Critical Discussion On Tesco Globalisation Strategy

Question

Task: Critically analyse the benefits that a company might obtain and the drawbacks that they may experience from the globalisation of markets. Use company and country examples in support of your discussion.

Answer

Introduction
Tesco globalisation strategyof market is crucial process for the success of company at the national as well as international level. This is an ongoing process in which the societies, cultures and economies are being integrated. Basically, globalization has both benefits and drawbacks for the companies operating in different markets. In terms of definition, Tesco globalisation strategycan be described as the process through which the company is able to transfer their money, cultures, goods, raw material and products between few countries having few or no barriers. By this process, markets at the global level are interconnected with the increased trade and cultural exchange (Pieterse, 2019). This essay provides a critical analysis of benefits and drawbacks experienced by the companies from globalization of markets. For supporting the arguments and discussion, specific examples of company and country is also provided. In order to analyze the impact of globalization, famous retail company Tesco is selected.

Company background
Tesco is the largest food retail company of United Kingdom. The company was founded by Jack Cohen in 1919 and now, this is ninth largest retailer in all over the world. With aggressive foreign expansion strategy, the company is operating its business in various countries including China, US, South Korea and Eastern Europe. The company is operating with 6,784 stores and 500,000 employees in all over the world. Currently, the company vends about 40,000 food products along with non-food and clothing lines. Apart from this, Tesco is also dealing with various petrol stations due to which it is considered as major independent gasoline retailer in UK (Tesco Plc, 2020). Basically, the company has achieved success through good store locations, strong marketing techniques and effective inventory management. In order to operate the business at global level, Tesco invested heavily in research and development process in the established markets. Based on the analysis, the company decided to enter in emerging economies where it has to face little competition such as Asia and Europe. There are some benefits and drawbacks experienced by Tesco globalisation strategy.

Benefits
High market share
Globalization of market and production has significant role in the success of Tesco. This is one of the largest retailers of UK operating its 65% of business outside the country along with 12 international subsidiaries. While operating the business at global level, the company is able to capture more market share by technological innovations which are emerged from international subsidiaries. Because of interconnections of markets, the organizational structure and operating skills of Tesco has been converted completely as the company has to learn and adapt the marketing processes of host countries. By using intra firm networks o telecommunications and face-to-face practice transmissions, Tesco is able to transfer its knowledge in international business operations (Dauth and Suedekum, 2016).

Technological advancements
With the help of innovative technologies and internet, Tesco is able to capture 13 countries in its business operations along with 3 billion customers. Due to inventive technologies, Tesco is operating as the largest online grocer in all over the world. The company has effective promotional strategies i.e. it has issued six million club cards to the employees in South Korea (Coulibaly, Erbao and Mekongcho, 2018).

Expansion opportunities
This is one of the key benefits experienced by Tesco at the global level. Basically, success is one of the keyobjectives for a company. Growth related to market share, profit, revenue, asset base and other features needs to be achieved by the company to become successful at the global level. Tesco globalisation strategyprovides a valuable growth opportunity to the company in various countries. According to Crane & Matten (2016), companies grab global opportunities when the chances in the local markets are completely exploited. Tesco globalisation strategyallows the company to make more revenue and profits as the company is able to get access of international customers that enhances its market share (Crane & Matten, 2016).

Human resource opportunity
Globalization of market provides valuable opportunity to Tesco in human resource. Employees in the organization have a crucial role to achieve the set goals and objectives. While entering in the new country, the company is capable to get access of personnel from the international labor market. Tesco’s businesses in the overseas markets are operatedby the employees from the host country. Though, company also seeks help from some experts to manage the execution of business core values and visions. Basically, Tesco globalisation strategyoffers a chance to Tesco to enhance the skills of employees through effective exchange programs. It also makes the company able to get differentemloyees that implement creative ideas in the business operations at the global level (Duncan, 2018).

New capital sources
By operating at the global level, the company is able to get access of new sources of money. Shortage of money is the keyaspects that impact on the business operations in the negative manner. Globalization of market and invention offers access of massive sources of money to the company. In simple words, companies can get access of money from the financial institutions, capital markets, and investors of host country. For Tesco, globalization is beneficial for getting diverse source of capital.

Business innovations
Innovation in the business is a main success factor for the company while operating at the global level. Tesco globalisation strategy supports and promotes innovation in specific ways. In case of Tesco globalisation strategy, it is helpful in increasing competition in the business environment by implementing creative strategies and tactics. Further, innovation is an important factor for Tesco to survive in the global market (Bretos and Marcuello, 2017). The company has heavily invested in the research and development process with the objective of making continuousdevelopments. This is helpful for Tesco to operate its business in the competition environment in global market. In international market, the company faces strong competition from Wal-Mart and Aldi. These two retail companies have string brand image and position in terms of market share. The high-level rivalry has forced Tesco to implement effective and inventive strategies to achieve high market share. By the Tesco globalisation strategy, the company is also able to get diverse talents who provide new and innovative ideas to gain high profit and revenue (Collins, 2015).

Large customer base
Customers have crucial role in enhancing the profit and revenue for a company. By the globalization of market, company is able to get large customer base. Tesco globalisation strategyis operating in 13 countries in all over the world. Customers in each country have different needs, desires, buying behavior and consumption pattern. By providing the desired products with effective offers and discounts, Tesco is able to attract large customer base in the European and Asian countries (Filatotchev, Bell, & Rasheed, 2016).

What are the drawbacks for Tesco globalisation strategy?
Cultural diversity
Each and every country has different culture and norms and this creates a challenge for a company to operate its business at the global level. Countries may have differences in terms of consumer’s needs, behaviors, languages, buying and consumption patterns and preferences for products (Mir, Hassan&Qadri, 2014). As compared to local market, Tesco globalisation strategyhas to face challenges in countries like China and US while expanding the business in these countries. In US market, consumers always prefer good choice of location of the store. In case of Tesco, selection of the location is the biggest fault done by the company. In UK, company located its stores near train stations and subway hubs which were profitable for the business. However, people hardly use trains and subways in US which were the cause of a big loss for Tesco in US market (Corstjens, 2012).

Difficult macroeconomic conditions
Differences in macroeconomic conditions of countries also create a big drawback for the company while expanding the business at the global level. Different currency units in the countries create problems for a company to convert the currency due to fluctuations in currency rates (Baylis, 2020). Along with this, different monetary policy and regulations are also problematic for the company entering in particular country. In case of Tesco, the company has to face difficult macroeconomic conditions in Thailand. Along with this, the operations of Tesco were also affected due to ongoing effect of financial crisis in Europe (Askew, 2013.)

Variances in marketing infrastructure
Each country has marketing infrastructure and pattern which a company needs to understand while expanding the business. Basically, it is crucial for the company to have proper research on the marketing infrastructure of the country in which it is going to start its operations. For instance, promotion technique in one country is marketing campaign and on the other hand, social media marketing is used in another country. Such differences create big challenge for the company in the new market. Tesco was failed to expand its business in China market as the company adopted solo Tesco globalisation strategyfor business operations (Guo & Gallo, 2017). The expansion of Tesco required local Chinese partner. Along with this, Tesco expanded its business late in China as compared to its rivals which was a big reason of failure. In case of promotional strategies, the company adopted similar promotional Tesco globalisation strategyin China used in UK i.e. company decided to attract the Chinese customers through Clubcard which is very popular in UK. But Chinese customers did not prefer Clubcard as they like to shop and carry multiple store cards. The lack of this information was the cause of a big loss for Tesco in China market (Stiglitz, 2017).

Political environment
Each country has different political environment in terms of directorship, democracy and system. Along with this, the country has diverseeconomic environment i.e. mixed economy, market economy, political instability and command economy. These are particular challenges faced by a company while entering in a new country. Government in foreign countries has different policies, rules and priorities (Dryden-Peterson, 2016). It is very crucial for the company to understand and follow the rules to achieve growth and success in the global market. Tesco is operating in 13 countries in Europe and Asia. With the international operations, the company has to deal with many political factors i.e. unemployment, political instability and tax rates affecting its business process. The tax on supermarket was proposed by various governments which affect the business of Tesco in negative manner. Along with this, Tesco has also faced import duty on goods while importing some of the inventories (Detomasi, 2015)

Strong completion
This is one of the biggest challenges faced by a company while entering in a new country. Existing players in the local market creates a big threat for the company to gain market share. It is not easy for the company to attract the customers at the global level. In case of Tesco globalisation strategy, Wal-Mart is the biggest competitor at the global level. Along with this, there are various food retailers in multiple countries Aldi, Lidl, Marks & Spencer, Waitrose, and Cost Cutter etc. which create tough competition for Tesco at the global level (Landon & Faisal. 2019).

Other challenges
Tesco in the global market face some other challenges while operating the business. Those challenges are economic crisis in various countries, changes in climate and weather, global warming, and differences in marketing standards and methods etc (Le Coze, 2017).

Examples of companies
There are some examples of benefits and drawbacks of globalization faced by big companies at the international level. Some of the examples are given below:

• One of the biggest examplesof company experienced benefits of globalization is McDonalds. The company adapted the trends of global markets extremely well. The company has more than 34,000 restaurants in 118 countries. The company has done proper research about the cultures and norms of various countries and showed flexibility to local food choices and preparation processes (Shaw, 2014).
• Apple is the most successful brand that experienced benefits from globalization of markets. By adapting effective customer service protocols along with minimalist and intuitive approach, the company is able to get success in its global appeal. Its worldwide stores are focused to fulfill local tastes and preferences of the international customers.
• Ikea has become one of the recognizable brands at the global level in terms of sustainability, form, functions, quality and low prices. By adapting the preferences and cultures of consumers in global market, Ikea is able to gain large customer base. In Japan, the company is offering tatami mats which are traditional Japanese floor cover. By this, the company is able to have a right balance global massaging and localized strategies (Animucka, 2015).
• In case of drawbacks, Google is one of the big examples. The company had disputes with the Chinese government over censorship. Google was not able catch up to Chinese competitors Baidu which offers easy access of pirated media to the consumers. It was noted that American companies were failed in China due to string competition by the local players.
• Biggest US coffee chain Starbucks faced drawbacks in terms of big loss in Australian market. While entering in the Australia market, Starbucks assumed that the coffee drinking habits of Australians would be similar as Americans. Due to existence of local players, Starbucks proved to be very expensive for Australian customers. Because of less awareness about the Australian market, the company has to face loss of $143 million.
• One of the UK based taxi finding application Hailo faced a major drawback of strong competition in North America. Despite of US $77 million investment from the high profit venture capital, Hailo was not able to deal with the competition created by Uber and Lyft in North American market and the company pulled out its business from the market.
• Wal-Mart, the biggest retail company was failed to take into account social nuances of German market. The company started its business in Germany with 85 stores but limitedtime for business operations, rows of supervisory red tape, complicated labor laws makes it harder to operate the business. With the loss of US $1 billion, the company pulled out the business from German market (Seale, 2020).

Conclusion
This report is focused on the benefits and drawbacks of Tesco globalisation strategy. From the above discussion, it is observed that Tesco globalisation strategyis the procedure by which whole world is becoming organized by the increased trade and cultural exchange.It is analyzed that company has to deal with various issues and problems related to environment, marketing tactics and preferences of customers.It is also clear that the company is able to capture more market share by technological innovations which are emerged from international subsidiaries while operating the business at global level. This report has given examples of companies and countries to support the arguments. It is crucial for the company to increase its business in the international market. It can be said with regards to the Tesco globalisation strategy that if a company is seeking for growth and success in overseas market then proper research should be done to recognizethe needs of customers, marketing systems and trade regulations.

References
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