Case Analysis: Tescos Steering Wheel

Case Analysis Tescos Steering WheelIn early 90s Tesco faced a stiff competition from various other retailers in the attention and so its revenues showed a downfall. At that point Tesco could not differentiate itself from the othercompetitors. Later under the leadership of then CEO Ian Mac Laurin it went through an visualise make all over, and acquired other retailing outlets like William Low with which it reached just up to the sustenance mark. Later terrycloth took over as the CEO of the Company and aimed to make the conjunction value drivenTesco in early 70s had acquired a lot of otherretailer companies but faced a problem of integrating them, more over Tesco stores were small and ill equipped. The corporation only cerebrate on price where asthe goods available at the stores were perceived to be of mediocre quality, but with acclivitous income customers looked forward to expensive and luxury merchandise.Answering to this change Tesco closed some of its outlets to concentrat e to give stores a betterfacility. It also started off the revamp of its a product portfolio. It launched a price reduction campaigns so as to counter the threat from competitors. Also it centralized its distribution system and its own labelfor food for thought products.Tesco developed its own brand labels targeted at different target sector. Tesco value for low income customers, Tesco brand for medium range products and Tesco finest for high end products. It also came up with special ranges like Tesco organics, Tesco whole foods and Tesco kids.The Tesco WayTesco doesnt want one leader. We want thousands of leaders who take initiative to execute the dodging. This is the statement made by Sir Terry Leahy, CEO of TescoTesco came up with the concept of The Tesco Way. They aimed at improving its competitive position in the market by becoming more customer focused and concentrated on differentiating itself from other retailers through the services it provided. Tesco had principles like Better for Customers, Simpler forStaff and Cheaper foroperations. To make this goal a reality, in the early 1990s, Tesco went through a process to clarify its mission, values, and strategy. Tesco communicated its new strategy to its employees via a instruction wheel, a simple symbol and metaphor for a tool intended to drive transaction and help employees navigate into the future. The Tesco steering wheel has four-spot 90 degree arcs, representing the four BSC areas of focus financial, customer, operations, and employee performance. With the community arc added recently. Every store gets a periodical steering wheel update, a summary of its metrics within each of the four arcs, so that all employees in Tescos multiple regions and formats get feedback on their performance. Tesco supplements its steering wheel report with shopping lists that capture key elements of the strategy in simple forms that employees can follow in their everyday activities. The steering wheel has helped the company stay focused on its strategy even as it experienced rapid growth over the past two decades. Balanced wag or in Tescos case the steering wheel provides the perfect base to the company for designing future strategies. It gives the current data and becomes the ideal predictors which isimportant forpredicting future trends and thus formulatestrategies.It communicates strategy-aligned goals and manages strategical performance. It monitors progress and measures success. The organizations core purpose to create value for ourcustomers and to earn their lifetime loyalty has been delivered on a clear and simple strategy of long-term growth. Tescos values and priorities (concerning customers, staff, business, and compliance issues) are embedded in the steering wheel through appropriate KPIs. These values pervade operations and are slavish in securing staff commitment to the steering wheel. It is arguable that by embedding its values in the steering wheel, Tesco transformed its bal anced scorecard from a management fashion model to a cohesive living strategy. The Tesco Steering Wheel evolves from, and is the route to fulfilling, the retailers core purpose to create value for customers to earn their lifetime loyalty and long-term goals. It organizes and defines the four core elements of Tescos business, those that together define the business. If faithfully adhered to, theTesco thinking goes, these elements will inevitably lead to the realization of the companys long-term goals and, through them, its core purpose. So it is that in each Tesco store, department and support facility is posted a corporate steering wheel, out of sight of the customers but in plain view of each staffer. alongside each of the 15directions and admonitions within the circleis acoloured dot green foracceptable performance, yellow for borderline performance, red for unacceptable performance which is updated, and can change, weekly. The scorecard is for the store, the job, and the in dividual. It gives one the ability, simply bylooking, to measure the performance of thatparticular entity-and what aspects of that performance need to be improved.Some ways of calculating these basic factors areOperationsWe try to get it right the first time-The difference between Predicted inventory and actual inventory.No excess stocks.We deliveryconstantlyeveryday- rule-governed deliveries and no miss.The stores receiving fair to middling and right stock in right condition.We always save time and money-Reduced wastageNo repetition of steps in a process.PeopleAn elicit job-Retention (lowering of attrition)AbsenteeismAudit and surveys focusing on indirect questions to know the employees interest levels.(using a 4 or 6point scale to avoid jibe marking).An opportunity to get on-Training levels achieved by the employees.Percentage of employees trained.No. of employees working loyally for how many yearsCustomersI can get what I want-Regular customer surveys.Complain cells.Surprise c hecks.The prices are good-Competitor analysisCustomer feedbackFinanceMaximization of profits-Calculating operating profit ratio, return on total assets, net profit ratio and return of capital employed and compare them with last year.Benefits of the balanced scorecard used at TescoAdd to the Balanced Scorecards precedency areas to reflect your organizations core aims and values.Converts strategy into an effective governance mechanism.Ensures alignment of all employees to the companys strategic vision.Provides holistic and balanced view of the health and performance of the organization.Increased transparentness and better communicationSimplify strategic aims by creating a visual summary and a shopping list of daily strategic to-dos. Make them applicable to peoples everyday work.Promotion from within then you have a deep understanding of strategy throughout the organizationHelps keep check on strategic aims against customer needs and preferences.ChallengesCo ordination across multip le functions.