Change Challenges Facing Tesco - Case Study Example

Change Challenges Facing Tesco The aim of this document is to examine the change challenges that Tesco has been facing it its bid to continue maintaining a competitive edge in the retail industry. The document will proceed to provide recommendations to address the problems and how the proposed recommendations will be implemented. Finally, the paper will address any challenge that is likely to be encountered in the course of the implementation of the recommendations. Tesco Plc is arguably the Britain’s largest supermarket. The company was incorporated in 1919 and has since expanded to operates more than 4331 stores in more than fourteen countries across the globe, including the U.K., U.S., Asia, and a couple of European countries (Haerifar 2013, p. 32). Tescos headquarters is located in Hertfordshire and is currently among the biggest employers having about 470,000 employees. Reports indicate that Tesco is the largest retailer in the British market both in terms of domestic market share and sales volume. Globally, Tesco ranks the third largest retailer just after Wal-Mart and Carrefour. Tesco initially specialized in the sale of drinks and food. However, the company has since diversified its product portfolio to venture in other markets that it earlier ignored, including clothing, music downloads, software, internet services, magazines, DVDs, and CDs. The fundamental mission of the company is to create value for the consumer of its products and services so as to earn their loyalty. Although Tesco has enjoyed many years of success in the retail market since 1971, the company has been facing a number of change issues that need to be addressed in the fastest time possible to maintain the companys competitiveness. Unlike in the past when retail businesses competed on the basis of the activities they engage in, the nature of competition has changed significantly. Instead, current retail businesses also compete on the level of efficiency and effectiveness of the logistics and supply chain. Burrows (2014) observes that Tesco has made significant progress in the recent past by increasing its global market reach to countries, such as India, Japan, the U.S. and China. In fact, Tesco has become successful in this foreign market by establishing its brand position to become the retail leader. The company reveals that foreign operations have accounted for more than half of its retail operations and more than 20% of its retail revenue (Humby, Hunt, and Phillips 2008, p. 41). Although this strategy of expanding business operation has worked well for Tesco over the years, the nature of the retail business has changed significantly, especially due to the economic downturn. Therefore, to continue realizing good performance and maintain dominance, Tesco ought to change its strategy from focusing on the expansion of its stores in the overseas markets to cost reduction. This is because, in case an issue arises with the production and distribution process, this would have an adverse effect on the product and service, as well as prices and quality. Therefore, by reducing the cost of distribution, Tesco would be motivated to search for better ways of how improvements can be made in the company. The other change issue that Tesco is currently facing is how to reposition itself to become competitive in a digital world. The company enjoys a market share of roughly 25% in the U.K. market as can be seen from figure 1. The company reveals that it has witnessed with great concern that the business is operating in a retail industry where the middle market is fast disappearing (Ruddick and Martin 2014, p. 4; Reuters 2014, p. 6). Accordingly, the changing nature of the retail business environment is poised to affect Tescos business operations in the future if nothing is done. Therefore, in order for Tesco to continue posting good performance, it would be advisable for the management to consider developing online operations (Goodley 2014, p. 16). This will benefit the company as it would not only the companys supply chain more efficient and sustainable, but also ensure that Tescos business model is properly aligned to the digital future. In fact, currently, most consumers prefer to shop online as opposed to having to present physically in stores. Therefore, the only way Tesco can succeed in the present day business environment is to adopt online operations to fulfill the changing needs of customers in the market. Fig. 1: Tesco’s U.K. market share Courtesy of pangasius-vietnam.com The third major change issues that Tesco has been facing pertains to change of management (Butler and Farrell 2014, p. 2). Tesco has been performing extremely well in the last decades. However, the performance of Tesco has been questioned in the recent past, particularly in the U.K. market where sales and profits have significantly declined. Between January and September, 2014, the company’s share price fell significantly as can be seen from figure 2. Recently, the company was accused of engaging in unethical behaviors after it emerged that the company executives overstated the profits made by the company. Investigations revealed that the executives overstated the earnings and profits in a bid to hide the poor performance registered in the U.S. market (Quinn 2014, p. 10). Additionally, the executives are under investigation after it emerged that the company mishandled the supplier payments. Fig. 2: Tesco’s share prices between Jan 2014 and Sept 2014. Courtesy of theguardian.com Fortunately, the C.E.O. of the company in the U.K., Chris Brown, was recently replaced – a move that will help restore the reputation of the company as well as protect investors investments in the company. His replacement has been necessitated by the fact that Tesco has been posting poor performance in the U.K. market under his watch (Davey and Adler 2014, p. 9). Furthermore, he has failed to take appropriate measures to ensure that the company is turned around to start making high profits. Secondly, it would be appropriate that Tesco replaces the accountants and any other person who might have conspired in the overstating of the company profits to hide the poor performance that the company has been posting in the recent time (see figure 3) (Cambridge News 2015, p. 5). Additionally, Tesco should consider instituting a strong internal control system to prevent executives from making fictitious figures in the accounts to deceive investors and the stakeholders of the company of good performance. Instituting a strong internal control system will also prevent mishandling of supplier payments, which has proved to be a major issue in Tesco. Fig. 3: Financial performance over Tesco between 2010 and 2014. Courtesy of dailymail.co.uk How The Changes Will Be Implemented Firstly, it is important to recognize that change is inevitable and sometimes must be introduced to ensure that the organization addresses some of the challenges it might be facing, as well as ensure that an organization is in tandem with the changing nature of business operations (Reiss 2012, p. 56). Therefore, in order to succeed in implementing the changes proposed above, the first thing that would be done is to involve the input of the staff in the implementation of the change. In this regard, an explanation would be given to the staff explaining why the proposed changes are necessary to improve efficiency and profitability of the company. Involving the staff in the implementation process will be important because it will minimize resistance to change that might make the implementation of the changes difficult (Harrington 2006, p. 4; Cameron and Green 2012, p. 37). In fact, one of the recommendations provided in the Kotter 8-Step Change Model is that the any proposed change should be explained to the staff so that they can understand what the proposed change is all about and how the change would affect the company. For instance, in the case of introducing online operation, the first thing that would be done is to explain to the staff what online operations would mean and its impact on the company. Once the change has been communicated to the staff and its rational explained, the next thing to be done would be to start implanting the change. However, the proposed changes will not be implemented at once. Rather, the proposed changes will be implemented in phases. This is necessary because it will give people who will be affected by the changes a chance to adjust to the changes (Anderson and Anderson 2010, p. 22). For instance, in the case of implementing the online operation, there would be a need to ensure that online operations is run alongside the traditional methods of operations at the initial stages and then faced out in bits to leave only online operations may be after about 6 months. In fact, this is one of the best strategies for minimizing resistance to change. Once the proposed changes have been implemented in full, a review would be conducted to determine the impacts of the changes and their successes. The review will give the opportunity to identify areas that require improvements to ensure that the implemented change achieve its objectives and success. Problems That Would Arise In The Course Of The Implementation Of The Changes The greatest problem that would most likely be encountered when implementing the proposed changes would be resistance from employees. According to Hiatt and Creasey (2003, p. 44), employees are always resistant to change and would always do everything possible in an attempt to ensure that no change is introduced. The resistance to change usually comes about because of the fear of the unknown and the fact that employees do not like to be changed. Paton and McCalman (2008, p. 9) shows that employees are only receptive to change when they believe that the change would benefit them directly. Therefore, before introducing the proposed changes at Tesco, there would be a need to explain to all the staff how the changes would benefit the company and diffuse the power struggle amongst managers and employees. In conclusion, Tesco is currently the third largest retail business in the company. The company was founded in 1919 and has seen grown and expanded its operations into the global market. Despite having enjoyed many years of success, Tesco is facing a number of change issues that need to be addressed, including logistics and supply chain changes, introducing online operations and changing the poorly performing management. Although making changes in these areas would help improve performance of the company, there is a likelihood of strong resistance to the changes from the staff. Therefore, implementers of change must ensure that the change is properly implemented to minimize resistance. References Anderson, D., & Anderson, L. A 2010, Beyond change management: How to achieve breakthrough results through conscious change leadership. John Wiley & Sons, Hoboken. 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