International Business Strategy for Tesco: Market Analysis Report for Expansion in India and Brazil

This report provides a market analysis report for Tesco to expand its business operations in India and Brazil. It includes an overview of Tesco, India, and Brazil, corporate strategy of Tesco, potential implications of formal and informal institutions in both countries, and recommendations for market entry strategy.

Running head: INTERNATIONAL BUSINESS STRATEGY
Tesco
International Business Strategy
5/27/2019

INTERNATIONAL BUSINESS STRATEGY 1
Table of Contents
Introduction................................................................................................................................2
Overview of Tesco.................................................................................................................2
Overview of India..................................................................................................................2
Overview of Brazil.................................................................................................................3
Corporate Strategy of Tesco...................................................................................................3
Two tier expansion strategies.............................................................................................3
The potential implication of formal institutions and informal institution in India................4
Formal institutions.............................................................................................................4
Information Institutions......................................................................................................5
The potential implication of formal institutions and informal institution in Brazil...............6
Formal institutions.............................................................................................................6
Information Institutions......................................................................................................8
Recommendations..................................................................................................................9
Market Entry Strategy..........................................................................................................10
Conclusion................................................................................................................................11
References................................................................................................................................13

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Introduction
Today, every small and large business are expanding or planning to grow their business
operations in the international market by adopting expansion strategies. The key reason for
the business expansion in the international market is that it offers the opportunity of growth,
increased market share, and improved understanding of consumer behavior to the
organization. In addition to this, expanding business in the international market results in
increasing the reputation as well as the value of the company in domestic as well as
international market (Rothaermel, 2013). However, for the successful expansion of business,
it is very important to conduct market research of the industry or country where the business
seeks its potential growth. The aim of this report is to discuss the market analysis report for
Tesco by suggesting the expansion of the business in one of the selected countries that are
India and Brazil.
Overview of Tesco
Tesco is the general merchandiser and grocery retailer of the United Kingdom. Company is
gained the third position in the global market measures in terms of revenue and in terms of
revenue, it is the ninth biggest retailer. Company has shops in around seven nations and is the
leading retailer of the United Kingdom market (Tesco, 2019). The company was established
in the year 1919 by Jack Cohen. Originally, Tesco has expanded its business in the global
market in the early 1990s. Company is also listed on the stock exchange of London (Tesco
PLC, 2019).
Overview of India
India is located in the region of South Asia. It is generally called the Republic of India and is
comprised of 7 territories and 29 states. Across the world, Indian is the seventh largest nation

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in terms of area. The nation is enclosed by the Bay of Bengal, Arabian Sea, and the Indian
Ocean. Along with this, the nation shares its borders with Bangladesh, Nepal, Pakistan,
Bhutan, Burma, and China (Radius Worldwide, 2019). India has arisen as the fastest
developing economy across the globe and all over the world; it is anticipated to be in the top
three economic powers in the future, reinforced by its strong partnerships and democracy. In
addition to this, there was an increase in the GDP of India of around 7.2% in the year 2017-
2018 and 7% in the 2018-19. India has successfully booked its place as the third biggest base
of start-up across the world with around 4750 technology start-ups (India Brand Equity
Foundation, 2019).
Overview of Brazil
Brazil is the largest nation in Latin America and South America. The total area covered by
Brazil is 8.5 million square kilometers and with around 208 million people. This nation is the
fifth largest nation across the globe in regards to area and also the fifth most populous nation.
The capital of the country is Brasilia and the most populated city of Brazil in São Paulo. The
country is comprised of 26 states union, 5570 municipalities, and Federal District (About
Brazil, 2019). Being the fifth largest nation in terms of area and the fifth largest market
opportunity in the world, Brazil is the only nation which provides plenty of business
opportunities to them who desire to operate their business in the country. It is rich in mineral
comprising oil and iron and with the huge population, mainly including young as well as
motivated personnel. Hence, the potential of executing business in the market of Brazil must
not be ignored those who desire to grow their processes in the global market or at a
worldwide level (Warburton, 2019).

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Corporate Strategy of Tesco
Two tier expansion strategies
The first part of this strategy is to expand the business in the non-food segment in the United
Kingdom which is its home market. This comprises providing health and home,
telecommunications, financial services, and pharmacy products (Gammell, 2011). The
company regularly maintains its share in the market in its grocery sales via aggressive
marketing and pricing while growing in the areas that are riskier and offer the chance to earn
more profit with good success. Tesco is involved in the strategic alliance with the Royal Bank
of Scotland through which it provides most of the RBS services of banking in its UK stores
(Butler and Neville, 2013).
The second part of this strategy is to expand its business of grocery in the Middle East,
Europe, and South East Asia (Tesco PLC, 2018).
The potential implication of formal institutions and informal institution in India
Formal institutions
Political Forces
A political factor is related to the policies established by the government, for example, the
level to which the government mediates in the economy. It is also associated with the service
or goods that the government of the country is ready to offer. Political decisions in India have
major implications on the businesses (Jadhav, 2012). For example, they have an influence on
the education of the workforce, health of the country and quality of the infrastructure of the
nation. As India is the major democracies of the globe, it has a centralized government. The
nation is majorly defined by different features like strategies of the regime and political
steadiness, the viewpoints of numerous political bodies, the interest of the candidates and the
impact of the political forums.

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Economic Forces
The economy of India has become stable after the declaration of industrial reform in the year
1991. For instance, there is a huge fall in the industrial obligatory licensing, divestment on
the congested firms of the public sector, such as permission granting for foreign technological
agreements, foreign capital liberalization and the creation of the Foreign Investment
Promotion Board. There has been ongoing development as well as improvement in the
economic condition of India. Besides this, the cost of labor is low in the country which offers
a huge benefit to the international firms to operate a business in the country.
Legal Forces
There have been major legal alterations in India in the past. For instance, laws for disability
discrimination, importance to recycling and increase of minimum wage have majorly
influenced businesses operating in the country. Past legislation yet influences the businesses
in India like essential commodities act of 1955, trademark act of 1969, weights act of 1969,
measures and standards act and consumer protection Act of 1969 (Amritt, 2019). Besides
this, there is a number of the legislation applied on the business environment like
employment legislation, restrictions on the trade and product, licensing, health and safety
regulations, copyrights, and compliance to European Union commission laws on monopolies.
Information Institutions
Social Forces
Social factors like alteration in the trend have a major influence on the environment of
business. For example, the aging population of India has seen an increase in the cost of
pension to the businesses and augmented recruitment of older workforces. Being the second
populous nation, the population of India is anticipated to be 1.1 billion. There are different
structures of the age group which possesses variable mobility, education level, and attitude

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towards work, skills level, and demographics of the population, leisure, income distribution,
and working environments.
Technological Forces
Technological factors encourage inventions and development of new product in the country.
Technology has a major impact on the reduction of cost, innovation, and quality. India is now
served with the 4G technology. This has eased countless projects that are related to
technology. Moreover, the IT sector in India is presently at boost and becoming a strong
market for communication and mobile provision. There are on-going developments in the
information technology, which results in funding for the technology through government,
upgrades of the software, and technological transfer.
Environment Forces
On the environmental perspective, the government, as well as the business sector of India,
understands the influence of the factors of environment like weather and climate change. In
the country, air quality has been influenced by industrialization and urbanization. There is a
number of problems that have been observed to be linked with the degradation of the
environment like premature deaths and pollution (Liaquat, Kalam and Jayed, 2010). This has
resulted in the introduction of pressure groups for environmentalism, noise controls, and laws
related to waste disposal.
The potential implication of formal institutions and informal institution in Brazil
Formal institutions
Political Forces
The government is stable as well as pre-emptive and there is no issue of political instability
within the nation. Corruption is the main issue today in the nation and it is reaching its worst
stage. It has become a trend as for opening a new business in the country there is a need to

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make the payments to the government officials and representatives (Trading Economics,
2019). As per the survey directed by Transparency International, Brazil gained the rank 72nd
in the list of 180 nations in regards to corruption. This data is higher in comparison to
economies like Cuba, and Turkey (Pestle analysis, 2014).
Economic Forces
Due to the population density and incursion of FDI, the possibility of growth of Brazil is
high. There is a considerable tendency of the rising middle-class and the gap between the
poor and rich people is gradually decreasing. In addition to this, the Central Bank has
positively decreased the currency devaluation risk of and has also controlled the inflation in
the country. Though, considering the dollar, the currency is measured to be overvalued,
which is adversely influencing the exports of the nation. Both international and domestic
businesses are provided with equal treatment in the country. In addition to this, the cost of
labor in the nation is significantly low. For the import duties, the government of the nation
has established a system in the position, which slowly reduces the tariff based on the number
of successful importing years. Additionally, the corporate tax in the country is 15%. In
comparison to other nations like Ireland and Greece, the rate of tax is significantly high.
Legal Forces
Unluckily, the country Brazil is considered as the bureaucratic country. Establishing any type
of business in Brazil requires a lot of paperwork and there is a number of regulations and
length procedures that must be followed by the business to operate successfully in the
country. The country is signified by Sao Paulo which is the biggest center of business and is
ranked 119 out of 155 in terms of ease of doing business. However, it is behind a number of
developing nations and markets. For instance, the rank of South Africa is 29, Mexico is
ranked at 73 positions, Russia is ranked at 79 positions, and India is ranked at 116. In Latin

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America, the only nations that regulate the business highly are Haiti and Venezuela in
comparison to Brazil (Today Translation, 2019).
Information Institutions
Social Forces
In the country, there is economic inequality among people because 20% of the people of the
nation live under the poverty line. Considering the class dispersal, there is increasing number
of affluent inhabitants and a huge people segment earns minimal incomes. The middle-class
population of the country is growing ((Pestle analysis, 2014). Besides this, the people of
Brazil remain updated about the fashion trends across the world and are also considered to be
modern, because they have knowledge about the big brand and also keen to purchase
luxurious as well as expensive products.
Technological Forces
In comparison to other nations like Russia and the United States, Brazil has a weaker
infrastructure of technology and investment, but the government and the private sector of the
country are making huge efforts to technological sectors.
Environment Forces
As per the geographical location of Brazil, its country is easily accessible due to the sea
because the country has an exit to the Atlantic Ocean. The products, equipment, and raw
material could be easily supplied through the sea which is cost effective for the transportation
businesses in comparison to air transport. Also, as per the geographical location of the nation,
there is no threat of the natural disaster such as Tsunami and Earthquake, which can affect the
business. Because of the huge size, the Brazil climate is diverse, even when most of the
country's portion is in the tropical zone. The climate of the country experience two seasons:
that is rainy in the summer and dry in the winter. There is no cold climate which reflects that

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the country has a similar climate like Malaysia, which makes suitable for operating business
in this nation.
Recommendations
Considering the business environment of both the nations that is India and Brazil it could be
said that Tesco must expand its business operations in the Indian market to earn more
revenue and benefits. From the analysis, it has been said that the government of India is
providing increasing opportunities to the internal firms who are planning to expand their
operations in the country through subsidies and limiting the entry barriers. Tesco can expand
its operations in the country because it offers low-cost labor, advanced infrastructure which
results in reducing the operational cost of the business. The economic condition of India is
stable due to recent tie-ups of the Indian government with international firms which will offer
increased economic opportunities to businesses. On the other side, Brazil has a strong
economic position, however, with that, the corruption in the country is increasing due to
which it is impacting its reputation as well as a position at the global level. Besides this, the
country follows a bureaucratic legal structure which imposes different regulations on the
business in the country. Hence, this can impact the business of Tesco in Brazil. On the other
hand, the legal structure of India is strong and has a democratic structure which offers equal
opportunities to the business. Furthermore, the advanced technological infrastructure of India
can offer more opportunities for Tesco to operate smoothly in the market. The weather
condition of India is also supporting a number of businesses to successfully operate in the
country. However, to operate successfully, Tesco has to adhere to the environmental
guidelines framed by the government of India because the country is presently dealing with
population due to industrialization and urbanization.
All the above-stated statements reflect that Tesco can expand operations in the Indian market
to gain increased market share as well as revenue.

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Market Entry Strategy
The strategy of market entry is one of the deliberate distribution and delivery way of services
and goods to the new or potential market. In the export and import of the products, it refers to
the formation, introduction, and management of the agreements in the foreign market
(Gruber, MacMillan and Thompson, 2013). A number of businesses can positively run the
business in the niche market deprived of extending business operations in the new markets.
On the other side, few of the businesses can attain increased brand awareness, business
stability, and brand awareness if they take entry in the new or potential market (Tielmann,
2010).
Developing the strategy of market entry comprises a detailed examination of the possible
competitors and possible patrons of the market. Pertinent factors that should be measured,
while taking decision-related to market entry into specific market comprises price
localization, export subsidies, trade barriers, competition, and knowledge of the local market
(Glowik, 2016).
The market entry strategy that Tesco must adapt while expanding the business in the Indian
market is Green Field Investment. Greenfield investment required higher participation of the
organization in the foreign market. A Greenfield investment is the strategy under which
company has to buy the land, create amenities such as infrastructure, electricity and operate
firm on an on-going basis in the international market (Becker and Fuest, 2011). It is one of
the most expensive strategies. Besides this, it holds the highest risk however few of the
markets demand business to undertake risk as well as cost because of regulations of the
government, the capability to access technology, and cost of transportation in order to
successfully operate a business in the country (Trade Start, 2019). Considering the present
market expansion strategies of the company to expands business by following two-tier
strategies. According to this strategy company expand its grocery business in the foreign

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market. Hence, Tesco can expand its operations in the Indian market through Greenfield
investment strategy by investing a huge amount in the infrastructure and land. As Tesco is the
leading retail chains of the United Kingdom, it possesses strong financial stability which
reflects that it can invest a huge amount in establishing a business in the Indian market. In the
initial phase, the company can establish greenfield investment strategy and if the company
will not be able to make a successful influence in the market, it can get into the contact with
the existing strong retailer of the market for the joint venture. This will allow organization to
gain the increased share in the market due to the high reputation and image of the existing
firm of the market.
Conclusion
The above report is debating about the market expansion strategy of Tesco in the potential
developing markets. The report has performed the market analysis of two countries that is
India and Brazil with a comprehensive discussion of the advantages and limitations that both
the market can raise for the company while operating business in the country. From the
analysis, it has been recognized that the business environment of Indian is more promising
for Tesco in comparison to Brazil market. This is being said because the government of India
is offering increase opportunities and inviting international firms to operate a business in the
country. Moreover, the country has strong political and economic stability which expose
business with increasing revenue and market share opportunities. On the other hand, the
bureaucratic government structure and increasing corruption level of Brazil can raise a
number of barriers like increased operations cost for Tesco while establishing a business in
the country. In addition to this, the advanced technological infrastructure of India will support
the company in bringing inventions and developments in the market smoothly. But the
technological environment of Brazil is not so developed and the government of the country is

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making efforts to develop the information technology structure. This highlights that Tesco
can successfully operate in the Indian market in comparison to the Brazil market.
Furthermore, in order to take smooth entry in the Indian market, the report has suggested
Tesco adopt greenfield investment strategy because it will provide complete control over the
business to Tesco. However, this strategy will be comprised of huge investment and risk, but
the financial stability of the company highlights that it can bear these risk.

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