Change Management Initiative at Tesco - Case Study Example

Change Management Initiative at Tesco Contents Contents 2 Introduction 3 Discussion 4 Conclusion 12 References 14 Introduction Strategy can be defined as a high level plan to achieve goals under various uncertain conditions. Strategic planning comprises of different skills subset such as logistics, tactics, etc. Though the term was first introduced in 6th century but it has gained more significance in the present scenario. In the highly competitive world it is essential for an organization to incorporate strategies in their business operations. Strategic planning brings forth certain changes in the system. It becomes important for a firm to manage such change initiatives so that the major objective behind the change can be effectively achieved. Strategy is essential since there are limited resources to achieve business goals. This factor basically comprise of goal setting, action determination, and resource mobilization to execute set actions. A strategy can be termed as a tool which elaborates on how resources can be used effectively to achieve goals. In an organization, the top management is generally responsible to design strategies. It can emerge as an activity pattern while a firm adapts to its external environment or gains competitive advantage. Strategy is not only associated with planning but it is a stream of decisions or mechanism for shaping organizational future. Leadership is a vital component as change management initiative needs to be communicated efficiently throughout the system. On the other hand, strategy helps a firm to implement best fit solution amongst all its activities. There is wide range of real world companies who has adopted change management initiatives. These initiatives have supported the companies to gain competitive advantage in the industry. In this study, Tesco’s strategic planning and change management initiatives will be thoroughly analyzed. Tesco Plc, general merchandise and multinational grocery retailer situated in United Kingdom had a huge business transformation. In 1980s and 1970s, this company had poor relations with Sainsbury but in the 21st century it is the largest UK food retailer. The company started its journey as a food retailer with a famous slogan – “Pile it High, Sell it Cheap”, but now it has grown as the biggest chain of non-food retailer across the globe. In this study change management initiatives of Tesco will be analyzed with the support of various theoretical frameworks. Discussion A strategic initiative is adopted by an organization to gain stability in the market place and achieve goals and objectives efficiently. This kind of initiative gives a new direction to an organization. For instance, Tesco faced a lot of challenges since it was operating in a highly competitive segment. Though Tesco now is recognized as a premium brand and successful retailer with minimal stocks and seamless supply chain activities but the scenario was not similar few years back. In those years, Tesco stores were in high street locations that needed to be upgraded, stock control was an inefficient process resulting into poor buying regimes, stock buying had minimum corporate control and it possessed ‘patchy’ customer service and staff attitude. Even the management function was more inwards that had no close association with end customers. On the other hand, price lists as well as checkouts were manually operated, product pricing was time-consuming, inefficient and manual, and there was no such integrated supply chain operations. Though the company was able to manage its costs appropriately but there was more scope to grow. Other players in the industry were able to control its costs in a better way and this savings were then passed on to end customers. In a highly competitive environment, often companies change its traditional approach of business operations to an innovative platform. This was the major change initiative adopted by Tesco (Maginn, 2007). The top management of the company decided that their supply chain activities need to be highly integrated so as to reduce manual error. Business transformation initiative incorporated in the organization aimed towards future growth and success. The transformational work at Tesco encompassed organizational transformation, process transformation, information transformation and technology transformation. Tesco in order to incorporate changes in its management functions thoroughly reviewed its organizational structure from store management and checkout staff to head office operations. Head office functions of the company were aligned with operational requirements of retail store and a new department was formed to control the interface and impact of head office functions on daily operations of retail outlets. There were significant changes made in supply change activities. These activities were re-structured to ensure that distribution centers located across the globe matched the retail store requirements. A major transformation was made by the company in retail store management. Tesco effectively removed all the middle management tiers and facilitated staff empowerment for customer service. This in turn helped to analyze the hidden demand of customers and even identify their levels of satisfaction. Personnel development managers were even introduced into various retail outlets so as to ensure that right positions were allocated for right people (Kehoe, 2007). On the other hand, the company wanted to become one of renowned retail outlets across the globe. In order to achieve future goals and objectives, Tesco reviewed its traditional business process. After analyzing, process was even transformed that served as another strategic planning. Business processes were re-aligned to a more customer focused approach. Inefficient processes were eradicated, staff time wasted in unnecessary meetings was reduced, program or project managers had to undertake standardized training program, performance measures were introduced, and constant review of supply chain activities took place with introduction of lean thinking mechanism. The company in order to remain competitive in the industry even incorporated advanced technology platform. This helped the company to computerize all its manual activities. Stock level, pricing, checkout, information transmission to retail stores across the world was done through integrated information system. However it can be stated that there was two major change initiatives undertaken by the company- introduction of information system and introduction of ClubCard. This concept was new in UK and not adopted by any of the competitors. ClubCard enabled the company to create a large customer database (Wren, 2005). The major aim of this approach was to understand customers well and offer products satisfying the hidden needs of customers. ClubCard helped Tesco to analyze shopping habits, demographics, product brought, geographical spread and services utilized by customers. This form of information transformation initiative had two-fold purpose such as collecting data and then effectively utilizing those data. It facilitated head office buyers to target specific segment, retail stores was able to target desirable customers and finally supply chain mechanism can be aligned with shopping patterns. With the help of ClubCard, retailer was able to target customers as individuals rather than using media advertising for providing product information. ClubCard vouchers enhanced customer loyalty and it had a long term purpose. Tesco through this change management initiative will be able to maintain large customer database that can be accessed as and when required. Most of the retailers aim towards achieving high sales margins by selling huge product volume. However Tesco adopted this unique approach so as to ensure that they acquire as well as retain existing customers. Mintzberg stated in his theory, strategic planning is a school configuration process. As per this theoretical framework, strategic implementation brings for transformation into the system. The strategy adopted by Tesco Plc was more of an initiative to gain competitive edge in the market place. Amongst the three models which are utilized for strategy formulation procedure, design school model can be stated as most appropriate for Tesco (Kouzes and Posner, 2006). Design school model encompasses SWOT analysis to identify probable opportunities and threats surrounding the organization. Core competencies can be identified through this framework. Positioning school model states there are different strategic initiatives that can be implemented by a company but only few best fit solutions can be used against other players in the market place. Planning school model contradicts design school model framework, describing strategic planning not to be totally based on SWOT analysis but there are other activities too involved. They are setting of objectives, internal audit, external audit, strategy operasionalization, and work scheduling and strategic initiative evaluation. The sales of Tesco Plc had exceeded 72 billion in the financial year 2012 and it was an impressive growth of approximately 7.4 percent. Core competencies of the company are its leadership position in UK, effective marketing strategy and strong financial arm. On the contrary, there are certain factors affecting the business operations and competitive position of the company (Burnes, 2005). They are over dependency on UK market or home market and lack of competitive advantage since strategies adopted by Tesco can be easily imitated by competitors. However the company has the scope for future growth by exploring opportunities prevailing in the external environment. It can diversify upon its existing services to better serve customers and even focus on international presence. The rising trend of retailers in the world is a major threat for the company and this demands more strategic planning. There is a high competition posed from developing countries, UK crisis even can affect revenue margin of Tesco and higher operational cost lowers profit margin. On basis of all these factors there are few change initiatives that can be adopted by the organization. Firstly the company should open more retail chains across the globe and in market place where the demand is high. Secondly Tesco can control its operational costs by lowering down the stock level and following lean approach throughout the system. It can even reduce on its staff base by transforming the entire procedure into technology based system. Thirdly, concept of customer loyalty program in the form of ClubCard vouchers is appropriate for the organization. This will not only help the company to gather customer information, but in future this information will support in business expansion or diversification. It is an innovative approach adopted by the company but certain modifications can be done on this initiative. For instance, Tesco can even use ClubCard to reach out to family, friends or relatives of customers. Vouchers are usually given to attract customers to retail stores but along with that firm can even take customer opinion on kind of service received and areas of further improvement. As per Michael Porter, effectiveness of a strategy can be judged through its being a best fit solution amongst wide set of activities (Beer and Nohria, 2007). For Tesco Plc, the best fit solution is to align all the organizational members to business transformation practices and make the traditional way of business thinking shift to being customer focused. Customer-centric approach can be facilitated more through continuation of ClubCard program and implementing productive suggestions given by customers. Strategic change cycle defines strategic planning to be a set of procedures undertaken by real world organizations. These procedures comprise of sequencing steps, taking into consideration goals, issues and vision, process application throughout organizational boundaries and appropriate role of decision makers, implementers and planners. This cycle do not ensure success of any strategic initiative as there are many hurdles associated with implementation of change initiative. While making rapid changes in business process it is necessary to make workforce aligned with the common goals and objectives. Leadership is another critical component in terms of managing change initiative. In majority cases, focus is on designing innovative strategy but efficiently managing the change is not taken into consideration. For instance, in case of Tesco, ClubCard initiative was communicated across the workplace and even team members were trained on how to deal with customers individually. These forms of personal training and development program are essential both for employees as well as middle management. Leaders were rather encouraged in Tesco to support employees during transition period and educate team members regarding change taking place in the system (Chesbrough, 2005). The management of this organization even facilitated employee empowerment so as to make them feel a sense of ownership. ABCs of strategic thinking is another framework describing the three steps of this procedure. They are current position of the organization, desirable future position and convenient ways to achieve that position. For instance, Tesco initially was not at a competitive position but adopting an innovative strategy in terms of ClubCard changed the entire scenario. However the strategy implemented by Tesco can be easily imitated by competitors so there needs to be certain changes. The company firstly should communicate more with its customers regarding their business operations. This will help to determine the hidden needs and wants of customers. Diversification of services which appears to be a suitable expansion plan for Tesco in the nearby future can be designed on the basis of these customer related information. Hence the future position of the company can be to develop a strong base of loyal customers not only in home market but across the globe. It can even eliminate marketing activities and save on its operational costs through ClubCard approach. The probable ways to achieve future position is by being more customer-focused, collecting feedback from customers every time they visit Tesco stores and giving gifts or acknowledgments to those customers whose ideas were innovative and effective for business process improvement. This in turn will not only help the organization to achieve high revenue margins but even provide stability to the firm in an intensively competitive environment. Core ideology needs to be maintained in any form of change management initiative. A change can be successfully implemented if it is well aligned with the core purpose and values of the organization. Like in case of Tesco its core value is to deliver best products and quality service at reasonable prices. Being a food and non-food retailer, there are wide set of operations which are managed by the firm. Hence its common goal is to align all the workplace practices towards overall success of the organization. On the other hand, core purpose of the company is not to undertake any form of malicious activities, respect all communities, adopt best practices in the system, and maintain transparency throughout its business operations (Diefenbach, 2007). There are certain critical dimensions for successfully executing the formulated strategy. Like in case of Tesco Plc it should be clarifying whether right or wrong decision have been taken, decisions taken should be permanent in nature, ensuring required flow of information and employees should be knowledgeable about change initiative and its future impact. The company through a particular training session revealed the strategic change initiative in the form of ClubCard. However the necessary steps for organizational change is well described in Kotter’s 8 step model. Figure 1: Kotters Eight Steps of Change (Source: Palmer, Richard and Gib, 2006) The sense of urgency as per figure1 was the need to create a wide base of loyal customers that can give the organization a competitive edge. Top management of Tesco communicated across the firm the need to overcome competitors by transforming profit oriented business approach to customer-focused environment. The change vision was simultaneously developed by the firm which stated that the major objective of Tesco was to satisfy its customers rather than seeking high sales volume. Apart from communicating the vision, the firm designed a program where employees can put across their opinions regarding change initiatives. These opinions were than addressed by the leaders or managerial body. It helped the company to facilitate employee empowerment so that there is no such resistance towards change. On the other hand, the organization was even able to align workforce with short term wins. There were specific performance appraisal systems designed for rewarding those employees who are able to satisfy their customers through best services. The change initiative was incorporated in the culture permanently by making it a core value and constantly motivating all employees. Training and development programs were conducted throughout the organization so as to identify weakness of employees and convert them into strengths. Employees were even motivated through various forms of monetary and non-monetary rewards. This helped to implement necessary change in the system and sustain it for long term. Leadership is a major area of concern for an organization that attempts to implement a strategic change initiative. There are different forms of leadership but its suitability depends on organizational situation. For instance, Tesco Plc was undergoing a change which required full participation from team members. Since the traditional business process was completely being eradicated and a technology based system was designed. Democratic leadership approach was adopted by the company. The major reason being there was a need to encourage employees in order to actively participate in the change management process. However the top authority also needs to control entire operations to ensure change initiative yields productive results (Stacey, 2007). This was done through incorporating democratic approach where team members give their innovative ideas and opinions but final decision is made by the top management. There was a collaborative work atmosphere structured by Tesco. All the members of different department worked together for achieving desired goals and objectives. Conclusion As per the above study, it can be stated that Tesco Plc focused towards becoming the biggest retail chain across the globe. However there were certain environmental issues which affected business operations of the company. For a retail company it is essential to meet customer needs as well as determine some hidden demand. In present scenario, the retail industry is highly competitive and frequent strategic changes are needed. Though competitors can easily imitate such changes but it is important for a firm to sustain a change. Tesco aimed at developing a large base of loyal customers and it designed ClubCard. There are certain changes which can be incorporated by the company in this change initiative for achieving long term competitive advantage. A strategic planning process can be successful only if all the employees are involved in the procedure. Employee empowerment was largely facilitated by Tesco as it believed that store managers and employees can better understand their customers in comparison to top management. This sense of ownership amongst team members reduced resistance towards change and even eliminated organizational conflict. For any organization it is important to create a sense of urgency in workplace. This helps in motivating employees for organizational change and aligning them with desirable goals. However the change adopted by a firm should be incorporated within the organizational culture for achieving better results. Tesco Plc has been able to gain desirable revenue margins through this change initiative and it forms the major factor behind firm’s success across the world. This real world example can be related to different strategic planning theoretical frameworks. References Beer, M., and Nohria, N., 2007. Breaking the Code of Change. UK: Harvard Business School Press. Burnes, B., 2005. Complexity Theories and Organizational Change. International Journal of Management Reviews. Vol. 7 (2), pp. 73-90. Chesbrough, H. W., 2005. The Era of Open Innovation. MIT Sloan Management Review. Vol. 44 (3), pp. 113-156. Diefenbach, T., 2007. The managerialistic ideology of organisational change management. Journal of Organizational Change Management. Vol. 20 (1), pp. 126-144. Kehoe, D., 2007. Leading and Managing Change. Australia: McGraw Hill. Kouzes, J., and Posner, B., 2006. The leadership challenge: How to keep getting extraordinary things done in organization. San Francisco: Jossey-Bass. Maginn, M., 2007. Managing in Times of Change. Australia: McGraw Hill. Palmer, I., Richard, D., and Gib, A., 2006. Managing Organizational Change – a Multiple Perspectives Approach. New York: McGraw-Hill/Irwin. Stacey, R., 2007. Organizations as Complex Responsive Processes of Relating. Journal of Innovative Management, 10(2), pp. 95-130. Wren, D. A., 2005. The Evolution of Management Thought. New York: The Ronald Press. Read More