Strategic Management Approaches for a Company Essay

furnishes a literature review of five strategic management viewpoints, that include Porter's (1980) Generic Strategies, Porter's (1980) Five Forces, Porter's (1985) Value Chain Analysis and Bowman and Faulkner's (1997) Bowman's Strategy Clock. This paper has made use of UK's Tesco supermarket retailer for case study. The analysis of Tesco using Porter's Generic strategies revealed that Tesco's generic strategy needs to be cost leadership given that they can successfully differentiate their clothing line to be able to charge a premium. Apropos globalization, Porter extends the generic strategy construct to international situation. However, Tesco cannot be bracketed as belonging to one particular category. Porter's Five forces revealed that in spite of cost leadership strategy the company has managed to create a very high value when compared to that of its key competitors. Tesco's advantage has been its range of stores, which are within reachable distance from most of residential localities across UK.

The Value Chain analysis revealed a low value to customers. The overall economic strategic management of Tesco is apparent in the lean and agile inbound logistics it employs and professes. Tesco has been critically acclaimed by many management experts in the retail chain field for its efficient use of IT systems that aid the company's aim of low cost leadership policies. Bowman's strategy clock revealed Tesco adopts the hybrid strategy as it incorporates elements of both differentiation and cost leadership. (Campbell et al., 2002). A hybrid strategy 'seeks to achieve both features in one go, that of a price lower than that of competitors and differentiation'. Hybrid strategies are beneficial entry strategy in markets with established competitors. Tesco employs this ploy as a part of their global strategy. In doing so they can target competitors and enter the market in differentiated geographical areas with better products and competitive pricing. Tesco also makes use of Market development strategy which has increased their book value and global presence.

Introduction

In 1980, Michael Porter wrote Competitive Strategy, which altered the thinking and attitude of the prevalent managers as well as academics generation (Crowther, 2008; Magretta, 2012). Two alternate models pertaining to strategic management have been formalized in that published work namely the 'Five Forces' and the 'Generic strategies' he added his 'value chain model' later on which was a rather generic work. This paper uses these three Michael Porter models, at the cost of repeating, the 'Generic Strategies' (1980), 'Five Forces' (1980) and the 'Value Chain Model' (1985). This work analyzes as a case study, Tesco, the popular supermarket retail merchant of United Kingdom. It also analyses other retail businesses including property services, banking, and also the United States' Shaw's retail chain. The paper in a bid to provide a backdrop to the analysis presented puts into reference one other theory that of Faulkner's (1997) 'Strategy Clock,' which could as well be used to analyze Tesco. The strategy being implemented by Tesco's will be appropriated in light of the three Porter's tools. The paper concludes with a discussion of the evaluation and will state some strategic revaluations that could prove fruitful for Tesco's operations in future.

As a prologue to literature review, it will be beneficial to furnish a comprehension of the concepts of strategy and its management. Strategy is the long-term scope and direction of an organization pursued to overcome challenges of changing environs and gaining a position of strength by positing its core strengths and resources towards fulfillment of expectations of its stakeholders (Johnson, Whittington and Scholes, 2009: 3). Strategic management is alternatively understood as 'knowing the strategic position that the organization strategically chooses (2009: 12).

Literature Review

Porter's generic strategies

In Michael Porter's (1980) 'Competitive Strategy" developing a strategy was primarily proposed as an analytical process on the basis of observations, analyses and evaluations, that have an effect on the market forces and other players in it that share the same arena of the market. 'Competitive Strategy" differentiates and posits the specific competition conditions. The competitive advantage of the industry was emphasized to be the basic measure of its strategic acumen. The relative position of the organization to the overall industry it thrives in is the chief ingredient of its economic success. (Mintzberg, 1990, in Mert, Bas, and Yildiz, 2013). According to Porter's (1980) theory, the main implements contributing to challenging the competition are the generic market segmentation, cost leadership and product differentiation. It should also be understood that there are basically three ways in which the completion manifests, that of segmentation or differentiation or the value of the product perceived by the consumers.

Figure 1: Porter's Generic Strategies

Porter's five forces

Porter's 'five forces' have an influence on the overall formation of any industry and in a way define the rules of both the competition as well as the causes or makings of profitability in a particular industry (Porter, 2008). The five forces comprise of the challenges posed by potential newcomers, powerful buyers, substitute products, competitive rivalry, and powerful suppliers (see Figure 2, below). These five forces will help an analyst to analyze an organization fully (Dobbs, 2012).

Porter (1980) emphasizes that the total gains that can be had in an industry is determined by the effect of these 'five forces'. (1980: 3, in Dobbs, 2012: 22). Porter later also proposed in 1980, the five forces, ultimately assess the impact of the strategic strength of an organization.

Figure 2: Porter's Five Forces

(Source: Porter, 1980 in mindtools.com)

Value chain analysis

The ability and acumen of managers to make appropriate use the external and internal dynamics to gain continued advantage on completion is 'Value chain analysis' (Hansen, Mowen and Guan, 2007: vii). Baig and Javaid, (2011) explain Porters (1985) "Value Chain Analysis' as comprising of 'transformation of raw materials into acceptable consumable products, such that the intrinsic value of the product differentiates it from that of the other players' in the market (2011: 252). Porter's (1985) model of generic value chain proposes that the value chain comprises of all activities that a firm undertakes to bring to fruition services and goods. There are two elements of the value chain (Figure 3, below). The first set of activities are the ones that add value to the final produce of the firm and the second are those that provide for support and are secondary or complementary in nature, that add indirect value. The support activities include the land building and capital assets, human resource management, technical research and development and sourcing. The primary activities include sales, and service, operations, inbound logistics, outbound logistics, marketing and outbound logistics. The value chain is the sequential activities of the organization as a whole and it is a measure of the weak points and strengths of an organization.

Figure 3: Porter's Generic Value Chain

(Source: Porter, 1985, in mindtools.com, 2014).

Bowman's Strategy Clock

Bowman and Faulkner (1997) were responsible for the strategy that is known as the 'Bowman's Strategy Clock', (see Figure 4 below). Bowman and Faulkner (1996) worked on extrapolated Porter's (1980) product differentiation, cost leadership, and market segmentation, generic strategies for challenging the competition to eight generic corporate strategies. The 'Bowman's strategic clock' elaborated the specific combinations of understood value and costing policies strategies adapted by organizations, and they sought to analyze and accentuate success by using each strategy.

Figure 4: Bowman and Faulkner's (1997) 'Bowman's Strategy Clock'

(Source: Bowman and Faulkner, 1997, image on mindtools.com )

Methodology

This paper employs the case study approach and examines the practical application of the theory. The case studies are that of United Kingdom's Tesco retail supermarket.

Findings

In this part of the essay relevant features of Tesco are discussed to allow for strategic market analysis of the company employing the strategic management tools, discussed above.

Brief History of Tesco

Tesco is a global grocery and general merchandising retailer. It is the biggest UK retailer by not only global sales but also local UK's market share. Its profits are in excess of E3 billion making it third largest global retailer sales-wise after America's Wal-Mart as well as France's Carrefour. According to one online report, the company began in East London as an individual man's vision and financed by Jack Cohen who was the son of a Polish Jewish tailor. He began selling grocery in the East end area markets in 1919 but launched it as a brand only in 1924. It was a name derived as Jack Cohen procured a huge shipment of tea from T.E. Stockwell, he simply used the first three letters of the name of the supplier and the first two of his own surname to make new labels, to form TESCO. Subsequently, the very first TESCO opened during 1929 in London. In food retailing sector, Tesco is among the top global retailers, having around 2318 outlets and giving employment to over three hundred and twenty five thousand individuals. It also offers online services to its customer through subsidiaries. Extra, Superstores, Metro along with Express are the variations in which one can find TESCO in UK where it has the largest market…