Management Approach towards an Open Organizational System TESCO PLC - Coursework Example

 Management approach towards an open organizational system Assessing Management Approach towards an Open Organizational System ABSTRACT This report highlights the impact of external factors on organizational behaviour and management of the organization. It includes the Open System Model, political, economical, social, technological, environmental and legal analysis of TESCO PLC. It also explains the division of work in an organizational structure. It critically evaluates the work diversification model which is being exercised by TESCO PLC and its subsequent effects. It thoroughly examines the multi cultural factors that are impacting the organization. Investigation of challenges like consumer behaviour shift, changed societal mind set, employee related government laws, changing norms and market trends, and variable economic conditions faced by the management and strategic department of TESCO Public Limited is also included along with the measures that have been taken to confront them. Table of Contents Statement of submission………………………………………………………………02 Acknowledgement…………………………………………………………………….03 Abstract………………………………………………………………………………..04 Table of Contents………………………………………………………………………05 Management approach towards an open organisational system………………………06 a. Introduction……………………………………………………………………06 b. An open model system……………………………………………………...…06 c. TESCO PLC- an introduction………………………………………………....07 PESTEL analysis of TESCO PLC………………………………………………….....08 Division of work at TESCO PLC……………………………………………………..12 a. What is division of work…………………………………………….…….......12 b. Work division model implemented in TESCO PLC…………………..……....13 c. Analysis of work division at TESCO PLC……………………………...……..13 d. Organisational chart of TESCO PLC……………………………………..........14 Culture at TESCO PLC……………………………………………………………...…15 a. Cultural characteristics of TESCO PLC…………………………………….....15 b. Factors influencing its organisational culture……………………………….. ..15 Current organisational struggling scenario of TESCO PLC……………......................16 Conclusion ………………………………………………………………………….....17 Appendices………………………………………………………………………….....18 References...………………………………………………………………………18 Management Approach towards an Open Organisational System Introduction: An Open System Model: Before analysing the management’s approach towards an organisation, let us first define an open system and its relation with an organisation. An open system is a system which interacts with its environment. Conventionally, it is not an isolated system. The open system model can be defined as: ‘Congeries of interdependent flows and activities linking shifting coalitions of participants embedded in wider material-resource and institutional environments.’ Factors surrounding an organisation have a direct or indirect effect on it. Similarly, the forces and mechanisms which lie within the organisation, also affects environment. Scott proposes the following characteristics of open systems: 1. Self-maintenance: Agents in the system take resources from the environment to survive. 2. Protection: Systems do not seek protection from the environment; they have to use it as the source of information 3. Boundaries: Open systems do have boundaries which are difficult to define. 4. Sub-systems: Systems have subsystems that are linked through dynamic interaction 5. Negentropy: Energy that turns into work (opposite of entropy which never turns into work). Open systems takes energy from the environment and then recreate themselves 6. Morphostasis and Morphogenesis: Morphostasis are the processes that sustain the system (e.g. socialisation and control activities) while morphogenesis are the processes that change the system (learning, growth and differentiation) 7. Law of limited variety: The variety in a system will not be more than the variety of the environment. (Scott, 2003) Open systems help an organisation to pursue the better understanding of its environment. This can be very useful in designing strategies and policies to monitor and analyse the external agents that can affect an organisation in various ways. It enables the management to efficiently mitigate the risks associated with those external environmental elements. In addition, it assists them in recognising the opportunities that can be presented by external forces. Inter-organisational elements can be also improved, changed, replaced, reduced or raised accordingly. This can be done in order to support the internal components which are having a positive effect on intra-organisational environment. TESCO Public Limited- An Introduction: Now, let’s briefly introduce TESCO Public Limited in order to evaluate it as an open model organisation. TESCO PLC is a world-wide merchandiser and retailer of groceries. It’s headquarter is in Chestnut, United Kingdom. Founded by Jack Cohen in 1919 with the opening of its first store in 1929, the network of stores is now expanded in approximately 14 countries of Asia, Europe and North America. TESCO stands third on the list of largest retailers in the world with reference to revenues (after Wal-Mart and Carrefour). If compared by profits, it is the second best worldwide retailer after Wal-Mart. Its portfolio includes retailing of books, clothing, electronics, furniture, petrol, software, financial services, telecom/internet services, DVD rental and music downloads. PESTEL analysis of TESCO Public Limited: TESCO Public Limited is an organisation, running its business globally. It displays a good example of an open system model because of its widened exposure to the environment and its factors. PESTEL analysis can be useful to determine these factors. A PESTEL analysis stands for political, economical, social, technological, environmental and legal factors affecting, directly or indirectly, an organisation. Let’s see how many external factors are affecting TESCO and what impact they’re exerting on it. It can be nicely interpreted with the help of PESTEL analysis: 1. Political Factors: Since TESCO is operating its business in more than 14 countries around the globe, it’s deeply affected by the political conditions of these countries. Any changes in legislation, framework or law can positively or negatively affect it. It includes changes in employment policies, labour laws, industrial policies, taxes and trade policies. Pro-Western Governments encourage western companies to expand their business in their country while others resist it. World Trade Organisation’s access to China smoothens the way for western companies and organisations to operate their business in one of the world’s largest market comprising of 1.3 billion consumers. Change in political scenario leads to changes in government and this may result in change of policies. Promotion of the European blocks for free trading resulted in addition of 10 more countries in European Union. It has free trade policy which provides a platform to TESCO to expand its business to these new entrants. 2. Economic Factors: TESCO is a retailer so change in economic conditions, whether international or domestic, can cause a change in buying behaviour of consumers. Recent recession in global economy has also affected the sales of TESCO It can be affected by changes in demand-supply, price, cost and profit. Increase in unemployment rate of a country can decrease the purchasing power of consumer which results in declining profits. The good impact of recession on TESCO, however, was decreased income, resulting in lower demand of luxuries, appliances and electronics but it increased the demand of everyday groceries and general items. 3. Social Factors: Change in buying habits has converted into bulk-purchases due to one-stop shopping. This is all due to increasing popularity of “all things under one roof supermarket” culture. Change in lifestyle has also brought significant changes on TESCO business, for example, people are getting more conscious about health and the money they pay. Consumers prefer to buy nutritious and healthy products. Therefore, TESCO management now has to choose products that meet customer requirements. Customers are willing to pay through plastic money instead of cash. To accommodate this changing trend, TESCO was one of the few companies who started to accept payments via credit and debit cards. 4. Technological factors: It is the most influencing macro-environmental factor. Advancements in technology have transformed the processes of supply chain operations. TESCO has adopted online grocery retailing by using internet and intranet. E-commerce and shopping cart advancements have gained notable popularity in welfare societies. New Wine Application developed by Cortexica Vision Systems enables Tesco customers to shop from mobile. TESCO bought Electronic Point of Sale (EPoS), Electronic Funds Transfer Systems (EFTPoS) and electronic scanners. They remarkably improve the efficiency of distribution and stocking activities. The needs are being communicated to the supplier in real time (Finch, 2004). 5. Environmental factor: Factors affecting environment are of critical importance these days. It includes prohibition of products that create pollution and are hazardous to environment. Introduction and promotion of environmental friendly products are in demand. According to a research from National Statistics, the percentage of consumers using reusable bags has risen at the rate of 3%. Decrease in demand for plastic bags has reduced by the same rate. This has decreased the production cost. It is of immense importance to the corporate social image of TESCO. TESCO started to include data related to carbon footprint on dairy products, potatoes and orange juice. It also planned to expand its product line to bread and non-food items (TESCO, 2010). TESCO launched Greener Living Scheme for consumers. This was started to aware them on environmental issues like how to minimise food waste when preparing meals. (Yuthas, 2009). TESCO’s green Club started rewarding consumers and green Club card holders with reusable bags, recycling mobile phones and aluminium cans. It promoted bag-less deliveries, too. (TESCO, 2009) (Data monitor, 2010). 6. Legal factors: According to the Low Pay Commission Report (National Minimum Wage, 2009), the combined up-ratings of 2008 and 2009 have resulted in an increase of 15.5% in the minimum wage.  This has caused an increase of operating costs of supermarkets including TESCO. TESCO implemented the Food Retailing Commission (FRC) suggestion, which states that ‘an enforceable Code of Practice should be set up banning many of the current practices, such as demanding payments from suppliers and changing agreed prices retrospectively or without notice.’ (Mintel Report, 2009). Division of work in TESCO: What is division of work? The process of diversifying tasks and responsibilities among the employees of an organisation to achieve the organisational goal is called ‘division of labour’. Labour and work can be divided on the basis of different criteria. It includes: Division according to skills and expertise It includes the division of work in accordance with the skills and expertise required to do that job. For example, a person with good management skills can’t replace a production labour and an engineer cannot effectively manage the job of finance personnel. Division according to demand-supply mechanism Demand-supply shift also changes the workforce requirement and the division. For example, an increase in demand of a specific product will require an increase in the amount of labour for that department to meet the supply. Similarly, decrease in demand will result in shifting surplus labour to other departments. Division according to the nature of job Sometimes work can be divided on the basis of its nature, instead of skills. For example, door to door selling needs energy and good health, therefore, two salesmen with same skills and expertise but with different ages cannot be positioned at the same place. It is because of increase in age that causes decrease in tendency to remain healthy and fit. Diversification according to gender, race and religion Work can also be categorised on the basis of gender, race and religion. A person who’s religiously vegetarian won’t be given a job of a chef in a carnivorous environment. Likewise, a devout Muslim cannot be assigned a job to sell wine. Therefore, TESCO management has to keep all these factors into consideration before assigning the jobs. Division according to society and culture Labour diversification can be done on the basis of societal and cultural norms. In South-Asian countries, most women avoid working in third shifts while in Western cultures it is not a consideration. Work division model implemented in TESCO: The work division model being implemented in TESCO PLC is a mixed model. The main characteristics of that model are: Division on the basis of skills and expertise; irrespective of background, gender, race, nationality and religion. Decentralisation of management; each segment has its own manager to manage its operation and is responsible for every taken action. Moderate span of control; managers don’t only deliver orders but they also have the power of decision making. They are accountable to the top management following a vertical flow of commands. Linear chain of command; the chain of command is linear, aligned vertically, starts from strategic management to middle managers and then from middle managers to labour and employees. Mixed organisational structure; organisational structure isn’t typically formal. It is mixed i.e. comprises of some formal and some informal components of organisational structure for effective management. Analysis of the work division model at TESCO PLC: TESCO is effectively carrying its corporate social responsibility. The current work division model of TESCO PLC is very effective. It is a global retailer with wide network of stores around the globe. It would have been very hard and costly to follow centralised management along with horizontal command chain. The factors contributing to this difficult practice are changed time zones, communication barriers, cultural and consumer differences, different laws and regulations and differing nature of economies. Recruitment and job division is strictly on the basis of the abilities, qualities, skills and expertise of an individual which results in efficient workforce, hence successful work division model. Organisational Chart of TESCO PLC: Culture at TESCO PLC: Cultural characteristics of TESCO: Being an international organisation, TESCO exercises a multi-cultural environment. It has employees who belong to different cultures, societies, religions and races. The employees include different genders, variant age groups and disabled people working at different organisational levels. Factors influencing its organisational culture: Employees belonging from different cultures have different approach to situations Changes in management perspective Multi-cultural task force gives rise to difference of opinion due to changed thinking. Technological advancement is yet another factor because European locals are more adapted to technology when compared to Asians Current organisational scenario of TESCO PLC: The present scenario of TESCO, regarding confronting change, is the globalisation characterised by advancement in technologies, changes in labour laws, and recession in global economy. The Human Resource Department of TESCO has adopted pro-labour polices for the benefit of their employees. Change in consumer behaviour with awareness and raised technological use was also balanced by upgrading most of the systems from manual to mechanical and from moderate to moderate. To cope with recession and target multiple segments at the same time, it categorised its product range into three sections: 1. Organic range; it is the branded and expensive range 2. TESCO collections; It is the collection of items which are packaged by TESCO itself and are cheap when compared to the organic range. 3. TESCO value range; these are the products available at the cheapest prices Conclusion: The Management and Organisational behaviour of TESCO public limited, as an open model system, is very effective. It successfully follows its social corporate responsibilities. Hence it is keeping its words of vision; which is, ‘We talk about Every Little Helps a lot, but it's not just a catchphrase or marketing slogan, it represents everything we stand for. For our people and our customers, it's how we run our businesses from China to Chorley.’ (TESCO, 2011) References Datamonitor (2010), Company Profile – Tesco, Datamonitor Europe, 2010, Ref Code: 1674 Finch P. (2004), Supply chain risk management, Supply Chain Management: An International Journal, Vol. 9 Issue 2, pp.183-196; Mintel. (2009), Food Retail Industry – Including Online, Mintel Research National Minimum Wage. (2009), Low Pay Commission Report 2009, National Minimum Wage [online] available at http://www.lowpay.gov.uk/lowpay/report/pdf/7997-BERR-Low%20Pay%20Commission-WEB.pdf [accessed07/07/2010 Scott, W. R. (2003), Organizations: Rational, Natural, and Open Systems (5th ed.). Upper Saddle River, NJ: Prentice Hall TESCO. (2010), Annual Report and Review 2010, TESCO PLC [Online] available at http://ar2010.tescoplc.com/en/downloads.aspx TESCO. (2009), Corporate Responsibility Report, TESCO PLC. [Online] available at http://www.investis.com/plc/cr09/crr09.pdf TESCO. (2011), Vision and Values, TESCO HSC [online] available at http://www.tescohsc.com/aboutus/ourvalues.html Yuthas, K. (2009), Inputting the Environment: Reconsidering the Environmental Information Matrix. Journal of Information Systems, 19(2), Fall 2005, p-105-109 Read More