ADV MA JOURNAL 2.docx - TESCO PLC: IS THEBALANCED...

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TESCO PLC: IS THEBALANCED SCORECARDUSEFUL IN ACOMPETITIVE INDUSTRY?Date: Nov 2016 Author: Vu Ngoc MaiWith the aim to clear goals for business to ensure the company delivers long- termsustainable growth, Tesco manages their business by a balanced scorecard, called SteeringWheel (Figure 1). This scorecard is slightly different from the original version, which wasdeveloped by Kaplan and Norton in 1992. The original BSC consists of four perspectiveswhereas the steering wheel contains five segments: People, Finance, Customer, Operationand Community.Figure 1: Steering Wheel used by Tesco PLC.
Tesco have use balanced scorecard 20 years where they set target for each objective in everysegment of BSC. The financial segment of Steering Wheel shows that Tesco priorities to protect andstrengthen their balance sheet. Moreover, the financial segment helps Tesco to reduce the capitalexpenditure by taking more discipline approach to capital investment. Besides, Tesco also increase theownership of freehold property by exchanging assets with British Land which leads to reduce theirexposure for index-linked and fixed-uplift inflation. Last but not least, Tesco has reduced the total ofindebtedness by selling their Homeplus business in Korea (Tesco annual report and financial statements2016). There are three out of six key performances indicators are used to measure financial performance.These are: sales, operating profit and cash flow.Next, Tesco believe the customers are important to their organization therefore they has investedmoney amounted to 1 billion pound to improve the shopping trip which driving a strong pace ofimprovement in the things that matters to the customers such as service, range, price and availability.Tesco has employed more than 9000 people in customer- facing roles and also ask people who work inthe office to spend more time at store. Moreover, they have also invested in increasing staff levels,training and equipment for key departments in existing stores, such as produce and meat. Because Tescobelieves customers will receive better service if there are more well-trained and knowledgeable staffs atstore. Furthermore, the number of products in each range has been increased at stores and consequently itmakes customers confused and puts pressure on employees. In this year, Tesco has reviewed the range ofproducts and decided to reduce 18% of total number of product lines with the aim to make the rangeeasier for customer to shop, save space for products that are purchased frequently and ultimately increasethe level of product availability. As customer wants lower, and a stable price they can trust all of the time,Tesco has decided to reduce price of hundred branded products and own- brand products.

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Tesco PLC, Tesco Direct

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