Tesco Organisational Structure

Tesco's foundations are built on its three core values, which influence the organizational culture within the company. On top of its core values, the organizational structure also plays a huge role in the operations of the company. The company's hierarchical, product-based and decentralized structure comes with various benefits and limitations. Let's examine this in more detail.

Introduction to Tesco

Tesco PLC is a multinational grocery and general merchandise retailer. It was founded in the East End of London in 1919, where Jack Cohen, having left the Royal Flying Corp at the end of the Great War, used his money to buy and resell surplus groceries from a stall.

In 1924 the first own-brand product, Tesco Tea was sold, giving the company's name. While being a leading multinational retailer, Tesco is currently the biggest supermarket in the United Kingdom with almost 4 thousand stores operating. It also operates in several other countries in Europe such as Hungary, Czech Republic and Poland, and some countries in Asia such as Thailand and Malaysia. According to the company's annual report from 2021, its group sales that year equalled £53.4 billion alone.

Tesco’s organisational structure

According to the latest data from 2021, the multinational retailer employs more than 360 thousand people. Tesco's organizational structure consists of three groups of employees at the top, mediate and base level of management.

At the top level , there is a board of ten directors with the chief executive officer (CEO), Ken Murphy. Then, there is a mediate level which consists of five committees: audit committee, corporate responsibility committee, nominations committee, remuneration committee and disclosure committee (see Figure 1).

Figure 1. Tesco Organizational Structure - StudySmarter Originals.

After the Tesco PLC board and committees, there is a base level of management , where employees are divided into specific regions. Here, the organizational structure starts with a regional manager at the top. Then, there are store managers and three other managers below them: food trading managers, non-food trading managers and personnel managers. All of the three managers have some people below them such as fresh food section managers, ambient food section managers, electrical section managers, clothing section managers and personnel assistants (see Figure 2).

Figure 2. Tesco Organizational Structure - StudySmarter Originals.

There are different types of organizational structures regarding:

• decision power (centralized and decentralized organizational structures),
• leaders and layers of management (flat and tall organizational structures),
• other types (functional, product-based and matrix organizational structures).

To begin with, Tesco PLC's organizational structure is decentralised. A decentralized organizational structure is when lower levels in a business have decision power. It is usually where the business has many locations and therefore the head office is reasonably unable to control or make decisions for all the locations.

Tesco has almost four thousand stores in the United Kingdom only. Additionally, it operates in some other countries in Europe and Asia. For this reason, it would be impossible for the board and committees to control operations across all the locations. Instead, there are regional managers in charge of specific regions and store managers who are responsible for separate stores.

Regarding leaders and layers of management, Tesco's organizational structure is tall (hierarchical) . It means that there are many leaders and layers of management. Here, managers have a narrow span of control and there is typically a long chain of command. As mentioned previously, the firm's organizational structure has three levels of management: top, mediate and base. Moreover, at all of these levels, there are several people fulfilling different functions and reporting to other managers.

Finally, the retailer follows a product-based organisational structure. It means that employees are grouped based on: a particular product they work on, customers they deal with, or a geographical area they serve. In this case, Tesco's employees are grouped based on the geographical area they serve. Every region has their regional manager. Additionally , in every region, there are store managers who are responsible for an individual store in that region.

Advantages and disadvantages of Tesco PLC organisational structure

As outlined previously, the company has a decentralized, tall and product-based structure. All of these aspects have both pros and cons.

When it comes to decision power, owing to the decentralized organizational structure, Tesco's employees at all levels have a sense of responsibility and consequently, are more motivated . Additionally, regional and store managers are able to make decisions suitable to their local area and customers. On the other hand, however, the company can struggle with achieving consistency .

Regarding leaders and layers of management, following the tall (hierarchical) organizational structure, Tesco has great progression opportunities, making it easier for the managers to perform their best work. However, having many people with more decision power above them, some employees can be less motivated as they do not have that many responsibilities. Furthermore , any changes that are implemented in the company take effect very slowly due to the long chain of command .

Lastly, due to Tesco PLC's product-based organizational structure, where all of the activities within a region are under the overall control, means that everything is coordinated better and runs more smoothly. It is easier for management to focus on a specific segment and truly fulfil customers' needs. Unfortunately, since the retailer's employees are allocated to a specific region, not based on their specific skills, they are not always directly involved in activities they are the best at and tend to lack the skills necessary for certain projects they have to work on.

Tesco’s organisational culture

The organizational culture of Tesco PLC prioritises three main values: customers, communities and planet.

Customers

Tesco is a company that serves numerous different customers on a daily basis. Everything they do begins and ends with their customers. For this reason, they are one of the three main values of the company. In doing so, Tesco aims to understand their customers' needs and aims to be able to anticipate and respond to their expectations.

Communities

Communities in one of the values of the retailer. Besides providing people with food, clothes and many other products, there are some other ways Tesco serves communities. The company also supports communities by creating good jobs, supporting local suppliers and producers, or helping local causes through their community programs.

Planet

Tesco PLC declares the planted as another core aspect of their business. Focusing on sustainability, the firm's purpose is to adjust its operations to reduce its environmental impact. This applies particularly to its supply chain which is the main factor affecting the planet. Moreover, the company supports and promotes a healthier way of living.

In conclusion, both organisational structure and culture have a huge impact on a company's internal relationships and functions. Tesco's core values and its specific structure shape and determine the way the company operates on a day-to-day basis.