International Business Strategy: Tesco in US and India Analysis

This report examines the influence of host country characteristics on the internationalization process, using Tesco as a case study. It compares and contrasts Tesco's entry into the United States (a developed multinational economy) and India (an emerging multinational economy), analyzing the impact of economic growth, regulations, business culture, infrastructure, and entry strategies. The report highlights the differences in business environments, including market orientation, government regulations, consumer behavior, and cultural dimensions. It also discusses the Uppsala model theory and its relevance to Tesco's internationalization, emphasizing the importance of ownership advantages and market knowledge. The analysis provides insights into the challenges and opportunities faced by multinational companies when expanding into different host countries and underscores the need for tailored strategies based on specific country characteristics.

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How characteristics of the host country influence the internationalisation process
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Introduction
Over the past decades, Internationalization has been of great interest to most of the
business organizations. The following report, therefore, focuses on determining how
characteristics of the host country influence the internationalization process. To achieve this, the
story explores and compares the process undertaken by a company to enter both in an emerging
multinational economy and developed a transnational economy. The chosen company for the
report is Tesco with a focus on India and the United States as an emerging multinational
economy and established a multinational economy respectively.
Tesco PLC
Tesco PLC funded by Jack Cohen in 1919 is a British multinational grocery with the
Headquarter at Welwyn Garden City, Hertfordshire England, and the United States. Tesco forms
the third largest retailer in the global gross revenue scale with different shops across Asia and
Europe. It majors in retailing different product such as clothing, furniture, toys, books, and
petrol.
Comparative analysis of the business environment in the US and India
Economic growth
Over past decades developed countries such as the United States have provided the
backbone and significant share to the development of numerous multinational companies due to
the availability of direct investment, however, in the past decade, developing countries have
provided a large market for most of the multinational companies(Martens, Caselli, Lombaerde,
Figge and Scholte 2015,p.210). The developing countries such as India and China form the basis

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of the emerging market in the 21st century and are quite significant to the multinational
companies as a result of their economic transformation. According to Welch (2015, p.362),
emerging markets refers to countries that have lower economic development and are always
undergoing through a transitional process by the governments to facilitate and promote both
internal and external investors. Emerging markets are having played significant roles in the
growth and development of global business since most of the emerging markets tend to grow
faster than the developed markets. As China was focusing on the FDI and producing durable
products, India, on the other hand, has been focusing on providing outsourced services
(Gillanders and Whelan, 2014, p.538). Currently, emerging markets dictate about 86% of the
global population. Both the emerging and the developed multinational economies have different
characteristics that pose different impacts on the internationalization process.
The United States is the global largest and most technologically powerful economy with
per capita of more than $ 45,000. The United States is one of the largest recipients of foreign
direct investors. The country received more than $450 billion in the economy during 2016. The
economic status of the country facilitates this; the US economy tends to offer higher returns
concerning emerging markets such as India. The US is more market-oriented to the extent that
private business entities and individual determine a large part of the decisions as the government
tends to purchase products from the private companies (Bortz and Kaltenbrunner, 2018, p.378).
Most of the business firms in the United States tend to enjoy greater flexibility than business
organizations in other countries such as Europe and Japan, ranging from decisions in laying-off
excess workers, development of new products and expansion of plants. The business
environment in the developed multinational economies is based on different factors such as

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liberalization of markets, political and economic stability resulting in high rate global
investment.
On the other hand, India is among the growing global economies alongside China and
Russia. The India economy is more based on conventional farming, handicrafts, modern
industries, modernized agriculture and a variety of services (Barman and Saikia, 2016, p.5). Most
of India labour is focused on English education thus provides the significant exports of
information technology services, software services, and business outsourcing services. By the
end of 2010, India’s economy transformed tremendously to challenge the financial crisis thus
attracted a growth the exceeded 8% per annum. India’s economy is more based on the inward
and outward FDI. The recent deregulation of the outward FDI in the late 1990s by the Indian
government has facilitated the accumulation of the financial resources for the foreign acquisition
that in turn, has promoted the pattern of inward investment. In Indians history, most of the firms
enjoy the ownership advantage. The ownership advantage is traced back during the post-
independence economic history where English dominated the tertiary education.
A large number of Indian consumers tend to be price-centric. The entry of Tesco
Company is also facilitated with the nature of consumption. India is one of the largest consumer
markets in the world, and over the past deceased, the consumption rate has tremendously
increased. For example, consumer spending in India rose from $549 billion to $ 1,060 billion
between 2006 and 2011 and is projected to rise to about 7.3% in the next 20 years (Kumar, 2016,
p.99). It is also anticipated that by the end of 2040, most of the Indians will be classified under
middle-class since their daily expenditure will be over US$100 per person. The projection thus
means that the purchasing power of the Indian will increase, and this is an excellent promise to
the new international investors especially, Tesco that focus on the consumer's goods. The Indians

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consumer mentality of price makes it difficult for the international business to survive under low-
priced environment.
Regulations
The US government has constructed rules-based systems that are consistent across
numerous countries making it possible for any investor to succeed in the market. High economic
growth, political stability, good infrastructure, and technological advancement all contribute to
the success of both the domestic and foreign companies in the United States (Reis, Fleury, MTL,
Fleury and Zambaldi, 2018, p.173). However, some of the business such as Tesco failed to pick
up in the US as a result of some factors. The United States has recently scored very low in terms
of the business environment for the international markets.
The United States is always regarded as one of the parts as the home of free-market
economic policies, that has always facilitated the vast development of the business environment.
The recent United States focus on international business regulations has resulted in challenges in
making entry into the environment (Stokes, 2018, p.135). The government controls result for the
past recessions that made the country economy to go down, thus in the process of re-establishing
it, the carried comprehensive reforms on the financial markets regulations. The business
regulations that cover the complex Tax Laws, Foreign Bank Account Reporting and other strict
environmental laws tend to disfavour other foreign companies trying to work in the country.
On the other hand, the Indian government liberated most of the regulations since the
1990s have facilitated the investment, entry, and growth of many companies. Operation in India
was entirely different from other countries. The success of the new entry depended mostly on the
partnership of the company with the existing Indian company in establishing labour relations.

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However, since the reforms in 1991 by the government, the factors do no longer exist now
(Schmidt, 2017, p.1899). Some of the business might not still thrive in the India market as a
result of the slow government reform process in allowing foreign investors since the government
permits only some key areas. Key sectors such as agriculture and telecommunication have high
tariff spikes, and this will make it difficult for Tesco retailers that also deal in the food supply to
thrive in the Indian economy.
Business Culture
In every country, there is a different business culture. The United States business culture
tends to be more individualistic and competitive. These values tend to influence the performance
of a business. Most of the people have different shopping habits thus makes it difficult for
foreign companies to evaluate and determine the best product to suit the entire generations. This
forms one of the reasons that led to the failure of Tesco in the United States since it was unable
to break the individualism culture if the American people who only believed in few companies as
the supplier of readymade food (Butler, 2018, p.198). The Power distance index of the United
States and the United Kingdom tends to be equal, thus makes it have more similar levels of
authority that facilitated easy entry of a new product into the market.
India is 137th in the global ranking in terms of size. The country has different sites that
operate under different tax, culture, and rules. These inconsistent regulations tend to affect the
nature of the business, especially to the new international ventures. While Unity diversity is one
of the Indian strength, it also forms a basis of weakness and disadvantage for foreign investors,
since they face a big problem in coming up with the Indian culture. According to some scholars
such as Sahoo (2017, p.6) relying on joint ventures is one of the best entry modes to such

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culturally distant markets. According to Hofstede's, cultural dimensions, India tends to have high
power distance than the UK, thus provides a larger gap of authority making it difficult for the
entry of Tesco into the Indian market.
Infrastructure
Infrastructure forms an integral part in decision making during the internationalization of
companies. The physical market infrastructure such as communication system, transportation
tends to facilitate the growth of the business, thus in the United States, that poses good
infrastructure favours the entry of much international business.
On the other hand, India has poor roads and train connectivity, that makes it difficult for
investors top cross borders. The poor infrastructure that makes it difficult in selecting a suitable
place especially the international business in conducting their business thus tends to make many
investors to shy away from such economies since it will cost them a lot of money in establishing
their business (Battistuzzo and Piscopo, 2015, p.33). Tesco having to deal with food will face
difficulty in acquiring storage, delivering foods in the correct status and processing of the foods.
Entry strategy
In every country, there is always an optimal internationalization strategy need to be
followed regardless of the company type. The entry strategy in these two countries: emerging
and developed multinational economies thus need to focus on different issues. The entry strategy
in such developed multinational economies always tends to be difficult and challenging than
emerging economies (Beerepoot and Roodheuvel, 2016, p.1378). In the United States most of
the entry modes are through direct export and licensing, that requires the company to go into

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direct costs with the market audience, thus without market knowledge, it makes the entry
difficult.
On the other hand, the best market entry mode in India is through joint venture mergers
and acquisitions between the foreign investors and the Indian companies. The joint ventures tend
to account for about 83% of the general entry samples. Examples of companies that have
flourished in India through merging acquisitions are Tata Motors that acquired Jaguar. These
mergers and acquisitions in India are based on the internal.
Internationalization and the theories
The term internationalization acquires numerous definitions; however, in a more general
description, it refers to the process through which a company gets involved in the international
markets (Sacramento, 2018, p.61). All companies and business organizations have operational
roots in their various domestic and a long-term plan, and they cross borders to increase their
market command, to reduce operational cost such acquiring labour cost at low cost and many
other factors.
Uppsala Model Theory
Concerning the theories, it is evidential that the Uppsala model is the best approach to be
used in by Tesco in making an entry into the Indian market. Uppsala Model Theory is more
grounded on the Swedish Analysis of manufacturing companies’ that follow the international
markets and is focused on the information of business efficiency in the international market. This
is because of the ownership advantage posed by most of the Indians domestic business entities.
Indian liberal environment resulted in greater participation from abroad and the approval for any
investment in India depends mostly on the percentage of collaboration (Oliveira, Figueira &

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Pinhanez, 2018, p.32). In the past decades, there was always put between the international
companies and the Indian companies, however, during the 1995 and 1997, when the power of
services was opened in India, most of the direct investment were approved. The approval of the
international companies in India thus only took place only based on the percentage of
involvement of Indians company. Companies such as OrmoSys used Uppsala Model to
internationalize into the U.S. The major factor was the search of further growth and lucrative
market since it uses the available knowledge from the surrounding countries such as Poland and
Turkey to determine the U.S. marketability. Consequently, Technica Engineering GmbH’s
founder Mr. Rodriguez based the expansion of the company into Turkey from the knowledge and
suggestion of the employees.
Institutional based view theory in Mittal Steel Company
While in the US economy requires Institutional based since most of the rules and
regulations, infrastructure, political, cultures, and economic stability facilitates global
investment. Institutional based view theory refers to the humanly made constraints that facilitate
the economic social and political shape of a country that widely affect the contract enforcement
(Ascani, Crescenzi and Iammarino, 2016, p.411). Tesco internationalizes with an aim to
diversify the risk that comes with operating in a single market as well as to achieve different
growth rates that are posed by different economies (de Chaves, Valéria, Reuther, and Fernandes,
2017, p.62). For an example of companies that have used the institutional based theory include
the Mittal Steel, that was originally born in India but was driven away by the Indian regulations
that led them to invest into other countries such as in China. The prosperity of Mittal Steel was
as a result of the recent institutional transition in China. In the general view, internationalization
thus has both positive and negative impacts on business activities.

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Electric paradigm theory in Barclays Bank
Electric paradigm theory proposed by Dunning, focus more on analyzing the decisions
behind the firm's location, internationalization advantage. According to the method, companies
that go beyond the national border possess ownership advantages about their competition in the
domestic and international market. Different multinational companies have used d Electric
paradigm theory to internationalize, such as the Barclays bank. According to the theory, the
multinational banks have succeeded in moving into new markets since they can act under two
forces; that’s a super-national financial market and domestic market, ownership, and location of
specific factors. The ownerships specific advantages allow the banks to access credit from the
parent’s banks, differentiation of services and economies of scope. The location-specific
advantages allow the firm to expand beyond borders due to proper economic performance in the
domestic country.
Conclusion
From the report, it is conclusive that the internationalization process depends on various
characteristics of the host country. In the past decade, emerging multinational companies have
provided better opportunities for foreign investment more than the developed transnational
economies that possess better business environments such as political stability, economic
growth, infrastructure, and technological development. Tesco thus needs to have a full market
review before deciding to embark on developing into the two different markets, since without
extensive research; it is more likely to fail.

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