As businesses around the world are scurrying to keep up with fast-changing times, business leaders and managers are bracing for inevitable “bumps” and “cracks” along the road that would lead them to become a globally competitive company. Often referred to as “the process of integration across societies and economies”, globalisation can be deemed as an inevitable phenomenon because it is a favourable flow of information, services, products, labour and many other things to move across state borders (Wong-MingJi, 2006). Through globalisation, Wong-MingJi (2006) added that the belief that “greater good would be served by leveraging comparative advantages for production and trade” permeates because businesses are often hampered with many political and legislative barriers between entities that conduct international transactions.
For companies that operate in a highly complex, diverse, and rapidly changing environment, the organizational design becomes a challenge because any business venture should not only configure a structure that works well in diverse locations, but it also needs to bring them together in a coordinated fashion with the capability for rapid redeployment (Shenkar & Luo, 2004). Being the largest retailer in the UK, Tesco PLC is bravely facing all these challenges in international expansion. Tesco’s retail dominance in the UK “cannot be denied” because it is said that “£1 in every £8 spent on retail in the UK is spent at Tesco” (Phillips, January 2007). Tesco’s first international venture was when they decided to enter “Ireland in 1978 by purchasing 51 per cent of Albert Gubay’s Three Guys operation for £4 million” (Palmer 2004).
However, Tesco’s initial international foray was judged by Palmer (2004) as “too hasty given the structural capacity for expansion and the relative strength of the company within their domestic market at the time”. It was in the 1990s when Tesco went all-out in its quest for international expansion. In response to a growing Eastern European market, Tesco opened stores in Poland, Hungary, Slovakia and the Czech Republic. During the same period, Tesco also ventured into Taiwan, Thailand and South Korea. In 2001, Tesco announced 2001 that it formed a strategic relationship with American supermarket Safeway, to take the tesco.com home shopping model to the US. In the same year, Tesco entered the Malaysian market. Also during this time, Tesco launched the “Customer Champions” in their stores and implemented “a new labour scheduler” for the purpose of improving service for customers (History – Tesco Website, 29 March 2008).
With regards to global integration, Tesco’s CEO Terry Leahy believed that “despite globalisation, local differences still hold sway over mass retailing” (The Economist, 16 April 2005). In the retailing market, Tesco is set to go head-to-head with retail giants like United States’ Wal-Mart and France’s Carrefour. The Economist (16 April 2005) revealed that Tesco is battling out “strong competition from discount chains in some central European markets”. Despite this challenge, “Tesco’s total international sales grew by 13% to £7.6 billion in 2004. Some 60% of its overseas investments are in Thailand, South Korea, Ireland and Hungary, generating together a return on investment of over 15%”. In South Korea, Coe & Lee (January 2006) revealed that Tesco’s strategy is described as “strategic localization” because it “reflects how several aspects of the firm’s activities have been intentionally localized to meet the needs of the political and institutional frameworks, industrial structures, and cultural norms and expectations of the South Korean market (a series of dynamics here termed ‘territorial embeddedness’)”.
Another implication of global integration for Tesco is that they revitalised their recruitment campaigns in coming up with globally empowered staff profiles. David Fairhurst, Tesco global resourcing director, indicated that their company is creating a database that contains all staff interviews that will assist their company to identify the best method in recruiting different types of employees (Wigham, 12 March 2002). Fairhurst revealed that Tesco is “planning to take on 50,000 extra staff yearly” and they have adopted the database approach “following the success of customer profiling based on buying patterns revealed by reward cards and customer research”. What Tesco did was to segment “their employee base so they can look at the reasons why Tesco employees come to work” and Fairhurst shared the fact that organisations should “not over-emphasise the need to recruit externally”, but they should learn to be “more proactive in talent planning” (Wigham, 12 March 2002).
When undergoing global integration, Tesco needs to change its structure to accommodate the increasing volume and scope of business as well as the increasing diversity of its business. Evans, Pucik & Barsoux (2004) identified that strategy, home and host country environments, projected market growth, the nature of business, and the human resources available to the firm, are the essential factors that influence the choice of organisational structure that will fit a business seeking global integration. This is why the Tesco management should provide a considerable leeway in its structural choices and it should continuously monitor the suitability of the structure as its operations evolve and as its business environment changes through time.
Bibliography
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Phillips, T. 2007, January. The Shop – Tesco PLC. Journal of Database Marketing & Customer Strategy Management, 14(2): 143-147.
Shenkar, O. & Luo, Y. 2004. Chapter 11 – Organizing and structuring global operations. International Business, New York: John Wiley & Sons, Inc.
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Wigham, R. 2002. Staff profiling allows Tesco to target talent. Personnel Today, p. 7.
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