Analyzing TESCO's Acquisition Strategy: Profits in Romanian Market

This research project investigates the impact of TESCO's acquisition strategy on its profitability within the Romanian market. The study employs secondary research, focusing on political, technological, social, and legal conditions in Romania through PESTLE analysis to identify market opportunities and challenges. Primary research, conducted via questionnaires with 30 participants, suggests Romania is a favorable market for TESCO's expansion. The report concludes that TESCO, as a major global retailer, can successfully expand into Romania due to abundant capital and favorable external factors, supporting market growth through product diversification. The report includes an overview of acquisition concepts, benefits of acquisition for TESCO, effects on profitability, research methodology, data analysis, recommendations, and a reflection on the research process. The study aims to identify how acquisition affects TESCO's profits, reviewing literature, conducting primary research, and recommending strategies to increase profits through acquisition.

Research Project

ABSTRACT
This dissertation focused upon investigating the influence on profits on Tesco when
venturing into Romanian market. The major cause of undertaking this research is to gather
additional understanding on the subject matter. Through secondary research there has been a
focus on conditions prevalent in the Romanian market on the grounds of political, technology
and social and legal. This will help in identifying the circumstances and nature of the market
where a business planning to expand their operations. The primary research for this dissertation
is fulfilled through undertaking a questionnaire involving close ended questions. The responses
of the 30 people gathered through random sampling determined that Romanian is a favourable
market for a business to expand their operations. Finally it can be said that Tesco is one of the
biggest retailer which is operating its business throughout the world can easily expand their
operations to Romania due to the presence of abundant capital resources. The presence of
favourable external factor will be helpful in achieving their target of market growth through
diversification of its product line.
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ACKNOWLEDGEMENT
I would personally acknowledge all the one who have supported me in my academic life
and obtaining its associated goals and objectives. At first, I would like to acknowledge my
parents, who have also provided support to me at every phase of my life and understood my
every single reaction at different phases. Without them, it wont be possible for me to reach
current level.
At next, I would acknowledge my committee members, colleagues and respective guides
who have guided me at every stage of research process. Thank you all for your collaborative
support throughout the project.
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Table of Contents
ABSTRACT.....................................................................................................................................1
ACKNOWLEDGEMENT...............................................................................................................2
Research Topic: “Acquisition in Romania and profits”. A case of TESCO. ..................................4
TASK 1............................................................................................................................................4
Overview and background of research...................................................................................4
Aim of research......................................................................................................................4
Objectives of the research......................................................................................................4
Research Questions................................................................................................................5
Rationale of research..............................................................................................................5
Significance of research.........................................................................................................5
LITERATURE REVIEW.......................................................................................................5
Concept of acquisition............................................................................................................5
The main benefits of acquisition for TESCO while expanding in Romania..........................7
Effects of acquisition on profitability of TESCO in Romania...............................................8
PESTLE Analysis..........................................................................................................................10
RESEARCH METHODOLOGY.........................................................................................13
TASK 2 .........................................................................................................................................23
Data Analysis........................................................................................................................23
RESEARCH TIME PLAN...................................................................................................39
TASK 3..........................................................................................................................................41
RECOMMENDATIONS.....................................................................................................41
TASK 4..........................................................................................................................................44
REFLECTION......................................................................................................................44
CONCLUSION..............................................................................................................................46
REFERENCES..............................................................................................................................47
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Research Topic: “Acquisition in Romania and profits”. A case of TESCO. .
TASK 1
Overview and background of research
Acquisition refers to the situation in which a single company acquires maximum shares
and asset of another company for motive of taking control over it. It can be said that an
acquisition is highly successful when one business purchases 50 or more percentage of
ownership of another country that they have targeted earlier. In the present world, it becomes
necessary for business organisations to approach another country for expanding their business so
that they can survive longer in business world and maximise their profitability ratio (Bran, Balu
and Ioan, 2015). Acquisition is one of the common ways which are adopted by large scale
company when they plans to approach another country for main purpose of profit maximisation.
The present research report is based on TESCO, a well known retail company of United
Kingdom which is offering its services all over the world. The company is already having good
presence at international level but still it is required by this company to adopt some effective
approach strategy through which they can enter into those country in which they have yet not
expanded. Now, top management team of TESCO have planned to expand their business in
Romania through the most popular way of acquisition. In this regard, management team of this
company have planned to conduct an effective research so that they can enhance their knowledge
on acquisition. The research will also help them in identify list of benefits in terms of profit
could be gained by them at the time going for acquisition in Romania. With reference to this,
below mentioned are aim and objectives that are prepared by investigator in order to conduct an
effective research.
Aim of research
The research aim for present study is “To identify how acquisition affects profits” A case
study on TESCO.
Objectives of the research
 To review literature on acquisition and profits.
 To carry out a primary research on acquisition and profits.
 To recommend how TESCO can increase profits by using acquisition
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Research Questions
 What is the concept of acquisition and profits?
 What are the main outcomes of acquisition and profits?
 What are the recommendation for TESCO by which it can increase its profitability by
using acquisition?
Rationale of research
The purpose of conducting this research is to find out impact of acquisition on profits of
TESCO. The research will also provide different ways and tactics to management team of
TESCO that will help them in implementing their acquisition effectively in Romania without
facing much issue. With relation to academic criteria, main rationale of conducting this research
is to improve knowledge of learners so that they their professional skills can be improved. This
knowledge will also help learner in identifying emerging opportunities related to career which
could be gained by them in quick manner. In context to investigator, knowledge and skills of
researcher and its team members about TESCO and its operational activities. It will also aware
researcher about some core areas of TESCO where they can work in future. This can be seen as
the career opportunity for researcher that can be grabbed by them in future.
Significance of research
The present research will provide in depth knowledge of acquisition and its benefits to
the companies belonging to retail industry so that they can survive longer in same industry for
longer period of time. It will also open up several additional benefits for TESCO through which
they can easily expand in Romania effective without facing much issues. As a result, it will
enhance their growth and additional profitability in effective manner.
LITERATURE REVIEW
Concept of acquisition
According to the thoughts of EduPristine, (2015), Acquisition is considered as the situation
in which one company simply acquires another one effectively. The main purpose of acquisition
is to wealth maximization, identifying and grabbing opportunities available at market place.
Along with this, it can be said there are different type of structure of acquisition which are
mainly adopted by companies at global expansion. Some of the common types among them are
stock purchase, Asset purchase and Merger. In stock purchase, Buyer Company mainly focuses
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on acquiring stock of targeted company from the one who holds its majority of stocks (Vinter,
2018). In assert purchase, buyer company only concentrates on purchasing assets of chosen
company. And at last, merger is combination of two different legal companies for the common
aid of maximising their profits with the support of one another (Mergers and Acquisitions, 2015).
In this, companies engaged together do share their responsibilities, profitability and liabilities
with each other. As per evaluation, it has been analysed that there are numerous of reasons which
influences business organisation for going for acquisition. The main reason which influences
TESCO for going for expansion in Romania are elaborated as below:
 Diversification of high growth in market as well as products: This is the first and
foremost reason which influences business organisation as it provides them wider market
area from where they could approach their potential customers. This will ultimately
provide them opportunity for enhancing their profitability.
 Diversifying risk: Another reason that persuades TESCO for looking toward acquisition
is diversification of risk. It can be said that if TESCO is going for acquisition then they
will be having benefit that their risk will going to be shared with another shareholder
(Bachmann and et. al., 2016). This means it will be easier for TESCO to bear uncertain
situation as they are having more people to share their risk. This ultimately enhances their
chances of sustaining longer in industry.
 Tax consideration: All business organisations are required to pay taxes which are
compulsory for them. These tax vary from country to country or on the basis of type of
business. It can be said that business person who are wishing to enhance their profitably
are considering it as opportunity or reason by which they can raise profits. In this regard,
it can be said that business organisation always look forward toward that country where
they can get maximum tax relaxations. As a result, its easier for them to enter into best
geographic location from where maximum profit can be gained by them effectively with
minimal tax rate.
From the above mentioned different reason which are obtained by business organisation
in order to looking forward for acquisition, it can be said that main motive of all these reasons is
to enhance probability of company (Brown, 2017). Along with this, acquisition is also seen as
growth opportunity for company which helps them in enhancing their market share. At next, it
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can be said acquisition also increases number of customers for company as they are able to reach
their desired region and its potential customers.
Apart from this, another author named as du Jardin (2015), have stated that acquisition is
considered as the best way through one an organisation can enhance its growth in quick time. In
addition to this, it has also been seen that business organisation can acquire this methodology for
giving boost rise to their business with the support of another company. For instance: It can be
said that if TESCO, acquires method of acquisition at the time of enhancing their business at
international scale the it is highly beneficial for them in establishing their business. At further,
the author have stated that acquisition also have negative phase which affects business of this
company. Its negative influence can be seen as the enhancement of conflict (du Jardin, 2015).
This is because, when two or more company involve together them then it create chances of
conflicts and misconception among companies and employees. As a result, these conflicts might
affect company negatively and also affect their profits in negative manner.
Its negative influence can be seen as if a company having negative image at marketplace,
brand image and goodwill of the company can be reduced. When two or more organisation come
together, employees of the both companies have insecurity about their job. It is very difficult to
have same cultural background for any organisation. As a result, conflicts and dissatisfaction
increases between the employees of both organisation. When employees faces such insecure
working environment, they become competitive with each other. For avoiding such situation, it
the responsibility of HR manager of the company to provide opportunities. With the help of
group task and working together employees of the company can reduce their differences.
The main benefits of acquisition for TESCO while expanding in Romania
On the basis of thoughts published by Globe Business Media Group, (2018), it has been
analysed that business organisations are gaining numerous of benefits by acquiring methodology
of acquisition. It can be said that if an organisation go for acquisition then they surely gets
benefits in terms of monetary growth. Along with monetary growth, there are various factors
which benefits the company (Hansen and Bratt, 2015). Some of the main benefits of acquisition
includes high speed of opportunities in comparison to competitors, enhancing power at market
place, quick availability of new resources and competencies, financial gains, quick fulfilment of
stakeholders prospects and last but not the least minimisation of entry barrier while entering into
new country. For instance, if TESCO is entering into Romania with acquisition, then the
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company will surely get some additional benefits which will increase the market share of the
company. It has been analysed that Romania is technological developed place which helps
company in operating their business in this country effectively without facing any issue (M&A in
Romania, 2019). Along with this, another benefit that might be gained by TESCO is that this
country is economically developed which make it possible for the company to operate effectively
in Romania. Another benefits a company might gain is that they can easily attract fresh talent,
and acquire skilled and capable employees, which will increase the performance of the company.
If a company have good management staff, profitability and performance will be increased. With
the help of effective management of team, company can reduce their conflicts and difference and
improve their productivity by working together in a team rather than individual (Li, and et. al.,
2016). Apart from this, some benefits face by Tesco include good quality of resources. With the
help of acquisition company can acquire resources and increase their competitive advantage at
marketplace. Company can produce good quality products with the help of effective raw
materials, as a result company can easily satisfy requirements and needs of customers. Company
can retain and attract customers, by satisfying the wants and demands of customers. Along with
all these, one of the main factor which affects the growth, brand image and market share of the
company while expanding its business with the help of acquisition. If a company is already
operating its business activities in an effective manner and Tesco wants to acquire it. As a result,
Tesco gain the advantages while operating its activities.
In addition to this, it has also been analysed that if TESCO is going with acquisition in
Romania then it would definitely help the company in improving its profitability as the company
can have more number of opportunities to influence customers available in Romania. Along with
this, it can be said that in Romania TESCO also gets business opportunities to interact with other
available companies with the help of which they can easily approach new businesses and could
maximise their profits.
Effects of acquisition on profitability of TESCO in Romania
As per the views given by Fantana, (2015) it has been evaluated that acquisition simplifies
the work of company which is enhancing their business in another country. This can also be
stated that a strategic acquisition is one of the most important means for enhancing the
productivity, growth and profitability of a firm. In this the growth of the company can be
enhanced by increase in market share and their sale. This process provides a host of advantages
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which includes the finance for upcoming future undertaking and the savings due to the
economics sale. It can be said that main benefits which are gained by business organisation
during their global expansion is monetary benefits that is profits. Acquisition helps an
organisation in entering into new sector or nation with support of their other stockholders. It
means that company is also having back support of other shareholders who could guide or assist
company performing business effectively (Ma, Cai and Zou, 2017). With reference to TESCO, it
can be said that acquisition in Romania will provide additional business opportunity to TESCO
this will also help them in enhancing their market share and ultimately contributes in increasing
their profits.
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PESTLE Analysis
This is an analytical framework that takes into account the macro environmental factors
with a view to carry out strategic planning and management. With the help of this analysis, a
firm can easily gain knowledge of the various elements pertaining to business environment of a
country. In this relation, TESCO is gaining access into Romania to facilitate market expansion
by leveraging acquisition as the strategy. Thus, the various components pertaining to PESTLE
analysis are explained underneath in context of Romania:-
Political factors:
The instability of political system as well as governmental policies of Romania has
caught the attention of companies operating within its confines and the investors seeking to
invest in this nation (Romania, 2019). It is essential for the management of TESCO to take the
political adversities of this nation into account while facilitating expansion in this market through
acquisition. Being a part of European Union, the entities which conduct operations within this
nation enjoy the advantage of excessive employment opportunities, availability of talented as
well as skilled manpower and abundance of resources. Thus, this serves to be an excellent
location for FDI for potential investors.
Economic Factors:
The economy of Romania is rapidly developing with extensive HDI and talented
manpower. This presents opportunities to investors seeking to gain entry into this nation. This
implies advantage for TESCO while seeking to gain access into the confines of Romania through
acquisition. This nation is on number 15 within EU in terms of overall nominal GDP. The
economy of Romania stands on number 40 across the global periphery. Even though the market
witnessed largest growth rate within the confines of EU in the years 2016, 2017 and 2018; it is
forecasted that this growth will see a downturn and cut down to 3.8% within 2019. The overall
economic information of this nation imply great growth potential for companies operating or
seeking to function within this market such as TESCO.
Social Factors:
Romania is a nation which is regarded to be a composite of a number of cultures, beliefs
and values. It encompasses Romanian - 89.5%, Hungarian (Secui included) - 6.6%, Roma
(Gipsy) - 2.5% and others - 1.4%. This illustrates the varying beliefs and ideologies of
population of this country (Political, Social and Economic Background and Trends, 2019). This
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would have a significant influence over the operations of TESCO after gaining entry into
Romania by way of formulating acquisition. The population of this nation is 1.95 Crores which
in itself is an extensive base of people. This would provide opportunity to TESCO to come up
with products through which it can significantly appeal to the population of this nation. It implies
increment in revenues as well as profits of corporation in future course of time.
Technological Factors:
Romania is a technologically advanced country which presents a number of opportunities
to companies operating within its confines. Thus, the management of TESCO can gain advantage
by incorporating innovations within the offerings to appeal to the audience of Romania in an
effective manner, thereby enhancing the scope of increase in profitability and growth of
company in new market place.
Legal Factors:
There are a number of laws and legislations prevailing within the confines of Romania.
These are required to be complied by an organisation when intending to gain access into a new
market place. In this relation, whereby TESCO is planning to carry out market expansion by
capitalising upon acquisition, it is essential that the management abides by the retail laws
pertaining to Romania. This would provide assistance to organisation in effectively establishing
itself within the new market and significantly appealing to the audience of new country.
Environmental Factors:
Romania is a nation which is keen on preservation of environment with the help of
stipulation of strict policies and regulations. The major challenges that have been prevailing
within the confines of this country are regarded to be air as well as water pollution. This takes
place as all of the manufacturing facilities, chemical plants and power plants within this nation
are reliable aggressively over the burning of fossils, thereby leading to generation of green house
gases into the environment. In response to this, Romania has taken several effective stances upon
Environmental Protection Law since the time it joined EU during 2007. Apart from this,
Governmental Resolution 152/2005 tends to put due emphasis over control and elimination of
pollution through execution of essential course of action for the purpose of decreasing or
eradicating air, water and soil pollution (Romania: Environmental Issues, Policies and Clean
Technology, 2019). With respect to this, it is essential for TESCO to ensure that it abides by all
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