International Management: TESCO-Future Group JV Analysis Report

This report provides an in-depth analysis of a proposed joint venture between TESCO Plc from the UK and the Future Group from India, focusing on the Indian retail market. It explores the rationale for selecting India, highlighting its fast-growing market and the Future Group's established presence. The report outlines the industry of operations (retail), objectives of the partnership, and analyzes the internationalization process, considering cultural dimensions of both organizations. It examines the advantages and disadvantages of the joint venture using the PESTEL framework, addresses governance issues, and discusses the importance of understanding partner cultures for successful implementation. The report applies internationalization and cultural management theories to the joint venture, concluding with an overview of the business prospects, challenges, and strategic considerations for the partnership's success in the Indian market.

Running head: INTERNATIONAL MANAGEMENT
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Name of the Student
Name of the University
Author Note

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Table of Contents
Introduction................................................................................................................................2
Rationale for the selected country..............................................................................................2
Industry of operations of the two organizations.........................................................................3
Objectives of the partnership.....................................................................................................4
Analysis of the internationalization process..............................................................................5
Cultural dimensions of the organizations in operational perspectives.......................................6
Advantages and disadvantages of the Joint Venture..................................................................7
Issues around the governance.....................................................................................................8
Understanding partner cultures and implementation of operations...........................................9
Application of internationalization and cultural management theories to the JV....................10
Conclusion................................................................................................................................11
References................................................................................................................................12

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Introduction
The report is focused on the analysis and evaluation of the business prospects of a
joint venture that would form as a result of partnership between two companies from two
different countries. Cultural aspects are very important in determining the internationalization
of businesses and cross cultural management. The chosen organizations for the report are
TESCO Plc from the UK, representing the high context culture and the Future Group from
India, representing the low context culture. Tesco is a retail marketing chain form the UK and
the Future Group is an Indian conglomerate operating in the industries of insurance, logistics,
media and retailing. The Joint Venture would be started in the Indian market. The report
would discuss the various cultural dimensions that are present concerning the starting of the
new Joint Venture. The objectives of the partnership are stated. Additionally, the cultural
factors that affect the operations of the two organizations and their respective markets are
discussed. The feasibility of business concerning the various advantages and disadvantages
that can be faced by the Joint venture is discussed. The market choices become important in
determining the business potential of Joint Ventures. The different cultural, physical,
economic and social factors affecting the market as well as the two organizations need to be
discussed much importantly. The cultures of the two organizations need to be evaluated to
understand their potential for supporting the Joint Venture. TESCO has been one of the best
performing retail chain for a long time in the UK. Similarly, The Future group has been
effective in establishing some effectively functioning retail chains across India.
Rationale for the selected country
The selected country is India, where the future group already operates its business.
The market is one of the fastest growing markets in the world. Tesco Plc and the Future

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group would get into a joint venture to open an exclusive retail market for food items in
India. The Future group has significant expertise in the market due to their long standing
presence in the retail market of the country. The retail sector of the country is deemed to be
one of the most dynamic sectors in the world. It is expected that the total consumption
expenditure of the country would reach nearly 3600 billion US dollars in 2020 (India and
India 2020). The market was chosen as it can provide a strong foundation for a food only
joint venture business. Moreover, the high cultural context of TESCO can be combined with
the low cultural context of the Future Group to develop a strongly balanced growth structure
(About Us | The Future Group Company Profile 2020). In this case the market of India can
provide an effective foundation for the development of the joint venture. The knowledge of
Tesco can benefit the Future Group. In turn the future group can guide the market operations
of Tesco. The Indian market is completely new for the Tesco Company. In this regards, the
organization can reap better rewards by promoting its brand value in India. The fast growth of
the Indian retail sector provides more value to the developmental needs of the new Joint
Venture. There are various social reasons for the selection of India as one of the most
important markets. This is because India has a growing number of urban middle class. There
are more people that are moving into apartments in urban areas.
Industry of operations of the two organizations
The industry that the Joint Venture would operate in is the retail industry. The retail
industry of the county is witnessing rapid development over the course of a few years. The
total consumption expenditure of the country would reach nearly 3600 billion US dollars in
2020. It is important to note here that the JV would be in regards to a food only retail store
chain. The Future Group from India and TESCO from the UK are both familiar with the
different aspects that are connected with the retail business for a long time. This gives them

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both fair amount of expertise in the retail sector. This would also make the development
process easier. Specified retail food stores are newly emerging in India. This industry
provides significant growth and profitability potential to both the organizations that are
available. The demand for retail space is expected to increase at a rate of 81%. The retail
industry of the country is worth 950 billion US Dollars with regards to the market size. It has
a CAGR of 13%. There is also fair amount of foreign direct in the retail sector of the
country. In 2018, the FDI was around USD 180.18 million. The retail food store would have
greater chances of success as food and beverage form one of the largest chunks of the sales
items. The Future Group is the parent body of Big Bazaar, which is one of the largest retail
stores in the country. This industry has been selected as both the involved organizations
would have ample scope for applying their gained market expertise. The industry expertise of
both the organization can provide better scope for strategic development of the JV.
Objectives of the partnership
The partnership would be focused towards harnessing each other’s expertise in
gaining essential momentum in the retail market of India. Internationalization would be an
important long term objective for the Joint Venture. Another objective of the partnership
would be to officially launch TESCO in the Indian market. The partnership between the two
organizations is also being made to acquire at least 20% of the market share of the retail
grocery market of the country. Another major objective of the partnership is to develop an
innovative food retail chain that can deliver products that are normally much difficult to get
or the larger portion of the customer base. Moving forward a major objective is to open more
than 20 stores in at least 3 major Indian cities within 18 months. TESCO has the objective of
introducing some of the most important flagship food items to the Indian customers. This
would help the company to develop a market base in the Indian market. Moreover, one of the

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major objective is to create a better inventory management system that can help the JV to
develop a stronger supply chain function. The most important areas of the value chain that the
JV would focus on enhancing would be the marketing, distribution and production.
Analysis of the internationalization process
There are various aspects that are connected with the internationalization process of
the organization. The culture of the UK consumers are more inclined towards buying
commodities from the supermarkets. In India, the grocery stores and grocery markets are
more important for the locals for buying commodities. Although in recent times there has
been a sharp shit towards the supermarkets, especially in urban and sub-urban areas. There is
a rising number of nuclear families that are migrating to rapidly developing urban areas from
all parts of India. These families always look for convenient ways to get their groceries and
everyday foods items. The new Joint Venture would be aimed at these people.
In the meso level, the industry and sector culture need to be given much importance.
The Indian retail industry, much like the retail industry in the UK operates through providing
various discounts and sales at different times of the year. In this case an important
differentiating factor is that the Indian retail markets rely on various festivals and other
traditional sales periods to provide special discounts. In this case, the culture of India can be
said to be a high context culture. There is more collectivism, social importance for knowledge
of people, interpretation of the surrounding elements of messages and high complexity of
communication. Indian organization structures are based on collectivism, high power distance
and masculinity. These aspects need to be kept in mind by Tesco as they plan to undertake
the venture in India. More emphasis needs to be given towards the recruitment of the locals.
This would also make sure that there is more customer engagement across the various stores.
In essence, the Future group is more inclined towards catering to the specific needs of their

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Indian customer base. Tesco would have to integrate the Indian cultural values and Indian
food habits in the Joint Venture.
Cultural dimensions of the organizations in operational perspectives
The operations at Tesco are based on customer engagement and product diversity in
the UK. Tesco has now become a well revered national brand in the UK. The company styles
itself as a 100% employee owned organization. It provides most value to its employees and
considers employee relations to be one of its most important functionalities. One of the major
objectives of Tesco is to nurture the best possible environment for the workplace. A positive
atmosphere is always given more importance in the company. The organization maintains
efficient levels of communication with the employees. Hence, employees have been known to
provide effective performances across the various stores that they operate across the UK. The
organizational culture is organic. All the departments are specialized in their respective fields.
The organization pays much importance to diversity and diversity management. The idea is to
optimize the functional abilities of all the departments and align them with the organizational
growth objectives.
The Future group operates various retail stores across India. The company has a
mechanistic organizational culture. The management of the organization is highly centralized.
However, the organization does pay attention towards employee relationships. There are
various incentives and performance bonuses offered to the employees to keep pace with the
production requirements. The emphasis is on developing the prospects for customer reach.
The group runs one of the largest supermarket chains in India known as the Bigbazar (About
Us | The Future Group Company Profile 2020). In accordance with the Hofstede’s cultural
dimensions, there is higher levels of collectivism, high power distance, masculinity, low
uncertainty avoidance and restraint (Favaretto et al. 2016). The employee management

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functions of the organization falters at times. However, newer methods of employee
management and employee relationship development are being devised.
Advantages and disadvantages of the Joint Venture
The PESTEL framework can be utilized for understanding the areas of advantages and
disadvantages for the Joint Venture.
Political- India presently has favourable retail sector laws and regulations that can be
advantageous for the Joint Venture. The government is also keen on increasing FDIs in all
sectors including retail.
Economic- Economically there can be certain disadvantages for the Joint Venture. Currently,
the country has experienced a significant fall in the GDP growth rate which can affect the
profitability prospects of the venture.
Social- Socially, the consumers want to save more. This can be a disadvantage as the Joint
venture might not get hold of the market effectively enough to create a stronger foundation
for the business. However, the market is still growing and the organization would need to
invest judiciously.
Technological- The urban areas of India have witnessed rapid technological growth over the
years. The metro cities have been positively affected by technological development. The
inventory management and transport oriented factors can be greatly developed as per the
requirements of the Joint Venture.
Environmental- There are certain environmental concerns in India due to the increase in
pollution levels of many large cities. The usage of plastic as a cheap packaging alternative

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have come under the scrutiny of the authorities. The JV would need to consider the
environmental factors judiciously.
Legal- There are no specific laws that govern the retail sector of the country. However, there
are important regulations that governs the sector, like the contract laws, consumer protection
laws, intellectual property laws etc. The JV would need to judiciously consider the important
aspects that are concerned with partnerships.
Hence, it can be said that the major disadvantages of the JV can arise due to
economic, social and environmental factors. It is important that the planning process if
effectively conducted to ensure that all the advantages and disadvantages are taken into
consideration.
Issues around the governance
Governance becomes an important factor in determining the effectiveness of the Joint
Venture. Corporate governance means the combination of processes, rules and laws that help
in the operation of businesses. In this case the Joint Venture would need to synthesize the
organizational governance aspects that are closely connected with the development of the
food retail store. The governance of the new Joint Venture would need to be kept independent
of the two organizations. There needs to be a more organic organizational culture that is
followed. It becomes important that an operations head is selected to lead the Joint Venture
firm. In order to develop a smoother management framework, the inventory management
efficiency of Tesco needs to be aligned with the workforce providing capabilities of the
Future group. The Joint Venture food retail store needs to have a separate department for
delivery of food items.

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One of the major issue concerning corporate governance is the leadership that is to be
utilized. The leadership factor is important as either Tesco or Future needs to influence the
leadership. The leadership styles that are implemented in these two organizations are very
much different from each other. It is more advisable that a transformational leadership is
implemented in the Joint Venture. Stakeholder management becomes another significant
challenge. Presently, the stakeholders of the two organizations are different. The customers
are unaware of the products that are manufactured by Tesco. They are more acquainted with
the Indian food brands and products. The suppliers need to be made more aware of the
operational factors that would guide the Joint Venture. Tesco and The Future group need to
work in effective coordination. This would help both the organizations to perform better in
terms of maintaining operational efficiency. The government regulations need to be given
more importance. The culture of the employees need to be considered much importantly.
Understanding partner cultures and implementation of operations
Cultural understanding would be the pillar upon which the Joint Venture needs to be
established. Tesco from the UK and the Future group from India are part of two very
different cultural background. More importance need to be provided to some of the crucial
aspects that can determine better cultural understandings. Communication is a key factor that
would need to be considered. Proper cross cultural communicational levels need to be
established across the organizational hierarchies. Cultural diversity is another important
aspect. Proper diversity management functions should be established. The consumer base that
forms the essential customer base for Tesco in the UK is very different from the customers of
India. There is a need to develop proper understanding of the food habits of the people of
India. This is because the JV would be established in India and cater to the needs of the local
populations.

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In consideration of the same it should be kept in mind that India has a larger number
of vegetarians than the UK. Indians rely much more on the availability of vegetables, lentils
and other pulses and cereals. There is a need to develop proper inventory functions for these
things as they would need to be important parts of the product offerings. The cultural values
are important to understand for both Tesco and the Future group. It should be considered that
the dairy products that are used in India are different from those that are used in the UK. For
example- In India, a special type of cheese known as Paneer is more popular than any other
types of sour dairy products. However, it also needs to be considered that the market for
western cheeses are also growing in India. In regard to the same the JV can be used to market
some of the trademark cheeses that are provided by the food department of Tesco. Another
example can be given of Ghee which is a dairy oriented product that is very important in
Indian as well as other sub-continental households. The cultural inclinations of the Indian
consumers are different to that of the UK based consumers. This needs to be provided much
importance even in the development of marketing and promotions.
Application of internationalization and cultural management theories to
the JV
The applications of certain important cultural management and internationalization
theories are important in terms of proceeding with the Joint Venture. Cross cultural
management theory concerns the inclusiveness of management regarding the cultural aspects
of the nations of the subsidiaries (Tjosvold 2017). The theory states that organizations should
adopt to the cultural types of the country where they operate. The local culture needs to be
embraced in order to ensure the feasibility of management structures and mechanisms. In
consideration of the same Tesco should coordinate with the Future Group to develop a better
Joint Venture business. It should utilize the market expertise that the Future group has in

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India to develop its business based on effective cross-cultural management. Another
important factor is the recruitment of people from the host country to optimize the
performance potential of the management system (Bird and Mendenhall 2016).
Internationalization theories also become important in regards to guiding the
performance prospects of the new joint venture. The theories of internationalization focus on
the imperfections that are present in the intermediate product markets. In consideration of the
same theory research and development become crucial for the setting up of businesses in
newer markets (Alexander and Joe 2019). Tesco needs to proceed carefully and only when it
perceives that the benefits that can be provided by the Indian market exceed the costs that
they would incur in developing the JV. In doing so, the organization would ensure better
productivity.
Conclusion
The implications that can be derived from the entire analysis point towards the fact
that the Joint Venture business between Tesco and the Future group. It is important to
consider the expertise of the Future group in the Indian market. This would make the
partnership easier. Smoother flow of information should be present between the two
organizations. The business plan that was provided through the study would be effective in
ensuring the effective productivity of the Joint Venture. The partnership of the two countries,
as found through the analysis, would need to rest of effective cross cultural management and
judicious utilization of the internationalization process.

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References
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17 February 2020).
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