International Expansion of Tesco: Market Entry and Assets

This individual report analyzes the internationalization of Tesco Plc, a British multinational retailer. It delves into the current state of Tesco's global operations, highlighting the countries and markets in which it operates, with a particular focus on its expansion in South Korea. The report examines the market entry modes employed by Tesco, including joint ventures, acquisitions, and Greenfield investments, and discusses the advantages and limitations of these strategies. Furthermore, it identifies Tesco's firm-specific assets, such as technology, human resources, and brand image, and explores how these assets contribute to its success. The report also investigates country-specific assets and location advantages that Tesco leverages in its international ventures, such as emerging trends and improved economies in countries like South Korea. Overall, the report provides a comprehensive overview of Tesco's international strategy, emphasizing the factors that drive its global expansion and market success.

Individual Report
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Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Current state of internationalization of the company, countries and market in which Tesco
operates........................................................................................................................................3
Entry mode that company has chosen to internationalize its business........................................4
Company’s firm specific asset along with ownership advantages that it may have....................5
Country’s specific asset along with location advantages that company can have.......................6
Ways of performing in this country by Tesco.............................................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................11
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INTRODUCTION
International management can be defined as a process and activities of managing business
operations in organization that serve products and operate in more than 1 market (Luthans and
Doh, 2018). This present study is based on Tesco Plc that is well known British multinational
and merchandising retailer, headquartered in England. It was founded in the year of 1919 by Jack
Cohen. This study is going to discuss about internationalization and ways by which companies
can take advantages of external opportunities in new market. It will discuss appropriate mode of
market entry that has been chosen by Tesco along with advantages and reasons. It will also
discuss firm specific asset such as technology and country’s specific asset such as characteristics
of customers and others.
MAIN BODY
Current state of internationalization of the company, countries and market in which Tesco
operates
Internationalization is a process of making something international or it can also be said that all
actions that are being performed by one company for bringing a place under the protection of 2
or more nation (Santangelo and Meyer, 2017). There are several companies in retail sector of the
UK that have expanded their businesses in other countries and internationalize their company.
One o the main examples of this is Tesco Plc. Tesco is British multinational groceries retailer
that has around 6,900 shops. It has supermarkets, hypermarkets, superstores and convenience
shops. In regards to internationalization it is stated that Tesco has expanded its business outside
the UK and to around 11 countries. It expanded its international operations in Eastern Europe
and currently in Asia for its growth (Success of Tesco’s International Expansion in South Korea
Market, 2014).
South Korea is one of the attractive markets for multinational companies because of improved
economy and several countries’ advantages. Tesco has also made an effective growth in South
Korea. Tesco stated and said that there are several factors that may affect performance and
productivity of the company such as market environment of the country in which company wants
to operate. There are several countries where this company operates such as: Thailand, Poland,
UK, Slovakia, Czech Republic, Malaysia, Hungary, Ireland and others. So, it can be said that it
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has an effective strategy of internationalization that makes it able in becoming successful and
make market entry successful. So, overall it can be said that one of the main strategy such as
joint venture makes it able in internationalization (Luiz, Stringfellow and Jefthas, 2017).
Entry mode that company has chosen to internationalize its business
There are several companies who have entered into new markets but some of them become
successful and rest of them got failed. There are several factors that may affect success and
business expansion such as internal factors, external factors, financial stability, human resources
and others. But one of the main factors that plays a vital role in making market entry successful
is market entry mode or strategy. Selection of market entry after analysing advantages and
disadvantages can make it either successful or failure. It depends on the market where company
wants to entre, financial ability and products that it wants to sell. So, in regards to Tesco Plc it is
found that it mainly focuses on joint venture with local firms, acquisition and Greenfield
investment (The International Strategy of Tesco PLC, 2017). One of the main aims of choosing
these modes of market entry is to become the market leader in the foreign country. By making
use of this strategy it became successful in European countries, in Asia and South Korea.
Joint venture: It is a business arrangement or one of the effective modes of market entry. In this
type, 2 or more than 2 parties agreed to pool their resources for accomplishing common or
specific task (Parameswar, Dhir and Ongsakul, 2018). All parties share markets, asset,
intellectual property, knowledge and profit. There are several advantages of reasons of selecting
this mode as market entry and increasing sales into new market. Some advantages that Tesco has
taken by making use of this mode of market entry include:
 Access to distribution networks and new market.
 Increased capacity.
 Access to new knowledge, capacity, skills and skilled staff that can help in attracting
customers and increasing sales.
 Access to market resources and resources of other company such as technology, finance
and others to the great extent.
Rather than advantages there are some limitations of this entry mode that can be solved out if
company focuses on increasing its own strengths and skills. Some limitations of this market
entry mode include:
 Lack of flexibility or adaptability.
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 There is a great imbalance in things.
 For making use of this mode in successful manner there is requirement for both and all
involved company to focus on research and development strategy about new market that
can consume time.
 Due to agreement and contract, companies find difficulties to exit voluntarily.
On the basis of above discussed all advantages and market entry mode that company has used, it
can be said that company may make use of more than 1 mode.
Company’s firm specific asset along with ownership advantages that it may have
Those companies who enter into new market mainly focus on their specific asset that can
help them out in accomplishing goals and becoming successful in new market. There are several
types of asset that can be included in form specific asset and it varies company to company.
Some companies may use human resources, skills, abilities, technologies and some may use
patent, brand, goodwill and others skills. Whatever skills they have effective and unique may be
used because it is believed that company can get success when it has an effective feature or
resources. There are some assets have been found that are specific of Tesco and it is believed that
all these assets made it able and helped it out in accomplishing goals and also becoming
successful in South Korea and other countries.
Technology: Among all assets it is found that now in this digital era, Tesco cannot image
its life without technology. It is stated that with the help of technology, Tesco is increasing
customers’ experience. It is found that people of the UK and South Korea spend their lot of time
in social media and using technology. So, by making use of technology it is providing products
and services to customers at their door step. By getting products at home door and purchasing
products online, it makes them feel valued and save their time as well as cost. Due to lack of
time and busy schedule, people find problems in going to market and buying products. So, as per
the needs of customers, Tesco is solving their problem by making use of technology. Digital
marketing is one of the main examples of this technology that has made it able in attracting
global customers and retaining them with it for the long run.
Human resources: It is found that Tesco Plc treat its human resources or employees as one of
the most important resource and it makes employees feel valued and motivated towards
accomplishing goals of the company. It believes that employees are the one who perform several
functions and have an ability to make their company successful and for getting work done in an
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effective manner it is important to motivate them. It provides rewards in both financial and non
financial manner as per the needs of employees (Chen, Chen and Wu, 2017). It also believes that
for Satisfying customers there is requirement of satisfying employees because satisfied
employees put their extra efforts in providing qualitative products and services to customers.
Satisfied and motivated employees become loyal towards the company and it helps company in
improving image as well as increasing sales. So, after technology it can be said that human
resources or skilled workforce of Tesco is main specific asset.
Brand image: It is one of the main things that other companies cannot imitate. It is a
unique feature of this company and in this regard it can also be said that companies who have
effective image, are less likely to invest in promotional and others activities. Strong customers
base Help Company in promoting their products by words of mouth. Because of brand image in
the market, it finds easier in identifying partner for joint venture for entering into new market
and making it successful. It is also found that Tesco has attracted many customers in South
Korea only because of its image and positive reviews of other customers on it official website. It
is found in survey that customers like to buy products from it and it increases their experience.
In regards to ownership advantages it is found that patent and brand image can help it out
in attracting customers in the new market. Both these are the main things that cannot be imitated
and company can make use of brand image for influencing people for buying products and
services. Brand image directly helps company in popularity and promotion of products by word
of mouth. It is also found that Tesco has limited liability for its stakeholders and due to this it can
easily raise large capital sum as there is no limit to the number of shareholders (Martin, 2017).
Brand image can also makes it able to attract shareholders to the great extent, making strong
financial base and making it able in expanding business and investing in important functions like
advertisement and others. So, it can be said that due to limited liability of ownership type of
company and having these entire specific asset it can easily enter into new market and can
increase sales, profit margin and market share as well.
Country’s specific asset along with location advantages that company can have
Each country has some specification and some things that makes it unique and differ than others.
These specific features are being considered by companies while thinking about entering into
country for business expansion. In regards to Tesco, it is found that it chooses several countries
for expansion and South Korea is one of them. There are several factors that have been
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considered by Tesco related to this country before expanding business. So, one of the main
feature and effective asset of South Korea that attracts retailers include:
Emerging trends: It is found that people of this country are more likely to spend in groceries
and all products sell by Tesco and other retailers. Customers do not hesitate investing large
amount and purchasing expensive and luxury things if they get valuable and qualitative products.
It is one of the main reasons that attract retailers as retailers find easier in increasing profit
margin, sales and market share (Weon and Rothwell, 2020). Demographic and other
characteristics of customers play a vital role in becoming successful and by identifying needs of
customers, company can take several advantages.
Improved economy: It is one of the main factors that is being considered by companies while
making decision of expanding business and selecting country. It is believed that country with
improved economy is more likely to provide advantages to companies and opportunities of
increasing sales and profit margin as well. One of the main reasons behind this is it leads to high
investment capacity. People in improved economy are employed and come under high income
group. High income group of people tend to invest in food products, groceries and other things.
So, it can help companies in accomplishing their goals. It is one of the main specific assets of
South Korea that attracts retailers like Wal-Mart and others. In regards to economy of South
Korea it can also be said that it is highly developed mixed economy that is mainly dominated by
family owned conglomerates (Yoon, 2018). It is considered as the 4th largest GDP in Asia and
the 10th largest GDP in the world. From its ranking only it can be said that it has improved
economy and can help Tesco in accomplishing goals and increasing sales as well.
In regards to location, it can be said that it plays a vital role while expanding business into
new market and new country. Location is the thing that can provide several opportunities to
companies and it is stated that companies focus on location for providing convenience to
customers and making them feel valued. In regards to location advantages that Tesco can take by
expanding business in South Korea is increasing sales. It is found that in South Korea,
employees are bound to work for longer hours but Tesco turned this disadvantage into advantage
by delivering products to customer on the same day. It increases customers experience and
satisfaction level and it is beneficial for this retailer as it can improve its image (Zamborsky and
Ingrst, 2017). It is found that location where Tesco had stores in this country was in centred
market and customers find easier in gong there. Location selection also made this company able
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in becoming successful, attracting customers and retaining with its brand. Location plays a vital
role in attracting customers as it should be at place where customers can come easily. So, overall
it can be said that South Korea has several markets and location were customers find to come
conveniently.
From the above discussion of country’s specific asset of South Korea it can be said that it
has made it able in becoming successful and increasing market share. Tesco virtually created
new market on a country’s lifestyle and it adapted all things, culture and other things of this
country.
Ways of performing in this country by Tesco
In regards to South Korea it is found that Tesco made success and accomplished its pre
determine goals. There are several factors that have helped this retailer in becoming success in
this and other countries. It is found that Tesco was the market leader in Thailand and was
expanding its operations rapidly in China and South Korea. In the year of 2006 it was considered
as the second largest retailer in South Korea. In this country it was having 17% market share and
has more than 10 stores. In the year of 1999 it entered in South Korean market with its main
market entry mode joint venture with the retail arm of Samsung group. One of the main aims of
this retailer was localizing its products offering in this country and it became successful in doing
so with the help of Samsung and with its association (Nippa and Reuer, 2019). It operated in an
effective manner in South Korea market with its main idea of pile it high and sell it cheap. This
strategy made it able in attracting customers, increasing sales and improving overall brand image
in the eyes of stakeholders. Other main effectiveness of this retailer was it focused on all age
group and income group of people. By providing qualitative products at cheap price to middle
class of people it gave them low end image.
It is also stated that strategy of this retailer: pile it high, sells it cheaper was appealing
people. It improved economy of the country and people were becoming richer and looking for
more luxury and expensive items. But after sometime Tesco’s fortune turn back to worse and it
came to be considered an equivalent to failure. As a diversification strategy, imperial tobacco
company acquired Tesco but it did not go ahead because of poor image of Tesco that it made in
the end and due to fear of failure it remained like this (Tesco’s Globalization Strategy and its
Success in South Korea, 2018). After some time also, it tried to regain its image in South Korean
market by making use of marketing strategy and making them aware about effectiveness of
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products and services. There were several other retailers that entered in this market and tried to
get market share. Entering of all other retailers like Wal-Mart, France based Carrefour, increased
competition for Tesco and people also switched their brand from Tesco to these retailers. Some
customers remained loyal and they made it able in regaining image and competing with other
retailers.
CONCLUSION
From report it has been concluded that mode of market entry plays a vital role as it makes
able to companies in becoming successful in new market and accomplishing goals. This study
has discussed advantages and reasons of selecting joint venture as market entry mode. Further, it
has also discussed some specific task that companies have and on that basis they expand business
and try to accomplish goals. Every company has some specific asset such as brand image, patent,
skilled workforce, technology and others with which help they try to attract customers, satisfy
their needs and making them able to stay with the company for the long run. It has shown
advantages of ownership type that company has and external opportunities that they can take
with the help of type of ownership advantages.
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REFERENCES
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an internationalization strategy: The emergence of an African multinational giant. Global
Strategy Journal. 7(1). pp.83-103.
Luthans, F. and Doh, J.P., 2018. International management: Culture, strategy, and behavior.
McGraw-Hill Education.
Martin, C.J., 2017. Skill builders and the evolution of national vocational training systems. The
Oxford handbook of skills and training. Oxford University Press, Oxford. pp.36-53.
Nippa, M. and Reuer, J.J., 2019. On the future of international joint venture research. Journal of
International Business Studies. 50(4). pp.555-597.
Parameswar, N., Dhir, S. and Ongsakul, V., 2018. Purpose of international joint venture and
interaction post termination. Journal for Global Business Advancement. 11(6). pp.687-
705.
Santangelo, G.D. and Meyer, K.E., 2017. Internationalization as an evolutionary process. Journal
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Weon, S. and Rothwell, D.W., 2020. Dynamics of Asset Poverty in South Korea. Social
Indicators Research, 150(2), pp.639-657.
Yoon, D., 2018. Rising unemployment among young people and improved employment policy:
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Zamborsky, P. and Ingrst, I., 2017. Emerging Multinationals Innovating in Emerging Markets:
Motives and the Role of Location Advantages and Disadvantages. Available at SSRN
3714080.
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Tesco’s Globalization Strategy and its Success in South Korea. 2018. [Online]. Available
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