A Critical Evaluation: Tesco's Strategy for Entering the Indian Market

This essay provides a critical evaluation of Tesco's strategy for entering the Indian market, including its motives and the challenges it faced. The analysis covers Tesco's joint venture with the Tata Group, its wholesale cash and carry business strategy, and its efforts to adapt to the Indian consumer market. The essay also explores the impact of government policies and the competitive landscape, using PESTLE analysis to understand the broader economic and political factors. Despite initial success, Tesco eventually faced significant losses, and the essay delves into the reasons behind this failure, including the complexities of the Indian retail market and the challenges of competing with established local players. The essay concludes by reflecting on the lessons learned from Tesco's experience in India and the implications for other multinational companies seeking to enter emerging markets. Desklib offers a range of similar solved assignments and past papers for students.

TESCO 0
trate ie in international mar etS g s k

TESCO 1
“Tesco in India”
The idea of a multinational company has been around for centuries but in the
twentieth-century multinational companies is becoming important enterprises for the nation.
Multinational companies have their origin in one country but it expanded their business
beyond the boundaries. Multinational companies normally function with headquarter which
is placed in one country (Prasad, and Prasad, 2018). There are many companies expand their
business beyond the nations to earn the profit in the market. To earns the high profit; Tesco
expands the business by entering into the Indian market. The company entered with the
various reasons and motives such as goodwill, high profit and many others. After the
liberalization, globalization and global products were getting more accustomed to the Indian
market. The multinational company takes the advantages by entering into the Indian market
as same Tesco also takes the advantage by entering the new market (Mukher, 2018).
Tesco is entered into India's retail market through a wholesale business with the
country largest company the "Tata group". It entered with a franchise agreement, in the arms
of the Tata group in the Indian market. Tesco entered with the Tata group company with the
joint venture approach. The company based in England, it provides the grocery product in
the market with the Tata to analyse the market or build the goodwill (Tesco PLC, 2018). In
this paper, the discussion will be made on the overview of Tesco with their strategies and
goals to enter the Indian market. The strategies of the company to enter the India market will
be discussed by analysing them. The company did not meet success in the Indian market; the
reason behind the business failure will also be discussed in the last section of the report.
It has been analysed that the Tesco has revealed plans to enter the market. The
company enters the Indian market by developing the relationship with the Tata Group. Tesco
helps the Tata group in expanding the business of Tata Group‘s hypermarket Chain Star
Bazar by investing the high capital in the company. The company announced the reason to
enter the Indian market by establishing the wholesale cash and carry business in the India
retail sector. Tesco deal with the Tata group to invest in dozen stores of north and south; due
to expanding the business in another cities and states the company earned the high revenue.
It is observed that the joint venture is beneficial for both the companies. The joint venture
makes the Tesco first foreign supermarket in India due to enter into the market with the high
branding company. The company invests $85 million in 12 existing Star Bazaar stores of

TESCO 2
selling the food and groceries like kitchen products, fashion items and home wares
(Papadopoulos, and Heslop, 2014).
India is a developing economy with nominal GDP and the third largest purchasing
power party. The long-term growth of the Indian economy is positive just because of its
young population, low dependency ratio, and investment rates into the global economy.
India is the world fast growing service sector with its annual growth rate. Since 1991, the
adoption of industrial policy and multinational companies has been recognised the rapid
growth of the Indian economy and it is beneficial for the multinational companies as well
due to enter into the new market. The rapid growth of the Indian economy is beneficial for
the Tesco Company to enter into the new market (Solberg, 2017).
The multinational companies have bought new technologies with the new product to
attract the consumer and create a wider choice for the consumer. Indian companies work
more efficiently and the consumers of the economy aware of the international markets. In
1991, the Indian government gave permission to the multinational companies to enter the
market and boost the economy. The multinational companies improve the lifestyle of Indian
consumers. The companies promote the food industry of the Indian market with the help of
strategies and objectives like Tesco entered the Indian market with food and grocery
products. Tesco entered as a joint venture company with the Tata group to supply the food
and grocery product in the supermarkets (Malhotra, 2014).
Indian consumers market has higher disposable income which has a positive impact
on the multinational companies. Increase consumer awareness affected the buyer behaviour
of the consumers. The credit facility of commercial banks has been increased at a rapid rate
which increases the consumer's demand. It is observed that Multinational companies have
the advantage to enter the Indian market (Dwivedi, and Kumar, 2017). Tesco is taking place
in India at the tremendous pace in the starting phase of entering into the new market. It
influences the lifestyle and buying behaviour of the consumer. Tesco focused on improving
the food and grocery product. Indian consumers attract the western trend and buy the Tesco
product. Indian consumers were spending their money on the various products which were
changed after the multinational companies. Tesco influence the customer to spend their
money on food and non-food. In India, the higher class people spend more amounts on their
income or luxury goods and trendy products. The middle-class people spend more on

TESCO 3
necessary products. Tesco offers the product as per customer behaviour (Parsons, Maclaran,
and Chatzidakis, 2017).
It has been analysed that India has a lack of franchise and wholesaler agreement
which is an advantage for the Tesco Company to enter the Indian Market. In 1991, the
Government of India offers the chance to the multinational companies to enter the Indian
market and invest in the economy. Tesco takes the advantages of the permission of the
government by selling their product in the north and south of India. Walmart has also
walked away from India due to an argument with the Bharti Enterprises. At that time, Tesco
enters the market with the 50% stake in the Tata Group's Trent Hypermarket Ltd. to open the
stores in the north and south (Srivastava, 2008). The decision taken by the company is
marked as the victory. After taking the decision by the government of reforming the
supermarket sector, it is the first foreign investment victory in the Indian market which is
achieved by the Tesco Company. It has been seen that the government of India opened its
doors to foreign companies to invest in the economy. Many big retailer companies entered
the Indian market but Tesco is the first foreign supermarket; this victory is beneficial for the
company. Tesco spread its business in the Indian retail market by established the wholesale
business in the market. It becomes the third largest supermarket group and it also uses the
slogan for promoting the company that is ‘every little help'. Tesco operates in 12 countries
across the globe; it expands its business at the international level. India is included in 12
operating countries of Tesco. The company takes the advantage of decision of Indian
government (Firstpost, 2018).
It has been seen that the company makes the strategies to achieve success in the
Indian market. The company strategy is to set up the shops in the market with the wholesale
cash and carry business. Wholesale cash and carry business strategy helps the company to
achieve success in the Indian market. There is limited wholesale or franchise agreement in
India which was the advantages for the Tesco to enter the Indian market. The company take
the advantage to established wholesaler cash and carry business in the Indian market.
Wholesaler business reached at the many retailer companies which help in selling the high
amount of services. By taking the advantages, Tesco expands its business in the large area.
According to the strategy, the company opens its first outlet in Mumbai. The company set
the small networks in Delhi and Bangalore to support the wholesale business of Mumbai.

TESCO 4
These small networks support the company by providing the thousand small retailers and
restaurants. Tesco competes the other wholesaler companies like it compete with the cash
and carry operation of Germany Metro AG and Shoprite Holdings as well as Wal-Mart
venture. The companies set their plans to enter the wholesale market. Tesco cashes and
carries business supplies the services to the stores (Independent, 2018).
One of the major strategies of the company is to help the Tata group in expanding its
hypermarket business. Work with the Tata group is beneficial for the company at the time
of entering into the Indian market. Tata Group gives the great experience to the Tesco
Company. Tesco was the first foreign company who invest in the Indian supermarket since
FDI was allowed that was the biggest advantage for Tesco. The objective of the Tesco is to
enter as a joint venture with the Tata group is to take the existing portfolio of Star Bazar
stores in Maharashtra and Karnataka. Tata group has high capitalization in the Indian market
which has an advantage for the company. Trent hypermarket has a franchise and a wholesale
supply arrangement with the Tesco. Tesco earns revenue by supplying the 80% stock to the
Star Bazaar stores. Tesco supplies their products with the good name of Star Bazaar. This
strategy of the company supports the company to achieve success in the Indian market
(Deshpande, Gaddi, and Patil, 2014).
Supplying the products and services to the Kirana stores and restaurant is another
strategy of Tesco. The distribution channel of the company provides wholesale product to
Indian retailers, kirana stores, small retailers, small farmers, and other business. It is an
efficient way of selling the product in the Indian market or to promote the company in a
large area. The company supplies their product with the goodwill of Star bazaar which is an
easy way for the company to expand the business in the Indian market. It helps the company
in its wholesale cash and carries business. Delhi and Bangalore are the small networks that
help the company by supplying the through small retailers and restaurants. It is observed that
the small retailer attracts toward the Tesco with the name of Star Bazaar. The strategy of the
Joint venture is a good step taken by the company to achieve success in the Indian market
(Solomon, Dahl, White, Zaichkowsky, and Polegato, 2014).
The main aim of the company is to smooth the running of its business in the Indian
market. It ensures that their stores are well stocked with the products from Indian suppliers.
The company sourcing team helps the company to maintain the stock in their stores. It is

TESCO 5
observed that the Tesco Bengaluru provides the key business services for the smooth
running of the company or operate globally. Tesco Bengaluru team helps in creating and
executing strategies by covering IT, financial, property, commercial and others. Strategies
are the good step to take by the Tesco Bengaluru; it helps the companies in promoting the
sales and increasing the supply of the product in the large area (Wood, Coe, and Wrigley,
2016).
PESTLE Analysis is a tool which is used by the company to analyse the Indian
economy or to plan their strategies. Within the context of Pestle analysis, Tesco has to adopt
the market strategies which promote the brand name in the Indian market. It can be said that
the company analyses the consumer behaviour of the Indian market to sell the product. It
also analyse the government policy of the new companies in the Indian market which helps
the company to satisfy the consumer demand and increasing the supply in the market. Tesco
comes with the joint venture approach that was a good strategy of the company to supply the
product with the good brand name of Tata group. Supply the product to small retailers,
restaurants, and others through the Star Bazaar is remarked as a good strategy for the
company (Hornerand Swarbrooke, 2016).
It has been said that the position of the Tesco in the Indian market is good. But after
a time Tesco suffer the huge amount of loss which affects the company. The company goal
to operate in India is failing due to a change in government policy. The policies of Indian
government were changed due to entering the new government with the new policies which
cause the loss for the company. The previous government of India has opened the door for
the Foreign Direct Investment from which Tesco comes in the market but in next few years'
governments was changed and it opposed the Foreign Direct Investment (Chan, 2016). The
two states in which Tesco operates its business is ruled by the new government which is
opposed the multinational company. Political opposition is a reason for the failure in Indian
operation. Due to ban on the foreign Direct Investment the company suffer loss and high
import tax rate is the main reason of heavy loss. Tesco chairman Johan Allan agreed that the
political factors affect the business of the company.
The recession is another reason for failing in the Indian operations. Indian retail
sectors were changed with the recession period. With the more online sales, hypermarket
visit by those consumers who have money or time. It shows that the few consumers remain

TESCO 6
in the market to visit the hypermarket and corners shop of the market. Recession decrease
the consumers of the retail market. A customer did not attract towards the discount given by
the company. Tesco competitors face the loss earlier thus; they came back and try harder to
satisfy the customer needs. But Tesco did not prepare for the loss however it faces the loss
and failing in the operation of India. Although, Indian market is beneficial for the company
because labour cost is minimum(Gay, 2016).
Competition with e-commerce is one of the major reasons for the declining sales
chain. E-commerce attracts the customers toward the product, it decreases the sale the Tesco
companies. Tesco business operations fall with the decline in sales or declining profit. The
company is not prepared for the competition with the e-commerce. E-commerce is the more
beneficial factor for those people who have not time or money to visit the retail shops in the
market. Tesco faces huge losses which show that the company has to close their stores. 8000
stores of Tesco close continuously due to suffering loss and decrease the staff of the
company. As per the research, it has been analysed that the India is far back in social media
and e-commerce technology which is not beneficial for the company and it was a reason of
the company in failing in Indian business operation (Lapoule, 2010).
It has been analysed that the strategies made by the company is good but the
company is not prepared for the losses and new policies. The company entered the market at
the right time and achieve many advantages but in the period of recession, the company
suffered loss due to online sales increases in the market. Joint venture strategy of the
company helps the company to attain success in the market by supplying the product and
services to the Star Bazaar. Foreign countries have advance technology which is far better
than the India. However, technology is the main factor which increase or decrease the cost
of the company (Mookherji, 2015).
It has been evaluated that the company faced the legal actions for accounting fraud
and misleading the investors. The company follows all the legal actions of the India
government. It is observed that the company van drivers use fuel saving routines which are
good for the environment and it also collect unwanted plastic bags from customers and
recycle them which are beneficial for the environment.

TESCO 7
From the above analysis, it has been analysed that the company takes the advantages
by entering and operating the Indian market. It can be said that the strategies set by the
company help to achieve the success in the Indian market but for the short term only. There
are many reasons behind the failure in the operation. The company used Pestle analysis tools
to analyse the market but the company faced the loss. Internal and External analysis of the
company identified the causes of failure. Political opposition is the major reason which
affects the retail sector of the Indian market. New government banned the company to
operate in the Indian market. Online sales change the life standard of the consumers which
affect the company and cause failure. The Indian market was fascinated with the Tesco
products in an early stage. The Indian food market is developing which create more options
for the customers of Tesco. India has a lack of wholesaler agreement which attracts the
Tesco Company but nowadays there are many brands of a similar product which is better
than each other. Due to the lack of effective and innovative strategies companies faced the
loss. The reason behind the failure in the Indian market is highlighted in this paper which
shows that lack of strategies planning. The strategies adopted by the company in outsourcing
their business in the Indian Market. Indian food market is growing fast.

TESCO 8
References
Chan, S. (2016) Foreign direct investment in a changing global political economy. New
York: Springer.
Deshpande, M., Gaddi, A. and Patil, S. R. (2014) Inference of FDI in Indian retail sector:
Some Reflections. Journal of Entrepreneurship, Business, and Economics, 2(2), pp. 82-97.
Dwivedi, S. and Kumar, V. (2017) Role of Foreign Direct Investment and Indian Banking
System. Journal of Bank Management & Financial Strategies, 1(1), pp. 1-5.
Firstpost. (2018) All you need to know about the Tesco-Tata Trent deal. [online] Available
from: https://www.firstpost.com/business/all-you-need-to-know-about-the-tesco-tata-trent-
deal-1293267.html [Accessed 12/08/18].
Gay, R. D. (2016) Effect of macroeconomic variables on stock market returns for four
emerging economies: Brazil, Russia, India, and China. The International Business &
Economics Research Journal (Online), 15(3), p.119.
Grönroos, C. (2016) Internationalization strategies for services: a retrospective. Journal of
Services Marketing, 30(2), pp.129-132.
Horner, S., and Swarbrooke, J. (2016) Consumer behaviour in tourism. Oxon: Routledge.
Independent. (2018) Tesco enters India with cash-and-carry. [online] Available from:
https://www.independent.co.uk/news/business/news/tesco-enters-india-with-cash-and-carry-
891979.html [Accessed 12/08/18].
Lapoule, P. (2010) Carrefour and its competitors in India. Management Decision, 48(3), pp.
396-402.
Malhotra, B. (2014) Foreign Direct Investment: Impact on Indian Economy. Global Journal
of Business Management and Information Technology, 4(1), pp.17-23.

TESCO 9
Mookherji, N. (2015) Tesco to go slow on India operations. [online] Available from:
https://www.business-standard.com/article/companies/tesco-to-go-slow-on-india-operations-
115042700050_1.html [Accessed 12/08/18].
Mukher, S. (2018) Role of Multinational Corporations in the Indian Economy. [online]
Available from: http://www.economicsdiscussion.net/multinational-corporations/role-of-
multinational-corporations-in-the-indian-economy/10917 [Accessed 12/08/18].
Papadopoulos, N. and Heslop, L. A. (2014) Product-country images: Impact and role in
international marketing. Oxon; Routledge.
Parsons, E., Maclaran, P., and Chatzidakis, A. (2017) Contemporary issues in marketing and
consumer behaviour. Oxon: Routledge.
Prasad, E. H. and Prasad, G. V. (2018) Impact of foreign trade on indian economy-a study.
Journal of Commerce & Accounting Research, 7(4).
Solberg, C. A. (2017) International Marketing: Strategy development and implementation.
Oxon: Routledge.
Solomon, M. R., Dahl, D. W., White, K., Zaichkowsky, J. L. and Polegato, R. (2014)
Consumer behavior: Buying, having, and being. London: Pearson.
Srivastava, R. K. (2008) Changing retail scene in India. International Journal of Retail &
Distribution Management, 36(9), pp. 714-721.
Tesco PLC. (2018) About us. [online] Available from: https://www.tescoplc.com/about-us/
[Accessed 12/08/18].
Wood, S., Coe, N. M. and Wrigley, N. (2016) Multi-scalar localization and capability
transference: exploring embeddedness in the Asian retail expansion of Tesco. Regional
Studies, 50(3), pp. 475-495.