NO DEAL BREXIT – DESTINY OR DISASTER?

Posted byalfiyasakPosted inUncategorizedTags:, , , , , ,

Is Brexit a Destiny or Disaster? If you are living in UK, by the present time you must have heard this boiling term ‘BREXIT’. But what exactly Brexit is? What impact it will leave on the country & businesses running in UK? Well in this blog you will get to know the answers for above questions also we will learn how the retail industry company like Tesco should tackle this change & get ready for it. We will also see various models which can help in the change management process for the organization.

What is change?

Change is defined as, “an inevitable and constant factor, an inescapable part of both the social & the organizational life & everyone is subjected to continual change of one form or the other” (Mullins 2010). In order to thrive in an increasingly competitive global environment, an organization must pay attention to its continual effectiveness and development. An underlying feature of the successful organization is the ability to adapt to change (Mullins 2016). Whereas Change management is the systematic manner to cope up with driving change occurring in the environment, implementing strategies, controlling change & helping people to adapt change (Rouse 2019).

What is Brexit?

Coming to the term Brexit which means Britain Exit, in 2016 UK decided to leave the EU (European Union) because of which there are lot of uncertainties going on as there are lot of knowns & unknowns. Leaving the EU is genuinely a major regime change, with massive political, legal, economic and social consequences (Rogers 2019). Many companies are struggling to understand what life would be like if UK decides to leave EU, they need to rethink on how they operate & organize themselves according to the present scenario. I decided to study the impacts of Brexit on retail industry company like Tesco and how they should come up with an action plan ready for the change.

IMPACT OF BREXIT ON TESCO

Tesco is a British global food supplier & general product retailer, they have their outlets & inlets across seven nations in Asia & Europe & it is the market leader of groceries in UK with market share of around 27 %. It is by far the largest supermarket in the UK. Well Brexit impact on a company like Tesco will result in an increase to cost of goods & overhead costs, higher import tariffs, higher sourcing costs from a weaker sterling, higher labor costs and the potential cost of customs friction from border controls (Tesco annual report, 2019). While a no-deal Brexit’s impact on the pound remains uncertain, the cost of imports and raw materials could become more expensive as retail prices would be increased if the pound value weakens further than it already has (Retail Gazette, 2019).

ACTION PLAN –

To prepare themselves for the upcoming change Tesco needs to implement some practices to evolve and survive. If we look on Lewin’s model which is most popular model for change management, we won’t be able to achieve satisfying results as Lewin’s (1947) three-stage model of planned change involves unfreezing the present situation, movement or changing to a new state and refreezing the new state to make it endure (McGuire, 2018).

As Tesco don’t completely needs to unfreeze its current business situation, they only need to rethink strategies to maintain the cash flow and continuous supply of goods without any barrier in trade practices. So, for a company like Tesco, John Kotter’s (1996) award winning 8 steps for leading change model would be more suitable. This model includes the following steps:

KOTTER’S 8 STEPS FOR LEADING CHANGE MODEL

Step 1 Create Urgency:

Managers need to make employees understand why the change is necessary? Tesco should identify and highlight the potential threats regarding Brexit impact on the company. As a no deal Brexit could mean tariffs and delays at the border that interrupts supply of some foods (Finance Express, 2019). Failure to prepare for this will cause disruptions and create uncertainty around business, ability to recruit, supply of goods to customers, disrupted financial results and operations.

Step 2 Forming a powerful coalition:

By Identifying the effective change leaders in Tesco and the key stakeholders, requesting them their involvement and commitment towards the entire process can Form a powerful change coalition who would be working as a team. In such way Tesco can form a Committee for ongoing concern, longer-term prospects with consideration of forecast cash flows, including sensitivity to trading and expenditure plans and potential mitigating actions considering any impacts of the uncertainties arising from Brexit.

Step 3 & 4 Creating a vision for company & Communicating the vision:

This can be achieved by Determining the core values, defining the ultimate vision and the strategies for realizing a change in a company & communicating the change in the vision very often powerfully and convincingly by Connecting the vision with all the crucial aspects like performance reviews, training (Juneja,2015).

Step 5 Removing Obstacles:

There is need for continuous checking of barriers or people who are resisting change (Juneja,2015). Tesco needs to implement proactive actions to remove the obstacles involved in the process of change.

Step 6 Create short term wins:

Tesco needs to create many short-term targets first instead of one long-term goal, which are achievable and less expensive and have lesser possibilities of failure.

Step 7 Build on the change:

Achieving continuous improvement, If Tesco can capitalize on these above steps also with promoting their local produce or adapting their range than they will be one step ahead.

Step 8 Anchor the change:

Tesco should ensure that the successful change becomes an integral part in their organizational culture.

Fayol’s 5 functions of management – Management in everyday routine carries five major functions. They are Planning, Organizing, Commanding, Coordinating, and controlling (Fayol,1984). As management is necessary part of an organization, implementing these functions by Tesco can make them achieve their desire objectives in change management process.

LEARNING OUTCOMES –

If Brexit occurs then there will be increased tariffs and regulatory checks, which means the cost of making fresh food and drink available could increase while everyday food prices could increase. Tesco needs to take practical steps to mitigate this, by adopting a ‘peak mindset’ and collaborating with their supply base. Making more of its own products, sourcing more from the UK, improving its buying power and diversifying into wholesale will really help them to sustain for long run in the competitive environment after Brexit. If Tesco arises with the right strategy it would be a Destiny for them otherwise it will turn out into a Disaster after Brexit.

REFERENCES –

Published by alfiyasak

Hi my name is Alfiya, I completed my undergrads in business management studies & I am currently studying MBA global business in Coventry University, London.

19 thoughts on “NO DEAL BREXIT – DESTINY OR DISASTER?”

  1. Nice blog and to what extent can Brexit influence the International business environment… would like to know your views on it in short.
    Just share your thoughts on how Brexit is affecting current business scenarios and your asssumptions on how it will be affecting in future because besides Tesco many other foreign firms will also be getting influenced by this change.

    Liked by 1 person

    Reply

    1. Hi Saniya,
      Thank you for your valuable comment. Coming to your query, Brexit can have its impact on others nations like Europe as well as United states, as they are trade partners of Britain. If one of them takes a step back then trade will definitely get imbalanced. The day after the Brexit vote, The euro fell 2% to $1.11. The pound fell. Both increased the value of the dollar. That strength is not good for U.S. stock markets. It makes American shares more expensive for foreign investors. As a result, a weak pound also makes U.S. exports to the U.K. more expensive. It affects the U.S. farming and manufacturing sectors. Other Industries in UK like finance, aviation, hospitality, automobiles, pharmaceuticals are also getting affected by this change. I hope you have received relevant answer for your question. Have a good day and do follow my blog for more such information.

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  2. Conscious that they need to maintain commercial momentum without falling foul of regulation or incurring unforeseen cost or delay, what exactly can marketers like Tesco do to weather this unprecedented period of uncertainty, especially if there is ultimately no deal?

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    1. Hi Sam Stark, Thank you for your valuable comment.
      Yes Tesco needs to maintain commercial momemtum without falling foul as Tesco is facing significant challenges as a result of the isolationist policies associated with Brexit. Tesco as the brand is most associated with Brexit and for this they need to arise with a strategic plan. Some certain measures can be taken by Tesco in order to thrive in the competitive environment after no deal.
      1 – Tesco needs to define the uncertainties they might face like tariffs, UK labor market, supply chain delays, taxes, foreign exchange.
      2 – Devise a specific set of strategic options for these uncertainties.
      3- Identify a clear set of signposts for actions and track them.
      Do follow my blog for more such posts, have a good day.

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  3. like two sides of a coin, everything has advantages and disadvantages, so as the Brexit. Tesco may face some serious issues at the beginning but with proper planning and management it may be able to overcome it. now it’s upto Tesco what efforts it’s gonna make to tackle this problem. let’s see if Tesco succeeds in maintaining it’s power. hope for the best.

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    1. Thank you Mujahid for your valuable comment. yes I agree on what you said, as there’s no such objective which can’t be achieved through proper strategies and management. As I mentioned in my blog If Tesco follows a peak mindset than this change wont be that drastic for them to cope up with. Have a good day. Please do follow my blog for more such information.

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  4. Brexit will have both positive as well as negative impact on every industry. Therefore they must take appropriate measures to tackle such situations. Tesco must pay more attention towards inhouse producing which can help to cut the costs of the products or must generate access to other resources who provide the same goods considerably at profitable prices. However implementing things are more important than just saying. And no doubt its going to be a tough time for even Britain as well as European Union, so let’s see hope for the best.

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    1. Hello Sana, Thank you your worthy views, I completely agree on what you said as Britain Crashing out of the EU would create problems for Tesco, its chief executive Dave Lewis has said, brexit would introduce a hard border between the UK and its neighbors.
      “When they pick a lettuce, in Spain, it has five days of life but now If that lettuce has to stand two days at the border, I’m not sure they can put it on a shelf, and that is not good for consumers. rather than this Tesco should come up with their own in house production to minimize the impoverishment. Also Tesco can merge with other suppliers at reasonable rates.

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      1. Exactly. However, Thank you so much for explaining. The blog was really good. Very well explanation. Thanks for sharing such an important view.

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    1. Hey Sahrish, thanking for commenting on my blog. Yes Brexit impact will do lead to change in role of employees as they will need to respond in due time, but it will change the game for employers more as the workforce trend will change. Employers will need to assign greater urgency to undertake strategic workforce planning that will help identify the skills and knowledge required now and for the future. Also there will be war for talent in UK. employers will be in search of employees, workforce management will be more important than ever. If you want to know more about Brexit do follow my blog, I will keep posting more, Have a good day.

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  6. This seems a very important political phase for both the parties. Tesco has an opportunity to make it self independent which is not that easy but yet not undesirable. The core management must adopt certain strategies to overcome this problem.

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    1. Hello Gulnar, Thank you for your comment. yes I agree with what you said, as there are lot of known and unknowns we cannot deny the fact that Brexit can create opportunities as well as difficulties for the firm. If the core management follows the change model theory of Kotter’s 8 step then they will definitely be able to accomplish certain objectives for preparing themselves, also growing as self independent firm can be done by implementing kotter’s steps and create a new vision and mission for the company.

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  7. Hello Alfiya,
    I find your blog is very good with a nice presentation and well informative. It gives me a lot of information on Tesco. But since Brexit has been delayed twice already, do you think taking any extra efforts to tackle Brexit will be a good thing?

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    1. Hi S.Gupta, Thank you for your valuable comment. As precaution is better than cure I think its better to be prepared for the change predicted by taking extra efforts for unseen consequences than to fall short when it happens. do follow my blog for more such posts, Have a good day.

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    1. Hi Culcmalua, Thank you for your valuable comment.
      Brexit has impacted Tesco in positive way too, As after the annoucement of No Deal Brexit Tesco decided to buy Booker (leading wholesale provider in UK) and diversify into the wholesale business and this has been successful. Tesco has gained huge scale in recent years, This provided greater buying power with higher-growth, higher-margin business.
      It also signed a buying agreement with Carrefour, which is Europe’s largest retailer. The partnership means they can exert more pressure on their suppliers, giving it greater ability to force them to burden any cost increases from Brexit.

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  9. A realistic approach to face the uncertainty of Brexit. Tesco might be successful in coping up with the change but will it have any impact on its performance in the market? will there be quality assurance provided by Tesco after collaborating with the local suppliers?

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    1. Hi Rishikesh, Thank you for your valuable comment. Well yes it can have positive as well negative impact in terms of performance in the market, coming to food safety standards after the collaboration there wont be any degradation as
      the UK standards around food safety and security are among the best in the world. They wont lower any standards after brexit too.

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