Case Study on Tesco Plc.
In March 2008, Tesco Plc. (Tesco), Britain’s largest retailer, opened a convenience store at Shanghai, its first in China. Till then, Tesco had been operating only through hypermarkets in the country. By opening the convenience store – Tesco Express – Tesco tried to attract customers who still preferred the traditional wet markets for buying fresh food. According to Ian Longden, head, Tesco Express China, “We think we can create a new type of neighbourhood store in China by taking the guarantee of quality and consistency that a big western brand can bring and combining that with convenience and value for money.”
Tesco announced that it planned to open several such stores across the country over the next few years.
Tesco’s experiment with the store format was an attempt to differentiate its stores from those of its rivals, Carrefour6 and Wal-Mart,7 which operated in China through hypermarkets and discount stores (Refer to Exhibit I for Tesco’s Store Formats).
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Tesco entered China in 2004 through a 50-50 joint venture with a local retailer, and began operating under Hymall, the banner of the joint venture partner.
Tesco considered China as one of its most important markets owing to the country’s rapid economic growth and high potential. In December 2006, Tesco increased its stake in the JV to 90%.
The entry into China and the subsequent expansion there was part of Tesco’s strategy of seeking new opportunities for growth.
Tesco was able to emerge as one of the top international retailers in the country by concentrating on localizing its offerings. By February 2008, Tesco was operating in the country through 56 hypermarkets.
During the first half of the year 2007-08, its Chinese venture had begun making profits. For the year ending February 2008, sales from China were at £ 702 million
In 1919, Jack Cohen (Cohen), who served the Royal Air Force during World War I, founded a grocery store using the gratuity he received when he left the military service. Cohen started to sell tea from a supplier TE Stockwell in 1924. The name Tesco was a combination of the initials of TE Stockwell, and the first two letters of Cohen. The first Tesco store was opened in 1929 in Edgware, London.
Tesco’s international foray began with its entry into Ireland in 1979 through the acquisition of a 51 percent equity stake in 3 Guys stores owned by Albert Gubay. In 1986, Tesco divested itself of its stake in the stores when it found that customers were rejecting the British products sold there. Tesco’s next international foray, its entry into France, proved to be as unsuccessful. In December 1992, Tesco entered France by acquiring an 85 percent equity holding in Catteau SA, which operated under the Cedico brand with 72 superstores, 7 hypermarkets, and 24 small stores.
According to newspaper reports, Tesco had been harbouring ambitions of entering China since the early 2000s. It had planned to venture into the country only with a local partner and was on the lookout for a suitable partner from 2002
Initially, Tesco decided not to sell its private-label brands in the Hymall stores. According to Lucy Neville-Rolfe (Neville-Rolfe), Director, Corporate Affairs, Tesco, “At first we will sell what is in stores at present… then look to bring in our own brand.”
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In late 2006, Tesco launched its private label, Tesco Value in China. The label was used on more than 500 products, including pre-packed foods, convenience foods, noodles, biscuits, and tissue papers.
A typical Tesco store in China occupied two floors, with the ground floor stocking food and the first floor stationing other items like clothes, consumer durables, and bicycles. A store in Shanghai had a parking lot that could accommodate around 400 bicycles, one of the most preferred modes of transportation in China.
As in its other international ventures, in China too, Tesco aimed at combining some of the core strategies of its UK and international operations and adapting them to local conditions. It was of the view that to succeed in any country, it was important to understand the local culture, habits, and customs and to modify the products and services accordingly. Leahy was of the view that a single top-down model would not work in any country and local people were necessary to understand and function in the local markets. In China, more than half of Tesco’s senior management personnel were Chinese.
According to the RNCOS market research report 2005, China’s retail market was valued at around US$ 756 billion, with organized retail accounting for only 20% of the market. In 2005, China was the seventh largest retail market in the world, and by 2010, it was expected to rise to the fifth position, ahead of France and Germany.
Questions:
Examine Tesco’s expansion into China.
How Tesco achieved a balance in implementing its global retailing best practices and localizing to suit the needs of Chinese customers.
Case Study on Justin King of Sainsbury plc.
In May 2008, Justin King (King), CEO of UK-based J Sainsbury plc., 4 which owned Sainsbury’s Supermarket Ltd (Sainsbury’s), one of the largest retailers in the UK, topped Marketing’s annual list of 100 most powerful people, earning the distinction of being the country’s most powerful marketer5.6 “Having beaten his own growth targets, set three years ago, and pocketed a £7m bonus in the process, King has achieved what many thought was unachievable.
By successfully striking a balance between making the supermarket appeal to consumers through its promotion of quality, price, and ethical provenance – its entire own-brand banana, sugar, and tea offering has been converted to fair-trade – and producing sales figures that have impressed the City, King has more than proved that his strategy was right,” the magazine said Analysts felt that King was instrumental in turning around the fortunes of Sainsbury’s and reversing the decline that the company had suffered in the UK retail market between 1995 and 2008.
Sainsbury’s, which was started in 1869, was the leading retailer in the UK till the early 1990s.
In 1995, Tesco plc. (Tesco) 7 overtook it to become the leading retailer of the country. Analysts were of the view that Sainsbury’s ignored the growing clout of Tesco as its sales were growing (Refer to Exhibit II for Financial Performance of Sainsbury’s between 1996-2000).
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In early 2000, Sir Peter Davis (Davis) was brought in as the CEO to help the company recover market share. He invested heavily in several initiatives to revive the company’s share, but these did not prove successful. Sales started to decline slowly after 2002 and in 2003, Sainsbury’s was pushed to the third position by the Asda Group plc
Sainsbury’s made its beginning in 1869, when its first store was opened by John James Sainsbury (John) and his wife Mary Ann Sainsbury (Mary) at their home in Drury Lane, London. The store offered high quality food at reasonable prices. Initially only fresh food was sold. Later, the store started to stock some packaged grocery items like tea and sugar. From the very start, the emphasis was on cleanliness, hygiene, quality, and order of keeping things within the store. This kind of organized store, a new concept in those times, drew several customers who till then, had to be content with small, cluttered family-owned shops, and unhygienic stalls and carts of the street vendors.
During the mid-1990s, Sainsbury’s enjoyed supremacy in the retail industry. At that time, the entire retail market was going through a lot of changes. Many big and small retailers, including hard discounters entered the market with new initiatives and marketing strategies.
In March 2000, in an attempt to revive the company and get back market share, a new CEO, Sir Peter Davis (Davis), was appointed in place of Adriano. Davis had earlier worked with the company between 1976 and 1984 and had handled marketing and buying operations.
On March 29, 2004, King was appointed as the company’s new CEO. He had earlier been employed with the food division of Marks and Spencers (M&S) (since 2001), before which he had worked with Asda. (Refer to Exhibit V for a brief profile of Justin King)
King spent the first six months in the company reviewing the business completely. As part of his assessment program, he started a direct mail campaign reaching out to 1 million customers asking them for their personal feedback about the company’s condition, their expectations from it, what they felt was wrong, and what they wanted improved
By March 2006, 31 stores of the 131 earmarked had already been refurbished. Price reductions were made on more than 8,500 products
In March 2007, after two years of the MSGA plan being put into effect and almost achieving the targets, the company launched new targets for the period 2007-2010 to further bring growth and stability to the business (Refer to Exhibit VIII for Recovery to Growth Plans 2007-2010).
Questions:
Examine reasons for Sainsbury’s growth and its subsequent slide in the 1990s and early 2000s.
Analyze the reasons for the recovery efforts taken under various CEOs including Peter Davis that did not yield the desired results.
Analyze Justin King’s ‘Making Sainsbury’s Great Again’ plan.
Case Study on Honda in Japan
With over 182,000 employees, Â¥ 10,011, 241 million in annual revenues in 2009 coupled with upwards of $ 1370.1 million$ and 1896.4 in operating profits for the FY 2008 and 2009 respectively, Japan’s Honda is easily the industry’s biggest manufactures of motor cycles, besides being an among the leading automobile producers. Operating across the globe, Honda is involved in the development, manufacturing as well as marketing and distribution of motor cars, motor cycles and a range other power products (Honda Ltd, 2010).
It was founded in 1946, by Soichiro Honda and subsequently incorporated two years later, followed by years of success and growth as a motor cycle maker. Away from its core business, the company’s 105 affiliates and 396 subsidiaries across the world provide financial services to thousands of its clients. It operates a four tier business model which includes the financial services division, motorcycle, automobile as well as power products (Honda Ltd, 2010). Besides multi wagons, Honda also produces a range of passenger cars, SUVs, mini vans, passenger cars, mini vehicles as well as sports coupes among others.
Honda’s flagship car and motor cycle models include the Accord, Civic, Legend, Insight, Acura CSX and Acura RL, CR-V, Cross Road, ASIMO Robots as well as the scooters among many others.
The company recorded sales of over 10,114,000 units mainly in Japan, North America and Europe, representing an 8.5% rise over the previous year’s figures. Its sales have been on the rise despite through the global economic down turn that hit its American competitors, and largely driven by Toyota’s PR woes over alleged flaws in the breaking system in its flagship Prius model.
This success is largely attributable to the company strategic preparedness. Case in point, in 2002, it launched a hybrid car model to tap into the ever growing environmentally conscious clientele, besides launching the Environmental Learning Center (based in Texas), while in 2004, the company entered into a strategic partnership with GE, that led into the development and production of a trail blazing light jet engine, suited for business jets.
Sethi and Swanson (1984), commencing in the year 2000, the company has embarked on an ambitious program to set up production plants in the emerging car and motor cycle markets, notably China, Argentina, Russia and the motor bike hot spot, Vietnam. The company prides itself with the twin principles of respect individuals and the Three Joys Principle i.e. buying, selling as well creating.
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These values reflect the company does wish to build on each person’s unique abilities and its endeavor to ensure that everyone who comes by purchasing the products or by other means should have a great/joyous experience. Honda ensures this by relentlessly, lead in the creation of value, innovation, new products at accessible prices.
Honda ltd’s strategic innovation is founded on a process of dichotomies reconciliation which include both learning and planning, positioning on the market vs. internal resources development and lastly, core competencies related to the product against the core capabilities related to the processes. These three dichotomies do representing divergent strategies etc that drive Honda as a company since its establishment and through years of exemplary growth and expansion.
De Wit & Meyer (2010), assert that a critical look at Honda’s strategies points especially its successful entry and dominance of new markets raises questions as to whether, Honda’s strategy and subsequent decision making is solidly based on a meticulous, analytical and rational planning or whether its strategies are a direct result of the some decisions/ strategies reached at by the company, which evolved or became modified due to the environmental influences of the industry in which the company operates.
While designing its strategies, the company has consistently followed a rational approach based on a critical analysis of the market and the industry environment. This strategy hinges on and it suited for a seasoned industry player such as Honda, since it seeks to build on, and exploit the company’s immense experience in the automotive industry (Johnson et al., 2005).
As a strategy, this is an important bottom up strategy that uses the already gained knowledge to optimize the company’s needs. Planning takes into consideration both the company’s resources as well as the environmental factors, as such will most likely utilize the company’s set objectives within the constraints. Honda’s largely seen as having successfully employed the planning strategy while entering into new markets notably while launching into the US motor cycle industry.
Its recent strategic alliances with GE as well as its design and launch of innovative new products and expansion of manufacturing plants, in the ultimate attainment of huge scale economies and extremely law costs represent examples of internal planning.
Planning is largely apparent from an outsider’s point of view. However, interviews with the company’s top management reveal a far different picture that suggests at best a company that is far from an overly rational, academic planning seeking to impose its corporate values and policies on the market and the industry, but rather a company, with a management structure that is at all times willing to learn. It is evident and widely accepted by many observers that Honda’s strategies have evolved, without a clear plan or analysis of the industry.
Case in point, the huge success attained by the company’s 50 cc Supercab surprised everyone including the company’s management. Mintzberg et al. (1998) observe that though the company’s strategy may have looked analytical and well thought out, the management did blunder severally up until the market gave them the correct formula.
Rational planning on its own is hardly, suited to many organizations and is in fact removed from the day to day running of a business as compared to learning, which permits management to continually develop and adjust their policies and strategies as they are implemented, in the light of new experience (De Wit & Meyer, 2010). Honda’s development of hybrid vehicles and energy efficient models e.g. the Honda Civic Sedan, in the wake of Toyota’s success in the same field represent examples of learning from the environment.
Honda has as well launched joint ventures in R&D with other companies. Using both strategies gives the company an advantage, not least because it only allows the formulation of strategies that best meet both the internal resources as well as the environmental factors prevailing in the industry.
Questions:
The Honda Company followed which rational approach based on a critical analysis of the market and the industry environment?
Give brief about Honda’s production.
Case Study on Xerox Corporation
In 2010, US-based Xerox Corporation’s (Xerox) CEO Ursula M. Burns (Burns) was named the 20th most powerful woman in the world by Forbes4 , for her role in reorganizing the iconic copier and printer giant into a data service company and for being a national advocate for science and math education in the US (Refer to Exhibit I for Forbes list of most powerful woman 2010).
Burns’s story was all about determination, hard work, and loyalty. The first African-American woman to become head of an S&P 100 company, she was credited with helping build Xerox into the world’s largest maker of high speed color printers and for strengthening the company’s business model, resulting in a more competent and profitable organization.
A leading global enterprise for business process and document management, Xerox, headquartered in Norwalk, Connecticut, offered document technology, services, software, and supplies for graphic communication and office printing purposes. The company had a broad portfolio of document management systems and software which included printers, multifunction devices, production publishing systems, managed print services, and related software. It also manufactured support and supplies, such as toner, paper, and ink, as part of its document technology offerings.
Through Affiliated Computer Services, Inc. (ACS)5 , which Xerox acquired in February 2010, it offered business process and IT. Outsourcing services, including data processing, finance support, and customer relationship management services for commercial and government organizations worldwide. As of January 2011, Xerox had 136,000 employees serving clients in more than 160 countries.
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Burns joined Xerox in 1980 as a mechanical engineering summer intern and later took on roles in the manufacturing, supply chain, marketing, and research operations. As she rose through the ranks of the company, she moved through the engineering, manufacturing, and various product divisions and led several business teams including the office color and fax business and office network printing business. In July 2009, she was named CEO of the company after two years of serving as President. Burns was also made the company’s chairman in May 2010.
Burns credited her success to some extent to Xerox’s search for diversity in talent. According to her, “I’m in this job because I believe I earned it through hard work and high performance. Did I get some opportunities early in my career because of my race and gender? Probably……… I went to work for a company that was openly seeking to diversify its workforce. So, I imagine race and gender got the hiring guys’ attention. And then the rest was really up to me.”
Burns was born on September 20, 1958, in New York. Raised by a single mother, she was the middle child in a family of three
In 2000, the technology bubble burst, leaving Xerox in the grip of rising debt. In October 2000, the company reported a third quarter loss of US$167 million, its first quarterly loss in 16 years. That same year, the company reported its first annual loss in five years. Xerox’s stock fell by 60% compared to the earlier year
In 2009, Mulcahy announced that she would retire from the CEO post. Her handpicked successor was Burns who had been by her side helping to turn Xerox around when the company was in a crisis. Moreover, Burns had an understanding of the organization and its business. “The succession plan has been in the making for several years and Xerox is as prepared as it can be. The strategy in place is very sound,” said Angele Boyd, vice president, IDC
Industry observers felt that Burns would act as an inspiration for many for having shattered the glass ceiling. They pointed out that despite being a black woman from a not too-well-to-do family, Burns had been able to achieve such success in life. They pointed out that, according to Catalyst , in 2009 women made up 59.6% of the US labor force, but less than 16% of top corporate officers were female (Refer to Exhibit IV for percentage of woman corporate officers in the US and to Exhibit V for how the percentage of women fall away at executive levels).
The figures were even lower for minorities. Some analysts opined that Burns was a great role model for her achievement irrespective of background, color, or gender.
According to industry experts, Burns took the helm at Xerox at a challenging juncture as the company was showing signs of weakness due to the economic slowdown. In the US, the demand for printers was weak and customers had cut down spending on printing equipment and supplies.
Sales were weak and the company’s revenue was flat. In 2009, Xerox’s sales dropped 14% to US$15.2 billion and the company cut thousands of jobs to lower costs. In the first quarter of 2009, Xerox’s sales dropped 18% to US
$3.6 billion, generating a profit of only US$49 million. “They’re in the midst of another major restructuring. So Ursula has to get through that, but it’s nothing new for her. She’s been in charge of that effort,” said Shannon Cross, managing director of Cross Research LLC.
Questions:
Explain the issues and challenges faced by women business executives.
Examine the growth and success of Ursula Burns.
What are the leadership qualities and management skills of Ursula Burns?