International Business Environment: A Comparative Study of Tesco & M&S

This report provides a comprehensive analysis of the international business environment, focusing on a comparative study of two major players in the retail sector: Tesco and Marks & Spencer. The report begins by defining international business and its environment, highlighting the factors that influence multinational corporations. It then delves into a detailed comparison of Tesco and Marks & Spencer, examining their business strategies, including marketing, human resource management, pricing, and promotional activities. The analysis extends to a financial comparison of the two companies, looking at revenue, operating profit, and earnings per share. Furthermore, the report explores how each company achieves competitive advantage, whether through low-cost strategies (Tesco) or differentiation (Marks & Spencer). The role of technology in enhancing their market presence and profitability is also discussed, with examples such as Tesco's self-service checkouts and IT in supply chain management. The report concludes by summarizing the key differences and similarities in their approaches to navigating the complexities of the international business environment.

International
Business
Environment
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TABLE OF CONTENTS
Table of Contents.............................................................................................................................2
Question 1........................................................................................................................................3
References......................................................................................................................................10
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QUESTION 1
Comparison of activities of two companies in same industrial sector
International business can be defined as the sale and purchase of products and services
across the domestic territory of a country. On the other hand, environment can be defined as
some of the external factors or forces which affect the overall activities of organizations. Thus,
international business environment consist of factors which affects operations of multinational
companies. In modern era, many organizations have started to operate in international level to
increase their sales and profitability (Hill, 2008). Further, not only private but many government
organizations have also expanded their operations to global level. One of the main objectives
behind going internationally is to enhance opportunities for future growth and development. It
has been observed that, before going for any kind of international expansion companies must
have a very long and wide vision. In addition to this, businesses are also required to evaluate
social, economic, political and environmental condition of the country in which they are
planning to operate.
An analysis of the above mentioned factors will help companies to operate effectively in
international environment. It can be also stated that, there are ample opportunities for growth and
development for organizations in the global market (Czinkota and et. al., 2009). Business can
easily increase their sales, profitability, and market share as well as customer base. On the other
hand, the risk involved in international business is very high and companies are required to
invest huge amount of financial resources. Further, it has been also witnessed that when
companies operate at global level there are various factors which affects decision making and
resources allocation process. The degree of competition is very high in the international
environment and it is not easy for companies to survive and gain competitive advantage (Wild,
Wild and Han, 2014). Other than this, it can be also stated that it is also not easy to retain
customers as they have wide variety of choices and alternatives available with them. Therefore,
multinational companies always seek for ways and strategies with the help of which they can
hold their customers and achieve competitive advantage over other market players.
One of the major challenges which are faced by companies while expanding their
operations beyond domestic territory of a country is regarding whether to hire local people or to
go for expatriate. In addition to this, expatriate can be termed as the individual who is sent
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abroad for a specific period of time for a particular project. Most of the time companies fail in
their international venture because they fail to understand factors such as language, labor
standards, political, social conditions and culture of the international country (Palmer, 2005).
Thus, every business is required to take care of the above mentioned factors and frame strategies
accordingly to stay profitable in the global market. There are many countries in the world which
has very cheap labor available and thus it encourages businesses to start operating in such
countries so that, they can lower down their cost of production and enhance profit margin. In
order to understand the overall concept of international business environment in a more effective
manner two companies of Tesco and Marks & Spencer of the retail sector has been taken into
consideration. Further, both the businesses are operating successfully in the international
environment.
Tesco is general merchandise and a British multinational grocery retailer which was
established in the year 1919. It operates in more than 10 countries of the world with more than
6800 stores. In terms of profits, the company can be termed as the largest retailer and in terms of
revenue Tesco is the third largest retailer of the world. Other than this, in the year 1991, the
company has diversified its range of offering by introducing products like electronic, books,
clothing, petrol, toy, furniture, internet and finance based services. One of the main strategies
which are used by the company is that, it uses its own brand of products. In the year 2012, the
company was having highest market share of 30% in UK leaving behind the other market player
such as Asda, Sainsbury, and Morrison etc. On the other hand, Marks & Spencer is a British
multinational retailer established in the year 1884. Further, its range of products includes home
products, luxury food products and clothing. With a staff of more than 83000 employees the
company serves its products and services in many countries of the world. Its first international
expansion was seen in the year 1973 where the company opened a store in Canada.
It has been found that, Tesco focus on its marketing activities to survive in long run and
enjoy higher profits. Further, to maintain its current position in market, the company tries to
identify changing market trends, need of customer and competitor policies. This helps the brand
to deliver products and services according to the need of customer and attain competitive edge
over other market players (Alexander, Quinn and Cairns, 2005). It can be also stated that, the
firm aims at gaining lifetime customer loyalty and in this aspect it try to find out the factors
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which creates dissatisfaction among people in the market who are using its products and
services. Other than this, the company carries out heavy advertisement on radio, newspaper and
television to communicate with its customer and provide them with information regarding new
products, schemes, discounts and other offers. It can be also stated that, manager of Tesco also
focuses on developing effective policies to manage human resources. The policy creates
satisfaction among employees and also helps them to retain in the long run (Palme and Quinn,
2005). The firm also provides training and development session to employees at regular interval
to enhance their skills and efficiency. It also takes care of the fact that proper communication and
coordination is developed among workers so that, they can perform their task in more productive
manner. Other than this, the company provides monetary and non monetary rewards to its
employees to motivate and encourage them to deliver better products and services.
On the other hand, Marks & Spencer stresses on promoting its products and services to
people in the market. Further, advertisement and internet marketing are the main areas on which
the brands generally focus (Barney and Clark, 2007). It can also be stated that, the marketing
activities of the company are very effective as it helps in satisfying need and demand of people
in market. In aspect of human resource, the company always tries to enhance skill of employees
so that, they can become more effective and efficient. The policy of human resources focuses on
providing better work environment and equal growth and development opportunities to
employees. This helps in motivating the workers and retaining them for long term.
By comparing activities of Tesco and Marks & Spencer it can be stated that, both are
performing really well. Tesco has targeted people of all income group whereas Marks & Spencer
has mainly targeted the people who belong to higher income group (Hoffman, Hoelscher and
Sorenson, 2006). Price can be defined as the monetary value which customers are willing to pay
for a particular product or service. Marks & Spencer has adopted a high price strategy in which
the company delivers superior and quality products at high price. On the other hand, Tesco has
adopted a low price strategy in which the company aims at attracting more customers, increasing
sales and profitability. It has been found that, employees are one of the most important assets of
any organization. Tesco has a workforce of around 5, 000, 00 employees whereas Marks &
Spencer has around 85000human resource. In addition to this, both companies have created
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effective human resource policies to retain their employees and make them more productive by
satisfying their need and demand.
Promotion can be defined as the way in which businesses communicate with their
customers. It has been observed that, both companies focus on carrying out high promotion for
their products and services (Carney, 2005). Further, doing advertisement with the help television,
radio, newspaper, online etc are some of the main aspects of promotional strategy of Tesco as
well as Marks & Spencer. The comparison of the financial activities of both the businesses
highlights the fact that Tesco is way ahead of Marks & Spencer. In the year 2014, the revenue of
Tesco was £m 63557 whereas the revenue of Marks & Spencer was £m 10,309 (Annual report,
Marks & Spencer, 2014). Other than this, the operating profit of Tesco in the year 2014 was £m
2631 whereas for Marks & Spencer it was 694.50 (Annual report, Tesco, 2014). The earnings per
share of Marks & Spencer were very high as compared to Tesco. Further, it was having a 32.50p
as basic earnings per share whereas for Tesco it was 23.75p.
In modern era, along with higher sales and profitability every business strives to achieve
competitive advantage. Further, it can be defined as a situation in which people in market prefer
to choose products and services of a particular organization over its competitor. It has been
observed that, it is very essential for companies to main competitive advantage to survive in long
run and achieve higher profits. In addition to this, it can be achieved with the help of
differentiation or by low cost (Reeves and Deimler, 2011). It can be stated that, these are the two
major factors which helps organizations to achieve advantage over other market players. A firm
can use differentiation strategy where it can produce and sell those products which are unique
and different from what other companies in market are offering. Further, it encourages customers
to buy and use such products and services. Adding distinctive features to existing products can
also help companies to create a differentiation. It can be also stated that, such kind of strategy
provides a direct competitive edge to businesses.
On the other hand, businesses can also opt for a low price strategy to gain competitive
advantage (Palmer and Owens, 2006). As per this strategy, companies low down their overall
cost of production and operations and increase profit margin. Sometimes aggressive discounting
is also adopted by companies to attract more customers and achieve competitive advantage over
other market players. It has been observed that, Tesco has adopted the strategy of low cost where
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it delivers products and services at very nominal prices. This has helped the firm to increase its
customer base and give people a clear reason regarding why they should prefer products of
Tesco. On the other hand, Marks and Spencer has adopted the strategy of differentiation to gain
competitive advantage. The company delivers high quality and superior products to people in
market at very high price.
In modern era, the use of technology has helped Tesco to achieve higher profits and
enhance its customer base. The corporate has invested huge amount of financial resources in
making its website technologically advanced. Further, it has direct resulted in increasing sales
and profit of the company. In recent years, the company has promoted itself as a discounted
retailer and technology has played a significant role in accomplishment of the same. One of the
best examples is implementing self service checkouts in various stores of Tesco. The main
advantage of using such kind of check out system is that, it allows customers who have
purchased very less commodities to avoid lengthy queues and complete their transactions quickly
(Barney and Clark, 2007). It has made very easy and convenient for people to buy products and
services from Tesco. This has assisted in reducing the amount of time taken by customers in
queues and also helped in monitoring the lines. It has been also observed that, the company has
implemented IT in its supply chain management which has helped in lowering down the cost and
has enhanced the profit margin. The company has also increased the efficiency and effectiveness
of its workers with the use of technology.
On the other hand, Marks &Spencer is also using latest technology to achieve
competitive advantage over other retailers in the market. The company has begun to use radio
frequency identification technologies (RFIT) in which microchips are used to track goods
electronically (Want, 2006). Other than this, the company uses high end technology to ensure
the fact that products are available on time and the store is filled with variety of products and the
brand has also established its online store with the help of information technology. It has been
observed that, it has gained competitive advantage from its online store. One of the main
advantages of this is that it has made convenient for people to buy products of Marks & Spencer.
It has also reduced the cost of the company by eliminating the cost of rent and maintenance of
physical store (Jones and et. al., 2005). The company has also implemented high end technology
in its delivery system. The products which have been ordered by customer can be tracked easily
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with the use of technology. In addition to this, technology has made delivery system of the
company more effective and productive. It can deliver products on time and in a more accurate
manner with the help of technology (Rowley, 2005). Therefore, it can be stated that, the use of
technology has helped Marks & Spencer to maintain competitive advantage.
It can be stated that both the companies have potential to sustain high performance with
the help of technology. As per the view of Michael porter there are five forces which drive the
performance of every business (Porter, 2008). The forces are buyer power, supplier power, threat
of substitute products, threat of new entry and rivalry among existing businesses. Further,
organizations are required to take care of the above stated factors in order to survive in the long
run. Retail sector of the world is one of the most potential and highly competitive sectors. Thus,
it is not easy for businesses such as Tesco and Marks & Spencer to have competitive advantage.
In addition to this, both companies have potential and can use technology to attain competitive
edge (Hill, 2008).
It has been observed that, the customer in retail sector has wide variety of choices and
alternatives available. Therefore, it is not easy for organizations to retain old customers and
attract new ones. Tesco and Marks & Spencer have the potential to use technological tools such
as internet to promote coupons and rewards to their customers. Both the companies are using
online platforms to market their products and services. Further, the companies can offer rewards
in such a way that every time a customer shops form the above mentioned retail stores and then
they will get shopping points (Hoffma, Hoelscher and Sorenson, 2006). This will help businesses
to make the customer loyal and retain them for long run. Therefore, it can be stated that, use of
technology will help Tesco and Marks & Spencer to divert power of customer and gain
competitive advantage.
It has been also witnessed that, suppliers of businesses have great powers and can drive
the price and profitability of companies. Tesco and Marks & Spencer also have potential to lower
down the power of suppliers and earn adequate profits. Further, companies can use internet as a
source to find more suppliers. In modern era, internet offers a highly potential platform which
can help the above mentioned retail companies to find large number of suppliers (Carney, 2005).
Other than this, businesses can easily achieve competitive advantage in market where different
type of challenges is present especially for new businesses. Those market where there is no
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barriers possess high competition and it is never easy for firms to attain competitive advantage.
Tesco and Marks & Spencer have the potential to use technology and create barriers for new
entry in retail sector. This will help the above stated companies to become ahead of market and
create barrier of entry.
Thus, it can be stated that Tesco and Marks & Spencer have created their unique and
distinctive brand image. Further, Marks & Spencer has used the strategy of delivering superiors
products at high prices whereas Tesco has used the tactic of low price to gain competitive
advantage. Both are highly competitive companies of supermarket of UK as well as overseas
(Reeves and Deimler, 2011). It has been observed that in terms of profit and number of
employees Tesco is way ahead of Marks & Spencer. Other than this, while operating in
international business environment and to gain competitive advantage, the above mentioned
organization are required to take care of various environmental factors. Political, economic,
social, technological are some of important factors which business need to analyze while
operating in the international environment. Further, they are required to frame policies and
strategies in aspect of the same.
On the other hand, by comparing the activities of Tesco and Marks & Spencer it has been
found that both are carrying out effective promotion and advertisement of their products and
services. Tesco has large customer base and its financial performance is also very good. There
are some areas which Marks & Spencer need to improve and one of them is its financial
performance (Doh, 2005). The online store also required to be developed in order to enhance the
experience of customers. It can be also stated that, by using the theory of competitive advantage
can help organizations to achieve competitive edge over other market players. Both the
companies are not focused on higher profits and sales but are well aware of their responsibilities
towards environment. Corporate social responsibility is an integrated part of Tesco and Marks &
Spencer overall business strategy. In addition to this, the above mentioned companies always
seek for ways through which they can lower down the impact of their operations on environment.
This directly contributes in enhancing the brand image of the businesses and provides them with
competitive advantage (Hoffman, Hoelscher and Sorenson, 2006).
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REFERENCES
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Annual report. Marks & Spencer. 2014. [Online]. Available through:
<http://corporate.marksandspencer.com/investors/b73df1d3e4f54f429210f115ab11e2f6
>. [Accessed on 6th October 2015]
Annual report. Tesco. 2014. [Online]. Available through:
<http://www.tescoplc.com/files/pdf/reports/ar15/download_annual_report.pdf>.
[Accessed on 6th October 2015]
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