Tesco's Market Entry Strategy in Emerging Markets

This assignment provides an in-depth analysis of Tesco's market entry strategy in emerging markets. The report examines the company's decision to expand into new markets, the challenges they faced, and the strategies they employed to overcome them. It also discusses the cultural and regulatory differences that Tesco encountered in its international expansion. The report concludes by highlighting the importance of adapting to local conditions and cultures when entering new markets.

INTERNATIONAL
MANAGEMENT

EXECUTIVE SUMMARY
If Tesco launch Indo western dress in India then they can easily exploit an untouched
market. The demand of this segment is enhancing continuously, increasing population and
purchasing power of the buyer are some of the crucial point which Tesco should consider

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................1
BACKGROUND.............................................................................................................................1
Nature of global environment and domestic environment..........................................................1
Key international factors in competitive environment ...............................................................2
INTERNATIONAL MARKETING STRATEGY..........................................................................4
Opportunities and threats for Tesco in India...............................................................................4
Marketing Mix............................................................................................................................4
Market entry strategies ..............................................................................................................6
Response of market entry strategy towards opportunities and threats........................................6
CONCLUSION ............................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Every multinational corporation wants to expand their business so that they can increase
their revenue and market share. These firm try to enter in the new market but their entry is not
easy. They have to follow various kinds of regulations that are present in foreign nation. They
also face issues in understanding culture of nation; it is directly connected to the success or
failure of a company. This report is based in Tesco; they are the market leader in UK and t
running their business in 12 countries. They are present in Asian and European market. This
assignment will discuss about the global environment, marketing mix and strategic marketing
policies. A new product (Indo western dress) will be launched in an emerging market i.e. India
under this project. International marketing strategy will also be included in this assignment.
BACKGROUND
Nature of global environment and domestic environment
Tesco is operating their business in various parts of this world. Global business
environment has seen some significant changes in the last 4-5 decades. Earlier, companies were
trying to expand their business in European continent but now, they are trying to enter in Asian
market because their economic growth and population is continuously increasing. Asian
countries are blessed with huge amount of natural resources and the purchasing power of people
living in these nations is also increasing (Deresky, 2017). Clothing industry has seen an
impressive growth in the last two decades. Market trends are rapidly changing and new players
are also entering in this sector. India is a country that is growing with a growth rate of more than
7%. Earlier, this nation was not allowing foreign investment but now, they are welcoming
multinational companies like Tesco.
Tesco domestic market and the country where they should enter
Cited enterprise holds a strong position in their home country. They earn most of their
income through food section. Management of this company understands that they cannot keep
their top spot if they will not enter in other segments like clothing, other FMCG items. This
company should aggressively expand their business in India. This nation has an ability to provide
great returns and the rules relating to ease of doing business in this country are also getting
easier.
Justification of choice
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Tesco can offer Indo western dresses in their stores. The demand of these kinds of cloths
is continuously enhancing and its market has seen remarkable growth in last 5-10 years. Indo
western cloths are basically the fusion of Indian ethnic wears and dress of western style. One of
the main reasons behind success of these types of cloths is that Indians started wearing them in
marriages (Marschan-Piekkari and Welch, 2011). Earlier, they were out of the budget of middle
class people but now, their buying capacity has increased and they can afford Indo western
dresses.
Key international factors in competitive environment
Tesco is not the only company who understand potential of India. Lot of firms are trying
to capture a significant amount of market share in this nation. Below are some of the elements
which are making a huge impact on the competitive environment:
Economic factor – European countries are facing the problems of low economic growth.
Their dependency on Asian continent is increasing because they are growing at a high rate
(Difference Between Invention and Innovation. 2017). India has achieved the highest growth rate
in 2016 and most of the economists are predicting that economic growth of this country will
enhance in upcoming years. This is not a good sign for multinational corporations like Tesco
because like them, other companies will also try to capture market share in these nations.
Clothing industry in India never saw a bad phase and it is dominated by local suppliers. The Indo
western segment in clothing industry is presently at its best level (Mudambi and Swift, 2011).
The impact of increment in buying capacity of buyers made a huge positive impact on this
segment. The rate of inflation is also under control in India and they are removing various kinds
of unnecessary rules relating to foreign investment.
Technology – Technique of switching cloths in Indian market is old as compared to the
one that is present in international market. Most of the producers are focusing on using skills of
labour for making Indo western cloths instead of adopting latest machineries. This will be
beneficial for Tesco. They can manufacture dresses by using the latest technology. Most of their
rivals in this section like Manyavar is offering their products at a high rate because they do not
have any major competitor but if Tesco will use modern tools then they can make better Indo
western cloths at low price.
Culture – Tesco will not face any major competition from global rivals like M&S
because these enterprises are not even thinking about offering Indo western dresses in India.
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They prime reason behind low competition from international rivals is that they do not want to
take huge risk of entering in ethnic wear. They feel that they may not understand the culture of
this country because of its high diversity (Ruigrok and Van Tulder, 2013). Some people often
argue that Tesco failed in USA due to the ignorance towards American culture. They has to keep
this in their mind at the time of launching Indo Western dresses in India. These type of cloths are
close to the heart of people because they ancestors use to wear ethnics. If mentioned organization
will make some controversial apparel then they have to face huge amount of loss in short period
of time. But, at the same time, if they will make something which is appreciated by society then
they can easily attain majority of market share of this segment within less time 5 years.
Their are some other factors that Tesco should considered at the time of entering in Indo
western clothing sector. Most of the companies do not want to invest in Indian market because
changes in this country happens swiftly. Below are some of the opportunities and threats to the
multi-national corporation like Tesco in this nation:
Opportunities – Every organisation know if they capture Indian market then they will get
strong globally. They know that a market with a population of 1.2 billion have ability to give
surprising returns. Clothing industry in India is growing and they market of Indo western dresses
is also enhancing. Exert of this sector believe that people in India want to wear western cloths
but for special occasions like marriages or parties, they prefer to buy Indo western.
Young generation in this country is very significant for every business organisation. They
understand that 70% population of this nation is below 35 so it this section is targetted by a
company then they can easily earn huge revenue. If multi-national enterprises like Tesco will
make ethnics and Indo western then they can get emotionally connected to this nation and this
will also help them in improving their sale in other segment like food retail business. Most of the
people in India are still living in villages, their buying capacity has increased in last 2-3 decades
and they are stilling preferring to buying Indian ethnics (Meredith Belbin, 2011). If Tesco find a
way to reach them then they can easily earn some competitive advantage over present players of
the industry.
Threats – India is known for their diversity in culture. Tesco has to make sure that they
do not make something which hurt the feeling of the buyers. They should try to make something
that is acceptable in different parts of India. This is a difficult because culture in every state of
this country vary. A product can be appreciated at one place but same product may be rejected by
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people of other state because of various reasons like it may hamper their religious believe.
Understanding culture in India has always been a difficult task for multi-national firms. One can
argue that targeting villages in this country can help a company in grabbing good market share
but the demographic condition of this nation is rapidly changing. Most of the young generation ,
living in villages, are moving in cities. Their buying pattern is changing they are preferring to
buy western apparels instead of ethnic or Indo western.
INTERNATIONAL MARKETING STRATEGY
Opportunities and threats for Tesco in India
Tesco would like to started their business operation in India because of the following
Opportunities that is present in this country:
 Clothing industry in this nation is growing at an impressive rate, by earning decent share
in this market they can earn significant amount of revenue.
 The income of upper class people in India is increasing and they are preferring to buy
product from retail giants like Tesco.
 By investing in India, cited company can improve their financial health. Their problems
relating to profit can get resolved if they successfully attain market share in Indo western
appraisals.
Threats
 Tesco did not succeed in USA because they fail to understand cultural diversity of this
nation. Diversity is integral part of India and if a company launch a culturally sensitive
product which is not accepted by people then their whole operations may get derail.
 If they invest huge amount of money in India and things did not work out according to
their expectation then financial position of this company will get worse.
Marketing Mix
Tesco can only attain their goals if they choose proper mix of marketing (Cascio, 2012).
They have various kind of options for promotion this culturally sensitive product but they cannot
choose every option. Below are explanation of marketing mix and the tools which cited company
should opt for achieving their goals:
Product – If a company like Tesco offer best quality of product them they can easily
attain significant amount of market in clothing industry specially Indo western section. They
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should decide right name of the product because it make huge impression of the mind of the
customers. Manyavar Mohey earned successfully expand their business in Indian market by
using this name. People found it attractive and it is similar to the kind of product which they
offer to the public. This firm should understand they every product go through three basic stages
i.e. growth, maturity and decline in sales. If one type of collection passed first two stages then
they should replace whole collection with new one.
Price – Indo western dresses are bit expensive because normally people wear them in at
the time of attending parties or function (Chhokar, Brodbeck and House, 2013). Their are
expensive from the prospective of layman. If Tesco launch their collection at economic price
then they can easily capture Indian market. They can also launch two brand, one will target rich
segment while other will focus on people with economic class i.e. middle class and upper class
section.
Place – They should open their stores in prime location. This firm is known for
aggressive expansion. They like to open their stores in every kind of locations like highways or
down-town etc. But at the time of entering in India they should only open their stores in malls
and at prime location. This should also think about selling their product through online mode, it
will help them in earning competitive advantages (Cosijn, 2016). Other players of same industry
are not offering Indo western dresses on any website or mobile application.
Promotion – The importance of promoting a product has increased in last two decades.
Tesco has to spend huge sum on promoting their Indo western collection. This company is not
known for their aggressive promotional events but if they want to capture this segment then they
have to make necessary changes in their strategy. Beside television advertisement, they also have
to promote their products on social media because most of the young generation are spending
more time on social media compared to television and radio (Obereder, 2012). This firm has to
offer heavy discount on culturally sensitive items like Indo western dresses so people at-least
visit their stores and see their collection. They should promote their products in a effective way
so most of the people in India feel that they are buying cloths from a domestic buyers. If they
successful buy a place in public's heart then they can attain more market share in less time
period.
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Market entry strategies
Entering in a new market is not an easy task. Tesco has already failed in may foreign
nations and if they want to enter in emerging market like India then they have to adopt correct
strategy for entering in the this nation:
Acquisition – Tesco can buy a local company for expanding their business in India. They
should try to identify an enterprise who has potential to become market leader in clothing retail
sector. This will assure smooth entry in India.
Merger – Tesco can form a new firm by merging their operation with a local or foreign
player. Entering in Indian clothing marketing is not an easy task, by taking assistance of other
firms this enterprise can strongly enter in India.
Joint ventures – this will be best market entry option for Tesco, they can start a joint
ventures with one of most successful company of India who is currently not present in clothing
retail sector (Wood, Coe and Wrigley, 2016). This will help them in understanding the cultural
diversity if India and they can launch their Indo western collection in an effective way. They will
also reduce the risk of loss on fixed investment, they do not need to invest their funds on buying
fixed assets. Their Indian partner can do this task, Tesco should basically focus on quality of
their products and other promotional activities.
Response of market entry strategy towards opportunities and threats
Proper strategy for entering in a market is necessary for growth of a company. Below is
the assistance that cited firm will get if they enter in India by opting option of joint venture:
Opportunities – By launching business with a popular and successful company, Tesco
can smoothly initial their business. They do not have any idea about the culture of India so if
they take assistance of their partner for setting designs of Indo western dresses then they can
easily capture high share in clothing industry. Tesco can assign a contact with their partner that
they will not invest money on purchasing fixed assets, this were minimise risk of loss money if
their business fail and it will also reduce pressure on cited firm because they do not need to
spend much amount at initial stage of business.
Threats – Finding is suitable partner will be one of the biggest challenge for this
company. If they will not have good tuning with their parter then they may have to cope with the
problem of cultural diversity (Shannon, 2014). Staring joint venture will never give help Tesco in
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getting the position which they deserve. Their have to divide their revenue with partners so even
if they will earn huge revenue, their financial position will improve for at least 5-7 years.
CONCLUSION
From the above report it can be conclude that every firm should analyse the extent of
competition that is present in emerging market. If they adopt appropriate strategy of market entry
then they can gain initial success.
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REFERENCES
Books and Journals
Cascio, W.F., 2012. Methodological issues in international HR management research. The
International Journal of Human Resource Management. 23(12). pp.2532-2545.
Chhokar, J.S., Brodbeck, F.C. and House, R.J. eds., 2013. Culture and leadership across the
world: The GLOBE book of in-depth studies of 25 societies. Routledge.
Cosijn, P., 2016. China’s Retailing Graveyard: A Case Study of TESCO. In Market Entry in
China (pp. 95-103). Springer International Publishing.
Deresky, H., 2017. International management: Managing across borders and cultures. Pearson
Education India.
Marschan-Piekkari, R. and Welch, C. eds., 2011. Rethinking the case study in international
business and management research. Edward Elgar Publishing.
Meredith Belbin, R., 2011. Management teams: Why they succeed or fail. Human Resource
Management International Digest. 19(3).
Mudambi, R. and Swift, T., 2011. Leveraging knowledge and competencies across space: The
next frontier in international business. Journal of International Management. 17(3).
pp.186-189.
Obereder, C., 2012. The Success Story of Tesco.
Ruigrok, W. and Van Tulder, R., 2013. The logic of international restructuring: The
management of dependencies in rival industrial complexes. Routledge.
Shannon, R., 2014. The expansion of modern trade food retailing in Thailand. The International
Review of Retail, Distribution and Consumer Research. 24(5). pp.531-543.
Wood, S., Coe, N.M. and Wrigley, N., 2016. Multi-scalar localization and capability
transference: exploring embeddedness in the Asian retail expansion of Tesco. Regional
Studies. 50(3). pp.475-495.
Online
Difference Between Invention and Innovation. 2017. [online]. Available
through:<http://keydifferences.com/difference-between-invention-and-
innovation.html>. [Accessed on 21th November 2017].
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