Management Report: Tesco's International Expansion in Emerging Markets

This report examines Tesco's potential expansion into the emerging markets of Brazil and Vietnam. It begins with an introduction to the challenges faced by contemporary businesses in a competitive global environment and the strategy of internationalization. The report then analyzes the industry and market attractiveness of both countries, considering factors such as population, GDP, credit rating, inflation, and problematic factors. A CAGE framework (Cultural, Administrative, Geographical, and Economic distance) is employed to assess the distance between the United Kingdom and each host country. The analysis includes Hofstede's cultural dimensions, administrative structures, geographical distances, and economic indicators. Furthermore, the report evaluates the industry-level attractiveness of both Brazil and Vietnam, considering factors like the threat of entry, substitutes, bargaining power of buyers and suppliers, and industry rivalry. Finally, the report recommends Vietnam as a more suitable market for Tesco, citing its higher economic growth, untapped market potential, and less intense competition compared to Brazil, supported by the CAGE framework and market analysis. The document is contributed by a student to be published on the website Desklib, a platform which provides all the necessary AI based study tools for students.

Running head: MANAGEMENT – EMERGING MARKET
Management – emerging market
Name of the student
Name of the university
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1MANAGEMENT – EMERGING MARKET
Introduction
The current business scenario poses huge challenges for the contemporary business
organizations due to the reason that competition is much intense in the current time with the
presence of huge number of players. Thus, it is important for the business organizations to look
out for new markets in order to cut off the intensity of the competition in the local market and to
enhance the customer base in the global market. Contemporary business organizations initiate
the strategy of internationalization in order to enter in the foreign markets and enhance the
customer base (Cavusgil and Knight 2015). In the recent time, developing economies are being
targeted by the business organizations in order to tap the growing opportunities in these markets.
Moreover, developing markets are having higher growth rate compared to the growth rate of the
developed countries. Thus, the business opportunities are more for the business organizations in
the developing countries.
Tesco is one of the leading chains of supermarkets based in the United Kingdom. They
are one of the major retailers in the European regions and have their market base in the Asian
region (www.tescoplc.co 2018). However, in the recent time, they are in the urgent need of
developing new markets to enhance the customer base. They are targeting Brazil and Vietnam as
new market to enter. Both these markets are showing huge market growth in the recent time.
However, prior to entering in these markets, it is important to determine the various aspects of
these markets. This essay will discuss about the industry and market attractiveness of these
countries. In addition, the distance between the United Kingdom and the host countries will also
be discussed. Recommended country and entry mode will also be discussed.

2MANAGEMENT – EMERGING MARKET
Overall attractiveness of Brazil
Figure: 1
Overview of Brazil
Source: (Www3.weforum.org 2018)
Figure: 2
Growth rate of Brazil
Source: (Www3.weforum.org 2018)

3MANAGEMENT – EMERGING MARKET
According to the Global Competitiveness Report, Brazil is having the ranking of 6 in
terms of domestic size. This is due to the reason that they are having the total population of 198.3
millions. Thus, Tesco will have huge market opportunities in the Brazilian market. Moreover, in
terms of the GDP, Brazil is having the ranking of 7 and GDP per capita currently stands at US$
11,311. Thus, economy is having favorable position in Brazil and it will help in having favorable
business environment for Tesco.
Figure: 3
Macro-environment of Brazil
Source: (Www3.weforum.org 2018)
According to global competitive index, Brazil stands at 38 in terms of country credit
rating. Thus, it will less risky affairs for Tesco to invest in this country. Moreover, Brazil is
having the ranking of 110 in terms of the inflation, which is quite favorable compared to some
other countries.

4MANAGEMENT – EMERGING MARKET
Figure: 4
Problematic factors for Brazil
Source: (Www3.weforum.org 2018)
However, there will have some negative factors that to be faced by Tesco in entering in
Brazil. The most problematic factor in Brazil will be the tax regulations. Tesco will face the
challenge of higher rate of tax and complex taxation process. In addition, inadequate supply of
infrastructure is also one of the major issues in Brazil. This is another area of concern for Tesco
in entering in Brazil.

5MANAGEMENT – EMERGING MARKET
Overall attractiveness of Vietnam
Figure: 5
Overview of Vietnam
Source: (Www3.weforum.org 2018)
Figure: 6
Economic growth of Vietnam
Source: (Www3.weforum.org 2018)

6MANAGEMENT – EMERGING MARKET
Vietnam is having less population compared to Brazil. Thus, the potential market size for
them will also be lower compared in Brazil. Moreover, the GDP per capita is also lower for
Vietnam compared to the Brazil. However, it is also should be noted that economy of Vietnam is
also growing at a positive rate.
Figure: 7
Macro environment of Vietnam
Source: (Www3.weforum.org 2018)
According to the reports, Vietnam is having credit ranking of 72 in terms of credit rating.
Thus, the investment in Vietnam will be mote risk affair for Tesco compared to investing in
Brazil. However, the ranking of inflation is similar between the two countries. In this case, Tesco
will find similar level of impact on both the countries.

7MANAGEMENT – EMERGING MARKET
Figure: 8
Problematic factors in Vietnam
Source: (Www3.weforum.org 2018)
According to the reports, the major issue that will be faced by Tesco in entering in
Vietnam is the access to the financing. Thus, they will face the challenge of garnering finance for
business operation in Vietnam. Another issue to be faced is the corruption. This will have serious
implications on the business operation of Tesco in Vietnam in the long run.
CAGE framework
This framework will help to identify the distance between the home and host county of
Tesco in terms of different elements. This is important due to the reason that the less will be the
distance between the home and host country, the more will be the business potentiality for the
business organizations.

8MANAGEMENT – EMERGING MARKET
Cultural distance
Figure: 9
Hofstede’s dimension of United Kingdom and Brazil
Source: (Hofstede Insights 2018)
From the above cultural analysis, it is seen that majority of the dimensions are having
more or less similar ratings. However, dimensions such as the power distance, individualism and
uncertainty avoidance are having larger differences (Dikova and Sahib 2013). Thus, inequality is
more in Brazil compared to the United Kingdom. In addition, Tesco should strongly adhere to
the social rules in Brazil compared in the United Kingdom. In terms of the languages, major
language of Brazil is Portuguese and the United Kingdom is having English as dominant

9MANAGEMENT – EMERGING MARKET
language (Beugelsdijk et al. 2014). Thus, gap is their between the two countries in terms of
language. However, English speaking population is rapidly increasing in Brazil reducing the gap.
Figure: 10
Hofstede’s dimension of the United Kingdom and Vietnam
Source: (Hofstede Insights 2018)
Cultural gap between the United Kingdom and Vietnam is more compared to the Brazil.
According to the above data, majority of the dimensions are having huge gap between the two
countries (Zhang 2013). Vietnam is more conservative compared to the United Kingdom. Thus,
the business approach should be different for Tesco in Vietnam. Majority of the population has
Vietnamese as their official language and number of English speaking population is also less
compared to Brazil.

10MANAGEMENT – EMERGING MARKET
Administrative distance
Brazil and Vietnam are having democratic government but the approach is different. This
is due to the reason that Brazil follows more fundamental and capitalist style of government,
while Vietnam is having communist style of government. In comparison to the government of
the United Kingdom, Brazilian administration is having fewer gaps compared to the Vietnam.
United Kingdom and Vietnam are having agreement of double taxation between them. On the
other hand, agreements between Brazil and the United Kingdom are more diverse and cover
more trading aspects (Zhou and Guillen 2015). Thus, the administrative gap between Brazil and
the United Kingdom is less compared to the United Kingdom and Vietnam.
Geographical distance
Brazil is located in Latin America and Vietnam is in the eastern Asian region. However,
the distance between the host countries and the United Kingdom is having less difference.
Distance between Brazil and the United Kingdom is 5,568 miles, while distance between
Vietnam and the United Kingdom is 6230 miles. Thus, the distance gap is not more. However,
for Tesco the distance to both the host countries is huge and time consuming (Burgoon,
Henderson and Wakslak 2013).
Economic distance
United Kingdom Vietnam Brazil
Economy (GDP) $2.565 trillion $214.02 billion $2.080 trillion
GDP growth 0.4 % 6.81 % 1.1 %

11MANAGEMENT – EMERGING MARKET
Economic gap is less between the United Kingdom and Brazil compared to the United
Kingdom and Vietnam.
Industry level attractiveness of Brazil
Figure: 11
Retail sales trend of Brazil
Source: (www.focus-economics.com 2018)
According to the reports, Brazil is growing through rough phase of retail sales mainly due
to the higher rate of unemployment and economic recession. This is causing dent in the retail
industry. However, from the starting of 2017, the market is rebounding and showing positive
growth after the steps taken by the government in attracting investments and employment
opportunities.