A considerable number of companies have developed into an essential part of the period of global competition, increasing development, improved business paradigms, and corporate reorganization. The continuing transformation from the traditional industrial framework with its hierarchical companies to a worldwide, knowledge-founded financial system and intelligent corporations, altering ideas regarding the social contract involving employers and employees, an progressively more adaptable pool of talent and a body of workforce, necessitates human resource (HR) purposes to realign and relocate itself in the vicinity of these drivers.
Changes in the nature of managerial work over the last years have a reflective and alarming impact on the roles of the HR managers within the new modes of organizational flexibility as well as leveling power of information technology. Generally, the emergence of HRM as a universal remedy for integrating business strategy and people management has exposed personnel practitioners to a fresh set of role challenges and managerial expectations that have stressed out the gaps between the HR language and reality. Further, the attempts to capture the changing environment of the HR personnel roles in response to major transformations in the workplace, the associated rise of HRM, and the competitive advantage of the whole organization through its manpower are few aspects that HR functions embark upon.
This study intends to assess the scheme of competitive advantage using effective human resource strategies in the organization. Particularly, the discussion will concentrate on HR strategy of Tesco. The relationship of strategic HRM and the acquisition of organizational commitment from the workforce as a whole are also included. In this manner, the paper will proved the assumption that competitive advantage is highly dependent to effective HR strategy.
Company Profile
Tesco is recognized to be United Kingdom’s biggest supermarket, dominating in British retail sector with both global sales and domestic market share. It originally caters in food but expanded it scope of service to clothing, consumer electronics, consumer financial services, internet service, and consumer telecoms. Tesco’s strategy is focused in long term engagement and based into four key parts namely: core UK business, non-food business, retailing services, and international presence (Tesco.com). In 2004, stores continue to expand from ninety-eight (98) to an intended two hundred seven (207) in 2005, half of which will be located in Asia. Tesco’s triumph as the company explains is due to an excellent Operating Strategy and Management team.
Tesco started off with self-service supermarkets in the U.S. during the 1930s. After a few years of operations, Tesco management then realized that selling a wider variety and larger stock volumes, and employing fewer staff dramatically lowered product prices. This was the start of great things for the company. Even as everything else crumbled into pieces during the war, Tesco was at the onset of its prosperity, thriving in the midst of adversity. It was in the 1940s when Tesco came to Britain to introduce self-service stores. About 20 years after, Tesco had become a familiar name, not only for groceries, but also for fresh food, clothing, and other household goods (Tesco PLC Interim Report, 2003).
Tesco has built its 100th superstore by 1985, and in 1987, it announced a £500 million plan to build 29 more stores. By 1991, the success of its petrol filling stations earned for the company Britain’s biggest independent petrol retailer. In the 1990s, the company built on its success by developing new store concepts and new customer-focused initiatives. Tesco broke new ground in food retailing by introducing, in 1995, the first customer loyalty card, which offered benefits to regular shoppers whilst helping the company discover more about its customers' needs. Other customer services followed, including grocery home shopping, Tesco Direct for catalogue shoppers and the Tesco Babyclub for new parents, as well as the launch of Tesco Personal Finance a joint venture with the Royal Bank of Scotland. It continued its winning streak in the new millennium. In January 2003, Tesco completed the acquisition of 870 T&S Stores in the UK; 450 of these stores will be converted to Tesco Express in the next three to four years. Moreover, Tesco opened in Taiwan in 2000 and, in May 2002 its first store in Malaysia in a joint venture with Sime Darby Sdn Bhd. In July 2002, Tesco acquired the “HIT” chain of hypermarkets in Poland. This acquisition added 13 hypermarkets to the Polish business, giving it a market leading position. By the end of 2002/03 Tesco had 45 percent of its space overseas, market leadership in 6 of its 10 countries, and was profitable in 8 out of 10 markets (Tesco PLC Interim Report, 2003).
Tesco is undoubtedly a whole mall in itself. Everything is literally found in one roof. No longer limited to grocery items, it offers services that would allow a customer to avail of everything in one stop. Besides the extra selling of books, cds, digital music, videos, flowers, games, gardening, gas, holidays and flights, they also provide financial services (e.g. credit cards, loans, mortgages, savings) insurance services (e.g. car, home, life, travel) telecoms services (e.g. Internet, home and mobile phone) and healthy living services (through its Tesco eDiets and healthy living club) .Tesco has developed various kinds of Tesco stores ranging from Tesco Extra, Metro Tesco and Tesco Express in its continuing quest to properly address the needs of their various customers when and where they want it. Advertising is done through personalities like Prunella Scales and Jane Horrocks. The grocery store is also mainly identified by a Clubcard from which a significant 80 percent of the sales are transacted. It also entails the use of vouchers which is also met with a similar success as over a billion vouchers are already given away.
Since Tesco is considered a one stop shop retail outlet that caters to every market segment in the country, it could be assumed that it possess a great number of manpower. This force is the underlying strength, aside from its powerful marketing strategy, that makes it dominant in its specified area of business operations.
Competitive Advantage and the Role of HR
Any organisation, may it be profit oriented or not-for-profit, the most vital asset is its employees. And for these organizations to maximize their assets, they should manage the employees’ working condition with intelligence and efficiency (Ulrich 1998). They must be allowed to be involved in making work-related decisions to further enhance the organisational structure (Delaney & Huselid 1996). Furthermore, the structure of tasks among the employees strengthens the organizational performance (Wilson 1989). It is therefore necessary to understand the employees for the organization to be effective (Schneider 1983). The development, building, motivation, enhancement and enrichment of the employees of any organization largely depend on the leadership, mandate and vision of the organization (Rainey & Steinbauer 1999).
Traditionally, HRM is the helps the organizations in achieving the goals of the organization by hiring and maintaining efficient employees. According to Sims (2002), the following are some of the responsibilities of HRM:
Train the workforce to maintain competitiveness of the organization.
Develop and communicate industrial policies and procedures in line with legislation.
Involvement in grievance and disciplinary hearings.
Lead negotiations.
Implement termination and hiring procedures.
Assessment and management of organizational climate and employees relations.
Liaison with trade unions.
Implementation of outcomes of collective bargaining and negotiation.
Develop compensation strategies and polices in line with legislation and the organization’s business strategy.
Attach meaningful monetary values to posts in the organization ensuring that the organization’s compensation is in line with market forces.
Develop appropriate compensation systems for the organization.
Manage overall labor costs.
Provide current information regarding employees to be used in the decision-making process and measurement of HRM’s contribution to the organization.
In this case, Tesco has 240,000 employees that contributed to the £33.974 billion GBP in 2005. The apparent effective implementation of HR functions by the HR personnel of Tesco is a basis itself to prove that HR strategy is a tool for competitive advantage. Being governed by CEO Terry Leahy, Tesco provided comprehensive execution of the HR function with respect to the employees’ welfare.
Further, Hessan & Whitely (1996, p.14) emphasized the idea to take advantage of the competitive situation not just by being better in how that product gets sold, serviced, and marketed at the customer interface. It requires that companies create breakthroughs in how they interact with customers, and design a way of interacting that makes an indelible impression on customers, one that so utterly distinguishes them from others that it becomes a brand in itself. In relation to Tesco, the products/services rendered are already their edge in the market operations. Aside from this, the continuous strategic planning and innovation, customer relations and welfare management, as well as HRM and its strategies, Tesco gained its respected reputation and dominance in UK retailing sector.
Tesco continuously invest not only to the international marketplace but also to their manpower. The idea of employee empowerment is potent to the organization. Participation of employee in the management is also recognizable. The practice of linking workers in the decision making process apparently had many benefits for the person as well as in the whole company and, as stated by its proponents, no actual disadvantages. For over half a century, proponents of participative management have unwaveringly claimed that the method provides an increase in the level of employee satisfaction, superior worker morale and motivation, developed company performance and efficiency, and greater acceptance by the workers of organizational change. Loaning a considerable reinforcement for the participative management development has been the redoubtable competition that is facing American companies from other countries, as well as the bothersome diminishing in productivity growth in a number of companies. With greater consideration now being provided to output and competitiveness, employee participation has been perceived as a significant step in the direction of acquiring both objectives (Maciariello, Burke & Tilley 1989).
Furthermore, leadership is a key issue in the development of groups, organizations and nations (Chesser, et al 2001). The study of leadership plays a crucial role in the behavioral and management sciences. It is generally accepted that good leadership is essential to the functioning of an organization. It may be useful to think of the leadership process as the interaction between the situation, the leader, and the followers. Leadership is a behavior so it is defined as a function of the leader's personality (Ratzburg 2001). Executing effective leadership style applicable to the working conditions and management strategy in Tesco HR practice guarantees eventual growth in the company’s performance and success. Tesco is always aware of and are always able to analyze change: evolving trends in the job market, new educational requirements and a clientele with constantly changing needs and characteristics. Thus, the implementation of transformational leadership (see Appendix I) is effective in maintaining its competitive advantage.
Truly, Tesco perfected the idea of effective HR strategy in gaining its competitive edge. HR development or the total improvement of all employees involved within the organization serves as the company’s strength. With this, the organizational performance of Tesco is flourishing and in a positive progression.
HR and Organization’s Performance
In the era of globalisation (Kim & Weaver 2000, 121; Ohmae 1990; Naisbitt & Aburdene 1990), every organization like Tesco must keep itself along with all the other organisations on being globally competitive. Corporate or organisational competitive advantage does not only depend on the organisation’s financial resources but on the human resources too. That is, for the organisation to achieve competitive advantage, the people involved in the organisation must also be competitive.
As organizations seek to develop sources of competitive advantage, researchers and practitioners have looked to firms' human resources. Recent research by Huselid (1995), MacDuffie (1995), Delery and Doty (1996), and others has demonstrated significant relationships between HR practices and organisational 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 (Becker & Gerhart 1996; Gerhart 1999).
The 90's are proving to be a decade of competition. Organisations are now faced with leaner structures and increased competition which in turn are generating a rapid pace of change in the workplace. The greatest barrier to adapting to continual change lies with the management of people rather than technology. In Tesco, the constant efforts of effective implementation and utilization of the HR strategies make it possible for the company to perform well in the market. The increasing profit yean in and year out is an evidence of the successful HR practice (see Appendix II).
Therefore, the knowledge and management of an organisation's human resources is pivotal to its responsiveness. In order to achieve this, the role of HRM needs to change from reactive to proactive. If HRM is to be used to an organisation'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 organisational systems and processes that enable individuals to add value within a larger organisational unit (Ulrich & Yeung 1989).
Treating the employees as champions and as a significant aspect of the organization naturally results to other positive outcomes. One of which is the improvement of the overall organizational performance (Brewer and Selden, 2000). A number of empirical studies have concluded that HRM practices have a significant effect on the organization, which leads to high performance (Haltiwanger, Lane and Spletzer 1999). One good example that identifies this relationship was the study conducted by Delaney and Huselid (1996). Utilizing 590 profit and non-profit-oriented firms, the researchers concluded that HRM practices like staffing selectivity and training are positively associated with organizational performance.
Organizational performance is achieved through HRM functions as they mold the employees as significant contributors to the firm. Having the appropriate skills that are honed to the maximum level, HRM practices will then lead to the attainment of various goals of the organization. From this relationship, it is then appropriate to conclude that the function of the HRM in a firm is not totally focused on hiring employees.
With Tesco and its management, organizational performance is reaping the fruit of success with the apparent results of effective HR strategies that goes hand in hand with the powerful marketing strategies that are put into operations. Today, as Tesco operates globally, the need to focus on international and strategic planning of HRM is necessary. Managing the diversified members of the labour force as well as the target market requires further involvement of the company to future feasibility studies and marketing probing. But with the existing resources of Tesco today, its operations will continue to flourish as it proves the assumption that effective HR strategies as well as practices serve as a competitive edge among other businesses both domestic and worldwide in operations. The competitive advantage of Tesco is credited to the suitable strategic plans of its administration including its HR. Indeed, effective HR strategy will result to a competitive advantage.
Further, Tesco is well on top of the retailing, as well as the Internet shopping industry now. Seventy-nine years after it was founded, Tesco is now well on its way of becoming an international brand. Adding up to its laurels, Tesco’s e-retailing arm is one of the most revered dot com shopping initiatives in the 1990s. However, with the continuing upsurge of internet technologies and the emergence of strong competitors, Tesco will need to undergo brand positioning and differentiation strategies to create and/or further its competitive advantages over other upcoming e-retailing companies. Moreover, while Tesco’s long-term strategies for growth have been successful, there still is a need for further scenario planning to predict and be prepared for the changing times ahead.
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.
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