7LO509 Global Supply Chain Strategy Assessment Answer

Introduction

Tesco PLC is a multinational grocery and general merchandise retailer based in the United Kingdom. It is one of the world's largest retailers, with operations in Europe, Asia, and North America. The company was founded in 1919 and has since grown to become a major player in the retail industry. Tesco operates over 6,800 stores in 12 countries worldwide, including the UK, Ireland, Hungary, Thailand, and Malaysia. The company employs around 440,000 people globally, making it one of the largest private sector employers in the UK (Smith and Sparks, 2019).

In the financial year 2020/2021, Tesco reported a turnover of £57.9 billion and an operating profit of £1.8 billion. The company's market capitalization as of March 2023 is around £20 billion. Tesco's core business is grocery retailing, but it also operates in areas such as clothing, electronics, and financial services. The company is committed to sustainability and has set a target to become a net-zero business by 2035 (Sparks, 2018).

From the aforementioned graphical representation, it can be inferred that the share price of Tesco experienced new heights in 2018 at the month of July, £325. This is the highest range in the last five years whereas, the share price has also deteriorated extensively in 2022 diving as low as £200. However, in the course of the last three to four months the organization is trying to regain its previous price gradually. The sudden dip in 2021 is due to a series of tax regulations imposed by the UK government. 

Task 1:

A critical discussion of the supply chain strategy that the organization has pursued over the last 3-5 years:

Tesco's supply chain strategy over the last 3-5 years has focused on improving efficiency, however the notion of waste reduction or enhancing sustainability has not yet been emphasized significantly by the organization. The organization has leveraged technology to get ahead of the competitive curve, however, establishing meaningful business relationship with suppliers who practice sustainability or sourcing products from suppliers who are oriented with net zero emission is yet to be accomplished by the organization. All in all, it can be stated that the company has leveraged technology to a great extent in collaborating with suppliers and partners to develop a customer-centric approach to satisfy consumers. While Tesco has made progress in realizing its intended actions, it will need to continue to innovate and adapt to sustainability and practice social responsibility extensively (Lindgreen and Hingley, 2019).

Task 2:

Critically evaluate the key Global environmental challenges (external and internal) that affected the supply chain strategy of the organization during the last 3-5 years:

The PESTLE analysis is discussed below in detail:

1. Political: It is possible to diversify into other European nations by taking advantage of the privileges offered by the European Union. Tesco will need to take local laws and regulations into account before entering these European nations, though. To safeguard neighbourhood stores, there might be rules in place, thus it's critical to assess the political climate of the nation regarding new businesses. The UK government may support Tesco because it contributes significantly to the nation's employment rate. Being the third-largest employer globally, Wal-Mart receives significant tax breaks in the US.
2. Economical: Because of the strengthening of the pound sterling, supermarkets outside of the UK are less able to compete with their respective local rivals. Through our established ties, we may obtain supplies from Wal-Mart to offset this. Tesco will be competitive in those markets thanks to the declining value of the dollar. The corporation is very concerned about rising labour costs. TESCO can source products from cheap nations like China and India to counteract this influence. Automation of services is beneficial for lowering labour expenses. TESCO's expansion is being constrained by the saturation of the UK market, preventing them from entering new markets like India, China, and European nations (Stadtler, 2019).
3. Societal: Current trends demonstrate that British consumers prefer bulk and "one-stop" shopping because of several socioeconomic events. As a result of demographic changes including an aging population, an increase in the female workforce, etc., UK retailers are emphasizing added-value goods and services. Additionally, because they can help organizations save money, supply chains and other operational improvements are currently in the focus.
4. Technological: Technology, a crucial macro-environmental variable, has impacted the evolution of many of Tesco's supply chain processes. The new technology benefits the company as well as the customers who have better access to goods, more personalized services, and more convenient purchasing (Cox, 2019).
5. Legal: Tesco's performance is directly impacted by several laws and regulations adopted by the government. There is a risk of fierce pricing wars and a pressing need for product differentiation when there are strong competitors with well-known brands. The government's policies for monopoly controls and lowering purchasers' power may be able to restrict entry into this industry via constraints such as license requirements and restrictions on access to raw materials (Houlihan, 2018).
6. Environmental: Tesco's biggest social problem has been environmental issues, a key area where businesses can adopt socially responsible business operations. Tesco's CSR is focused on how an organization goes above and beyond the essential duties to stakeholders as required by law and corporate governance because of recognizing this trend within the general ethical mindset.

Porter’s five force analysis:

1. Threat of new entrants: The retail industry is attributed to a high barrier, which is why it is quite challenging for new players to enter into the market. Generally, these barriers range from high capital requirements, economies of scale to brand recognition. That is why Tesco, which is already an established player, is safeguarded from new entrants, since it already holds a strong position in the retail market.
2. Bargaining power of supplier: Suppliers in the retail industry have a certain bargaining power which provides them with a unique opportunity to influence the working function of retail companies. However, Tesco, being a large and reputed organization can negotiate for favourable price with suppliers (Lambert and Cooper, 2020).
3. Bargaining power of buyers: Consumers or the buyer has a relatively higher degree of bargaining power in the retail industry. Not only do they have a wide variety of options from where they could purchase, but at the same time, the pricing strategy adopted by competitors of Tesco is also challenging in nature. Hence, Tesco requires incorporating necessary measures in the field of pricing and sustainability in order to maintain the reputation for quality and value, so that it would retain its existing consumer base.
4. Threat of substitutes: In the retail industry, there are several substitutes available to consumers. However, the quality of these substitutes may vary. Hence, willing consumers who are quite health conscious in nature, would definitely verify products before purchasing them. Tesco should emphasize sustainability initiative through which it can mitigate the threat of substitute and retain its consumer foothold.
5. Competitive rivalry: Organizations such as Sainsbury, Asda and Morrison’s are quite competitive in nature, since they are also vying for market share in a similar domain to that of Tesco. Hence, Tesco needs to incorporate appropriate strategies in relation to pricing as well as sustainability in order to maintain its brand equity and market foothold (Mentzer et al. 2019).

Competitor’s Market Share analysis of TEESCO

The following market share analysis of Tesco is conducted on the basis of its performance in comparison to Sainsbury as well as ASDA since these two organizations are regarded as potent rivals of TESCO in the retail industry.

1. Market Share: According to British Retail Consortium, as of February 2023, Tesco had a 26.3% share of the UK grocery retail market, followed by Sainsbury's with 15.4% and Asda with 14.5%.
2. Revenue: In its 2020/2021 financial year, Tesco reported total revenue of £57.9 billion. In comparison, Sainsbury's reported a revenue of £29.0 billion for its 2020/2021 financial year, while Asda's revenue was not publicly available as the company is owned by Walmart.
3. Profitability: In 2022 financial year, Tesco reported an operating profit of £1.8 billion, whereas Sainsbury's reported an underlying profit of £356 million for its 2022 financial year, while Asda's profit was not publicly available.
4. Number of Stores: As of February 2023, Tesco operated over 6,800 stores globally, including 3,836 in the UK. Sainsbury's had 1,414 stores across the UK as of March 2022, while Asda had 632 stores as of December 2021 (Davis, 2020).
5. Online Presence: As per the British Retail Consortium or BRC, as of February 2023, Tesco had a 34.4% share of the online grocery market in the UK, followed by Asda with 21.5% and Sainsbury's with 18.2%.

SWOT analysis

Analysis

The brand equity of Tesco is undeniably reputed in nature across the retail industry. As a consequence of which the organization has a large market share. In addition to that, the diversified business portfolio which Tesco possesses assists the organization to remain competitive. Being equipped with modern technology, the supply chain management of the organization has been streamlined to a great extent. On top of that, the organization has also incorporated innovative measures in terms of increasing the efficacy of inventory management as well as logistic maintenance. Despite having strong brand equity, the market reached of Tesco is limited greatly within the extent of the United Kingdom. Not only the organization has experienced difficulty in terms of generating profit in remote locality, but at the same time its dependence on existing suppliers has curbed the company's ability to counter competition from discount retailers. The organization should look forward to expanding into new market horizons, such as Southeast Asia. According to a recent survey conducted by Deloitte, it is revealed that approximately 23.6% growth in retail industries is experienced across Southeast Asia. Hence, the organization can develop sustainable as well as healthy products in order to gain foothold in Southeast Asia. One of the impediments for the organization’s working function is economic volatility. Due to the recent political turmoil in the United Kingdom; the manner in which tax regulation has imposed on the retail industry has been proven to be quite detrimental for Tesco to maintain its profitability (Copacino, 2021).

Task 3:

Determination of sustainability of supply chain strategy of TESCO:

VRIO Framework:

From the aforementioned VRIO framework, it can be inferred that the supply chain strategy which is currently undertaken by Tesco is not at all sustainable in nature. In view of the fact that although the supply chain strategy is valuable in nature, in terms of providing value to customers as well as enhancing efficiency. However, it is not at all inimitable or rare. As a result of which Tesco’s potential rivals are actually pursuing a similar strategy. To put it in a simple perspective Sainsbury's model of supply chain is similar to that of Tesco, which is why the organization is losing market foothold. On top of that Sainsbury is one step ahead of Tesco in terms of incorporating collaboration with local suppliers in order to improve the economic sustainability of the supply chain management. Additionally, the strategy may not be organized in a way that maximizes its potential. For example, Tesco has faced criticism for its treatment of suppliers and working conditions in its supply chain. As a result, it may be necessary for Tesco to re-evaluate and adjust its supply chain strategy to ensure its sustainability in the long term (Anderson et al. 2018).

SAFE CRITERIA

Based on the SAFE Criteria framework, it can be argued that Tesco's supply chain strategy is not sustainable. While the strategy may be efficient and cost-effective, it may not be stable in the face of changing market conditions or consumer preferences. Additionally, the strategy may not be able to adapt quickly to unexpected disruptions, such as natural disasters or supply chain disruptions. However, the strategy is agile and flexible, which allows Tesco to respond quickly to changes in demand or market conditions. Overall, while the current supply chain strategy of Tesco has numerous strengths but it may need to adapt and revise by making necessary changes to the current system to ensure long-term sustainability (Handfield et al. 2019).

Value Chain Analysis

The Value Chain Analysis framework reveals that the supply chain strategy practiced by Tesco is currently sustainable. The inbound logistics, operations, outbound logistics, marketing and sales, and service components of the value chain are all effectively integrated and support the overall strategy. Tesco's strategy includes initiatives such as online grocery shopping, supplier collaboration to improve sustainability, and investment in technology and automation to streamline processes. These efforts have helped Tesco improve efficiency; however, when it comes to waste reduction, the organization has extensive room for amendment in the field of sustainability practices. Not only the company has experienced serious concerns regarding employee treatment, but at the same time the carbon footprint of the organization is unchecked. Hence, from an apparent vision, even if the value chain analysis pointed out that Tesco’s supply chain strategy is effective. One of the crucial aspects that should be taken into consideration in this particular context is that in the long run it is quite detrimental to maintain economic sustainability as well as environmental sustainability for Tesco to maintain its current format of supplies chain management. Therefore, while the current strategy is sustainable, there may be room for improvement to ensure the strategy remains sustainable in the future (Taylor, 2019).

Task 4:

A brief discussion of at least 3 strategic supply chain options to ensure the success of Tesco in the future:

TESCO PLC is facing increasing competition in the retail sector and changing consumer trends, which necessitates the development of strategic supply chain options to ensure the company's future success. The following three strategic options have the potential to safeguard the future of TESCO in relation to supply chain sustainability:

1. Focus on Sustainable and Socially Responsible Supply Chain: TESCO can prioritize the development of a sustainable and socially responsible supply chain. This could include investing in renewable energy sources, reducing carbon footprint, and improving ethical sourcing practices. TESCO can also partner with suppliers who share the same values and prioritize sustainability in their operations. Such a strategy would not only reduce the company's environmental impact but also enhance its reputation and attract customers who prioritize sustainability.
2. Optimize Supply Chain Efficiency: Optimizing the efficiency in the field of supply chain is also one thing that Tesco can focus on. By reducing lead time, it would not only assist the organization in improving inventory management but also enhances the logistic as well as distribution operation. This can give Tesco a new edge through which it can satisfy consumer demand more effectively, while reducing costs as well as improving profitability. The company can also leverage technology which is already on its intended list for revitalizing its supply chain strategy by incorporating data analytics in order to forecast accuracy and improve the visibility of supply chain (Darmawan et al. 2019).
3. Expand International Operations: TESCO can consider expanding its international operations by entering new markets and increasing its global presence. This could involve identifying strategic locations, partnering with local suppliers and distributors, and adapting to local customer preferences. By expanding its operations, TESCO can tap into new revenue streams and increase its market share, ultimately improving its financial performance.

Of these three strategic options, the focus on a sustainable and socially responsible supply chain would be the most appropriate for TESCO to pursue in the long-term. Owing to the fact that although the organization is currently aligning its working function gradually towards sustainability. However, there is immense room for improvement. For instance, the organization has recently introduced paper bags and jute beds to replace plastic. However, as far as sourcing products from suppliers who practice sustainability is concerned, Tesco has the notion of extensively relying on existing suppliers. Not only it is financially detrimental for the organization to maintain its competitive edge in the field of pricing strategy, but at the same time the bargaining power of the suppliers, in this instance, increased multiple folds, which is why the company is losing potential market ground across the United Kingdom and also in other parts of the globe. While optimizing supply chain efficiency and expanding international operations can improve short-term financial performance, they do not address the fundamental sustainability concerns that are increasingly important to customers, stakeholders, and regulators. By prioritizing sustainability in its supply chain strategy, TESCO can improve its reputation and attract customers who prioritize sustainability (Dekker, 2020).

Task 5:

A critical analysis of a range of implementation issues:

Implementation Issue

To implement a sustainable and socially responsible supply chain strategy, Tesco would need to consider a range of implementation issues.

1. One key consideration would be how to control foreign investment, as Tesco operates in several international markets. To ensure that foreign investments align with Tesco's sustainability goals, the company could establish strict guidelines and criteria for all potential partners and suppliers. These guidelines could include criteria for ethical labor practices, environmental sustainability, and responsible resource management. Tesco could also consider partnering with local organizations or non-governmental organizations (NGOs) to help monitor and enforce these guidelines.
2. In addition to that incorporating sustainable practice is a change which is not a mechanical process but an emotional one this can necessarily be translated into the fact that the organization would require to invest substantial proportion of it's revenue in terms of educating the existing workforce regarding the benefit of sustainable practices not only it would assist the organization to get the workforce on board with the notion of change incorporation but at the same time it would also assist the organization 2 eradicate the concept of resistance from the employee
3. Aside from addressing the financial aspect as well as the human capital aspect associated with incorporating change in the organization, it is imperative for Tesco’s managerial authority to evaluate the rules and regulations of the respective market. For instance, the legislation regarding sustainability that is present in the United Kingdom is not similar to that of Malaysia. As a result, the organization would have to invest heavily in terms of evaluating and seeking legal guidance to avert from any unnecessary issues of legality and maintain their working function as per the compliance of predetermined legislation of the target market (Robbins et al. 2019).

Time scaling

As far as time scaling is concerned, inculcating a strategy of supply chain management that is sustainable is an endeavour that is lengthy in nature. Aside from requiring extensive ongoing commitment from the workforce, the organization also has to allocate a substantial proportion of funds in order to heavily invest in inculcating sustainable strategy across all its stores around the world. Simply put, Tesco would require a financial strategy in order to allocate the significant resource that is adequate for the successful realization of the implementation process, which ranges from investing in new technologies, training and orienting employees as per the new sustainable practices and establishing business relationship with suppliers who are oriented sustainability (Griffin, 2021).

Impact on business

In terms of impact, a sustainable supply chain strategy would have significant positive effects on TESCO's reputation, customer loyalty, and stakeholder engagement. The company would also be better positioned to meet evolving regulatory requirements related to sustainability, reducing the risk of regulatory penalties or reputation damage.

Ownership of the sustainable supply chain strategy

Ownership of the sustainable supply chain strategy should be shared across multiple departments within TESCO, including supply chain, marketing, and sustainability. Senior management should provide clear leadership and establish metrics to track progress towards sustainability goals. Collaborative partnerships with suppliers will also be critical to the success of this strategy, as suppliers play a crucial role in the implementation of sustainable practices throughout the supply chain.

SVF framework to determine the financial feasibility of Tesco's new sustainable supply chain:

Social Feasibility:

Tesco's new sustainable supply chain strategy aligns with its commitment to being a socially responsible organization. By prioritizing sustainability, Tesco can improve its reputation and attract customers who prioritize sustainability. This is expected to enhance customer loyalty and create a positive impact on the environment.

Value Feasibility:

The implementation of a sustainable supply chain strategy requires investments in renewable energy, sustainable packaging, and ethical sourcing, among others. These investments may increase the cost of goods sold, and hence, the prices of Tesco's products. However, Tesco's commitment to sustainability is expected to create value in terms of improved customer loyalty, enhanced brand image, and increased sales (Kroeger and Weber, 2019).

Financial Feasibility:

Conclusion:

To conclude it can be stated that Tesco has a plethora of options to revitalize its supply chain strategy, so that it is sustainable in the upcoming years. However, after meticulously analyzing the options present for Tesco, it can be pointed out that emphasizing sustainability and socially responsible practices is the best way to move forward for Tesco. Although there is an array of impediments that the organization would require to address before inculcating the sustainability and it's supply chain management, ranging from financial issues to educating employees beforehand, prior to incorporating the change. However, if appropriate actions are implemented in due time, then the financial feasibility of the proposed action would definitely safeguard the business interest of Tesco in the long run.

References:

Anderson, D.L., Britt, F.F. and Favre, D.J., 2018. The 7 principles of supply chain management. Supply Chain Management Review, 11(3), pp.41-46.

Copacino, W.C., 2021. Supply chain management: The basics and beyond (Vol. 1). CRC Press.

Cox, A., 2019. Power, value and supply chain management. Supply chain management: An international journal, 4(4), pp.167-175.

Darmawan, M.A., Putra, M.P.I.F. and Wiguna, B., 2019. Value chain analysis for green productivity improvement in the natural rubber supply chain: a case study. Journal of Cleaner Production, 85, pp.201-211.

Davis, T., 2020. Effective supply chain management. Sloan management review, 34, pp.35-35.

Dekker, H.C., 2020. Value chain analysis in interfirm relationships: a field study. Management accounting research, 14(1), pp.1-23.

Griffin, R.W., 2021. Management. Cengage Learning.

Handfield, R., Sroufe, R. and Walton, S., 2019. Integrating environmental management and supply chain strategies. Business strategy and the environment, 14(1), pp.1-19.

Houlihan, J.B., 2018. International supply chain management. International Journal of Physical Distribution & Materials Management, 15(1), pp.22-38.

Kroeger, A. and Weber, C., 2019. Developing a conceptual framework for comparing social value creation. Academy of Management Review, 39(4), pp.513-540.

Lambert, D.M. and Cooper, M.C., 2020. Issues in supply chain management. Industrial marketing management, 29(1), pp.65-83.

Lindgreen, A. and Hingley, M., 2019. The impact of food safety and animal welfare policies on supply chain management: the case of the Tesco meat supply chain. British Food Journal.

Mentzer, J.T., DeWitt, W., Keebler, J.S., Min, S., Nix, N.W., Smith, C.D. and Zacharia, Z.G., 2019. Defining supply chain management. Journal of Business logistics, 22(2), pp.1-25.

Robbins, S.P., Bergman, R., Stagg, I. and Coulter, M., 2019. Management. Pearson Australia.

Smith, D. and Sparks, L., 2019. Tesco’s supply chain management. Logistics & Retail Management: Emerging Issues and New Challenges in the Retail Supply Chain, London and Philadelphia: Kogan Page, pp.143-171.

Sparks, L., 2018. 07 tesco’s supply chain management. Logistics and retail management: Emerging issues and new challenges in the retail supply chain, p.149.

Stadtler, H., 2019. Supply chain management: An overview. Supply chain management and advanced planning: Concepts, models, software, and case studies, pp.3-28.

Taylor, D.H., 2019. Value chain analysis: an approach to supply chain improvement in agri‐food chains. International Journal of Physical Distribution & Logistics Management.

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