Global Business: The European Economic Community, MNCs Internationalisation, and Market Entry Analysis of Tesco

This document discusses global business, focusing on the European Economic Community (EEC) and the reasons why multinational companies (MNCs) internationalize. It also analyzes Tesco's entry into the international market. The advantages and disadvantages of EEC, challenges faced by MNCs, and Tesco's strategy for global expansion are discussed. The document provides insights into the benefits of operating globally and the challenges that come with it.

Global Business

Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
Conduct an online research on The European Economic Community........................................1
Critically discuss the reasons why MNCs internationalise and the typical challenges they
encounter......................................................................................................................................3
Select an MNC and analyse how the firm could enter an international market..........................6
Briefly summarise what an individual learned from this module and how review own
entrepreneurial qualities...............................................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Global business refers to that kind of business and organisations which operates facilities
like factories and distribution centres in number of nations across the globe. It is differ from an
international business that sells commodities globally but has facilities only in its own and
domestic nation. This kind of business is crucial to earn profit and maximise revenue as well as
number of consumers. By operating business globally, establishment can minimise risks and to
leverage new growth options. The written report will discuss about The European Economic
Community and merits and demerits of it (Kasemsap, 2018). Along with this, MNCS
internationalisation will define by considering the challenges which are faced by them during
executing international operations. Further, will explain about entrance of MNC in an
international market and discuss bout domestic market, strategies of internationalise,
environmental analysis, route of entry and leadership quality that will help in supporting market
entry. Moreover, a reflective essay will also explain which consider information about learning
of individual and own entrepreneurial qualities.
MAIN BODY
Conduct an online research on The European Economic Community
The European Economic Community (EEC) was a territorial association that intended to
realize financial integration among its member countries. It came into being on account of the
Treaty of Rome of 1957. In the year 1993, European Union (EU) was formed and the EEC was
consolidated and renamed into European Committee (European Community, 2020). Some of the
advantages and disadvantages of integration of The European Economic Community are being
discussed as follows:
Advantages
Single market: Creation and facilitation of a single market economy where the member
states can engage into fair competition and trade practices for maximisation of consumer and
trade interest has been the biggest advantage of EEC. With the help of EEC, access to more than
480 million people and 27 countries has been provided to the member countries which has
promoted the trade activities within European Region (The advantages of the EEC, 2017) Hence,
EEC has had a prominent role in mitigating trade barriers and simplification of trade rules with
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the objective of providing the member states to take full advantage of trade opportunities in the
region.
Single currency: All the member states of the European Economic Community share and
utilize a single and uniform currency, The Euro which was first introduced in the year 1999.
Integration of trade activities in the region has been largely influenced by sharing a common
currency which has also reduced the cross border transaction costs and the impact of unpredicted
exchange rates on trade have also been minimised (The pros and cons of the eurozone, 2019).
Agricultural benefits: In the year 1962, with the objective of helping member states achieve
self-sufficiency and food security, common price-levels were introduced to subsidize basic and
essential farming products. Later on, these controls were removed to provide decent income
opportunities to farmers in the region by guaranteeing a minimum amount which is one of the
biggest advantages of EEC (The advantages of the EEC, 2017). It has encouraged the farmers to
increase production with integration of technology and as a benefit, great agricultural reforms
and innovations have been attained in the region.
Disadvantages
Net Migration: Due to the policy of free movement of labour between the member states of
The European Economic Community, a lot of cities have faced the problem of over-crowding. It
has resulted into lowering the per capita availability of resources in the region and the price
inflation in the region has also become evident (Disadvantages of EU Membership, 2019).
Cost: The cost of membership of The European Economic Community for the member
states is very high and due to the regional imbalance in growth, the cost is difficult for many of
the states to bear with the benefits not exceeding the costs and expenditure (The pros and cons of
the eurozone, 2019).
Bureaucracy: Decision-making powers have been taken away from the local communities
and bureaucracy is more evident in the way The European Economic Community functions
rather than adopting a democratic way of functioning which is another disadvantage of being a
member of The European Economic Community (Disadvantages of EU Membership, 2019).
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Critically discuss the reasons why MNCs internationalise and the typical challenges they
encounter
A international business has amenities and other resources in at slightest one nation other
than its domestic nation. A MNC usually has offices and factories in several countries but a
centralised head office where they manage international administration. These organisations also
known as international; stateless or transnational corporate ventures tend to have budgets that go
beyond those of numerous small organisations (Tallman, Luo and Buckley, 2018). A
multinational company and establishment is a global firm that drives at least a district o its
revenues outside its domicile nation. Several multinational organisation are based in urbanized
countries and they generate high paying jobs and employment as well as technologically
advanced products in nations that or else would not have access to such options or products.
However critics of these companies believe these firms have undue political impact over national
authorities, develop budding countries and generate job losses in their own domestic nations.
Along with this, these kinds of companies also make internationalisation in term of making
growth and development. The description of some reasons, cause of which MNCs
internationalises, are as under:
Improving profit margins- Developing earnings margins is one of the key ordinary
reasons for incoming global markets. When develop plan of actions are utilised up on the
nationwide extent, the next path is often to seek out global development. Allocating its
commodities in additional nations maximise the respective venture’s number of target audiences.
As the firm provide compelling resolutions and build faithfulness crosswise international
marketplace, revenue capabilities and rises as well. There are also momentous cost savings that
can be related wit going global. An organisation may demand to minimise costs by relocating
closer to a provider or advantage from lower manufacturing costs by increasing processes to
another nation. Doing business globally may open up new speculation options. Moreover, a
lower cost of acquiring consumers may be another compelling reason to enlarge globally.
Competing for new sales- Closely related to the aim of developed profit margins is the
want to maximise sales. Even if the organisation operators basically are fulfilled with revenue
extents, global growth can further develop overall revenues. The race to enlarge globally is often
about gaining a presence in foreign markets (Huo, Levchenko and Pandalai-Nayar, 2019). Being
the first to disembark in a new marketplace can offer important benefits. If the organisation does
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not enter a mature marketplace with its resolution, rivals do. Not only do the for miss the income
resource, but the organisation lose out on other expensive resources that the firm miss the income
basis, but the corporation lose out on other precious resources that the company could utilise to
promote it with in domestic and foreign. In some cases, an immense home enterprise gets
infested by a lesser player that makes it internationally and develop sbig through international
synergy. Organisations develop particular global plan of actions in order to gain rivalry benefits
in the new international economic system.
Diversifying the business- The global development permits an organisation to enlarge its
business in a pair of input manners. First, the company increase the hazard of slowing want
across multiple nations (Bidault and et. al., 2018). If one marketplace never gains or losses
interest in the firm providing, the venture can pick up the slack with achievement in other
nations. Along with this, the firm can attach with providers in global markets and take benefits of
new resources and assets occupied in home marketplace. Establishments often improve
modernism and enlarge supplementary differences of their resolutions when they operate in
several nations. Manufactured goods differentiation likewise insults the company from the
companies from the threats of deteriorating attention on a specific product.
Recruiting new talent- It is another reason and cause of running or making
internationalisation by operating business in global marketplace also provides businesses contact
to a wide and more expanded ability pool. Workers who use diverse language in their
communication and acknowledge several civilizations improve relations with a range of target
audiences. To have a global trademark that is well presumed will encourage top level talent to
the establishment (Kasemsap, 2020). Business can also constitution international work groups in
a manner that permits for synergy in construction an international brand.
There are some challenges that can be suffered by MNCs during the time of manage
production in global marketplace which can obstruct its competitiveness thus arguments and
these are as under:
Market imperfections- It may appear weird that an organisation has determined to operate
production in diverse nation’s crosswise world, where it does not exist and does not know laws,
home traditions and business activities of such a nation is likely to face issues that can minimise
the administrator’s capability to measure company circumstances. The added funds and capital
reasoned by access in abroad markets are of less attention for the home firm. Establishments can
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also in their own marketplace be inaccessible form rivalry by shipping costs and other duty and
non-tariff obstructions that can force them to rivalry and will minimise their profitability. The
companies can increase their joint earnings by amalgamation or acquirement which wills inferior
the rivalry in the shared marketplace (Räisänen, 2018). This could also be the case if there are
few alternatives or inadequate permits in a unknown marketplace.
Foreign government regulations- A conglomerate organisation suffers the challenges of
production with numerous sets of administration regulatory framework and policies that may
cause it to incur added funds. For example as per to E&Y guide written in 2010, unknown
national authorities are maximising value added duties in products and facilities, with the
purpose of tightening compliance legislations. A modification in observance rules often states
that a company has to accept its functioning plan of action and the way in which it allocates its
commodities and facilities. This may need maximised costs to hire local specialists who are
capable to maintain side by side of alterations and contract instantly with confined administration
officials.
Operation coordination- A global company suffers the issues of determining how to
organize and rationalize processes amongst its domestic nation and it’s forging operations.
Determinations have to be made towards when and how to set up a local corporeal existence and
how to get the hold up of narrow companies such as labour mergers and parts providers. A
certain amount of home specialists require to be carried on board to assure that the company is
capable to efficiently network and converse in unfamiliar atmospheres. Operations may require
to be standardised as much as potential among nations, which could direct to maximise overhead
and repetition.
Human resources- The management of reimbursement and payment often establishs to be
a confront for a transnational organisation. Several labour marketplace circumstances might
outcome in the company providing a set of advantages that it or else would not (Kokodey,
Gnezdova and Lomachenko, 2018). To get attention and retail the talent in requirements, a MNC
venture could search it demanding to manage an equilibrium between its managerial values and
hiring the required individual resources to efficiently execute in an unknown nation.
Lobbying- international business lobbying is absorbed at a variety of company concerns,
from tariff formation to ecological rules. Organisations that have advanced more in pollution
manage systems may entrance for very hard tariffs to control rivalry of foreign sectors. For every
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duty class that one global need to have minimised, there is a different intercontinental that
requires the tariff increased. In UK, auto sector, the fraction of an organisation’s introduced
factors will vary, some organisations support tighter import limits, while others support looser
ones. It s very grave and is extremely complex and consume a lot o work for the owner.
Select an MNC and analyse how the firm could enter an international market
Introduction- international corporation is a company that runs in several nations at the same
time and performs its production actions in more than one nation. MNC firms are capable to
reach their target markets more easily as they make production in the nations where the target
markets are (Wilkins and Ferrer, 2018). These kinds of firms can easily access raw material and
cheaper labour costs. This task is supported to Tesco which is a British multinational groceries
and general merchandise retail sector organisation. This firm was established in 1919 and is
headquartered in Hertfordshire, UK. It operates its business in more than 13 nations across the
world. Now it can determine to enter in Germany with the purpose of internationalisation and
make development in business.
Analysis of domestic market- Tesco is a highly reputable firm that has been developing over
the last 8 decades and is still progressing. It is a highly profitable company and operates its
business in effective manner. In UK, Tesco is the foremost grocery retail firm with a reliable
share of over 25 percent of the market and is classed as one of the big four supermarkets along
with Morrisons, Asda and Sainsbury’s. The enterprise have four diverse stockpile or outlet
formats such as Express, Metro, Superstore Extra and one test arrangement residence plus, for
non-food and clothing. As a Multinational company, they highly concentrate on the local
consumer requirements and acknowledge them. The firm operate its business with the help of its
6800 outlets and more than 450,000 employees construct their involvement in organization the
production of this venture.
Strategy to internationalise- There are several strategies that can be used by Tesco in term of
internationalise its business in Germany (Xie and Redding, 2018). The explanation of them as
under:
Multi-domestic- It is a business strategy that have as motive to meet the demands and
necessities of the local markets globally by modifying and innovating their commodities and
services. In context of Tesco, the administration of this firm can adopt this business plan of
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action in term of operating business in Germany by making change and innovation in its
products and facilities as per needs and demands of this nation.
Global- This business strategy is the opposite of multi-domestic. By adopting it, the
management of Tesco can standardised product internationally and have the aim to increase
effectiveness in order to minimise finds as much as potential by expanding in Germany (Öberg,
2019). These kinds of ventures are greatly consolidated and subsidiaries are often very dependent
on the HQ.
Transnational- This strategy has attributes of both international and multi-domestic
establishment. Its plan is to increase home receptiveness but also to earn advantages from
international incorporation. By adopting this plan of action, Tesco can often try to create
economic system of extent more upstream in the value chain and be extra supple and nearby
adoptive in downstream practices like advertising and sales.
International- A global firm therefore has little requirement for limited alteration and
international incorporation. This approach is also often indicated to as exporting plan.
Commodities are manufactured in the organisation’s home nation and send to consumers all over
the globe. By adopting this strategic option Tesco can also operate its business in Germany and
accomplish set business aims.
Environmental analysis of Germany- The explanation of this analysis is as under:
Political environment- It is a independent nation with federal administration. Germany
ahs currently been rankled by political turmoil. Imminent modifications in leadership, together
with the threatening shadow of Brexit have reasoned a fair amount of upheaval in the political
landscape of the nation. However, knowing as the nation has a history of choosing for constant
governments, the respective nation can hope to be directing Europe in the new era yet again.
Economic environment- Germany is the 4th largest economy in the world. The country
boasts a low unemployment rate of 3.2%, which is arguably one of the lowest globally. This
nation is one of the top exporters of the globe and has a mixed economic system with a
budgetary surplus (Trad, 2019). Even if, the current refugee crisis has left the nation surprised,
but with an immense economic organization and along with this Germany looks set to stay an
established economic control.
Social environment- Germany is a cosmopolitan with several lifestyles, the majority of
the population here is find out as Christian though Islam and other religions are also practiced.
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The respective nation finds out itself as a welfare state and includes citizen welfare its main and
key purpose. The Germany community is known for its punctuality, immense ethics and hard
work. The nation also surpass in the world of sports especially football.
Technological environment- The respective nation is well recognized for its
development in the area of science and machinery. Germany is included as the 5th most
technologically advanced country with expertise across different sectors (Kotabe and Helsen,
2020). The nation is also a directing nation in forms of information technology and has already
made significant advances in the areas of artificial intelligence and mechanism knowledge.
Environmental factor- Germany, along with the rest of the world, suffers the threats of
global warming and climate modifications, Envrenemntal pollution and fast industrialisation as
well as utilisation of fossil flues has prompted the country to accept a policy of motivating
alternatives energy sources. The country is domicile to the world’s major wind farms and storm
turbine as well as the largest solar park, Solarkomplex Senftenberg. The nation is working its
way regarding sustainable assets use and plays an essential role in global climate corporation.
Legal environment- The legal countryside of Germany publishes the amalgamation of
business organisations by both residents as well as foreign capitalists. An outstanding
atmosphere, together with top notch infrastructure and structural improvements to the corporate
tax rates has made the nation an attractive destination for capitalists globally.
From the above environmental analysis it can be summarised that Tesco can operate its
business in this nations as there are high chances of development as the firm is good in technical
field that help in making business production and promotion effective.
Mode of entry- There are several routes and ways of entry in international business. The
explanation of them as below in reference to Tesco:
Exporting- It is an activity of selling commodities and services manufactured in one nation to
other. Exporting may be direct and indirect and in direct exporting, the enterprise capitalising on
economies of scale in manufacture focused in the domestic nation sets up an effective method for
conducting export functions and procuring foreign sales. Indirect export considers exporting by
domestically supported sell overseas mediators (Crane, Matten and Spence, 2019). The exporter
has no control over commodities in the foreign market.
Challenges and solutions- One of the most common and significant challenge that can be
face regarding international export is in getting trade finance. In term of resolving this issue, the
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administration of company like Tesco should discussing alternative loan providers and already
has a plan in place to repay the loan.
Joint Venture- It is a strategic option utilised by Tesco to enter a foreign market like Germany
by joining hands and contributing ownership and administration with other firm (Yanto and et.
al., 2018). By adopting this way of internationalisation, the respective firm can make partnership
with two or more organisations to attain common goals.
Challenges and solutions- The issue that can face by this entry mode of lack of Joint
venture experience or knowledge in particular nation. By getting information about all the rules
and regulations of joint venture strategy in Germany, the firm can deal with these kind of
complexities.
Outsourcing- It is cost efficient method and route that can be utilised by Tesco to minimise
costs by delivering portions of work to extrinsic providers rather than accomplishing it internally.
It considers both domestic and abroad contracting and also off shoring.
Challenges and solutions- Selecting the right vendor is the bedrock on which the entire
outsourcing activity depends is the great complexity of outsourcing route. To get over this issues,
the supplier should choose strictly as per the need of the company and the needed output
required.
Leadership qualities that supports the market entry- there are several leadership qualities and
skills that are crucial to support market entry of a business. Networking, communication and
critical thinking etc. are some effective qualities as networking help in making effective connect
with the particular business market of specific nation (da Silva Lopes, Lubinski and Tworek,
2019). Along with this communication and critical thinking help in getting information about
market and taking decision in effective manner.
Conclusion
This has been summarised from the above mentioned information it can be concluded
that Tesco is a multinational firm and by adopting different international strategy it can expand
in to another market. There are different market entry route that can also adopt by firm to make
internationalisation. Effective leadership qualities also support in getting entry in foreign market.
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Briefly summarise what an individual learned from this module and how review own
entrepreneurial qualities
From the above module I learned about various things such as brief information about European
Economic Community like when it came in to being on account. It is crucial for a single market
economic system in which an individual refers can involve in to fair rivalry and trade activities
for increment of customer and trade interest. I also learned that all the people state of EEC
contribute and use a single and regular currency (Kano, 2018). I also get information about
limitations of EEC like net migration, cosy and bureaucracy etc. In addition to this form this
module i learned about different reason cause of which MNCs make internationalisation. By
making internationalisation, the firm can make development in its profit margins and Revenue
Company operate its business large level in several nations crosswise the world. It also assists in
increasing the sales and improving productivity as well as make diversification in the business by
establishing in different countries. When a multinational company make internationalisation by
operating its business in another nation then it help in hiring new and skilled manpower that is
crucial fro the growth and development of company.
Along with this, i also learned about several challenges that are faced by MNCs during the
time of international operations like market imperfections, foreign government regulations,
operations coordination, human resource and lobbying etc. foreign government regulations are
the main issues that can affect the firm as national author of each nation has its own regulatory
framework. I also get knowledge about international business strategy that can be accepted by a
firm like Tesco in term of operating business in global business environment. I also learned that
before entering business in to a particular nation, doing environmental analysis is crucial to get
information about the political economic and many other areas that influence a business (Luthans
and Doh, 2018). I also aware about the route of marketing entry through which a business can
enter in international market. Different leadership qualities are also provided knowledge me
about the importance of them in company during market entry.
By determining the learning of this module, i also review my entrepreneurial qualities which will
support me to establish and operating a business. I have good communication skill, critical
ability and problem solving which will highly contributed in setting up a business or operating it
global business environment. I do not have good time management and decision making but to
make development in these competencies i prioritise my work and solving different case study
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(Morozova, Popkova and Litvinova, 2019). I also have good listening and networking ability that
assist in making good market relation and gaining knowledge about different business aspects.
CONCLUSION
This has been summarised form the above defined content that global business is an area and
method through which a firm can operate its business in number of nations crosswise the globe.
At the time of expanding business in different nations and making internationalisation there are
several kinds of challenges that are faced by an establishment. There are different market entry
route which can also be adopted by enterprise to get enter in to new market. Along with this
effective leadership qualities are also crucial to market entry and operate business in successful
manner.
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