucrative market destination for Tesco’s foreign market expansion strategy. From this understanding, many economists recommend that foreign companies should take advantage of Dubai’s market liberalization (Rehman 2007).

Tesco Company History

Tesco is rated the third biggest grocery store in the world (based on revenue collection); coming second to Wal-Mart and Carrefour (Corporate Watch UK 2004). However, with regards to profitability, the company only comes second to Wal-Mart when it is compared to companies dealing in its line of business (grocery) (Humby 2008).

The company’s headquarter is in the United Kingdom (UK) but its outlets are found in over 14 countries across the globe, with a market presence in three continents (Reuvid 2005). However, most of the company’s sales are derived from the UK because about 30% of its revenues are derived from this market (Child 2002, p. 2).

The company’s strong presence in the UK market is partly attributed to its presence in the London stock exchange under the name TESCO, but its presence is also felt in the Irish stock exchange where it trades in the same name (Terterov 2005).

Tesco started expanding into overseas markets in the 90s, through a rapid expansion strategy that was initially focused on venturing into Eastern European markets and the Southeast Asia (Thompson 2010).

These markets were initially perceived to have an undeveloped grocery market, thereby posing a lot of opportunities for the company; however, this did not materialize in some markets such as France where the company unsuccessfully tried to venture into (Raab 2008).

Nonetheless, the company only recently ventured into some of the world’s most developed markets such as the United States (US) where it commenced business in 2007 (Heinemann 2010, p. 203). This makes Tesco an unprecedented British grocery company (in terms of international growth) because no other grocery company from the same region has ventured into overseas markets (Humphery 1998).

Research Questions

Main Objective

• To establish if Dubai UAE market is a feasible market destination for Tesco Plc.

Specific Objectives

• To ascertain the impact of Dubai, UAE’s market size in the introduction of new products and services
• To ascertain Dubai, UAE’s market growth rate and its impact on the introduction of new product brands
• To establish Dubai, UAE’s market profitability and establish its impact on the introduction of new products and services
• To determine the industry cost structure of Dubai, UAE’s market and its impact on the introduction of new products and services
• To establish Dubai, UAE’s existent distribution channels and their impact on the introduction of new products or services
• To establish Dubai, UAE’s market trends and the potential impact of such market trends on the introduction of new products and services
• To investigate Dubai, UAE’s key success factors and determine how they impact the introduction of new products or services.

Literature Review

Tesco’s motive for venturing into emerging markets is largely centered on its expansion strategy and its profit-making aim (Meek 2007). For instance, in the Indian market, Tesco was largely attracted by the fact that the Indian food retail industry was worth about $202 billion (an attractive market for any international company) (Pringle 2004, p. 247).

Currently, half the company’s profit is estimated to be driven by its emerging markets and more potential is still said to be unexploited in these markets. Tesco also perceives its emerging markets (especially China and India) as a platform to propel its expansion and growth plans. For instance, Best (2008) declares that “entering the wholesale market and forming links with Tata, Tesco is setting the stage for future growth” (p. 9).

The company also perceives its venture into emerging markets as an opportunity to learn about emerging markets, but more importantly, emerging markets provide the company with an opportunity to establish a supply chain system that enables it effectively carry out its global operations (Ryans 2009).

However, for any company to achieve effectively product or service success in a new market, extensive market research ought to be carried out (City staff 2010). Nonetheless, it is not enough to carry out marketing research and determine the success or failure of a new product in a new market; it is also important to determine the variables to watch in a new market (Just-food 2009).

Finding the right consumers in the United Arab Emirates market for Tesco’s products and services can be a difficult thing, and according to some marketing literature, very time consuming (if the right target market is not identified – because of the diversity in customer characteristics) (USA International Business Publications 2007, p. 1).

The difficulty with introducing a new product or service in the UAE market is that, United Arab Emirates (UAE) being an Arab state is subject to unique behavioral traits among its population, emanating from the influence of the Arabic culture and Islam religion (USA International Business Publications 2007, p. 1).

Considering many investors or multinationals around the world are looking for new growth opportunities, there is increased pressure among most multinationals to go global and expand their operations beyond their primary business environments (Wachman 2006, p. 3).

There are many regions around the world which pose excellent investment opportunities and the UAE is no exception because the region stands out as one lucrative and highly profitable market destination (USA International Business Publications 2007, p. 1).

For instance, the UAE remains a very profitable market due to its increasing population and its increased financial wealth, which has also seen the emergence of a strong middle class, bound to increase the demand of goods and services in future (USA International Business Publications 2007, p. 1).

This positive market outlook of the UAE economy is further complemented by the high consumer confidence among consumers in the UAE (Rehman 2007).

In fact, statistics show that, UAE has a high consumer confidence when compared to other countries across the globe (USA International Business Publications 2007, p. 1). This statistic shows that, UAE consumers are very optimistic about various aspects of the economy, such as future employment opportunities, economic growth and such like aspects of the economy.

Identification of Tasks Necessary to Complete Work

Task One: Market segmentation

This research will be accomplished within a period of six months. Since the target market (Dubai, UAE) is a big economy, the market will be subdivided into several regions and research data regarding these regions effectively quantified. The first two months will therefore be allocated for this purpose.

Task Two: Data Collection and Appointment Booking

The third month will be allocated to collecting relevant data regarding the subject study. In the same month, there will be a concurrent attempt to book appointments of market experts who have the knowledge about the target market being studied.

Task Three: Data Analysis

From the third month of conducting the study, a thorough data analysis will be done to come up with a summary of the relevant research information regarding the topic of study. This goes on until the sixth month of study when the data integration process commences.

The data analysis process proceeds for four weeks and after completion, interviews will be done to ascertain the information obtained from the market experts, or to provide new information or insights regarding the target market (which were probably never showed in the first phase of research).

Task Four: Data Integration

The last month of study will be used to integrate the research findings and come up with a final presentation of the findings. The resources needed for this entire research to be a success, include unlimited sources of online and offline publications regarding the target market.

Methodology

This research will be qualitative in nature. The major mode of research data to be used in this study will be secondary research data. In this regard, there will be widespread consultations of people who have the knowledge about Dubai, UAE market.

In the same regard, there will be extensive research done to ascertain information about Dubai, UAE market, through existing documents like textbooks, journals and the likes. Majorly, the secondary research data to be used involves research information from external sources of information (out of the organization); in the form of directories, databases, industry reports and the likes.

To analyze the sourced data, business intelligence will be used as a computer-based technique to analyze the relevant data. Business intelligence as a data analysis tool has often been used with a high level of efficacy and reliability. Its reliability is traced from its past reliance by multinational companies to identify existing business opportunities and areas of cost cutting.

The software has also been used to identify areas of key organizational metrics so that companies can be able to predict future business performance (Nigel 2007, p.121).

These characteristics of the business intelligence software (for data analysis) are tailored towards ensuring this paper provides the most relevant information for Tesco’s expansion into Dubai, UAE.

For instance, the fact that the software is keen on identifying cross-selling and up-selling opportunities or it gives a comprehensive insight into customer behavior is a useful advantage in the data analysis process because such data is beneficial in understanding the UAE market.

The above research methodology is unique to most research studies done in the UAE market because it will be specific to the feasibility of the UAE market, with regards to how it is responsive in accommodating Tesco’s core business sectors.

Therefore, as opposed to several research studies done to expose the main areas of competency for Dubai, UAE, this paper is more detailed by focusing on the food industry market where Tesco’s main business specialty lies. Most of the existing literatures show how Dubai, UAE, market is good for business but they fail to be specific to how the market is ready to accommodate various business sectors (Nigel 2007, p.121).

The methodological approach for this study is also more comprehensive and broader than the methodological approaches used by many researchers in the past. This methodology is skewed to collect data from all stakeholders of the UAE market and it is not biased in estimating the relevance of information according to specific time periods.

Historical and current information is collected and analyzed according to how it affects Tesco’s plans of venturing into the UAE market. This is obtained from analyzing published materials from national libraries and making use of national statistics like census information to have a proper understanding of the UAE market and how it supports Tesco’s activities (Nigel 2007, p.121).

From the above information, it is therefore crucial to note that the methodological approach for this study is poised to give credible, relevant and reliable information about the UAE market.

Conclusion

This paper identifies Tesco’s valuable experience in the global market as crucial to its success in the UAE market. As a result, this paper suggests that Tesco stands a high chance of succeeding in this market, considering the growing market potential for Dubai.

Moreover, Dubai is not a saturated market in the UAE and it is also a crucial gateway to the rest of Middle East. These factors make the UAE an important market for Tesco’s expansion.

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Company profile

The name of the company under discussion in this report is Tesco. The company was found in Cheshunt, United Kingdom. It is a multinational company dealing with grocery and general retail merchandise.

In terms of revenue, it is ranked as the third largest retail merchandise in the world after Wal-Mart and Carrefour. In terms of profits, it ranks second after Wal-Mart stores. Its main market is in the United Kingdom but it has grocery stores in more than 13 countries in various parts of the world.

The company’s mission is to be acknowledged by its customers as the premier drilling services company while the vision statement is to become a customer’s strategic partner in the elimination of non-productive time.

The three core values of the organisation include ethics, compliance and safety. Others include performance, discipline and team work.

The company’s corporate social responsibility is aimed at helping people to live according to high standards through the provision of low prices for all the goods and services.

It also spends some of its profits for charity. For example, in 2006, it spent 1.8% of its profit for charity purposes (McLoughlin & Aaker 2010).

PEST analysis for Tesco company

Political environment

The political environment under which the organisation operates is very stable. There are very minimal political risks for the business, both in the United Kingdom and in other countries where it has operations.

The organisation also enjoys good will of the host governments. This has enabled it to invest heavily without the fears associated with political risks.

Economic environment

In 2008, the world underwent a global recession which was the biggest one since the Great Depression of the 1930s. Just like other multinationals, Tesco was not exempt from the effects of the recession.

Social environment

Many of the countries where Tesco operates have a very friendly social environment. This has been achieved through the sensitivity of the company to the needs of the local customers as well as the provision of customer-friendly goods and services at affordable prices.

The company also engages itself in charity work and other corporate social responsibility activities, thus also creating a very conducive social environment for its operations.

Technological environment

The company has embraced and adopted technology in most of its operations and service delivery. It provides its customers with various online services and also operates a website where it posts business information for access by potential customers.

Porter’s competitive forces and Tesco SWOT analysis

Definition of competitiveness

This is a concept which is used to refer to the ability of a business enterprise to supply or sale its goods or services in a given market within a given period of time and under certain rules and regulations governing the supply of such goods or services.

The nature of this definition implies that for there to be competitiveness, there must be few or many suppliers of certain goods or services in a given market.

Since all businesses are established with an overriding objective of making profits, each business tries as much as possible to overcome all barriers which prevent it from selling or supplying its goods and services in a given market.

Competitive forces

Michael Porter, a scholar and economist at Harvard Business School, published an article titled “How Competitive Forces Shape Strategy”. This article started a revolution in the competitive strategy field.

Porter introduced five forces that shape business competition, academic research and business practice. According to Porter (1996), companies often compare themselves with rivals within the industry or with existing competitors when measuring competitiveness.

They frequently overlook other crucial competitive forces, including bargaining power of buyers, bargaining power of suppliers, threat of new entrants and threat of substitute products and services.

Knowing the five forces can enable a company to realize the nature of its industry and make a decision on what will bring more profits and less damage from business rivals attacks.

In order to gain competitiveness, companies have to look beyond rivalry among existing competitors and consider other important forces that will lead to ultimate competitiveness. The five forces are discussed in detail below.

Threat of new entrants

In all major industries, there are competitors who exercise dominance. These competitors are known as the ‘incumbents’.

Marketing analysts have, however, argued that the domination by the incumbents does not guarantee them permanent stay in an industry since new entrants may express interest in the same industry.

Before they enter an industry, they usually invest a lot in an entry strategy and come up with unique approaches so as to acquire a market section as well as gain trust of the customers.

In most cases, new entrants rely on pricing by settling lower prices for their products than for those of the incumbents. Other new entrants may also consider improving the quality of their products so as to attract new customers.

This makes the incumbents cry foul due to stiff competition from the new entrants. The incumbents may even be forced to quit a particular industry, particularly if the they have a powerful capital base. The incumbents react by erecting barriers to entry in the industry.

For instance, they may design very sophisticated and expensive technologies which are not easily available. They may even create hindrances to the access of the distribution channels so that the new entrants do not get access to so much needed supplies.

Tesco strategy for dealing with the threat of new entrants in the merchandise industry is the differentiation of its goods and services, which it considers as one of its core competencies or strengths.

New entrants may be discouraged from entering a particular industry through diversification and product differentiation, which Tesco has managed to do.

Bargaining power of suppliers

In some industries, there are monopolies in terms of supply of goods or services. In such industries, the powerful suppliers are able to manipulate the prices of the goods or services the way they want.

A supplier is regarded as powerful if, for instance, s/he does not depend on a particular industry for the revenues and therefore, s/he can do without the industry.

A supplier is also considered powerful if s/he supplies goods and services which are unique or if some companies have established a long term business relationship with him/her. Powerful suppliers are also those who supply goods and services which cannot be substituted.

A good example is pilots and the aviation industry because it is not easy to get well trained and qualified pilots within short notice and therefore, the pilots’ unions may have a big bargaining power.

In the computer industry, Microsoft can serve as a good example. It can decide to increase the price of operating systems. When this happens, the other computer dealers have no option other than to cut on their profits.

In some cases, some powerful suppliers can also threaten to enter the markets themselves if the customers are not willing to purchase the goods at their desired prices. Companies may overcome this by having a large capital base so that they can become suppliers themselves.

Tesco core competence for dealing with this threat is having a large capital base which enables it to manufacture some of the goods it needs for itself.

However, it does not manufacture all the goods and this forms one of its core weaknesses. Tesco is therefore capable of being manipulated by its key suppliers.

Bargaining power of buyers

In some industries, there may be few but large buyers who purchase certain goods or services in bulk. Such buyers usually have a bargaining power to lower the price of the goods or services in question because if the suppliers do not comply, they end up with minimal sales and profits.

Buyers usually have power when the cost of switching suppliers is low as well as when the products in question are undifferentiated or standardised.

The bargaining power of buyers can affect the profitability of the industry because they may lower the purchasing prices and then lower their selling prices. When this happens, the people who suffer are the other small dealers in the industry as well as the suppliers.

Buyers can increase their competitive strategy by teaming up and setting the buying price of the products at a certain level. This can cushion them from unscrupulous suppliers as well as from new entrants.

Tesco strategy for dealing with this is lowering its prices so that as many people as possible can access its goods and services. The overall objective is to try to avoid having in place specific customers or buyers who the Company cannot do without.

Threat of substitute products

In business competition, a substitute refers to a product or service which plays similar functions as the original product or service (Porter 1996).

Possible examples of substitutes include the electronic mail as a substitute for sending letters by mail, video conferencing as a substitute for commuting and the use of plastics instead of aluminum products.

Substitutes usually act as a threat to some industries, especially when they are priced in a more friendly manner than the original products as well as when the costs of switching vendors is relatively low.

Companies can guard themselves from the threat of substitutes by differentiation of their products as well as through teaming up to influence a government policy on the introduction of substitute goods in the market.

Tesco guards itself from this threat by differentiation of its products as well as through teaming up with other multinationals to influence a government policy on the introduction of substitute goods in the industry.

Rivalry among existing competitors

Tesco has guarded itself from the effects of rivalry among existing competitors by having very reliable and consisted suppliers as well as through producing some of the goods by itself. It has also invested in various industries as a form of diversification.

During hard economic times, diversification helps organisations remain competitive because they are able to counter the losses or low profits in a particular industry by profits from other businesses which are not affected by the harsh economy, like during the global recession of 2008 which pushed many corporations out of business due to huge losses.

Strategic rationale for global development

As explained in the introduction, the company started in the UK as a small store. However, owing to the need for diversification and expansion, the company opened new stores in other countries outside the United Kingdom.

Examples of places where it has stores include various parts of Europe, Asia as well as North America (McLoughlin & Aaker 2010).

Through globalization, Tesco managed to move to China where the culture and values are completely different from those of the United Kingdom where the company started. Tesco entered China in 2004 after acquiring about 50% of the Hymall.

It also operates in various cities and towns in China, such as Shanghai, Weifang and Taizhou. In Shaghai, the Company introduced what it refers to as Tesco Express, which is a customized store made to suit the needs of the local people both in display and branding of the products.

In Malaysia, the company has been operating a chain of stores since 2002. Currently, it operates over 45 stores which account for 30% of local market share. The stores mainly deal with electronic goods, cloth wares and the club card service.

In 1999, the Company in partnership with the Samsung Company opened its first store branded ‘Home-plus’ in South Korea. Tesco runs hypermarkets as well as a customer delivery service, whereby it delivers goods to its customers, especially those who purchase in bulk.

Methods used by Tesco company to expand globally

Such multinational organisations as Tesco usually operate in diverse environments in terms of culture. Because of this, it is essential for them to be proactive in internationalising their operations if they are to succeed in establishing stable businesses.

Being proactive involves planning in advance and putting the proper infrastructure in place for business management and establishment (Henry 2011).

This may involve establishing relationships and networks with local business stakeholders, the government as well as insuring the businesses against any risk(s).

It also involves studying and understanding the culture of the foreign countries before establishing the business (Whittington 1993).

Mergers and Acquisitions

Tesco’s expansion strategy was coined to respond to the needs of local customers in other countries. Due to the difficulties of entering new markets, especially abroad, the organisation used mergers and acquisitions to enter those markets.

Examples of mergers by the Tesco Company include the partnership with Samsung in South Korea to form Samsung–Tesco Home Plus merger, with Tesco owning over 90% of shares in the merger.

Another example is Thailand where it went into a partnership with Charoen Pokphad to form a merger called Tesco-Lotus. The Company acquired several companies in South Korea in 2005.

The same year, Tesco made two acquisitions in Japan and Poland and also acquired a store in Taiwan which belonged to Carrefour, one of its main competitors..

Recommendations

The company seems to be doing well as far as its strategy is concerned. Its strategic planning has enabled it to become one of the most reputable organisations in the world.

It has also managed to boost the economies of the countries where it has operations by employing the local citizens without discrimination. The company can also be commended for its excellent relationship with its main competitors.

The act of acquiring a store belonging to Carrefour is an indication that the companies’ strategy is not based on elimination of rivals but rather on business ideas.

Based on the above evaluation of the company, what can be recommended regarding its future strategic direction and increasing its competitive advantage is investing more resources in differentiation and positioning.

It should also consider the training of expatriate managers on cultural diversity, especially to equip them with the understanding of Hofstede’s five dimensions of cultural differentiation. This would enable it to deploy most of its experienced managers to the new branches to speed up expansion.

I also recommend that the organisation scales up its social responsibility initiatives because it seems that it is not doing well in this sphere.

Having vibrant social responsibility programmes may boost the organisation’s reputation and acceptance by the local communities who are also the customers of its goods and services.

For it to succeed where others have not, it needs to invest a lot in market research so as to identity the markets which are not exploited and line products which can attract many people within a very short period of time.

It should also consider investing heavily in advertisement on the print media as well as on social network sites, such as Facebook and Twitter. This would attract a huge percentage of youths who nowadays prefer doing everything online.

When it implements all above recommendations, it would not be a surprise to hear that it has overtaken its main competitor Wal-Mart in terms of assets and income.

Reference List

Henry, A 2011, Understanding Strategic Management, Oxford University Press, Oxford.

McLoughlin, D & Aaker, D 2010, Strategic market management: global perspectives, Wiley, Hoboken, N.J.

Porter, M.E 1996, what is Strategy? Harvard Business Review, Vol. 74. no. 6, pp. 61-78.

Whittington, R 1993, What is Strategy and Does it Matter?, Routledge, London.

Introduction

Tesco has just signed a deal with Indian firm Tata to go into the country and establish new stores there. It may encounter challenges associated with multicultural global teams. Variations in the perception of conflict, confrontation and rank could also arise. These differences are highlighted in subsequent sections of the report.

Unique characteristics of global teams

Gluesing and Gibson (2004) identified a number of dimensions that make global teams substantially different from conventional ones. First, geographical locations change from physical ones to multiple ones (Hensey, 2001). It is likely that Tesco’s new branches in India will continue to use suppliers from the UK or other parts of the world. Therefore, immense coordination will be critical in coping with these multiple environments. The strategic partnership is going to create dissimilarities in economic, social and political conditions. Company representatives in the UK could make decisions under the presumption that the political climate is a certain way (Gannon and Newman, 2005).

It is possible that reality may prove them wrong. Alternatively, workers can only implement some strategic moves when the level of economic development in their country is compatible with the decision. Infrastructural, telecommunication and material access differ between India and the UK, so this may cause some glitches in strategy (Leung et al., 2005).

Communication is a context-based characteristic that could come in the way of seamless execution of Tesco’s plan. English is the UK’s native tongue while persons in India speak a multitude of dialects. Difficulties could arise in communication between personnel as Indian employers may not express themselves fluently. Sometimes words may appear the same but could have divergent meanings, depending on the cultural context (Zhang and Zhou, 2009). In India, the word ‘No’ after a statement means that the person is looking for agreement from the recipient (Gupta, 2008). This differs from the general meaning of the word, which is often a rejection of something. Some learning and contextualisation of words ought to take place.

Differences in managerial styles may manifest as Tesco starts business in India. Adler and Gundersen (2008) report that managerial style differences are one of the issues that slow down the implementation of the strategy. Task and relationship patterns may differ between the Indian partners and their British counterparts. Most western cultures, including Britain, tend to perceive hierarchy as tools used to “organise and facilitate problem-solving around those tasks.” (Adler and Gundersen, 2008, p. 47).

Conversely, relationship-oriented cultures like India perceive hierarchies as structures that help individuals know who has authority over them. A number of respondents from these cultures believe that an organisation cannot even function without hierarchy. Tesco may want to avoid flat structures as that could cause confusion and slow down work (Boyacigiller et al., 2004). Instead, the organisation ought to consider formal hierarchical structures with clearly defined reporting personnel for each individual.

How teams perceive tasks in and of itself may also affect how work gets done in the new alliance. Gluesing and Gibson (2004) also define certain key characteristics that may define tasks in global teams. One of them is workflow interdependence, which refers to the degree to which workflow within the team relies on others’ contribution. Effective coordination of information and knowledge is critical in making such teams work. Tesco’s new partners are likely to belong to this category since the retail sector is a highly complex one.

The second trait is external coupling, which refers to the degree to which global team members relate with their environment (Crowley, 2005). If the external coupling is high, it is likely that the concerned environment is dynamic, and members must respond to it accordingly. In the retail sector, both organisations ought to keep abreast with new products and processes. However, external coupling in this industry is still not very high since people tend to perform routine functions. Tesco would have to synchronise its two divergent environments in order to make the business work.

A third trait is internal coupling, which is the extent to which team members need to get to know each other. Global teams participating in mergers or acquisitions tend to have high levels of internal coupling (Mullins, 2007). The partnership between Tesco and India’s Tata necessitates a high level of internal coupling among senior managers. These persons have to get acquainted and must work hard to determine local practices in each others’ country. Failure to do so could lead to adverse consequences in the enterprise.

Intercultural challenges

Perhaps one of the most significant cross-cultural challenges that may affect the partnership is the preferences for indirect or direct confrontation. Behfar et al. (2006) explain that if a certain component of a multicultural organisation has members who prefer aggressive ways of confrontation while the other group is oriented towards consensus-building, then this could cause tensions. People from individualistic societies, like the UK, tend to focus on message content rather than the delivery process. As a result, members of high-context cultures are likely to perceive their counterparts as overly aggressive, rude and impatient. They may think of this method as untactful and could eventually fall out with their western counterparts (Burnes and James, 1995).

On the other hand, the Tesco representatives may also have problems with Indian partners owing to the non-confrontational style. Many Asians prefer using indirect methods to deliver bad news. UK expatriates may perceive this as passive, less efficient and evasive. They may think that consensus building is not necessary or is a mere waste of time (Hendry and Hope, 1994). Unless cross-cultural training occurs, it is likely that the multicultural team will feel incompatible.

Challenges in confrontation could also arise when Tesco representatives attempt to use an egalitarian style of leadership, which encourages people to participate in decision-making (Boyacigiller et al., 2004). Persons in the UK do not mind if ideas originate from a low-level employee since this eventually affects the organisation positively. This implies that if a mid-level employee wants to challenge another’s idea, they are free to do. However, Indian partners may not respond very positively to such a perspective because it is a sign of personal disrespect in their culture. The hierarchical nature of this society demands that problem-solving occur in a formal and indirect way (Hogan, 2005). These issues may present particular challenges unless the company strives to do something beforehand.

Perception of time and urgency could also impede strategy implementation between the two partners. Expectations on what time is permissible in the delivery of projects differ culturally. Some cultures may perceive realistic project deadlines as one and a half months, while others may think of them as slightly longer. Additionally, attitudes towards lateness are substantially different between western and eastern cultures. When a company fails to synchronise differences in perceptions of time, then the chances are that measurable costs may emanate (Hughes and Williams, 2000).

Tesco’s Indian branch could have difficulties in finalising purchase orders, complete process cycles, among other things if misalignments arise between these entities (Maul and Brown, 2001). Anger, misunderstandings and a partner’s reputation could be on the line when these differences arise. The Indian team may perceive the UK team as having unrealistic exceptions. On the other hand, sometimes, the UK team could think about their Asian counterparts as inefficient and slow (Trompenaars, 1996).

Timing of tasks could also emanate from differences in perceptions of urgency and time. Both partners need to agree on how long they will spend doing typical work tasks (Rollinson, 2002). Managers often have to dedicate a substantial share of their time in meetings. Multicultural teams, like the new Tesco partnership, could struggle with differences on schedule. Perhaps the Indian team may want to spend 3 hours in a meeting while the UK one would prefer 1 hour, instead. Time asymmetries may escalate to endemic levels if projects are long term (Behfar et al., 2006). Quarterly reports are the norm in Britain, but this may not necessarily be prevalent in all parts of India. Alternatively, if members extend the delivery date by as much as 8 months, then dire consequences could arise.

The need to understand respect and hierarchy is a priority item for multicultural teams. Issues of the chain of command are quite crucial in Indian business environments. Violations of hierarchy occur when people ignore the chain of command. People from high-power distance cultures like India could react quite dramatically to these violations. A low-level employee would deeply offend a high-level Indian manager if they contacted them directly. Sometimes this could lead to the cancellation of contracts or similar consequences (Gilley and Maycunich, 2000). It is likely that Tesco representatives do not care much about rank, and this attitude may make the organisation lose business from new Indian suppliers. The UK team may want to stay away from unconventional reporting relationships. For instance, Indian older members may not feel comfortable about reporting to younger members (Behfar, 2006). Some of them may also not be comfortable with the idea of reporting to lower-ranking members, so UK parties ought to deal with these challenges.

Some problems may also arise out of parochialism from the developed nation. Many partners in developing countries often complain about self-indignation, arrogance and even ignorance among their more-developed peers. It is common for westerners to ask non-westerners whether they are familiar with a certain type of technology. Sometimes that technology could already be in the target nation and maybe nothing new. However, these questions reflect some sort of naivety and arrogance on westerners’ part. They may misconceive other undeveloped societies as backwards and thus cause resentment among them. Tesco employees should avoid stereotypes and technological parochialism; otherwise, this may perpetuate divisions amongst workers and reduce productivity (Thornhill, 2000).

All the above differences emanate from differences in cultures between India and the UK. It is imperative to study theoretical models in cultural differences between these countries in order to place potential difficulties in context. Hofstede carried out an analysis of cultures across the world and came up with five parameters to be used for this analysis. The figure below shows the differences between the two nations in terms of these dimensions. India scored differently from the UK in all the parameters.

Power distance is a measure of the extent to which a culture values in rank. As alluded to in earlier portion of the paper, India is a high power-distance culture with a score of 77. Conversely, Britain has a score of 35 in this dimension. Their score shows that a person’s personal background ought not to affect how far they get in life (Brett, 2007). On the other hand, Indians have a caste system that determines how much one can accomplish. Some individuals are predestined architects, lawyers, doctors or cooks (Chang, 2006). These expectations may limit the level of opportunities that Tesco managers can offer different members of the local community.

48 was India’s score in the collectivism-individualism index, while the United Kingdom got 85. Traditional family values dominate Indian business; this explains why indirect communication is common (Macduff, 2006). Conversely, UK citizens are highly individualistic, and this implies that personal fulfilment lies in the hands of individuals. Such differences matter in partnerships because they will affect communication patterns, conflict handling or negotiations.

Britain got 66 in the masculinity-femininity index while India got 56. This implies that in the UK, women have greater chances of success since their gender is a non-issue. Conversely, India appears to appreciate this factor, as well. However, some differences may arise in terms of etiquette and human rights accorded to females. These divergences could have implications on persons who are able to advance or those who may not be able to do so (Gannon and Newman, 2005).

India got a score of 61 while Britain got 25 in the long term orientation index. This implies that Indian businessmen tend to force friendships with potential partners. The UK expatriate may think that signing a contract could be the end of negotiation while the Indian businessman may assume that this could be the beginning of a strong friendship. Finally, Indians had low uncertainty avoidance of 40 while Britons had 35. Surprisingly, this finding indicated that both teams would not struggle to make things up as they go.

Conclusion

Most of the differences in the two cultures can be traced in the Hofstede model as India is high context culture while the UK is not. Team contexts, task expectations, as well as characteristics, will be substantially different. Approaches to time, rank and confrontation are likely to impede strategy. Tesco must engage in cross-cultural training to mitigate these challenges.

References

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Behfar, K 2006, ‘Managing challenges in multicultural teams’, Research on Managing groups and Teams, vol. 9, pp. 233-262. Web.

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Introduction

The essay is an in-depth critical examination-a quantitative critique of an article (e-Journal of Organizational Learning and Leadership) titled “Managing Organizational Change: Leadership, Tesco and Leahy’s Resignation” written by Nwagbara Uzoechi published in fall 2010. It has been noted with concern that it is important for researchers and scholars to be capable to critically analyze studies done by others (Beth par. 1). This is one way of learning regarding research works for them to be able to better their knowledge on the same. However, this does not always mean finding flaws in research articles but also to bring forth areas strongly addressed by the author.

The problem

The problem that initiated the research revolves around the resignation of Tesco’s CEO Sir Terry Leahy and the change brought about by the resignation. Throughout the article, the author has pointed out that leadership, as well as management, is responsible for the well being of an organization and change is the only constant aspect within any organization. In the wake of such leadership change from Terry to Clarke Philip, there is a need to manage the anticipated change process so that it is a smooth process come March 2011. In the same line evaluating leadership styles of the retiring CEO is of importance. Similarly, the article sought to bring to light the dynamics of the transitional power structure within Tesco and how customers, as well as subordinates of the organization, react in respect to the process of change and transition (Nwagbara 1).

The problem is introduced in the third paragraph but adequately covered in the paragraphs and articulated with existing literature. The significance of the problem is adequately described in subsequent paragraphs. The researcher posits that once the although the two individuals have worked together and for the organization for long, there is still need of successfully managing the process of change through change management so that the problems associated with organization change are timely addressed (Nwagbara 2). This will ensure that Tesco will still be competitive in the business world, have employees that feel secure, customers that are satisfied and higher stock value.

The variables being under scrutiny in the article include leadership and management styles of Terry, the process of change, the impact of change, reactions of customers and employees to mention but a few. These variables in my view are adequate in addressing change that is to be experienced by Tesco. It is no doubt that the answers to the problem will have management implications as well as applicability. The finding will not only help the incoming CEO but also to other leaders outside the organization.

Research question or hypotheses

It is worth noting that it is a requirement that research questions and or hypotheses be stated under subheading research question/hypotheses. In this article, this is not done. However, the author has made readers be in a position to point out the questions that guided his study. Among the questions revolves around Terry’s leadership style, process/model of change management, the impact of the change brought about by the resignation of Terry, reactions of customers and Tesco’s employees (Nwagbara 12).

From the views of Beth par. 5 closely examining the research questions and the research problem at hand, there is a natural flow of the former from the later. The author in my view manages to successfully link change, its consequences and how to manage the process. It is no doubt that the wordings of the research question are clearly. Similarly, throughout the article, the objectivity of research questions can be easily derived from the purpose of the research.

Conceptual framework

A conceptual framework is an important tool in research that outlines possible actions to be undertaken. The researcher to bring to light his thought, views and findings, the author of the article comprehensively accomplishes this. This has been fully described in the article. We are made aware of the possible courses of action to be taken and similar the approach used by the researcher to arrive at the problem of the study.

I have also noted that the conceptual framework includes all the relevant variables and fits the problem at hand. The variables of the study flow from the theoretical framework from their identification, definition and elaboration to findings. Though the conceptual framework, it is easy to understand the relationship among variables under study (Nwagbara 3). This attributed to the efforts made by the author to describe and link them.

Review of the literature

The literature review for the article is comprehensive, logical and relevant to the study topic. The authors have successfully addressed all aspects concerning Tesco, its leadership style, success, challenges, as well as change and its constituents an impact. The literature review is logical as the information flows from one major point to the next (Beth par. 6). Similarly, all major variables have been fully defined and explained to the reader. Generally, going through the entire article it is apparent that the author did review various and sufficient kind of literature to back his statements and written in a manner that readers can point out strengths and weaknesses of the previous works in leadership and change process as well as management.

Additionally, the information used in literature seems to come from not only primary sources but also secondary sources. This kind of mixture of data sources counters the weaknesses of one another leading to more authentic and relevant information. On the same note, it is evident that readers can easily make a case of why the research was being carried out, addressing the changing that is to face Tesco in the wake of Terry’s resignation. It is apparent that if this is not done successfully, then the negative impacts of change might undermine future vitality of the organization.

More importantly, the kinds of references used to back the literature are from varied years that are recent and classics. This has made it possible for the author of the article to take readers through the past and rent handling of organizational change as well as the concept of management. With that, it is evident that some evolution took place over the years. In the references list most of the materials used are above the year 1990, some above the year 2000 and a few between 1951 and 1989 (Nwagbara 22).

Research design

With regards to research design, the author of the article did manage to clearly and correctly specify the research design used. The theoretical and descriptive study design was employed by the author. Descriptive study design seems to be appropriate for carrying out the research (Nwagbara 15). Its suitability is on its ability to allow the researcher to link what is observed and what is in the existing literature. Theoretical is a study approach in which the goal is to prove/disprove a hypothesized truth or proposed future research plans that may be carried out in the future but not at the current moment. The choice of this method was as a result of its cheapness.

It is important to note that theoretical study calls for deeper digging of various literature ranging from journals, publications, books, other forms of literature and from the internet. What this implies is that most of the data required were collected by perusing through secondary sources of data as compared to primary sources.

The design, in my opinion, is appropriate in helping the author answer the research questions. Concerning replication of the research design, the authors did their best to ensure that other scholars who intend to carry out research using such similar design can successfully replicate it with some adjustments to suit their case.

Data collection and instrumentation

In my opinion and a close examination of the article, it is evident that the research exclusively relied on data from secondary sources. Even though the researcher intended to establish the reactions of customers and employs, there is no evidence of tools to collect primary data. This is my view did affect the conclusiveness of the study. The choice of using secondary data seems to have been guided by the various advantages that come along with it (Nwagbara 11)

The issue of reliability and validity are not that clear but the way the author arrived at using certain material to support his arguments, for instance, using Kottler nonetheless has not been fully supported but I bet the author leaves the reader to guess. This notwithstanding, the author adequately answered the research question which was how should Tesco manage the change brought about by the resignation of Terry as the CEO, the leadership styles exhibited by Terry and the reactions of customers and employees on Terry resignations.

Qualitative analysis and results

The research questions and the descriptive study design in my view fit the method of analysis. However, it could be better if the researcher could employ a better non-parametric statistics in analyzing the collected information but with also changing the way of data collection-using primary tools of data collection such as survey questionnaires or interviews to know the views of customers and employees. An analysis method such as cross-tabulation and or principal component analysis to rank the major or significant views of the stakeholders could give more insight on the same; nonetheless, the author achieves this (Beth par. 4).

Being a fact that the choice of the analysis method to be used depends on the kinds of levels of measurement, the author was careful to adopt parametric statistic to analyze the ordinal level of data. The analyses of the data collected from secondary sources were descriptive for instance tables and graphs. Although graphic displays of results are simple, clear and accurate as they are visible they are not well labelled, this being wrong. Presentation of the findings nonetheless is clear and neat (Nwagbara 18).

Discussion and interpretation of findings

Scrutiny of how the author discussed and interprets the research findings, it is apparent that the discussion fit with the data it is logically based on the data as well as results presented. Additionally, the author successfully linked his findings with other previous works finding agreement between what he found and what was found by his previous counterparts (Beth par. 3).

Although the researcher did not identify the limitations of the study he did manage to clearly and succinctly bring forth the implications of not managing the change process most rationally and suitably for Tesco. In my view, the author did his best in interpreting the research findings.

Conclusion

The article established that for Tesco to undergo a smooth change process there is need for the organization to undergo some organizational engineering to ensure that resistance to change among other issues as Terry leaves and Clarke takes over is minimized and the future success of the company is guaranteed. This is in line with the research questions and the findings.

From my close examination of the research article, there is no doubt that the author strived to meet the standard requirements of a research article based on the topic under study. From the research problem to a conclusion, through research design, conceptual framework, data analysis, interpretation of the findings, and presentation of the findings the author did make efforts in meeting basic standards of research. However, in my opinion, several areas were not brought out succinctly. A typical example is in the presentation of result particularly using tables and graphs. The author failed to properly label the tables and provide the source of such information especially the one w addressing the issue of the market value of Tesco shares.

Other areas of concern are about the way of data collection. Even though the research question was answered, the desire of the author to bring to light the reaction of customers and Tesco’s employees on the resignation of Terry could be better understood through a primary data collection tool such as interview and survey questionnaires.

Works Cited

Beth, Rodgers. Guidelines for Critique of Research Reports, 2010. Web.

Nwagbara, Uzoechi. “Managing Organizational Change: Leadership, Tesco and Leahy’s Resignation” e-Journal of Organizational Learning and Leadership, 2010. 8(2):1-23.

Introduction

Risk management is a process encompassing many considerations and factors, and it should be treated accordingly. This process of managing risks suggests that organizations should not merely strive to avoid negative events but predict them, assess possible losses, plan mitigation measures, and address risks systematically. A type of situation in which the risk management toolkit can be applied is a corporate disaster (specifically, related to accounting). From the perspective of the risk management cycle components, it is possible to assess what a company did right and what it did wrong in terms of minimizing risks. In this context, the risk is understood as the product of likelihood and loss (R=Li x Lo). The case of Tesco accounting scandal will be addressed from the perspectives of policy, identification, measurement, analysis, decision, implementation, and feedback to describe strategies aimed at ensuring more effective management of the risk of fraud in the future. First, the case will be summarized. Then, the issues of policy making and presence of adequate policies will be examined. Further, the way risks were identified and measured will be assessed. The following sections will show the processes of decision making, implementing decisions, and providing feedback to improve the policy. What was done right and wrong will be discussed.

Case Summary

The Tesco accounting scandal was not simply fraud, i.e. mere lying of the executives; there were more complicated factors and contributors. First of all, the atmosphere at the company was indicating that something was going wrong, as before the scandal broke in September 2014, there had been a series of rather obscure resignations (Colson, 2017). As it is becoming evident now, several staff members decided to resign because they felt the pressure of the practices of misrecording and were willing to discontinue their work at Tesco rather than being involved in what they thought was illegal. There were repeated references to the company’s environment of secret wrongdoing, and Richard Parsons, then-member of the commercial finance team, practiced absenteeism and informed his supervisor that the stress and worrying he was experiencing did not allow him to do his job properly. (Colson, 2017). Another employee, Aysen Nadiri, repeatedly contacted top managers to express her concerns about what she perceived as illegitimate accounting practices; specifically, she referred to the early registration of income. However, the management was unwilling to discontinue the practice or to admit that the targets set in the strategic framework of the company’s development could not be met. Nadiri ultimately resigned due to feeling compromised as a professional and worried about what could happen to the company.

More importantly, the upcoming disaster was not only marked by resignations but also prepared by the reaction of the top management. Carl Rogberg was the UK finance director at the time, and he later was one of the eight executives accused of the fraud during the scandal and subsequently dismissed. He is currently standing trial, and he was notified about the worrisome resignations. However, he reportedly ignored them and told human resources management officers to hire more people instead of the resigned. Rather than an accident, the case appears to be a disaster that resulted from systematic failures, which is why it qualifies for analysis from the risk management perspective.

Policy

A particular risk management assessment framework has been chosen for the presented case; the elements of the framework are connected into a cycle and shown below (Figure 1). The elements of the cycles have been widely discussed in the relevant literature by various theorists (Christoffersen, 2012). Further, they were integrated into a cyclic system for the purposes of analyzing the presented case. The first element that will be addressed is policy, and it is recognized that policy constitutes a crucial aspect of managing risks. In general, risk management can be defined as the development and implementation of efforts aimed at identifying and minimizing risks (Harrington & Niehaus, 2004); the former part—development—consists largely of policymaking. It is recognized that risk management aspects should be incorporated into a company’s regulations so that managers have instruments to address risks properly and minimize the effects of negative scenarios (Harrington & Niehaus, 2004). From this perspective, it is necessary that, if risk management policies are not in place, the leadership and the management of a company are flexible enough to introduce additional policies.

For Tesco, the primary pure risk identified in the context of the presented case is the risk of fraud, and it can be addressed from the policy perspective. First of all, policies do not necessarily rule out pure risks, e.g. there cannot be a policy against fire or unexpected death; however, policies may protect stakeholders from the occurrence of a situation in which the only outcome is a loss (Dionne, 2013). For example, businesses or individuals may not be allowed to engage in certain activities in case they do not have proper insurance—this is a way to minimize pure risks.

Apparently, Tesco did not have proper policies that could protect the company from misstatements of financial performance. The role of the board of directors in the situation is not yet clarified; the case is now being reviewed in the court. Concerning auditors, there are reasons to suspect that their assessment of the company’s performance was intentionally misrepresented (Colson, 2017). However, it should not be overlooked that the company did have such policy-related protection tools as the sustainability policy (Tesco sustainability case study, 2017), which is evident from the way it managed to continue its operation after the fraud scandal.

Identification

Having risk management policies or a flexible mechanism for risk management-related policymaking (or both) in place, companies should adjust the process of risk identification (Harrington & Niehaus, 2004). According to the enterprise risk management framework, companies should, first, create a toolkit to enable the management of risks that companies expect their managers to manage and, second, ensure that managers can use specific techniques to map and classify possible risks (Gates, Nicolas & Walker, 2012). In addition, there is a relationship between risk identification and observation (Appendix A). This relationship suggests that risk identification encompasses risk assessment and risk response, while observation includes control and monitoring (Gates, Nicolas & Walker, 2012). Therefore, risk identification refers not only to detecting certain risks but also to having appropriate tools a company can use to respond.

It can be argued that Tesco did indeed identify the risk properly in the presented case, but the response was rather poor. The fact that the finance director ignored the resignations in which employees referred to inappropriate accounting practices does not mean that he was unaware of the risk. It rather shows the management’s apparent inability to analyze what the consequences would be, and this is a risk identification flaw. Recently, government regulations have changed significantly as per requirements for companies in terms of creating and revealing financial performance information. However, with poor internal risk identification strategies, companies may still be unable to detect fraudulent developments or the creation of networks of executives involved in fraud.

Measurement

In risk management, a special role is played by measurement and the ability of companies to assess their risks with a certain degree of precision according to particular scales. The Chartered Institute of Management Accountants refers to the national efforts aimed at preventing corporate fraud, and one of the major initiatives is establishing a unit responsible for measuring fraud losses and assessing “value and risks of future fraud threats” (Chartered Institute of Management Accountants, 2008, p.54). Measurements can be based on various formulas; an example is the gross-based assessment is performed according to R=Li x Lo + AbMi, where R is a risk, Li is a likelihood, Lo is a loss, and AbMi is the absence of mitigation, i.e. additional loss suffered due to the lack of proper response to risk.

It is unclear how Tesco measured their risks, as certain aspects of internal management may not be revealed to the general public. However, it can be assumed that the company had measured fraud risks appropriately, as the scandal broke at a relatively low point of fraud-related losses. Although the amount of money lost in the accounting black hole is rather impressive— 250 million GBP, or 331 million USD (Colson, 2017)—this amount constitutes less than 0.5 percent of the company’s revenue. According to the guidelines for calculating materiality (Three steps to determining and applying materiality, n.d.), this black hole can be considered immaterial because it is less than five percent of income from continuing operations.

Analysis

In the context of risk management, analysis refers to processing the data collected from measuring risks (McNeil, Frey & Embrechts, 2015). Once a company establishes the extents and other characteristics of risks, it is necessary to further analyze possible risks; specifically, from the perspective of potential gain and potential loss. From this perspective, major theorists separate financial risks from pure risks and attribute the former to speculative (Dionne, 2013). The Chartered Institute of Management Accountants (2008) suggests that risk analysis should be based on five key considerations: likelihood, impact, controls, net likely impact, and prioritization.

In the presented case, risk analysis was part of internal regulations, too, which is why it cannot be assessed in detail. However, it is evident that Tesco’s top management managed to create protection from the fraud risk. For example, the Serious Fraud Office imposed a fine on Tesco, and the company had to launch an investor compensation program (Rees, 2017), but the previous and the new chief executives (the change in the position happened as the scandal was unfolding) avoided liabilities, and only three directors were accused of fraud by false accounting and fraud by abuse of position.

Decision

Upon analyzing risks, organizations need to make decisions on what action should be taken to prevent possible negative effects. Key variables in this regard include specific programs or initiatives and the enforcement of corporate policies (independent) and risk-related circumstances (dependent) (Cerchiello & Giudici, 2012). In this decision-making process, the relationship should be recognized between risk management and other factors in operation, including internal ones, such as corporate governance and ethical culture, and external ones, such as legislation (Figure 2). Therefore, decisions (regarding the pure risk of fraud) should be made based on multiple factors impacting a company simultaneously and continuously, but what is important is that the decisions do not increase the likelihood of loss.

It is noteworthy that the fraud in the Tesco scandal did not simply occur: it was a process in which many employees had been involved, and some decided to resign directly referring to the fraudulent practices as the reasons for resignation. Tesco as a company did not decide to engage in fraud, but the managers did make several decisions that demonstrated poor fraud response, while fraud response is one of the three components of fraud deterrence (Figure 2). When the earliest signs of fraud appeared (such as employee absenteeism due to the atmosphere of secret wrongdoing), the decision should have been made to expose the misrecording; it could have prevented the accounting black hole and the negative effects for investors. The corporate decision (as opposed to individual decisions) in this regard should have been to respond readily to the signs of fraud).

Implement

The implementation of anti-fraud strategies in the context of risk management should be based on the recognition of what exactly can be affected by implementing the decision made in the previous part of the risk management cycle. Dorminey et al. (2012) suggest a model of fraud-related crimes (Appendix B), and an important aspect of this model is that the perpetrator in it is separated from the crime; three interconnected components of each are identified and can be affected. The perpetrator characteristics can be affected through implementing human resources management strategies in which it is ensured that employees’ financial situations do not pressure them to engage in fraud, and they do not rationalize the process of committing a crime (Dorminey et al., 2012).

Nonetheless, in the Tesco case, the crime components of the model are more relevant to the risk management implementation stage. Apart from the act of fraud itself, there are also concealment and conversion. The former refers to perpetrators’ ability to hide their crimes. In this regards, Tesco should have established transparency in which fraudulent practices would not have been known to a few employees only (who ultimately resigned) but would have immediately launched the process of correcting financial reporting processes. Conversion refers to perpetrators’ ability to convert the results of fraud into something they can use and benefit from directly (Dorminey et al., 2012). To prevent such conversion, it was needed to initiate better inspection before the accounting black hole grew to 250 million GBP.

Feedback

Finally, upon implementing, feedback should be provided to support further policymaking thus effectively completing the risk management cycle (Figure 1). Liu, Liu, and Liu (2013) propose the failure mode and effects analysis (FMEA) framework, in which it is crucial to provide feedback on the risks and thus calculate the risk priority number (RPN) according to the following formula: RPN=O x S x D, where O is the likelihood of a failure, S is the severity of it, and D is the likelihood of having the failure unidentified. Based on the occurrence of certain negative effects, risk managers compare them and the extent of effects to the results of initial risk management planning; in case there is a significant difference, it indicates that the current processes that are part of the risk management cycle do not function properly.

The Tesco case is an example of poor feedback in terms of risk management. According to the Solicitors Regulation Authority (2014), monitoring risk levels should be followed by controlling these levels in case they are unacceptable through regulatory tools (Appendix C). The company’s top management was aware of the complaints about inappropriate accounting practices, i.e. feedback was provided. However, it did not result in a response, which indicated a poor system of processing feedback. More consolidated feedback incorporating specific references to accounting practices that were performed illicitly needed to be provided, and it would increase the possibility that feedback would have affected Tesco’s corporate decision-making.

Risk Management Strategy

Upon reflecting on each element of the risk management cycle, it is necessary to summarize the key elements of Tesco’s risk management strategy. First of all, a major component of successful risk management can be derived: cost and benefit analysis. This analysis consists of a system of interconnected measures and actions, including but not limited to avoidance, separation, combination, and transfer. To minimize risk, an organization should calculate the entire potential loss and further adopt the practices needed to not only avoid negative scenarios or factors that are likely to lead to negative outcomes but also distribute roles, functions, and assets in a way that reduces the likelihood of loss. In Tesco, a number of policy-related tools were adopted to prevent the development of fraud. However, it was demonstrated in the presented case that the tools turned out to be not sensitive enough, and fraudulent practices were present in the company for a significant period before they were exposed.

Therefore, the main weakness of the strategy was the lack of exposure capacity and response mechanisms. Despite the signs of the unfolding fraud (the resignations in which fraudulent practices were specifically referred to as the reason for resigning), Tesco leadership proved insufficiently prepared for exposing illicit actions and preventing the accounting black hole. However, it should not be recommended to enhance the strategy by spending large amounts of money on risk reduction and loss avoidance. Instead, the improvement of Tesco’s risks management strategy should be aimed at reinforcing the system of internal response and prioritizing the risk of fraud. The company’s current approach to risk management is more focused on managing external risks, while internal risks can lead to serious reputational and financial losses. The risk management strategy should be enhanced by adjusting the mechanisms that detect and report illicit internal practices.

Conclusion

In identifying and measuring their risks, Tesco apparently failed to detect fraudulent practices; at the same time, the scandal broke before the accounting hole reached 0.5 percent of the annual revenue, which is why it can be said that risk prevention mechanisms were in place. If the loss caused by the risk had been properly analyzed and measured, the company would have responded to the signs of fraud before the black hole developed. Additionally, feedback would have improved the company’s policies and ensured improved decision-making and implementation processes. The main weakness is that the company failed to respond adequately to the alarming resignations. In the future, better feedback strategies need to be developed and adopted.

Reference List

Cerchiello, P. & Giudici, P. 2012. Fuzzy methods for variable selection in operational risk management. The Journal of Operational Risk, 7 (4), pp.25-41.

Chartered Institute of Management Accountants. 2008. Fraud risk management: a guide to good practice. Web.

Colson, T. 2017. ‘The current environment has broken me’: Tesco accounting scandal ‘compromised’ staff and sparked resignations.Business Insider. Web.

Christoffersen, P.F. 2012. Elements of financial risk management. 2^nd ed. Waltham: Academic Press.

Dionne, G. 2013. Risk management: history, definition, and critique. Risk Management and Insurance Review, 16 (2), pp.147-166.

Dorminey, J., Fleming, A.S., Kranacher, M.J. & Riley Jr, R.A. 2012. The evolution of fraud theory. Issues in Accounting Education, 27 (2), pp.555-579.

Gates, S., Nicolas, J.L. & Walker, P.L. 2012. Enterprise risk management: a process for enhanced management and improved performance. Management Accounting Quarterly, 13 (3), pp.28-38.

Harrington, S. & Niehaus, G. 2004. Risk management & insurance. 2^nd ed. New York: McGraw-Hill.

Liu, H.C., Liu, L. & Liu, N. 2013. Risk evaluation approaches in failure mode and effects analysis: a literature review. Expert Systems with Applications, 40 (2), pp.828-838.

McNeil, A.J., Frey, R. & Embrechts, P. 2015. Quantitative risk management: concepts, techniques and tools. Princeton: Princeton University Press.

Rees, T. 2017. Former Tesco directors to face trial over accounting scandal.The Telegraph. Web.

Solicitors Regulation Authority. 2014. SRA Risk Framework. Web.

Tesco sustainability case study. 2017. Web.

Three steps to determining and applying materiality. n.d. Web.

Appendix A: Risk Identification and Observation

Appendix B: Meta-Model of White-Collar Crime

Appendix C: Risk Management Feedback Loop

Appendix D: Chart

Areas of Increased Audit Risk

To properly assess the areas of increased audit risk faced by Tesco PLC, it is essential to explore the typical risks relevant to the retail industry, the company’s history of auditing problems, and the facts presented in its annual reports. This will facilitate a holistic approach to risk auditing, which is consistent with the spirit of integrated reporting.

Looking at the past auditing problems of Tesco, one recent event that specifically stands out is the case of the company’s accounting fraud detected in 2014. As noted by Kukreja and Gupta (2016) and Lokanan (2018), the accounting misstatements resulted in Tesco’s profits being overstated by close to £263 million, which had a substantial negative influence on the stock prices of the company and its major stakeholders. The major source of overstatement was the manipulation of financial funds related to vendor allowances through “making overoptimistic assumptions” concerning this category.

At the same time, Tesco is a multinational company operating as a grocery and general merchandise retailer, which means that it is subjected to some of the auditing risks specific to the industry. In the sphere of fast-moving consumer goods (FMCG) retailers can expect to face increased auditing risks concerning the inventory valuation and store impairment procedures. These two areas can be specifically problematic for Tesco given that in addition to the UK stores the company is operating in multiple countries (Wood, Coe, and Wrigley, 2016), such as instance Malaysia, India, Czech Republic, and Hungary. Basing on the comprehensive view of the company, it was possible to formulate the four areas of increased audit risk formulated in the following subsections.

Inventory

Inventory valuation and counts are associated with a high risk of potential material misstatements for the players of the retail industry. Handling and reporting inventories are associated with numerous subjective judgments, and to conduct prudent auditing, it is essential to define how reasonable are the related assumptions. At the most superficial level, it is possible to check if the inventory days’ estimate has shown substantial volatility in the latest reporting periods. As it is reported by AJ Bell (2019), days inventory of Tesco went down from 16.29 in 2017 to 15.38 in 2018, which doesn’t seem to be an excessive shift.

As noted on page 70 of Tesco’s 2018 annual report, the company provides for obsolescence of the inventory amounts basing on the forecasts of their usage. Based on this methodology lie the assumptions made on the provisioning percentages of the existing inventory balances. These types of assumptions can also require increased attention and audit focus.

Recognizing the Group’s Income

Given that the events of 2014 have brought up to the surface a problem with Tesco’s overstated profits, recognizing the company’s income can be one of the major spheres of auditing risks. This is primarily the case as some of the probable drivers of overstated profits of retail companies are the delayed accruals of costs and accelerated recognition of some of the fractions of commercial income.

As it is mentioned in Note1 and Note 20 of the 2018 annual report of Tesco PLC, some parts of the income of the company are closely related to the volume-related allowances, fees, and discounts with the suppliers of store merchandise. Even though the relevant income recognition should be made upon accomplishing the pre-defined performance conditions, it is not necessarily so in practice due to the complexity and a high number of various purchasing arrangements. For this reason, there is a need for certain managerial judgments which can cause both material and immaterial errors.

Current Tax Liabilities

Taking a closer look at the Group balance sheet of Tesco, it is possible to see some substantial changes in the current tax liabilities components between the years 2017 and 2018. More specifically, the amount of current liabilities attributable to this specific line is equal to negative £613 million in 2017 and negative £335 million in 2018. Considering the percentage terms of the trend for the item, this represents a decline of 45.35%. Being a very substantial shift, this kind of dynamics of Tesco’s current tax liabilities represents an area of increased auditing risk and therefore required close attention of the authorized auditors.

Store Impairment

The last area of increased audit attention to be mentioned is handling the amounts associated with store impairment. This is specifically relevant due to the increased complexity and uncertainty surrounding this item in Tesco as the company is operating close to 7,000 stores in 7 countries placed in different geographic regions of the world. In balance sheet terms, the process of store impairment is related to the property, plant, and equipment item of the Group’s balance sheet.

Some of the areas in which the subjective judgment of the company’s management is required are the definition of indicators of impairment and the factors that can trigger the reversal of impairments recognized in the past. In addition, there can exist some tangible discrepancies between the carrying value of stores can exceed the actual recoverable amount of financial funds related to them.

Reducing the Audit Risk

To reduce the previously defined auditing risk, authorized auditors should resort to standardized professional procedures that can address the specific components at risk, or the audit risk area holistically. In this way, it is possible to reduce the defined accounting and financial risks of the companies’ stakeholders to an acceptable minimum level.

Audit Procedures for Inventories

As it was mentioned previously, one essential challenge for the Group in consideration is the fact that the physical inventory of Tesco is situated in 7 different countries. This will require obtaining external confirmations on the inventory counts at various Tesco facilities, as well as a need for physical attendance of the authorized auditors in some of the randomly samples stores or warehouses.

This will help to establish the existence of various physical items at the places where they are reported to be. In addition, the auditors should evaluate the assumptions made at the base of valuation of the Groups inventories, as well as of the labor, materials, and overheads. Within the process of verifying the existence of inventory items, auditors should also review the accuracy of records of the past inventory write-offs.

The second necessary auditing procedure related to reporting of the Groups inventories is verifying if the assumptions made for reporting this category are valid and adhered to. For instance, the authorized auditors should take a random sample of some of the inventory items and verify if they are indeed reported at the lower cost and according to the principle of net realizable value as it is claimed by the company’s accountants in its annual report. This procedure can be executed in practice with the help of comparing the reported inventory values to the invoices provided by the company’s suppliers and the current sales prices of the relevant items. Within this procedure, it is also essential to take into account the factor of seasonality.

Audit Procedures for Recognizing the Group’s Income

One of the workable procedures that should be used to verify if the reported commercial income of the group is correct if the pre-defined performance conditions of the arrangements with the company’s suppliers were indeed fulfilled. This procedure requires specific attention because being done properly, could have prevented the accounting scandal that the company faced back in 2014.

To check the mentioned performance conditions fulfillment, the auditors may choose a random sample of the company’s suppliers and test whether the arrangements were properly recorded and met through communicating directly with them. In the cases when some of Tesco’s suppliers cannot be reached, the auditors can choose to rely on the careful investigations of the relevant contractual agreements and the actual sales amounts of Tesco stores.

Lastly, auditors could also use special statistical packages to conduct data analytics of the sample of relevant contractual deals of the Tesco Group with its suppliers. Carefully exploring the descriptive and inferential analytics on the deals, the auditors can detect the ones that exhibited characteristics of outliers basing on some pre-defined criteria, such as instance the unusually high values of discount to sales or bonus to sales ratios. This will help to determine the deals that require increased levels of auditing attention.

References

AJ Bell (2019) Tesco PLC (XETRA:TCO) – Share price – Key Ratios, [online] AJ Bell Youinvest. Web.

Kukreja, G. and Gupta, S. (2016) Tesco accounting misstatements: myopic ideologies overshadowing larger organisational interests. SDMIMD Journal of Management, 7(1), pp.9-18.

Lokanan, M. (2018) Theorizing financial crimes as moral actions. European Accounting Review, 27(5), pp. 901-938.

Wood, S., Coe, N.M. and Wrigley, N. (2016) Multi-scalar localization and capability transference: exploring embeddedness in the Asian retail expansion of Tesco. Regional Studies, 50(3), pp. 475-495.

The importance of marketing management for a company can be compared only to the general executive management and human resources management spheres. Among the main targets of the marketing department at any organization the following ones can be singled out: searching for new markets, preparation of the new markets for the company’s launching, identifying the main factors that will bring success to the company in this or that market, etc (Attwood, 2007).

As we can see, marketing plays a rather significant role in the development of every organization, and the current work is dedicated to the marketing research of the new policy by one of the largest retail traders in the world – the British company Tesco. Recently, Tesco has launched an initiative of retail grocery supermarkets under the brand name “Fresh & Easy” to the US markets. In this paper, we are going to examine the policies of Tesco in respect of its new supermarkets and to predict the rate of success that can be reached by Fresh & Easy supermarkets, if any.

To begin with, let us say that Tesco is one of the most highly-developed companies in the world in the sphere of retail trade. Subsidiaries and branches of Tesco can be found all over the world and have a lot of customers in many countries. Tesco strives for further development and its US expansion is another step towards the achievement of this goal. The grocery market in the United States is one of the most developed and one of the largest in the world; that is why it was decided by Tesco officials to continue the development of their company in this very direction.

Furthermore, Tesco purchased large areas where the new supermarkets were to b built and planned that the size of each of the stores will be about 1, 400 m² which is not the largest size in the USA but still a considerable area for retail trade. The assortment of goods that are now sold in the Fresh & Easy supermarkets owned by Tesco is not limited to the grocery but includes such things of everyday demand as bakery, liquor, pharmacy, and others.

Drawing from this, we can state that supermarkets that operate under the brand name Fresh & Easy are supplying the people in the areas of their location with all the necessary products for a living. But will they be successful? This is the question that we are to answer in the following paragraphs (Freshandeasy.com, 2008).

To answer this question, we should at first define which basic factors provide for the success of the new channel launched in the new and unfamiliar market. Among the most important factors, there are such ones as properly organized marketing of the company’s activities and their possible effect upon the newly introduced market, analysis of the supply and demand in the areas where then new supermarkets were to be erected, examination of overall market conditions, state of competition in this market and the close attention paid to the needs and wishes of customers in the areas, as well as access to the company’s information together with the company’s ability to gather and analyze the necessary information about all the above-enumerated factors (Chow.com, 2008).

In the Fresh & Easy supermarkets owned by Tesco, the situation with almost all these aspects seems to be well developed. As for the basic aspects, such as marketing organization, it is a quite high level of development as far as Tesco opened its supermarkets in the underserved area of the West Coast of the United States such as Oakland, Compton in California, Phoenix in Arizona, and some others. This allows us to state, that Fresh & Easy supermarkets will be another successful trading channel of Tesco. Besides, the analysis of the potential of the US underserved markets carried out by Tesco proved that Fresh & Easy will have a great field for work on and a considerable customer base (Los Angeles Times, 2007).

The study of market conditions, such as competition development as well as supply and demand showed that Tesco’s supermarkets will face little competition in the areas of their interest. Supply was also reported to be poor while demand for grocery and other consumer goods was constantly growing. All the above-considered factors allow us to predict the success of the new channels launched by Tesco to the United States markets, especially if we pay attention to the fact that work with customers and recruitment policies provide for the positive image of the supermarkets, create customer bases and new working places for the local population.

Nevertheless, there are factors that do not let us be sure of the absolute success of new channels introduced by Tesco. These factors are drawbacks to the company’s environmental policies and competition standards. Fresh & Easy supermarkets are criticized for lack of recycling programs, improper utilization of packages of their goods, and overall harmful effect of the stores upon the environment in the US states where the new supermarkets were opened.

This, in its turn, leads to the breaking of relationships with business partners of Tesco that do not want to spoil their image by cooperating with the company whose activities are severely criticized by society (Attwood, 2007). These factors demonstrate that the success of Fresh & Easy supermarkets in the USA depends greatly upon the improvements that are to be made by the managerial staff and executive officials of the company (The Economist, 2007).

To conclude, the new channels of trade introduced by Tesco to the US markets under the brand name of Fresh & Easy have all chances to become successful and develop into dominant retail traders in the country but to do this they have to make certain improvements to their environment and customer policies.

References

Attwood, K. (2007). Tesco’s partner in online home sales site pulls out. The Independent. Viewed at findarticles. Web.

Chow. (2008). Chow search results: “fresh and easy”. Web.

Freshandeasy. (2008), Home Page. Freshandeasy.com. Viewed at freshandeasy. Web.

Los Angeles Times, (2007). Where is South L.A.’s Fresh & Easy? Tesco has opened its first markets, but not in South L.A. Is the grocer’s commitment to ‘food deserts’ firm? Web.

The Economist, (2007). Briefing: Tesco. Fresh, but far from easy. Viewed at economist. Web.

At the moment, there are two major weaknesses that might threat the further evolution of the company and limit its opportunities. First, TESCO is extremely depended on the UK and European market as in accordance with the statistics, the bigger part of income comes from these two strategic locations (Wood 2014). Additionally, the company does not recognise this threat and does not devote resources to the development of other markets in areas where it works. The possible solution to the problem is the introduction of the strategy emphasising the critical role of other locations as the potential source of new clients and the generation of additional income. Improvement of the infrastructure in other states might help TESCO to improve its positions.

Another weakness is related to the previous one. Existing retail formats fail to show outstanding effectiveness in some countries because of the lack of market research about clients’ preferences, their buying power, preferable options, and demands to products (Wood 2014). In such a way, the company experiences a decrease in incomes in areas that are potentially beneficial. The possible solution might include additional market research with the primary aim to determine the main source of the problem and eliminate it.

Altogether, TESCO remains a potent retailing company that holds leading positions in the international market. The company is recognised in many locations, and in the UK and Europe, it is taken as a leading seller of food and products of acceptable quality and price (TESCO 2018a). All these factors indicate that there is a potential for further improvement and development for the brand to become a leader and compete with other giant corporations.

The company is focused on selling groceries as the biggest part of its operations; however, there is also an increase in the provision of other consumer goods to broaden the target audience and generate additional revenue. The latest reports show that that given approach remains effective as TESCO was the largest retailer in the UK by sale with 27.4% of the market share of total grocers (TESCO 2018b). There are three major shareholders which are BlackRock (6,64%), Norges Bank (3.99%) and Schroders (4,99%) that hold the company’s shares (TESCO 2019). The improved relations with these actors are organised via direct annual meetings and online methods.

At the moment, TESCO experiences a certain growth in the operating profit margin if to compare to 2017 (TESCO n.d). It can be explained by the stable high number of sales and effective strategies. However, there is a significant financial risk because the margin remains considerably low. It means that there is a need for a certain intervention.

Finally, the company has some weaknesses, which are the dependence on the UK and European market and the ineffectiveness of the research resulting in some failures in other locations. Consideration of these problems and their solutions might help to align the stable functioning and growth of Tesco as many other factors show that the corporation has the potential to hold leading positions in the market.

Reference List

TESCO n.d., Five year report, Web.

TESCO 2018a, Annual report and financial statements 2018, Web.

TESCO 2018b, Strategic seport 2018, Web.

TESCO 2019,Notice of annual general meeting 2019, Web.

Wood, Z 2014, ‘Five problems for Tesco’s new boss to deal with’, The Guardian, Web.