International Business Report: Tesco's Foreign Market Entry Strategy

This report provides a comprehensive analysis of Tesco's international business strategy, with a specific focus on its potential expansion into South Africa. The report begins with an introduction to international business, emphasizing the importance of targeting international expansion for enhanced profitability. The main body delves into contemporary issues in international business, such as trade patterns, regulatory measures, and economic unions, and their impact on companies like Tesco. It then evaluates the global context, including dynamic business environments, the digital era, and the importance of innovation and employee skill development. The report also explores alternative modes of entry into foreign markets, including exporting, licensing, franchising, joint ventures, and foreign direct investment, with a justification for the most suitable entry mode for Tesco in South Africa. The report also touches on the reasons for internationalization and alternative theories of internationalization, along with the impact of multinational corporations on home and host nations. Finally, the report includes an analysis of data on country markets. The report concludes by summarizing the key findings and recommendations regarding Tesco's international expansion strategy. The report utilizes various academic sources to support its arguments.

International
Business

Contents
INTRODUCTION........................................................................................................... 3
MAIN BODY................................................................................................................. 3
Contemporary issues relating to International Business.........................................3
Identification and Evaluation of the global context in which International Business
must function.......................................................................................................... 4
Alternative modes of entry in Foreign Markets.......................................................5
Reasons to internationalize and alternative theories of internationalization...........6
Impact of multinationals on Home and Host nations...............................................7
Analysis and evaluation of data on country markets...............................................8
CONCLUSION............................................................................................................ 10
REFERENCES............................................................................................................ 11

INTRODUCTION
International Business refers to the conducting of Business Activities in the countries
other than the Home Country. Therefore, it is quite important from the point of view of the
organizations so that they are able to target International Expansion and thus aim for enhancing
their overall level of profitability which will help them a lot to be able to attain the future goals
and objectives quite properly (Chia and Kern, 2020). It is also very important for the Businesses
that they are able to make the use of the opportunities which exist in the Business Environment
so that they can attain their future goals and objectives. This report will focus on Tesco. It is a
British Multinational Retailer which provides a wide variety of goods and services to the
customers in the market. It is planning to expand its business operations to South Africa as a part
of its expansion strategy. In this report, a detailed and specific discussion will be made on the
way in which the use of the Business Opportunities can be made in the Foreign Markets for
enhancing the overall level of profitability.
MAIN BODY
Contemporary issues relating to International Business
When the organizations want to expand internationally and therefore want to enter into
International Business it becomes quite important for them to make sure that they are able to
assess the different types of issues which are related with International Business (Ciampi and
et.al., 2020). The issues which are related with International Business are explained as follows-
 Different trade patterns- In International Business, there are different types of trade
patterns in various countries. Therefore, it takes time for the organizations to adjust
according to them. For expanding to South Africa, Tesco has to assess these trade
patterns which will be quite helpful in formulation of a detailed strategy to be applied for
the purpose of attainment of the trade goals and objectives.
 Regulatory measures- International Business has an issues relating with the regulatory
measures which can thus create an impact on the Business Organizations. Every country
has its own set of regulatory measures which are required to be followed if the Business
Organization has to be successful there. For the purpose of targeting an expansion in
South Africa, it is quite essential that Tesco is able to make sure that it adjusts its
operations according to the regulatory measures and therefore this will be quite helpful in
ensuring that the management of the work can take place quite appropriately.
 Lop Sided Development of Developing Countries- There is a Lop Sided Development
in Developing Countries which thus affects the Businesses. South Africa is a Developing
Country and thus for Tesco it is important that it prepares a detailed strategy to be applied
there which will be quite helpful in ensuring that the company is able to work in a right
manner and therefore attain its future goals and objectives in a proper manner.

 Economic Unions- Economic Unions in various countries are not so strong and thus as a
result this also affects the Businesses of the Companies who want to target International
Expansion (Ciasullo and et.al., 2020). In the context of Tesco, it is quite important that
the assessment of this problem is done so that the right strategy can be used to
internationalize the business operations in South Africa.
 National Policy of Development- This policy has been implemented in the different
countries and therefore it has multiple provisions which are required to be considered by
the Businesses so that they are able to function in a smooth manner (Gamage and
Priyanath, 2020). For Tesco, it is necessary that its use can be made so that the company
is able to manage out its particular needs and requirements in a proper way in South
Africa.
 Procedural Difficulties- This refers to the problems and issues which are faced by the
Businesses when they are expanding their operations internationally. These arise due to
the lengthy procedures which are required to be fulfilled by the companies so that they
can manage out their overall operations in a proper manner quite effectively and
efficiently. In the context of Tesco, it is absolutely important that the assessment of these
particular problems and issues is done in South Africa so that the company is able to set
up its operations in a right way in the country.
 Other Problems- There is other problems as well which are faced by the firms while
expanding their operations internationally. For Tesco, it is necessary that the assessment
of these particular problems can be done which will help the company a lot to ensure that
it is able to expand to South Africa and therefore manage its business operations quite
properly there so that the attainment of the goals and objectives can be done.
Identification and Evaluation of the global context in which
International Business must function
International Businesses have to identify the emerging global trends according to which
they must function. This is especially important because this will be helpful in ensuring that the
Businesses are able to enhance the overall profitability level quite effectively and efficiently. The
global trends which are required to be considered by Tesco in South Africa are-
 Dynamic Business Environment- Business Environment of the organizations is quite
dynamic in nature which means that it can change quite quickly and therefore it becomes
quite important for the Businesses that they are able to make the required adaptations
with the changing nature of the Business Environment by ensuring that they keep up with
its needs and requirements (Gao and et.al., 2020). Tesco therefore is required to adapt to
the Dynamic Business Environment in South Africa which will be quite helpful for it to
be able to identify the way in which the enhancement of the profits can be done.
 Adapting to the Digital Era- The present Era is a Digital Era and therefore it is quite
necessary for the Business Organizations to make sure that the required adaptations can
be made so that the customers are provided good products and services which can thus

satisfy them. In the context of Tesco, it is therefore quite important that the Digital
Technology is used appropriately while expanding to South Africa.
 Targeting the global markets for growth- It is important that the Businesses are able to
target the global markets for the purpose of the attainment of higher-level growth in the
market. This will be quite important to ensure that the organizations are able to assess and
meet out the future needs and requirements in a proper manner (Hameed, Nisar and Wu,
2021). For Tesco, it is crucial that the global markets for growth are identified and thus
the company is able to set up its operations there for attaining a strategic and competitive
edge over the competitors in the market. Therefore, the company has identified South
Africa as a market where higher-level of growth can be attained and thus the management
of the particular needs and requirements can take place quite appropriately.
 Innovation- Innovation is an important trend because through making its use the new
products and services can be introduced in the market and thus this can be helpful in
enhancing the satisfaction level of the customers leading towards building of a Brand
Image and Goodwill of the Business Organizations (Hofmann, Brunner and Holschbach,
2020). In the context of Tesco, it is now very important that the use of Innovation is made
appropriately for the purpose of introducing new goods and services in the market.
 Skill Development of Employees- Nowadays it is essential for the Businesses to aim to
enhance the skills of the employees because by doing so the employees will be able to
contribute in a better manner towards the development of the Businesses (Jain,
Kashiramka and Jain, 2020). For Tesco, it is quite important that the skill gap in its
employees can be identified by it which will be crucial in ensuring that the attainment of
the future goals and objectives can be carried out. This will help the company in attaining
the desired level of success in South Africa for the purpose of making future progress.
Alternative modes of entry in Foreign Markets
There are alternative modes of entry in Foreign Markets (Kumari and Aithal, 2020).
These can be used by the Business Organizations to be able to ensure that they can
internationalize their business operations and are able to enhance the profitability quite properly.
These modes of entry are explained as follows-
Exporting- This refers to the direct sale of goods and services in another country. It is
quite important because it helps a lot in ensuring that there can be an enhancement in the overall
profitability level of the organizations which can be useful for them (Liñán, Paul and Fayolle,
2020). In Tesco, it is important that the use of exporting is made so that the goods and services
can reach the different types of customers in South Africa and the company is able to make
relevant progress in the market of the country.
Licensing- This means providing the rights to another company in the Foreign Country
to make the use of the Business’s property. This is an effective method through which entry can
be gained into Foreign Market. Therefore, for a company like Tesco it is quite crucial that the
use of this particular method is made so that it can gain entry in South Africa so that it can

increase its profits there and can grow substantially in order to attain sustainable level of success
in the future.
Franchising- It is a method through which the Businesses are able to provide the
intellectual property rights to run their business operations to another organization which runs
their business in a foreign country (Muhamad Yusuf and et.al., 2020). Thus, Tesco can make the
use of this method in South Africa which will be quite helpful for it to be able to manage out the
needs and requirements of the different types of customers in the market.
Joint venture- It is a method in which the Businesses are able to enter into a partnership
with each other in which they agree to enter into a Foreign Market with combined resources
(Oumlil, 2020). Therefore, Tesco can make its use to enter South Africa as by partnering with
another retail giant the expansion of the business can be done for the purpose of earning higher-
level of profits in the future.
Foreign direct investment- In this method, the organizations invest directly in the assets
in the foreign markets. For Tesco, it is quite important that it can be considered so that the
company is able to invest its funds directly in the foreign markets and thus this will be quite
important to ensure that the management of the market needs and requirements can be carried
out in a proper manner. Therefore, in this way the company will be able to identify the best way
in which the overall efficiency and effectiveness can be enhanced quite appropriately.
Justification- Exporting is the best way through which Tesco can gain an entry into the
market of South Africa. Also it is a method through which the organization will be able to make
sure that it is able to ensure that the management of the particular needs and requirements can be
done. This method will allow the company to set up a customer base in the country, gradually
aim to enhance the overall market share and thus make sure that the level of profits can be
enhanced quite appropriately.
Reasons to internationalize and alternative theories of
internationalization
There are different types of reasons due to which the companies tend to expand their
operations to other countries. An explanation of these reasons is provided as follows-
 Better earning potential- In the International Markets, there are wide opportunities
which are available for the Business Organizations through which they will be able to
ensure that they can attain their goals and objectives quite properly (Pittino and et.al.,
2020). Tesco can expand its business operations to South Africa to be able to identify the
ways in which the enhancement in the profits has to be carried out which will thus lead
towards better management of the organization.
 More growth opportunities- It is necessary that the different types of growth
opportunities are used in the future so that the organizations are able to ensure that they
are able to attain their business goals and objectives in the future and are able to attain

sustainable level of success. Tesco needs to ensure that by expanding to South Africa
growth opportunities can open for it which will help it a lot in the future.
There are certain theories of internationalization which can be used by the Businesses to
be able to ensure that they are able to manage out their international operations in a better
manner. These theories can be explained as follows-
 Absolute Cost Advantage- This theory states that free trade is essential for the
prosperity of the nations (Strayhorn, 2020). Thus, in this way according to this theory it is
essential that the restrictions on the trade between the nations are relaxed which can be
thus helpful in maintaining good trade relations in a proper way between the countries.
Tesco is therefore required to make sure that it uses the business opportunities available
in South Africa to be able to attain a higher-level of efficiency and effectiveness in the
Business Operations.
 Comparative Cost Advantage Theory- This theory refers to the ability of an economy
to be able to produce a good or service at lower opportunity cost than its trading partners.
In the context of Tesco, it is therefore quite important that it makes the use of this theory
so that it can expand its operations in South Africa.
Therefore, in this way it can be said that by making the use of these theories, Tesco can
make sure that it attaints its goals and objectives in South Africa and can attain success
there in the future effectively and efficiently.
Impact of multinationals on Home and Host nations
There is an impact of multinationals on Home and Host nations. This can be explained in
the following manner-
Impact of MNCs on Home nations-
 Increase in revenues- There can be an increase in the revenues for the Home Nations
because of the influence of the MNCs. Therefore, in this way they can make sure that
they can lead towards better potential for increase in the earnings of the countries in a
proper manner (Tajeddini, Martin and Ali, 2020).
 Leads towards Co-Operation- MNCs lead towards Co-Operation between the
Developed and Developing Countries. Thus, in this manner it can be said that this can
lead towards management of the work in a better way quite effectively and efficiently in
a right way.
 Improvement in bilateral trade relations- MNCs help in improving the bilateral trade
relations between the countries which can be quite impactful in ensuring that the trade
can take place in a proper way. Thus, in this way the MNCs are quite useful in ensuring
that trade activities can take place in a smooth manner within the countries which can be
quite beneficial for them in the future in proper manner effectively and efficiently.
 Increase in economic growth- With the increase in the number of MNCs, there can be
an increase in the overall level of economic growth in the countries. Therefore, in this

way it can be said that these MNCs are quite essential so that these countries are able to
make progress in a right way in the future.
Impact of MNCs on Host Nations-
 Boost to economic growth- With the arrival of MNCs in a country, the economy of the
host nation starts witnessing rapid growth which can be highly helpful for the country in
the future. Therefore, in this manner it can be said that in this way MNCs make sure that
they can contribute in their own way towards the overall level of economic development
quite effectively and efficiently (Trang and Nam, 2020).
 Technological growth- MNCs help the host nations by ensuring that they are able to
provide them with a higher-level of technological growth which can be quite helpful for
them. Thus, in this way they can help these countries by ensuring that their technological
development takes place which will help in making these countries advanced in the terms
of technology.
 Reduction of dependence on imports- MNCs can help the host nations by reducing
their dependence on imports which can thus be quite useful for them. Therefore, in this
way it can be said that this will help these countries as they will be able to get the
required goods through these MNCs and thus in this way their expenditure on imports
will be reduced.
 Development of R&D facilities- The arrival of MNCs in a country can be helpful for a
host nation because of having enormous capital and resources at their disposal they can
make sure that they invest substantial amount of funds in R&D facilities.
Analysis and evaluation of data on country markets
It is important to analyze and evaluate data on the market of the country which has been
chosen for the purpose of expansion. This can be helpful in ensuring that the right strategies are
used so that the Business is able to earn higher-level of profits there. The Analysis and
evaluation of data of South Africa’s market reveals the following information-
 Strategic location- South Africa has a very strategic location and therefore this can be
helpful in ensuring that the companies who enter South Africa are also able to expand
their operations to the other African Markets which can help them in increasing their
growth (Vahlne and Johanson, 2020). Therefore, Tesco has an opportunity of ensuring
that it expands to the other African Countries as well which will be quite helpful in
leading towards higher-level of profits in the future.
 Favorable Regulatory Environment- South Africa is a country which has a favorable
regulatory environment. This is quite helpful in ensuring that the countries are able to
make sure that the use of such type of environment can help a lot in enhancing the overall
level of profits and thus leading towards attainment of sustainable level of success.
 Sophisticated Financial Sector- South Africa’s financial sector provides various
opportunities for the Businesses which can be used by them so that they are able to

ensure that they can grow in the market and can attain the goals and objectives in the
future. The market of South Africa is developing and thus offers growth opportunities for
the Businesses. Thus, in this way this can be quite helpful for an organization like Tesco
so that it is able to ensure that it can identify the ways through which higher-level of
profits can be attained by it in the future.
 Transportation Infrastructure- South Africa’s Transportation Infrastructure is
developing and therefore this can lead towards better growth opportunities for the
organizations which are operating in the country so that their overall development can be
channelized in a proper manner (Wallenius, 2020). Tesco can make the use of this
infrastructure to be able to make a better use of the market opportunities and ensuring
that it attains a strategic and competitive advantage over its competitors in the market.
 Established Manufacturing Base- South Africa has an Established Manufacturing Base
which is useful for the organizations to be able to ensure that they can set up their
manufacturing unit and thus manage their business operations quite properly. In the
context of Tesco, it is absolutely important that such type of base is used so that the
company is able to target an increase in the profits.
Thus, in this way it can be said that South Africa has an established market where the
opportunities keep on arising and therefore this can be helpful in ensuring that the
organizations like Tesco make the use of the opportunities and are able to target the
attainment of higher-level of growth in the future effectively and efficiently. This will
lead towards the better management of the business activities in such a way so that the
company is able to become successful in the market of the country in the future. For this,
it has to make the use of planning and should be able to implement its plans
appropriately.

CONCLUSION
From the above report, it can be concluded that International Business refers to the
conducting of the Business Activities in the different countries all across the world. This can be
useful for the organizations because they can progress rapidly in this manner by ensuring that
they are able to attain their future goals and objectives. Thus, in this way the Businesses should
identify the available business opportunities and should ensure to make their use which will help
them to progress in the market and attain a strategic and competitive edge over the competitors in
the market. Also the Businesses are required to follow the international rules and regulations
regarding trade. Therefore, it is a requirement for the Businesses that they can make sure that
they are able to identify an appropriate mode through which they can ensure that they can attain
higher-level of profits in a proper manner.

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