Management Environment: Tesco Plc - Coursework Example

Management Environment: Tesco Plc The Organisation The organisation under evaluation is Tesco Plc Head Quartered in United Kingdom. This organisation would be evaluated in terms of Business Transformation enabled, Organisational Structure and Challenges, PESTE Analysis, Operational Challenges faced and Fayol’s Management Principles as follows. Part 1 The Business Transformation Process in an Organisation The Process of Business Transformation is considered as a key managerial initiative undertaken by the organisational managers through the effective integration of components related to human resources, technology and the existing organisational processes to the strategic objectives and goals of the company. This process of integration helps the business gain competitive advantage in terms of the changes in the external business environment. Henceforth the business transformation can also be observed as the process of ‘value generation’ or ‘value addition’ to the existing level of technological, human and organisational inputs to achieve the desired level of potential outputs (Leung, Chiu and Hung, 2010, p.131). Business Transformation Trends in Tesco The process of business transformation enabled in Tesco would be evaluated in terms of the changes or alterations brought about in the supply chain management structure of the company. Tesco is found to bring about large scale transformation in its supply chain processes along a four decade time frame to help render potential agility to such in meeting the needs of its consumers spread along the overseas market. The process of Business Transformation enabled in the company would be evaluated in terms of analysing the inputs, the process components rendering value addition and the potential outcomes. Inputs The process of business transformation enabled in the supply chain management system of Tesco was fuelled by key Inputs relating to the changing vision of the concern in gaining an enhanced space in the international marketplace. Other visionary changes brought about that acted as potential inputs to the business transformation process in Tesco consisted of enhancing the parameter of affordability and accessibility of rendering grocery food products to the consumers. Value Additions in terms of Enhanced Processes To satisfy the level of inputs or information gained in from the larger market the transformation process was highly subjected relating to the supply chain systems. Changes or transformations brought out in the supply chain systems of the company rendered the creation of regional and centralised distribution systems. In the initial stage the supply chain systems of the company was dependent directly on the supplier bodies supplying merchandises to the company outlets. The ‘Direct to Store’ supply chain process of the company happened to render differentiated assortments and varieties of products pertaining to the same category at different stores. Herein though the business process carried out related to focused decentralisation on the part of the store managers deciding on the level and types of merchandise to be traded yet it created a problem for the company to enhance its position in the global markets. The main reason attributed to the problem was that customers in different regions failed to gain the same type of product which in turn enhanced the level of dissatisfaction. Thus the centralised distribution system was brought about in which the store managers were required to furnish their orders and merchandise requisitions to the head or regional office. The Purchase Department in the Head Office or Regional Centres of the company thereby collaborated with the Supply Chain bodies to render effective quality and quantity of products in each of the different stores. Furthermore a pattern of electronic communication was enabled by the managers working at the centralised and local level to potentially collaborate with the supply chain teams. Output Henceforth the transformation of the Supply Chain networks of the company from ‘Direct to Store’ model to ‘Agile Supply Chain’ network contributed in effectively tracking the supply chain bodies to deliver products before time. Moreover the dependency on the centralised unit of the company to collaborate with the supply chain systems contributed in enhancing the competitive business position of the company. The consumers of Tesco spread along the global sphere reflected satisfaction in terms of gaining the right product, at the right price and in the right time. Dependency on the ‘Agile Supply Chain’ system further helped Tesco in gaining on competitiveness along the global scale and thereby relegating the company to a higher position in the positional matrix (Sople, 2012, p.240-241). Part 2 Organisational Structure of Tesco The managers of Tesco with the focus of internationalising the level of operations of the company focused on designing the organisation structure of the company as a Hybrid structure. The creation of a Hybrid Organisation structure helped the company in both working on in terms of centralised and decentralised organisational systems to enhance the competitive advantage in the long run. Conceptually the Hybrid Organisation Structure is that which tends to combine the attributes of both the product and the functional structures. Thus the activities of the company occurring at an international level spanned along different geographical sectors work based on the decentralised mode while other activities relating to decision making, planning and scheduling functions operate based on a centralised fashion (Blancett and Flarey, 1995, p.80). The Hybrid Organisational Structure of Tesco reflected below shows that the company functions mainly along two segments where the Chief Executive Officer of the Company along with the Chairman and Board of Directors fall under one wing. The other wing relates to the Chief Executive Officer of the Company relating to different international regions pertaining to Asian and European continents and other department or segment Heads. Thus wherein centralisation is reflected in terms of the First Wing the Second Wing reflects decentralisation where Unit Heads pertaining to Sales, International Financing, Business Development and for Internet Retailing Operations were created. The company based on the Hybrid Model reflected above aimed to gain an enhanced space in the international grocery retail market (Palmer, 2005, p.42-45). In addition to the Hybrid organisation, Tesco Plc is also observed to embrace the Flat Type of Organisation structure. Conceptually the Flat Organisation structure works on the existence of broader Spans of Control such that the organisational hierarchy is also short in nature. Subordinate teams in the concern can directly interrelate with the management groups in the concern depending on the existence of Flat Organisations. Thus the Chain of Command pertaining to Flat Type of organisations are also short in nature through which the higher managers can easily delegate tasks through decentralisation to the other middle or lower level managers (Gitman and McDaniel, 2008, p.190-191). An Example of a Flat Organisational structure can be reflected by the following diagram. Figure 1: Hybrid Organizational Structure of Tesco (TheOfficialBoard.com, n.d.) Figure 2 (Gitman and McDaniel, 2008, p.191) Potential Advantages and Disadvantages This type of Hybrid Structure gained in by Tesco rendered potential advantages and disadvantages for the firm. Focusing on the ambit of advantages operating based on the Hybrid Structure made the managers located at the head office render potential control over the supply chain bodies along the different geographical regions. Further the decision making activities of the company also gained momentum pertaining to the activities like mergers and acquisitions conducted along the international sphere. However again such Hybrid Structures spelt potential disadvantages for the Tesco in that the company management failed to evaluate the need for effective human resources along international markets. Thus the potential investments rendered by the company to enhance its market share in potential markets felt short of the parallel recruitment of needed manpower to support the supply chain drives. The Flat Type of organisational culture is practiced by the company pertaining to the activities of internal communication. Existence of a Flat Organisation in the company through operation based on six levels from the Chief Executive Officer to the personnel working in the Front Line happens to reduce the level of complexities involved. It also happens to reduce the number of job positions in the concern and thereby encourages the people to deliver enhanced performance to gain potential growth. Further existence of a Flat Organisation structure also helps the managers to inculcate the process of change management in an effective fashion within the concern in helping the people get adapted to the new vision and mission objectives framed (Litle, 2012). Part 3 Operational Challenges faced by Managers in Tesco The managers of Tesco are found to face key operational challenges relating to the international business parameters of the company. Observation made shows that Tesco in terms of its operation in the Chinese market has focused on rendering large scale investment to build up a large number of outlets along diverse regions. However owing to the abrupt changes in the Chinese economy the company faces immense challenges in gaining a better trade-off to the amount of investments rendered in the region in terms of profits and revenues. The Chinese economy is found to be affected owing to the introduction of large scale economic reforms that in turn has reduced the potential of spending power of the individual consumers. More so with the emergence of an inflationary environment the policy changes brought about in the Chinese economy tends to gain a more sustainable ground thereby largely affecting the international business aspects of Tesco. The company is found to suffer from losses relating to its grocery business in the region (Barford, 2012). Again the operation of Tesco Plc is also found to counter potential challenges relating to the region of United Kingdom. The company having focused considerably relating to expansion opportunities in the Chinese soil has largely drifted from considering market development opportunities pertaining to United Kingdom. Tesco Plc managers focused more on market expansion opportunities in China through mergers and acquisition activities that in turn led to render more focus on China than in other business regions like United Kingdom. In United Kingdom the company is also charged with reducing the number of staffs per square feet making it trouble for the customers to shop and buy the right product. Again the company is also charged for not being able to properly manage and sustain the quality parameters of Private Label food products. Further operational challenges and rebukes are also being faced by the operational managers of the company in their shift to non-core business areas pertaining to banking and financial services and also other home based services rather than largely focusing on development of its food business. Owing to the above parameters the stakeholders of the company like its shareholders have started revolting pursuing the Tesco management to revise its focus on the United Kingdom region (Topham, 2012). Part 4 PESTE Analysis of Tesco Political Factors Affecting Tesco Firstly the government of United Kingdom is focusing on rendering of stringent rules relating to the marketing and consumption of healthy foods. Political campaigns are being conducted in several areas creating consumer awareness on the same front. This fact tends to render potential implications on Food and Grocery Retailers like Tesco in United Kingdom to render potential inspection of quality of foods marketed and thus would help in product and service enhancement. Secondly change in policy relating to taxes and a duty levied on the retail and consumer goods marketing companies tends to affect the business functioning of such corporations. Thus for companies like Tesco to effectively function in such changing markets require to create contingency funds to counter such implications (Dransfield, 2005, p.141-142). Economic Factors Affecting Tesco A significant economic factor that can affect Tesco’s operation in emerging economies is the shrinking of the supply chain potential. It is observed that in emerging economies the organised or the modern retail network has failed to significantly penetrate resulting in the existence of weak supply chain systems. This constitutes to be a potential factor acting as hindrances to retail growth (Tesco, 2012, p.27). Similarly another economic factor relates to regions like China that have gained ascension to the WTO (World Trade Organisation). Ascension to the body happens to make the regions follow the new regulations and policies pertaining to trade and environmental regulations that in turn affect the operation of retail organisations like Tesco (C-Change & Groundwork, 2008, p.16). Social Factors Affecting Tesco Two important social factors that tend to impact the business operations for Tesco can be highlighted as follows. With the rise in the birth and death rates relating to a particular region the sales of merchandises like toys, games and kids apparels and the demand for family services rendered by Tesco relating to funeral category rises in a respective fashion. Again, Tesco being a multinational company is always required to honour and respect diverse work groups and cultures. Henceforth the management of Tesco should be well concerned about protecting the rights of people belonging to religion like Islam (The Impact of the Economic Environment, n.d.). Technological Factors Affecting Tesco On the technological front development of the online business platform relating to services like Online Grocery and Retailing along with development of pages in popular social networking sites makes the company gain an international presence. International popularity has made the company increase on its market share and revenue margins in both developed and emerging international economies. Such moves also help the company render effective customer servicing in an instant fashion (Tesco, 2012, p.15). In addition to encouraging consumers gain the advantage to book orders online technological developments pursued also assists the company in managing the long lines of customers at the store tills. The use of developed scanners not only assists in effective and fast scanning functions but also helps the company in effectively managing the supply chain network and thereby reducing lead times (King, 2008). Environmental Factors Affecting Tesco The management of Tesco takes a closer concern on the use of recycled packaging products for use at its various stores thereby helping to reduce the amount of waste materials related to packaging operations. Use of recycled packaging products along with focusing on reduction of energy usage levels in the different stores also contributes in reduction of operational cost. Similarly the management of Tesco also tends to evaluate and map the Carbon Footprint related to the stores, logistics and supply chain systems. Reduction in the Carbon Levels through such actions helps the company develop an enhanced social responsible image (Tesco, 2008). Part 5 Evaluation made reflects that that the Concept relating to Division of Labour is well exercised in the ambit of Tesco’s operations. Division of Labour as indicated by Henry Fayol relates to the division of work based on the principle of specialisation. The management of Tesco focused on outsourcing the procuring and supply chain functions to external supply chain teams to help gain the right competitive advantage and benefits of consumer buying power (Gibbon and Ponte, 2005; Smith, 2006, p.38). However in terms of employee morale the grocery supermarket chain is found to reflect low potential in managing and sustaining a harmonious work environment in the concern that in turn would encourage the employees satisfy challenging customer requirements. Owing to loss of harmony the employees in Tesco mainly in the front line are found to render negative views on customer servicing issues in social networking pages. The company management is also working on reduction of sick and unplanned leaves through payment reduction and also in extending the retirement period thereby reducing employee morale (BBC News, 2004). References Barford, V., 2012. Five things Tesco got wrong. BBC News [Online]. Available at: [Accessed October 11, 2012]. BBC News, 2004. Tesco stops pay to cut 'sickies' [Online]. Available at: [Accessed October 11, 2012]. Blanchett, S. S., and Flarey, D.L., 1995. Reengineering Nursing and Health Care: The Handbook for Organizational Transformation. 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