LIT BREXIT

Posted on by Sravya Akkarabani

TESCO In the face of BREXIT

BRITISH EXIT- “BREXIT” – Deal or no deal ???
THE MOST HAPPENING MARRIAGE IS GOING TO END??
FREEDOM OF MOVEMENT IS NOT ANYMORE A GOOD NEWS FOR EU AND UK PEOPLE..

THE CHANGE MANAGEMENT

The focus of this blog is to discuss the issues and strategies that are to be changed in FOOD Industry in the face of Brexit as UK having the highest import and export services in food trade for convenient Regulations. Food Retailers will be among the hardest hit on any sector if Brexit happens. Also ,to show the analysis done on TESCO company in the uncertain situation and how they can survive.

WHY UK WANTS TO GET SEPARATED FROM THE EU?

  • UK being the NET Contributor to EU, wants to reduce the investment in EU
  • An argument that UK trade with other countries like china , being hampered by EU

2016, JUNE 23rd people with majority voted to leave EU causing the largest downfall of Sterling pound (GBP) against US dollar (USD) rate. Now with BREXIT the cross-border services with EEA and Britain will be more complex, a question has been raised whether the UK based Retailers can have the same profits like before after Brexit? Will it keep its position sustainable after brexit? The imported goods are already expensive leaving countries to rethink about the supply chain formula.

TESCO LOGO and TAG LINE

TESCO PLC UK based company having 7817 stores with 517,802 Employees across the world which is providing the highest market share in UK. planned earlier to layoff around 9000 based in Britain before the date was extended to Jan 2020,

Graph 1 : Market share TESCO (Armstrong, M. and Richter, F. (2019)

From the day UK voted to separate from EU , Tesco started facing very adverse affects few of them were Suppliers increased price on blankets due to weak pound rate for expensive imports , Unilever brands sudden increase in hike , Few brands like Marmite, Ben and Jerry’s Ice cream, Hellman’s Mayonnaise went unstocked at all Tesco retails locations. So solve this uncertain conditions and have good business Tesco decided to have an agreement with Unilever to revert to the old service agreement. But things were not favourable due to Retailers expecting high trade tariffs as well to impose supply chain costs.

Based on Several change management theories we can analyse how Hard brexit and soft brexit can affect TESCO. As we are talking about uncertainty we should understand the meaning of change.

We can define change management as a collective term for all approaches to prepare for the uncertainty, support and help individuals, teams and organisations in making organisational change Successful. Anon. (2019)

Fig: Successful change (Burnes.2010)

Initiative done to offset Brexit by TESCO:

Tesco Refrigerated containers (Eley, J. (2019)
  • Tesco has rented refrigerated containers to store the frozen food to lighten the potential disturbance from brexit. Usually they store excess food for the Christmas period but this time they had decided to onsite for the rest of the year as part of readiness for the brexit. As part of discussion in Jan 2019 TESCO chief executive Dave Lewis stated that they would like to deal with suppliers in order to have sensible opportunities that can help in improving the stock holding process (Joshua Warner Joshua Warner, Warner, J., and Warner, J.W.J. (2019)
  • Tesco successfully bought Booker and diversified into wholesale business. through this plan they acquired good profits in the first quarter of 2019. This had helped them to gain the greater Buying power and International exposure with high margin business which are the key factors for Tesco to sustain brexit. (Joshua Warner Joshua Warner, Warner, J., and Warner, J.W.J. (2019)
  • Signed an agreement with carrefour which is EU largest Retailer which can help Tesco to force suppliers that can help in control.

Challenges to be faced in case of hard brexit:

The disadvantage of having hard brexit is , TESCO has not earned good track outside the UK. the product diversification is the major factor and the competitors like Lidl, Salisbury Morrison’s. Overseas operations are not doing good for TESCO. They are trying to restore customers trust.

https://www.ig.com/uk/news-and-trade-ideas/are-tesco–sainsburys-and-morrisons-ready-for-brexit–190923

Let’s see how we can analyse a company based on MC Kinsey 7 s model. Basically, this 7 s model can be used to work on the alignments.

  1. Focusing on Improvement
  2. Examining the adaptability status of the company
  3. Process Alignments
  4. Determining the best way to implement strategies (Dudkina,2015)

This model helps to illustrates the link between seven elements in any business to get effective standards for an organisation. It has been divided into two groups.

Soft Elements(blue) and Hard Elements(grey):

Mc kinsey 7S model, (Dudovskiy, J. and Dudovskiy, J. (2016) 
StrategyCost leadership Business-Focus on availability
StructureHierarchical structure
SystemPerformance evaluation system-helps in improving the overall process by simplifying
Shared valuesWhat does the organisation believe in
StyleHow does the organisation behaves in management style
StaffSkilled people & Empowering
SkillsCore competencies

Table : MC KINSEY 7 S MODEL

What can be done to sustain in the market:

Using lewins Force field Model which helps an organisation to understand the situation based on two factors.

1. Driving force – Forces that can help to drive the change

2. Resisting force – Complicating forces that hinder the change.

So we can say by balancing the productivity of the organisation and issues that are affecting the productivity, we can maintain at an equilibrium state using this model. (Kaminski, J. (2011)

There are three stages.

Lewin Change management model Anon. (n.d.)
  • Unfreeze: Motivation to change. This helps in understanding the requirement of change.
  • Change or transition: Training and guiding people to get ready for the change.
  • Refreezing: It’s all about making sure that they maintain the continuity in change and also helpful in the future without back step. (Kaminski, J. (2011)
  • TESCO FOCUSING ON:
  • Essentials on how they use scale for good
  • Every decision taken by considering customers, communities, retailers and staff everyone should be fairly satisfied.
  • Being the loyal brand to customers

Conclusion:

Tesco expecting to have a softer brexit in order to have free trade within EU as the import would be costlier if brexit happens. NO DEAL Brexit could help them to sustain the market. They should be prepared for the worst by taking definitive actions to protect themselves from the unexpected challenges of brexit. Focus on having a clear image by gaining customer trust addressing the scandals and all suppliers payment issues. However, after the brexit is announced the “IMPLEMENTATION PHASE” helps in arranging things until there is a comprehensive agreement between the UK and EU countries.

UK PEOPLE MUST BE READY TO HAVE DIFFERENT FOODS WITH POOR QUALITY PAYING OUT MORE THAN PRESENT, BASED ON ALL THE RESEARCH IT IS SAID THAT FOOD IS GOING TO BE MORE EXPENSIVE.

Now your turn👇 lets discuss , give your opinion on below in the comments section.

  • What is CHANGE MANAGEMENT FOR YOU?
  • Do you think the process involved in change management is a new beginning?
Video: Change management cycle Anon. (n.d.)

References:

30 thoughts on “LIT BREXIT”

  1. Hi!

    It’s a really interesting article.

    You have highlighted the difficulties that Tesco could face in terms of exchange when applying a hard Brexit.

    I also wanted to know how Tesco will help its European employees in the case of a hard Brexit?

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    1. Hi Charles,

      Getting to your point if it is a hard brexit. Tesco being the the largest international companies among few countries other than UK, They are having many stores in EU as well. They can ensure that their employees will not be left with the uncertainty by acknowledging their gratitude they had for the company.
      Employees are first , if you ignore employees then there is nobody who can trust your system who had worked for long years.

      Liked by 1 person

      Reply

  2. Thats a good article on after effects of Brexit,
    I liked your detailed analysis of the measures that Tesco is implementing to face the economical and marketing conditions post Brexit. Good work sravya keep it up.

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    1. I am hearing this brexit deal from months but nothing is happening. due to this no implementaion of brexit Theresa may resigned and things continued with new team still no result. They are also finding the best way inorder to avoid obstacles when any of the brexit deal happened either soft or hard brexit.

      Nice article about tesco and brexit deals let best comes out.

      Liked by 1 person

      Reply

      1. Hey Ravi,
        I can understand your point of view, As you can see things cannot be changed in a go. you can see this is an issue which is impacting many sectors directly and indirectly. lets see how brexit will impact the world trade fare.
        Thank you

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  5. I agree that change management is very important in organisation, I was part in merger entity to face the uncertainty in telecom sector. People in the organisation were not happy post merger as they were cultural differences and hierarchical pressures from management for every single task. This lead the employees panicking with the uncertainty.
    The company is still struggling with huge loss in every quarter.
    Change is a process , every organisation, every country every individual should face the uncertainty at some point of time .

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    1. I strongly agree with you because, I was also a part in the merging entity as well. Organisation with two different cultures The mindsets of people working there were more stressed due to autocratic nature’s of the organisation post merger. I would say change management process is very important to grow further.

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  10. Good topic. Few open ended statements. Nice theory background but i would like to see the analysis of Tesco using “Mc Kinsey 7S” model. From my perspective, a “change” is defined as a variation/deviation from the scope or BAU. The impact of “change” should be assessed using SWOT analysis to break down the opportunities and threats. Accordingly, a plan needs to be drafted to manage the change. Based on the type of organisation, the change process would be different. In this dynamic environment, change management is inevitable.

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    1. Yes Vikas,
      I totally agree with your perspective of analysing the strengths and weaknesses by swot analysis. The main agenda of the topic was to see how companies based in UK are going to face the change management post Brexit. Change is a continuous process, adaptability is the key factor for any change you wanted. Let’s say it’s inevitable but to face it You should build yourself strong to prove the sustainability of the organisation for long time.

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    1. Hi Rashwanth,
      A Recession is very much a possibility. Though UK can survive the uncertainty some how during the implementation phase. There would be loss in UK firms and business facing the uncertainty due to Brexit. Mobility of labour would be a discussing topic as post Brexit things are going to be more expensive if it is a no deal Brexit.

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  14. Been listening about the Brexit from a long time. I could understand that it will have a significant impact on the economy but reading this article made me think about what the industries are and should be doing to face the big change. Change management, in my opinion is the strategy that an individual or an organisation use to adapt to the changes around. Yes, the process involved in change management is definitely a new beginning. I would take it up as an opportunity to rethink all the existing processes and as mentioned in the article, do whatever it takes to make the organisation ready for the change by preserving the trust of the customers and the employees.

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    1. Hi Sravani,
      We all know there are certain factors which may get affected due to brexit. Until unless we dig deep into it we will not how can this impact the existing and future system depicting the losses and improvements. This is the right time to adapt to the change and start embracing with the new beginnings by inventing new process and systems to achieve bigger heights and prepare for the uncertainty at any cost which is inevitable.
      employees and customers are the two factors for which the company must be accountable in first place.

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  15. Any organisation or industry having same life structure leads to downfall , yes change required for growth and adaptation of new economy condition, when change happen no one wants to agree or accept because of existing process is easy for their daily lives .
    Based on current condition for some days all products to be more expensive but once all the hierarchy process set then rise of organisations will automatically happens.

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    1. Hi Harika,
      You are absolutely right, People get scared when there is a change in the existing process which disturbs their aligned way of traditional working system, once you are out of your comfort zone and willing to learn something great than the old. the change starts within you. this is the major factor to drive change for the greater cause.

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  16. Great work on your blog! it’s absolutely beautiful.

    Aside from the disadvantages of the lack of product differentiation and the fact TESCO has established a firm presence outside the UK, what are other challenges that Tesco might face in the occurrence of a hard Brexit?

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    1. HI Narcia,
      There will be an implementation phase post brexit which aligns new agreements, so TESCO should make sure the problems they analysed need to be covered in the agreements for future deals.
      Pound rate may fall at some point of time, this is because we had seen that the pound sterling varying very low to Euro from 2016 Brexit announcement. this makes the imported goods more expensive which leads the grocers to increase their product price which will not be a welcoming thing by customers anymore. Their competitors like lidl and asda are already trying to attract customers by reducing the costs. Tesco should strive for sustainability very seriously as the maximum food products are from EU. tariff costs will be a bigger problem.

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Published by Sravya Akkarabani

I am an Independent women who believes in self rather than any, I am recent MBA graduate fulfilled my dream of pursuing an MBA in London. As an experienced working professional for 5 years and willing to grow in life more as an individual networking with people across the globe. You would see me soon achieving bigger things in life as a person with ethics and self esteem.