Analyzing TESCO's Expansion Strategy in Hungary's Retail Sector

This report analyzes TESCO's expansion strategy in Hungary, focusing on the business environment and market dynamics. The introduction provides an overview of TESCO, a British multinational retailer, and its objectives for Foreign Direct Investment (FDI) in Hungary. The main body delves into the background of TESCO, its global presence, and its operations. It then provides a detailed PESTLE analysis of Hungary, examining political, economic, social, technological, legal, and environmental factors relevant to TESCO's business. Finally, the report applies Porter's Five Forces model to assess the competitive landscape within the Hungarian retail sector, analyzing the bargaining power of buyers and suppliers. The report concludes by summarizing key findings and insights into TESCO's potential for success in the Hungarian market.

Business Organisation and
Environment in a Global
Context

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1) Background of TESCO...........................................................................................................1
2) Background information on the business environment in Hungary.......................................2
3) Analysis of business scenario.................................................................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................8

INTRODUCTION
Business is a word which relates to producing, selling, buying products and services to
make profit and give customers satisfaction (Chiu, 2018). It is legal body which follow
government's law & regulations. TESCO is a retail organization of United Kingdom, which
delivers online groceries, banking or mobile services. Company planning for its expansion
through FDI in Hungary to cover more international market shares. Foreign Direct Investment is
an investment process made for business expansion in other countries. Hungary’s) political, legal
or environmental factors are beneficial for retail industry. Report will explain background of
TESCO organization. After this it will describe Hungary background with the use of PESTLE
and use the Porter's Five Forces Model to analysis business situation in other country.
MAIN BODY
1) Background of TESCO-
TESCO is a British multinational groceries and general merchandise online retailer
organization. Its headquarters located in Hertfordshire, United Kingdom. It is the 3rd largest retail
company measured by gross revenue or 9th largest organization on the behalf of annual revenues
in whole world. Organization has shops in seven Asian countries and with market share
approximate 28.4%, and market leader of groceries items in United Kingdom, Hungary, Ireland
or Thailand. It was founded in 1919 as a group of market stalls. TESCO name first appeared in
1924 with combined initial first two letters of owner surname or 1st shop opened in 1931(Barnet).
Company is listed on the London Stock Exchange (Cramer, 2017). It had market capitalization of
around 18.1 billion and on 22 April 2015, it was 28th largest organization on London Stock
Exchange.
The UK operations of company is the biggest within group with over 3300 retail stores
and approx. 3,00,000 employees. In 2001 July, TESCO get became involved in online groceries
retailing in United State and has by obtained 35% stake in Grocery. June 2003 2003, it purchased
the C two-network in Japan and acquired majority stake in Turkish supermarket. Organization
has large diversification at worldwide, which show its growth. The first self-service shop of
company was established in St Albans, Hertfordshire and 1st supermarket in Maldon in 1956. It
has built out a good or cheap supplier system & this way can sure good prices. Its first brand
which has been settled in the beginning of 2000 and continuously working till now. Organization
has started expansion in Asia or stores diversification which result in of opening of small outlet
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like Tesco Express, Tesco Metro those are famous in the city. It also has influential petrol
retailing business or predominantly presented within supermarket or hypermarket. According to
Thomas their financial services are provided exist through the Tesco personal finance or online
delivery services.
The main objective of TESCO is will be to maximize profit or increase shareholders
value. It introduced a loyal and card branded club card in 1995 and after this started offering
internet shopping services. On 21 March 1997, organization announced purchase of retail arm of
British food which consisted of Quinnsworth, crazy prices chains in other countries like Ireland
(Del Giudice, Carayannis and Maggioni, 2017). In September 2013, it launches first 7” table
computer, called Hudl. January 2015, Lewis who was the chairman of organization made an
announcement to close company's head branch in Chestnut and 43 those shops in future which
are not giving profit and cancelled opening of 49 new supermarketsupermarkets. It also
confirmed the sales of Blink box on demand video services and fixed line or broadband
connection Talk Talk. In June 2017, It operates large number of in-shop cafe, but began to
introduce new retro in its own shops from 2013.
2) Background information on the business environment in Hungary-
Hungary is a landlocked Central Europe country, 16th largest in Europe cover 93,030
km2. Since 2004, it is member of European Union. Its climate is temperate being impacted by
three climate climates zones- oceanic, continental or Mediterranean. Country's major industries
are mining, metallurgy, agriculture, chemicals, construction, motor vehicle manufacturing, and
textiles. It collects profit from the other growing areas like retail services, telecommunication,
finance, pharmaceutical industry etc. In Hungary retail business has large scope of growth.
Corporate Social Responsibility has become important in country after adhesion to European
Union. Ecological issues are less than in the other countries of Central Europe (Falkner, 2017). It
has a liberal business environment compare to other countries. Its better trade infrastructure
involve finance, legal environment, are good for business perspective. Its GDP grew by an
average of more than 4% after 1990s. Hungary's external sector is dominated by other trading
activities which which are related to machinery or transport equipment.
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PESTLE analysis-
Hungary is 16th largest European country which has good business environment for foreign
investors.
Political factor- The President is Chief of state and Prime Minister is head of
government. Hungarian politics is unicameral or country is democracy. Its political environment
provides all facilities to operate business. The country constitution draws down governments’
fundamental body structure. TESCO want to expand their business in Hungary through foreign
direct investment. Before established organization in country company has to do research on
political issues. For increase the foreign investment government encourage trade and provide all
require resources or facilities. TESCO is a retail organization of United Kingdom & country's
political environment has good business culture. Its tax policy, healthy or safe commercial
background invites others. High revenue, low taxation rate, highly available resources attracts
foreign investors to do their business in Hungary. Annual return at high scale, nominal tax policy
is the motivational factors to run business (Grayson and Hodges, 2017). Its political environment
welcomewelcomes new business entity, this the reason that TESCO retail store making plan to
expansion in Hungary. Government policies give warm welcome to other countries that they
operate business at their own conditions.
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Source: (Focus on Economic, 2016)
Economic factors- Hungary is an OECD high income mixed economic country with highly
human development or qualified labour force with 13th lowest income inequality at worldwide. It
has is an export oriented market environment with heavy foreign trade. has This is on 49th
position in the world in term of GDP, which attract outside business investors to expand their
organization here. TESCO has great opportunity to increase productivity and make more profit.
Hungary has good economic condition in retail sector, so company export its products in
different areas. Country transport facility is helpful in import export of products and services for
Tesco. Employment available at minimum wages is indirectly company's profit. Country
continues to be one of the leading nations of Europe who attract foreign direct investment, that is
the reason that organization expanding business through Foreign Direct Investment. Its economic
condition is the attracting factor for local or international markets. It is the largest electronic
manufacture in Eastern Europe and good in mobile technology. This is part of European single
market which presents 508 million users.
Social factor- Compare to other OECD countries, Hungary has a mixed social culture
across the different dimensions. Hungary is one of the lowest levels in net household disposable
income and has average earnings. It suffers from one of the highest job strain in OECD, while
long-term unemployment. Labour market is insecure and employment rate are average. TESCO
expanding their business in Hungary, where it has good chance for retail. It can provide its
products and services at reasonable price. Because of unemployment company easilycan easily
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Illustration 1: Ease of doing business in Hungary

appoint local employees on low salary package. Its social culture has great opportunities for
business to make more profitability. Good social level is mark of healthy or well educated
society. Hungary culture give chance to increase numbers of customers or encourage company to
spread their products at different places.
Technological factor- Research & development calculated for around 1.16% of GDP in
2010. Technical sector experienced improvements changes over the last few year. Internet usage,
mobile user was increasing continuously. Hungary is an attractive place for highly technological
industries (Kirton and Trebilcock, 2017). TESCO use this factor which is more profitable for it.
In the midterm, it is expected that driven by the technical changes more companies outsource
their IT cultures to emerging technological market like Hungary. Tesco easily can gain smart
profit margin by its online services which provide mobile, internet services etc. With the use of
improved technical toolstools, it can manufacture more advance products according to
customers’ requirements. Tesco retail outlet uses the latest technologies to maintain their
business in Hungary. Its highly improved technical facilities provide the newest technologies to
deliver and manufacture products and services. Government give support in research and
development for the new techniques.
Environmental factor- Rapid industrialization in Hungary significantly reason of
environmental problems like air, water, soil pollution. Auto mobiles or electric power plants
emissions increase the air pollution. Certain percentage of country waterways, building suffering
from acid rain. It has their own environmental rules. Insufficient treated sewage also gives their
contribution in water pollution. Tesco has to identify those factors whichwho can damage
country's environment. Company services effectedare effected by climatic changes,
transportation law, fuel prices, regulations against water or power supply. Organization will be
accountable for all climate losses. They have earned more productivity without ruin country
dignity.
Legal factor- The legal changes made by Hungary government are good for protection of
law or human rights (Lasserre, 2017). Tesco also has to protect citizens’ rights and provides
those products and services which follow government law. As a part of European unit country
ethical codes bounded to deliver goods those do not break conditions of Community
Legislations. The Hungarian Republic do not want that other country business protect people
rights and never judge them on the basis of social status, skin complex, gender, language,
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political opinion, fortune etc. Tesco has to follow government law during business expansion.
Company's stores have to fulfil employment rules and regulations, health & security, patent law
to accomplish goals in Hungary.
3) Analysis of business scenario-
Porter five forces model is analysis tool that is used for for businessanalysing business
conditions. It is useful to evaluate macro or micro environment. This equipment is helpful to
understand the possibilities of business exist competitive market situation & future conditions.
The model is used to analyse competitive atmosphere in terms of five forces whichmake impact
have impact on organization's profitability or influence strategy. This include three forces from
horizontal competition, the threat of substitute goods and services, threat from competitive rivals,
new entrants, two forces from vertical side that is bargaining power of suppliers and buyers.
Bargaining power of buyers- In retail sector accepted brands are prominent between few
of the best industry players. Customers develop product preference because each organization
brands are differentiated, caring the usersuser’s requirements. Goods and services lines are
extensive they need to be knowledgeable about differences among products which fulfil their
requirements and desires. Tesco has to produce such products and services whichthose satisfies
ssatisfied customerscustomers’ needs. They do not have much bargaining power in retail
industry (Leipziger, 2017). It is quite difficult to bargain in stores & have top purchase at fix
prices. Organization provides goods & services aton reasonable cost to attract user’s loyalty or
increase number of seals. It doesn't want to lose any single buyer at any worth. Hungary buyer
market is a large or it is a chance for Tesco to attract cover more consumers.
Bargaining power of suppliers- The needs of firm in retail industry are very certain and
it is competent in context of competitive in delivering innovative innovating or incomparable
goods & services. The high profile companies that deliver outdoor products and services not only
for suppliers who practice sustainability but to gain complete profit from market. Retailers are
tried to spread their relations with suppliers. Buyers bargaining power of suppliers is intense just
because of size or concentration of the biggest retailers, impact their power or sustain
customerscustomers’ numbers, they have to manufacture differentiate & heavy brands products.
Tesco also a retail company which who tries to produce branded goods to reduce power of
suppliers. In Hungary new supplier may not find entry into retail sector. Providing competence,
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reliability, ethics or sustainability is valuable that is the reason of long time sustainability in this
retail industry.
Threat of new entrants- The threat of new entrants in this industry is fairly low. Many
top players have become so reputable via their brand recognition with produce qualitative
products & services or reduce the high market risk through the effective strategies. Malls,
shopping complex represent majority of individual retailers. Tesco retail stores can earn more
profit in Hungary because of its market value at worldwide (Morden, 2017). In Hungary new
entrants will like have a very difficult time replicating those companies’ initiatives and manage
themanaging the balance between these market fields, so forcefully make industry successful.
Most of top branded products players have established their stores through green initiatives,
society foundations, innovation, research & development to decrease risk of new competitors and
getting profit from such organizations.
Threat from substitutes- Deciphering the threat from substitute products and services is a
difficult to determine in retail sector, it depends on customers. While few users may focus on low
cost with care of quality, many consumers focus on high cost products (Schaltegger and Burritt,
2017). There are indeed low price brands of much lower quality, but it is likely Tesco will not
find the same users within these two levels of brands. This makes the threat of substitute
relatively low, but completely dismissible. Hungary is a developing and growing country. Every
organization wants to expand their business here. Tesco plans spread its store in Hungary but
during expansion company has to face threat from substitute. If close products are available in
the marketmarket, then it increases chances of users move to others.
Competitive rivalry- As above description the players in the retail sector have established
themselves through the launched new qualitative products in market. Environmental situations
are increasingly changing the requirements out of customers. Tesco will have to face big
competition during expansion in Hungary (Murray, Skene and Haynes, 2017). Huge competition
in market decreases its effectiveness. Buyer or supplier both are responsible for increasing
competition in market. They must constantly be looking to maintain existing customers, reel in
new ones and win over the infrequent buyers.
Porters 5 Forces model analysis the business condition in the competitive market of retail
industry. This industry not only has potential to grow, but sore in profit in firm by offer the
different diversifying products and services at minimum price.
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CONCLUSION
Report explained different business situation in market which can arise for Tesco retail
outlets during the time of expansion in Hungary. Its working environment and high social life
style is good for foreign investors Local people are highly qualified and maintain top living class
standard. Government rules & regulations are easy for new entrants. Country provides a safe,
healthy working culture to local employees and foreigner employers. Hungary has good
economic background and that is the reason others want to operate their business from here.
External factors like political, economic, technological, legal, environmental etc. have make
impact on organization. These all reduce productivity or changes in these component leads to
increase in risk in market.
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REFERENCES
Books and Journals
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Cramer, J., 2017. Corporate Social Responsibility and Globalisation: an action plan for
business. Routledge.
Del Giudice, M., Carayannis, E.G. and Maggioni, V., 2017. Global knowledge intensive
enterprises and international technology transfer: emerging perspectives from a quadruple
helix environment. The Journal of Technology Transfer, 42(2), pp.229-235.
Falkner, R., 2017. Business power and conflict in international environmental politics. Springer.
Grayson, D. and Hodges, A., 2017. Corporate social opportunity!: Seven steps to make
corporate social responsibility work for your business. Routledge.
Kirton, J.J. and Trebilcock, M.J., 2017. Hard choices, soft law: Voluntary standards in global
trade, environment and social governance. Routledge.
Lasserre, P., 2017. Global strategic management. Macmillan International Higher Education.
Leipziger, D., 2017. The corporate responsibility code book. Routledge.
Morden, T., 2017. Principles of management. Routledge.
Murray, A., Skene, K. and Haynes, K., 2017. The circular economy: An interdisciplinary
exploration of the concept and application in a global context. Journal of Business
Ethics, 140(3), pp.369-380.
Rees, G. and Smith, P. eds., 2017. Strategic human resource management: An international
perspective. Sage.
Schaltegger, S. and Burritt, R., 2017. Contemporary environmental accounting: issues, concepts
and practice. Routledge.
Schaltegger, S. and Wagner, M., 2017. Managing the business case for sustainability: The
integration of social, environmental and economic performance. Routledge.
Online
Focus on Economic. 2016. [Online]. Assessed through:
<https://www.focus-economics.com/countries/hungary>.
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