Tesco's International Strategy: Market Expansion and Analysis Report

This report provides a comprehensive analysis of Tesco's international strategy, focusing on market expansion opportunities in Singapore, Latvia, and Taiwan. It begins with a PESTEL analysis of the macro-environmental factors in each country to assess the political, economic, social, technological, environmental, and legal factors influencing Tesco's potential market entry. The report then justifies the selection of Singapore as the most suitable market for expansion, supported by a comparative analysis. Furthermore, it applies Porter's Five Forces analysis to evaluate the competitive landscape within the retail industry, assessing the threats of new entrants, substitute products, and competitive rivalry, as well as the bargaining power of suppliers and buyers. A VRIO analysis is also conducted to evaluate Tesco's internal resources and capabilities. Finally, the report explores various modes of entry into the market, recommending the most appropriate strategies for Tesco's international expansion. The report is a complete business analysis for Tesco's international strategy.

INTERNATIONAL
STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................1
1. PESTEL analysis of the macro-environmental factors of Tesco:................................................1
2. Justification To Select A Country For Market Expansion...........................................................4
3. Porter's five forces analysis..........................................................................................................5
4. VRIO Analysis:............................................................................................................................7
5. Various modes of entry and also recommendations....................................................................9
CONCLUSION................................................................................................................................9
........................................................................................................................................................10
APPENDICES ..............................................................................................................................11
Appendix 1...........................................................................................................................11
REFERENCES..............................................................................................................................13

INTRODUCTION
For operating business in the international market it is very important to have strategies
which can be used internationally. As these plays vital role in evaluating the opportunities exist
in the global market.
Tesco is a leading British multinational retailing company, headquarters in Hertfordshire,
England, UK (Dixit and Skeath, 2015). It is the third largest in terms of earning profit. This firm
has its significant development effect in the economy. It successfully operates across Asia, North
America as well as Europe. Due to the world-wide expansion it influences all the factors
regarding company such as financial status, culture, and organisational structure. Its international
expansion strategies has acknowledge the need to be tactful as well as careful to the local
possibility by merging into joint ventures with regional firms. For instance, Samsung in South
Korea as Tesco home plus. It deals in products such as clothing, books, furniture, electronics,
toys, software, petrol and services like financial, telecom and internet.
Company's vision is to be high esteemed in business were in the people they serve and
also group were they function as well as the loyal members and shareholders.
MARKET SHARE OF KEY PLAYERS IN FOOD RETAILING SECTOR
1. PESTEL analysis of the macro-environmental factors of Tesco:
Tesco, a multinational sustenance retailing organization, it's headquarter situated in the
UK and has outlets in 12 nations over the world. It ranks second biggest retailer after Wal-Mart
as far as benefits made and furthermore holds the title for the second biggest retailer considering
incomes (Hitt, 2016). It is commonly known for offering nourishment and non-sustenance items,
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Tesco, now likewise gives back, mobile, protection, equipment administrations and significantly
more.
PESTEL Analysis for Singapore
 Political Factors: Singapore is a democratic country, the political risk involved is quite
low. In the continent, this is the only nation that enjoys the lowest risk. Being a
democratic country, people elects the political party to lead. After the independence, it
had political stability. This had lead to the good standard of living as well as peace also, it
had transformed business threats to the opportunities. In this country, right to speech is
restricted for the opposition parties. Value of free speech is controlled that is limited. The
defamation laws, opponent group to be cautious that any comment could lead to suits or
may be imprisonment. The concern of legal case restricts the prospect of right to say or
speak from the other party. This had directed the debates between the party is low.
 Economical Factors: This is a free market economy, and is running at a very fast rate.
For the establishment of any business in this country, it is very good as the environment
is corruption-free and this will support firms. Workers are educated and self motivated,
this had strengthen the market. It is the most competitive nation also its legal as well as
financial enterprise structure assist them. The country has the highest per-capita income
in ASEAN (Association of Southeast Asian Nations). Also, the government of Singapore
has invested in expanding the market in the economy. Due to this, many industries like
pharmaceutical as well as tourism has developed and prospered and this is good for
establishing a firm like Tesco, which is a multinational retailing company. One of the
main causes for the success is its location. The active player in the economy is the
government (Parmentola, 2011). It maintains the significant productive assets. With the
support of neighbouring nations, lots of costs that is incurred on the labour is saved.
Following are some of the restrictions on economic performance of the country are :
Deficiency of labour, increased cost of labour, reduction in productivity.
 Social Factors: Like the other eastern nation, Singapore also follows the classic and
conventional family values. Today the new generation, has inclination more towards the
western culture as well as values. To fulfil the desires and requirements, resident of the
nation works very hard to achieve the same. This had motivated the them to increase the
country's productivity. The purchasing power is expected to be high in the business area.
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It has very high literacy rate. In Singapore, it is very essential that every child should go
the primary school. Government has made thing thing compulsory. It is for the parents to
make sure that their child has regular attendance and also they should be very fluent in
English and Chinese language. This is beneficial to every individual who lives in. it also
assist to draw attention of the international trade as well as foreign direct investment.
 Technological Factors: it is very important for the nation to have technical
advancement, this is one of the key cause in the development of resident's standard of
living as well as quality. For the advancement in the country's performance, internet plays
a vital role. It simplifies and increases the communication and connectivity. This had
encouraged the social networking and people are easily connected through this with rest
of the world. Approximately 70% of the people uses internet. E-commerce has seen the
enormous growth here. The speed of the broadband internet they are getting is more than
10 Mbps. This had motivated the multinational business entities to come and set up there
business and government is operating regarding an electronic government period.
 Environmental Factors : To control the air quality and other aspects of the environment,
The Ministry of the Environment and Air pollution Unit works. The main problem of the
pollution is transportation in urban region. This country has the highest carbon dioxide
emissions (Vargas-Sánchez, 2015). Due to this thing, 30% of mangrove species were lost
and many are in the verge of extinction. The Water Pollution Control and Drainage Act,
aids to prevent quality of water. This is also the main concern for the nation, as there is a
lack of water to assist their requirements. The country is more likely dependent on
Malaysia to supply water.
 Legal Factors: There are certain legal rules and regulations that assist business
development and also the market success. Government has initiated many favourable and
transparent laws and regulations that increases the growth. The objective is to create
services for e-commerce. Government has launched several policies regarding e-
commerce.
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PESTEL Analysis for Latvia (Europe):
See Appendix 1
PESTEL Analysis for Taiwan:
See Appendix 2
2. Justification To Select A Country For Market Expansion
It is essential for the company to make a proper analysis of market in which they want to
enter. As they are having three options so a comparative analysis can help to them to make an
appropriate decisions to enter in suitable market. Here is justification for each market and
selection of market;
Latvia: on the basis of above given discussion on this nation it can be concluded that this is
developing nation and it is having a huge support of those organisation which are working of
international economical welfare like; WTO and IMF. It is main competency of the nation that it
can take a support of these organisation in financial crisis and any type of unwanted situations.
People are having a respectable income by which they can easily purchase things which are
essential and which are included in to luxury items. Several types of races are living there which
can be an opportunity for the TESCO to set their business smoothly in this market. But less
population is provides a lesser scope for company to increase their business. It is not known and
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popular nation and it has a lesser scope of development in future so after a certain time
company's growth will be stopped.
Taiwan: It is a world famous nation for it's development in technology so it is essential for the
Tesco to expand their business on those markets which are having a scope of future growth. As
now Taiwan government is focusing on liberalization policy and according to this government
can give a liberalise to those companies which wants to expand their business in their country.
Unemployment rate is just 4% which shows that people are having a high purchasing power and
people are having a mind set of development in their position which motivates and leads them to
buy new things to develop their own status. It is technological advance country and it is having a
huge scope of development in economy. But some of drawbacks are also involved with this
nation that is tax rates for foreign companies is too high.
Singapore: Over 10 years, Singapore market has shown enormous growth. In present, it is
reasoned as a high-income economy (Wild and Han, 2014). The growth is seen by various
factors such as consumption expenditure, investments, demand both domestic as well as national
and savings. The contribution by service sector is 75.5% to the total GDP (Gross Domestic
Product), industrial sector by 24.5% and manufacturing by 18.3%. To increase the productivity,
government has initiated and started developing the research and innovation work for the
maximisation of the industrial sector. This will expand the partnership that is being built between
the government and industry.
Selection Of Market: On the basis of above presented rational it can be concluded that
Singapore is suitable country for Tesco for business expansion. Because it is having a huge
development and growth opportunities for nation which revert on companies also which are
working in the nation. It is a most popular tourist destination so it can give more business to
company.
3. Porter's five forces analysis
It is the assessment of the framework within an industry evaluating the level of
competition, in order to determine the sources of the competitive advantage. It is to determines
the attractiveness of an industry and also to know the competitive intensity by 5 forces that is
Threat of entry of new competitors, threat of substitute products, intensity of competitive rivalry,
bargaining power of supplier as well as bargaining power of buyer.
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For evaluating the competitive environment of Tesco company, Porter's five forces analysis is
used :
Threat of entry of new competitors : Entering of new competitor in the retail industry
is very low. Heavy capital investment is required to be competitive in the market and also to set
up the brand. Sainsburry, Asda, Morrisons are the contenders that exist and have grabbed the
food retailing industry by 80% in United Kingdom. So to establish and occupy the share in the
market, company need to produce products or services at low price or high quality.
Threat of substitute products : The treat of substitute commodity in the retailing sector
is low for food products and for non-food its medium to high. In the food industry, the
substitutes of this is the grocery and organic shops, departmental and convenience stores these
are not consider as competition to the Tesco company as they render high end products at a
cheaper rate. However, non-food products like in clothing sector, threats of substitute is quite
high as buyers are more attracted towards getting discounts (Hultman and Robson, 2011). Hence,
the company is threat to the speciality stores.
Intensity of competitive rivalry : The intensity of the competitive rivalry is very high in
the retailing sector. The cited company faces immense competition within the industry that
includes Asda, Morrisons and Sansbury's over price, promotion and products/services. The main
competitor in this sector that has grab the market share by 16.8% (approx.) which was earlier
16.6% and Sansbury's 's has 16.1% which in the previous year was 15.8% while Morrisons has
11.6% from 11.3% during the year 2009-2010. Tesco's market position has treat, from the
competitors increasing share.
Bargaining power of supplier : The bargaining power of suppliers is quite low. It
should be seen that vendors are more preference to the key grocery and food retailing business
entities like big supermarkets. In order to acquire the lowest price probable from the provider,
the positions of these retailing companies like Tesco, Asda, Sainsbury and Morrisons is
strengthened the negotiation strategies in the positive form.
Bargaining power of buyer : the bargaining power of buyer is reasonably high. The
switching cost is too low, if the products have even a little differentiation or more standardised
the consumer can easily switch to the other brand (Camisón, 2010). It has been projected that
buyer are inclined more towards the products that has low price and with the online shopping as
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well as the availability, they can easily compare the price and the quality they are offered and
thus can choose.
4. VRIO Analysis:
VRIO Analysis is a business assessment framework that is used by the Tesco company to
make the efficient decision making. This offers the knowledge and output gives the competitive
advantage. It is analysing the company internally as it is used to determine the resources of the
firm and what will be the competitive advantage be supplied to the business entity.
This analysis refers to the 4 indicators that is considered for the firms: Value, Rarity,
Imitability and Organisation.
 Value : this analysis ask if the resources adds value to the cited company then, it is
possible that it will render advantageous opportunities. This will reduce or banish the
effect of threats. Value of resources are determined by the stakeholders that whether they
are useful for the firm or not. These help in various regions, internally or externally as
well that can be advantage to the technical, economical or social. Resources are important
for the development, if these are useful in more than 2 areas. If the resource does not
gives benefit to the firm, then they can invest their capital in somewhere else for the
growth. It is a weakness to the business.
 Rarity : Resources are grabbed only when one or few entities, known as rare. These
should be valuable as these gives the competitive advantage. If in the case, when more
than few firms uses the similar capabilities of resources in the identical way then this
directs to the competitive equality (Cantwell and Lundan, 2010). This can be due to the
usage of same resources execute same strategies. In this way, no company can attain the
best performance.
They should not ignore the resources even if they are common and valuable
because losing the valuable resources as well as the abilities will have the negative impact to the
firm as they are necessary for staying in the economy. Imitability: it is very expensive to make a copy of any resource. If any business entity
does not have a resource, they cannot duplicate, purchase or substitute it at an affordable
price. Imitation can be either by directly copying or by offering substitute products.
They has to be rare as well as valuable to imitate which accomplish continuous
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competitive advantage (Griffith, 2010 ). These are quite difficult to copy or follow, can
be determined by 3 ground are as follows :
1. Historical circumstances: which refers to the development of the resources because of
the vents happened in the past and are expensive to imitate.
2. Casual ambiguity: it is not clear for the company to determine or find out certain
resources that have a reason of competitive advantage.
3. Social Complexities: resources and abilities that depends on the culture of the cited
company.
 Organisation: the final indicator of VRIO analysis. It needs to identify the value, rarity
and imitability. If the resources get through from all these three requirements then the
above mentioned business entity has to be organised to gain all the benefits. They must
manage all the system of management, its policies regarding to it, process, culture along
with these structure of the organisation to realise the full potential of the resources. Then
only they can attain the sustainable competing advantage.
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5. Various modes of entry and also recommendations
To enter into foreign market has its own impact on the outputs. Expansion into external
market can be done in through 4 ways:
 Direct Investments – it is the control of provisions in the target market as it
includes the movement of the resources that basically involves the human
resource, funds and technology. It is made by grabbing the current business or by
setting up the new firm. It needs the high level of commitment as well as
resources.
 Joint Ventures – There are five aims that are included in entry in the market,
sharing of risk and reward and also sharing technology. Advantages that include
direct distribution channel as well as the political connections.
 Exporting – it is the direct selling of the products which are domestically
produced and sold it to the other nation. It is the classic mode to enter into the
foreign market (Harzing and Pinnington, 2010). The cost incurred in this method
is in the form of marketing. There is no heavy investment is required in the
production facility. For the exporting purpose 4 major players are necessary that
are Government, Exporter, Transporter provider as well as Importer.
 Licensing – this is very important as it allows the firm to utilize the property of
the licensor. These can be in the form of techniques of production, trademarks as
well as patents.
As TESCO is having a huge brand image in UK and other countries where they are working and
it is having a well developed working style so they have to use it in the Singapore to enter in
market. They have to use direct investment in that particular market because it is having higher
chances for business growth and minimum risk of losses. By direct investment they can provide
products and services to their customers as in that particular format as they provide their services
in another countries.
CONCLUSION
From the above report, it can be concluded that the various international strategies
adopted by TESCO are successful enough in expanding its business in the business environment.
The cited company is effective in managing its operations globally as it has created a good hold
in market. Pestle analysis shows that there are various policies of government which restrict
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TESCO to develop its market cross country. It has favourable conditions in Singapore as demand
for cited companies product are more in this area.
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APPENDICES
Appendix 1
PESTEL Analysis for Latvia (Europe):
Political factor: It is republic country and included in European Union countries. It is a
part of United Nations, NATO, IMF, WTO and Council of Europe. It has got a membership of
EU in 2014 and currently it is having diplomatic relations with more than 155 countries.
Economical Factors: As the country is a member of IMF, WTO and EU, these are
supporting to it economy to grow up. Estimated GDP of the country is $53 Billion and according
to this $27180 is per capital income of people living their which shows that these people are
having a enough purchase power.
Social Factor: Approx 19 million people lives in Latvia and it is social mix after World
War-2 Russians, Jews, Germans and Poles has came to live. Mostly Christians (79%) are living
there.
Technological Factors: It is a developing country and highly focusing on to improve use
of technology in different ways. Companies which are working in Latvia are continuously
improving their services and products by making innovative technological change.
Environmental Factors: The country is having a equal weather and mainly it has four
weathers. Most of the area is covered by greenery and forest, Latvia is highly focused for nature
conservation.
Legal Factors: Many types of laws are ruling for Consumer Protection Law, Company
establishment in Latvia. National legal system is based up on Constitution of the Republic Of
Latvia.
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Appendix 2
PESTEL Analysis for Taiwan:
Political Factors: Koumintang is the ruling party of Taiwan which is strict communist party and
now Taiwan is developing change in it's legislation to develop a democratic system. Government
is adopting liberalization which can be beneficial for those companies which wants to be a part
of Taiwan.
Economical Factors: It haves a regular developing economy and it's fast growing economy in
world. It has more than $520 Billion GDP and 0.69% growth rate in it. Unemployment rate is
just 4% which shows that most of the population is involved in the economical growth and it can
be concluded that people are having enough money to invest and shopping.
Social Factors: More than 90% people are living in this country are Han Chinese, 35% are
Buddhist and 33% are Taoism in the nation. Most of products are used in country are highly
affected by Chinese culture.
Technological Factors: It is technological hub and Taiwan is highest producer of Micro Chips,
more than 14 Million telephone and 24 Million mobile users are available. Taiwan is a leader in
technological sector and quality products related to digital communication and otyher gadgets.
So it is a technically advance country and it is having a lot potentials tyo give more better
products and technology to world.
Environmental Factors: It has a ideal weather and government is highly focused to secure their
climate so they have made many types of act like, Air Pollution Control Act, Waste Disposal Act
etc. to provide a better environment to live.
Legal Factors: Taiwan is highly focused to put pressure on it people to follow all rules and
regulations by which they manage their legal environment and make a restriction on illegal
things. It is focused to take more than 20% tax from foreign companies so by this they has
increasing their foreign incomes.
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