Introduction
The current paper addresses the crisis
management issues and the challenges faced by companies and stakeholders in the
modern world. The case of Tesco will be examined as an illustration of how
organizations across global markets are battling with the impacts of crises. It
is noteworthy that contemporary trends, such as globalization, have compelled
firms to adopt innovative ways of managing crises (Sommerville & Houlihan
2005). However, despite this, some of them still struggle to maintain control
over several significant crises. This paper also explores the benefits that
stem from crisis management and examines strategic responses from leaders.
Finally, it highlights a few strategies that can help managers to cope with
these threats.
Case Study Analysis
Tesco’s response has been unique. Its success
stems from the company’s ability to develop effective crisis management tools.
These include both internal and external stakeholders’ engagement processes.
For instance, apart from engaging its customers directly, Tesco engages other
major stakeholders, such as suppliers, employees, community groups, government
agencies, NGOs, and even governments (Tunkel 2017). Similarly, Tesco also
partners with various agencies like law enforcement agents and health and safety
departments to respond to various urgent situations. Tesco has managed to
tackle numerous crises since its establishment a century ago. Despite all its
efforts, Tesco’s reputation declined in 2011 in the wake of the Great British
Beer Flood. This affected its sales volume but made Tesco more proactive when
responding to emerging problems.
Tesco has responded to each of its crises
through various methods. One of its most important approaches involves using
their customer-facing teams to enhance communication with potential clients.
When conducting market research, Tesco aims at learning about consumer
behaviors, which in turn helps the company identify new opportunities and new
products. As indicated earlier, Tesco uses their customer-facing team to
conduct regular surveys on new products and services to understand consumers’
perspectives better. If they learn about their consumers’ needs and
preferences, then Tesco may introduce quality products that meet their
expectations.
Tesco has employed similar concepts in
mitigating risks in its operations. To begin with, Tesco has established a
“safety first” policy whereby they only sell safe and trusted items (Turing
2015). Further, Tesco ensures that products used in production are safe for
use. All its products undergo rigorous testing procedures to verify their
safety for human beings. After the flood incident, Tesco developed two specialized
water bottles that were suitable enough for people who had difficulty bathing
in floods (Tunkel 2017).
Tesco’s biggest challenge comes from changes
in consumer behavior and competition. Tesco’s main competitors, Sainsbury’s and
Co-op, have succeeded where Tesco failed in the past. Their strong brands make
them popular choices among Britons. This makes it exceptionally difficult for
Tesco to attract people to opt for cheaper alternatives (Sommerville &
Houlihan 2005). Furthermore, Tesco faces stiff competition from supermarkets in
England, South Africa, and Spain, as well as from retailers that operate
without any form of regulation.
Tesco’s top executives and directors must
formulate policies that support a healthy growth rate. This process helps
reduce uncertainty to allow managers to plan effectively. Furthermore, Tesco
must build a diverse workforce so that they can serve the changing needs of
customers. They must work closely with the local communities where they do
business, such as those found among Amish farmers. They should offer training,
mentoring, and assistance to ensure that they retain talented staff. At Tesco,
the board of directors has taken several measures to strengthen the role of the
CEO’s office in the management of the firm. First, Tesco set up an office of
executive search where they hire professionals who identify and evaluate
executives who would improve their performance. Second, Tesco has an executive
committee that looks into mergers and acquisitions to increase the level of
investment in technology for the firm. More managers are appointed to the
boards of Tesco instead of just one manager who acts as chairman. This strategy
helps create clarity, transparency, and accountability of the firm’s goals,
objectives, values, and values. A third strategy is the appointment of
non-executive directors to the board. These non-executive directors have
extensive experience in the finance and accounting fields. This creates greater
confidence between the Board and executives, making it easier for them to
perform their duties.
Tesco’s strengths are weaknesses, and vice
versa. While Tesco holds many key assets, there are also notable weaknesses and
opportunities. Firstly, it cannot provide online grocery delivery.
Consequently, Tesco faces stiff competition from Amazon and Walmart. Secondly,
some consumers complain that Tesco does not take proper care of the
environment. Thirdly, Tesco operates its stores too small, leaving out other
outlets. Lastly, there is criticism on the use of large quantities of beef and
milk. Some critics believe that Tesco’s high meat consumption is an issue that
affects social responsibility.
Tesco’s core competencies are strength,
weakness, opportunity, and threat (Sommerville & Houlihan 2005). Since
Tesco is successful because of its core competencies, it has tremendous
opportunities to grow and expand. From 2012, Tesco has successfully expanded
across Europe and Asia. Additionally, Tesco enjoys economies of scale due to
the huge size of the supermarket chain, which enables it to reduce costs
(Sommerville & Houlihan 2005). However, Tesco is facing threats such as the
ongoing recession, increased food prices, fluctuating interest rates, rising
unemployment levels, and Brexit (Sommerville & Houlihan 2005). Moreover,
Tesco faces the following questions regarding future sustainability and
profitability: Is Tesco’s growth sustainable? Will long-term investments
succeed? Can Tesco survive in the face of change and uncertainties? How will
Tesco cope with crises that occur regularly? What are the best solutions? Based
on the case study, Tesco appears to be experiencing multiple crises. There are
three major issues at stake, namely: 1) Tesco lacks adequate resources to deal
with these challenges; 2) there seems to be limited information flowing among
the board, shareholders, and investors; and 3) Tesco faces high demand for its
products, which in turn compels it to reduce costs. It is noteworthy that Tesco
has never experienced bankruptcy in its history.
Tesco faces many challenges, including both
public and internal ones. On the public side, the current environmental
regulations are causing concerns. Therefore, Tesco is seeking to find newer
ways of meeting customer demands and safeguarding the environment. Currently,
Tesco has launched initiatives that seek to transform the way they deliver food
and drink to the market (Turing 2015). Notably, these initiatives involve
promoting socially responsible supply chains. Through offering free delivery
options, encouraging drivers to drive to shops less frequently, and purchasing
green goods, Tesco hopes to make Tesco a leader in reducing climate damage. As
part of its commitment to a circular economy, Tesco wants to encourage shoppers
to return food bought online. Such experiences can make consumers want to buy
more of the same product. Another area that requires immediate action from
Tesco is education and employment opportunities. Although there have been
improvements in the situation of young people, the situation of older people
remains the same. The aging population contributes significantly to the rise in
the cost of living, which has led to job losses across Britain (Tunkel 2017).
The first step towards addressing Tesco’s
challenges comes from understanding which stakeholders own or control what
matters to Tesco. By identifying these roles, Tesco can assess the capabilities
of different stakeholders and the importance attached to different aspects of
Tesco’s activities. In addition, Tesco has identified which areas need
attention. This includes creating awareness on the impact of food shortages and
poor nutrition as drivers of chronic diseases such as diabetes and obesity.
These conditions lead to long-term hospital stays and premature deaths. Also,
Tesco has sought to bring awareness to critical topics that affect society.
This includes tackling inequality and improving workers’ rights and conditions.
Overall, Tesco’s major challenges stem from inefficient decision-making
processes, ineffective governance, and a lack of transparency.
Tesco currently has three primary sources of
resilience, namely: resource diversity, employee empowerment, and employee
involvement. Each of Tesco’s three sources of resilience is based on factors
such as supplier relationships, manufacturing relationships, corporate social
responsibility, innovation, and human capital (Sommerville & Houlihan
2005). For example, while Tesco operates its outlet network and its direct
sales channels in partnership with independent retailers, another source of
resilience was built by Tesco back in 1884. According to Omrani (2015), Tesco’s
core values are essential in enhancing its resiliency. The company’s core
values are “social responsibility, fairness, teamwork, and integrity.” Hence,
Tesco appreciates the value of sharing knowledge at every stage of its
operation. This enables Tesco to build positive relationships with other
stakeholders, thus building trustful partnerships.
Tesco’s chief strengths that facilitate
resilient responses to its weaknesses include its ability to invest in areas
where it excels. Most notably, Tesco invests in areas where it understands
leadership, marketing, and leadership development. Particularly, Tesco focuses
on achieving excellence in the areas of digital transformation, energy, waste
reduction, procurement, and logistics. With this expertise, Tesco can undertake
its challenging tasks (Sommerville & Houlihan 2005). As an international
corporation, Tesco finds it easy to work with diverse cultures across the globe
as it focuses on delivering results (Sommerville & Houlihan 2005).
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