Question

Tesbury International

When Tesbury started to expand internationally in the early 1990s, the company set up an international division to oversee the process. The international division was based in Bentonville, Arkansas, at the company headquarters in the United States. Today, the international division oversees operations for Tesbury as the largest global retailer in the world with 11,695 stores under 63 banners in 28 countries that collectively generate almost $500 billion in sales per annum. Some 2.2 million Tesbury employees work in these international positions to serve more than 100 million customers weekly. 40% of the company’s customers are outside the United States.

In terms of reporting structure, the international division is divided into three regions – Europe, Asia and America with the CEO of each region reporting to the CEO of the international division, who in turn reports to the CEO of Tesbury.

Initially, the senior management of the international division exerted tight control over merchandising strategy and operations in different countries. They also made almost all decisions for the representative managers in the different countries. This means that the managers in the various countries had limited flexibility to respond to issues concerning their particular area.

The reason for the tight control was straightforward; Tesbury’s senior managers wanted to make sure that international stores copied the format for stores, merchandising and operations that had served the company so well in the United States. They believed naively perhaps that topmost control over merchandising strategy and operations was the way to make sure this was the case.

By the late 1990s, with the international division approaching $20 billion in sales, Tesbury’s managers concluded that this approach was not serving them well. Country managers has to get permission from their superiors in Bentonville before changing strategy and operations and this was slowing decision making. There was information overload at the headquarters and this led to some poor decisions. Tesbury found that managers in Bentonville were not necessarily the best ones to decide on store layout in Mexico, merchandising strategy in Argentina, or compensation policy in the United Kingdom.

At a point in its international expansion, Tesbury decided to acquire Britain’s Bestfresh supermarket chain. It is estimated that this acquisition will some $14 billion to Tesbury’s international divisions. With this acquisition in mind, Tesbury managers realise that it was not appropriate for managers in Bentonville in America to be making all important decisions for Bestfresh in the United Kingdom. As one manager puts it, “you cannot run the world from one place.”

As a practical matter, given the product mix in Tesbury stores, products and services have to be tailored to conditions prevailing in the local market. Currently, significant responsibility for sourcing remains at the country and regional level, however, Tesbury would like to have a better and more efficient merchandising and operating strategy.

1. Identify the organisational structure that Tesbury used in its international expansion strategy and explain two reasons why the company used this structure.

2. Explain two problems that the use of this structure created for the company that hindered its smooth operations.

3. Recommend an alternative structure for the international expansion into the United Kingdom and explain three reasons why this structure might work well for the company.

4. Changing the structure would involve organizational change. Explain organizational change and examine three steps that can be used to change the structure

Answer 1

Answer to Q. No. 1

The company has implemented divisional structure for its international division. As the company has distributed the departments on the basis of different regions which are controlled by the headquarters its shows the implementation of the Divisional structure in the company.

Reasons why the company has followed this structure are:

1. Company wants to implement a uniform store format in the regions same as of the format used by stores in the USA.

2. Company wants to ensure the control of top most authorities over the merchandising and operational strategies for all the worldwide stores.

Answer to Q. No. 2

Two reasons why this structure didn't worked for the company are listed below:

1. Slow decision making process in the company- As Country managers has to get permission from their superiors in Bentonville before changing strategy and operations.

2. Bad decision making due to information overload at the headquarters.

Answer to Q. No. 3

While international expansion in the United Kingdom company can implement the functional structure. This structure will benefit the company by removing the ill effects of the existing system in the company.

The advantages of this structure are as follows:

1.Good decision making: As the authority will be demarcated among the country managers they will be able to take quick decisions.

2. Specialisation: The country managers will have to focus on their respective areas/stores only which will lead to their specialisation.

3. Higher productivity: Specialised staff is always efficient staff which means higher productivity for the company.

Answer to Q. No. 4

Organisational change refers to a change or alteration in the structure or technology in the organisation.

Steps in the process of organistional change that can be used to change the structure:

1. Identifying the benefit from the change.

2. Plan for change

3. Evaluate the alternatives available to make changes.