Tesco Organizational Analysis - Case Study Example

Tesco Organizational Analysis Tesco Organizational Analysis Tesco is a retail multinational company that has its headquarters in Tesco Plc involved in food, mobile phones, fuel, electronics, wine, and other products. Tesco uses a number of platforms to achieve its global agenda including Giraffe Restaurants, Your Beauty Salon, Telecoms, petrol stations, Tesco Tires, and other platforms. Tesco has over 30% market share in the United Kingdom and over 2500 stores in 12 countries spread over three continents. The success of Tesco can be attributed to the organization of the business to ensure success in operations in different areas both locally and globally. This study aims at analyzing the organization of Tesco through analyzing Tesco’s structure, internal and external environment, and Tesco culture and competitive advantage. Tesco Structure Organization structure involves the manner in which an organization relates with the employees, the production lines, processes and functions, and decision-making process in the organization (DuBrin, 2000). Tesco has a hierarchical structure as evidenced many levels and accountability to more than one person by the employees at Tesco, who have to make decisions before the information is handed over to the CEO for final decision-making. A hierarchical organization structure involves a large amount of workers answering t supervising officers who answer to another upper level and this continues to the CEO, at the highest level, Terry Leary at Tesco (DuBrin, 2000).. The hierarchical structure at Tesco allows the employees to have an understanding of their expected duties and carry them without having to be over supervised. The hierarchical structure at Tesco also clearly defines authority and responsibility for every employee ensuring everyone is aware of the costs that occur when the tasks are not fulfilled within the required timeframe. Employees at Tesco are divided into various departments aimed at augmenting efficiency and better performance. The departments at Tesco include administration, finance, distribution, ICT, human resource, marketing, customer service, sales, research and development, and production. Each of the departments is responsible for different actions at Tesco to deliver growth and profitability aspirations of the organization. On products, Tesco has different product divisions determined on prices, packaging, and quality. These product divisions include Tesco Finest, Tesco, Tesco kids, Tesco Organic, Tesco Healthy living, and Tesco Value. Test Finest are products of the highest price and quality while Tesco Organic includes environmental friendly and healthy products. Tesco produces products of good quality for the middle-class while Tesco value includes basic products in at low prices. Tesco healthy living is products for athletes and other people aiming at healthy living while Tesco kids are products aimed at kids including toys. Internal Environment The internal environment is analyzed through analyzing the relation of business to customers, suppliers, distributors, and competitors. Customers: Tesco has see most of its recent success coming from the ability of the company to predict correctly and respond effectively to the needs of the clients through the products offered by the company. This has been possible through using the Club card that has allowed Tesco to have over 40 million customers signed to the program that allows Tesco to track customer purchases and trends (Humby et al., 2008). Offering wide product ranges, production and sale of products at low prices, and locating stores at places that deliver convenience to the customers are some of the ways taken by Tesco to ensure consumer loyalty and satisfaction. Online shopping, click and collect services, and home delivery are the recent innovative measures at Tesco delivering value and convenience to Tesco customers. Suppliers: Tesco’s suppliers comprise both local and international suppliers with Tesco taking a leading step in the development of small suppliers who deliver quality, efficiency, and convenience to the business. Tesco, however, pays lower prices to the suppliers and prefers bulk supply to reduce costs allowing the business to lower prices of its products and services. Distributors: Tesco’s distribution has been efficient in product delivery to the final consumers. This is due to the excellent distribution channels by the retailer using distributors and retailers to ensure product delivery at lower prices is done. Tesco is a retailer and sells the products directly to consumers through the high amount of stores in 12 countries and has a policy not to deal with regional and local distributors. The preference to distribute products through Tesco stores ensures lower costs and accountability at Tesco. Competitors: Sainsbury, Wal-Mart, Safeway, and Wm Morrison are the main competitors of Tesco since they provide similar products and services. Tesco maintains customer loyalty through effective internet market and online operations that have made the company increased global presence, offering of loyalty points and use of the Club card, innovation, and new product development, offering lower prices, and efficient and quick customer service (Humby et al., 2008). External Environment Analysis of the external environment at Tesco is done using PESTLE, which is an analysis tools for the understanding of the political, economic, social, technological, legal, and environmental aspects of the external environment that affects an organization. Political factors are among the external environment factors that influence the performance of Tesco with different tax rate in countries of global operations affecting the bottom-line of Tesco in terms of profitability and shareholder dividends. Political stability in countries of operations is the other political factors affecting Tesco’s operations owing to their influence on currency rates and the purchasing ability of the population in different countries. Governments within different jurisdictions where Tesco operates have been encouraging retail businesses to hire locals, thereby, shaping the diversity of Tesco’s employees, and encouraging the creation of employment opportunities by the retail giant. Economic factors affect Tesco’s performance including the effect of the credit crunch that resulted in a change in the growth strategy and the reduction in profitability of Tesco. An increase in the saving culture of the consumers has also affected the consumers at Tesco for fear of effects of the recession affecting Tesco negatively. The need for the production of affordable products has been necessitated by changes in economic conditions affecting the performance of Tesco globally. Social factors have shaped the behavior of Tesco with changes in customer preferences and needs being one of these factors. An increasing number of people require healthier organic food that has led to the shift of Tesco’s production and offer to ensuring organic and healthy foods are delivered in all of its stores. An increase in female workers in different areas and other demographic changes have led to the offering of prepared meals at Tesco stores recently. Technological factors: Tesco has been in the forefront in the incorporation of technology in its operations making a trend in the retail sector and accessing increased markets for augmented profitability and success. This is evident in the use of digital, internet, and mobile marketing at Tesco that has allowed the business to reach a higher amount of global customers. Technology use at Tesco is also evidenced by the introduction of electronic-shelf labeling and online shopping at Tesco through Tesco online. Tesco successfully instituted Club card and data mining techniques to learn customer needs and wants depicting the use of technology at Tesco that has been the major read on for the increased success of Tesco in recent years. Technology has aided in the introduction of self-check points and offering of wireless devices among the Tesco wide range of products. Legal factors: Different legislation in different parts of the world where Tesco operates include Fair trade policies instituted in the United Kingdom among other legislation affects the ability of Tesco to profitable operate. This is aimed at encouraging the use of fair business practices by the United States government in operations by Tesco and other retail companies in the course of their global operations. Government policies also have an impact in the performance and success of Tesco. These include policies that restrict retail businesses from changing current prices of their goods in response to change in demand without notice to the consumers. Tesco is able to comply with these legal obligations through different measures in the course of its operations allowing the business to have global operations that are successful and profitable. Environmental factors: changes in regulation and the need for business involvement in environmental conservation efforts are the main environmental factors affecting Tesco’s global operations. Tesco has made a commitment aimed at 50% reduction of carbon footprint by 2020 (Ryle, 2013). Tesco is also involved in environmental conservation through enlightening its consumers on environmental conservation measures to aid in minimizing wastes from the Tesco stores. Tesco Culture Culture is the beliefs, attitudes, values, and knowledge shared by a group of people. Culture is an important aspect for success in organizations especially those involved in international and global operations, as is the case in Tesco. Organization culture involves the values and beliefs in a firm and forms the personality of the business in terms of the relation between employees and with customers. Tesco’s culture involves understanding the different needs of customers in their cultural backgrounds and ensures each employee acts in the manner that is responsible in the community. Tesco’s culture involves active responsibility in relation to climate change, local communities, healthy nutrition, and responsible sourcing. Tesco’s Competitive Advantage Tesco has been in a position to remain profitability and augment global operations owing to three main competitive advantages. The main competitive advantage of the firm is overall cost leadership with Tesco having the lowest prices than its competitors through having economies of scale, paying lower prices to the suppliers, and reduced business operating costs (Ryle, 2013). Differentiation is the other competitive advantage at Tesco allowing the business to have products that differ from those offered by competitors and tailoring these products to a specific market segment. The third competitive advantage of Tesco is focus on a specific market segment and giving the best service and excellent quality delivery to this market segment. Tesco has segmented each market segment according to their needs and tailor products to the market segments generating loyal consumers with products specified for high class, middle and low class segments, kids, adults, and the youth, and other segments at Tesco allowing the company to have focus in market segments (Ryle, 2013). Each market segment is satisfied with the offering by Tesco and is loyal to the business. Any Recommended Changes The recommended changes for Tesco including increasing their commitment to the development of suppliers by offering better prices to ensure they have a consistent supply at all times and improve environmental conservation efforts. References DuBrin, A. J. (2000). Essentials of management. Cincinnati: South-Western College Pub. Humby, C., Hunt, T., & Phillips, T. (2008). Scoring points: How Tesco continues to win customer loyalty. London: Kogan Page Ltd. Ryle, S. (2013). The making of Tesco: A story of British shopping. London: Bantam Press. Read More