Tesco PLC: Grocery And Retail Organization And Their Move Towards Global Market

Introduction to Tesco PLC

Question:

Discuss about the Economic and Security Review Commission.

Tesco PLC is a multinational grocery and retail organization and they belong to Britain with the headquarters in, Hertfordshire, England, United Kingdom. It was found in 1919.This organization is known as the grocery king in the United of Kingdom. They are also known on the basis of their ranks in the global market as they are in the third position in terms of profits in their industry and they stand on the 9^th position in terms of revenues in the global market. They are present in most big and emerging markets such as Asia, Europe, Hungry, Thailand, etc.  They provide various types of goods as well as services to its consumers. Household items, grocery products, electronics management, furniture, etc. are some of the fields w=in which their presence could be found. More than 476,000 employees are working under in Tesco PLC across the globe and their subsidiaries companies are Tesco Stores Ltd., Tesco Bank, Tesco Mobile, Tesco Ireland, Tesco Family Dining Ltd., etc. In 2001, Tesco was involved in selling grocery items through internet sources in the US market and they attained 35% stake. With this success factor, Tesco starts selling its items through both mediums i.e. online sources as well as physical sources (Backer, 2010).

According to the Network Society theory of the globalisation of the business, economy needs to be consisted with informational, knowledge-based, networked, etc. in terms of global networks of interactions. The economy which can work as one unit in order to attain desired goals and the objectives using adequate development in the information technology, computers, internet, and a new technological paradigm which leads to the new mode of development. With the adaptation of this theory for enhancing the globalisation in the business, adequate network structure will be made through which interaction level with the new technology paradigm will be enhanced. It enhanced the cultural material to increase the global economy for transforming the commodities into a processed knowledge. With the consumption of the information technology forces, a unique link between the culture and the productive forces will be developed which will lead to the enhancement in the production cycle (Chen & Young, 2010).

Human society has also gained adequate advantage with the help of Network Society theory of globalisation. Information technology has a great impact and due to the implementation of the IT in the society and the business cultures, various types of advantages have been gained by them. IT has reduced the burden from the human’s mind as with the help of IT sources, appropriate development has been occurred (Cui & Jiang, 2012).

Network Society Theory of Globalization

Tesco PLC has also adopted this theory in order to enhance their performance and to move towards the global market. The major reason behind the success of the Tesco is the implementation as well as adaptation of the Information Technological sources for imposing the unique and centralised control system over all stores, subsidiary companies across the global market.  Tesco PLC has attained adequate image in the global market and this is due to the adaptation of the Network Society Theory of globalisation. This theory explains that humans, as well as business firms, have adopted the advanced system for moving towards the global market for various purposes such as an expansion of the business, growth of the business, setting adequate image in the global market, etc. Hence, the same theory suits with the working procedure of the Tesco PLC and this is the major reason of their presence in more than 12 countries across the globe. Tesco PLC is the only retail store multination corporation of Britain which has developed their presence in the overseas market management (Dunning, 2012).

Tesco PLC is already present in the Chinese market but with the emerging market opportunities in China, Tesco has decided to introduce another retail store in the Chinese market. The major key factor is the emerging markets and the emerging economic conditions of the Chinese market. Following are the factors available in the Chinese market which attracts the business organization to expand their business in Chinese market:

• Capital Availability: Foreign Direct Investment is the terms which define the interest of a foreigner in local economy accepting risks and other factors available in the certain economic conditions. Till the late 1990s, US markets were the favourable choice for the foreign investors but in the early 2000s, China overtook US market and for the foreign companies, Chinese markets are favourable locations in terms of business expansion as well as for investment purposes (Jiang & Sinton, 2011).
• Competitiveness: Chinese markets have the adequate availability of all the resources at cheap rates which are required for setting up the business in the foreign markets. Labour, workforce skills, talents, as well as the business development value chain are some of the resources available to China which attracts the Tesco to set up their store over there (Li, Cui & Lu, 2014).
• Regulatory Environment: Every organization needs to fulfil the host country’s rules, regulations, policies, etc. in relation to avoid any kind of glitches in the activities of the organization. Regulatory environment describes that Chinese market’s environmental conditions are quite simple and favourable in terms of business entities. Business entities need to fulfil the requirements determined by the government authorities in relation to the environmental conditions for enhancing the effectiveness in the organizational workplace.

Apart from this, there are lot of factors available in the Chinese market which attracts the foreign companies to invest as well as to expand their business over there (Liang, Reiner & Li, 2011).

As per the Porter’s Diamond theory, it refers to the national advantage to certain country due to certain natural resources availability amongst the various countries of the globe. Those resources could be land, labour, skills, etc. These factors help the country to gain adequate competitive advantage in the global market. Country can gain the competitive advantage due to existing availability of the resources or they could also create their country sufficient enough to compete in the global market with certain unique capabilities. In this scenario, China has created them sufficient enough in recent years through utilising available resources in their country (Shealy & Dorian, 2010).

The major issue from which China was struggling was emerging population and they utilised their manpower in order to gain the competitive advantage in the global market. They have made their country as skilled labour as well as government’s support for increasing the economic capability of the country. This is the reason; China has overtaken the US market in terms of getting high foreign direct investments. With the implementation of the policies in relation with utilising the available natural or human resources by the China, other countries have adopted the strategies adopted and implemented by the Chinese government. Continuous improvement in the Chinese GDP and in the national income, the major reason is adaptation of the unique strategies for utilising the available resources within the country to make the country capable enough to gain the adequate competitive advantage in the global market (Song, Yang & Zhang, 2011).

Porter’s Diamond Theory on China

Tesco PLC could choose absolute advantage theory or the new trade theory for analysing the available market entry options in the Chinese market. Absolute Theory refers to the concept where an organization produces high quality and huge quantity of certain products. This theory deals with the market entry strategies in the international market. Chinese market has gained the advantage in the competitive market using available manpower resources within the country. Tesco PLC could use this theory in order to determine the available market entry strategies for entering the Chinese market management for trading purpose. With the implementation of this theory, organization will be able to fulfil its requirements in relation to the adequate market entry strategy for entering the foreign country to perform business functionalities. Using this theory, Tesco could finalise one of the effective strategies for the purpose of entering into foreign country from licensing, franchising, joint venture, etc. types of market entry strategies (Szamosszegi & Kyle, 2011).

Apart from absolute advantage theory of choosing the adequate market entry strategy, Tesco could also choose the new trade theory for determining the available market entry strategies. This theory explains that trading activities increase with the increase in the FDI and the productivity level of the country. This theory is based on the assumptions such as monopolistic competition and rapid increase in the returns. According to this theory, international organizations attract towards the country through reviewing the productivity, skilled labour, etc. resources availability. With the implementation of this theory, organization would be able to analyse the appropriate market entry strategy through reviewing the available resources in China (Yi & Davey, 2010).

Market entry mode choosing is not an easy task; it requires adequate research and efforts. On the basis of market entry mode, success and the growth of the organization could be determined. Certain factors such as controlling measures, resource commitment, risk factors of the economy, etc. available in the country should be determined by selecting the appropriate mode for the Tesco to enter into Chinese market (Park, et. al., 2008).

The International business challenge may be referred as the risks and the uncertainties factors available in the economy in which organization is planning to expand their business (Newman, 2014). Expanding business in the overseas market could lead to various issues which could affect the performance of the organization. These issues act as the barriers to the success and the growth in the organizational functionalities. High risk factors involved in the certain market conditions, lack of skilled labour, lack of adequate financial resources, etc. are some of the issues present in the economy which could affect the business’ performance, as well as the assumption of enhancing the demand of the organizational products, enhancement in the success as well as in the growth rate of the organization, will not be fulfilled. Following are some of the biggest challenges which could affect the Tesco’s planning in order to enter the Chinese market for the purpose of expansion:

• Chinese Laws and Regulations: Before commencing the trading activities in the foreign market conditions, organization needs to evaluate and fulfil certain requirements in relation to the rules and the regulations described by the host country’s government. Tax legislations, laws of trading activities, etc. are some of the laws which need to be fulfilled by the organization to avoid disturbance in the trading activities which may arise due to non-fulfillment of the laws and regulations of the particular country. Apart from this, workplace requirements should also be considered. China has introduced various laws in relation to maintaining the worker’s interest in the organization and they cannot be retrenched or terminated without any specific reason. As China has gained the top rank amongst the most emerging economies and the major factor behind this achievement is the labour of the China. China has utilised its population in an appropriate manner and as a result, they are known as the largest producer of various products and services, most favourable place in terms of FDI, etc. Hence, reviewing these factors, Tesco PLC needs to fulfil all these requirements especially requirements linked with the labour’s requirements in order to avoid glitches in the functionalities of the organization in terms of expansion of the business (Hamamura, et. al., 2009).
• Communication and Cultural Differences: Adaptation of effective communication strategy to operate the business activities act as the effective international business strategy. However, this may differ as per the culture. Thus, Tesco needs to adopt cross-cultural competencies in order to gain the adequate communication skills for the organization. In terms of international trading activities, organization needs to adopt certain effective communication strategies for making the effective communication amongst the colleagues, clients, foreign customers, etc. In the absence of practicing these strategies, organization may face the issues such as breaching of contracts in terms of trading activities, etc. (Hofstede, 2011).

Market Entry Mode for Tesco PLC in China

Multinational Corporations have created a great impact on the various countries’ economies. Due to development of MNCs, various opportunities such as employment, rise in the GDP, foreign direct investment, etc. have also increased. Thus, while performing the functionalities, MNCs needs to consider Global Compact Principles and the sustainable development goals in order to attain the organization as well as host country’s objectives. Certain global compact principles are human rights, labour, Environment, anti-corruption. Human Rights principles state that the MNCs need to support and respect the internationally proclaimed human rights in accordance with the organizational functionalities. Along with supporting and respecting human rights, organization needs to make sure that these rights do not be overruled as well as they should not be abused (Imada, 2012).

Labour which is the important factor available in the Chinese markets should be protected from all the unethical activities to be conducted in the workplace. Child labour should be abolished, discriminatory practices should also be abolished which could affect the business’ performance. Environmental policies, rules and other requirements in consideration with the environmental conditions should also be considered while performing the functionalities of the organization (McSweeney, 2002).

With the implementation and the adaptation of global compact principles as well as the sustainable development goals, organization will be able to attain the desired goals and the objectives for the origination (Kirby, 2017).

References

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Cui, L. & Jiang, F., 2012, “State ownership effect on firms’ FDI ownership decisions under institutional pressure: a study of Chinese outward-investing firms”, Journal of International Business Studies, vol. 43 (3), pp.264-284.

Dunning, J.H., 2012, “Routledge”, International Production and the Multinational Enterprise (RLE International Business).

Hamamura, T., Meijer, Z., Heine, S. J., Kamaya, K., & Hori, I., 2009, Approach—Avoidance motivation and information processing: A cross-cultural analysis, Personality and Social Psychology Bulletin, 35(4), 454-462.

Hofstede, G., 2011, Dimensionalizing cultures: The Hofstede model in context, Online readings in psychology and culture, 2(1), 8.

Imada, T., 2012, Cultural narratives of individualism and collectivism: A content analysis of textbook stories in the United States and Japan, Journal of Cross-Cultural Psychology, 43(4), 576-591.

Jiang, J. & Sinton, J., 2011, “Overseas investments by Chinese national oil companies”.

Kirby, P. W., 2017, Troubled natures: waste, environment, Japan, University of Hawai’i Press.

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McSweeney, B., 2002, Hofstede’s model of national cultural differences and their consequences: A triumph of faith-a failure of analysis, Human relations,55(1), 89-118.

Newman, A., 2014, Business Communication: In Person, In Print, Online, USA: Cengage Learning.

Park, H., Blenkinsopp, J., Oktem, M. K., & Omurgonulsen, U., 2008, Cultural orientation and attitudes toward different forms of whistleblowing: A comparison of South Korea, Turkey, and the UK, Journal of Business Ethics, 82(4), 929-939.

Shealy, M. & Dorian, J.P., 2010, “Growing Chinese coal use: dramatic resource and environmental implications”, Energy Policy, vol. 38 (5), pp.2116-2122.

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