During nineteenth century Britain had an increase in population as well as per capita incomes, and the refrigerator technology innovation resulted in making the food retailers to come forward aiming to make the food available to the working people at a reasonable price. The concept of 'Self-service' retailing became established during 1930s. It helped to control the prices using fewer staff to offer a wider range and quantity of merchandise. Subsequently Sainsbury's opened the UK's first self-service store in July 1950. Although Tesco claims their first self-service outlet opened in 1948. The Sainsbury's self-storage outlet was getting busy and became 'Supermarket' by 1960 as a low price, high-volume, self-service store carrying wide variety of food. In 1970s competition was on price whereas in 1980s it was concentrated on adding value to the customers. Presently, in food retail market the major supermarkets are Tesco, Sainsbury's, Asda and Morrison, having their own strategic views for future development.
1.2 Explaining the Research Issue
In this research, my concern is to highlight the strategy used by supermarkets to get competitive advantage over its close competitors, the barriers in implementing those strategies, the uniqueness of individuals that help them maintain distinguishing characteristics to be successful.
Basically I define the issue as:
"Strategic choice in the retail sector in UK and its implementation to the supermarkets - an operational strategic view."
Here I will be analysing two companies named Tesco and Asda from their operational strategic views1.
Tesco plc is the largest retailer in the United Kingdom in the grocery and general merchandising retail chain area. Tesco is the world's third largest grocery retailer from sales and domestic market share point of view. Basically Tesco is specialized in food sector but it has diversified into more areas like clothing, health & beauty, electronics, financial service, telecoms etc. (Wikipedia, 2007). Tesco's strategy is to create value for customers to earn their lifetime loyalty, where value indicates uniqueness of products and services which will help them to create loyal customer.
On the contrary, ASDA tries to stand out from the crowd by being significantly cheaper than its three large rivals by concentrating on prices instead of loyalty schemes. They actually have 'everyday low price' strategy.
See literature review for operational strategy & operational strategic management
From the above information about Tesco and Asda's strategic view, it becomes evident that they are trying to apply different approaches to achieve their goal. My concern will be to analyse their individual strategies from operational view. Since I am working in operations with ASDA Romford for last 2 years, I already have some knowledge about their operational strategy and activities that I will be utilising in my research.
Importance of this issue / Rationale
This research will be helpful both for the consumers and the companies. As through this research, TESCO and ASDA will learn more about consumers' needs and their feedback, resulting in more- satisfying products and services.
From personal perspective, this issue when analysed properly will help me to understand the significant role of different strategic models used by retail sector to help them stay ahead of competition and how these companies make best use of the resources available to them. It will provide me deep insight into practical implication of their operational strategies and know-how about the efforts made by these organizations to excel in the prevailing market competition.
From organizational perspective, this will allow the companies to do their self-analysis. To know the right direction of where the company is headed, it is essential for them to self evaluate their strategies and operational tasks in order to measure the overall performance of the company. Then they can work out those areas easily which needs improvement to gain more market share and maintaining loyal customer base while staying ahead of competition.
2. RESEARCH QUESTIONS & OBJECTIVES
My research will have following objectives that I expect to achieve successfully after carrying it out properly by keeping in mind certain questions that are explained as under:
Research Questions
By analyzing the topic carefully, it will help to understand what I am actually going to do. Below I summarise all my research questions in two main parts.
Firstly, I need to identify how the strategy for the proposed companies i.e. Tesco and Asda is helping them to sustain in the UK retail industry, hence I have to address the uniqueness of both companies along with their financial statement analysis i.e. ROA, ROCE2 analysis to understand how the strategy helps them to expand the business.
Secondly, how their operational activities are helping them to achieve the overall business target, to identify problems, to see the additional costing involved in operational process, how they are minimizing the cost of operations, from where the value is being added to gain the overall strategic target, analysing the individual benchmarks of both the companies, problems for implementation and their plausible solutions.
Research Objectives
The main objectives of this research are to explore knowledge about following:
What are the critical success factors that help each company to achieve the target?
What are the shortcomings about implementation of strategy, basically the operational strategic aspects?
2 ROA=Return on asset, ROCE=Return on capital employed
What are the probable solutions for erosion of the existing problems for future expansion?
What capabilities/competencies are needed in terms of resources i.e. technology, human etc., also type of supplier, sourcing and outsourcing policies in terms of general operating systems.
How to improve operational activities to add value to overall business?
3. LITERATURE REVIEW
In this section I will analyse general concepts and theories presented by different authors that relates to my selected topic and how these models and concepts will be utilised further in my research.
Knowledge of relevant literature
Strategy is the highlighted issue here, which is defined as 'the direction and scope of an organization over the long term, which achieves advantage in a changing environment through its configuration of resources and competencies with the aim of fulfilling stakeholder expectations'. (Johnson G. et al, 2006). So strategy is not a temporary thing, it does have a permanent effect on organization which would be beneficial for the organization.
Basically there are different levels of strategy in every organization consisting of corporate level strategy, business level strategy and operational strategy. Corporate Strategy is all about the overall objective of an organization which could include geographical coverage issues, diversification of products/services or business units and the methodology for resource allocation among different departments. Whereas business level strategy is all about competing a particular market with the specific product design for the specific market segment which gives the company a competitive edge over its rivals. However Operational strategy is the implementation stage of strategy as it outlines how the organization can shape the corporate and business level strategies in terms of resources, processes and manpower.
In every strategy there are three important following terminologies:
Mission relates to the overall purpose of the organisation, which is in line with the values and expectations of stakeholders and concerned with the scope and boundaries of the organization.
Vision is all about future positioning of a company as the strategic management desires.
Goal is a general objective that an organization wants to gain from its mission.
(Johnson, G. et al, pg 13, 2006)
I will be studying all the three levels of strategies in ASDA and TESCO but my focus will mainly be on the operational level strategies as it deals with the implementation phase of the other two strategies as well.
List of descriptors
To be successful, an organization adopts particular strategic choice and implements it through different business activities. So some of the important descriptors include of my research are:
Strategic Choice
Operational Strategic Management
Critical Success Factors (CSF)
Strategic Choice
Organizations make strategic choice to gain competitive advantage3. An organization may decide to offer its product on lower price than the competitor which is related to low-cost strategy. The other choice could be differentiation by selling some unique products which provides them speciality. Another strategy is hybrid which combines both differentiation and low-price strategy.
Now the question arises that how the organizations are implementing the strategic choice by the operational management activities? For this we need to address the 'Operational Strategic Management'.
Operational Strategic Management
Operational strategy cannot be implemented without overall focus of the strategic management of an organisation. The strategic management in the operational level is reflecting the overall strategic management (both corporate and business level) by using the existing resources, core competencies and manpower.
(Donald waters, 2006)
In recent years, resource based strategies i.e. core competencies, capabilities are getting emphasized rather than only using market based strategy for analysis of strategic and operational problems. (Bourne M. et al, 2003)
Also other researchers said that for retail sector, sustainable/ long term growth depends on the proper utilisation of internal resources and knowledge of employees (Intangible assets) rather than funding in research & development sector which creates value to the shareholders as the profit margin increases, hence indicating the successful strategic management in operations. (Christopher Knee, 2002)
3 See appendix: figure 1 for sources of competitive advantage
Basically the operations of an organization include all the activities that are directly concerned with making its product and the operational strategy concerned with all long term goals, plans, policies, culture, resources, decisions and actions that affect the whole operations. To be successful the organizations need to consider the market competition carefully and gaining some sort of competitive advantage. However, the level of competition depends on market size and growth, stability, market trends, profitability, risks, size of competitors, barriers to entry and exit etc. Porter summarizes these in his model of 'five forces of competition'4. This model, when analyzed for TESCO and ASDA, will help me understand the potential strength of both the firms and to consider the commonality between their strategies if any.
Furthermore SWOT Analysis also has a significant importance in operational level for an industry. It clearly defines strengths, weakness, opportunities and threats pertaining to that particular industry. Moreover, all the factors of operational strategy can be analysed by one of the important internal analysis tool called value chain analysis. This is basically based on the view of a process as a series of operations, each of which adds value to the products / services. From the value chain analysis we can further make a cost analysis which deals all the operations in a process as incurring costs and look for the ways to minimise them. Excessive cost can be occurred in three ways in the supply chain5.
Backwards from the organization
internal issues to the organization
Forward in the supply chain
Backwards from the organization could occur because of initial investment, inbound logistics and foreign exchange rates etc. To minimise this kind of cost could be done by negotiating with suppliers to get more favourable prices, backward integration to control the supply, providing low price substitutes etc.
4See appendix: figure 2 'Porter's five forces Model'
5 See appendix: 'Explanation of supply chain'
Internal issue to the organization happens by the age of the plant and equipments, obsolete technology, economies of scale, learning effects, low productivity, overheads of administration, inflation etc. It can be reduced by tight budgets, increasing the productivity, try to outsource high cost operations, invest in cost saving technology, improve operations, process and product redesign etc.
Forward in the supply chain occurs by the cost involved in advertising and marketing, promotion and sales, outbound logistics, distributors' margin and cost of wholesalers. To reduce these, the organization needs more favourable negotiation with distributors, change to a less expensive distribution strategy, forward integration etc.
(Donald waters, 2006)
Critical Success Factors (CSF)
Critical success factors are the significant parameters for the achievement of business success as it apparently outlines the core competencies that give competitive edge over the competitors for any business. Normally it is identified in the areas like production processes, employee and organization skills, functions, techniques and technologies. (BNET, 2007) So for this current research, critical success factors for ASDA and TESCO will be addressed.
3.3 How this literature will be utilised
Looking for the strategy used by Tesco and Asda would help me fine out their long term direction with the scope of organizational activities to gain competitive edge. The main purpose is to find the uniqueness of each firm and the way they both renew their competitive advantage in order to match the changing environment. I will see how they implement their strategies and how they eventually satisfy the stakeholders' expectations. Also I will measure which strategic choice is being used by Tesco and Asda, whether it is low-cost, differentiation or hybrid. To get a broader view of both operations and the environment, I will plan a SWOT analysis for both the firms which will provide a better overview of whether their overall situation is fundamentally good or bad. It will help to provide the understanding of their resources and aims.
Moreover the cost analysis will help me find out where Tesco and Asda are losing money, how they can achieve to minimise that additional cost to increase stakeholders' confidence to stick with the company, how to improve the existing strategy by solving the supply chain issues.
4. RESEARCH METHODOLOGY
In this section I will be explaining the design of my research i.e. which research strategy I am going to adopt and what will be the data collection methods for that research design. Furthermore I shall be explaining the validity and generalizability of my research proposal.
4.1 Type of Research Design
Research Method is simply 'a technique of collecting data. It can involve a specific instrument, such as a self completion questionnaire or a structured interview schedule or participant observation whereby the researcher listens to and watches others'. (Bryman, A. et al, 2007)
In other words, research methods are the rules and procedures which are used as tools or ways of proceeding to solve problems.
Basically there are two ways of doing research in terms of establishing what is true or false and to draw certain conclusion; induction and deduction. Induction is based on empirical evidence, while deduction is based on logic.
By Induction we draw general conclusions from our empirical evidence i.e. based on experiments or experiences rather than ideas or theories observations. And by Deduction we draw conclusions by logical reasoning. (Ghauri, P. et al, 2002)
I will be using both inductive and deductive approaches for the main research. In this context, Inductive research will help me understand the facts that are helping the proposed company to be successful. For instance, what are the uniqueness and critical success factors of ASDA and TESCO that are assisting them to achieve their respective target/goal? However the deductive approach will lead me through the logical sequence like how those uniqueness and critical success factors are achieved by the proposed company and also how the existing strategy is adding value to different departments through operations. Mention worthy, I have an experience of working in ASDA, ROMFORD as a 'Merchandiser' part of operational team where I gain experiences about dealing with a big team members, part of logistic operations like material handling, warehousing, inventory control etc.
Data Collection Methods
As I am looking for both the facts and logical reasoning of my findings from operational point of view, I will be applying qualitative and quantitative approach for collecting data as part of my research.
For qualitative data analysis, I will be using 'Grounded Theory' as it is the most prominent of the general approaches to qualitative data analysis.
To define the 'Grounded Theory' it is the theory that is derived from data which is systematically gathered and analysed by the research process. In this method, relationship among the data collection, analysis and finalised theory is very close. (Anselm C. Strauss, et al, 1997). For this I will be doing personal interviews and questionnaire to get appropriate and concise outcomes.
As I intend to add my personal experience to analyse the strategy implementation of the companies, I will be using the 'Phenomenology theory' as well.
Initially Phenomenology may be defined as the study of structures of experience or consciousness. Literally, phenomenology is the study of 'phenomena' that tells us appearances of things as they appear in own experience, or the ways we experience things. (Stanford Encyclopaedia of Philosophy, 2003)
As I am talking about the operational aspects, I will be using quantitative approach as well. For that I will be using model-based quantitative research i.e. research where models of casual relationships between control variables and performance variables
are developed, analysed or tested. Performance variables can be either physical variable such as inventory position or utilization rate, or economic variables such as profits, costs or revenues. (J. Will M. Bertrand, et al, 2002)
In this case, five years financial statement of both companies will be analyzed that in operations where they are losing money, how to avoid that, some future suggestions etc. Overall a cost analysis would be done for both companies, hence the additional cost identification as well as minimisation in order to develop an effective and efficient supply chain that will ultimately help to develop overall company's position.
Validity and reliability of research proposal
Validity refers to the accuracy or truthfulness of a measurement. It will help me to follow the right direction for my research that I will be carrying forward. Below I have explained three types of validity along with the steps I will be taking to assess these validities.
Face validity
Face validity refers to the likelihood that a question will be misunderstood or misinterpreted. To increase face validity, I will be pretesting my survey on somebody other than the actual potential respondents. They will fill in my survey pretending to be somebody from the target population. Then they may ask me some questions which would help me improve my questionnaire and remove any confusion before presenting it to the actual respondents.
Content validity
I have prepared my survey questionnaire and read it thoroughly to make sure that it provides adequate coverage of my research objectives. Above Literature searches and pretest questionnaire helps to increase the likelihood of content validity for my research.
Construct validity
Content validity of my proposal is the theoretical foundations and framework that will be the basis of my research.
Reliability
Reliability refers to stability or consistency of the results derived from the research. For example, a measurement that produce consistent results over time is said to be reliable. And when a measurement is prone to random error, it lacks reliability. I will use a most popular method for estimating the reliability of my surveys and that is the measure of internal consistency. My survey questions will be split into two groups and then I will determine the correlation between the two groups which is generally known as split-half reliability.
5. REFLECTIONS
In this section, I will be discussing the appraisal of ethical implications, possible threats to participants and how to minimize them in order to gain cooperation of all participants.
5.1 Ethical Considerations
I completely understand that misuse of marketing research can annoy consumers' and the companies, so I will be completely looking after major ethical issues that include intrusions on consumer privacy and the misuse of research findings. Below is the way how I will work out these ethical issues.
Maintaining consumer privacy
Consumer privacy plays an important role to make the research carried out successfully. Therefore I completely understand this sensitive issue and trying to make my survey as appropriate as needed, which will not include too many personal details about the consumers so as to make them satisfied about privacy of their personal details. I will be approaching the target market at convenient times so that they do not feel disturbed on interrupted in their busy routine. My survey will be to the point, asking only for the information I need rather than going into their personal details. Also I have an intention to use it responsibly to provide value and not to share any information with any other.
Avoiding the Misuse of research findings
I will definitely follow the codes of research ethics and standards of conduct to
avoid any misuse of my research findings. I, hereby, must accept the
responsibility for careful reporting of my research in order to protect both
company's' and consumers' best interests.
5.2 Possible threats and steps to minimize them
During my research I may encounter certain resistance from the participants i.e. during the course of interviews with the companies and surveys with the public, but this seems quite natural. However, my focus is to minimise it to a great extent. Following could be the threats to participants and the way I plan to minimise it.
Human subjects may withdraw because of fatigue due to long questionnaire and lack of interest. For that reason I am trying to make my questionnaire as much to the point as possible avoiding the repetition of similar questions.
Inter-subject interaction can be the other threat. Sometimes a group of people who are being surveyed get along to share information about experiment deception. This would be possibly avoided by reaching the subject separately at different locations and making them feel a productive part of the experiment which would help them too, to know insights of retail market.
Some times people tend to behave differently when they know that they are being observed. For this I am trying best to make my survey very interesting and will try to focus women more than men as they tend to be involved more in grocery shopping than men. So they would find it more interesting and would feel free to give their views.
5.3 Procedures for gaining the cooperation of participants
To gain the cooperation of participants, I will be arranging interviews6 with operations director of both ASDA and TESCO. I have got the permission7 from the line manager, Asda, Romford to arrange an interview with Mr.Zabs, Operations director, Asda, Romford and waiting to receive the permission from Tesco, Gants Hill to arrange an interview with their Operations Director.
Besides these interviews I plan to conduct survey8 regarding the Customer Satisfaction about ASDA and TESCO and also conducting internal survey with the employees in the stores' outlets. My objective is to make a comparison between these two company's operational strategic views, their future planning etc.
6 see appendix for interview questionnaire
7 See appendix for the e-mail from the Line manager ASDA, Romford about interview
arrangement confirmation
8 see appendix for my 'survey questionnaire'
6. TIMELINE
6.1 Describing activities with completion times
As I knew about the submission of my research proposal which was expected to be in January, so I started searching for the topic of my research in November. After finalising the topic, I tried to work on the highlighted potential concepts. I spent nearly 2 months for reviewing literature about this topic and analysing the key aspects and its usage in my research. In January I completed working on my topic and finally submitted the proposal on 25th January.
I am having a meeting with my supervisor this month to discuss important issues. After that my next step would be to interview the operations department of my selected stores which is decided for February. In same month, I will keep on gathering information about the related topic and will review my survey questionnaire side by side. Also I will start conducting surveys in Feb and will work on analysing the data under the guidance of my supervisor. I will be having major discussions with supervisor about the findings of my research that would help me to write it up in detail to be presented in dissertation. This all will be done till March. Hence my dissertation will be roughly ready by March end which will allow me some time to revise and edit where necessary and eventually finalising it for submission in April.
6.2 Action Plan
Below, I am listing the main activities of my research along with their implementation time.
Nov
Dec
Jan
Feb
Mar
Apr
Generate potential topics
Literature review
Finalise Topic
Research proposal submission
Meeting with supervisor and reading relevant literature review and others
Interviews with Asda and Tesco personnel
Review materials i.e. survey questionnaire and change where necessary
Gather data i.e. primary research and analysis, discussion with supervisor
Write-up, discussion with supervisor about findings
Draft print
Revise and edit
Final review
Submit dissertation
