International Marketing Management For Education, Law, Human Resources, Accountancy – Tesco Case Study

Focusing on Licensing as a Major Market Entry Mode

Describe about the International Marketing Management for Education, Law, Human Resources, Accountancy?.

International marketing consultant is a person who is an expert, responsible to provide expert advice in a specific area like security, management, education, law, human resources, accountancy, marketing and some other significant areas. Therefore, this particular research work would try to analyze the situation from the perspective of an international marketing consult, as he is considered to be an expert professional in the particular area, having vast knowledge in the subject. For this research paper, Tesco has been selected, as it has been planning to take entry into the foreign overseas market with the use of business format licensing as one of the strong market entry approaches.

From the organization profile, it can be seen that Tesco is one of the leading organizations who ensures that the employees must not pay more for the branded shop. Apart from that, they have a plan to expand the business in different parts of the world and have opined that everyone in the team of Tesco is highly passionate regarding understanding the customers. Tesco has been planning to take entry into Indian market, as there exist several opportunities in this market. Therefore, this specific research work would try to focus on the importance of licensing, importance of geographic position and historic background of the operating country, market entry strategy as well as some other parts.

There exist several market entry strategies like licensing, investment and strategic alliances and among them, licensing plays one of the vital roles overall. It can be stated that the trade barriers are gradually falling around the world and the corporations require having a strategy to take entry into the foreign markets. Alegre and Berbegal-Mirabent (2015) have stated that licensing is another form of licensing and in case of licensing, the licensors would grant an organization in the foreign market a license to produce the specific product as well as use the brand name in return they would receive a royalty payment. Therefore, it can be stated that licensing is defined as the method of the foreign operation whereby a corporation in one country agrees to permit an organization in another country to utilize the manufacturing, trademark, processing and some other skills provided by the licensor. However, it can be stated that this is quite similar to the franchise operation and Tesco is one of the leading examples in this case (Almadani 2014).

Importance of History and Geography of India

It can be mentioned that licensing takes into account little expense as well as involvement; the only cost is signing the required agreement and policing its implementations. In this case, it is necessary to mention the advantages and the disadvantages of licensing, as this would be helpful in understanding the importance of licensing in details. Advantages of licensing have been described in details here.

Licensing is a good way to start in the foreign operations and open the door towards low risk manufacturing relationships

This is helpful, as the capital not tied up in the foreign market operations

Linkage of the parent and receiving partner interests means both get most out of the marketing effort (Arora, Fosfuri and Rønde 2013)

Enables several options to buy with the partners and this enables provision to take royalties in their stock

Besides discussing the advantages, it is required to mention the disadvantages as well, as this would enable the company to be well aware of the negative facts at the time of taking entry into the foreign market.

Limited form of participation in order to length of agreement, particular product as well as the procedure or the trademark

There exist a potential threat in returns from marketing as well as manufacturing, as this might be lost (Bently and Sherman 2014)

Partner develops know-how and so license is short

This demands considerable fact finding along with planning, investigation and proper interpretation

Figure 1: Legal issues of licensing in India

(Source: Berthon et al. 2012)

After discussing these points, it is required to mention that those who decide to license are required to keep the options open for extending the market participation. This might be done through the joint ventures with the help of licensee. From the organizational profile, it can be seen that Tesco has been planning to expand the business in different parts of the Asian countries and it is regardless to say that there exist several rules and regulations in different countries. Customer demand and buying behavior of the customers vary from one country to another and based on the available options, there exist several international market entry options. Therefore, it can be stated that it is difficult to select only one market entry mode to start the business venture in the new country. From the above mentioned case scenario, it can be stated that Tesco can select any of the market entry modes to take entry into the foreign market and among all the approaches licensing seems to be one of the effective ones. As per the viewpoint of Bogers, Bekkers and Granstrand (2012), it can be suggested that Tesco might consider licensing, as licensing agreement is the best possible market entry approach mode to take entry into the foreign market.

In this case, Tesco can easily implement a successful licensing approach with an experienced licensor in the Indian market and this would help them to gain greater market share in short time. As Tesco is already present in different foreign markets, they have enough experience in this field. Most importantly, it can be stated that as money is not tied up in the foreign market due to the licensing strategy, this would be beneficial for Tesco and another advantage of licensing is that very little amount of money is required for licensor. Apart from that, this market is easy for the licensors and the company is expected to receive a greater share of the return on investments (ROI). In case of India, there exist some disadvantages in India like legal and regulatory environment including IP and the contact law. Moreover, it can be seen that there is a high chance that the license might become a competitor. In India especially, licensing and franchising strategy is largely adapted by several foreign organizations. There is no particular law pertaining to licensing in India and this part is required to deal carefully at the time of expanding the business into Indian market (Bond and Saggi 2014).

Figure 2: Licensing framework in India

(Source: Brannen, Moore and Mughan 2013)

Chang, Hu and Lin (2013) have stated that historical background and geographical position of the country assists in marketing management of the international business operation in order to gain better view on the market. It has been seen that in India, the main aspect is diversity in case of both history and geography and thus it is necessary for Tesco to look at this part sincerely. Historical background of India would help Tesco understanding the nature of trade Indians do follow in case of both internal business and external business. Historical aspect would enable Tesco to gain knowledge how Indians do negotiation in business, their used strategies for conducting the business, attitude towards foreign investment as well as the legal systems of India. It can be seen that there exist huge cultural differences in Indian and UK culture and this might affect the business due to their misunderstanding (Czinkota and Ronkainen 2012).

Tesco is required to prepare a proper analysis to understand the buying behavior of the Indian customers and based on that, they are required to select the best market entry options. However, it can be stated that understanding this particular aspect would assist Tesco in understanding the role and responsibilities of the Indian Government in the international market along with the relationship of the managers and the subordinates with their subordinates (Dhillon 2013).

Figure 3: Retail Industry Sales

(Source: Gilligan and Hird 2012)

In India, there are 7 major religions and many minor religions along with 6 main ethnic groups. There exist several barriers to trade and investment in some sectors resulting from the regulatory constraints along with local sourcing requirements and import tariffs. It is necessary to protect the Intellectual Property (IP) and at the same time, these are several risks of bureaucratic delays, risk of bribery and corruption and some other issues as well. Climate, topography and population are some of the major aspects that are required to focus on for gaining popularity in the Indian subcontinent (Hawkins et al. 2013).

In this part, emphasis is required to shed on analyzing the challenges that Tesco might face in case of operating in the Indian market and these have been mentioned here in details.

It can be seen that with the change of geographical location, the shortage of talent as well as the lack of the trained man-power is visible in several places in India. Therefore, it is regardless to say that Tesco would be able to run a stable business in India.

It can be seen that in India, a “Plethora of Clearances” is required to submit before opening a retail outlet, which limits the expansion of retail outlets in the first place.

India is one of the developing countries and thus the situation of the roads and transportation is not proper throughout the nation. Therefore, at the time of expanding the business into India, Tesco is required to tie the business knot with multiple vendors in order to fulfill their requirements that would raise the overall price and costs of the business operations (Holtbrügge and Baron 2013)

Hovhannisyan and Keller (2015) have stated that the organized sector of India does not have the status of the manufacturing industry that would make it easy for Tesco to raise the necessary funds for their expansion plans in the near future.

However, in case of India, some strict restrictions are maintained from the government on FDI limitations and this has been affecting the retail industry to have more exposure.

Figure 4: Unorganized and Organized retail sector in India

(Source: Kaminski 2014)

Tesco authority is required to cope up with the geographical situations of the country, as huge diversity can be seen in weather and temperature of the nation. Various climates and topologies are there in India and at the place of establishing the manufacturing unit, this natural factor is required to keep in mind. If Tesco establishes the manufacturing units in the hot and humid areas of the nation, some extra precautions are required to take for keeping the machines in action. Apart from that, it can be stated that the warehouses of Tesco might be located in those areas where the products would be stored in the hot and humid areas. At that place, Tesco is required to implement some extra artificial technologies in order to keep the products safe and sound (Kanwar 2012).

Figure 5: Expected Market Expansion of Retail industry in India

(Source: Leone and Reichstein 2012)

Magnusson et al. (2013) have stated that there exist a variety of ways in which a corporation can take entry into the foreign markets. It can be stated that no particular market entry strategy exist for all the international market and thus it can be stated that based on the circumstances in the operating country, the entry mode varies. Direct exporting, franchising, partnering, joint ventures and the already mentioned licensing are some of the most effective methods of taking entry to the foreign market. Meissner (2012) has stated that several factors influence the selection of the strategy and these are tariff rates of the foreign country, adoption necessary for the particular product, transportation and marketing cost as well as variation in culture. Direct exporting is such a strategy that allows an organization to directly sell their products in the foreign market. In this case, it can be stated that once an organization gain recognition into the foreign market, it is easy for them to adopt this direct selling strategy. In this type of entry mode, the agents and the distributors work closely with the organization in order to represent the interests of that particular organization. These executives become the face of the company and thus it is required for Tesco to select these representatives carefully, if they rely on direct selling approach (Mercurio 2012).

Papadopoulos and Heslop (2014) have started that depending on the enriching discrepancy and the geographic position, the market entry approach largely varies. Rapid business model used by the organization has to be unique in nature and at the same time, Tesco is required to have a strong brand recognition that would lead the company expanding in different parts of the nation. As per the viewpoint shared by Parola et al. (2013), it can be seen that Tesco might use partnering strategy for taking entry into the Indian market. The local organizations are there to help Tesco in gaining in depth knowledge of the local market operations, as local organizations in the retail sector plays one of the major roles. Apart from that, partnering is another open option to Tesco, as this would enable this international organization to club up with the existing companies like Big Bazar, as this is one of the leading organizations in India (Parr 2012).

However, it can be seen that the total sell of this organization is not same in all parts of India and thus Tesco can collaborate with this organization to gain strong market position. After that, it can be stated that the organization is required to select the target market carefully, as the success of the business largely depends in this factor. As Tesco has been planning to take entry into the Indian market, it is required to set the target market before taking entry into the market. After determining the target market, Tesco is required to conduct a detailed market analysis in order to determine where to expand the business and what the areas that Tesco would be able to take entry besides the foreign markets (Raysman et al. 2014).

Runner (2013) has stated that when any organization tends to take entry into the foreign market, it required adopting as well as standardizing its marketing mix. Therefore, it can be stated that in order to make an appropriate marketing decision, a market place required to understand that not only one marketing mix is entirely standardized or adopted. However, it can be stated that as per Stevens and Dykes (2013), the essence of the global marketing is to recognize the balanced localized method of the marketing mix along with the standardized approach of the marketing mix. Therefore, it can be stated that in case of market entry strategy, the major decisions that the responsible managers have to take is the degree to which a corporation must standardize or adopt the global marketing strategy (Terpstra, Foley and Sarathy 2012).

Considering Russia as an industrialized country, it is seen that non-tariff barriers of the country is extremely high. The requirements of Russia related to customs are relatively high and complex. All products that are sold in the Russian market must include relevant information that will include the information related to the product and bulk shipments contain general information that must be written in Russian. Therefore, this process is also time consuming, Most of the organizations are forced to consult with Austrade in Moscow and Vladovostok which can provide the support of specialist Russian customs agents and brokers (Stevens and Dykes 2013). Import duties are applied on most of the products and import license and product specific approvals are highly important for items such as food and beverages, industrial equipment and pharmaceuticals. At the expense of the exporter, sometime the organizations are also forced to run a pre-shipment technical inspection (Wang, Roijakkers and Vanhaverbeke 2013).

There are mainly eight types of non-tariff barriers that an organization faces while doing business in Russia. Those barriers are mentioned in the below table,

Limitation on trade	Entry measures of customers and administration
1.      Allowances	1. Systems of valuation
2.      Requirements for import licensing	2. Practices of antidumping
3.      Requirements for local content	3. Classification of Tariffs
4.      Price limitation for minimum import	4. Requirement for documentation

(Source: Parola et al. 2013)

For dealing with Non-Tariff Barriers (NTB), pertaining towards the business of Tesco in China, the marketers require to understand that how the distribution channels work in the economically developed nations like China and Australia. Market analysis states that the goods products as well as the good services of the organization largely attract the consumers of China. This nature of the business would help the organization to overcome several Non-Tariff Barriers like corruptions, consumers and the transportations. However, it is required to mention that some strategies are there that would help the organization to overcome NTBs like corruption in that nation. This takes into account Intellectual Property (IP) protection of the organization as well as investing in the technical advancements in regards to deal with phoning (Xuegong, Liyan and Zheng 2013).

Figure 6: Trends in Tariff Rates

(Source: Laurent and Jean, 2014)

The above introduced picture has demonstrated the trends in tariff rates globally. In case of India, it can be stated that if the corporations want to deal with the corruptions, they are required to use efficient distributors. Unfortunately, it can be seen that in the developing countries like India, most of the organizations tend to avoid “whistle blowing”, as they believe that it might hamper the business relationship. In this particular case, a tendency is observed that they hire their local employees and gradually enhance their physical presence and this help them to deal with the NTBs to some extent. Some other ways are there, through which these Non-Tariff Barriers can be managed, like in UK, the government agency required to peruse the responsible Indian government to gradually develop the effective laws, rules and regulations to help in eliminating these Non-Tariff Barriers that the corporation is facing at the time of conducting the business operations (Leonidou, Katsikeas and Morgan 2013).

Laurent and Jean (2014) have stated that with the expansion of globalization, an emphasis has been shed on designing the marketing strategies depending on the requirements of the foreign countries. However, it can be stated that there are two significant reasons for undertaking a product adoption and these are-

To accomplish the requirements of the foreign market

To comply properly with the laws, rules and regulations of the foreign marketplace

At the time of conducting the business in India, Tesco is required to put additional warnings on the labels, required by the laws of Indian Government. In India, there are three types of product adoption namely tangible adoption, intangible adoption and promotional adoption. For Tesco, it is required to focus on tangible adoption of products based on the nature of Indian customers and their buying behaviors. However, it is required to mention that as Tesco is one of the renowned global brands, it needs not to change its brand name at the time of expanding the business in the Indian global market (Laurent and Jean 2014).

The concept of product life cycle was introduced in the year of 1950 to help business organizations to analyze the desired life cycle of product from design to outmodedness. The major aspects of product life cycle theory are divided into four parts which are introduction, development of product, maturity of the product and decay (Stevens and Dykes 2013). Most of the organizations that are operating globally are using this tool to maximize the value of the product in different countries so that they can gain concentrated profitability in each of those stages. The concept of product life cycle is briefly described in the figure below,

Figure 7: Product Life cycle diagram for Global business organizations

(Source: Magnusson 2013)

This product life cycle diagram is helpful to understand several levels of a product. However, these stages are not the only thing that a company has to evaluate in order to understand the product life cycle. There are different sub-levels in every stage. For example, in introduction stage Tesco will have to consider five ideas that are validation, conceptualization and determination of design, and prototype testing. During the first stage of the introduction, Tesco will use its promotional strategies along with advertisement to increase am improve the company’s brand awareness among the people of India (Bond and Saggi 2014). The advertisement strategies will be developed based on the situation and demand of the target market. In order to gain higher brand awareness and larger amount of market share in India, Tesco will select licensing strategy as their entry mode which will help them to make an entrance in the Indian retail market.

During the second stage which is the development or growth stage, Tesco will have to select either profitability of market share in Indian market. Tesco will have increase the amount of production which will help them to reduce their unit costs. After the introduction stage, when Tesco will gain some new customers, this second stage will be responsible for increasing the brand loyalty among those customers (Arora 2013). In order to achieve customer loyalty the organization can implement strategies such as discount offers, gift coupons, special events and effective advertisement strategies. This will also help them to grow the market of Tesco in the country.

Figure 8: Product Life cycle model

(Source: Hawkins 2013)

In the next stage which is the maturity stage, Tesco will experience that their sales are going down slowly, and an unstoppable decline will start with that. This would be the high time when the authority of Tesco will have to defend their current market position from the existing market competitors. Some organizations might start selling products a lowest price to challenge Tesco and its brand position in the market. This stage is considered as the longest stage in the product life cycle and it is found that many products stay in this stage for decades (Chang 2013).

The last stage of product life cycle would be the decline stage when the sales graph of Tesco will down drastically as shown in figure 8. The revenue will go down also to a stage from where it would be impossible to rise again. In this situation Tesco will have only two options to choose. The author of the organization will have to either discontinue the product or sell the rights to manufacture and maintain the product to another organization. Another unique strategy that the organization can follow is to allow the stocks of the product drop to zero.

However, it is recommended that Tesco should sell the product to another company with all the rights related to it. Tesco can also sell only the rights to support the product to another organization while sharing the profits (Xuegong et al. 2013). Then that organization will be responsible for advertising and maintain the product in Indian market. For example, if Tesco is selling some type of clothing product and the product has lost its value, the authority of the organization can sell the rights of the product to Big Bazar which is the most famous retail organization of India. This is a critical stage of the product life cycle model as it will decide how Tesco will respond to its products that have lost market value and popularity.

Conclusion

This study entirely focused on the entry mode strategy as part of marketing strategy of Tesco that will suit them best while starting their venture in India. Licensing is considered as the best option as entry option for Tesco by which they will able to firm their grip in Indian retail industry. However, as India is place of extreme diversity, it would be difficult to follow only one entry strategy. The management of Tesco will have to conduct a precise research in order to find out the best possible entry strategies for different parts of the country. For example, in one region it is possible that success might gained through licensing strategy; however, one the other hand, it might be found that for another region franchising would be the best strategy. Tesco is currently trying to develop their position in Indian market by only increasing brand awareness among the people. For this reason licensing strategy would be more than enough as it will help them to achieve their initial objectives and goals. However, the demand of the customers is not the only thing that changes with the regions, the geographic and historical aspects also varies in India. Therefore, the organization will have to keep that in mind as product life cycle of a product will entirely depend on the cultural needs of the customers that change in almost in every state.

References

Alegre, I. and Berbegal-Mirabent, J., 2015. Entrepreneurship and the Influence of History: How Much Impact Do Country-Specific Historical Factors Have on Entrepreneurship Initiatives?. In Entrepreneurship, Regional Development and Culture (pp. 35-52). Springer International Publishing.

Almadani, A. 2014. Globalization and Corporate Governance. International Journal of Innovation, Management and Technology.

Arora, A., Fosfuri, A. and Rønde, T., 2013. Managing licensing in a market for technology. Management Science, 59(5), pp.1092-1106.

Bently, L. and Sherman, B., 2014. Intellectual property law. Oxford University Press, USA.

Berthon, P.R., Pitt, L.F., Plangger, K. and Shapiro, D., 2012. Marketing meets Web 2.0, social media, and creative consumers: Implications for international marketing strategy. Business horizons, 55(3), pp.261-271.

Bogers, M., Bekkers, R. and Granstrand, O., 2012. Intellectual property and licensing strategies in open collaborative innovation. Open Innovation at Firms and Public Administrations: Technologies for Value Creation, pp.37-58.

Bond, E.W. and Saggi, K., 2014. Compulsory licensing, price controls, and access to patented foreign products. Journal of Development Economics,109, pp.217-228.

Brannen, M.Y., Moore, F. and Mughan, T., 2013, September. Strategic ethnography and reinvigorating Tesco Plc: Leveraging inside/out bicultural bridging in multicultural teams. In Ethnographic Praxis in Industry Conference Proceedings (Vol. 2013, No. 1, pp. 282-299).

Chang, M.C., Hu, J.L. and Lin, C.H., 2013. The optimal licensing strategy of an outside patentee in vertically-related markets. International Journal of Economics and Finance, 5(3), pp.101-104.

Czinkota, M. and Ronkainen, I., 2012. International marketing. Cengage Learning.

Dhillon, B., 2013. Life cycle costing: techniques, models and applications. Routledge.

Gilligan, C. and Hird, M., 2012. International marketing: strategy and management (Vol. 17). Routledge.

Hawkins, T.R., Singh, B., Majeauâ€ÂBettez, G. and Strømman, A.H., 2013. Comparative environmental life cycle assessment. Journal of Industrial Ecology, 17(1), pp.53-64.

Holtbrügge, D. and Baron, A., 2013. Market entry strategies in emerging markets: An institutional study in the BRIC countries. Thunderbird International Business Review, 55(3), pp.237-252.

Hovhannisyan, N. and Keller, W., 2015. International business travel: an engine of innovation?. Journal of Economic Growth, 20(1), pp.75-104.

Kaminski, M.E., 2014. The capture of international intellectual property law through the US trade regime. Southern California Law Review.

Kanwar, S., 2012. Intellectual property protection and technology licensing: The case of developing countries. Journal of Law and Economics, 55(3), pp.539-564.

Laurent, P. and Jean, B. 2014. Model contracts for licensing interoperability information. Luxembourg: Publications Office.

Leone, M.I. and Reichstein, T., 2012. Licensingâ€Âin fosters rapid invention! the effect of the grantâ€Âback clause and technological unfamiliarity. Strategic Management Journal, 33(8), pp.965-985.

Leonidou, C.N., Katsikeas, C.S. and Morgan, N.A., 2013. “Greening” the marketing mix: do firms do it and does it pay off?. Journal of the Academy of Marketing Science, 41(2), pp.151-170.

Magnusson, P., Westjohn, S.A., Semenov, A.V., Randrianasolo, A.A. and Zdravkovic, S., 2013. The role of cultural intelligence in marketing adaptation and export performance. Journal of Marketing Research, 21(4), pp.44-61.

Meissner, H.G., 2012. Strategic international marketing. Springer Science & Business Media.

Mercurio, B., 2012. Awakening the Sleeping Giant: Intellectual Property Rights in International Investment Agreements. Journal of International Economic Law, 15(3), pp.871-915.

Papadopoulos, N. and Heslop, L.A., 2014. Product-country images: Impact and role in international marketing. Routledge.

Parola, F., Satta, G., Persico, L. and Bella, E.D., 2013. Entry mode choices in international markets: examining the antecedents of service firms’ strategies. International Journal of Globalisation and Small Business, 5(1-2), pp.34-57.

Parr, R., 2012. Royalty rates for licensing intellectual property. John Wiley & Sons.

Raysman, R., Pisacreta, E.A., Ostrow, S.H. and Adler, K.A., 2014.Intellectual property licensing: forms and analysis. Law Journal Press.

Runner, J.T., 2013. Noun phrase licensing. Routledge: Abington.

Stevens, C.E. and Dykes, B.J., 2013. The home country cultural determinants of firms’ foreign market entry timing strategies. Long Range Planning, 46(4), pp.387-410.

Terpstra, V., Foley, J. and Sarathy, R., 2012. International marketing. Naper Press.

Wang, Y., Roijakkers, N. and Vanhaverbeke, W., 2013. Learning-by-licensing: How Chinese firms benefit from licensing-in technologies.Engineering Management, IEEE Transactions on, 60(1), pp.46-58.

Xuegong, S., Liyan, G. and Zheng, Z. 2013. Market entry barriers for foreign direct investment and private investors: Lessons from China’s electricity market. Energy Strategy Reviews, 2(2), pp.169-175.