Global Business and Globalization: A Case Study of Tesco and Walmart

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Global Business
Case study: Report
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Contents
Introduction.................................................................................................................................................3
LO1. Critically analyse how global business and globalisation influence on the way companies have
developed and how they are organised and operate.....................................................................................5
Literature Review....................................................................................................................................5
Critical Analysis of Global issues which has impacted Tesco.................................................................7
Critical Analysis of Global issues which has impacted Walmart.............................................................8
LO2. Appraise the entrepreneurial and leadership qualities of the globalised business.............................11
Conclusion.................................................................................................................................................15
References.................................................................................................................................................16
Introduction
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The globalization has become an emerging trend in the business environment. The globalization
is the process through which the organizations of the home country spread its business operations
throughout the world through adopting various strategies. Through adopting the globalization the
international influence over the organization enhances and enables it to operate on an
international scale. Through understanding the concept of globalization we can assume that the
world economy has been globalized which makes the market a single market. In a globalized
market the production is interdependent throughout the word which makes the products and
services accessible to the world wide consumers (Javalgi and Toya., 2018).
This report speaks about the globalization and the influence of the globalization on the
organizations operating in the world. The global industry which has been taken into
consideration is the retailing industry. The retailing industry is operating throughout the world
since it has attractive opportunities in the global market. Since the retailing industry which
includes the super market chains can contribute to the employment opportunities, to the growth
of the GDP of the nation the government takes special interest in the development of this
industry.
Source: Growth rate of supermarket chains in UK, CB insights
Some of the major challenges which the retailing industry faces include the changing customer
needs and demands, the changes in the technology, the competitive which is happening in the
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market, the economic and political issues which are unpredictable in different markets
throughout the world (Ibeh, Crick and Etemad, 2019).
Two companies which are operating in the retailing industry globally are taken into
consideration for the purpose of analysis. The selected organizations are Tesco and ASDA which
are the leading super market chains in UK and have its operations globally. Some of the
contemporary issues like the Brexit, cyber crimes, demographic issues which has impacted the
operations of these organizations are discussed with relevant examples. Some of the leadership
strategies taken by these organizations to tackle these contemporary issues are also highlighted.
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LO1. Critically analyse how global business and globalisation influence on the
way companies have developed and how they are organised and operate
When an organization operates globally, it can be impacted by the other global businesses and
the globalization which can generate positive or negative outcome for its global operations. It
purely depends on the strategies, decisions, etc of the management of the organization which
enables it to operate successfully in the globalized market.
Literature Review
Levitt claims that the occurrence of the globalization has resulted into the commercial reality
which has resulted in the emergence of the global markets. The markets have been grown beyond
the magnitude which has been imagined with the globally standardized products and services.
Some of the important factors which the managers of the globalized organizations have to
consider is the national, local and the global preferences which can impact the sustainability of
the organizations globally. But, Levitt argues that the national and regional preferences in the
business, consumer behaviour etc can gradually disappear due to the emergence of the
standardization and adaptation of the globalization in the markets. This can result in the
homogenization of the products and services. His theories and findings also highlight the
universally accepted tastes and preferences, the standardization of the products and services, the
marketing designs which is appropriate for the global business operations. When considering the
challenges and the contemporary issues of the globalized organization the varying customer
demands and the preferences, domestic and international marketing, etc can be considered as the
main issues (Gökmen, 2019).
When an organization go global, it is not mandatory that it can achieve success in the host
market easily. The major component of the globalization is the international marketing mix. Here
the global organizations are marketing the same products throughout the world by formulating
the marketing mix appropriate for each country or the local market. This can make the global
operations more customers oriented and can achieve sustainability in the market in which it is
operation. This strategy of globalization can be considered as the adaptation of the global
organization as per the conditions of the market. This globalization strategy can make the
organization fit in each specific market. But the critiques argue that this form of globalization
lacks standardizations in the business operations which can impact the reputation and the brand
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image of the organization. The major challenge which the organizations operating globally faces
as the dilemma between the standardization and adaptation.
The super market chains are the leading organization which determines the success of the
retailing industry. This is the industry which provides more importance of the customer
preferences and tastes. The strategies and the decisions should primarily focuses on the changing
demands and tastes of the customers in order to achieve competitive advantage. When
considering this industry in the global perspectives narrowing down the decisions and marketing
mix domestically is more important. The globalization highlights some important factors like the
cultural differences which reflect in the buying behaviour, foods, etc of the population of the
specific market. A measure of standardization cannot be imposed by the global retailing industry
in this products and services. Once the organization remains successful in determining the
product and services preferred by the local or national consumers then their sustainability and
growth in that market can be assured (Morgan, Feng and Whitler, 2018).
The organizations TESCO and Walmart are the two leading supermarket chains which are based
on UK and have its operational units in different parts of the world. The concepts and the factors
which have been discussed here like the cultural differences, adaptation Vs standardization,
changing demands of the customers etc have huge impacts over these organizations global
operations. The globalization has enabled the Tesco and Walmart to integrate trading with many
global giants, foreign direct investment, and establishment of the ecommerce markets etc. All
this facilitation of the globalization for the organizations also contributes to the contemporary
challenges to these organizations which can retard the operations in the foreign market (Fatehi,
and Choi., 2019).
The global business environment is subjected to the political, economical, social, technological
challenges which can impact Tesco and Walmart both positively and negatively. These external
environment factors are different for different nations which have to be determined specifically
for each country for the establishment of the global business successfully. Since these factors are
beyond the controlling limits of the retailing organizations it is mandatory to change the
strategies accordingly. The scientific management tools like the PESTLE analysis, SWOT
analysis, Porter’s five force analysis etc enables the Tesco and Asda to determine the changes
and adapt various strategies accordingly. Hence from the review of the literature in terms of the
globalizations it can be concluded that the global market is subjected to continuous changes and
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differences which to be tackled with has differentiated marketing strategies rather than imposing
standardization in its operations.
In order to perform a critical analysis on the global issues faced by the organization Tesco and
Walmart, Pestle analysis has been performed on both. This identification reveals the challenges
faced by the organizations in terms of its external environmental factors.
Critical Analysis of Global issues which has impacted Tesco
Political: The most recent contemporary issue which has been faced by the organization Tesco is
the decision of the British government to exit the EU. This political decision has hindered the
operations of the Tesco with the countries which are the members of the EU and also has to face
challenges in its operations. The increase in the price of the raw materials from the local and the
national suppliers has resulted in narrowing down the profit margin of Tesco. The income of the
population of UK has been reduced due to the impact of this political decision which has
changed the buying behaviour of the customers. Mr John Allen the CEO of Tesco highlights that
the EU referendum has generated a risk factor for the retailing industry that makes the investors
to invest in this sector globally (Samiee and Chirapanda, 2019).
Economical: When considering the Tesco the labour costs can be a higher challenge which can
impact it economically. The minimum labour wages has made 4.7% which enhances the cost of
production. The changing labour costs globally can reduce the stability of its cost of production
which affects its sustainability. The Brexit approach also impacted the Tesco economically
through causing inflation. The economic dependency of Tesco over the UK market is more than
27% which has affected its profit margin. When operating in different countries with different
economic condition the vat charges, impart and export charges, etc may vary.
Social: The changes in the demographic factors across the world can be a big challenge for the
Tesco. The needs and preferences of the customs in the market in which it is operating may be
different. This imposes a challenge for it to formulate the marketing mix appropriate for each
nation. This custom made marketing mix specific for each country enhances the costs involved
in the marketing. The country China in which it is operating is populated with the customers who
prefer the lower prices hence the marketing strategy which fits to this requirement is essential.
Technological: The major challenge which is beyond the reach of the organizations in the retail
industry and other industries are the threat related to the technology. Cyber crime which is the
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major challenge which the organization Tesco as well as the Walmart faces in the current global
market. The theft of the data can impact the reputation and credibility of the organization and
hence can result in the legal obligations. The introduction of the technologies like the RFID has
enhanced the in store experiences of Tesco and has contributed to its organizational performance.
But in countries like China the proper utilization of this technology doesn’t happens due to
unskilled labour.
Environmental: The global awareness about the conservation for the environment and energy
has become a major challenge for the operations of Tesco globally. The organization has get
sanctions from the associations when it enters into the new markets. For each country the terms
and conditions related to it may be different which has to be followed up and has to be met
appropriately.
Legal: According to the records during the year 2016, the employees of the organizations Tesco
has sued it claiming the discrimination based on the age. The laws and regulations in the
business environment are open which can be utilized by the employees or the other stake holders
to gain justice. Sometimes the organizations like the Tesco have to think the legal part of the case
of the case if it has to take any disciplinary action even though the organization is taking the right
actions. The legal implications can cause the damage to the organization which can lead to the
loss of sustainability (Figueira, Rickne and Sugano, 2019).
Critical Analysis of Global issues which has impacted Walmart
Political: The exit of the British government from the EU has impacted the Walmart also since it
operated in the same retailing industry. Since this action has resulted in the sliding of the ponds
the organization has to formulate rather strict supplier strategies which have impacted their
supplier management. Since the bargaining power of supplier is higher in this industry this
political decision has impacted the supply chain management of Asda. In the countries like the
China where wall mart is operating, the political instability is higher which can put continuous
changes in the tax, interest rates etc which can hinder the smooth operations of the retailers in
this market.
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Source: Brexit impact on key industries, soopiaman
Economical: Like Tesco the walmart also faces the issues related to labour costs and the Brexit.
The major economic challenge which the Walmart has recently faced is the loss of profit margin
through the provision of the products and services at competitive prices. The price cut off which
has yielded competitive advantage in markets like china, Africa etc has impacted its international
operations negatively through making it relatively slower in its growth and sustainability
(Steenkamp, 2019).
Social: Being a food and groceries retailer the walmart also faces the challenge related to the
international marketing mix which the Tesco faces. The always lower price strategy which
reflects in the marketing campaigns of walmart generates positive results in China but generates
negative outcome in US as the people of this market perceive the quality of the product with it
prices. Hence the global standardization reflects a major challenge for the walmart. The changes
in the demographic factor age are also a challenge. For example the UK population occupies the
older age groups who eat less which can be threat or challenge for the Walmart as well as for the
Tesco.
Technological: In order to enhance the customer convenience and to promote the globalization
in a better manner the organization Walmart has enhanced its online presence which enables the
customers to purchase its products from any part of the world like its competitor Tesco, Asda etc.
In the year 2008 the walmart has been sued as the customer information which included the
payment transaction has been stolen. This issue has ruined the credibility and the reputation of
the Walmart. As the technology grows the threats and challenges associated with it also
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enhances. Getting approval for the utilization of some technologies in the global market is also a
challenge for the retail organization.
Environmental: In the market Mexico the organization Walmart has to face the opposition form
the residents for its new store opening in the inner grove heights considering its height and the
environmental issues which the store operations can generate. Considering the changes which
can happen to the rural suburban nature due to the operations of Walmart its sanction has been
cancelled in some of the international market. Hence this factor can be considered as a major
challenge for the retailing industry in the international British. Since the UK is not involved in
the EU membership, such sanctioning and approvals has become a serious issue for the retailing
organizations like walmart and Tesco (Sapouna, Dimitratos, Larimo and Zucchella, 2018).
Legal: The legal and regulatory frame works imposes fines and penalties for the international
organizations if their operations are not legally confined. The Walmart has to pay $1.5 million in
the connticut as it failed to cope with the rules and regulations associated with the storage of the
pesticides. In the market of Florida the organization walmart has to pay the penalty of $765000
for violating the laws associated with the storage tanks at its auto service centre. The legal
obligations of the multinational organizations are very crucial which acts as a major challenge
for these organizations (Dost, Phieler, Haenlein and Libai, 2019).
Findings and Justifications
From the Pestle analysis the major challenges which the organization Walmart and the Tesco is
facing being operating in the retailing industry has been identified. The Changing demands and
preferences of the customers, the Brexit approach of the UK government, the dilemma between
the standardization and domestic marketing mix, the differences the economic conditions of the
market, the cyber crime, the rules and legislations etc can be a major challenge for the retailing
industry globally
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LO2. Appraise the entrepreneurial and leadership qualities of the globalised
business
For a global organization which is operating internationally it is essential that it should possess
the leaders or managers with entrepreneurial and leadership qualities which enables it to yield
success in all the markets. In order to achieve sustainability, competitive advantage, strategic
leadership position in the market place or in the global marker, the leaders and the managers
plays a vital role. They can shape the behaviour of the employees to lead them towards the goal
achievement, make them potential enough to compete according to the global standards. The
effective leadership qualities enables the global organization to maintain and management the
relationship and in the development of effective organizational culture. Some of the ways
through which the leaders or the management of the organizations Tesco and the Walmart has
responded to the contemporary issues identified are discussed below.
The response of the Tesco to the contemporary issues
Political Issues: Brexit is the political issue which acts as a major challenge for the organization
Tesco. Being facing the high risk challenge by the retailers like Tesco the innovative and the
positive minded leaders of Tesco made strategic decisions to overcome the issue. Since it has
impacted the buying potential of the people in UK the management decided to focus more on the
discount sale which can retain the loyal customers and can manage the business till the situation
becomes better. It decided to open up the discounted stores in Ireland and in other parts of its
operating markets. It also provided the options like the renting of the refrigerated containers
which enhanced the purchase of the frozen food (Steenkamp, 2019).
Economical Issues: The rise of the minimum wages to the employees and the Brexit has
impacted the economy of the Tesco in severe manner through reducing its profit marketing. In
order to compensate the loss which the has to bare due to the minimum wage policy, the
innovative and the entrepreneurial leaders of the Tesco decided to provide sufficient training and
development to the employees and to utilize the available resources maximum. This has
contributed to the achievement of the loyal and potential employees for the organization which in
turn supported the organization in the risky situations like the Brexit.
Social Issues: The changing demands and preferences of the customers throughout the world is
the main social issue which the organization is facing. In order to tackle this social challenge the
management of Tesco adopts the collaborative leadership style. Here the employees are given
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with the authorization and the empowerment to make the decision and exhibit their innovative
opinion so that the organization can get innovative ideas and provide services which can retain
and satisfy the needs of the customers. The management possess the sufficient knowledge which
made them to realize the importance of retaining the customers and its relevance in the
achievement of the competitive advantage.
Technological Issues: The management of Tesco identifies and recognizes the seriousness of the
cyber crime and the implications which this theft of data can cause for it and for its customers.
The organization has its own technological development and monitoring team which operates to
restrict the cyber crime. This organization provides security and safety to the information and
data through the implementation highly secured data protection software. Only the authorized
individuals are having the privilege to access and restore data. They also develop policies and
procedures which provides confidentiality and credibility to the information of the customers and
their data (Wanda and Razak, 2018)
Environmental Issues: The organization takes part in the environmental campaigns which
generates awareness about the conservation and the preservation of the natural resources. The
organization Tesco promotes its online shopping facility through highlighting the fuels having
perspectives which enhances the credibility of the organization. It also focuses on going
paperless through the provision of the soft copy of the bills. The mission of the organization
Tesco to become environmentally sustainable is to reduce the carbon foot print by 50% by the
year 2020. This strategic approach of the Tesco management has enabled it to yield good
reputation and brand image.
Legal Issues: It is mandatory for all the organizations like Tesco to carry out the business
operations which are legal compactable. For facing this legal challenge and to make the business
operations free from the legal implications the Tesco has outsourced its legal structure to the
professional legal advising organization. This approach of the organization has saved its time and
resources to spend it cross checking the legal factors. At the same time it could also make its
business operations smoother (Chen, Sousa and He, 2019).
The response of the walmart to the contemporary issues
Political Issues: Walmart being an organization which has been operating from decades have
experienced managers who possess the knowledge to manage the critical challenges like the
Brexit. With its experience in managing its business during the period of recession, the
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