INTRODUCTION

The organization, whether they are big or small, carry out operational activities for
purchasing, development and utilization of resources(Wang, Wallace, Shen, & Choi,
2015). These type of activities helps to gain higher profit for them. It is necessary to
build proper and integrated operational plan for the optimisation of profit in the ever
increasing competitive market(Namazian & Eslami, 2011). In the past decade, the value
and significance of operation management have been increased dramatically for many
reasons such as foreign competition, product lifecycles, shorter service, conscious
consumer etc(Coughlan & Coghlan, 2002).

The operation management at Tesco, biggest retailer in the UK, has a significant
contribution to its competitiveness in global food processing market. The need of the
customer is always changing and it is imperative to meet those changing needs to
outperform the competitor and for this Tesco has to continuously develop its operation
capability(Kirkwood, 2007). This paper aims to analyse the application of operation
management strategies employed by Tesco and its impact on the business
performance of the organization.

TESCO PRODUCT AND SERVICE WITH POTENTIAL ORDER WINNER AND

QUALIFIER

Currently, Tesco is offering a wide range of service and product spanning across
several industries and sectors. The retail outlet of Tesco offers mobile phones,
entertainment goods, electrical items, groceries and clothing. Tesco also offers other
categories of an item like sound vision, watches, jewellery, sports and leisure, gifts,
toys, baby and toddler, kitchen, furniture etc. Tesco has several brands which include
kipa, Tesco Express, Tesco Extra, Tesco.net, ISP, Tesco Metro, harts, Cullens,
Clubcard and Garden.

The ability to gain success is an order winner for any company. Order winner is the
criteria used by the customer to differentiate the service and product of the different
company. It is the unique characteristics which are lack in their competitor. In Tesco, the
order winner has been dependability and cost of the product. Tesco is known for its
pricing strategy which is to provide best service and product in reasonable price.
Dependability, on the other hand, implies that customer very much trusts Tesco product
and depend on it. This two major order winning factor of Tesco helps to gain a
competitive advantage for the company(Tesco, 2014).

The performance dimension of the company is measured by order qualifier. The

customer expects minimum benchmark of performance to choose the specific product
and services. When customers intend to buy any service and product, they set minimum
requirement and in Tesco flexibility and speed are the two main factors for order
qualifier. The customers who come to Tesco purchase the product by measuring
minimum performance level in terms of flexibility and speed of the service. The flexibility
has been achieved by the company through flexible delivery service, flexible payment
mode etc which is backed by technological innovation. This flexibility in Tesco helps the
company to encourage the new type of service and product with the ever changing
customer preferences. Speed in Tesco has been achieved by the introduction of online
grocery system as well as the option of the home delivery system. These days customer
doesn’t want to waste their valuable time by queuing up in the supermarket and wait for
payments. Hence, due to technological improvement, Tesco consumer can directly
choose their desired service and product from Tesco’s official website(Marketline,
2011).

SLACK MODEL OF OPERATION MANAGEMENT

The 4D model of (Slack, Chambers, & Johnston, 2008) emphasizes the overall
operation management of the selected company in a respective order.
Figure 1 4D Model

Following this model, Tesco has implemented these following corporate strategies to
augment its competitiveness in the global market through it s operation management.

CORPORATE STRATEGY AT TESCO

DEVELOP

Tesco has closed all its smaller grocery stores as part of its corporate strategy and at
the same time, it has opened a large supermarket in a suburb in huge number. It is
important for a giant retailer like Tesco to be determined in its business direction which
can be achieved only by reforming the business operation(Cachon, 2012). Four store
model is being employed by Tesco i.e, Tesco Extra, Tesco Supermarket, Tesco Metro
and Tesco Express. This diversification of its store leads to increase in the flow of
customer and guarantee higher profit thereby ensuring total sales. Tesco is not confined
to the UK but expanding its overseas market to internationally translate its store market
across the globe to face saturation in its domestic market, the demand for self-
development and fight high competition. At present Tesco is operating in twelve
countries and as a result, this international expansion is the major reason of its success
which reflect its outstanding operational strategy.

DIRECT

Customer centric objectives are the main focus of Tesco. For this, it has to break few
traditional retailing rules. Tesco adopts a critical operational strategy which always
makes it one step ahead of its competitor which primarily focuses on the benefit of the
customer. Tesco club card has been introduced to its loyal customer as a part of low
pricing policy (Foropon & McLachlin, 2013). In comparison to its competitors, Tesco has
reached the pinnacle of success through suitable pricing policy and selling a range of
goods at an affordable price compared to its competitor. For keeping low product price,
Tesco has adopted the approach bulk purchasing, designing of the suitable delivery
system, avoidance of waste and recuperating efficiency of the employer. By procuring
through the various developing country like India and China, Tesco has practiced
effective supply chain management in order to reduce its non-food products through
expansion of purchasing channel Hence, it can be said that Tesco has achieved its
competitive advantage against its rival by adopting low pricing strategy leading the
company to success.

DESIGN

The buying behaviour of the customer is tracked by the introduction of loyalty card
which also helps to accumulate customer database(Turner & Wilson, 2006). This
database helps the company to target its promotional activities and change the layout
for the convenience of the customer. The card further helps to build an excellent
relationship with the customer through profit and credit accumulation with the customer.
Hence, with the introduction of a loyalty card, Tesco has succeeded in effectively link
marketing strategy with its operating function(Plimmer, 2010).

DELIVERY

Improving delivery system is equally important in addition to price and loyalty card.
Tesco has gained a competitive advantage over its rivals by innovating in supply chain
management for providing efficient customer service(Burch & Lawrence, 2005). The
prime distribution system, as well as home delivery service, is primary requirement to
improve the delivery system. The retail industry has leapt forward in terms of
technological advancement and Tesco also stepped into online grocery shopping to
further increase its distributive network. Tesco has established its own fleet for the
transportation of goods to increase the cost and delivery cost from a large number of
suppliers. The supply chain management is further improved by the introduction of new
technologies and lean management. This new introduction in supply chain management
helped Tesco in three significant perspectives, i,e, reliable supply chain system,
increased work efficiency and customer service.

PERFORMANCE OBJECTIVES IN TESCO

The performance objectives of Tesco have been set in respect to following categories:

Customers: The primary focus of Tesco is on a customer who helps to generate

revenue for the organization.

Suppliers: To perform adequately, operation department depends upon the supplier.

Employees: To carry out operational activities and set good working condition, the
workforce is needed.

Community: The operation process of Tesco directly impacts its community when goods
are distributed which in turn can have an adverse effect on the community.

Shareholders: Shareholders earns a higher return on investment due to operational

efficiency.

In reference to the Slack model of performance objectives, these entire groups are
included in five performance objectives.

QUALITY

According to Tesco, quality is the key component to drive performance of the

organization. Since it sells a food product, it is essential to deliver high-quality food stuff
and deliver in first rate condition. The selection of suppliers plays an important role to
improve the quality of the food product(Matsa, 2011). There is a provision of checking
expiry date regularly of Tesco product which helps to prevent the selling of a
substandard product(Abu, 2004).

DEPENDABILITY

When a customer receives their required goods and services in time, it is called
dependability which is done by taking necessary action for the convenience of the
customer(Mawass & Kanjo, 2013). The dependability of Tesco is judged by the
customer after adequate and timely delivery of the product which they demand. The
stocks are available at any time in Tesco so that no customer return empty handed. The
company is never out of stock whenever customer landed on Tesco(Child, 2002).

FLEXIBILITY

Flexibility is one of the most important objectives at Tesco by keeping in mind the
changing mind of the customer with the introduction of new service and product(Boyle,
2007). For example, Irish yoghurt is an example of such product. Since there was a
recent trend in the demand for the natural product, Tesco introduced this product
realizing the trend. The flexibility approach is well demonstrated by the launch of this
product by Tesco.

The flexibility approach is also seen on another product of Tesco i.e, Ice-cream. In
winter season Ice-cream is available at minimum amount while it is available in larger
amount during summer. The flexibility is also seen in its branch expansion outside the
UK which provides location flexibility. This is caused due to increasing technological
advancement and globalisation(Palmer, 2004).

COST

When goods and services are produced in lower cost, it leads to lower price to the
consumer(Sternbeck & Kuhn, 2014). Though Tesco offers higher price compare to its
competitive company, it has some specific product having low cost and offer discounts
(for example: buy one, get one free). The consumer has to rate the performance of the
organization and in such condition, the cost is the vital objective to be successful in the
merchandize market. When cost doesn’t match the quality of the product, the customer
chose to buy a product from its competitor(Gunasekaran & Ngai, 2012). Hence to get
away from these cost reducing threat Tesco has ensured efficient costing system for
both its consumer and business.

IMPACT OF TWO OBJECTIVES ON TESCO

QUALITY

Quality should be in compliance with the domestic or international standard for all
product and service offered by the company(Abu, 2004). Quality aspect is important due
to two main reasons in Tesco.

Firstly, when a customer feels that service or product is within their expectation, it
increases the rate of satisfaction which in turn increases the rate of purchasing from the
same company. This increase in customer and purchase rate leads to increase in
revenue thereby increasing profit.

FLEXIBILITY
Tesco has the ability to adjust the changes comes from external factors which include
the amount of change in the volume of product dispensed by the company after such
factors prompted to increase or decrease the amount produced. Flexibility is not always
confined within increasing or decreasing the volume of goods produced but flexibility in
payment, delivery service etc are also the various mode of flexibility which is adopted by
Tesco. This type of flexibility is influenced by innovation in technology and increasing
competitor.

CONCLUSION

Tesco can improve its operation management in various ways. Continuous

improvement (CI) approach should be used so that company’s operation where there is
weakness can be improved gradually but not by impulse(Anand, Ward, Tatikonda, &
Schilling, 2009). The continuous approach focuses on improving the service and
product in ongoing basis through incremental improvements. For some operation, it is
necessary to have trained and educated staff to improve management that requires
technology(Somasundaram & B Badiru, 1992). Employee sometime can be resistant to
change the efficiency of operation so Tesco management should introduce proper
incentives such as promotion, higher pay and rewards to prevent any resistance by an
employee to improve the operation of the company.

Tesco can attract more customers by focusing on diversifying the foreign market. Tesco
needs to enter into more countries from current twelve as the global expansion of the
company is the strategic goal. This requires improvement in strategic planning
improvement. The pricing policy of Tesco needs to be reviewed. Though the company is
enjoying success, the low pricing policy of Tesco does not cater all market
segmentation. The pricing policy should be compatible with the need of the customer.
Low prices should be charged for the customer from higher economic strata. There are
small numbers of the store in the most foreign market which hinder the effective delivery
of the Tesco product based on store-based approach. Hence, to reach out to large
customer base, Tesco need to switch to online shopping in a foreign market is an ideal
improvement strategy for the company.
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