Tesco's Response to Brexit: A Management and Organizational Report

This report provides a comprehensive analysis of Tesco PLC's strategies in response to Brexit. It begins with an introduction to Brexit and its potential consequences for UK businesses, specifically focusing on Tesco. The report then delves into Tesco's company profile, organizational structure, and the strategic measures implemented to navigate the challenges posed by Brexit, such as reduced production, building up dry food supplies, and consumer offers. Furthermore, the report examines modern management approaches, particularly the contingency approach, and applies Porter's Five Forces analysis to assess the competitive landscape and the threats related to Brexit. The conclusion emphasizes the importance of strategic management and contingency planning for Tesco's success amidst Brexit, highlighting the significance of the analysis in the context of the evolving business environment. The report draws on academic sources to support its findings.

Running Head: TESCO 1
Management and organizations
Student’s Name
Course
University
Date

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Table of Contents
INTRODUCTION.....................................................................................................................................3
TASK ONE................................................................................................................................................4
TESCO PLC..............................................................................................................................................4
TASK TWO...............................................................................................................................................5
THE ORGANIZATIONAL STRUCTURE OF TESCO PLC...............................................................5
STRATEGIES USED BY THE COMPANY AMIDST BREXIT..........................................................6
TASK THREE...........................................................................................................................................8
MODERN MANAGEMENT APPROACH FOR THE TESCO............................................................8
Contingency approach to management....................................................................................................8
TASK FOUR............................................................................................................................................10
Porter’s five forces analysis for Tesco....................................................................................................10
THE THREAT THAT IS RELEVANT TO BREXIT..........................................................................12
Conclusion................................................................................................................................................13
Reference..................................................................................................................................................14

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INTRODUCTION
Brexit is one of the most recent trending news in the social media in the United Kingdom (de
Witte, 2017). The United Kingdom held a referendum on June 23rd 2016 where more than 51%
of the citizens voted to leave the European Union. This led to the resignation of the former Prime
Minister David Cameron (Goodwin and Heath, 2016). The alienation has diverse consequences
to various companies in the UK (Chalmers, 2017). This is because of the trade restrictions that
might exist where EU non-members will not be allowed to trade in the EU nations hence
affecting the market that some of the companies had already established (Dallago, 2016). This
report is going to focus on TESCO Private Limited Company which has its headquarters in the
UK. The report is going to outline various ways through which the company is preparing for
Brexit amidst negotiations that are still in progress till the implementation on 16th March in 2019.
The report shall outline various aspects under task one, two and three.

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TASK ONE
TESCO PLC
Tesco is a British multinational company that trades in groceries and general merchandise whose
headquarters is in Welwyn, Garden city, Hertfordshire in England in the UK.This is a private
limited company based in the UK that sell groceries and other food staffs (Barnes, 2011). The
company is among the best performing companies in the UK. The company is based in the
United Kingdom occupying over 25% of the market share in UK and is a market leader in the
UK as well as in other markets like Malaysia and Thailand. The company was found by Jack
Cohen in 1929. The company stocks are traded in the London Stock Exchange under the symbol
TSCO. It operates in the diverse business segments in retail industry including grocery, apparel,
books etc., as well as services related to financing, DVD rentals and internet services.
Tesco operates various chain stores in other countries in Europe which has contributed much to
its great success in the competitive business environment. The company’s success has also been
attributed to its strong marketing strategies used by the organization to enhance the brand
awareness to the consumers. Tesco has made use of the technology by advertising its products
into various blogs and social platforms increasing the sales due to the large number of available
consumers for the product.

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TASK TWO
THE ORGANIZATIONAL STRUCTURE OF TESCO PLC
The board of directors of the company is comprised of 10 members who are very important in
the daily operations of the company. The governance structure of the company is made up of five
committee members as shown.
The organizational structure of the company is highly hierarchical portraying the size of the
business. Various stores have different managers with different managerial roles. The general
organizational structure for the company is as outlined in the figure below.

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STRATEGIES USED BY THE COMPANY AMIDST BREXIT
The management has a crucial role in the strategic management process to deal with the
Brexit issue. Some of the strategies that has been used by Tesco amidst Brexit are as outlined
below:
Reduced production
The company has reduced production of its various goods and services since the Brexit issue was
supported by the majority of people in the United Kingdom. Reduced production is as result of
the economic down fall that is anticipated in the country after the implementation of the Brexit
move on 16th march 2019. Poor economy signifies low purchasing power among the individuals
hence there is no need for high production. As a result of Brexit, there shall be trade restrictions
by EU which might prevent the UK from trading with other countries under EU.
Building up the supply of dry food
The CEO of the company claimed that the company needs to focus on the supply of dry food like
bread so as to minimize the losses that might be incurred by the company in case there is sales
reduction in the company. The company might be forced to stock pile the food throughout the
negotiation process so as to be in a good position to continue with the business once the situation
after the negotiation bears fruits. The company shall ensure that the fresh food imports are not
held up to reduce the risk of loss that might be incurred by the company due to the consequences
of Brexit implementation.

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Creation of offers for the consumers
Tesco has come with various offers for the consumers such as encouraging them to buy a certain
number of products and get an extra free product. This increases the sales hence clearing the old
stock to enhance continuous production.

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TASK THREE
MODERN MANAGEMENT APPROACH FOR THE TESCO
Tesco has to be ready to tackle the Brexit consequences appropriately to enhance its continuous
success in the competitive business environment. The company has to apply the modern
approach to overcome the challenges that arise in the process. The company shall use the
contingency approach to be successful amidst Brexit issue as outlined below in details.
Contingency approach to management
This is one of the management theories which states that the most appropriate style of leadership
depends with the situation at hand. Managers who use this style of leadership ensure that they
focus both to the situation at hand and their own leadership styles when making some of the key
decisions in the organization (Seo, 2011). The TESCO manager can come up with various ways
of running the organization amidst Brexit issue which is a situational aspect. He can come up
with various ways of coordinating various activities within the company to ensure that no losses
are incurred by the company during this transitional period. The manager can enhance the
reduction in production of goods so as to avoid the surplus in the market due to marketing
restrictions that might be enforced. This is to ensure that only small amount of products should
be produced to serve the UK market efficiently. The manager can also enhance the acquisition of
goods that can last throughout the negotiation period. This can be made effective through
limiting the importation of fresh goods to avoid risk of loss that might be suffered by the
company.
Contingency theory is very crucial under this circumstance because the implementation of
Brexit might have some negative impact to the economy hence affecting the profit margin of the

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company. The management of the company should access the risk that the company might face
as a result of the Brexit and take the precautionary measures so as to minimize the losses that
might be incurred after the implementation of the deal on 29th march in 2019. TESCO should
clearly formulate winning strategies for the various circumstances that might occur in case Brexit
is successful.

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TASK FOUR
Porter’s five forces analysis for Tesco
This analysis attempts to provide a thorough analysis of the five different forces that determine
the extent of the overall competition of the company in the grocery industry (Asad, 2012).The
forces are as shown in the figure below with further explanation.
New products threats
Tesco faces a challenge when some new products from other companies enter the market (Grant,
2016). This is has a diverse effect in the quantity of sale made by the company over a given
period of time due to the reduction of the profit margin. The company ensures that it over comes
this by focusing on specific market segments in the UK.
Existing firms’ rivalry

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There is a great rivalry among some of the existing firms in the supermarket chain sector. Most
of the firms incur a lot of expenses in advertising hence in the process they popularize their foods
and groceries. The consumers usually switch because of the costs make the competition stiff. The
company can overcome this by winning the hearts of the consumers through increased offers for
various products in the market. This enhances the repetitive purchasing behavior among the
consumers and this weakens the rival firms.
Suppliers’ bargaining power
Tesco has many suppliers who have low bargaining power enabling the company obtain various
goods at fair prices an aspect that facilitates effective price for the company’s products attracting
many consumers which in return leads to profit maximization. The company ensures that it
formulates effective strategies to obtain quality raw materials from the suppliers at favorable
prices.
Buyers’ bargaining power.
The bargaining power of the buyers determines the initial price that the company can set for its
various products. The buyers for the company’s products have low bargaining power since they
have a nice income. This enhances profit maximization by the company once huge sales are
made.
Threat posed by substitute products and services

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Tesco does not face a threat of substitute products because it sells a wide range of commodities
such as clothing and jewelry, health and beauty products, home appliances and many others.
Tesco sells a wide range of products with their substitutes hence this threat is irrelevant for the
company.
THE THREAT THAT IS RELEVANT TO BREXIT
Brexit would expose TESCO to the threat of new entrants in its market. This is because
Brexit may result to the trade restrictions which may result to no trade for the company in EU
markets hence in the process, its market may be overtaken by other companies.

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Conclusion
Tesco should be prepared appropriately for Brexit once the implementation on March 2019.
Through effective strategic management, the company shall be in a good position to excel in the
competitive business environment. Porter’s five forces analysis is very important in the success
of the company in the process of strategic management during the Brexit negations led by the
UK Prime Minister Theresa May. Contingency planning is very crucial for the success of any
organization amid crisis. The formulation of the contingency plan by the management of the
organization shall be very important after the Brexit is implemented hence the organization
would not face serious consequences.

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Reference
Asad, M. (2012). Porter Five Forces vs Resource Based View - A Comparison. SSRN Electronic
Journal, 5(12), pp.56-67.
Barnes, R. (2011). The great Tesco beauty gamble (the Tesco supermarket chains marketing’
strategy for breaking into the UK beauty services market). Strategic Direction, 27(7), pp.67-90.
Chalmers, D. (2017). LSE Law Brexit Special #4: Trade after Brexit. SSRN Electronic Journal,
pp.56-58.
Dallago, B. (2016). The future of European integration and Brexit: Is Brexit only Brexit?. Acta
Oeconomica, 66(s1), pp.111-136.
de Witte, F. (2017). LSE Law Brexit Special #1: Negotiating Brexit. SSRN Electronic Journal,
pp.65-80.
Goodwin, M.J. and Heath, O., 2016. The 2016 referendum, Brexit and the left behind: An
aggregate‐level analysis of the result. The Political Quarterly, 87(3), pp.323-332.
Grant, W., 2016. The challenges facing UK farmers from Brexit. EuroChoices, 15(2), pp.11-16.
Seo, M. (2011). Comparative cultural research Interaction usage by following task based on
Fiedler’s contingency theory of leadership. Journal of the HCI Society of Korea, 6(1), p.17.