Structure of a UK-Based Grocery Retailing Business - Essay Example

Structure of A UK-Based Grocery Retailing Business Executive Summary This paper is an assessment term assignment that studies and analyses the context and structure of a UK-based grocery retailing business, Tesco. The paper commences with the introductory background of Tesco, which provides an overview of the company’s strategy, target markets, product portfolio and diversification and growth prospects. After detailed introduction of the company, the paper evaluates the internal and external environment of Tesco in terms of company and industry analysis. The company analysis entails business vision and holistic intent of Tesco, organisational structure and hierarchical setting and management leadership style from inside and outside perspectives. The industry analysis involves the examination of competition, presence of competitors, the level of rivalry amongst the industry player, the relative position of Tesco amongst opponents, bargaining power of suppliers and customers in comparison of Tesco, threat of new entrants and substitutes. Finally, the paper presents a couple of suggestions to advance the structure of Tesco and the feasibility criteria for these suggestions. Introduction This paper is a scheduled academic project which studies and analyses the context and structure of a company. Tesco, the well known retailing brand based in the United Kingdom, has been chosen for the purpose of study. Tesco will be analysed from both inside and outside perspectives, including the internal structure, culture, philosophy, and operations that determine the internal environment of the company whilst the industry analysis in terms of competitors and competition, anticipation of new entrants, industry growth phase, company expansion, etc is considered as the external environment of Tesco. The paper closes with a pair of suggestions followed by conclusions presented at the end. Background of Tesco Tesco is a pioneer international brand known for retailing amongst various grocery and packed food products, clothing items, financial services and even fuel retailing services in different parts of the world. The company operates in fourteen geographic market segments in UK, United States of America, Europe, North America and Asia. Tesco strives to create valuable shopping experience for its customers and consumers across the target market. Tesco pursues these market segments through deployment of a seven steps core business strategy which determines the company’s vision and intent onto these areas: Grow and sustain the existing UK market, expand retailing services in all geographic target markets, establish as an outstanding retailer amongst all product-market categories, sustain retailing leadership amongst all product categories through cost leadership and technology and innovation, transcend and leverage Tesco’s brand value to existing and upcoming brands, create value to the communities at large, and expand Tesco human resources team to add strength to the company. The firm currently employs around 500,000 employees for smooth operations of the organisation (Tesco PLC c). Tesco has a diversified location strategy which provides the customers with a wide assortment of brick stores along with an online shopping facility through its e-retailing strategy. Tesco runs around 4,000 stores globally, which are responsible for a sales turnover of roughly about 50 billion pounds per year. The various store formats of Tesco include Extra Stores, Metro Stores, Express Stores and Super Stores (Tesco PLC b). The size and location of these stores differ with respect to the changing consumers’ demands, their shopping trends and their respective purchasing patterns and behaviours. Tesco scans the market trends in terms of opportunities and threats and devise strategy to counteract accordingly. The company has embarked upon diversification into several retailing businesses besides food retailing. It includes finance services retailing, telecommunication services, Internet retailing, petrol stations retailing, and health care, research and consultation services (dunnhumby) etc. Tesco employs integrated operations strategy to deliver value to customers through cost efficient and effective operations across the company logistics chain. The company has established a strong online presence through managing e-commerce activities efficiently, which has leveraged the company’s ability to easily reach many value seekers, dwelling to the corners of the world, for availing Tesco products and services through Internet based order placement and product delivery mechanisms. Discussion The purpose of this assignment is to study and analyse the context and structure of the UK based retailing giant, Tesco. The analysis of Tesco entails first the examination of the company’s internal environment. Tesco Analysis  Vision and mission  The vision and mission of Tesco are established around its stakeholders. The company specialises in retailing business and therefore the mission of Tesco is to emerge as a retailing enterprise by providing diverse services to all the geographic target markets by developing Tesco’s strategic business competencies through effective collaboration of company’s human resources, operational efficiencies and technological innovations and advancements. Tesco’s vision is: “Tesco’s business intent is mainly to establish itself as an embryonic innovative domestic and international company, which would be exceedingly esteemed by the people Tesco is surrounded with; customers, employees, partners, communities, investors”(Tesco PLC a) Organisational structure  The organisational structure of Tesco is characterised by a relatively flat hierarchy as compared to the company’s widespread operations and business activities. Tesco is known for the decentralised nature of its employees’ structure and operations. The company’s lenient structure and simple design fits best with the changing business environment adapting to the challenges posed by the globalisation of businesses. The structure of Tesco comprises hardly five hierarchical steps which a line manager requires to proceed to attain the status of a top level executive manager. The staff at Tesco stores reports to the store manager, who reports to the regional manager (RM); these RMs are accountable to the sectional managers, who, in turn, reports to the top management. This five tier structure is a strategic arrangement of hierarchy at Tesco, which is deployed to disseminate power and authority amongst individuals to inculcate decision making ability, enhance responsiveness to the dynamics of the business’s external environment and instil crisis management skills within and throughout the Tesco team. The company’s culture is marked by open communication system amongst all the employees. The company extremely appreciates employees’ growth and escalation to higher hierarchical levels and invests in the development and training of all the team members at Tesco. The company believes that training and development are crucial for advancing and sustaining human resources’ competencies and for supporting organisational abilities with time to pursue the holistic objectives of the company. Leadership style  Leadership style has a major influence on the success of the firm (Bolden, 2011). The leadership style of Tesco is dynamic and enthusiastic. The leadership at Tesco is sorted out, from internal and external perspectives, into two categories of leadership style for management and for competitors. The leaders at the company focus on customers, employees and network topology (Arvonen & Ekvall, 1999). The leadership at Tesco drives the employees to solicit customers’ value requirements and take decisions appropriately to deliver those value criteria to the customers. Leaders of Tesco are also concerned about the growth and development of their employees; therefore, another leadership concern is to provide maximum opportunities to employees for enhancing their competencies to stimulate motivation and ownership of Tesco amongst them. The leadership is also characterised by inspiring networking skills amongst the employees (Dierendonck, 2011). Tesco believes that strong networking creates stronger ties with the value chain members which can be used as an edge against the competition. Tesco has established itself as a cost and quality leader in the industry. The renowned brand name and the corresponding customer loyalty are the proof of Tesco’s leadership in the external arena. Industry analysis  The industry analysis of Tesco determines the dynamics of the business industry and the external environment in which it operates. Competition in the industry Tesco operates in retailing business industry, which is in growth to maturity phase in UK and beyond, i.e. across the world. The company’s core business is grocery retailing, which has been diversified across many product categories and geographic markets. This has brought Tesco to confront diverse competition areas both for market and product categories. However, by restricting the scope of the study and focus to UK market and grocery retailing, it has been found that some of the direct competitors of Tesco are Sainsbury, Asda and Safeway. Besides these UK local retailers, Wall Mart, a USA based retailer giant, has emerged as the most powerful rival of Tesco which has took over Asda recently. All of these players compete on low pricing for their products and services. The competition in the industry is not that fierce because there are few major players which have got both the financial and operational capabilities to compete in the growing retail business. The position of Tesco is relatively strong in the UK segment which contributes most to the company’s sales and revenues. Tesco’s technology and operational innovation focused approaches backed by the strong financial position, gives the company an edge for developing cost efficient mechanisms and methods to deliver value to the customers. The company is in a sound position to devise an aggressive competitor strategy to counter the measures taken by opponents in the retailing industry. Power of suppliers, POS  The power of suppliers in the grocery market and retailing industry varies with the type, size and reputation of the company dealing with these suppliers. In case of Tesco, the power of suppliers is not as enormous as the company’s reputation and strength. Tesco has effectively deployed supply chain management systems, and its strong networking with the strategic partners benefits both the company and its suppliers. The value drawn from Tesco customers’ loyalty and strong brand name is transferred to its suppliers, which gives Tesco the edge to bargain deals with suppliers. This enables Tesco to deliver services, maintaining the logistics and operational costs low. Power of customers, POC The power of customers varies with the geographic markets Tesco serves. However, the power of UK customers is high in general due to strict consumer protection laws. But POC is moderate for Tesco because the company enjoys customer loyalty through persistent value delivery mechanisms: club cards, Tesco direct, etc. Barriers to entry Since the industry is in growth-to-maturity phase, the opportunities for newcomers are limited. Moreover, the grocery retail business today is characterised by enhancing shopping experience and all-goods-under-a-roof convenience practices, which limit the scope of small industry players to survive, leaving the arena for major retailers. Threat of substitute product Threat for substitute exists for Tesco because of the presence of Wall Mart and Sainsbury. However, the company’s differentiation and cost-quality leadership strategy is likely to provide an edge against substitute products. Suggested change in structure  Tesco’s decentralised flat structure is supportive for operational efficiencies; however, the company must work out its soft structure and culture, i.e. the internal communication mechanisms, so that the top management and line managers’ contact becomes direct and straight. This is important to develop stewardship of broad organisational affairs amongst down-the-line employees. Conclusion The paper analysed the context and structure of Tesco. It has been found that the company’s structure is flat and distributed across five layers of hierarchy. The leadership focuses on customers, employees, networking, and competition. Competition in the industry is not fierce with few major opponents; the power of suppliers and customers is moderate relative to the reputation and brand acknowledgement of Tesco; barriers to entry are obvious for new entrants; and threat of substitute prevails for Tesco goods. The company requires modifying its communication to ease interaction and engagement amongst the top and line managers. References and Bibliography Arvonen, J. & Ekvall, G. (1999), ‘Effective leadership style: both universal and contingent?’ Creativity and Innovation Management, vol. 8, no. 4, pp. 242-250. Bolden, R. (2011), ‘Distributed leadership in organisations: a review of theory and research,’ International Journal of Management Reviews, vol. 13, no. 3, pp. 251-269. Boxsell, A. 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