Challenges Faced by Tesco in International Business Operations

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INTERNATIONAL MANAGEMENT
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Introduction
Conducting business globally tend to offer business with exciting new prospects for
growth as well as profit. From the U.K’s unprecedented decision to leave the European Union to
the historic and divisive U.S presidential election, 2016 has been seen as a year of extensive
change and uncertainty (Wood, Coe and Wrigley 2016). As a result, crisis regarding conducting
international business has been observed to be highly severe for UK business than in other
countries. According to authors, political, economic, cultural and environmental issues are
rapidly becoming the remit of international business leaders such as governments. Expanding
business in foreign countries means attaining new clients or customers and further potentially
stimulating and augmenting revenues and profits. Coca-Cola shows a highly effective
multinational business structure. Reports of Burt, Johansson and Dawson (2015) have noted that
the company has been structurally organized into continental groups which have been supervised
by President. However, regardless of its diverse international presence, the Coca-Cola brand and
product has been regulated centrally and stable around the world. Further than abiding by official
rules and regulations, engaging in international business frequently require abiding other
documented cultural guidelines (Mohr and Batsakis 2014). This can determine challenging in
rising markets with imprecise rules and conventions or potential corruption. Thus, businesses in
the United Kingdom must abide by the Foreign Corrupt Practices Act that intends in removing or
decreasing unlawful acts, corruption and unethical practices in global business (Oh, Sohl and
Rugman 2015). The following paper will evaluate international company like Tesco facing
challenges that derive from conducting business on an international scale. In addition to this, the
paper will evaluate local company ‘People's supermarket” London U.K which has no intentional

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focus and alternative strategies for evaluating international markets, its purposes and methods of
internationalization.
Discussion
PESTLE Analysis
Established and thriving on the principle of economies of scale, Tesco began selling for
less in small for less in small rural towns have been ignored by other large retailers. Tesco
offered products at cheaper prices in comparison to its competition. Increasing its competitive
advantage, Tesco introduced the “supercenter strategy” in 1988 in order to generate a “one-stop
shopping” experience for wide range consumers’ needs and requirements (Tesco UK 2019).
Studies of Mohr and Batsakis (2014) have claimed that while there have been witnessed some
clear achievements and failures in Tesco’s international business operations, in other countries,
there has been an amalgamation of expansion and contraction. According to Oh, Sohl and
Rugman (2015), Tesco started its business operations into Japan in 2002. Japan comprising of
around 127 million has been recognized as one of the highest per capita income as well as largest
economies in the world with a thriving market for retailers. However, in Japan there have been
identified determinants regarding “regulatory challenges, intricate supply chain, and language
disputes in addition to strong associations and unions which have posed challenges for all
businesses such as Tesco. Furthermore in addition to these factors, the biggest challenge which
Tesco has experienced in Japan has been related to the extensively advanced and demanding
consumers. Drawing relevance to these challenges Tesco macro and micro environment analysis
have been conducted to understand factors affecting Tesco’s performance and business
operations (Burt, Johansson and Dawson 2015).

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PESTLE Analysis
Political- Reports of Osiyevskyy and Zargarzadeh (2015) have noted that although Tesco has
recently affected Brexit due the exit of UK from EU. However, the Indian government has
adapted new format of fiscal policy to recuperate the direct unfavourable impact of the Great
Recession of 2008-09. This new format has been positively influencing Tesco in many extents.
There can be observed an increase of the net profitability of Tesco as the corporate tax reduced
from 35% to 285% (Gollnhofer and Turkina 2015). Furthermore, import duty on products and
services tend to impact Tesco at it imports some inventory from outside U.K like China and East
Asia.
Economic- Labour expense is a vital factor that impact UK supermarkets. For instance, its annual
wage bill is amounting GBP around 4.5 billion. Furthermore, there have been several factors
impacting Tesco related to expense, prices and profits (Kulke and Suwala 2016). Tesco has been
focusing on the mounting borrowing expenditure in UK. These factors have been increasing the
costs as well as prices and reduce its profits. Thus has been influencing the brand reputation
along with cost leadership strategy.
Social-Recently, recently majority of people in Asia and UK are professional thus are highly
inclined towards the outside work and frequently seek the fast food to attain the daily food needs.
As a result, there is increasing number of people inclining towards Tesco consequently
increasing the net sale of the Tesco products (Mylan et al. 2015).
Technology- Gollnhofer and Turkina (2015) have noted that Tesco has developed its own digital
mobile payment system known as PayQwid. From London to Asia 524 Tesco stores are using
this digital app. According to Wood and Reynolds (2014), Tesco customers can download the