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

The diploma ceremony process was as follows. Students lined up to be hooded. Professors Venkataraman and Rodriguez performed the actual hooding ceremony. Together, they could hood 12 students per minute, on average. After hooding, students waited at the top of the steps to the stage until a Faculty Marshal called their name. This past year, Professor Allayannis read the names of the Global MBA for Executives (GEMBA) students, Professor Wilcox read the names of the MBA for Executives (EMBA) students, and Professors Frank and Parmar read the names of the residential MBA students. There were 29 GEMBA students, 65 EMBA students, and 315 residential MBA students. Once their name was called, students walked across the stage to Dean Bruner, who handed out their diploma. Then they continued on across the rest of the stage and returned to their seat. The administration had set a target of finishing the diploma ceremony in 60 minutes. The Marshals called names at the rate of one every 7 seconds. It took students an average of 8.2 seconds to walk across the stage, shake the Dean’s hand, and receive their diploma. After the handshake, it took students an additional 2 seconds to depart from the stage. There were approximately five students on the stage at any given time (one being hooded, two waiting for their names to be called, one in the process of receiving the diploma and congratulatory handshake, and one finishing the walk across the stage.)

1. What is the takt time for the diploma ceremony? Answer in seconds.

2. What is the cycle time for the process? Answer in seconds.

3. What is the throughput time for a student from the time he/she begins the hooding process until he/she walks off the stage? Answer in seconds.

4. What is the throughput rate? Answer in students per hour.

5. Could the goal of a 60-minute diploma ceremony be met? Yes or no?why.

Suppose that the treasurer of Apple has an extra cash reserve of $200,000,000 to invest for six months. The six-month interest rate is 4 percent per annum in the United States and 3 percent per annum in France. Currently, the spot exchange rate is €1.00 per dollar and the six-month forward exchange rate is €0.98 per dollar. The treasurer of Apple does not wish to bear any exchange risk. Where should he/she invest to maximize the return?  

Even though most corporate bonds in the United States make coupon payments semiannually, bonds issued elsewhere often have annual coupon payments. Suppose a German company issues a bond with a par value of €1,000, 20 years to maturity, and a coupon rate of 6.2 percent paid annually. If the yield to maturity is 7.3 percent, what is the current price of the bond? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

You are an economic advisor to Australia’s Prime Minister. Australia is an open economy with free capital mobility. The P.M. wishes to know why he can’t maintain a fixed exchange rate with the United States and at the same time reducing interest rates in Australia to fight a recession.

Explain why the P.M. can’t have both a fixed exchange rate an independent interest rate policy at the same time. (Use either uncovered interest parity or an FX market graph in your answer)

9.Which statement is FALSE about changing the unit of payment?

In a survey of 3005 adults aged 57 through 85 years, it was found that 81.7% of them used at least one prescription medication (based on data from “Use of Prescription and Over-the-Counter Medications and Dietary Supplements Among Older Adults in the United States,” by Qato et al., Journal of the American Medical Association, Vol. 300, No. 24). Use a 0.01 significance level to test the claim that more than 3/4 of adults use at least one prescription medication.