Global Contexts and Operations Executive Summary

Report on
Global Contexts and Operations
i

Executive Summary
The report is objectified to identify the changing business trends and opportunities that are
created by the continuous changing market force because of mass impact of globalisation. The
changing business trends from the previous to current condition has been discussed and
evaluated as well globalisation and the driving forces behind globalisation along with the impact
of globalisation on open market economy are discusses also. A country analysis of China has
been initiated due to identification of country position in order to set the entry mode of Tesco to
the China market as a part of its overseas expansion. The entry mode for Tesco is identified with
proper justification and the commercial, cultural and ethical issues that can arise are also
effectively evaluated.
ii

Table of Contents
Executive Summary.........................................................................................................................ii
Introduction......................................................................................................................................1
Changing Business Trend................................................................................................................2
Globalisation....................................................................................................................................4
Globalisation Forces........................................................................................................................5
Globalisation Benefiting SMEs.......................................................................................................6
Foreign Market Entry......................................................................................................................8
Country Analysis.........................................................................................................................8
Entry Mode..................................................................................................................................9
Commercial Aspects......................................................................................................................12
Cultural Aspects.............................................................................................................................13
Ethical Issues Concern...................................................................................................................15
Conclusion.....................................................................................................................................16
Bibliography..................................................................................................................................17
iii

Introduction
Globalisation has impact all over the world as it has brought the entire world into a single centre
creating a borderless open market considering the entire world a single market. The invisible
market force of globalisation bringing the countries and markets closer and influencing to
integrate with each other in order to developing a mutual benefit relationship. Business trends
have kept changing with the change of time according to the world need and economies are
directly impacted by the business. Businesses can now easily expand the operations to overseas
through different mode of entry to the foreign market as borders are now considered open for all.
Tesco, one of the top retailing outlets of the world, intending to enter China market is
significantly impacted by globalisation and Tesco can choose any sort of entry mode through
proper analysis benefit ratio.
1

Changing Business Trend
Businesses have changed over time according to the needs of the countries and economies in
their way and to some extent, countries have resigned its business structure to carry on the good
economy. Since globalisation has started taking over it has also initiated from the need for
mutual benefit by each other by sharing resources, providing an opportunity to others to get the
benefit. Markets now are open for all more than ever it was in the past and globalisation has
made this happen whereas countries invite others to make investment and join the economy for
making business.
Since Mercantilism, which was the regional and national business policy that was initiated from
17th to 18th century intending to create the surplus of the economy of the countries through
making more of exports than imports. The main goal of mercantilism was to reduce the imports
and maximise the home production with a purpose to export, more than the amount of import.
Mercantilism was a complete non-free trading policy for countries and export and import
products used to charge high with additional tariff charges (Nolt, 2015). Countries were not
interested back than making collaboration to develop the mutual benefit relationship, rather was
focusing only on the home production and exporting of that production.
Initiating absolute advantage theory of production added a newer dimension to the business
which is currently applicable in a wider manner for the perfectly competitive market. Absolute
advantage theory mainly focuses on the lowering the production cost rather than others and
producing a maximum number of outputs with the least amount of resource input, in other
words, absolute advantage theory tries to attain maximum efficiency (Schumacher, 2012). In the
current China market, which is a perfectly competitive market there are numerous businesses and
competitors which results into lower market share, but companies, for example, Tesco in China
market can maximise its profit through minimising operational costs with maximum efficiency
rather than occupying market share.
The foreign direct investment allows companies such as Tesco to make a direct investment in
China market and setting up their retailing outlets in China with a collaboration to the Chinese
government fulfilling the regulations (Kalamova and Konrad, 2012). FDI allowing Tesco making
2

direct investment reduces the international trading costs, however, Tesco needs to analyse the
parameters of FDI to determine the cost-benefit ratio.
Through the eclectic paradigm companies such as Tesco can identify if the FDI would be fruitful
or they should not enter to the open market economy if the local and internal investments provide
more of profit than the foreign investments (Cantwell and Rajneesh Narula, 2013). The ultimate
goal of the eclectic theory is to identify which investment would generate more profit overall –
foreign investment or home investment.
Business have always changed according to the needs of economics such as the free market
economy was due to globalisation was initiated due to the needs of countries across borders.
Globalisation has made the national and international communication easier through involving
everything under a common network frame whereas countries are more committed to each other
than ever before. The world now is considered as a single market and any country can enter the
market easily and create a better mutual relationship with other countries.
3