International Market: Tesco Case Study

International Market: Tesco Case Study

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With the growing globalisation, businesses around the world are focusing on expanding themselves into new nations and operating the firm at the international level. International business is referred as the practice of buying and selling of goods and services across the borders. In the recent decades international trade had expanded to a greater extent. Firms are focusing on developing effective strategies that can help them in going global and running the business in an effective manner(Watson, et. al.2018). In this report the researcher would focus on explaining the different concepts related to international market expansion and the different issues faced by the businesses while going global. For explaining all these concepts, the report will focus on the case study of Tesco which is ‘Tesco’s International Market Expansion’.

The case study had explained regarding the expansion of Tesco in Japan, India and US market and challenges faced by the firm. Along with this the case study had explained regarding the position of Tesco in the UK online grocery market. In this research report the researcher would focus on addressing two important questions related to the chosen case study. For analysing and evaluating the major concepts behind the concepts related to the questions the researcher would focus on using an appropriate methodology.

Tesco is a British retailer that is having effective market position and the company is offering wide range of products and services to their customer. The chosen company operates in diverse nations and having a better brand image in the international retail market. Tesco was founded in 1919 and they are working effectively for offering high quality products to their customers for helping them in enjoying a better-quality life. In the British grocery market, the company hold top position with 30% of the market share(Aiello, et. al.2020). With effective brand image the company is focusing on entering emerging markets for generating higher profits and leading the firm towards success and development. Tesco is good at international expansion and they are operating in different nations of Europe, Asia, US and in Turkey also.

METHODOLOGY

Methodology is an important part of the research study as it is having an impact on the quality of the research. In this report the researcher is focusing on explaining the concepts related to the international business market. There are different types of methods that can be used by the researcher for conducting the research. In this report the researcher is focusing onexplanatory research design. In explanatory research design the researcher focuses on explaining a particular situation or a case study in detail(Bowen, et. al.2017). In this research the research would focus on the case study of Tesco international expansion. Based on the case study the researcher would focus on explaining two questions of the case study in this report. The questions are mentioned below such as:

• At the end of August 2011, Tesco has announced its exit from Japan. Critically assess those factors that compelled Tesco to withdraw from the Japanese Market.
• Due to Covid-19 crisis, consumers in the UK have increasingly shopped their groceries online and this trend would like to continue. Discuss strengths and weaknesses of Tesco in the UK’s online grocery market and provide recommendations to sustain its online development strategy in the future.

For explaining these two questions the researcher would focus on using secondary data collection method that would help them in answering these questions in an effective manner. Secondary data collection method is used by the researcher for collecting the information for the study and in this method the researcher focuses on collecting the data through secondary sources(Goode, et. al.2017). It can be said that in this method the research analysing the research question in detail by making use of academic sources for explaining the answer in an effective manner.

Researcher would use different literature sources such as books, journals, articles, and research papers for answering these questions. With the help of different literature sources, the researcher would focus on explaining the concepts related to the case study question in an effective manner.For supporting the analysing the researcher would use SWOT analysis of case company Tesco in the Japan market for analysing the strengths, weakness, threats, and opportunities of Tesco related to its position in the online grocery sector of UK. And for the first question the researcher would focus on using different concepts and academic sources for representing different arguments and in-depth analysis for answering the question in an effective manner. Along with this the researcher would focus on giving recommendations forthe case study.

RESULTS AND FINDING

Expansion of Tesco in Japan Market

Market expansion is referred as the practice of entering the new market for doing business and increasing the brand image and global presence of the company.Tesco extended its business through entering into new markets and introducingnew stores in the US, arriving developing business sectors in Central Europe and Japan through acquisition, and entered commercial centres(Park, 2017). Tesco being a multinational company with high revenue generation and effective market position had decided to enter the Japanese market for doing business.Tesco had entered the Japanese market through acquisition in 2003. Late on by Tesco had established one hundred and five stores in Japan(Rosnizam, et. al.2020).

In 2007, Tesco developed and diversified its stores in Japan by opening Tesco Express store which was a small-sized supermarket. And in 2009, a new supermarket brand was opened by Tesco. The company was increasing their number of stores for offering more unique, high quality and convenient shopping experience to their customers. But they were not able to operate in an effective manner and in 2011 they have decided to leave Japan. At the point when Tesco must exit from the Japanese commercial centre, it was running 129 stores in city zones around Tokyo, and its pay reached 50 billion yen. It can be said that Tesco had faced major loss due to its business operations in Japan because after nine years they have exited the Japanese market(Wood,et. al.2017).

Factors that had compelled Tesco to withdraw from Japanese Market.

Tesco is holdinga better market position and having an effective market share in the global retail industry. The company is operating in different nations and focusing on expanding themselves by entering emerging economies that can help them in growing. In 2004 Tesco had entering the retail industry of Japan with an aim of establishing the business in an effective manner. But in 2011 after nine years Tesco had announced that they are leaving Japan and will not continue to operate in Japan.There are different factors that lead to the failure of Tesco in the Japan market.

One of the major factors is high level competition in the Japan grocery retail market. The Japanese grocery market is the second largest market in the world after US. According to this the international firms are having great opportunity to operate and do business effectively in the grocery retail market of Japan, but this is not true(Ikeuchi, 2017). The international retailers like Tesco are facing high level of competition. Although the company is offering low-cost products to their customers but failed to successfully make a way into the Japanese market.

The graph mentioned above represents the struggle of Tesco in Japan retail market. From this figure, it can readily understand the struggle that Tesco had faced to survive in the Japanese market (Son et al., 2018).In 2011, when Tesco announced its withdrawal from Japan the number of stores had expanded by 146.8% yet deals per 1m2 had progressively plunged to 51.3%.

The economic factors had also played a major role behind the failure of Tesco in the Japanese market. The Japanese economy is had faced major slowdown in the year 1990 that had continued till 2001 and this had affected the sales of Tesco to a greater extent. There are different factors behind the economic slowdown such as increased interest rates. Tesco had entered the Japanese market and had developed retail stores for increasing their sales and due to the economic slowdown, they have faced lower productivity and lower sale this had affected the company in negative manner. Following the economic slowdown, the unemployment had also increased to a greater extent and this had affected the sales of the retail sector(The Nikkei 2011). According to the PESTLE analysis an effective strategic model for external business environment, economic factors are having a major impact on the firms. This had occurred in the case of Tesco in Japan because unstable economic condition and high unemployment rates had affected the sales of the company in Japanese market. From the beginning Tesco had faced issues related to the economic factors in Japan and this had affected the sales and profitability of the company in the Japanese market.

Different demographic factors had also played an important role in the failure of Tesco in Japan(Shin&Managi, 2017). The shopping habits of the population of Japan are completely different from that of UK and due to this reason Tesco fails in understanding the buying patterns and pReferences of their customers.The case company had failed in understanding the local shopping habits and buying preferences of customers because the Japanese culture is having a higher impact on them. The shopping habits of Japanese customers was different from that of UK and in the nine year they are not able to understand the customers and satisfy their needs, this is a reason behind the failure of the company in Japan(Son, et. al.2018).From the examination of British and Japanese shopping preferences, it can be interpreted that the British buyers appreciate doing a "major shop" when seven days since there is sufficient space to keep their shopping. While, much Japanese space is premium, and completing a major shop isn't an alternative. Instead of buying luxury items, the Japanese shoppers preferred to buy more reasonable private label items. Tesco is offering high quality products with their low-cost strategy but then also they are not receiving better profits(Brannen, et. al.2020). It can be said that due to the distinctive structure of the Japanese market, its lack of ability to exhibit organizational knowledge, paired with local consumers Tesco had become unsuccessful in doing business effectively in Japanese Grocery market.

UK Online Grocery Market

With the increasing technological advancement, the world is moving towards digitalisation. The preferences of the customers are changing dramatically as they wanted to use the services that are easy to use. The retail sector had transformed to a greater extent with the better technologies that are helping the businesses in offering high quality services in an effective manner.UK is a technologically advanced and developed nation due to this reason the customers are highly influenced by better technology and prefer to buy products online. Due to the social trends the customers are highly influenced with online shopping as it is easy to use and allow great convenience to the customers(Pitts,et. al.2018). Following this social trend of online shopping the retailers in UK had started focusing on offering their products through online platforms. The grocery retailers such as Tesco, Walmart, ASDA had started their own application for offering the products and customers through online modes.The online grocery in UK had increased to a greater extent. The digital buyers are increasing significantly in UK and the firms are focusing on developing better strategies that can help them in increasing the online sales.

Strengths and Weaknesses of Tesco in the UK’s online grocery market

Tesco is having an effective brand image and great customer base. Tesco offers grocery products, general merchandise, additional non-food items, and offers banking goods and services. The firm focuses on bringing effective innovation in the products and services that can help them in offering better services. Tesco is constantly focusing on technological innovation for gaining competitive advantage over other and for this only they have started offering the products through online mode(Brand, et. al.2020). With the increasing market share of online shopping, they have introduced their online operations from 1994 and they have started selling their products online for satisfying the customers and offering them more convenient shopping option. For analysing the strengths and weaknesses of Tesco in the UK’s online grocery market the report focuses on using SWOT analysis. Since the SWOT analysis the different strengths and weakness of Tesco in UK online grocery market are mentioned below such as:

Strengths

One of the important strengths of Tesco is that they hold the position of being a second largest online retailer in Europe after Amazon and the effective brand image in the online retail market. Along with this the company is also having an attractive position in the grocery market of UK that helps them in attracting more customers and increasing their both online and offline sales. Tesco is one of the first retailer that had started online shopping of grocery in UK, and they have also made great contribution in the growth in online retail in UK(Munson, et. al.2017). The case company is investing better capital in digital marketing and this is helping them in attracting the customersin an effective manner. Tesco is having an effective robust strategy for attracting and retaining their online customers through different tools of digital marketing and this is a strength of the company.

Weakness

One of the weakness of Tesco in the online market is that it does not allows the customer to pay for the products through cash. This is because only master cards and visa cards and this sometimes creates an issue for the customers. Along with this the customers sometimes face issues related to the lack of availability of the grocery items at the time of placing an order.

Opportunity

With the effective technological advancement, the company is having great opportunity to bring further innovation in their online application that can help the customers in getting great online shopping experience. For this the company can increasing the different payment options for the customers and great product differentiation while making an online purchase based on the different categories(Aiello, et. al.2020). It can be said that Tesco is having great opportunity to expand online shopping services and can increase their online sales that can add value to the company.

Threats

The threat which is being faced by the case company is that it is facing high level of competition from other grocery retailers those are offering their products to the customer through online shopping modes. The major competitors of Tesco involve Walmart, ASDA, Sainsbury, and Morrison’s as they are also the major retailer of UK that are offering online grocery shopping to the UK population.

Changing customer preferences in Covid-19 pandemic: A opportunity for Tesco

The present era of Covid-19 and the pandemic situation across the globe had brought major changes in the all the industries. Due to the situation of lockdown in majority of the nations the business operations are highly affected. In this situation the businesses that are operating through online platforms are selling their products and services in an effective manner and other are facing major negative impact on the pandemic on their businesses(Power, et. al.2020). The grocery industry of UK is also highly affected due to the pandemic situation.

In the pandemic the customers are being afraid of spread of corona virus disease and this is affecting the sales of the retailers. Due to the higher risk of the spread of the novel corona virus disease the customers are focusing on purchasing the goods and services through online mode. The grocery customers are using online platforms for purchasing the grocery. Statistics had revealed that in the year of 2020 around 50% of the UK costumers had purchase their grocery from online mode of shopping which is significantly higher from the previous years. It can be said that after the covid-19 also the customers would not focus on buying the products and services through online mode only(Singh, 2019).

This situation had created greater opportunities for all the grocery retailer to increase their sales through online mode of selling their products and services. This is because online grocery shopping would become new normal as the customers would focus on preferring online grocery shopping instead of in store shopping. Tesco is having highest market share in the online grocery market of UK and the situation of Covid-19 had created greater opportunity for them to offer their products through their online platforms. This would help the company in generating higher profit by offering effective safe and convenient shopping experience to their customers through the online modes.

Recommendations for Tesco to sustain online development strategy in future.

In the present era the world is facing major issues related to the spread of novel corona virus disease. The retail sector is highly affected due to this because the situation of lockdown had restricted them to offer the products and services to their customers. All the retailers are focusing on products through online platforms. Tesco is having an effective market position in online retail industry of UK and this is helping them in offering products and services to their customers(Martin-Neuninger& Ruby, 2020).

The risk of spread of the corona virus disease is significantly high so it herecommends that the case company should focus on developing effective strategies and programs for ensuring the safety of their employees at the workplace. Along with this the company can also introduce the concept of contact less home delivering of the grocery products. This would help the company in ensuring that they are offering safe and secure products and services to their customers in UK. Also, the company can take make rules related to safety measures that all the delivering persons are required to use sanitizers and should go for covid test every week. This would help them in offering safe services to their customers and making their business operations safe for their employees as well.

As the company holds better position in online retaining covid pandemic is a great opportunity for the firm to expand their online customer. For this it can be recommended that they should focus on attracting more customers by investing better amount in social media marketing and digital marketing as this would help them in increasing the traffic at their social media pages and online app well. This would help them in increasing their customer base and getting benefitted through the opportunity offered by covid-19. Effective marketing and better discounts can also be offered by the case company as this would help them in gaining competitive advantage over others. In the present situation all the firms are now offering products and services through online mode only, so the firm needs to be more effective in developing better strategies. With the increased competition in the online retail sector of UK, Tesco needs to be more effective for enhancing their profitability by increasing their sales.

Tesco can also focus on creating the advertisements that explain that what are the safety measures being taken by them at their stores and deliveries as this would help them in creating a positive image among the customers. This would help the customers in getting assurance that proper covid-19 precautions measures are being taken by the company while offering and delivering the products and services to their customers. For this they can also tie up with the social media influencers as they are more effective in conveying the message and information to the public. This would help them in attracting more customers to buy the grocery and other products through online website and application of Tesco. It would help the company in getting benefitted from this opportunity and will reduce the loss caused by the pandemic situation across the world. It can be said that this would help them in doing business effectively even in the pandemic situation and generating higher profit as well.

DISCUSSION AND IMPLICATIONS

Based on the above research and the answers provided it can be said that the business environment is getting complex day by day and operating in an international market is not an easy task. There are different factors of the external business environment that are having a higher influence on the businesses operating in the nation. From the analysis of the case company Tesco in Japan it can be said that all the business markets are having unique features and the different socio-economic, demographic and the economic factors are some of the major factors that are having higher influence on the customers and the businesses operating in the nation.

These factors are the major reason behind the failure of Tesco in retail industry of Japan. From this another import thing that have been understood is that the organisations need to make major changes in their working pattern, their business strategies and organisational culture according to the different factors of the foreign country in which they are entering. If Tesco would have focuses on making changes in the firms, then it would have helped them in establishing themselves in an effective manner.

With the increased technological advancement, it had become important for the businesses to focus on developing effective strategies and using latest technologies. Online shopping had gained a lot of important in the last 10 years and is growing significantly and generating higher profit for the companies. The retail sector of UK is highly developed, and the firms are entering into online retaining of the products and services for offering more effective services to their customers. The report had found that Tesco is having highest market share in the online sales of the grocery products and with this position they are having great opportunities to generate high revenue in the pandemic situation. In the report the researcher had highlighted that how the case company can work on different plans and strategies for utilising this opportunity in an effective manner and running the firm appropriately in the pandemic situation also.

CONCLUSION

In the above-mentionedreport, the researcher had focused on explaining the concept of international market and businesses in an effective manner. This research had investigated the case study of Tesco that is related to the expansion of Tesco in the international market and how it had faced different issues at different markets. In this report the researcher had highlighted the knowledge related to Tesco's entrance into the Japanese market. Along with this the report had explained that what are the key reasons that constrained Tesco to pull out from the Japanese market. Along with this in this report provided detailed knowledge related to the UK grocery online market and how the situation of covid-19 had developed an opportunity for Tesco to expand their online market. The researcher had used better resources for answering the case study answers and had provided detailed answers.

From the report it can be concluded that different factors of the external business environment are not in favour of Tesco’s expansion in Japan. Due to this reason after several years of operating Tesco exit the Japanese market as they are facing losses and for the company this expansion went wrong. Also, the report concluded that the situation of Covid-19 pandemic had developed greater opportunity for Tesco to grow in the online grocery sector by offering more safe products and services to their customers. Thus, it can be said that different factors are associated with the international expansion of the businesses and all those factors need to be managed in an effective manner for leading the firm towards success.

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