Evaluate the suitability of the emergent and intended approaches to strategic management for Tesco One of the world’s largest retailers operating in 12 different countries and with over 500,000 employees is Tesco PLC (Tesco, 2014). Tesco’s states their strategic priorities as to continue their investment in the strong UK businesses, establish a multichannel leadership and to pursue disciplined international growth (Tesco, 2014). In any company, strategy plays a key part in its success or failure and can be split into two types; intended and emergent. An intended approach is described as “a planned strategy designed at a senior level of management for the implementation at other organisational levels” (Witcher & Chau, 2014). Whereas the emergent approach is “a strategy where the final objective is unclear and whose elements are developed during the course of its life, as the strategy proceeds” (Lynch, 2012).
In other words the intended strategy is the main plan of a company and the emergent strategy is the unplanned reaction to environmental changes. In reality successful companies need to use a mix of the two strategies, however some companies find it difficult to integrate them both at the same time. I am going to be discussing the appropriateness of strategies that Tesco have undertaken and the key drivers that have influenced their decisions. Tesco started in 1919 when Jack Cohen used his war money to set up a stall selling groceries in the East End of London, which then developed ten years later with the opening of his first flagship store in Burnt Oak (Clark & Chain, 2014). For years Tesco was known as one of the biggest food supermarkets, but in 1974 after opening its first petrol station and then further diversifying with non-food products such as clothes and electrical in 2000, Tesco was no longer just a supermarket. Tesco had developed into a hypermarket which revolutionised the way that customers were shopping. Hypermarkets give customers the opportunity to buy everything in their one big store instead of shopping in several places.
Harris considers “a strategy will need to evolve over time and a business must be able to flex and change in line with emerging trends, challenges or opportunities” (Harris, 2012). Therefore I believe that Tesco’s non-food strategy was emergent as they noticed the successful industry and competitors, like market leader Argos, and saw an opportunity to expand their product portfolio. They wanted to influence customers to buy more than just what they had come into the store to buy. The list of products Tesco now offers seems endless and analysts have agreed that the key to the non-food growth is because of the good value products (Dangerfield, 2007). Another reason for the non-food idea is the influence of the acquisition of Walmart and Asda in 1999, which had become a moderate success, and may have highlighted to Tesco that they needed to do something to compete and not get left behind (Hope & Hall, 2008). Gray proposes “If I had to put it down to one thing it would be diversification.
Tesco is quick to spot gaps in the market, adapt to consumer trends and get ahead of the competition” (Gray, 2013). In an intended point of view, Ansoff’s strategy matrix would emphasise that “the diversification strategy is the most risky and distracts the company” (Ginevičius & Auškalnytė, 2001). However from an emergent point of view, Mintzberg and Waters suggest “openness to emergent strategy enables management to act before everything is fully understood – to respond to an evolving reality rather than having to focus on a stable fantasy” (Mintzberg & Waters, 1985). Therefore as this fits an emergent approach I agree with Gray and Dangerfield that Tesco are suitable to diversifying due to their quick reactions to the environment and keeping up to date with their product line. In addition this emphasises that customers are becoming more demanding and competitors are becoming smarter, so both are key drivers for this non- food strategy.
Dangerfield also suggests “Most UK retailers are supply driven which has been OK for years, but now the customer is king” (Dangerfield, 2007). On one side the increasing customer demand and needs led to this being successful for Tesco as they could add in extra products and dominate their indirect competitors. But on the other hand for some customers too much space and too big stores could put Tesco at the risk of customers being put off; “If you got to Tesco for your biscuits, you might not want to walk around a massive hypermarket” (Dangerfield, 2007). This again is the changing customers’ needs and therefore drove Tesco in 2002 to publicise a takeover of T&S stores, leading to the launch of One Stop convenience stores (Tran, 2002). This emergent strategy occurred two days after Co-op snapped up the largest convenience store, Alldays (Tran, 2002). Eisenhardt and Brown pointed out that emergent strategy can arise from an improvisational approach, which comes about by acting rapidly on the advantage created (Eisenhardt & Brown, 1998).
Therefore Tesco saw their competitor’s actions from their acquisition and implicated their own emergent acquisition strategy to be on the same level as Co-op. This strategy was not the most suitable as it was a rushed venture and Tesco already had Tesco Express outlets around the UK, so the only thing they were achieving by taking over T&S stores is narrowing down the competitors in the market. Furthermore at the expense of £377m they still only had 3.5% of the convenience store market along with consumer complaints that One Stop was more expensive than Tesco (Goodley, 2010). Tesco’s expansions in the UK eventually lead to fewer opportunities once they had a presence in the majority of postcodes, so their next big strategy was to expand internationally. In 1993 and 1994 Tesco kicked off their phase of international expansion into France, China, Korea and Turkey with the acquisition of Catteau and Hungary’s S-Market (Butler & Kollewe, 2014).
This can be seen as an intended strategy due it being part of their strategic priorities on their website, the seriousness of such a big decision and for some instances they did not look at the external environment when considering this strategy. For example their first move with the acquisition of Catteau in France was sold off after four years as they struggled to compete with the bigger rivals and discounters (Butler & Kollewe, 2014). Intended strategies can be supported by Porter’s frameworks of Generic strategies and five-forces. Argyres and McGahan state “Porters frameworks for analyzing industries and competitive positioning brought a new level of discipline and rigor to the field” (Argyres & McGahan, 2002). Therefore emphasizing the importance of planning, Porter believes his five- forces analysis is very useful in 999 out of 1000 cases, and the essence of most good strategies is the need to make many choices that are all consistent and therefore companies cannot randomly make a lot of consistent choices (Argyres & McGahan, 2002).
However Moore suggests that Porter’s ideas worked well in the 80’s and 90’s, and are still relevant today, but the nature of the world today no longer suits this strategy whereas emergent strategies offer strategic flexibility which is key (Moore, 2011). De Wit and Meyer also claim “emergence allows for opportunism and ongoing learning” (De Wit & Meyer, 2014). They believe that intended and emergent strategies are complete opposites and to a certain extent are contradictory; therefore a firm cannot be fully committed to long term plans and simultaneously adapting itself (De Wit & Meyer, 2014). These arguments insinuate that although the intended approach is long term, structured and provides a plan, which some companies need, it is not reactive to the changing environment and lacks the creativity and guarantee of future success. In addition to the international expansion, Tesco entered the US in 2007 to open hundreds of ‘Fresh & Easy’ stores but it was a failed venture and Clarke decided to scrap it with more than £1bn spend (Butler, 2013).
This can be seen as an intended strategy due to the international expansion which was a key objective as mentioned above but at the time it can also be emergent due to the responding to the Walmart and Asda acquisition that occurred a few years before. Pretorius and Maritz see the two strategies as opposite ends of a continuum, one is more rational whilst the other is incremental (Pretorius & Maritz, 2011). However Bodwell and Chermack proposed a tool for scenario planning known as ‘organisational ambidexterity’ which is the ability of an organisation to use both intended and emergent strategies (Bodwell & Chermack, 2010). I believe that in this case the ‘organisational ambidexterity’ was attempted but had not been used correctly by Tesco as the US expansion was unsuccessful and caused the brand a big loss. If they had concentrated more on the environment and gone in at a time when the economic climate was a bit stronger they may have had more success in this strategy.
Furthermore the US is a massive market so Tesco probably saw this as a potential way to boost their profits, but there was lack of research due to the unsuccessfulness and high barriers to entry that they didn’t forecast. In a way the calamity of the US, battered the international image of Tesco and consequently further overseas problems occurred with Clarke reporting Tesco had a decline in profits in nearly every country in 2013 (Butler, 2013). Therefore we can see that although emergent strategies are adaptive and take account of what’s going on in the environment, they are limited in a sense that there’s little control, lack of planning and no future purpose. This can be supported by Mintzberg et al. who state “few, if any strategies are purely deliberate, just as few are purely emergent. One means no learning, the other means no control. All real-world strategies need to mix these in some way” (Mintzberg, et al., 1998).
Therefore the international economic growth has had a positive and negative impact on Tesco and has driven a mixture of emergent and intended strategies. A more recent technological innovation that Tesco have embarked on is the introduction of their own tablet called the Hudl which runs the latest Version of Android, 1.5GHz processor, HD screen and expandable storage (Cellan-Jones, 2013). The quick development of technology has affected a lot of industries and has been a key driver for Tesco as their dominance in the market and quick response has allowed them to compete again with its indirect competitors. I believe this was an emergent strategy due to Tesco noticing the environment’s profitable success like the market leader, Apple, along with the Amazon Kindle and Samsung tablets. Furthermore Tesco have developed theirs into a family-focused tablet offering kid-friendly features, bright colours and great value that parents are always looking for in products (Gibbs, 2013).
They have also priced it at the lower end of the market at £119 which will help compete with many of the competitors (BBC News, 2014). This is a very successful strategy as the Hudl tablet had sold half a million units within 6 months and according to Butler “the most positive news to come out of Tesco and shows the company being innovative and bold” (Butler, 2013). Therefore shows emergent strategies can be successful as its flexibility can innovate new opportunities far quicker than a long term intended strategy. It has also given Tesco the boost they needed to bring back their value brand. In conclusion Tesco have used a mix of intended and emergent strategies over time, but more recently have implemented emergent strategies due to the changing environment that needs quick responses.
Tesco’s most successful strategies were the entry into the non-food market and the tablet invention because they took into account what was happening in the environment and didn’t hesitate to dominate the market. However the least successful strategies were the international expansion into the US and the ‘one stop’ stores because although they were partly emergent they tried to incorporate an intended strategy of expansion as well which did not work. The key drivers were then mentioned which included the power of customers, technological advancement and competitive rivalry. I also discussed that Pretorius and Maritz believed that the two strategies are on two different ends of a continuum and therefore implementing both at the same time is a difficult task.
Furthermore De Wit and Meyer suggest that a firm cannot be fully committed to long term plans as well as adapting itself to flexibility. Therefore although Bodwell and Chermack suggest the use of ‘organisational ambidexterity’ is the way firms should go, if the two strategies are not use correctly together, it can have bad effects on a company’s success, like Tesco. As we have seen over the years Tesco has always been good at adapting itself to fit in the environment and competing on many different levels. But recently this has all changed with the recent report of an overstated half-year profit forecast of £250m, a slump in shares and a restructure in the management (Clark & Chain, 2014).Although this came as no surprise the future of Tesco will be determined by whether they can balance between using intended and emergent strategies successfully and keeping up with the main key drivers.
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