HRM for competitive advantage
Tesco plc is one of the largest food retailers in the world and its core business is in Britain. Tesco is already well established in the international market. In 1995 Hungary was the first international market. Tesco operates in the continental Europe Hungary, Poland Czech Republic, The Republic of Ireland, Slovakia and Turkey and in Asia it operates in Japan, Malaysia, South Korea, Taiwan and Thailand. It has approximately 4000 stores across 14 countries and employing 440,000 people worldwide. It provides online service through its subsidiary Tesco.com including tescodirect.com and tesco.net. It’s headquartered in based in Hertfordshire, UK.
http://www.fundinguniverse.com/company-histories/Tesco-plc-Company-History.html- accessed on 05/05/2010
http://people.exeter.ac.uk/wl203/BEAM011/Materials/Lecture%204/TESCO%20Company%20Profile.pdf -accessed on 06/05/2010
The first Tesco store was opened in Burnt Oak, Edgware in 1929. It operated under four banners: Extra, Superstore, Metro and Express. Many of its stores have gas stations. Tesco also offers retailing services which includes Tesco.com and Tesco personal finance which is a joint venture with the Royal Bank of Scotland.
http://people.exeter.ac.uk/wl203/BEAM011/Materials/Lecture%204/TESCO%20Company%20Profile.pdf- accessed on 06/05/2010
1.1 Interventions HRM function can take to achieve competitive advantage for Tesco:
In the era of globalization (Treen 2000), every organization like Tesco must keep itself along with all the other organizations on being globally competitive. Corporate or organizational competitive advantage does not only depend on the organization’s financial resources but on the human resources too. That is, for the organization to achieve competitive advantage, the people involved in the organization must also be competitive.
Traditionally, HRM helps the organizations in achieving the goals of the organization by hiring and maintaining efficient employees. According to Harrison (2002), the following are some of the responsibilities of HRM:
Train the workforce to maintain competitiveness of the organization.
Develop and communicate organizational policies and procedures in line with legislation.
Involvement in grievance and disciplinary hearings.
Implement termination and hiring procedures.
Assessment and management of organizational climate and employees relations.
Implementation of outcomes of collective bargaining and negotiation.
Develop compensation strategies and polices in line with legislation and the organization’s business strategy.
Develop appropriate compensation systems for the organization, and many more.
As organizations seek to develop sources of competitive advantage, researchers and practitioners have looked to firms’ human resources. Recent research by (Armstrong 2005) and others has demonstrated significant relationships between HR practices and organizational performance. This line of research has estimated that a one standard deviation increase in the use of “progressive” or “high performance” work practices can result in up to a 20% increase in firm performance (Walton 1999).
Therefore, the knowledge and management of an organization’s human resources is pivotal to its responsiveness. In order to achieve this, the role of Tesco’s HRM needs to change from reactive to proactive. If HR is to be used to an organization’s competitive advantage it needs to go beyond merely attracting and retaining good people. It should strive to gain a complete understanding of its workforce and develop organizational systems and processes that enable individuals to add value within a larger organizational unit (Keep 1989).
For HR to succeed in achieving competitive advantage for Tesco, it must take on a proactive role within the organisation. Strategic HR creates value by providing opportunities for organic learning, development of intellectual capital and enhances core competencies. This value is crucial to Tesco’s future success (Treen, 2000). Employers are increasing extorting the best possible performance from employees. Best practice will increase the skills of the current workforce, and with recruiting it will reinforce the culture of a highly skilled work force (Mullins, 2005).
Tesco’s operate within a fiercely competitive sector, using a human resource led business strategy, has help to place them in the number one position. This is only sustainable if the strategy is ongoing, with competitors actions monitored for any changes (Mullins, 2005). To fully exploit the wealth of knowledge contained within an organisation, it must be realised that it is in human resource management that the most significant advances will be made. As a result, the human resource department must be made a central figure in an organisation’s strategy to establish a knowledge basis for its operations (Armstrong, 2005).
The principal function of any organisation is to increase the value of the business and therefore enhance the wealth of its Owners. This is obtained by efficient use of the limited resources available to them (Blackwood, 1995). Training inextricably linked to market economics, that knowledge is prized in so far as it can generate a market advantage(Garrick 1999).Therefore, through training and developing employees, Tesco’s will gain a competitive advantage.
Organizations no longer offer a job for life there is no longer guaranteed employment, with a pension as a reward for loyalty and compliance. The “psychological contract” between employer and employee has shifted. Employees are increasingly mobile, changing employment for promotion, reward and job satisfaction; top employees have more choice as to where to work. To retain these key employees Tesco HRM should intervene in culture needs to allow an environment of personal growth (Harrison, 2002).
With less job security, the best reward an organisation can give an employee is transferable skills (Armstrong 2005). With the changing employment market, employees feel less job security and are taking more responsibility for their career paths. The skills they are taught within Tesco’s could be transferable; therefore in the long run they could benefit competitors. Although the benefits of training the work force exceed the disadvantages, this employee mobility should not be ignored by Tesco’s HR.
Tesco’s every little helps slogan is easily recognised by the customer, but is also built in to the training program. This slogan is part of the ethos and culture that is Tesco. The organisation surveys their employees to gauge motivation and to identify training which employees require. This goes further than just identifying organisational benefits of training. Individuals can plan for the future career. Therefore Tesco’s HRM should ensure further career development to the individual employee (Armstrong, 2005).
The study of Tesco’s HR policies has demonstrated that by introducing a higher level of training to all employees has an effect on the employee performance. When the employees are trained and demonstrating a higher commitment to the organization, they feel part of the overall strategy. This leads to employees feeling valued and therefore a more committed work force. This is then felt by the consumer, with a higher level of service, which gives the organization a competitive advantage.
In sum, HR strategies or HRM in general, is a distinctive approach to employment management which seeks to achieve competitive advantage through the strategic deployment of a highly committed and capable workforce, using an integrated array of cultural, structural and personnel techniques. It is about understanding, researching, applying and revising all human resource activities in their internal and external contexts as they impact the process of managing human resources in enterprises throughout the global environment to enhance the experience of multiple stakeholders, including investors, customers, employees, partners, suppliers, environment and society.
2.0 Critical examination of Tesco and Retail industry:
Tesco PLC is a UK based supermarket chain. It is the largest British retailer, both by global sales and domestic market share, and the fourth largest retailer in the world. Tesco widely offers groceries, among other products such Tesco Direct, Clothing, Entertainment and books, Banking and insurance among others. Tesco has a long term strategy for growth, based on four key parts: growth in the Core UK business, expand by growing internationally, be as strong in non-food as in food and to follow customers into new retailing services. (Tesco, 2010).
Tesco is being faced by fierce competition in the Retail Industry. Some of its rivals are Iceland, Asda, Morrisons and Aldi, which are perceived to be stronger on price. To counter this, Tesco has launched its own label discounter products which are cheaper compared to other popular brands. To tackle competition in Retail Industry, Tesco is broadening their strategy away from the UK into numerous nations mostly in Europe and recently in USA (The Independent, 2008).
Like many organisations hit by recession, Tesco faces potentially prolonged recessions at worst and tough trading in a number of the markets where it operates, including the United States, the Republic of Ireland, Japan and Hungary. In 2009, Tesco found international sales growth more difficult to achieve. However, Tesco want to focus on future performance and strategize on oversees market while planning to introduce a new range of products. For example, they have launched the first universal free eye test service for anyone not entitled to an NHS funded check-up to access in store completely without charge (Talking Retail, 2006). To coincide with the move Tesco Opticians offer a range of stylish prescription glasses priced at only £10. These are the cheapest prescription glasses available from any optician’s chain in the UK.
2.1 Key points on Tesco in the Retail Industry:
1. Global Position: Tesco is a sophisticated and successful corporation with strong market presence in global Retail Industry. Tesco now challenges Wal-Mart as the most aggressive and dominant food retailer in many of the places it operates. Tesco has positioned itself as service oriented retailer offering low cost products. Through its clubcard loyalty scheme, Tesco has extensive customer knowledge, which they can use to introduce new services and supply customers with a variety to cater for their preferences, on different part of the globe (Slovenia, 2004).
2. Access: Tesco has highlighted its commitment to increasing fresh food in low-income communities by promising to locate stores in those areas. They have also introduced online shopping making it easy to access their products and services without visiting the stores. What differentiate tesco.com from other retailers is that it does not operate its own warehouses, but enables customers to buy online from their familiar local Tesco stores (Claas & Klein, 2004 ).
3. Workplace Issues: When launching its stores in U.S., TESCO promised it stores would be a great place to work, the company has decided to rely on part-time rather than full-time employees. However, this would seriously limit the ability of workers to achieve a living wage. This is one challenge that Tesco needs to deal with.
4. Supply Chain Issues: Tesco has a global supply chain that involves thousands of suppliers and subcontractors. Because of its big size, they are able to benefit from economy of scale. Tesco exerts tremendous pressure on its suppliers to maximize cost savings and production flexibility. However when supply chain abuses are documented, Tesco says that it tries to respond, but that it is difficult to monitor all the activities of its suppliers and subcontractors (The Tesco Invasion, 2007). In Conclusion, Tesco continues to rely upon its operations: a strong marketing capacity and a powerful influence over numerous entities from city councils to farmers and suppliers. By aligning their strategies and operations, Tesco will continue to have a strong presence in the UK, and most importantly abroad.
2.2 Strategic Objectives of Tesco:
Tesco’s strategy is consistent which allows them to concentrate on their core UK business and expand in new markets very powerfully through diversification (1997) and it resulted into very competitive and profitably which made Tesco to be the market leaders outside UK. The objectives of the diversification were:
To be a successful international retailer
To grow the core UK business
To be as strong in non-foods as in food
To develop retailing services- such as Tesco personal finance, telecoms and tesco.com
To put community at the heart of what they do
Source – company profile-http://www.tescocorporate.com/plc/about_us/strategy/
Strategy – “We have continued to make strong progress with all four parts of our strategy – a strong UK core business, non-food, retailing services and international- by keeping our focus on trying to improve what we do for customers:
Making their shopping trip as easy as possible
Constantly seeking to reduce our prices to help them spend less
Offering the convenience of either large or small stores
Bringing simplicity and value to complicated markets”
Source-Tesco Preliminary Results 2004/5
Tesco introduced club card, a loyalty card in 1995 to build customer loyalty and which allows customers to collect points from their purchases and later redeemed them to exchange for goods. By club card they were able to gain more information about their customers and studied the buying pattern of the customers on who regular they are buying certain products. To build customer loyalty Tesco introduced the use of stamps which can be exchanged for cash or goods.
2.3 Strategic thrust of Tesco:
Tesco follows various strategic directions in order to remain the market leader within this industry:
Some of these strategic thrusts are as follow:
To place value on employees training and to integrate this value into the culture of the organisation to maintain its competitive advantage.
There is constant reviewing of this intervention.
By introducing high and flexible level of training for its employees.
Rolling out at work simplification and clarification for its employees.
Challenging unwritten roles through delegation and empowerment of jobs amongst its employees.
All its employees have a very important role to play in turning core values and customer services commitment in reality on a daily basis.
A human resource-led business has helped Tesco to take the lead over its rivals in the competitive UK supermarket sector.
Such assumptions have proved to improve organisational effectiveness.
Also staffs of Tesco are kept informed regarding everything what happened within the business through their weekly newsletters and monthly videos, injecting more involvement amongst staff.
Basic assumptions such as managers telling staff how to think, feel, act and observe things during the opening hours, it helps a great deal to enhance and boost the confidence in the Tesco s staff .
3.0 Importance of Hr processes in Tesco:
Human Capital issues are increasingly recognised as having a strategic importance for organisations. An effective employment of the HR function entails a minimisation of administrative activities to give space for more consulting and strategic activities
Tesco is recognizing as a biggest supermarket dominating with global sales and domestic market share. Since it considered a one stop shop retail possesses a great number of manpower. Employee is the underlying strength, asides from its powerful marketing strategy, which makes it important in its specified area of business operations. In strategic planning, the mission statement of Tesco defines what makes it unique from its competitors.
Any organization the most important asset is its employee. Organisations are implementing strategic HR as a change agent, not to replace an out dated personnel department. To maximize their assets they have to manage their employees’ working condition with intelligence and efficiency. Work related decision should involve enhancing the organizational structure. The structure of tasks among the employees strengthens the organizational performance. It is necessary to understand the employees for the organization to be effective. The development, motivation enhancement and enrichment of the employees of any organization largely depend on leadership and the vision of the organization. Human resource management helps to achieve the goal of organization by recruiting and maintaining efficient employees. The HR strategy at Tesco’s revolves around work simplification, challenging unwritten rules, rolling out core skills to all employees and performance management linked to achieving their targets. Tesco ensures that every employee has the opportunity to understand their individual role in contributing to the Tesco core purpose and values. This requires an innovative induction programme for different cultures, styles of learning and varying commitments to the job. HR should concentrates on providing a clear way of defining roles, responsibilities and activities. The system guarantees that all employees are responsible, accountable, and informed.
3.1 HR Activities in Helping the TESCO to Achieve Competitive Advantage:
A large number of organisation have been developed in that time where competition is very high and new development are going on so in that situation HR should have to play a vital role in order to gain competitive advantage in the market.
Where as in current recession period organisations need to train their employee to survive TESCO is playing a vital role by providing training skills to their employees. TESCO is one of the best retail industry who gain competitive advantage in the market by spending a lot on learning and training skills on their employee and then integrate these skills into its (TESCO) goals and objectives.
HR is a vital asset for any organisation so it is the duty of the organisation to manage their asset’s working conditions with effectively. They should be got chance to evolve in decision making process.
TESCO is not only investing on international market place but also considering the element of their manpower as well. For the good performance and gaining competitive advantage for an organisation in the market participation of employee in management and giving them opportunity to take part in decision making had number of benefit for the employee and for organisation as well.
An effective Leadership is playing a vital role for the development of an organisation’s performance. TESCO is aware of any sudden change so having effective leadership among the HR situation can be handled easily and sustain the competitive advantage of TESCO in the market.
human resource playing a good role to sustain the competitive advantage in retail industry which can be gain by effective recruiting process, motivating and giving reward to their workforce. such kind of strategies can help TESCO to gain competitive advantage in the market.
In early days marketing has been used for introducing product but with the new innovation and tense competition it’s no longer success for any organisation but having involvement of management orientation and management function(HRM) it can easily achieve its sustainability in growth and gain competitive advantage in the market.
HR activities which can help TESCO to gain competitive advantage in the market is the motivation to their employee as well either it can be intrinsic motivation or extrinsic motivation.
Regarding above discussion we can say that in TESCO human resource Management playing a vital role in achieving Competitive advantage in the market.
For Tesco to achieve its competitive advantage, it will have to set value on its HR department. HRM practices enable companies to gain competitive advantage in two major
Ways: One is by helping themselves and the other is by helping others. There is a significant benefit from having HRM considerations represented in the strategy formulation stage rather than only in the implementation stage ( McMillan 1983). Once the strategy is formulated and the appropriate HRM thrust identified, specific HRM practices need to be developed. These practices, such as staffing, training and development, and compensation, are the ones that actually create the competitive advantage for the company. In addition, selection of the most appropriate practices should be appropriate to the strategy. Once the strategy is formulated, the determination of the needed behaviours comes from job analysis. The HRM practices that stimulate those behaviours must be identified. They must be implemented so as to ensure consistency across HRM practices. It is consistency which will help ensure that a competitive advantage through HRM practices is gained and sustained and also good HR management.