Tesco Goes Global
Why did Tesco’s initial international expansion strategy focus on developing nations? There are valid reasons why Tesco decided to operate on developing countries as they planned to expand its business internationally despite its competencies in many aspects in terms of business operation and management right in its home market – in the United Kingdom .
These reasons have been proven effective after many years of recorded successes in their performance in the international markets As an initial step, venturing with local retailers in some Eastern European and Asian countries where there are few capable competitors at stake is very effective in carrying out its business plan with less efforts and threats as a result of political, social and economic resistance.
Tesco simply avoided strong competition outside its country where marketing strategies might be powerful than it has. Its primary goal is to penetrate and establish a business before utilizing other strategies to compete in the market .
This means that their marketing strategy is effective as far as their research is concerned but that will not be so if utilized in countries known to have strong competitive advantage As a result, Tesco as one of the largest retailing company in the world has generated more business ventures in addition to what it already established in the United Kingdom having a in 2005 alone. Getting into global business became easy for Tesco after carefully analyzing the trend in international business. 2. How does Tesco create value in its international operations?
There are factors that create value for Tesco: 1) the company devotes considerable attention to transferring its core capabilities in retailing to its new ventures, 2) the company hires local managers and support them with a few operational experts from the United Kingdom, 3) the company’s partnering strategy in Asia is a great asset because the companies Tesco has teamed up with are good and have a deep understanding of the markets in which they are participating, 4) the company and its partners bring equally useful assets to the venture which increases in the probability of success, and 5) the company focuses on markets with good growth potential but that lacks strong indigenous competitors. 3. In Asia, Tesco has a long history of entering into joint venture agreements with local partners. What are the benefits of doing this for Tesco? What are the risks? How are those risks mitigated? Tesco is able to share ideas and use ideas from the Asian companies. The risk is that the companies involved could pull out, steal Tesco ideas, or fail and leave Tesco with debt. The risk is mitigated by Tesco being involved only 50/50. 4. In March 2006, Tesco announced that it would enter the United States.
This represents a departure from its historic strategy of focusing on developing nations. Why do you think Tesco made this decision? How is the U. S. market different from others Tesco has entered? What are the risks here? How do you think Tesco will do? Tesco observed how it competed with Wal-Mart in the United Kingdom and made an analysis that it would do just as well in the United States. The breakeven analysis would be achieved by the second year and the market in the United States has not seen a model like Tesco’s format. The United States is a different market because it is a developed country and has many competitors in all of its markets. The risk is that the United States competitors will beat out Tesco.