operation management assessment of tesco malaysia

This report is to analyze the processes and strategies such as design, planning and control of operations systems of Tesco Stores (M) Sdn Bhd (Tesco Malaysia). Theoretical framework and concepts learned from this course are applied to evaluate the company’s operational strategies.

The study evaluates how Tesco Malaysia positions itself in the market segment and analyzes the strength and weakness in its existing strategy.

Based on the findings, we will able to identified and provide recommendation to compliment or improve Tesco Malaysia existing processes. Recommendations to incorporate these changes are meant to improve operational efficiency and market share. In return, maximizing profits and increasing its value proposition.

Table of Contents
1.0Introduction4
1.1Company Background4
1.2Vision and Strategy4
1.2.1Vision4
1.2.2 Strategy5
1.3Core Purpose and Values5
1.3.1Core Purpose5
1.3.2Core Values5
2.0Competitive Priorities of the Organization and Business Level Strategy7 2.1Competitive Priorities of Tesco7
2.2Business Level Strategy8
3.0Five Objectives of Operations Management9
3.1Quality9
3.2Speed9
3.3Dependability10
3.4Flexibility11
3.5Cost11
4.0Key Performance Indicator12
4.1Tesco Malaysia KPIs based on the Five Performance Objectives12 4.2Comparison with other competitors13
5.0Conclusion14
References15
Appendix17

1.0Introduction

1.1Company Background

Tesco Stores (M) Sdn Bhd (Tesco Malaysia) is a joint-venture between Tesco plc. and Sime Darby Berhad in 2001. Sime Darby still holds a 30% stake in this joint-venture. In February 2002, Tesco Malaysia opens its maiden hypermarket in Puchong, Selangor. It currently operates 46 Tesco and Tesco Extra stores format following the acquisition of Makro Cash and Carry in 2006 and employs over 15,000 staff nationwide (Tesco Stores, 2013). They plan to open three new stores in 2014.

1.2Vision and Strategy

1.2.1Vision

To be the most highly valued business by: the customers we serve, the communities in which we operate our loyal and committed colleagues and of course, our shareholders

There are five elements which describes the sort of company it aspires to be; • wanted and needed around the world
• a growing business, full of opportunities
• modern, innovative and full of ideas
• winners locally whilst applying our skills globally
• inspiring, earning trust and loyalty from customers, our colleagues and communities.

1.2.2 Strategy

It consists of seven-part strategy for growth, which reflects the way consumer needs are changing and the increasingly global nature of their business, 1.To grow the UK core
2.To be an outstanding international retailer in stores and online 3.To be as strong in everything we sell as we are in food
4.To grow retail services in all our markets
5.To put our responsibilities to the communities we serve at the heart of what we do 6.To be a creator of highly valued brands
7.To build our team so that we create more value

1.3Core Purpose and Values

1.3.1Core Purpose

Tesco Malaysia core purpose is to create value for customers to earn their lifetime of loyalty.

1.3.2Core Values

1.No one tries harder for customers.
a.Understand customers
b.Be first to meet their needs
c.Act responsibly for our communities
2.Treat people the way you want to be treated.
a.Work as a team
b.Trust and respect each other
c.Listen, support and say thank you
d.Share knowledge and experience

Figure 1: Tesco’s Core Purpose and Value Steering Wheel

2.0Competitive Priorities of the Organization and Business Level Strategy

2.1Competitive Priorities of Tesco

Tesco competitive priorities fall into two major categories: price and own-label.

To reduce cost, having a great relationship with the suppliers and sourcing goods from local or overseas manufacturers who are more competitive with price and volumes reduce their input cost. Further to this, the ability to control operating cost and drive for efficiency in their operation management is a requirement.

Tesco own-label is exclusive and made to match-leading brands. It’s about giving customers confidence in the quality, value and reliability of the things they sell. Their pricing are very attractive and it’s their selling point to help customers save more without compromising on quality.

If Tesco is able to create a brand loyalty for their product offerings, thus price inelasticity on the part of the buyers.

2.2Business Level Strategy

Using Porter’s Generic Strategies, we’re map Tesco Business Level Strategy
Table 1: Porter’s Generic Strategies

According to (Porter, 1985), A firm needs to choose between cost-leadership and differentiation strategies to create a sustainability competitive advantage or it will become stuck-in-the middle without coherent strategy (Acquaah & Ardekani, 2006). However Tesco has shown it is possible to implement both cost leadership and differentiation strategy, term as hybrid strategy (Baroto, M. B., Abdullah, M. M. B., & Wan, H. L., 2012). Other successful companies have done so such as IKEA and German’s Auto Industry.

3.0Five Objectives of Operations Management

3.1Quality

The Tesco Homebrands are exclusive and made to match-leading brands in quality, value and reliability. They have 4 categories, Value, Choice, Light Choices and Finest. Each brand has its own product offerings to meet the growing demands of diverse customers taste and preference (Tesco Homebrands, 2012).

When you walk into a Tesco store, you can expect it to be well lighted, air-condition, clean and tidy. Shoppers perception previously was such setup would mean the product prices are expensive. This is no longer the case and customers have to come expect a pleasant store environment. Keep stores neat and tidy is not easy to sustain but it is an inexpensive way to attract customers.

3.2Speed

Speed of response to a product and services is becoming more demanding now. In a well-run store like Tesco, you need good and efficient cashier to help move shoppers out of lines fast or in a timely matter. Having more checkout counters open also helps to reduce long queues as it could lead to customer dissatisfaction.

Stock availability on the shelves is becoming more important for retailers. This is to ensure every product are available at it place all the time for shoppers purchasing. Else, they will go somewhere else. In order to measure stock availability, Tesco has implemented a key Store routine process call the Gaps scan. By scanning the product barcode, it will inform what the current stock level. If below, the gap scan will provide them what are corrective action and a label will be place to indicate the reason (Julien, 2013).

3.3Dependability

Since opening its first store in Puchong, emphasis was to have a large car park to ensure availability of parking to the shoppers. This is not necessary the case as public took advantage of the free parking. Parking
fees was implemented to discourage free parking where paying shopper will get free parking after spending x amount. It was not successful, dropped and a challenge till this day. As a result, Tesco is unable to realize the full potential sales that could have generated.

In Tesco, accurate prices are important to maintain customer satisfaction. Shoppers are dependent that pricing in stores are consistent with what’s being advertise on the printed media and online. In the event there is a price dispute, Tesco will honor the lowest price. To minimize such incident, store staffs are required to scan the product barcode before opening hours.

3.4Flexibility
Tesco Malaysia new store format, Tesco Extra has a contemporary design and a brighter look. It caters to small businesses, families and individuals with comprehensive selection of products and services such as pharmacy, business development to support small business owners with their purchase (Tesco Stores, 2013). Plans are on the way to retrofit their existing stores to this format.

Recently, Tesco Malaysia launched the Grocery Home Shopping Service. They are the first retailer to setup online shopping service where it will deliver to your doorstep. It’s very convenient and alternative solution if you’re do not have time to visit the store. (Tesco eShop, 2013)

3.5Cost
Tesco relationship with manufacturers, suppliers and the use of technology for distribution and logistics are crucial in keeping its operating cost low. For example, Tesco Value product ranges are white in color, simple packaging and standard design across the whole product range. Tesco is how they are able to minimize its cost to keep the retail price as low as possible.

Another is Tesco Ambient Distribution Centre (TADC) at Bukit Beruntung which is the hub for optimal storage and logistics. They were able to show how this high tech facility is able to cut down delivery cost and time to consumers by nearly half which translates into high transparency in its supply chain and lower prices for customers (Tesco Press Release, 2012). Tesco use of technology helps to implement effective cost saving strategies.
4.0Key Performance Indicator

Key Performance Indicator (KPI) is a quantifiable measurement of a company’s set operational and strategic goals. The tables below represent Tesco Malaysia scoring based on the performance objectives and its competitors.

4.1Tesco Malaysia KPIs based on the Five Performance Objectives

1 = poor performance, 10 = excellent performance
Table 2: Tesco Malaysia KPI

4.2Comparison with other competitors

1 = poor performance, 10 = excellent performance
Table 3: Comparison of Tesco with other competitors

5.0Conclusion

Tesco Malaysia has done very well with its current business strategies to meet customers demand for product choices, low prices and availability. They have listen to their customers and have become a better retailer now.

With a stable operation and revenue stream, our recommend to Tesco Malaysia are the following, •Being aggressive in opening new stores especially in East Coast, Sabah and Sarawak. •Review the use of different store sizes to fit into smaller communities. •Identified correct product mix and range for different store sizes. •Leverage on technology used within Tesco Group to become more efficient and provide better service. Example : self-service checkout, intelligent queue management system. •Diversified their revenue stream to reduce risk from single source of income.

The end result is to increase market share and increasing profits it earns over its lifetime.

References

Acquaah, M. (2006). Does the implementation of a combination competitive strategy yield incremental performance benefit? A new perspective from transition economy in Sub-Saharan Africa. Journal of Business Research , 61, 346-354. http://dx.doi.org/10.1016/j.jbusres.2007.06.021

Baroto, M. B., Abdullah, M. M. B., & Wan, H. L. (2012). Hybrid Strategy: A New Strategy for Competitive Advantage. International Journal of Business and Management, 7(20), p120.

Julien, A. (2013). How do we measure availability in Tesco? Retrieved from http://www.fmm.org.my/images/articles/events/Julien%20-%20How%20do%20we%20measure%20availability%20to%20project.pdf

Porter, M. (1985). Creating and sustaining superipor performance. Competitive Advantage. New York: FreePress.

Tesco eShop, 2013, Retrieved from http://www.tesco.com.my/eshop/html/help.aspx?ID=2&PID=5&rel=help#1

Tesco Homebrands, (2012). Retrieved from http://www.tesco.com.my/html/our_brands-details.aspx?ID=135&PID=138

Tesco Press Release, (2012). Retrieved from http://www.tesco.com.my/html/press_release_details.aspx?ID=107&PID=172&NID=5 Tesco Stores, 2013. Retrieved from http://www.tesco.com.my/html/tesco_store-details.aspx?ID=115&PID=122

Appendix

Figure 1: Tesco’s Core Purpose and Value Steering Wheel

Table 1: Porter’s Generic Strategies

Table 2: Tesco Malaysia KPI

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