Tesco's Approach to International Business: Strategies and Challenges

This report provides an in-depth analysis of Tesco's international business strategies, examining the various factors influencing its global operations. It begins by exploring the international environment using a PESTEL framework, highlighting the political, economic, social, cultural, technological, and legal aspects that impact Tesco's business. The report then delves into the marketing strategies employed by Tesco in international trade, including multi-domestic, global, and transnational approaches. Furthermore, it discusses different strategies for entering international markets, such as exporting, countertrade, licensing, joint ventures, company ownership, and franchising. The report also touches upon the benefits and potential pitfalls of international trading. This document is available on Desklib, a platform offering a wide array of study tools and resources for students, including solved assignments and past papers.

Organisation Report

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Exploring international environment with different types of example-......................................3
Marketing Strategies in the International Trade-........................................................................5
Strategies for entering into International Trade-.........................................................................6
Benefits of International Trading-...............................................................................................8
Pitfall of International Trading-..................................................................................................8
Conclusion- .....................................................................................................................................8
References:.....................................................................................................................................10

INTRODUCTION
The principles of international business helps in determining different cultural, legal,
ethical and economic environment which emphasis on business practices and outcomes for
producers, employees and consumers. International business referred as trade of goods, services,
technology across national borders at global or transactional scale. The global economy is
dominated by multinationals from all countries in world. It allows firms to take use of resource
which is present in different countries more efficiently. New latest technologies are bring by firm
in order to utilize resources in more efficient way (Anwar,and Sun, 2019). Through set up of new
industries and business in different countries, international business helps in improvement of
business growth & employment potential in those countries. There is not only movement of
goods or services in international business but also involves movement of capital, technology,
intellectual property such as patents, trademarks etc. For the report TESCO is considered which
is British multinational groceries and general merchandise retailer establish in 1919 dealing in
products of supermarket, superstore, hypermarket. Its headquarter is located in Welwym Garden
city. England UK. The report will cover international environment by conducting PESTEL
analysis. The range of techniques related to management planning process is applied and
strategies of internal business is determined in this report. Further, report will discuss several risk
which are arising from international trade operations.
MAIN BODY
Exploring international environment with different types of example-
The international managers of organisation face intense and constant challenges which
requires training and understanding of foreign environment. The manager has to deal with large
variety of cultural and environmental differences (Chang,2020). The international environment
macro- environment in context to Tesco which is wide term affecting firm business environment
that involves factors of political, economic, cultural etc. Therefore, it is compulsory for people at
managerial level to work on factor which comprises international business environment as this is
essential for country's economy. Following are types of international business environment
which are mentioned below-

 Political environment- As Tesco is largest retailer in the world with numbers of stores
operating in different corners of the world, so for keeping a good brand image in the
market company needs to fulfil or follow various rules and regulations which are
imposed by the government of different countries on the functioning of company's
managerial activities (Friel,Schram, and Townsend,2020). It is very essential for Tesco to
keep updated itself with the changes which are occurring in the political sector because, if
a business wants to run smoothly in the market without and hurdles then it become
important to stay accountable towards the responsibility for the public authority. By
taking a recent example related to Brexit, Tesco may face the problem fluctuation in sale
of their product and services. Due to the tension which can be seen between US and
China in relation to their trading, Tesco find it difficult to get the complete control on the
market. The situation between these two countries is very complex and other issue which
Tesco might face is the alteration in the taxation policies in some countries from where
company purchase its raw material, it somewhere affect the earning of the company.
 Economic environment- Several economic components and products which are
available in the market affects the consuming criteria of the customers in relation to the
broad line up of Tesco's product. Company should carefully focus on the economic
condition of the countries in which it is operating, because several economic factors like
increase in the price of the products, purchasing power of the consumer, etc., may affect
the profitability and and other operational activities of the organisation. For a successful
distribution and good return on the offerings, firm must have the complete knowledge
regarding the tax structure. Tesco is continuously growing in the markets of several other
countries but its maximum earning is still generate from the customers of United
Kingdom, so if some changes have been occurred in the economic sector of the country
then Tesco will have to bring big change in its production line up or selling strategy,
because of this company may suffer some extra costs in its functioning.
 Social & cultural environment- Tesco needs to maintain a good social image in its
different marketing practices, not only this according to the Social Inclusion Initiative in
United Kingdom Tesco is responsible for respecting and work for fulfilling the needs
and expectations of the people in the society. In many countries people are interested in
buying goods or products in mass volume and by observing this change in the purchasing

behaviour of the consumers Tesco has decided to shift some sections of their stores in
non food models. The products in this section will mainly focuses on the consumer's
request which are guided by some social factors, apart from this, selection of goods and
services also controlled by the several cultural factors availing in the society and
followed by the people (Hayakawa, and Mukunoki, 2021). For maintaining a good
customer base Tesco needs to identify all the changes and trends in the market related to
taste and preferences of the consumers and issue products according to that. Tesco play a
good marketing plans by switching its production activity towards the organic item after
company has observed the growing concern of the customers towards organic food
products.
 Technological environment- With different innovations in the field of technologies it
has became very significant to for all the companies operating in different industrial areas
to bring modification in their production techniques. Like Tesco has taken its business to
online platform which helps the company to reach to more customers sitting in different
parts of the world, moreover company also initiate in giving service of home delivery of
the ordered products. For resolving the problem of long queries of the consumers for
billing purpose, Tesco has linked up with Amazon Go which make it easier for the
customers in billings of the products which they have purchased and now they don't have
to stand in long lines which also waste their time. These technological improvements can
improves the effectiveness and functional activities of the Tesco which directly enhance
the profit earning ability of the company.
 Legal environment- Tesco's management's activity is excessively affected by the laws of
the legislative authority of the country. Due to some law which is imposed for avoiding
the activities which are against the competition, it become hard for Tesco to get involved
with other business, because such steps by the company can be taken as disobedience of
laws. It is utmost duty of Tesco that, company must have to give nominal amount of
salary which has been decided under law.
Marketing Strategies in the International Trade-
The international strategy is first approach which is taken by most of business for global
expansion. To develop an international marketing strategy for Tesco the market research is done

to have understanding of products, laws and regulations (Kerr, 2020). Several markets are
governed by policies that might regulate or prohibit sale of certain goods. The understanding of
market is crucial while developing international strategy in foreign market why they needs to buy
product over competition. The provides recognition of brand. It is essential to consider the 4Ps of
product, price, place and promotion for offering products to customers in global market. There
are three types of international marketing strategy-
1) Multi domestic strategy- The firm using this strategy sacrifices efficiency in favour of
em phasing responsiveness to local requirements within each of its markets. Brands
which are operating internationally have to follow two components if they want to
expand more internationally, they need to emphasis more on those frameworks of
domestic which have more potential to went global.
2) Global strategy- The firm using scarifies responsiveness to local requirements within
each of its market in favour of emphasising efficiency. Minor modifications are made in
products and services and stresses to gain economies of scale by offering same products
in each market (Zou, 2021). Global strategy of international market allows the business to
issue better and standard quality of product in the overseas market which enhance the
image and brand value of the company at global level.
3) Transnational strategy-The firm using this strategy seeks middle ground between multi
domestic strategy and global strategy. The Tesco tries to balance the desire for efficiency
with needs to adjust local preferences with several countries.
Strategies for entering into International Trade-
 Exporting- When a company start offering its product which has been produced in the
domestic nation to the consumers of the other nation to involve in the international
business, then this procedure is termed as exporting (Lu, 2021). There are two ways to
export the product in the international market, one through direct exporting in which no
mediator party is involved company itself sell the product in the markets of different
countries. Other method of exporting is indirect exporting, in which company presents its
product via some hired agents who distribute their product in the market. Tesco has been
involved in the export business, through this company offer its product to many countries
like France, Hungary, Poland, Spain, etc. This will help the company to diversify its

business different market sector which automatically diminishes the productivity costs
and give rise to the profitability in the long run.
 Countertrade- In this method of international trading, one domestic business exchange
its product and services to the company of another country without any involvement of
currency. This system does not have to follow any specific rules and regulations like any
other techniques of entry have to do (Pavlidis,and Markantonatou, 2018). Countertrade
could be an economic selection for several business as it can save the companies from
various imports expenses. Tesco gets several advantages by taking its steps in the
countertrade as there is no currency transaction so company is safe from any kind of debt
which could be occur through shortage of foreign currencies.
 Licensing- When a company gives permit to another company, by giving their rights for
marketing its product and services in the market, this situation is known as licensing.
Companies often use this form of entry in international, when they want to offer their
products in other countries and the firm to which they are deciding to issue the license
have very big market share (Smith,and Sarabi,2022). If Tesco use licensing as a means
for international business then very little investment is required as there will be no
expenses which is related to the allocation of goods and services.
 Joint Ventures- It is little bit similar to the partnership, but in joint venture involves two
countries and both are from different nations. In this form, one company who want to
expand its business in international market but do not want to have proper control over
the working of the company combine with an another established overseas company.
This method of international trading support the business to enter into the new market in
which company have some possibilities to grow and expand. It will also helps in
approaching the new technology which may increase the revenue and make the
functioning of the business more effective.
 Company Ownership- Ownership of a company means buying that business which is
operating internationally. Many institutions wants to sell their product in the overseas

market without facing the expenses related to delivery of the product, in such case
companies adopt this method (Robert,Puteaux, and Najjar, 2020). When you buy a
company which is already settled in the market then it will automatically gives the power
to stand in front of the competitors in the international market and also helps in
increasing the customers for the business which gives you the competitive advantage in
the given market.
 Franchising- Sometimes an individual get an opportunity to be an in charge of a
company or a business by paying an amount and get the responsibility to run the business
on the behalf of the company in other nation. If a company wants to franchise its
business, then it essential to have a strong brand value in the market and must be famous
among the customers, so that they easily get attracted towards it. Recently Tesco has
declared a deal for its franchise with a businessman from Saudi Arabia who owns a
shopping, the CEO of the company has stated this as an opportunity to establish the
business in new markets.
Benefits of International Trading-
By entering into the international market, Tesco is able to increase its return on products
by acquiring new possible consumers in the market. Through expansion in international trade
Tesco is able to increase it working ability and also contributes in the economy at world-wide
level. It also support the company in getting enough chances for foreign direct investments.
With the involvement of companies from different nations, global economy also grows
efficiently. When Tesco expand its business globally, it meet with new customers or employees
who have different skills and opportunities for performing the activities of the company, which
enhance the talented workforce in the organisation. Company also get the opportunity to interact
with the new culture and social values which are followed in the several countries and with this
knowledge they can easily understand the demands and expectation of the employees in
international market. Tesco automatically get the tag of an international company by offering its
product and services and with expanding its business in other nation.
Pitfall of International Trading-
Several challenges which companies will face while taking their business at global level.
Tesco needs to take care about these circumstances, otherwise they will act like a hurdle in the

growth of the business (Salipante,and Jerome,2020). Like, Tesco has to close its several stores
which are operating in the various parts of America and the reason behind this cultural issues
which are faced in the functioning of the stores. This incident adversely affect the revenue
generation capability of the company and also results in losing of customer base in America.
Currency exchange rate also affects the working of the company who are involved in the
business of export of goods and services. Another factor which could be a challenge for a
company which is operating in global market is inflation rate, which leads more expenses for the
production of the goods and services (Smith-Casanueva,2018). Tesco also need to concentrate on
the policies of the government which are imposed in the country, because if company fails to
follow these policies then it will become hard to survive in that nation. Languages are the most
common challenges which are often faced by the companies which are planning for going global.
If company do not pay necessary attention regarding these language barriers in the organisation
then they won't be able to understand the problems and issues of their employees and also find it
difficult to convey their brand's message to the local people. So ,if Tesco wants to go global and
achieve success, then it have to consider these challenges which are discussed above and find
suitable solution for the same. Tesco needs to aware about the type economic environment which
is prevailing the selective market for the global expansion as it can help in improving the
economic health of the company also. If company avoid such factors then it won't be able to gain
the profit and must have to face failure in the international market. Tesco must follow the global
trends for the smooth functioning of the management.
Conclusion-
The above is a detailed discussion on the expansion of business in the international market.
Tesco which is one of the largest retail company in United Kingdom is taken for this study, and a
research on the different factors of the external environment which may affect the working of the
business in the international market has been discussed. After this, marketing strategies for the
business which and different methods by which a domestic business can take entry in the
international trade has been analysed and in last advantages or disadvantages of international
expansion to a company is stated.

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