Tesco's 'Steering Wheel' Strategy
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Case Details:
Case Code : BSTR187
Case Length : 21 Pages
Period : 1995-2005
Organization : Tesco
Pub Date : 2005
Teaching Note :Not Available
Countries : UK
Themes: Growth Strategy |
Balanced Scorecard
Industry : Retail
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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EXCERPTS Contd...
Making Operations Efficient
Tesco's distribution network in the UK was among the best in the world. The company emphasized the importance of putting resources to the maximum use. Tesco stores in the UK received two deliveries a day one a "fill up" delivery and the other, a "top up" delivery.
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To keep the things simple for customers as well as for employees, Tesco adopted several new systems such as electronic shelf edge labeling all across the store, through which prices could be changed from a single central point; self scanning tills; self service pre-packaged products, coffee shop on mezzanine floor and also merchandising of fresh produce.
Drawers were used to store replenishment stocks. To increase stock holdings on the shop floor, the depth of shelves was increased. The supply chain and distribution system of Tesco strove to do away with non value-added costs. In the UK, Tesco operated 26 distribution centers...
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Finance
Pricing was a key strategy and selling point for Tesco. Low prices were adopted to maximize sales. Tesco's value-added products at low prices attracted many customers. After the launch of 'unbeatable value' campaign in 1996, Tesco went in for massive price reductions. The company adopted the strategy of 'Everyday Low Pricing' (EDLP), while continuing its other promotional activities. The EDLP program aimed to regularize low prices for Tesco customers; low prices were not merely a strategy used for the occasional sale, but on a regular, daily basis... Adopting the EDLP strategy demonstrated Tesco's commitment to its customers, putting their interests first...
The Crticism
Tesco's 'Steering Wheel' was successful in steering Tesco towards the fulfillment of its strategic objectives. However, Tesco's rapid growth in the early 2000s attracted severe criticism mainly for its HR policies and procurement policies. Though Tesco prided itself at being a people-centered organization, media reports said the company paid unduly low wages. One move that received lot of flak from all quarters was Tesco's stand on employee absenteeism. In order to reduce absenteeism, Tesco came up with a policy of not paying for the first three days of sick leave taken by employees. After the policy was implemented, Tesco claimed that the absenteeism came down to 4.6% from 5.8%.
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Exhibits
Exhibit I: Tesco - Competitor Profile
Exhibit Ii: The Tesco Way
Exhibit Iii: Tesco's Store Format
Exhibit Iv: Tesco - Asian Operations
Exhibit V: Tesco - European Operations
Exhibit Vi: Tesco Personal Finance Products
Exhibit Vii: Tesco's Steering Wheel
Exhibit Viii: Tesco's Principles
Exhibit Ix: Tesco's Values
Exhibit X: Tesco's Goals
Exhibit Xi: Tesco's Core Purpose
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