Understanding International Business

This assignment delves into the complexities of international business. Students will examine various aspects including market entry strategies, adaptation of marketing mix elements, international market selection and segmentation, product-country images, and the role of ethics in global business practices. The focus is on understanding the challenges and opportunities inherent in operating within diverse international markets.

Running Head: Internationalisation of Business
Key challenges for an MNC in the international business arena
Case study of Tesco UK
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Running Head: Internationalisation of Business
Table of Contents
Introduction...........................................................................................................................................3
Part 1 Analysis of selected Multinational Corporation..........................................................................3
Q.1 Profile of the company as an MNC.............................................................................................3
Q.2 Theory related to globalisation of business.................................................................................4
Part 2 Host country analysis..................................................................................................................5
Q.3 Key country/regional factors affecting Tesco’s choice of country..............................................5
Q.4 Application of theory..................................................................................................................6
Part 3 Foreign Entry Strategies..............................................................................................................7
Q. 5 Entry strategies..........................................................................................................................7
Part 4 MNC and its impacts...................................................................................................................8
Q.6 Two key international business challenges.................................................................................8
Q.7 Recommendation on the basis of UN Global Compact Principles and/or Sustainable
Development Goals...........................................................................................................................8
Conclusion.............................................................................................................................................9
References...........................................................................................................................................10
Student ID 2

Running Head: Internationalisation of Business
Introduction
International economy has always been a platform of multinational corporations with integral
elements such as globalisation, diversified product planning and arrangement and growth of
competition. These all add to the global businesses and strategies which remain key aspects
for a company to keep its business wings afloat without being run aground. This current essay
is set to be a focal indication as to challenges faced by MNC like Tesco and the strategies
perpetuated by theories relating to international business. Recommendation portion as per
requirement laid down by the assignment of this essay is also a important feature of this write
up.
Part 1 Analysis of selected Multinational Corporation
Q.1 Profile of the company as an MNC
In the effort of retail formatting, foreign direct investment is a strategy-stayed mechanism,
led by several aspects considerable, from the view of tactical arrangements by TESCO. The
company is a super power conglomerate in retail industry with its dominance in UK and other
countries. The company is wide-ranging products retailer with business inception in the year
of 1919. The company meets the qualifying pointers to be undoubtedly called as an MNC. If
profitability is a key index of firm’s standing as an MNC then TESCO is in third position in
revenue (Chandra, Styles and Wilkinson, 2009). The business operation of the company is
carried out in fourteen countries including Asian countries, countries in UK and North
America. Nearly 5,30,000 employees work in the different parts of the company across the
world. The company has achieved a market share of approx thirty percent in Europe and this
has helped the company to achieve market dominance. Tesco’s decision to invest in china to
expand retail business came as no wonder due to instability in the industry in the recession-
scarred European markets. Several subsectors, the company does operate in, are books,
petrol, furniture, garments, electronics, and software with further services offered by the
company in field of telecommunication and internet along with financial services (Czinkota
and Ronkainen, 2013). Tesco has secured its place on Forbes global 2000 list. The
profitability of the firm also shows potential with £1.28 billion annual profit and first full year
of growth since the year 2010.
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Running Head: Internationalisation of Business
Q.2 Theory related to globalisation of business
Globalisation has pack of theories which differ with each other relatively. Among these,
world culture theory is also underpinned by the concept of globalisation. This theory has a
belief that in the global arena, world is viewed as a society with composite group of relations
within numerous units (Dow and Larimo, 2009). In this theory, people gather knowledge of
this global reality and if the issue detected is staying together in the real entity, the very
essence is supported by world culture theory for bringing units close to each other with
similar stress on thoughts of people in the global reality. If this theory to be considered then
globalisation brings the entire world in a single entity with importance on cultural
compression cooperating a system which believes that all cultures are parts of a culture of
large global entity (Fletcher and Crawford, 2013). This undoubtedly restricts the local
business in local area concept. This gives birth to an entity which is full of diversity which
helps glocalisation to flourish.
The aforesaid theory has its semblance with the cultural belief of Tesco and the cultural
diversion and thought for world as a society and social entity. Concept of globalisation got its
elevation. This theory always embraces socio cultural aspects and places importance on the
social cultural factors which promote social and corporate growth in a world as a society
(Joshi, 2009). The company has reached beyond its home boundary and almost inherits its
world-wide reputation depending on the thrust like globalisation which is the company-
induced approach to start international business operation.
World culture theory is somewhat fit into the strategic thinking pattern of the company which
never restricts capital investment in promising countries for business expansion. This has
required the company to think world as local platform with equal importance on cultural
relationship, human resources and business performance with social consideration to leverage
world culture theory to its utmost advantage for the entity-world relationship (Leonidou et al,
2010). No matter the initial troubles the company had, the effort of the company marks the
growth in worldwide business in countries in Europe, Asia and North America. World
culture theory is supportive of Tesco in establishing a synergy of cultures thereby triggering
cultural diversity to achieve coordinated and balanced work performance (Murphy, 2010).
This is the key performance generator in the corporate arena across the word and the success
and dominance of the company is quite explicit asserting that the world culture theory as a
globalisation concept is helpful for the company as a development path.
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Running Head: Internationalisation of Business
Part 2 Host country analysis
Q.3 Key country/regional factors affecting Tesco’s choice of country
Retail market in China is ever growing and offers range of opportunities for organisation like
Tesco to expand its retail market operation. Even after financial crisis that has huge effect
across the world, retail sales of the nation achieved $1.8 trillion in the year 2009.
The growth in retail sales of the country is supported by the increase in house hold income.
The people of the country have better living standards and this drives them to look beyond
their basic needs to ensure better quality lives, which directly and passively promotes retail
sales and Tesco being aware of this tried to seize this as retail expansion opportunities
(Nijssen and Herk, 2009).
Household spending in china has increased in availing services like merchandise, telecom,
healthcare and transportation. This indicates that the country has many people who can afford
to pay for high priced products by discretionary spending which became much higher than
the previous decades. This is always being seen as an opportunity of retail business expansion
and Tesco finds the country as an attractive foreign country in Asia to start retail business
(Papadopoulos and Heslop, 2014).
China offers most lucrative investment options for foreign organisations particularly retailers
due to growing incomes and growing market size. Investment opportunities are plenty in
China due to some reasons like support from government level, grants and funding facility
ensured by Government, preferential policies from government.
Growing formatting of business, investment opportunities in e-commerce, online retailing,
multi channel retailing, third party e-commerce platforms which offers services like business
to business and business to consumer, consumer to consumer services (Papadopoulos and
Martín Martín, 2011).
Q.4 Application of theory
Porter’s diamond theory is a framework that helps to understand the competitive advantage a
nation does possess for having some factors within it. This framework also speaks of how
government of a particular country can play vital role to make a nation’s position better in the
economic environment. This theory is framed by Michael porter. This is a proactive
economic premise which not only put a figure on comparative advantages but also helps in
understanding more power, while some scholars suggest that natural resources are best
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Running Head: Internationalisation of Business
formative determinant for deciding competitive advantages, porter argued that countries may
find themselves in better positions if focus on development of some factors like skilled
manpower, improved technology, availability of government assistance is continued (Powers
and Loyka, 2010). The four points of this framework are represented as determinants of
comparative national economic advantage. These factors are strategy of firm, structure and
rivalry, supporting sectors, demand conditions and factor conditions. The first three
conditions focuses on preliminary fact that business is led by competition while demand
conditions like nature of customers and their preferences influencing the demands of products
in a particular sector (Tan and Sousa, 2013). The last one is factor conditions which is more
vital as porter always has emphasised upholding that conditions like technological
innovation, skilled manpower and development in infrastructure can be created by a nation
for itself. Factor conditions can be developed by government’s cooperation by encouraging
business and also challenging the businesses so that business can develop more technologies,
skilled and talented workers and infrastructural development.
This theoretical diagram presents knowledge which realistically matches up to the nation
China with its plenty natural resources. Government of china is cooperative and policies like
offer of grants, funding, preferential facilities are pro business moves that widen business
opportunities (Griffin and Pustay, 2012). More over organisation such as Tesco with its
capacity to promote technology, developing talented workforce find the nation more
encouraging to continue business with great level of expertise. Therefore representation of
factors through four determinants in the framework developed by Porter denotes a similarity
with China. The country is a preferred business destination due to attractive foreign direct
investment opportunity and this is facilitated by government policies also and retail business
environment of the country (Ball et al, 2012). These factors have been inspiring factors for
Tesco to make entry in the retail sector of China.
Part 3 Foreign Entry Strategies:
Q. 5 Entry strategies
With the possibility of long term growth numerous organisations are eagerly increasing their
business operation in China. In the year 2004, Tesco adopted joint venture acquisitions as a
market entry strategy into china. The international strategy of the company is influenced by
achieving insight regarding the cultural elements of the country (Killing,2012). Tesco’s clear
international strategy lays importance on building confidence on joint ventures. Joint venture
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Running Head: Internationalisation of Business
agreement with Ting Hsin that had inception of its business as an instant noodle producer,
was included in the strategy of Tesco to face competition with wal-mart. Tesco had a joint
venture strategy anticipating that partnership with another company in the Chinese market
could give it access to seventy six million Chinese customers. The retail business expansion
of Tesco in china could be better regarded effective expansion with help of effective alliance
and joint ventures while obtaining a ‘late mover advantage’ to competitors like Wal-mart and
Carrefour. Joint ventures as an entry mode demanded adequate resource commitment by the
local company, higher degree of control and substantial investment. Tesco’s higher control
from the joint venture acquisition was backed by fewer risks in comparison with other capital
pushing options (Birkinshaw, Brannen, and Tung, 2011). Tesco had an better
internationalization planning with successful record of acquiring supermarkets in Hungary,
Poland, Ireland and this drove this company look for expansion in the emerging markets of
Asia to reach middle income families. With the strength of agreement with partner Ting Hsin,
Tesco acquired its wholly owned subsidiary named Ting Cao that subsequently owned the
Hymall chain which is China’s biggest food supplier. Ever since 2006 Tesco started opening
stores across China and total store counts became 125. Tesco relocated its international
sourcing head office in Hongkong with a hub in Shanghai. For building strategic
internationalisation, Tesco had built up its Strategic internationalization by taking geo centric
approach (Cantwell, Dunning and Lundan, 2010). This affirms that the company has global
strategy whilst adapting operations to the local markets through global synergies and
strategic partnership. Shanghai became a home from home for Tesco and became first
commercial platform in China. This has helped the Tesco to know local customers better and
eventually many new stores were opened by Tesco along with hypermarkets.
Part 4 MNC and its impacts
Q.6 Two key international business challenges
In April, 2011, in its total year results, it was stated that the company’s localized operations
was successful to break even in the latter half of the year. Tesco’s then CEO confirmed that
the company would decrease the store opening aim in the country. It was great trouble for the
company to have prime location and also to achieve permissions from government for
opening its life space malls (Cavusgil et al, 2014).
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Running Head: Internationalisation of Business
In the year 2012, the pressure was from continuous high level of inflation and pressure on
wage costs. This has forced the company to take more careful steps. Tesco was also forced to
delay the development of hypermarkets in China for the particular period in the year.
Q.7 Recommendation on the basis of UN Global Compact Principles and/or Sustainable
Development Goals
Sustainable development goals lay guidelines that can help Tesco develop some core areas
which can further their business while adopting more responsible approach towards world
and society. Tesco’s retail grocery and supermarket business find a boost operating within the
scope of sustainable development goals. In each realm of business some recommended
course of functions may translate the company’s position into grater shape for marking more
strength (Kolk and Van Tulder, 2010). Tesco can promote actively, perception of joint action
as well as accountability platforms like an innovative nature of collaboration. This is helpful
for the company to particular human rights challenges. It may position social interaction at
the frontal space when human rights are largely concerned. The organisation with other
company can work in value chains for meeting systematic difficulties by adopting holistic
approach. A better approach like shared value can initiate better contemplation followed by
implementation (Cavusgil et al, 2014). Past focus on philanthropy as well as social
investment can be merged with shared value model by the company. Engagement with
innovation in business to ensure better technological advancement for meeting better
opportunities for the company and society can be considered if society could be benefitted.
But the concern must not be neglected regarding limitation of these to certain policy
environments and some opportunities in market. These must not be constrained. Sustainable
development goals create chances for not only updating vision of business towards
sustainable development but at the same time vision requires a change at the very basic level
(Cavusgil et al, 2014). This requirement is within the consideration and needs to be better
assessed depending upon necessity. Social upliftment is huge task by almost every company
and this for the company Tesco remains a must do for eliciting respects from all levels of
stakeholders in the business across the globe. The realization of the company is, that there is
barely any powerful means for the trading to speed up social development rather than
directing human rights all through the value chains. Business and human rights are the two
arterial sides which require each other for establishing better governance in societal format
and corporate harmony (Cavusgil et al, 2014). An important proposition stresses on that each
company not just can offer support at scale of development via the networks of business
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Running Head: Internationalisation of Business
collaborations. At the same time the important accountability for them is to confirm so. This
positions itself as a vital element between business and human rights. Tesco as a responsible
conglomerate with huge success in corporate world can think the same and must look for
embedding the said vision in this discussion at the core of its business central regarding the
continuation of business with most effective and sustainable development in current and long
run (Kolk and Van Tulder, 2010).
Conclusion
Business never remains constrained and the globalised economy keeps organisations moving
across international countries. Strategies are vital for business expansion while for Tesco,
strategic internationalisation is always matter of consideration while taking a business leap in
foreign countries including china. The company found investment options in China lucrative
and looked for business expansion in the country due to several factors like cooperation of
Chinese government and consumers’ propensity to avail products to live better and quality
lives. Apart from the natural resources, the country can develop its other resources like
skilled manpower, technological development and infrastructural improvement. There are
many aspects that can be embedded into the business vision of the company for making more
development.
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Running Head: Internationalisation of Business
References
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Running Head: Internationalisation of Business
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