Tesco Supermarket Management

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Executive Summary

This paper evaluates how elements such globalization, organizational culture and structure, leadership, change management, decision making processes, communication strategies and motivational methods affects Tesco plc in organizational and people management. These are important elements in ensuring the success of any organization.

The discussion has revealed how globalization caused the corporation to expand its tendrils to other emerging markets. Tesco has been involved in acquisitions and takeover bids to maintain its competitive advantage. In organizational culture, it has been revealed that Tesco has a strong commitment to its customers to deliver quality products and high quality standards of services.

The paper has also discussed how the corporation switched from a functional to a divisional organizational structure to enable it effectively manage its global operations and the massive number of employees. The ever changing global economic environment forced the corporation to adopt an organizational structure that could foster cost-effectiveness, organizational efficiency and employee commitment.

The corporation’s leadership style is about influencing individuals to achieve more for the company rather than sorely relying on the leader to make achievements for the company. These and many other issues are discussed in the paper.

Introduction

Ever since Tesco plc was founded by Jack Cohen in 1919, it has been able to sustain its growth to become a globally recognized grocery and general merchandising retail chain. During its formative years, Tesco specialized in serving the UK market mainly in food and drink.

Over the years, the corporation has increasingly diversified its product lines to include clothing, food products, consumer electronics, telecommunications, music download services, financial, flower delivery, legal, online diets, software, and car insurance services (Datamonitor, 2004 p.12).

It is the purpose of this paper to critically evaluate how globalization, organizational culture and structure, leadership, change management, decision making processes, communication strategies and motivational methods influence the retail chain in people management.

Globalization and its Effects

Globalization is the name given to the various processes that aims at enhancing the connectivity and interdependence of the global markets and businesses (InvestorWords.com, 2009 para. 1). The forces of globalization have enabled Tesco to transform its operations from a local business entity into a global business organization.

The effects of globalization have seen Tesco diversify in both geographical locations and product range (Hutchings, 2005, p. 349). The corporation’s geographical expansion started in 1995, when the corporation commissioned a retail store in Hungary.

To maintain its competitive advantage in international markets, the retail chain opened other outlets in Ireland, the Czech Republic, Kingdom of Thailand, Taiwan and the Republic of South Korea in the 1990’s (Datamonitor, 2004 p. 5).

Due to globalization, the corporation had to expand its tendrils to reach other emerging markets inline with the global trends. This entailed using a lot of investments to expand internationally since little potential for further expansion existed in the already saturated British market.

Tesco has been involved in acquisitions and takeover bids to maintain its competitive advantage. In essence, the corporation enters emerging markets by acquiring performing retail chains. In 1994, Tesco acquired both Global TH and WM Low and Co. In 2004, the corporation concluded its acquisition of the 40-plus Adminstore group (Tesco Merger, 2004, para. 2).

This acquisition enhanced the dominance of the corporation in the UK retail market. The corporation has been affected by issues dealing with government policy especially in its international destinations. Issues dealing with tax regimes, labour laws and work policies have always challenged Tesco’s quest to conquer international markets.

However, Tesco have relied on stringent management practices to boost its performance internationally. The 2004 financial statistics on Tesco revealed that it was a market leader in six of the twelve countries it had invested in (Datamonitor, 2004, p. 15).

Organizational Culture and Structure

Price (2007 p. 101) argued that a well formulated organizational culture coupled with effective organizational structure should be viewed as reference points for people management. Tesco plc has contracted over 440,000 employees in over 3,700 retail stores around the world (English, 2009 p.1).

In this perspective, Tesco must have a resilient organizational culture and a flexible structure to effectively demonstrate their core business interests in countries exhibiting a multiplicity of diverse cultural orientations, business etiquettes, leadership styles and techniques of conducting business.

Organizational culture details how work is perfumed in the business entity, and lays the groundwork for acceptable and non-acceptable behaviours and actions (Cranwell-Ward et al, 2002 p. 365). At Tesco, the management has realized that workers are more likely to achieve happiness if the core values and beliefs of the corporation are aligned with their own.

According to Tesco’s CEO Sir Terry Leahy, the corporation’s future success will be dependent on its own values. Presently, the corporation’s organizational culture has enabled it to achieve success in areas where other supermarkets have failed. Tesco shares a strong commitment to its customers to deliver quality products and high quality standards of service (Williamson, 2000, para. 10).

Its vision of excellence has enabled the organization to achieve success in many areas. The corporation’s staff members exhibit positive attitudes towards the customers in addition to showing high standards of professionalism, respect, self-regulation, pride, continued improvement, openness, team spirit and partnership. Tesco employs a flexible style of working to permit for additional trading hours.

However, staff members are always left with the leeway of deciding the times they would like to work. These fundamental values are critical to the success of Tesco. The illustration below shows how organizational goals, leadership abilities and organizational culture are aligned to achieve success.

Figure 1: alignment framework of goals, leadership attributes and organizational culture

Alignment framework of goals, leadership attributes and organizational culture

Organizational structure is used to describe how individuals and tasks are arranged within a business entity in order to help the organization in meeting its fundamental objectives (Hofstede & Hofstede, 2005 p. 252).

According to Industry experts, Tesco supermarket practise a strategic business unit (SBU) model of organizational structure in order to enhance the level of competitiveness within individual market areas and across geographic regions (Hutchings, 2005 p. 354). The retail chain utilizes a four-part growth strategy, namely the core UK business, international services, non-food services and retailing services (Tesco, 2009).

These growth strategies can be perceived as people management systems (Price, 2007 p. 64). During its formative years, Tesco utilized the functional organizational structure (Wentling, 2004 p. 172).

Its stores in the UK were divided into comparatively simple components since it had not undertaken comprehensive diversification of both products and geographical locations (Hutchings, 2005 p. 351). In terms of people management, this structure is advantageous since employees can clearly understand the corporation’s operations, command structures, and tasks and responsibilities.

The corporation switched to a divisional organizational structure to enable it effectively manage its global operations and the massive number of employees. Under the divisional organizational structure, various departments and stores are divided into self-contained components, able to respond to environmental stimuli on their own (Prince, 2007, p. 188).

The ever changing global economic environment forced the corporation to adopt an organizational structure that could foster cost-effectiveness, organizational efficiency and employee commitment (Prince, 2007, p. 184).

The divisional organizational structure has greatly assisted the corporation in managing the human resources under its disposal in addition to managing its market entry and product offerings to fit individual market segments in diverse countries (Hutchings, 2005 p. 353).

In terms of people management, the divisional structure has enabled Tesco’s employees to achieve team spirit, and has enabled the customers to easily identify with the organization’s products and services based on the geographical area of operation (Prince, 2007 p. 188). Also, this arrangement gives managers the opportunity to develop broad skills needed to drive the organization’s agenda forward.

Indeed, the retail chain has successfully used the divisional structure to coordinate and reconcile its operations, decisions, and strategies, both at the corporate level and the business unit level (Prince, 2007 p. 188).

Through divisional structure, Tesco has successfully ventured into international markets by making adaptations to the local culture rather than attempting to impose their products and services to the local populations.

Leadership

Tesco has employed a combination of good leadership, effective management, and a lean business model in its quest to rise above its competitors especially in the UK market (Bono & Heller, 2006 para 1). Tesco’s leadership ethos is reflected in the corporation’s organizational culture.

In a 2007 interview, Tesco’s CEO Sir Terry Leahy argued that leadership should be about influencing individuals to achieve more for the company rather than sorely relying on the leader to make achievements for the company (Benjamin, 2007 para. 9).

According to the CEO, leadership should be about motivating and influencing employees, and challenging them to achieve more for their own objectives as well as for the objectives held by the organization.

By any standards, the above leadership style can be termed as transformational. In leadership theories, transformational leaders inspire their followers to rise above their own self interest for the purpose of accomplishing the objectives set by the organization (Tejeda et al, 2001, p. 41). As of February 2009, Tesco had over 400,000 employees working in over 3,500 stores globally.

To manage such a huge number of employees, leaders must have the capacity to instil a profound and long-lasting effect on the subordinates. Leaders must also have the capacity to deal with old challenges in new ways. To deal with such a huge multitude of employees, leaders must be charismatic, and must be able to provide vision and instil a sense of pride on the subordinates.

Consecutive studies have revealed that transformational leadership is correlated to organizational success (Tejeda et al, 2001, p. 43). The leadership style used in Tesco can be used to demonstrate why the corporation have continued to grow even in the face of economic challenges.

Leaders such as the CEO and other departmental leaders using situational leadership have been able to communicate high expectations to the employees, not mentioning the fact that they have been at the forefront in offering individualized attention and promoting rational thinking among employees. These are some of the basic tenets of transformational leadership.

Change Management

Organizations must increasingly adapt to the forces of change if they are to survive the harsh business environment of the 21^st Century. Innovation and creativity are two components that have enabled Tesco to negotiate the changes occasioned by both internal and external environment. Many supermarkets have made mistakes by not recognizing their trading environments.

However, Tesco has developed innovative strategies that enable the corporation to account for its customer’s buying habits that change with seasons. Some branches are known to hold a sequence of Customer Question Times, where customers are invited to ask questions (Williamson, 2000 para. 6).

Such innovative undertakings enable the retail chain to learn about new environments, trading and business practices, customer buying practices, and the perceptions and values held by the customers regarding the corporation. Such an arrangement enables Tesco to be proactive in dealing with the factors that leads to change.

Decision Making Processes

Different types of decision making processes are needed for diverse situations. At Tesco, the customer is placed at the heart of any decision-making process. According to Drive (2004 p. 7), all decisions made by Tesco’s management are supposed to be rational, accountable and transparent. Although major decisions are expected to come from the top managements, store managers always involve the workers in decision making.

Brief meetings are convened to offer the workers an opportunity to give their inputs and share their challenges and problems with the management.

The collaborative decision making not only ensures that the corporation remains ahead in its quest to conquer the retail markets but it also offers the much needed motivation to the employees. However, the decision on whether to implement the suggestions made by the employees rests sorely on the managers (Cranwell-Ward et al, 2002, p. 146).

Communication, Negotiation, Conflict Resolution, and Motivational Methods

Tesco Plc has always recognized that open communication channels and open door policy are fundamental to its success. The management has also recognized that well-motivated employees are vital for the sustained success of the organization (Cranwell-Ward et al, 2002, p. 146). Tesco started a review of work methods in the 1990’s to with the challenges of an increasing variety of products and services.

The review, also known as FUTURE program aimed at opening the channels of communication for effective management of workers. In addition, the program was aimed at freeing the employees so that they could achieve more for the organization. At Tesco, every worker has been given the opportunity to identify and voice the challenges faced, including suggesting solutions in an open and structured manner.

This serves to motivate employees to achieve more for the company while working in an environment where the freedom of communication is guaranteed and respected.

Through the FUTURE program, workers are offered the opportunity to negotiate for the tasks and duties done on behalf of the organization and how such duties could be streamlined, improved or stopped if they have no value addition. Again, this kind of freedom and responsibility serves to heighten motivation levels on the part of employees.

According to Cranwell-Ward et al (2002), “the consultation and involvement process, combined with additional communication results in a release of energy and enthusiasm in staff as they become aware that their views are appreciated and ideas actioned” (p. 146). The management also uses feedback and regular communication to enhance elevated states of motivation and productivity.

At Tesco, routine and tools that enhance more face-to-face communication on individualized basis enhances motivation on the part of employees even in times of intense organizational change. Team meetings are also used by the management to brief and consult employees on a variety of issues relevant to them.

These open communication channels ensures that conflicts are solved through amicable ways and employee-management relations remains cordial. Consequently, employees are able to attain high motivational levels to propel the corporation into new heights in terms of performance.

SWOT Analysis

In strengths, Tesco is the leading British retailer based on the local market share and global sales. In addition, the corporation ranks among the three largest worldwide retailers based on both revenue and profits (Tesco, 2009). The corporation’s multi-format capacity will ensure its continued growth in both food and non-food market shares.

Tesco’s diversification into non-food items such as insurance, internet and banking services have only served to increase the corporation’s financial clout. Tesco.com is the leading online supermarket globally. What’s more, the corporation have been able to build a formidable brand image that is associated with quality customer shopping experience, trustworthy goods and products, and excellent value for money.

In weaknesses, Tesco has often been accused of overly relying on the UK market. The corporation has a lot of opportunities especially in the non-food retail sector. According to industry experts, the corporation can continue to use its low cost structure coupled with improved merchandizing expertise to make significant inroads into the non-food market share, especially in electronics, internet and entertainment.

Tesco’s threats arise from the external operating environment, stiff competition from peer supermarkets, economic crises and mergers of supermarkets especially in the UK.

Conclusion

According to the discussion above, it is evident that Tesco will achieve monumental growth in the coming years since it has successfully fended of the 2008 economic crises despite undertaking aggressive expansion programmes (English, 2009 p.1).

While the corporation’s financial clout and customer base looks stable for now, immense opportunities for growth exists in the future due to the way its organizational culture, structure, decision making processes and leadership has helped the supermarket to manage people – both employees and customers.

Tesco’s management of the above elements have inarguably enabled it to foster cost-effectiveness, organizational efficiency and employee commitment. Consequently, Tesco is headed for better times in the future due its effective strategies in both organizational and people management.

List of References

Benjamin, T. (2007) Transcript: Terry Leahy, CEO of Tesco. CNN. Web.

Bono, E., & Heller, R. (2006) Tesco Management. Web.

Cranwell-Ward, J., Bacon, A., & Mackie, R. (2002) Inspiring Leadership: Staying Afloat in Turbulent Times. Cengage Learning EMEA Datamonitor. (2004) Tesco Plc. Web.

English, S. (2009) Tesco Keeps its Crown as Results Beat City Forecasts. The Evening Standard. Web.

Hofstede, G., & Hofstede, G. J. (2005) Cultures and Organizations: Software of the Mind, 2^nd Ed. London: McGraw-Hill.

Hutchings, I. (2005) Tesco in the Czech Republic. In M. Terterov & J. Reuvid (Eds) Doing Business with the Czech Republic. GMB Publishing Ltd. ISBN: 9781905050550

Investor Words. (2009) Globalization. Web.

Price, A. (2007) Human Resource Management in a Business Context, 3^rd Ed. Cengage Learning Business Press. ISBN: 9781844805488.

Tejeda, M. J., Scandura, T. A., & Pillai, R. (2001) Transformational leadership. The Leadership Quarterly, 12, 31-52.

Tesco plc (2009) Welcome to Tesco Plc. Web.

Tesco Merger approval Criticized. (2004). Web.

Wentling, R. M. (2004) Factors that assist and Barriers that Hinder the Success of Diversity Initiatives in Multinational Corporations. Human Resource Development International, Vol. 7, No. 2, pp. 165-180

Williamson, V. A. (2000) Business in times of Change. The Irish Times. Web.

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