Strategic Management In Tesco Company
The management teams of business firms need to be ahead in terms of innovativeness and decision making for them to drive their respective companies towards their targets. If they fail to do so, they expose their employers to risk of failure and this affects their performance reputation. To ensure that they uphold a good image also for their firms, the managers need to come up with CSR and Sustainability plans that will increase the business lives of their respective companies in the sectors that they operate in (Azzam and Muneeza, 2012). Through such plans, the firms are able to run all their functions in a professional manner with regard to the outlined international company standards. This report focuses on analysing the CSR and sustainability agenda of Tesco, a large MNC that has specialised within the UK and global retail market.
CSR and sustainability
Business firms do improve the image of their brands when customers notice that they are not only after making good profits but also improving the health and welfare of people and communities around them. By engaging in the improvement of the society both in financial and non-financial terms, the firms do improve on their reputation and this positions them competitively to easily win the support of locals and international communities that they trade within (Jones et al., 2014). This is achieved via the implementation and commitment to the concepts of CSR and sustainability, which act as operational models to foster good functional procedures that facilitate the realisation of economic, social and environmental targets of the concerned firms. All top firms in different industries are using these techniques to improve on their strengths, hence, making them highly competitive in the market in the race to attract potential partners and customers.
CSR and how decisions are integrated on its sustainability agenda
In the quest to improve the society through the CSR and sustainability policy, business firms should start from within (Khan and Korac, 2014). They should 1st take care of the needs of their workers so that they can feel valued and empowered by their employers. This is why the management of Tesco has incorporated the development needs of its employees and other interested parties in its CSR plan. The company has the UK apprenticeship project to give more than 1,000 employees and partners of all ages relevant opportunities that they need to improve on their competitiveness with time (Jones et al., 2011). The company does support the needy people to access quality education and this has attracted a lot of customers as they are convinced that their money will not only profit Tesco but also improve the lives of others.
The recommendations that were made by the Paris Climate agreement on how to handle the climate change made Tesco to adjust its CSR policy slightly. This made the company to aim at being a zero-carbon firm by the year 2050. To achieve this, the company has been working step by step to minimise its CO2 emissions. It targets to reduce such emissions by 25% in 2020 and by the time 2025 comes, it would have cut the emissions by 60% before accomplishing its target in 2050. To show it’s serious about this, the company has already adjusted to renewable sources of electricity and this is catering for 65% of its operations. The company is also committed to reducing global food waste and it has utilised the available advanced technology to do so. For example, it has developed the resalable salad packaging bags in order to make its Clementine as well as satsumas to stay fresh for a long period of time. This has enabled it to minimise the fruits and vegetables that used to go into waste by more than 6,000 tonnes. This shows that the sustainability agenda of the company is bearing fruits as it is facilitating the growth of Tesco both financially and non-financially.
Most plastic packaging materials are non-recyclable and when they are burnt in the public, they do increase CO2 emissions in the atmosphere and this exposes people to health challenges associated with the respiratory functioning (Saleh et al., 2011). Thus, this has made Tesco to invest in the improvement of its packaging materials and mechanisms. This has seen it make significant changes to its wet wipes and in the process it has reduced 20% of the materials that are used, hence, minimising the plastic that was previously used by 57 tonnes. The saved materials can be used to make another 10 million packs and this will reduce the quantity of plastic bags in the environment, thus, reducing pollution. The company is committed to environment conservation and this is seen in its campaign to minimise soil degradation in regions it’s sourcing some of its agricultural materials from. For example, in areas like East Anglia, which have specialised in potato production, Tesco has partnered with National Farmers Union, Rivers Trust and Environmental Agency to educate farmers in the outcomes of water run-offs. The partners are testing the recent technology that is likely to aid the retention of the top soil that is very valuable and minimise the amount of fertilisers that are being excessively used and in the process penetrating into the local waterways.
Most MNCs are engaged in improving the health of the public by partnering with different NGOs that are running health related programs (Samy et al., 2010). Tesco is one of the companies that have partnered with top NGOs like Diabetes UK, Heart Disease and Cancer research UK to assist the needy and elderly disease victims. In the UK, there are many people that are suffering from long term and disorders and do not have the much needed resources to access high quality health care. As a result, they are relying on well wishers to give them both financial and non-financial aid. Tesco in a 5 year plans with the above named partners to assist the targeted victims to get all the support that they need in their quest to live and age successfully. Engaging in all the above CSR activities has made Tesco to grow sustainable, hence, easily retaining its top retail position in the UK and growing tremendously in the global retail market.
Tesco Company is attaining high monetary and non-monetary goals due to its good governance policies. The company is headed by a board of directors that is led by the chairman, John Allan and it has been in the forefront of making and implementing innovative and creative decisions that are aiding Tesco growth. The company has an executive committee that is headed by Dave Lewis and members within it are specialised in different fields that include marketing, customer relations, legal, communications, finance and administration among others. These individuals have unique skills and competencies that make them to deliver the expected outcomes within the specified period of time (Stuebs and Sun, 2015). The governance framework of the company is comprised of the board, the remuneration committee, governance committee, CSR committee, the audit committee, disclosure committee, executive committee and the risk and compliance team and their roles do match their tittles. The delegation of duties has made it easier for Tesco to make functional decisions that foster its success in the UK and in others parts of the globe that it trades in. The company has been able to tackle any external threats and difficulties that it faces innovatively and in the process, it has improved its competitiveness in the sector.
The business organisational performance is measured the amount of income or profits that the company generates in a year. The firms need to focus on improving their revenues for them to be in a strategic position for continuous growth. In determining and analysing the performance of Tesco, the net profit, debt ratio, return on assets as well as the current ratio will be used applied below;
Profit; when an organisation is making good profits, then its performance is good but when it’s incurring losses, its performance is poor and the necessary measures have to be implemented to rectify the situation (Saleh et al., 2011). The company generated 1.2 Billion pounds and this means that it has sufficient resources to fund its operations.
Return on Assets; this is important in determining the profitability capabilities of the assets of the company. If the ration is high, let’s say 5 above, then, it means that the company’s assets are very productive. Such a ration for Tesco is outlined below;
Net income/Total assets= 1208/44862= 0.02 and this means that the company’s assets have a very low profitability potential.
Liquidity/Current ratio; this is important in checking if the company has the ability to settle its short term obligations (Siahtiri, 2017). If the value is less than 1, it means that the company is in a bad liquidity position and the ratio is attained by dividing the current assets over the current liabilities. The current ratio for Tesco is calculated below;
Current assets/current liabilities= 13726/5512= 2.49
This means that Tesco is in a good liquidity position as it has the ability to easily meet its short term obligations.
Leverage ratio; it is important in analysing the total of the company’s assets that are acquired via debt. If the ratio is lower, then, the company’s financial structure is stronger and vice versa. For Tesco, the debt ratio is as outlined below;
Total debt/total assets= 20,678/44862= 0.46
From this ration, it is evident that the financial structure of Tesco is attributed to its high sales and income generation.
Tesco Company is doing well in the market and this is credited to its outstanding management and leadership. The company has a unique CSR policy that has seen it engage in minimising environmental and social challenges. It has invested in empowering people in different ways and this has improved its image. The company is properly governed under the leadership of Allan (chairman) and Dave (CEO). They have worked on improving its financial performance, hence, having a strong financial muscle for its growth.
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