International Business Strategy for Tesco: E-Business Model and Market Entry

This report analyzes the e-business model of Tesco and suggests market entry in Vatican City. It discusses economic theories, strengths and weaknesses of the business model, and impact of global competition. The report also highlights the importance of international business strategy for the development of the company and its offerings.

International
Business Strategy
Business Model
2018
6/14/2018

BUSINESS STRATEGY 1
Table of Contents
Introduction................................................................................................................................2
Overview of Tesco.................................................................................................................2
Economic Theories.................................................................................................................2
Classical Economic Theory................................................................................................3
Keynesian Economics........................................................................................................3
Neo-Classical Synthesis.....................................................................................................3
Recent Economic Event.........................................................................................................3
Apple acquired Shazam..........................................................................................................3
E-Business Model of Tesco...................................................................................................4
Strength and Weaknesses of Business model........................................................................5
Strength..............................................................................................................................5
Weaknesses........................................................................................................................5
Areas of Improvement........................................................................................................5
Impact of Global Competition...............................................................................................6
Market Entry..........................................................................................................................7
Conclusion..................................................................................................................................7
References..................................................................................................................................8

BUSINESS STRATEGY 2
Introduction
International business strategy means the plans that assist the commercial transactions
between companies in different nations. The international business strategy is very important
for the development of the company and its offerings (Buckley and Ghauri, 2015). The time
companies feel that the domestic market has become saturated and there is no scope for
increasing the level of profit then they think of international expansion (Bhasin, 2018). This
report is being in order to highlight the international expansion strategy for Tesco Company
that will help it in increasing its market share and customer base. This will be done by
analyzing the strength and weaknesses of a present business model of the company and
making improvements. Besides this, it will suggest Tesco to enter in Vatican City where it
can offer its services and products to the customer.
Overview of Tesco
Tesco is one of the famous grocery and merchandise retailers and has its headquarters in the
United Kingdom (Tesco PLC, 2018). The company is the third largest retailer in terms of
profits and ninth largest in terms of revenue. The company operates its business activities in
Europe and Asia and is one of the market leaders in these markets. Jack Cohen is the founder
of the company and it was established in 1919 (Tesco PLC, 2018).
Economic Theories
Keynesian Economics- It is said to be an economic theory of overall expenditure in
economic and its influence on the inflation and output. The theory was developed in the
1930s by John Maynard Keynes who was the British economist. It was established to
understand the great depression. According to this theory, it business is suffering from poor
financial conditions or facing losses it may decrease its capital investment, rather than taking

BUSINESS STRATEGY 3
the full benefits of inferior prices in order to invest in the new equipment and new plants.
This also results in decreasing the overall employment and expenditures.
Recent Economic Event
Tesco Company was facing a downturn from last some years despite being the biggest
supermarket chain in Britain. However, there is growth in the sales first time since 2014 as
the company was dealing with high competition in terms of wages price in the market. There
is 0.3% rise in the supermarket’s sales as published by Kantar Worldpanel. This has also
resulted in increasing the prices of shares to 2% due to increase in the investment by Tesco.
Besides this, the executives of the supermarket also planned to close some stores and reduce
the range of products in order to enhance the Tesco's fortunes amid an increasing
supermarket price war. Tesco has planned to close 40 stores which are placing 2000 jobs at
major risk, along with this it has sold its non-core business such as Blinkbox Music to
Guvera, and Blinkbox Movies to TalkTalk (Thomas, 2015).
From the above recent activity of Tesco, it can be observed that the executives of the
supermarket have followed Keynesian Economics theory according to which it has reduced
its expenditures and employment to increase the sales.
E-Business Model of Tesco
E-business is not just an application of the technology for a business model of existing
business however but it is comprised of the formation of the new model of e-business that is
dependent on the utilization of new technology. The business model offers the construction
for the service; information and product flow where the revenue sources are defined and the
advantages to the numerous actors of business are clear (Sreedhar, 2018). The business model
is defined in the simple terms as the method through which a business can stand itself by
generating the revenue and recommend the methods through which business can make money

BUSINESS STRATEGY 4
by identifying where it stands in the supply chain (In, 2007). From last some years, various
models of business have developed which were not imagined before the development of
recent advanced and digital technology.
There are numerous e-business models which are adopted by the retailers. Tesco Company
makes use of an interactive model which is known as Market Portal Model. This model helps
in integrating the supplier and buyer side and enhances features and functions which allows
both of them or groups to perform the business operations effectively (Griffin, 2018). It is
also utilized by the business such as Walmart because it is effective in the management of
inventory and distribution. The Market Portal model is also called a transactional model
through which purchases can be done through the website of the Tesco (as it is security
enabled). The data in relations to the transactions of the customers go to the suppliers at the
same time to the Tesco Company. The suppliers of the company can only see the important
information which is of their use and remaining data are hidden. Then suppliers directly
operate deliveries and distribution. Market Portal model need completely integrated website
such as like Tesco.com.
E-business application of Tesco also involves the management of financial value chain that
helps in tracking the invoicing, cycles of payment, and pricing.
Strength and Weaknesses of Business model
Strength
Relationship marketing strategy- The biggest strength of Tesco is in its use and collection of
the data. Tesco Company gathers the transactional data of customers by the Club-card which
is transformed into data and knowledge that can be converted into action.
Tesco.com- The online retail store of Tesco i.e. Tesco.com is the world's fourth-largest store
of online grocery after Argos, Dell, and Amazon. The delivery service of the Tesco's online

BUSINESS STRATEGY 5
store appeals to the consumers which are physically unreachable for the retail stores. It also
focuses on the ‘time-poor' customers who like to have their grocery at their doorstep.
Tesco.com accompaniments the strategy of Tesco appropriately and offer best customer
experience.
Weaknesses
Weak management of Inventory- Inventory management of Tesco is one of the operative
weaknesses. The company has to revolve its inventory quicker and make effective and
efficient inventory management.
Areas of Improvement
The strength of Tesco lies in its capabilities to loom what customer is purchasing. It is
broadly trusted that consumer's present and past behavior is an effective predictor of the
customer's future intentions. While the Tesco's Club card may be offering as an important
tool, however, there are some areas where it needs to do some improvements. The Tesco's
Club card only helps in analyzing the items that are purchased by the consumers and not the
reason behind those purchases. This reflects that it only analyze the behavior of the customers
and not their attitude. In order to have complete knowledge of the consumers, Tesco has to
understand the behavior of the customer before the event. It has to understand the reason
behind the purchase of the customers.
Tesco has a system of business intelligence on its website that suggests pertinent offers to the
consumers the time they log in their account. But the suggestion of the website is dependent
on the past behavior of the customers. It is recommended that it needs to adopt advance
technology that can help in predicting the future consumer behavior.

BUSINESS STRATEGY 6
Impact of Global Competition
With the execution of the e-business model, Tesco Company is able to do some cost cutting
of operational costs which will increase its revenue and sales. As there are reductions in the
overhead, this resulted in the reduction in the cost for the consumers, which is one of the
aspects for which Tesco is famous and therefore it is the largest retail store of grocery in the
whole world. The setting up cost of the systems, upgrades, retraining, maintenance, security
and staff training has been decreased to some extent that offers a competitive advantage to
the Tesco, therefore, increasing the sales in long-term. The global outreach of the company
has also offered it an edge over its competitors such as Asda, Sainsbury’s, etc. Along with
this, the outsourcing functions such as rent, recycling, energy management, logistics, website
functions, etc. overheads have decreased. The commission of the competition gas confirmed
that business creates other ways of controlling the prices of the products deprived of any
single business dominating the market.
Market Entry
Vatican City is known as the independent state established in the city of Rome. In terms of
area, it is of 44 hectares and said to be the world's smallest state in population and area
(Klein, 2013).
The risk in Vatican City- The risk that Tesco Company can face is that country possess very
less population and there is no largest area to expand the business. Business needs to take a
risk in establishing its business by assuming that the population will increase in near future or
there is no competition in the market.
The Vatican City population majorly involves males (Iexplore, 2018). It reflects that any
business which is entering in this country need to focus majorly on the male as they can be
the primary target market which can create some issues for Tesco Company as it offers a

BUSINESS STRATEGY 7
variety of products for both males and female. Besides this, the company needs to follow all
the culture of the country as they are very particular about their values, believes and culture.
For example, there is a proper dress code to enter the church (Every Culture, 2018).
Further, the country faces some warnings of a terrorist attack which is one of the major
threats for the company to enter.
Mitigations for Tesco’s e-business model- In order to enter in the Vatican City Company
needs to have permission of the country’s government. The company can make use of
biometric devices which will increase the security of the personal information of customers.
Besides this, the Club card facility can be applied in the e-business model and can be used to
analyze the behavior and attitude of the customers towards purchases in Vatican City.
Besides this, the area and population are very limited in the location so the company will not
require a large number of employees to maintain the information of the customer, delivery of
products.
Conclusion
In the conclusion, it can be said that Tesco Company is the leading brand in the market offers
best quality and services to its customers. The above report has presented the e-business
model for Tesco that will help the company to reach those customers who cannot visit the
stores. Besides this, the report has suggested the market entry for Tesco in Vatican City in
order to increase its number of locations where it offers services.

BUSINESS STRATEGY 8
References
Bhasin, H. (2018). Importance of International Business – Benefits of International Business.
Retrieved from https://www.marketing91.com/importance-international-business/
Buckley, P.J., and Ghauri, P. (2015). International Business Strategy: Theory and Practice.
2nd edn. U.S: Routledge.
Every Culture. (2018). Vatican City. Retrieved from
http://www.everyculture.com/To-Z/Vatican-City.html
Griffin, D. (2018). What Is a Portal Business Model? Retrieved from
http://smallbusiness.chron.com/portal-business-model-3869.html
Iexplore. (2018). Vatican City — History and Culture. Retrieved from
https://www.iexplore.com/articles/travel-guides/europe/vatican-city/history-and-culture
In, L. (2007). E-Business Models, Services and Communications. 1st edn. Pennsylvania: IGI
Global.
Klein, C. (2013). 10 Things You May Not Know About the Vatican. Retrieved from
https://www.history.com/news/10-things-you-may-not-know-about-the-vatican
Sreedhar, G. (2018). Improving E-Commerce Web Applications Through Business
Intelligence Techniques. 2nd edn. Pennsylvania: IGI Global.
Tesco PLC. (2018). About us. Retrieved from https://www.tescoplc.com/about-us/
Tesco PLC. (2018). History. Retrieved from https://www.tescoplc.com/about-us/history/

BUSINESS STRATEGY 9
Thomas, N. (2015). Tesco sales return to growth. Retrieved from
https://www.ft.com/content/127d320e-b10c-11e4-9331-00144feab7de