Organisational Structure, Management Approach, And Industry Analysis Of Tesco In The Wake Of Brexit

Organisational Structure and its Effectiveness

Tesco is one of the biggest groceries and general merchandises firm in Britain. In terms of gross revenue it is the third largest retailer in the world and ninth in terms of revenues. It is having its branch in seven nations across Europe and Asia. In UK its market share is around 28.4% and is leader in groceries market of UK, Hungary, Thailand and Ireland. It was started as group of market shells by Jack Cohen in 1919 (Grant, 2016). In 1924, he purchased a tea shipment from T.E. Stockwell and named it Tesco. This report showcases the way in which structure functions appropriately after the decision of Brexit. It also suggests a modern day management approach that might help the firm in dealing with this situation. Last part of this report shows the industry analysis in the wake of Brexit.

Political environment in UK has changed and the decisions such as Brexit have affected the business operations up to a great extent. Both EU and Britain are calculating potential impacts that will be caused by the separation and hence companies will also have to plan their strategies to make sure that they reduce the impact of Brexit.

Organisational structure is understood to be as the system that shapes the way in which different tasks are directed so as to achieve the organisational goals.  It has a very crucial role in the management of business in different situations (Clarke, et al. 2017). Tesco’s organisational structure at the corporate governance level is parallel where there are several departments headed directors with a CEO heading them all.

At the store level its organisational structure is hierarchical which is reflecting its large size. There are four levels management in bigger stores but it is not rigid in the case of all the Tesco stores. The flexibility comes according to the size, range of store specific factors and also the location (Yueh, 2017).

Organisational structure helps organisation to strengthen the strategic decision making process. The flexibility in the organisational structure will help Tesco in adjusting according to the changing situations in the Brexit Environment. Since the financial problems in the European region have got bigger hence the corporate governance has to be very effective. Tesco has a parallel organisational structure to check and balance each decision being taken in this situation.  Since the turbulence due to Brexit at the store levels will be large hence the roles and responsibilities must be hierarchically distributed so as to improve the flow of instructions and make the work process smoother. In the wake of Brexit when the new ties and business partners need to be made, flexibility in the organisational structure will help the firms in managing the task (Howell, 2018). This will also help to manage changes that will be made at individual activities of the firm as experienced managers will be placed for each of their operations. Since the changes will be required due to the changing environmental conditions hence hierarchical structure could benefit the organisation.

One Management Approach That Could Help Tesco

Along with this the organisational structure of Tesco will help in removing the chances of failure and improve the risk taking ability of the company which is very much necessary in the environment that will be created after Brexit. Tesco has more local people in the organisational structure at the store. This will help the firm in managing the operations even after Brexit as they will not have to leave people from other regions of EU at important positions of the organisational structure. This will not create turmoil in the talent management of Tesco.

In order to reduce the impact of the Brexit, management needs to adopt an approach that is capable of dealing with the situations that would occur in front of the company on regular basis. Among the different types of management approach available with the firm, the best approach that suits the firm in the wake of Brexit will be Contingent approach. This approach will help the firm in managing all the situations that arise due to Brexit. Contingency approach states that no approach to management is the best approach and the changing environment cannot be handled with rigid approach. Company must change the approach according to the changing situation (Dudovskiy, 2016).

Since the consequences of the Brexit is uncertain and largely depends on the negotiation that is going on between EU and Britain. If the negotiations are in favour of the organisation, then there is a chance that the challenges for the companies working in the UK will be less otherwise company will have to face lot of challenges. Most numbers of issues will arise in operations management and for resolving these issues the most effective ways will be to use the contingency approach (Weinberg, 2017). The leaders needs to respond according to the situation and must have creativity in their idea so as to reduce the effect of challenges posed on different departments of Tesco due to changing environmental condition in the wake of Brexit.

For example there will be change in the supply chain management of Tesco as lot of suppliers and distributors of the Tesco are from different parts of the EU.  Company will have to find new partners and will have to improvise their supply chain management so as to ensure that no gap remains in the demand and supply of different types of products (Butler, 2018). In order to maintain the balance company will have to take contingency approach so as to act as per the changing demands of the market and hence availing products from the producers. Contingency approach will also help Tesco in making sure that they have an effective plan for dealing with different bleak situation that arise in operations management. In implementing this approach, flexibility in the leadership will play a much greater role. Contingency approach in the management will help in maintaining the faith in the minds of the stakeholders that the company is ready to face any situation that arise due the situations such as Brexit.

Industry Analysis of Tesco

For doing industry analysis, Porter’s five force model will be beneficial.

• Bargaining power of customers: This will still remain on the higher side as the competition within the industry is very large and people have huge numbers of options to select from (Itv Report, 2017). Only a slight reduction will in the numbers of company who were doing free trade in UK from other parts of EU.
• Bargaining power of suppliers: This will become moderate as the low cost suppliers of the Tesco that were from other parts of the EU might not be available hence it will increase the bargaining power of the local suppliers (Chapman, 2018). Still it will be moderate as there are large numbers of internal suppliers present in UK who will reduce each other’s power.
• Competition: There seem to be very little effect on the numbers of competitors present in the UK retailing market (Itv Report, 2017). Only a slight bit of reduction will be in the numbers of small scale companies as Brexit is going to affect them most harshly. Even in the wake of Brexit this threat remains on the higher side.
• Threat of new entrants: This threat is moderate as the changing norms will attract new investors to invest in the retailing sector. But, it is also the fact that in order to open such large supermarket chains lot of capital will be required hence the threat remains to be moderate (Bold, 2017).
• Threat of substitutes: There are large numbers of innovation going on in the retailing industry hence the numbers of substitute products are also in large numbers. This condition is not going to change much after enforcement of Brexit also hence this threat remains to be on the higher side (Conrad, 2017).

In the changing business environment it has become essential for the organisation to bring innovative strategic objectives so as to ensure the long term success of the company. For Tesco Innovative strategic objectives is to improve the service and value rather than pricing. They are planning to make their organisation more automated and hence removing large numbers of people from its stores (Potts, 2018). Removing people will help the firm in making cost cuts which is a major concern of the investors in Britain these days. They are planning to bring more innovative technologies in their operations so as to bring efficiency in the work process. Most of them will be in the supply chain management.

Conclusion

From the above based report it can be concluded that Tesco being one of the biggest retailers in UK will face different types of challenges in the wake of the Brexit. They have a parallel organisational structure at the corporate governance level and at the store level they have a hierarchical organisational structure. The flexibility in the organisational structure will help them in adjusting to the changing business environment due to Brexit. Contingency approach to management will let the functions of the company to be effective. Industry condition for the company will remain favourable and the innovative strategic objective that company has used is to bring automation to the business processes.

References 

Bold, B. 2017. Tesco brand ‘most associated with Brexit’. Online Available at: https://www.campaignlive.co.uk/article/tesco-brand-most-associated-brexit/1429028. [Accessed on 17^th December 2018]

Butler, S. 2018. Tesco to shed up to 1,700 jobs in new management shake-up. Online Available at: https://www.theguardian.com/business/2018/jan/22/tesco-to-shed-1700-jobs-in-new-management-shake-up. [Accessed on 17^th December 2018]

Chapman, B. 2018. Tesco planning to stockpile food over no-deal Brexit fears, supermarket admits. Online Available at: https://www.independent.co.uk/news/business/news/tesco-food-stockpiling-no-deal-brexit-a8566571.html. [Accessed on 17^th December 2018]

Clarke, H.D., Goodwin, M.J., Goodwin, M. and Whiteley, P., 2017. Brexit. Cambridge University Press.

Conrad, A. 2017. To go or not Tesco? Brexit’s Potential Impact on the UK Food Industry. Online Available at: https://rctom.hbs.org/submission/to-go-or-not-tesco-brexits-potential-impact-on-the-uk-food-industry/. [Accessed on 17^th December 2018]

Dudovskiy, J. 2016. Tesco Organizational Structure. Online Available at: https://research-methodology.net/tesco-organizational-structure/. [Accessed on 17^th December 2018]

Grant, W., 2016. The challenges facing UK farmers from Brexit. EuroChoices, 15(2), pp.11-16.

Howell, E., 2018. An Analysis of the Prospectus Regime: The EU Reforms and the ‘Brexit’Factor. European Company and Financial Law Review, 15(1), pp.69-100.

Itv Report, 2017. Tesco boss: ‘Brexit is squeezing household budgets’. Online Available at: https://www.itv.com/news/2017-04-12/tesco-operating-profits-up-30-to-1-28-billion/. [Accessed on 17^th December 2018]

Potts, O. 2018. Tesco’s new Brexit supermarket doesn’t stack up. Online Available at: https://www.spectator.co.uk/2018/09/tescos-new-brexit-supermarket-doesnt-stack-up/. [Accessed on 17^th December 2018]

Weinberg, C. 2017. Brexit vs. Tesco: Will Britain’s Largest Grocer Stand the Ultimate Test?. Online Available at: https://rctom.hbs.org/submission/brexit-vs-tesco-will-britains-largest-grocer-stand-the-ultimate-test/. [Accessed on 17^th December 2018]

Yueh, L., 2017. Britain’s Economic Outlook after Brexit. Global Policy, 8, pp.54-61.