Global Business Expansion: Tesco's Vietnam Market Entry Challenges

This report explores Tesco's strategic plan to enter the Vietnamese market, highlighting the managerial and operational challenges the company may face. These challenges include commercial risks, organizational structure issues, cultural differences, currency fluctuations, foreign taxation, country-specific risks, and potential social and political instability. The proposed market entry plan involves a strategic alliance with Big C, a hypermarket chain in Vietnam, to gain market insights. The initial target market focuses on urban consumers in Ho Chi Minh City, with plans to expand to other major cities. A market penetration pricing strategy will be used to attract customers initially. The report concludes by emphasizing the importance of understanding these challenges and implementing a well-defined market entry plan for Tesco's success in Vietnam. Desklib provides access to similar reports and study tools for students.

Global business

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Global business...........................................................................................................................3
1. The managerial and Operational challenges that Tesco can face in international business....3
2. Creation of a plan to enter into Vietnam.................................................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................9

INTRODUCTION
One of the main idea of growth of business expansion and it included starting a business
in an area or country where it does not operates. This report will highlight Tesco s entry into the
new market of Vietnam. With this the concept of global business is highlighted so that the Board
of Directors can understand this report on successful planning. The report will also highlight the
following two important areas of challenges faced in international markets in managing and
operating business. Also, a plan is executed to enter the Vietnam 's market place.
MAIN BODY
Global business
The concept of global business is defined as international trade and commerce where the
business enters to a global market place to sale its product and services to the consumers. At the
international marketplace there are many participants form different nation who exchanges goods
over grate distances and enters into business relationships. This phenomenon is referred as global
business.
1. The managerial and Operational challenges that Tesco can face in international business
With deciding to enter into the markets of Vietnam, Tesco will face different challenge in
course of establishment of the supermarket as well as conducting the business operation in
Vietnam, this includes
Commercial risk: one the major challenges that Tesco's managers can face is related
with establishing a plan of business expansion in Vietnam and effective plan leads to the launch
of Tesco in Vietnam failures which include wrong detection of expansion strategies, target
market and consumers. Tesco is also required to establish global competitors viability where
exact level of competition it can face in Vietnam is required to determine otherwise with tough
competition it will become difficult for Tesco to survive in long run in Vietnam.
Organizational structure: is another issues that is stand before Tesco, as working
culture of each country is different as per the Vietnamese culture the organization structure is to
be decides with integrating with working polices of Tesco and this present an issue of creation of
effective organisational structure of Tesco for successfully operating in Vietnam.
Control in the organization process: the organization faces the challenges related with
cultural difference and this creates problem in integration of the cross cultural personnels which
can hamper the smooth operator of business. The possibility of negative culture and politics can
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be as issues within organization. While operating the activities of business, Tesco can face the
issues of control on the cost (fixed and variable). With more cost the expenses of organization
can rise which in turn enhance the requirement of working capital which can lead to
mismanagement of funding and effect profits of business.
Weak partner: another challenge that Tesco can face is related with selection of a wrong
partner as an expansion policy. A weak partner can prove to be burden over business instead of
assisting Tesco in understanding the business culture, marketplace, segment and other business
related features.
Timing of entry: The management of Tesco is presented with problem of choosing right
time on which business must be launched in the Vietnamese market place. This is crucial under
the expansion plan as a wrong timing can give Tesco supermarket a weaker response and this can
directly effect its sales in present and future.
Currency: of each nation in which Tesco operates is different and the currency valuation
also differs and prices are to be set in local currency that is Vietnamese dong (Markman and
et.al., 2016). Conversion of dong in dollar or pound can give a lower values which can effect the
profitability of the over all Tesco group. So a fall in currency prices can be fetal for the Tesco.
Foreign taxation: Taxation polices of each nation is different and for some nations it can
be similar but the taxation police of Vietnam is totally different as that of UK (Vietnam's
dangerous economic downturn, 2019). This requires appointment of legal peroneal and a
complete understanding which take time and money as well. As a wrong understanding can
Tesco to face legal consequences.
Country risk: one of the most important challenge which can be faced by Tesco is
related with national government legal practises and policy and their implication on Tesco's
operations. This includes intervention of the government regarding legal abidance and legal
matters which can hamper the establishment and smooth running of business.
The trade policies of Protectionism to protect the demotic trades and business of Vietnam
makes it difficult to enter the Vietnamese markets because there are imposition of various
barriers to trade and investment by foreign businesses. This make legal compliance more costly
and lengthy and a small default can lead to filature of the expansion plan.
Bureaucracy challenges can be faced by Tesco, which includes : Red tape a complex
procedures and rules that bureaucrats follow in completing their tasks. It gives rise to Conflict
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when the goals of various bureaucratic agencies just don't match up with Tesco and they end up
working at cross purposes.
Vietnam is characterised by corruption and this can lead Tesco in facing the issues rated
with getting legal no permission without any bribery which indicate increase the cost of
expansion (Planning for International Market Entry, 2019). Also, this It can result in
administrative delay as under corrupt government system it is difficult to get the permission
easily.
The country of the expansion, Vietnam have undergone a major economic crisis and
mismanagement at all levels which have brought the country to a ruin (Brannen, Piekkari and
Tietze, 2017). Though the condition in present times are better but fact is to kept in mid which is
a major one for Tesco in order to protect itself for sustainable success.
Social and political instability: With opening Tesco supermarkets in Vietnam one of the
importance fact is to determine is acceptability of the public. Without understanding taste,
preference and demand of consumes of Vietnam, Tesco at no cost can operate successfully in
Vietnam. Here the business faces the issues related with detection of taste, demand and
preference of Vietnamese consumers.
Similarly, politic changes, faster alteration of government, their polices can lead the
business to face issues to survival. Tesco can face issues related with taking government
approval and legal compliances.
Cultural differences: due to working culture differences of UK and Vietnam can result
in delayed formation and finalization of business contract (A 5 Step Primer for Entering an
International Market, 2019). Also, Tesco can face issues of entering open ended contract with
employee as a practice their which is not the organizational practice of Tesco.
All of the above are the managerial and operational challenges that Tesco can face under
the expansion plan of starting and running successfully, the Tesco supermarket in Vietnam.
2. Creation of a plan to enter into Vietnam
For entering into them markets of Vietnam, the marketing mangers are required to
execute a plan over how to enter them markets of Vietnam and how to start operating there. This
basically includes following:
Market strategy: Tesco will enter the Market of Vietnam through entering into strategic
alliance with the Big c which is hypermarket chain in Vietnam. The reason behind selection of
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this strategy is that it will provide Tesco an idea about marketplace, needs n and demand of
consumer with their taste and preference.
Potential business partners: Tesco will enter into strategic alliance with Big C
hypermarket chain of Vietnam, and will continues to opera under name of Tesco with giving Big
C a profit sharing.
Business strategies: As per the legal requirement and policies of Vietnamese
government Tesco will frame the organizational policies accordingly (Lasserre, 2017). This
includes provisions related with salary and wages to employees, legal abidance, taxation polices,
Health and safety measures and others.
Target market: in staring only one supermarket will be opened in Vietnam which will
be opened in Ho CHI MINH city. With successful operation in this city 5 other Tesco
supermarkets will be open in other leading cities of Vietnam namely including: Da Nang, Hanoi,
Hoi An, Nha Trang and Mui Ne and Phan Thiet.
Target consumers: for the Tesco will be those who are demand of easy and faster
shopping experience of smart shopping in lesser time (10 Key Steps To Expanding Your Business
Globally, 2019). This means the people under jobs who are under employment is the target
consumer of Tesco, so according good and commodities will be introduces in Vietnam.
Pricing strategy: for entering into the markets of Vietnam Tesco have decided to use
them market penetration strategy where all goods and services will be introduces with lower
prices and gradually with establishing its market positions rates will be increased.
CONCLUSION
From above report it can be stated that to enter into Vietnam, Tesco has been required to
determined the managerial and operational challenges that it can face while setting up the
business in Vietnam. The challenges have been identifies as legal and policy requirement, risks
cultural difference, weak partners, high competition, the business strategies etc. In the plan to
enter market of Vietnam, the managers have identified the marketing strategies to enter the
marketplace, along with detection of potential business partners, market segment, target
consumers and pricing policies.
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REFERENCES
Books and journals
Brannen, M. Y., Piekkari, R. and Tietze, S., 2017. The multifaceted role of language in
international business: Unpacking the forms, functions and features of a critical challenge
to MNC theory and performance. In Language in international business(pp. 139-162).
Palgrave Macmillan, Cham.
Lasserre, P., 2017. Global strategic management. Macmillan International Higher Education.
Markman, G .D and et.al., 2016. Entrepreneurship as a platform for pursuing multiple goals: A
special issue on sustainability, ethics, and entrepreneurship. Journal of Management
Studies. 53(5). pp.673-694.
Online
10 Key Steps To Expanding Your Business Globally. 2019. [online]. Available
through :<https://www.forbes.com/sites/allbusiness/2015/03/04/10-key-steps-to-expanding-your-
business-globally/#52d997b93803>.
A 5 Step Primer for Entering an International Market. 2019. [online]. Available
through :<https://www.forbes.com/sites/yec/2011/09/22/a-5-step-primer-for-entering-an-
international-market/#3bd9989f50a0>
Planning for International Market Entry. 2019. [online]. Available through
:<https://fittfortrade.com/planning-international-market-entry>.
Vietnam's dangerous economic downturn. 2019. [online]. Available through
:<https://www.dw.com/en/vietnams-dangerous-economic-downturn/a-16406306-0>.
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