Introduction
Leadership transition is the change in the management of an organization. The transition may include the merging of departments such that managerial tasks for different sections can be performed by one head of department, and the replacement of managers. Leadership transition can be necessitated by the poor financial performance of a firm that results from an inefficient management system and the promotion of a manager due to the exemplary performance in terms of uplifting the image of a company in the corporate market. On the other hand, transition in a company’s management can cause instabilities in the operation of business activities, in case the change in management is not implemented in a systematic and strategic manner. This paper discusses the role of leadership and possible managerial challenges in the leadership transition of Tesco.
Role of Leadership in the Organisation
Transactional Leadership
The company’s management coordinates all the activities, including the formulation and implementation of policies and plans. The management represents the organization’s incorporate functions such as seminars and conferences, hence acts as a ‘spokesperson’ of the enterprise in the public domain. For instance, Philip Clarke was involved in looking for the international market for Tesco, and through his good representation of the company, Tesco captured an extensive international market, hence improving the revenue generation capacity. Managers of specific departments represent the specific units that they lead. The leadership system is also responsible for the achievement of the goals of an organization, hence each of the managers aligns his/her personal objectives to those of the firm. However, the goals can only be achieved when the managers coordinate the functions of the functional units within the organization and align the objective of each of the stakeholders to those of the firm. The managerial system also solicits support from the internal structure and that of the external stakeholders to ensure that the objectives of the firm are accomplished.
Transformational Leadership
The managers can change the performance of an organisation in several ways, which include the enhancement of employee confidence in the possibility of the achievement of the objectives of the firm. Through the involvement of junior workers in decision-making, the employees’ dedication and confidence in working for the betterment of the company’s performance is enhanced. The workers tend to align their personal interests with that of the organisation. Transformational leadership involves the ability of the managers to function as the agents of change, by formulating and enacting policies that are aimed at the improvement of organisational performance. For example, the involvement of Terry Leahy in the management of Tesco changed the manner in which business was conducted in the company. During Terry Leahy’s tenure, the company expanded its market cover and turnover.
The management should also be able to act swiftly towards the adoption of any strategy that can enhance the survival of a firm in the highly competitive market. Transformational leadership is also measured by the ability of the management to trust other stakeholders of the company and involve them in making critical decisions. The management should also be value-driven, such that all activities are aimed at the achievement of specific objectives that are quantified.
Managerial Challenges
Ineffective Administration of Policies
The firm may administer policies that fail to be effective as planned, and this may have a negative implication on the general financial position of the company. For example, when Philip Clarke took over as the CEO of Tesco he reduced the prices of 3000 basic items to counter the negative impact that the global recession had on the purchasing power of the consumers. Consequently, the policy did not yield the intended results – the company’s sales volume reduced by 3.8%. The decision, therefore, led to a decrease in market share and profits.
Inability to Adopt the Changes
The management system of an organisation should be swift enough to adapt to market trends. This includes the use of the latest technology for the production and marketing of products. Tesco suffered a declining performance in the market, due to the failure to adapt to technology and product marketing, and the inability to improve and maintain customer loyalty. Tesco was slow to adopt digital marketing as a strategy to improve the global market share.
Characteristics of the UK Retail Industry
The UK retail industry comprises of 319,125 premises, which is 9% of the total number of businesses registered under VAT. Approximately 18% of the total sales in the retail sector are done online, mostly using internet platforms. Approximately 82% of consumers place their orders online. More than 34% of the total consumer spending is through the outlets. On average, 39% of the expenditure in the retail sector is in food shops, 12% in clothing, 9% on fuel for automotive, and 8% on household goods. Recent statistics indicate that the retail sector has an economic output of $92.8 billion, which is 5% of the GDP. However, Tesco like-for-like sales reduced by 07%, between 2010 and 2012.
Building the Adaptive Firm
Tesco can rejuvenate its corporate energy by adopting a sustainable pricing strategy, in order to compete with its rival firms. The company can also improve its digital platform and use it for marketing and online placement of orders. Tesco can also shut down international outlets that do not show prospects of generating profits in the near future.
Assessment of Competition
According to the latest business reports, Tesco is ranked number 1 among the top 10 retailers in the UK. The company faces competition from other firms such as Asda, Waitrose, Morrisons, Sainsbury’s, Aldi, Amazon, and Lidl. The competitors have extensive use of the internet for marketing their products. The companies have a market niche within Europe and the rest of the world.
Key Success Factors
The main success factors include the formulation of strategies for the improvement of performance. This involves putting a performing manager at the helm of company leadership. For instance, Tesco considered Philip Clarke and Dave Lewis for the CEO position because of their good performance in past leadership positions. Flexibility and adjustment to market trends such as the adoption of internet sales and marketing is also a key factor in organisational success.
Understanding the Strategies of a Market Leader
The managers should also have a strong mental capacity to learn and work in situations that are complex, to enhance the ability of the organisation to handle the dynamic changes of the market. In any market, a firm’s survival is determined by the quality and price of its product. Tesco adopted a price reduction strategy to match the prevailing purchasing power of the clients. However, the strategy is formulated with the company’s expenditure in mind.
Conclusion
The paper described the role of leadership and possible managerial challenges in the leadership transition of Tesco. The research has established that managers play a pivotal role in the improvement of a company’s management. Good company performance is achieved when managers formulate and implement viable strategies for improvement. However, the implementation of the strategies may be hindered by ineffective channels for administration and the inability to adapt to changes in the market. Further research should be conducted to establish how online sales and marketing has impacted on the market performance of Tesco.