Answer to Question #296500 in Management for shan

Question

                                                

Jack Cohen founded Tesco Plc (TSCO.L) in 1919. After expanding into every available market in the United Kingdom, including developing new store formats for small areas (Tesco Metro) and a superstore format (Tesco Extra), new product lines such as electronics and home goods, and an environmentally-aware range of foods, the company began to expand internationally. 

Tesco operates using four strategic business units - Core UK, which handles United Kingdom grocery operations, International, which handles international holdings, Non-Food, which handles sales of electronics, home goods and other non-food items sold in Tesco Extra and other stores, and Retailing Services

Question 1

Based on the article above, Tesco choose to pursue SBU structure across all its business areas for maximising the degree of competitiveness. Advise Tesco based on your opinion on the success of TESCO upon pursuing the selected sturucture as the main tool to overcome competitors.

Answer 1

The structure of SBU consist of operating units; wherein the units serve as an autonomous business. The top corporate officer assigns the responsibility of the business to the managers, for the regular operations and business unit strategy. It is a fully-functional unit of a business that has its own vision and direction. Typically, a strategic business unit operates as a separate unit, but it is also an important part of the company. It reports to the headquarters about its operational status. This structure will work for TESCO since this principle works best for organisations which have multiple product structure. Using the SBU structure allows for diversification, products with a specific focus, and fewer distractions from within the competitive market.

SBU helps managers be focused on the different factors within the same organization. Each product or business unit has various requirements and these requirements can be managed efficiently by giving them their individual attention. Generally, there are some factors that are seen as determining the success of an SBU that is; the degree of autonomy given to each SBU manager, the degree to which an SBU shares functional programs and facilities with other SBUs and finally the manner in which the corporation handles new changes in the market. An SBU may share its parent organization's corporate identity or develop its own brand identity, depending on the degrees of freedom allowed to the management of the division. A one-fits-all strategic approach would be inadequate in large, diversified organizations and multinational companies. Dividing the corporation's operations into SBUs increases efficiency and market focus. SBUs are found to be a viable form of organizational sectioning because they ensure that products and product lines are given specialized focus, as if they were developed and marketed by an independent company. The SBU is driven by its own mission, which would be independent of that of the parent firm and the other SBUs in the organization. It would operate in a competitive market space that is separate from other divisions in the corporation. The convenience of operating through an SBU is that it would create a strategically focused management structure that is not distracted by the wider product portfolio of the corporation. 

Every business must find a strategy that enables it to achieve a competitive advantage in the marketplace. That choice of strategy is based on the strengths and weaknesses of the company's products and the position it wants to have in the minds of its customers. The best strategy is the one that leverages the company's strengths for the greatest profits and the highest return on investment.