CASE STUDY: HR BALANCE Scorecard vase study,

Competitive Environment of Tesco

Tesco is the largest food retailer in the UK and one of the leading grocery retailers in the
world. It supplies 30% of the food purchases made in the UK. More than 550,000
employees service the company’s customers in nearly 5,000 locations spread across 14
countries in Europe, Asia and North America (Tesco plc, 2010, p 1-3).

The company’s operations in the British retailing space, coupled with its steady
overseas expansion, have opened it to numerous competitive challenges and threats. In
the UK, the company faces strong and increasing competition from its heavyweight
rivals like ASDA-Walmart, Sainsbury’s and Morrison (Finch & Wood, 2010, p 1-2). Each of
these organisations is constantly trying to improve its market share through various
customer focused and efficiency oriented strategies (Finch & Wood, 2010, p 1-2). Whilst
Tesco continues to lead in market share, sales and profitability in the UK, it remains
under constant competitive pressure and any strategic or market place error could have
adverse results (Finch & Wood, 2010, p 1-2). The economic environment in the UK is
possibly going through its worst turmoil since the 1980s. Increasing unemployment,
thousands of job losses and a very slowly reviving economy have dampened the
enthusiasm of supermarket shoppers and created difficult market conditions for market
participants (Kollewe, 2010, p 1-2). Sharp reduction in government spending, the
proposed elimination of thousands of public sector jobs by the present coalition
government and the three-fold increase in academic fees have already led to
widespread protests and are expected to affect the economic climate further (ABC Inc,
2010, p 1).

Whilst the company is steadily increasing its global footprint, the UK continues to be its
overwhelmingly large market and accounts for practically 67 % of its total sales and 71
% of its profits (Tesco plc, 2010, p 1-3). The economic and social turmoil in the country,
along with increased competitive pressure from its main competitors will certainly
intensify environmental and competitive challenges for the company intense in the
coming years (Tesco plc, 2010, p 1-3).

Tesco has in recent years been working at steadily expanding its global operations. Its
global presence is however less than that of Walmart, Carrefour and Metro and its
position in the global retail market, whilst strong and increasing, do not mirror its
dominant position in the United Kingdom and it is the grocery leader in only two
overseas markets, Malaysia and Thailand (Finch & Wood, 2010, p 1-2). Tesco, like other
major firms expanding strongly into international markets often faces different and
difficult environmental and competitive conditions in its various operational regions.
Much of the competition in its overseas markets comes from numerous local
competitors who not only operate with far lesser overheads but also understand local
tastes and preferences much better. Tesco is combating competition in its overseas
markets and trying to establish its presence with the help of well established local firms
and different store formats (Tesco plc, 2010, p 1-3). However the global experiences of
various supermarket majors like Walmart and Carrefour reveal that global expansion is
not easy and significant market failures can occur from incomplete understanding of
market requirements and choice of market strategies (Sarkar, 2009, p 1-3).

Tesco’s Corporate and Marketing Strategy

Tesco’s rapid growth in recent decades has been driven by its carefully planned and
sustained customer focused strategy. The company is possibly the only retailer to
appeal to different market segments, upmarket, midrange and low price. It constantly
focuses on improvement of customer value and services with focused action in areas
like supply chain management, pricing, quality, product range and in-store as well as on-
line customer convenience. The company initiated a major strategic change in the mid
1990s with the adoption and customisation of the balanced scorecard approach, soon
after it was first advanced by Robert Kaplan and David Norton.

Balanced Scorecard Approach

The balanced scorecard approach was developed by Kaplan and Norton to provide
businesses with a holistic tool for performance measurement in different critical areas
of business firms. Whilst much of performance measurement in the past focused on
the financial aspects of the business, the balanced scorecard approached performance
measurement from four viewpoints, namely the financial perspective, the customer
perspective , the business process perspective and the learning and growth perspective
(Kaplan & Norton, 1996, p 7-13).

The balanced score card whilst originally constructed for measurement of performance
is now used for formulation and implementation of strategy by business firms.
Organisations adopting the balanced scorecard set objectives in each of these areas
and thereafter formulate targets and initiatives for meeting such objectives, as well as
measures to assess actual progress in meeting them (Kaplan & Norton, 1996, p 7-13).
Its use enables firms to clarify strategy in terms of the different dimensions outlined by
the balanced scorecard tool, communicate strategic objectives in different areas, plan
set targets and align strategic initiatives, and implement systems for achievement of
feedback and engagement of double loop learning (Kaplan & Norton, 1996, p 7-13).
Adoption of Balanced Scorecard by Tesco
Tesco adopted the balanced scorecard method in the mid 1990s to drive its strategy
and operations. Tesco’s adoption of the balanced scorecard method led to the
development of the famous Tesco Steering Wheel, which was originally divided into four
quadrants, namely Customers, People, Operations and Financials (Kaplan, 2008, p 1-2).
The Tesco Steering Wheel (TSW) originates from the company’s core purpose and long
term objective, namely the creation of value for customers in order to earn their
constant loyalty. The company added a fifth dimension to the TSW in 2007, namely
community, in order to encourage employees to become excellent citizens and improve
their communities. A diagram of the new Tesco Steering Wheel with five quadrants is
provided as under (Kaplan, 2008, p 1-2).

(Source: Kaplan, 2008, p 1)

Tesco’s steering wheel helps in ensuring that its 550,000 employees in multiple
countries work towards delivering distinctive and unswerving buying experiences to
consumers in each and every store. The concept of the TSW came about from the
adoption of the balanced scorecard in the early 1990s when Tesco engaged in a
process to elucidate its mission and strategy to ensure the realization of this objective.
“Tesco, (in the words of Sir Terry Leahy, CEO) doesn’t want one leader. We want
thousands of leaders who take initiative to execute the strategy.” (Kaplan, 2008, p 1)

Balanced Scorecard Case Study: Tesco

Competitive Environment of Tesco

Tesco is the largest food retailer in the UK and one of the leading grocery retailers in the world.
It supplies 30% of the food purchases made in the UK. More than 550,000 employees service the
company’s customers in nearly 5,000 locations spread across 14 countries in Europe, Asia and
North America (Tesco plc, 2010, p 1-3).

The company’s operations in the British retailing space, coupled with its steady overseas
expansion, have opened it to numerous competitive challenges and threats. In the UK, the
company faces strong and increasing competition from its heavyweight rivals like ASDA-
Walmart, Sainsbury’s and Morrison (Finch & Wood, 2010, p 1-2). Each of these organisations is
constantly trying to improve its market share through various customer focused and efficiency
oriented strategies (Finch & Wood, 2010, p 1-2). Whilst Tesco continues to lead in market share,
sales and profitability in the UK, it remains under constant competitive pressure and any
strategic or market place error could have adverse results (Finch & Wood, 2010, p 1-2). The
economic environment in the UK is possibly going through its worst turmoil since the 1980s.
Increasing unemployment, thousands of job losses and a very slowly reviving economy have
dampened the enthusiasm of supermarket shoppers and created difficult market conditions for
market participants (Kollewe, 2010, p 1-2). Sharp reduction in government spending, the
proposed elimination of thousands of public sector jobs by the present coalition government and
the three-fold increase in academic fees have already led to widespread protests and are expected
to affect the economic climate further (ABC Inc, 2010, p 1).

Whilst the company is steadily increasing its global footprint, the UK continues to be its
overwhelmingly large market and accounts for practically 67 % of its total sales and 71 % of its
profits (Tesco plc, 2010, p 1-3). The economic and social turmoil in the country, along with
increased competitive pressure from its main competitors will certainly intensify environmental
and competitive challenges for the company intense in the coming years (Tesco plc, 2010, p 1-3).

Tesco has in recent years been working at steadily expanding its global operations. Its global
presence is however less than that of Walmart, Carrefour and Metro and its position in the global
retail market, whilst strong and increasing, do not mirror its dominant position in the United
Kingdom and it is the grocery leader in only two overseas markets, Malaysia and Thailand
(Finch & Wood, 2010, p 1-2). Tesco, like other major firms expanding strongly into international
markets often faces different and difficult environmental and competitive conditions in its
various operational regions. Much of the competition in its overseas markets comes from
numerous local competitors who not only operate with far lesser overheads but also understand
local tastes and preferences much better. Tesco is combating competition in its overseas markets
and trying to establish its presence with the help of well established local firms and different
store formats (Tesco plc, 2010, p 1-3). However the global experiences of various supermarket
majors like Walmart and Carrefour reveal that global expansion is not easy and significant
market failures can occur from incomplete understanding of market requirements and choice of
market strategies (Sarkar, 2009, p 1-3).

Tesco’s Corporate and Marketing Strategy

Tesco’s rapid growth in recent decades has been driven by its carefully planned and sustained
customer focused strategy. The company is possibly the only retailer to appeal to different
market segments, upmarket, midrange and low price. It constantly focuses on improvement of
customer value and services with focused action in areas like supply chain management, pricing,
quality, product range and in-store as well as on-line customer convenience. The company
initiated a major strategic change in the mid 1990s with the adoption and customisation of the
balanced scorecard approach, soon after it was first advanced by Robert Kaplan and David
Norton.

Balanced Scorecard Approach

The balanced scorecard approach was developed by Kaplan and Norton to provide businesses
with a holistic tool for performance measurement in different critical areas of business firms.
Whilst much of performance measurement in the past focused on the financial aspects of the
business, the balanced scorecard approached performance measurement from four viewpoints,
namely the financial perspective, the customer perspective , the business process perspective and
the learning and growth perspective (Kaplan & Norton, 1996, p 7-13).
 

The balanced score card whilst originally constructed for measurement of performance is now
used for formulation and implementation of strategy by business firms. Organisations adopting
the balanced scorecard set objectives in each of these areas and thereafter formulate targets and
initiatives for meeting such objectives, as well as measures to assess actual progress in meeting
them (Kaplan & Norton, 1996, p 7-13). Its use enables firms to clarify strategy in terms of the
different dimensions outlined by the balanced scorecard tool, communicate strategic objectives
in different areas, plan set targets and align strategic initiatives, and implement systems for
achievement of feedback and engagement of double loop learning (Kaplan & Norton, 1996, p 7-
13).

Adoption of Balanced Scorecard by Tesco

Tesco adopted the balanced scorecard method in the mid 1990s to drive its strategy and
operations. Tesco’s adoption of the balanced scorecard method led to the development of the
famous Tesco Steering Wheel, which was originally divided into four quadrants, namely
Customers, People, Operations and Financials (Kaplan, 2008, p 1-2). The Tesco Steering Wheel
(TSW) originates from the company’s core purpose and long term objective, namely the creation
of value for customers in order to earn their constant loyalty. The company added a fifth
dimension to the TSW in 2007, namely community, in order to encourage employees to become
excellent citizens and improve their communities. A diagram of the new Tesco Steering Wheel
with five quadrants is provided as under (Kaplan, 2008, p 1-2).

(Source: Kaplan, 2008, p 1)

Tesco’s steering wheel helps in ensuring that its 550,000 employees in multiple countries work
towards delivering distinctive and unswerving buying experiences to consumers in each and
every store. The concept of the TSW came about from the adoption of the balanced scorecard in
the early 1990s when Tesco engaged in a process to elucidate its mission and strategy to ensure
the realization of this objective. “Tesco, (in the words of Sir Terry Leahy, CEO) doesn’t want
one leader. We want thousands of leaders who take initiative to execute the strategy.” (Kaplan,
2008, p 1).

Tesco used the steering wheel, a clear symbol for a tool to drive performance and assist
employees find the way into the future, to communicate to its employees. The original TSW has
had four equal arcs, representing the four areas of balance scorecard focus, namely financials,
customers, operations, and employees. The company added another dimension, community, to
the TSW in 2004 to encourage and support workers to participate in and help the communities
where they work and live (Tesco plc, 2010, p 1-3).

Tesco’s steering wheel is not easy to implement. Extensive efforts are required by way of
consumer research, collection of data, and analytics to ensure that objectives and metrics
continue to remain appropriate, even as consumer tastes and preferences change and competition
intensifies (Kaplan, 2008, p 1-2). All Tesco stores get monthly updates on the steering wheel,
summaries of metrics of the five arcs four arcs, so that Tesco employees in different regions and
multiple formats get appropriate performance feedback. Tesco adds to the effectiveness of its
steering wheel report with small lists that explain important strategic key elements simply so that
employees can pursue in their routine functions. The TSW has assisted the company in focusing
on its strategy during its rapid growth in the 1990s and the 2000s (Kaplan, 2008, p 1-2).

Tesco’s Strategic Map in the Coming Years

Tesco has an established and steady growth strategy that is based upon broadening business
scope in order to achieve sustainable long-term growth by pursuing customers into large and
growing markets at home and new markets overseas (Kaplan, 2008, p 1-2). The company’s
growth strategy has five main components, namely (a) to achieve success in international
retailing, (b) to increase the core UK business, (c) to achieve equal strength in non-food
businesses, (d) develop retailing services and (e) place the community at the centre of all
operations. Tesco’s business strategy has been based on diversification during the last decade
and the company intense to strengthen its various businesses across multiple countries and
formats during the next two years (Kaplan, 2008, p 1-2).

The company’s strategic objectives for the coming two years are indicated in the BSC chart
provided below. These objectives have been based essentially on increasing and maintaining the
important thrust areas of the company.

Financials

 Improve group sales by more than 10%

 Reduce start-up losses in the US and make US operations profitable
 Improve international sales by more than 25%
 Improve return on capital employee to 15%
 Improve UK market share by 1%

Customers

 Focus on customers having to spend less in the UK

 Gove customers health choices
 Improve customer choice
 Improve range of clothing
 Improve range and quality of general merchandise
 Increase product range of Tesco bank
 Make FF a global fashion brand

Processes

 Improve health and safety processes

 Improve capabilities of people
 Improve processes for product safety
 Improve controls for fraud and compliance
People

 Create 20,000 new jobs each year

 Reward our employees for their work and support their development
 Develop leaders with greater intensity
 Improve the effectiveness of whistle blowing policy
 Improve diversity and inclusivity
 Improve employee retention to 95%

Apart from the above quadrant, Tesco also has the following strategic objectives in Community
Care. Tesco has undertaken numerous initiatives in labeling of products, reduction of carbon
footprint, diverting store waste directly to landfill and reduction of carbon emission from stores
and distribution centers. The strategic objectives for the next two years in this area have been
formed on the basis of Tesco’s commitment in specific areas of community care.

Competitive Environment of Tesco

Tesco is the largest food retailer in the UK and one of the leading grocery retailers in the world.
It supplies 30% of the food purchases made in the UK. More than 550,000 employees service the
company’s customers in nearly 5,000 locations spread across 14 countries in Europe, Asia and
North America (Tesco plc, 2010, p 1-3).

The company’s operations in the British retailing space, coupled with its steady overseas
expansion, have opened it to numerous competitive challenges and threats. In the UK, the
company faces strong and increasing competition from its heavyweight rivals like ASDA-
Walmart, Sainsbury’s and Morrison (Finch & Wood, 2010, p 1-2). Each of these organisations is
constantly trying to improve its market share through various customer focused and efficiency
oriented strategies (Finch & Wood, 2010, p 1-2). Whilst Tesco continues to lead in market share,
sales and profitability in the UK, it remains under constant competitive pressure and any
strategic or market place error could have adverse results (Finch & Wood, 2010, p 1-2). The
economic environment in the UK is possibly going through its worst turmoil since the 1980s.
Increasing unemployment, thousands of job losses and a very slowly reviving economy have
dampened the enthusiasm of supermarket shoppers and created difficult market conditions for
market participants (Kollewe, 2010, p 1-2). Sharp reduction in government spending, the
proposed elimination of thousands of public sector jobs by the present coalition government and
the three-fold increase in academic fees have already led to widespread protests and are expected
to affect the economic climate further (ABC Inc, 2010, p 1).

Whilst the company is steadily increasing its global footprint, the UK continues to be its
overwhelmingly large market and accounts for practically 67 % of its total sales and 71 % of its
profits (Tesco plc, 2010, p 1-3). The economic and social turmoil in the country, along with
increased competitive pressure from its main competitors will certainly intensify environmental
and competitive challenges for the company intense in the coming years (Tesco plc, 2010, p 1-3).

Tesco has in recent years been working at steadily expanding its global operations. Its global
presence is however less than that of Walmart, Carrefour and Metro and its position in the global
retail market, whilst strong and increasing, do not mirror its dominant position in the United
Kingdom and it is the grocery leader in only two overseas markets, Malaysia and Thailand
(Finch & Wood, 2010, p 1-2). Tesco, like other major firms expanding strongly into international
markets often faces different and difficult environmental and competitive conditions in its
various operational regions. Much of the competition in its overseas markets comes from
numerous local competitors who not only operate with far lesser overheads but also understand
local tastes and preferences much better. Tesco is combating competition in its overseas markets
and trying to establish its presence with the help of well established local firms and different
store formats (Tesco plc, 2010, p 1-3). However the global experiences of various supermarket
majors like Walmart and Carrefour reveal that global expansion is not easy and significant
market failures can occur from incomplete understanding of market requirements and choice of
market strategies (Sarkar, 2009, p 1-3).

Tesco’s Corporate and Marketing Strategy

Tesco’s rapid growth in recent decades has been driven by its carefully planned and sustained
customer focused strategy. The company is possibly the only retailer to appeal to different
market segments, upmarket, midrange and low price. It constantly focuses on improvement of
customer value and services with focused action in areas like supply chain management, pricing,
quality, product range and in-store as well as on-line customer convenience. The company
initiated a major strategic change in the mid 1990s with the adoption and customisation of the
balanced scorecard approach, soon after it was first advanced by Robert Kaplan and David
Norton.

Balanced Scorecard Approach

The balanced scorecard approach was developed by Kaplan and Norton to provide businesses
with a holistic tool for performance measurement in different critical areas of business firms.
Whilst much of performance measurement in the past focused on the financial aspects of the
business, the balanced scorecard approached performance measurement from four viewpoints,
namely the financial perspective, the customer perspective , the business process perspective and
the learning and growth perspective (Kaplan & Norton, 1996, p 7-13).

The balanced score card whilst originally constructed for measurement of performance is now
used for formulation and implementation of strategy by business firms. Organisations adopting
the balanced scorecard set objectives in each of these areas and thereafter formulate targets and
initiatives for meeting such objectives, as well as measures to assess actual progress in meeting
them (Kaplan & Norton, 1996, p 7-13). Its use enables firms to clarify strategy in terms of the
different dimensions outlined by the balanced scorecard tool, communicate strategic objectives
in different areas, plan set targets and align strategic initiatives, and implement systems for
achievement of feedback and engagement of double loop learning (Kaplan & Norton, 1996, p 7-
13).

Adoption of Balanced Scorecard by Tesco

Tesco adopted the balanced scorecard method in the mid 1990s to drive its strategy and
operations. Tesco’s adoption of the balanced scorecard method led to the development of the
famous Tesco Steering Wheel, which was originally divided into four quadrants, namely
Customers, People, Operations and Financials (Kaplan, 2008, p 1-2). The Tesco Steering Wheel
(TSW) originates from the company’s core purpose and long term objective, namely the creation
of value for customers in order to earn their constant loyalty. The company added a fifth
dimension to the TSW in 2007, namely community, in order to encourage employees to become
excellent citizens and improve their communities. A diagram of the new Tesco Steering Wheel
with five quadrants is provided as under (Kaplan, 2008, p 1-2).

(Source: Kaplan, 2008, p 1)

Tesco’s steering wheel helps in ensuring that its 550,000 employees in multiple countries work
towards delivering distinctive and unswerving buying experiences to consumers in each and
every store. The concept of the TSW came about from the adoption of the balanced scorecard in
the early 1990s when Tesco engaged in a process to elucidate its mission and strategy to ensure
the realization of this objective. “Tesco, (in the words of Sir Terry Leahy, CEO) doesn’t want
one leader. We want thousands of leaders who take initiative to execute the strategy.” (Kaplan,
2008, p 1)

Tesco used the steering wheel, a clear symbol for a tool to drive performance and assist
employees find the way into the future, to communicate to its employees. The original TSW has
had four equal arcs, representing the four areas of balance scorecard focus, namely financials,
customers, operations, and employees. The company added another dimension, community, to
the TSW in 2004 to encourage and support workers to participate in and help the communities
where they work and live (Tesco plc, 2010, p 1-3).

Tesco’s steering wheel is not easy to implement. Extensive efforts are required by way of
consumer research, collection of data, and analytics to ensure that objectives and metrics
continue to remain appropriate, even as consumer tastes and preferences change and competition
intensifies (Kaplan, 2008, p 1-2). All Tesco stores get monthly updates on the steering wheel,
summaries of metrics of the five arcs four arcs, so that Tesco employees in different regions and
multiple formats get appropriate performance feedback. Tesco adds to the effectiveness of its
steering wheel report with small lists that explain important strategic key elements simply so that
employees can pursue in their routine functions. The TSW has assisted the company in focusing
on its strategy during its rapid growth in the 1990s and the 2000s (Kaplan, 2008, p 1-2).

Tesco’s Strategic Map in the Coming Years

Tesco has an established and steady growth strategy that is based upon broadening business
scope in order to achieve sustainable long-term growth by pursuing customers into large and
growing markets at home and new markets overseas (Kaplan, 2008, p 1-2). The company’s
growth strategy has five main components, namely (a) to achieve success in international
retailing, (b) to increase the core UK business, (c) to achieve equal strength in non-food
businesses, (d) develop retailing services and (e) place the community at the centre of all
operations. Tesco’s business strategy has been based on diversification during the last decade
and the company intense to strengthen its various businesses across multiple countries and
formats during the next two years (Kaplan, 2008, p 1-2).
The company’s strategic objectives for the coming two years are indicated in the BSC chart
provided below. These objectives have been based essentially on increasing and maintaining the
important thrust areas of the company.

Financials

 Improve group sales by more than 10%

 Reduce start-up losses in the US and make US operations profitable
 Improve international sales by more than 25%
 Improve return on capital employee to 15%
 Improve UK market share by 1%

Customers

 Focus on customers having to spend less in the UK

 Gove customers health choices
 Improve customer choice
 Improve range of clothing
 Improve range and quality of general merchandise
 Increase product range of Tesco bank
 Make FF a global fashion brand

Processes

 Improve health and safety processes

 Improve capabilities of people
 Improve processes for product safety
 Improve controls for fraud and compliance

People

 Create 20,000 new jobs each year

 Reward our employees for their work and support their development
 Develop leaders with greater intensity
 Improve the effectiveness of whistle blowing policy
 Improve diversity and inclusivity
 Improve employee retention to 95%

Apart from the above quadrant, Tesco also has the following strategic objectives in Community
Care. Tesco has undertaken numerous initiatives in labeling of products, reduction of carbon
footprint, diverting store waste directly to landfill and reduction of carbon emission from stores
and distribution centers. The strategic objectives for the next two years in this area have been
formed on the basis of Tesco’s commitment in specific areas of community care.

 Support causes in local communities.

 By and sell products responsive.