SlideShare a Scribd company logo
1 of 57
1
MASTER OF BUSINESS ADMINISTRATION- MBA
INTERNATIONAL BUSINESS
INDIVIDUAL ASSIGNMENT
LECTURER–JOE FITZGERALD
INDIVIDUAL ASSIGNMENT
Bilal Ahmed - Nº 2159403
Full time Student
Dublin- 08/01/2016
2
Contents
EXECUTIVE SUMMARY...........................................................................................................4
TESCO AT A GLANCE..........................................................................................................4
BACKGROUND:................................................................................................................. 4
MAIN COMPETITORS:............................................................................................................. 8
PRODUCT RANGE:............................................................................................................... 9
SUBSIDIARIES................................................................................................................... 9
INTRODUCTION...................................................................................................................... 10
EXPANSION TO CHINESE MARKET:................................................................................ 11
INTRODUCTION.................................................................................................................. 11
GROWTH............................................................................................................................. 12
DECLINE.............................................................................................................................. 12
PREREQUSITE FOR FOREIGN TRADE:.............................................................................. 13
POLITITAL FACTOR:............................................................................................................. 14
POLITICAL SYSTEM IN CHINA:......................................................................................... 15
Democratic ........................................................................................................................... 16
Tesco.................................................................................................................................... 17
TESCO MUTUAL RELATIONSHIP (WITH CHINESE GOVERNMENT)............................ 19
ECONOMIC ENVIRONMENT:................................................................................................ 20
THE MARKET ECONOMY: ................................................................................................. 20
CENTRALLY PLANNED ECONOMY: ................................................................................. 21
MIXED ECONOMY: ............................................................................................................. 21
CHINA CASE: ...................................................................................................................... 21
TESCO................................................................................................................................. 23
STATISTICS:........................................................................................................................ 24
PER CAPITA INCOME: ....................................................................................................... 24
INFLATION........................................................................................................................... 24
TAX RATE............................................................................................................................ 25
SOCIAL ENVIRONMENT: ...................................................................................................... 26
DEMOGRAPHIC .................................................................................................................. 27
GREY MARKET:.................................................................................................................. 27
YOUTH MARKET:................................................................................................................ 27
Tesco.................................................................................................................................... 28
ADAPTATION STRATEGIES................................................................................................. 30
TECHNOLOGY........................................................................................................................ 31
TECHNOLOGICAL ADVANCES IN CHINA: ....................................................................... 32
3
TESCO................................................................................................................................. 33
ENVIRONMENTAL.................................................................................................................. 34
CHINA ENVIRONMENTEL POLICY: .................................................................................. 35
Tesco.................................................................................................................................... 36
Environmental Objectives: (Synopsis)................................................................................. 36
LEGAL ..................................................................................................................................... 38
SUPRA NATIONAL:............................................................................................................. 38
NATIONAL............................................................................................................................ 38
DOMESTIC........................................................................................................................... 39
CHINA .................................................................................................................................. 39
TESCO................................................................................................................................. 40
CONCLUSION......................................................................................................................... 41
RECOMMENDATION.............................................................................................................. 43
APPENDIX:.............................................................................................................................. 44
COMPETIVE POSTION:...................................................................................................... 46
CULTURAL CONTEXT:.......................................................................................................... 47
DETERMINANTS OF CULTURE: ....................................................................................... 47
CULTURAL DIMENSION..................................................................................................... 48
PROS AND CONS(CHINESE MARKET) ............................................................................ 50
POLITICAL RISK:................................................................................................................... 53
REFERENCES......................................................................................................................... 55
4
EXECUTIVE SUMMARY
The aim of this report is to analyse the environmental factors (pestle) Analysis. This
is the mnemonic of political, economic, social,technological,ecological and legal.
Which every multinational organization confront when it outset its business abroad.it
is interchangeably called environmental scanning.my purpose for this report is to
analyse and evaluate Tesco (British food retail group) strategy with regard to its
expansion of china. Where many experts said that Tesco fail to understand various
macro factors in china market which lead to the divestment of his stake from 90% to
20%.furthurmore I will present recommendation and reasoned analysis that why
Tesco fail to capitalise world largest growing market. Given below is introduction and
broad facts of Tesco plc. Have a glance
TESCO AT A GLANCE Tesco plc is a British multinational grocery and general
merchandise retailer headquartered in Cheshunt and Hertfordshire, England, and
United Kingdom. It is the third largest retailer in the world measured by profits and
second big retailer measured by revenues.
BACKGROUND: Tesco was founded in 1919 by Jack Cohen as a group of market
stalls. The Tesco name first appeared in 1924, after Cohen purchased a shipment of
tea from T. E. Stockwell and combined those initials with the first two letters of his
surname, and the first Tesco store opened in 1929 in Burnt Oak, Barnet. His
business expanded rapidly, and by 1939 he had over 100 Tesco stores across the
5
country. The first self-service store opened in st Albans, and the first supermarket
in Maldon in 1956.In 1961 Tesco Leicester made an appearance in the Guinness
Book of Records as the largest store in Europe.
GEOGRAPHICAL COVERAGE: Tesco has presence in 12 countries
across Asia and Europe and Tesco is the grocery market leader in the UK (where it
has a market share of around 28.4%), Ireland, Hungary, Malaysia, and Thailand.
GROWTH STRATEGY: During the 1950s and the 1960s Tesco grew organically,
and also through acquisitions, until it owned more than 800 stores. The company
purchased 70 Williamson's stores (1957), 200 Harrow Stores outlets (1959),
212 Irwin’s stores (1960, beating Express Dairies' Premier Supermarkets to the
deal), 97 Charles Phillips stores (1964) and the Victor Value chain (1968) (sold
to Bejam in 1986).
CORE PURPOSE:
Serving Britain's shoppers a little better, every day. Our business was built with a
simple mission – to be the champion for customers, helping them to enjoy a better
quality of life and an easier way of living. This hasn’t changed. Customers want great
products at great value which they can buy easily and it’s our job to deliver this in the
right way for them.
6
That’s why we’ve chosen ‘Serving Britain’s shoppers a little better every day’ as our
new core purpose. As a business, serving customers is at the heart of everything we
do – from colleagues in our stores to those of us in supporting roles.
In the UK, we serve some 66 shoppers every second, so it’s our goal to ensure
every one of those customers experiences just a little better service on each visit.
VALUES IN PRACTICE:
 No one try harder for customers
 We treat people how they want to be treat
 We use our scale for good
VISION: To be the most highly valued business by: the customers we serve, the
communities in which we operate, our loyal and committed colleagues and of course,
our shareholders.’
“Tesco’s core purpose (mission) is simple:
We make what matters better, together.”
7
MOTTO: Jack Cohen's business motto was "pile it high and sell it cheap", to
which he added an internal motto of "YCDBSOYA" (You Can’t Do Business Sitting
on Your Arse) which he used to motivate his sales force.
MARKETS SERVE: Originally a UK grocery retailer, since the early 1990s Tesco
has diversified geographically and into areas such as the retailing of books, clothing,
electronics, furniture, toys, petrol and software; financial services; telecoms and
internet services.
MARKET POSITIONING: The 1990s saw Tesco reposition itself; it moved from
being a down-market high-volume low-cost retailer, to one which appeals across
many social groups, by offering products ranging from its "Tesco Value" items
(launched 1993) to its "Tesco Finest" range. This broadening of its appeal was
successful, and saw the chain grow from 500 stores in the mid-1990s to 2,500 stores
fifteen years later.
INCORPORATION: Tesco is listed on the London Stock Exchange and is a
constituent of the FTSE 100 Index. It had a market capitalization of approximately
£18.1 billion as of 22 April 2015, the 28th-largest of any company with a primary
listing on the London Stock Exchange.
8
As one of the largest retailer with around 480000 colleagues, Tesco serve millions of
customers in week in stores and in online.
BOARD OF DIRECTORS: Our Board comprises the Chairman, our Group Chief
Executive, our Chief Financial Officer and a number of Non-executive Directors.
Our Executive Committee comprises the Tesco PLC Executive Directors and a
number of senior executives.
MAIN COMPETITORS:
 Walmart stores(Chinese market)
 j.sainsbury
 Carrefour(Chinese market)
 Aldi
 Lidl
 dunes
 marks &spencer
 super value
9
PRODUCT RANGE:
 books
 clothing
 electronics
 furniture
 toys
 petrol
 software
 financial services
 telecoms
 internet services
SUBSIDIARIES:
 Tesco Stores
 Tesco Bank
 Tesco Mobile
 Tesco Ireland
10
 Dobbie’s Garden Centres
 Tesco Family Dining Ltd.
 Giraffe Restaurants
 Dunnhumby
 Home plus
 Spenh
INTRODUCTION:
This purpose of this report is to identify swot analysis and pestel analysis. Both
models are key consideration either you are diversifying your business in country or
outside the country, thorough environmental scanning and identifying strength or
weakness is key driver which stimulate business prospect. Due to increasing
globalisation every large company is keen to exploit opportunities outside their
domestic region. This lead to ever-increasing trade between countries and formation
of treaties to regulate the trade. International trade is mutually beneficial for both
countries because every country is not conferred by everything so law of
comparative advantage and porter diamond of national advantage upheld. And
11
then we deal with the nature of change in the micro environment and examine its
impact on our chosen company. The importance of understanding the Macro
environment is twofold, first we recognise the change in business strategies due to
market environment and be in a position to respond, and second we should also be
alert to the fact that nature of change facing organisation is itself changing.(Graham
Hooley, marketing strategy and competitive positioning, 2012)
.
EXPANSION TO CHINESE MARKET:
The aim of this assignment is to analyse Tesco expansion in foreign market. I have
chosen Tesco china expansion as it was very large market and Tesco top executives
spend much of their time to analyse this market before moving forward to opening
supermarkets, hypermarkets and convenience stores. Despite all of these efforts
they fail to capitalise the expansion. Here Tesco life cycle outline in china; have a
glance;
INTRODUCTION:
JULY 2004 Tesco enter in to a china market through purchase 140-m china hyper
market HYMALL.
JULY 2005 Tesco joint venture in china will reportedly open 15 new outlets in china
including Beijing over the course of next year, according to sir terry leahy.(CEO)
12
JAN 2006 Tesco taken number of its outlets with its first store in Beijing, its venture
with hymall operated 39 stores in china.
GROWTH
SEP 2006 ,Tesco says it will launch own label product in china under the name LE
geo Tesco value.
.DEC 2006 Tesco pays partner the Taiwanese retailer ting hsin increase stake in
hymall from 50% to 90% by spending 180 million. Portfolio of stores reach to
36.Leahy says; we have seen exciting growth in china since announcing the joint
venture two years ago and are looking forward to the partnership entering in to new
phase.
JAN 2007 new Beijing shop. The first store operating under the Tesco banner.
Increase store portfolio to 46.set out plan to open 10 stores a year under the banner
name TESCO.
NOV 2009.joint venture come in to force, develop shopping mall in north east china,
each with their own Tesco hyper market.
Nov 2010 Company unveil target to quadrupled sales to 4 billion in next five years.
DECLINE:
13
APR 2011 retailers cut Chinese store opening targets after local operation failed to
break even in the second half.
AUG 2011 Tesco raise 70 million to help fund Chinese expansion.
AUG 2012 retailers reveal plan to close four hyper market claim tough “macro
condition”
June 2013 first quarter show that sales fell by 4.9%, food industry drop by bird flu
and pork market hit by food safety scare.
AUG 2013 Company confirm rumour that it will merge its operation with china
resource enterprise, taking 20 % stake.
MAY 2014 Tesco complete the deal with china resource enterprise. Relinquishing
total control
http://www.raconteur.net
PREREQUSITE FOR FOREIGN TRADE: Chinese expansion was fail to capitalise
this was partly due to lack of strategic depth of market and partly because of Tesco
fail to understand the macro factors in account which the very first part to move
forward, careful and meticulous scanning of market place, extensive research and
development about the culture, society, politics is pre-requisite and necessary
consideration before expansion. Every country is not identical and surrounded by
14
different environmental and cultural elements, which need to be clearly analyse
before moving forward, every company which outgrow, looking for new markets and
opportunities where it can sell its product and increase customer base and revenue.
But opportunities does not come out from a thin air, it required careful monitoring of
surrounding, continuous evaluation of environment and meticulous observation of
core competencies. Profound strategic evaluation and careful consideration of all
pros and cons, do and don’ts must take in to account before moving forward abroad
to business. This evaluation generally surrounded by PESTEL analysis and
competitive models (porter’s five forces) and swot analysis. For the sake of
conciseness I draw my attention to pestel model which sufficiently covered all aspect
of macro environment which shape the overall market.
POLITITAL FACTOR:
Politics is define as a science of governing especially the government of political
entity such as nation and the administration and control of its internal and external
afffairs.The political and legal environment has a profound effect on the operation
and competitive positioning of MNC’S (multinational companies) We discuss the
legal and political component together because of the interplay between the two
make it difficult to disentangle their individual impact. The political environment
determine the main participant in the environment, determine the relationship among
15
them and the rule of game that govern the political process. The political
environment also influence the legal environment, since it is The governing bodies
that are charged with the authority to create and impose rules and regulation, codes
of behaviour, standards and practices. The political environment of country can be
conducive to trade or anti trade. Or in some country there may be demand of some
kind of goods and countries where restriction and ban on some product. Such as in
Islamic societies the pork and wine is prohibited so it would not be prudent to embark
that business in Islamic dominant societies. Political system mainly influence by the
local history, geography, tradition and culture. There are three main political
ideologies.Anarchiasm is a system that promote personal liberties and deemed
public government unnecessary.Totaliatarianism is system that promote total
control by public government (communism, fascism) and no concern for personal
liberties at all. Pluralism is system that is based on belief that all groups, public,
private should participate in political organization and process (democracies and
monarchies) (Ehud menipaz&Amit menipaz, international business; 2011)
POLITICAL SYSTEM IN CHINA: political system of china is take place in the
framework of socialist republic run by the single party the communist party of china,
the leadership of communist party is stated in constitution of people republic of
china. Political power of china much less personal and more institutional based.
16
Many Chinese foreign observer see the transition from socialist china to the capitalist
state in which private ownership play an important role. Economic right are granted
gradually while maintaining complete control over political organization and allowing
no political rights. This type of system is normally surrounded by tough regulation,
strict adherence to rules and moderate competition.
Democratic countries as oppose to china usually provide stable business
environment, there is a less risk of military takeover.furthur more transparency, tax
law ownership, profit repatriation and democratic institution contribute to the
environment that allow free competition.as an example ,during first decade of 21st
century intel got Chinese govt incentive of US two billion to setup a new fabrication
plant. Tax incentive also offered in mainland areas of china. But North Korea and
china still running totalitarian system in which govt has strong and stringent control
over most aspect of people’s lives.
Politics can effect things such as;
 Fiscal policy (taxation, inflation, social infrastructure, business policies)
 Import and excise duty
 Provide grants(aid to struggling business)
17
 Product safety standards(minimum level)
 Labour law(pay,health,leaves)
Tesco: Chief executive Sir Terry Leahy echoed other retailers when he commented
on Tesco's China deal.
"China is one of the largest economies in the world with tremendous forecast
growth," he said.
Political barrier for foreign companies in china is getting reduced gradually, china is
becoming attractive market for retail business. Companies find it very difficult to do
business in non-capitalistic economies due to their inherent weakness and less
freedom of trade and business. But after becoming a member of WTO china pave
the way for multinational companies to do business with reasonable freedom and
less intervention by government.
On 11 December 2001, China became the member of the World Trade Organisation
(WTO). Mike Moore, WTO Director General said at the conclusion of the meeting of
the Working Party on China's Accession to the WTO With China's membership, the
WTO will take a major step towards becoming a truly world organization.
18
According to WTO negotiations, China commits to “liberalize its regime in order to
better integrate in the world economy and offer a more predictable environment for
trade and foreign investment in accordance with WTO rules”.
With the openness of the Chinese market to the outer world, especially after joining
the World Trade Organisation, China is becoming less restrictive to foreign investors
in retail sector. Now foreign retailers are able to have the option to establish wholly-
owned foreign enterprises (WOFEs) rather than operating through a joint venture
(JV). This has resulted in increased confidence and now foreign retailers are not only
enjoying organic growth by increase their store numbers but also entering into new
agreements by acquiring or merging with other chains in the retail industry.
In 2006, Ministry of Commerce decided to hand-over the centralised power from
Beijing of approving the small and medium sized foreign invested retail operations to
the local entities of the Ministry of Commerce at the provincial level. This shows a
commitment by the central authorities that they are willing to give a sense of ease
and freeness for the international retailers.
Currently, there are at least 35 retailers in China out of top 50 global retailers.
Ministry of commerce gave approval to more than 1,000 multinational retailers and
wholesalers to operate in China with contractual foreign direct investment of USD 1.9
billion, in 2005 alone.
19
With the market easing policies of the Chinese Government by reducing restriction
on the foreign companies to operate in China, international retailers like Tesco are
increasing their share in the market.
http://www.ukessays.co.uk
TESCO MUTUAL RELATIONSHIP (WITH CHINESE GOVERNMENT)
Tesco on political and legal ground did not find it difficult to survive and thrive, Tesco
explore opportunities and obtain grant and concession several times from
government. It’s also establish a network its local supplier to promote local growth
and also use local fund to finance its growth. Tesco overall relationship with Chinese
government were pleasing and productive. Here are some examples;
 Tesco is the latest British company to have been enlisted by the Chinese
government in its efforts to restore the reputation of its exports juggernaut.
 Executives from Tesco are understood to have attended a meeting in Beijing
last month with officials from China's Ministry of Commerce, at which issues
such as sourcing and product safety were discussed.
 The Chinese government is rallying support from Tesco and other
multinational retail groups as it tries to head off the deepening crisis over the
reputation of the country's consumer products.
20
 The system will give Tesco total control, and also let it work with provincial
Chinese governments in implementing their mind-bogglingly ambitious urban
regeneration programmes.
 Developments will happen at an alarming rate. When land is bought in
auctions, developments must start within two years. There is no "land-
banking" in China
http://www.cfr.org/china
ECONOMIC ENVIRONMENT: system consist of natural structure and process that
allocate the use of resource and govern the conduct of business activities. Most
economic system describe on a continuum from a market economy (promote
individual point of view in structure, process and rewards) to the centrally planned
economy (promote social wellbeing of community),in between is the mixed economy.
THE MARKET ECONOMY: in which goods and services are freely traded and price
is determined by market forces “supply and demand”.in a market based economy
most of the resources such as land, labour capital etc. are owned by individual rather
than govt.in a market economy, entrepreneurship which is the initiation of ventures
based on business opportunities is encourage and rewarded. A market economy in
its purest from, free from govt intervention is called free market.
21
CENTRALLY PLANNED ECONOMY: A centrally planned economy consist of
institution and processes that allow government to centrally allocate resources and
conduct business activities. A major assumption of this system is to ensure the
welfare and prosperity of society as a whole over individual. Objective of this system
is to achieve pre-determined political, social and economic goal through government
control.
MIXED ECONOMY: In a mixed economy natural resources, manufacturing plants,
and land are normally split equally between private ownership and government. But
government retain control of some strategic and key industries such as steel, military
equipment’s, nuclear energy etc. And those which are quite necessary for country
sustainability and survival.in mixed economy government intervene in maker through
incentive and subsidies mechanism or through fiscal and monetary policies. This
system is still operating in many develop and develop countries.
CHINA CASE: china economic system previously based on centrally control
economy. Toward the end of last century china decide to adopt capitalist mode of
economy, investment and competition. China recognise the importance of science
22
and technology as a foundation for international competitiveness ,china economic
growth is very fast after its join (WTO) IN 2008averaege growth of GDP is 8.7%
which bound to double every 8 years. China is very attractive for foreign investors
and provide significant grants and subsidies to bolster its internal growth. But it also
has some weakness. Corruption is widespread in provincial governments, banking
system is getting weak, rising poverty levels, environmental issues are neglected,
social discontent is paramount, and energy crises also pose a big threat. China is
also confined by some form of socialism and its economy is partly centrally control
by government. Chinese key industries such as steel, automotive, toys, mobile are
still being controlled centrally. But still private entrepreneurship is allowed and
encouraged, but gradual relaxation of control over press and television has been
reversed, government initiated content-censorship.
(Ehud Menipaz&Amit Menipaz, International business;2011)
FACTORS THAT CONSTITUE ECONOMICAL ENVIRONMENT:
Factors that an influence overall economic condition, here is the brief list but this is
not an exhaustive;
 GROSS DOMESTIC PRODUCT
 NATIONAL INCOME
23
 PER CAPITA INCOME
 LENDING/BORROWING RATES
 SUPPLY/DEMAND OF LABOUR
 PHYSICAL INFRASRTUCTURE
 REAL WAGES
 INFLATION
TESCO: As an emerging economy and increasing GDP at the rate 8% and forecast
to double every 5 years is really a mouth-watering indicators for multinationals.
Tesco realise this and start up to explore this emerging market. There was a decline
from 50 to 10 percent of population living near or absolute poverty. This high earning
middle class is back bone to any country and business this constitute a high
proportion of clientele. China GDP in year 2009 was relatively 7% higher than
previous year and this was absolute 81% increase during five year period.
24
STATISTICS:
As an emerging economy and increasing GDP at the rate 8% and forecast to double
every 5 years
By the mid-1990s, around 350 million people had an annual income of $500 or more,
which helped create a consumer market that could afford goods such as soap and
detergents.
The changing economic outlook give eightfold increase in per capita and
PER CAPITA INCOME:
Year Yuan
2005 3255
2006 3587
2007 4140
2008 4761
2009 5153
INFLATION:In February 2010, in eight categories of commodities, six of them
experienced prices rise and the rest two witnessed prices decline;
25
The consumer price index went up by 2.7 percent year-on-year
 The food price went up by 6.2 percent while the non-food price rose by 1.0
percent
 Prices for tobacco, liquor and articles up by 1.6 percent,
 Price for clothing down by 1.3 percent,
 Prices for household facilities, articles and maintenance services down by 0.8
percent,
 Health care and personal articles up by 2.4 percent
 Transportation and communication rose by 0.1 percent,
 Recreation, education, culture articles and services up by 0.8 percent,
 and housing up by 3.0 percent
http://www.ukessays.co.uk
TAX RATE:the corporate income tax rate in china is 25%.but special tax rates
available for those countries who are investing in backward regions such
as(west china)
26
All these leading indicators are business conducive and a great imperative
,increasing population required goods and services like household goods
better infrastructure transport ,communication which required investment on
the part of government, wise countries fulfil these needs by welcoming foreign
companies to cope with local demand, stimulate them by lifting trade barriers
,tax concession, government aid/grants and so on. This can also be evident
in china case which Tesco cognizant and move forward.
Tesco sold well-known local brands along-with other locally sourced products
in its stores. Tesco sourced about 60% of its international sourcing from China
through more than 300 suppliers at the end of 2006. In 2007, Tesco sourced
about 2.2 billion worth of goods from China and planned to source more than
4 billion in the next two years.
http://www.ukessays.co.uk
SOCIAL ENVIRONMENT: social environment of any country consist of various
indicators and trends which guide business executives about future trends and
anticipated demand for certain product.by meticulously identifying these pattern one
27
can surpass competitor in tough environment. Social environment has wider
implication for conducting business activities examples include the following;
CHINA INDICATORS:
By 2002 foreign companies accounted for nearly one-quarter of major supermarkets
in China, the country's State Economic and Trade Commission found.
China has a population of 1.3 billion people - compared to Britain's 59 million - and
an economy which is surging 9% a year.
http://news.bbc.co.uk
DEMOGRAPHIC: china today is demographically a rather young population, fertility
and mortality two major factors that sharp population size and age structure.2010
census showed that china population growth is slowed down, china population
inched up at just 0.57%annualy only about half the level of previous decade.
GREY MARKET: by 2010 nearly 14% of Chinese population was over 60, and nearly
1 in 10 were over 65.china is already an aging society. China total fertility rate is
amongst the lowest in the world 1.4 per women. (Dudly L et al,2011:P.P 5-6)
YOUTH MARKET: Declining fertility levels reduced the availability of young workers,
but this was exacerbated by the expansion of higher education. Sustained low
28
fertility and rising college enrolments mean that the supply of young workers will
continue to decline beyond 2020. The size of the young population aged 20-24 will
only be 67m by 2030, less than 60% of the figure in 2010. The middle class is said to
outnumber the entire population of the United States," says a spokesman for
Britain's Kingfisher which has introduced B&Q to the Chinese.
The relevance of these figures to the current study is that these represents ever
increasing consumers to which Tesco can attract towards its products to both its
market share and its profits in the long term.
http://www.brookings.edu
Tesco: Despite exploiting every macro factor in its favour Tesco fail to evaluate and
analyse cultural differences in depth which lead to curtail its stake in china market, it
is evident that Chinese market required poly-centric approach on part of business
executives, profound affinity to local culture and language is the key to break in to
large market. Every foreign expansion required optimum use and arrangement of
macro factors these variables are key to secure and realise market outlook, look at
below statement;
(Tesco should have look cultural differences in china before investing in second
large economy of the world)Qing Wang “(Professor of marketing and innovation)
29
she said; Tesco which came late in to china, open first store in 2004 mistakenly
believe that its secret weapon give its advantage over rivals. (Rick ponderous 6
Sep 2013)
Research indicate that Asian consumers are ill-suited to club card approach.
Although numerous number of consumers took part in loyalty programme but
research indicate that 63% out of them have loyalty cards from other chains also, it
means one can not bound Chinese consumer to specific chain.
http://www.foodmanufacture.co.uk
Tesco discovered that compare to western consumer, Asian consumers are variety
seekers. Research concluded that these Chinese consumers “believed larger
choices gave them more power of control, more motivation to make decisions, more
chances to have programmes which suit their needs and a more satisfying shopping
experience.
http://www.chinaconnections.com.au
30
ADAPTATION STRATEGIES
In China, Tesco combines its core strategies as in the UK with other of its
international operations to adapt to local conditions. According to Tesco's CEO,
Terry Leahy, it is important that operations are blended with the local circumstances
and a single top-down model would not work. Moreover, Tesco also appointed
Chinese senior management personnel to run it stores.
Instead of changing consumers' preferences, Tesco modified its own practices
according to consumers' needs. Moreover, Tesco also observed through its own
research before entering into the Chinese market that to operate in the Chinese
market is very different from other of its operations in Europe. In China, customers
prefer to feel and touch the products before buying it as is said by Tesco's
spokesman, Greg Sage. He also said that "We took four years to study the market.
It's very different from other countries."
Tesco designed its stores' interiors according to local customs and most importantly
as per preferences of the local customers. However, exterior of stores resemble to
those of in other countries. Individual customers greeted at stores in each stores
entrances by staff in traditional Chinese manner.
the fresh produce section in these Chinese stores was different as compared to in
stores in Europe. Chinese staff shouted aloud in these sections to attract customers'
attention for products which included live reptiles, for example, turtles, fish, toads,
31
jelly fish, etc. All these live animals were selected by the customers and then cut to
cater the customers' needs. The purpose of selling such live animals was to counter
the competition from the traditional wet markets, but in a more health conscious
manner. According to Wei Ying Chiao, "It is a balance between a wet market and a
supermarket. We have created a familiar feeling for the grand mums."
Tesco tried not only to generate loyalty through its brand but also catering the needs
of its Chinese customers by offering them local products. As in the words of Towle,
"Our brand is very important for generating loyalty, but our customers are Chinese
and we need to give them the local products they want, too."
http://www.ukessays.co.uk
TECHNOLOGY: An ever-increasing technology in 21st century has significantly
transformed every element of society, from business to education and from transport
to communication everything is revolutionised and this process is still moving at very
fast pace. A shortening of commercialisation time of new innovation, photography for
example took 100 years from invention to commercial viability. While World Wide
Web took only 5 years to commercialise.technoloy is continue to develop at
bewildering pace
https://alexnstone.wordpress.com
32
distance are shrinking rapidly as firms are using internet to market their
products.one result is that cross-national segment are now emerging for products
and services from fast food ,through books and mobiles to computer and toys.(Ehud
& Menipaz,2011:P.P 56)
TECHNOLOGICAL ADVANCES IN CHINA: The development speed of China’s
science and technology in the previous 100 years was regarded as unprecedented.
By early 21st century, China has remarkably narrowed the gap in general between
its development level of high technology and the world’s advanced level. Over 60
percent of China’s technologies have approached the international advanced level,
and 25 percent have greatly progressed, though still lagging behind the international
advanced level. The past five years the proportion of Chinese public with basic
scientific quality has annually increased by 0.24 percentage point, from 0.2 percent
in 1996 to 1.4 percent in 2001. In 2001, the government decided to focus its science
and technology work on promoting the upgrading of traditional industries, propelling
hi-tech researches, strengthening basic researches, deepening reform in the system
of science and technology, and building a state system of innovation.
http://www.china.org.cn
33
TESCO: Technological advance country by its nature exhibit a growth and
opportunities in the sense that multinational like Tesco can equipped its store with
modern computer-embed stores. Self-check out, can buy modern security equipment
from local markets. Also the population of technologically advanced countries
provide well verse work force which has understanding to operate modern
equipment’s as well as awareness to ever changing and volatile business
environment.
 Tesco increase online shopping experience by using QR code
technology for customer convenience.
 Internet play a vital role in order to make those strategies workable.
 Tesco has launched its online shopping store in china in 2013.
 Tesco's china online business uses the same operational model and
technological infrastructure as the UK business.
 Mr Clarke said Tesco intends to increase its investment in digital
technology to $750m (£492m) this year and added: "In the future, app
development is going to be just as important as property development."
 Although in china debit/credit card not prevalent, so Tesco is managing
by accepting payments through alternate means cash/cheque
payments.
34
 In China, Tesco has created a digital-only version of its pioneering Club
card loyalty program.
 Every customer to be served quickly, therefore, check-our counter
were designed in such a way to provide a quick service as most
customers buy in small quantities but with regular intervals. The
average spending per visitor per customer is about 5.25, mostly in
cash, therefore, quicker check-out process required to be a necessity
which Tesco tried to achieve.
http://www.ukessays.co.uk
ENVIRONMENTAL: This is very key consideration of 21st century. Industrialisation
age give rise to pollution and large countries utilising earth resources at very fast
pace, if we continue to exhaust resources at the same pace we would require three
planets full of resources (dr.michio kaku, 2011) big companies are genuinely acting
to cut waste, cut carbon emission, find sources of renewable energy and develop
sustainable business models (senge et al,2008:P.P 5-6) and more focus concept of
sustainability(meeting current needs without harming future generation)
35
CHINA ENVIRONMENTEL POLICY: To address the pollution that accompanies
rapid industrial growth in China, a National Eco-industrial Park Demonstration
Program was launched in 2000. Tianjin Economic-Technological Development Area
(TEDA). The emergence of an environmental institution in TEDA is used as a
backdrop to assess how TEDA has transformed itself into one of the top three
national eco-industrial parks in China. Following two years of field research, a
network of 81 inter-firm symbiotic relationships formed in TEDA during the past 16
years were identified involving the utility, automobile, electronics, biotechnology, food
and beverage, and resource recovery clusters.
http://www.china.org.cn
The country has become the world’s second-largest economy and its biggest
carbon emitter; decades of breakneck economic growth have left many of its
rivers desiccated and its cities perennially shrouded in smog.
Over the past year, the Chinese government has begun to emphasise
environmental protection in its official rhetoric. The new law “sets
environmental protection as the country’s basic policy,” state news agency
Xinhua reported.
http://www.theguardian.com/environment
36
Tesco continues to recognise climate change as the biggest environmental threat the
world faces and by helping to develop initiatives such as the Energy Ambassador
programme, we can reduce our impact on the environment. The energy ambassador
programme led to an increase in the number of staff who understand how their jobs
contributes to energy use and the costs of running stores.
http://www.tescoplc.com
Environmental Objectives: (Synopsis)
 Tesco continues to recognise climate change as the biggest environmental
threat the world faces and by helping to develop initiatives such as the Energy
Ambassador programme.
 In September the world’s attention was drawn to New York for the UN’s latest
Climate Summit, where more than 100 world leaders gathered to pledge
action to tackle climate change.
 Commitments ranged from a plan by China to cut carbon intensity and
reduce their greenhouse gas emissions by 40%.
37
 At Tesco, we have made two medium-term targets to cut our carbon footprint,
one of which is to halve the carbon emissions per square foot of our stores
and distribution centres across all our operating markets by 2020 against a
2006/07 baseline.
 With global energy prices due to almost double in the next five years,
introducing innovative technologies like this will help manage challenging
carbon and operating costs
 . We aim to be a zero-carbon business by 2050 and also have interim carbon
reduction targets regarding 'emissions per square foot of stores and
distribution centres' and 'emissions per case of goods delivered.'
 We have an excellent track record of trialling new energy efficient
technologies, which if successful we can then incorporate into our future
developments. We have set the target of being a zero-carbon business by
2050, and in order to do this we must continue to embrace new technologies
and work with our partners to achieve new innovations in environmental
design."
38
LEGAL
Legal environment has profound effect on competitive positioning of MNC’S.both
within home country and within target country. Well develop and business conducive
legal infrastructure is very necessary for MNC’S to survive and thrive in foreign
countries. These issues cover statues, legislation, regulation, common law, civil law
etc. Which we have covered earlier in the context of political factors. Country
legislative body has charge with authority to amend, review or revise law if consider
necessary. There are normally three types of legislative bodies which multinational
must observe;
SUPRA NATIONAL:
 WTO
 INTERNATIONAL COURT OF JUSTICE
 U.NO
 EUROPEAN UNION
NATIONAL
 LAW MAKING AUTHORITY(PARLIMENTIARY)
39
 BYE-LAW
 DOMESTIC LAW
DOMESTIC
 COMPANIES ACT
 LISTING REQUIRMENT
 ACCOUNTIND AND AUDITING LEGISLATION
 EMPLOYEMENT LAW
 PRODUCT SAFETY STANDARDS
CHINA:
In the past western inner provinces of china were less friendly to free economy and
corruption was prevalent in those areas. Now china is taking steps to eradicate
corruption and also building infrastructure to offset disadvantages to western
provinces. These changes will make western provinces more cosmopolitan and help
attract MNC’S and foreign investment.it is the mayors and provincial rulers who exert
pressure on the central government to allow MNES the freedom of operation
,appropriate ownership of rules, and the necessary development of supporting
infrastructure for such venture to thrive in their territories
40
TESCO. Greenpeace personally presented a letter to Tesco's China headquarters in
Beijing requesting the supermarket chain ensure its agricultural suppliers stop using
harmful and, in some cases, illegal pesticides, and to make its produce supply
chains are transparent.
This latest round of tests came in response to claims by Tesco in September refuting
Greenpeace's previous findings. It is the fourth test run by Greenpeace since early
2009.
Greenpeace filed a public interest law suit against the supermarket giant in early
September 2011 because of its continuing violations of Chinese food regulations.
Greenpeace are calling on Tesco to take responsibility and ensure its produce
doesn't harm people and the environment. Tesco should at the least raise its
produce standards in China to the quality used at other Tesco stores around the
world.
http://www.ethicalconsumer.org
More than 100 workers have blockaded a Tesco in east China, the latest incident in
a wave of industrial action in the country.
http://www.theguardian.com/world
41
CONCLUSION
Every large organization spend much of their time to gain understanding external
context in which company has to operate. These external factors can have power to
influences organization at every stage of its life cycle. Organizations who judiciously
analyse, evaluate and understand this wider environment better than competitor
have greater chance to excel in specific market. PESTEL consideration play a vital
role, it provide sense of direction and opportunity/threats, if forecast and analyse
correctly stand out company and propel to make contingency plan. Opportunities not
manifest itself it need to be explore and this overall understanding of wider
environment itself bring a great opportunities. Tesco in its operation in china had
vastly adapt its practices and procedures corresponding to Chinese culture and
standards, its lay out of stores and courteous local staff, its replace simple
hierarchical top down structure by eliminating management layers and appoint
Chinese for senior management position, they give feel and touch sense of product
by changing stores structures and make store interiors according to local customs,
Tesco also change its product section and it was filled with reptiles where live
animals cut in front of customer and present in courteous manner. Tesco recognise
local food requirement and fulfil these according to prevailing culture, these all efforts
intent to create loyalty and long-term relationship with Chinese customers. While
adopting all local practices Tesco fulfil legal obligation and have a rapport
42
relationship with chines provincial and central government and attended many
meeting whose agenda is to give preference to local suppliers and product
safetystandards.tesco also took part in many urban development programmes
alongside provincial government and substantiate urbanisation by building better
infrastructure.it has partnership Lenovo group to develop green IT projects in china.
These all efforts elevate Tesco reputation in china but there is a misconception
which lead Tesco to ultimately curtail its stake in china. Which is the misobservation
and incorrect assumption about chines consumer. Despite four years of preceding
study and R&D about china market Tesco fail to analyse customer behaviour
thoroughly in china. Tesco loyalty card scheme prove unsuccessful and as mention
previously about 63% customers who had loyalty card also contain similar cards
from other super chains, Asian consumers are variety seekers to enhance their
power, bargaining and choice, its wrong perception that secret weapon would give it
advantage over rivals were fail to capitalise.
43
RECOMMENDATION:
 Every foreign expansion must be accompanied by extensive research.
 Relationships and network building before moving give extra advantage.
 Large organization should select joint venture partner before incorporating
wholly owned enterprise.
 Suppliers should be secure locally in order to minimise transportation and
other related cost.
 Finance should be secure locally, so currency fluctuation cannot wound
organization.
 Poly-centric or geo-centric approach must be pursue and also display loyalty
to local customs and cultural values.
 Recruit local employees and train them sufficiently. Promote them and give
senior positions.
 Establish and maintain relationship with top government officials and
commerce bearucrat. Use lobbying power when situation warrants its usage.
 Always follow norm and take ethical stance according to local customs in
every aspect of company operation like marketing, sales, advertisement.
44
 Only promote those products and services which is not strictly prohibited. E.g.
;pork and wine(Islamic countries)
 Participate and sponsor local sporting events and take active part in
philanthropic activities.
APPENDIX:
CSR Activities in china(at a glance)
LABOUR WAGE CONTRACT:Britishretail giant Tesco has signed its first collective
labor contract with employees in China.
The contract reportedly covers Tesco's 30,000 employees in 109 supermarkets, 14
convenience stores, and six logistic centers in China.
According to the collective contract, Tesco will establish a collective wage
consultation system. Based on the increase of China's consumer price index, the
profit conditions of the company, and the wage level of the entire industry, Tesco will
discuss the salary increase rate with the labor union in February every year. The
45
retailer will also sign a wage-related special agreement to ensure that the employees
can share the development benefits of the company.
SUSTAINABLE RESOURCES:Britishretail giant Tesco has signed a letter of intent
with the Department of Commercial Services Administration of the Ministry of
Commerce of China to jointly promote the sustainable development of the Chinese
retail industry.
According to local media reports. the signing of the letter of intent shows that Tesco
has reached a consensus with the Chinese government about the sustainable
development of the retail industry. Meanwhile, it sets a good example for the
cooperation between enterprises and the government. This move marks an active
measure of Tesco's realization of its environment-related strategic goal, which is to
achieve zero carbon emissions by 2050.
GREEN I.T PROJECTS:The British retail giant Tesco Plc recently announced that it
had established a partnership with Lenovo Group, to develop green IT projects in
China.
Under the agreement signed between the two sides, Lenovo will collect Tesco's used
IT products in an environment-friendly, and outsource those products to its affiliated
company for recycling process.
46
ENERGY EFFICIENT TECH:International retailing giant Tesco has opened a new
store in Tieling in northeast China which is reportedly the first energy-saving Tesco
outlet in the region.
Built in accordance with Tesco's standard for energy-saving stores, the Tesco Tieling
Guangyu Store has an advanced energy management system that makes large-
scale use of a range of energy-saving equipment including a brand new ventilation
system, electronic expansion valves, high efficiency energy saving draught fans, and
high efficiency electronic ballasts to help reduce the power consumption of air-
conditioners and refrigerators. It is expected that the store can reduce energy
consumption by 25%
http://www.chinacsr.com
COMPETIVE POSTION: Local mention earlier local competitor in quick copying
ideas and later use them for there advantage. Walmart had an advantage over
Tesco because it entered in market very earlier, harmonise and grasp local
knowledge and culture. Tesco was also a late entrant to the market and never
caught up with Carrefour and Walmart. It bought its first stake in China in 2004,
began with a relatively modest set of stores and was happy to operate the branding
of its partner, Ting Hsing. It did not open an own name location until 2007.
47
Only three years ago, Tesco had a five year plan every bit as ambitious as the ones
formulated by China's leaders, saying they would open more new retail space in the
country than they had built up in the UK.
http://www.theguardian.com
CULTURAL CONTEXT: every country has its unique set values, beliefs and
languages which is also influence the way of doing business. Management should
have cross-cultural proficiency in order to manage affairs in foreign countries, among
many issues international manager must be aware from variation in cultures. Every
aspect of cultural determinants highly influence the way we doing business and
shape the overall environment.
DETERMINANTS OF CULTURE:
 RELIGION
 SOCIAL STRUCTURE
 EDUCATION
 POLITICAL PHILOSOPHY
 ECONOMIC PHILOSOPHY
(Graham Hooley, marketing strategy and competitive positioning, 2012)
48
CULTURAL DIMENSION
 Power Distance (PDI) – Power distance is the extent to which less powerful
people in an organization will accept and expect power to be distributed
differently. China ranks 80 on PDI which is very high. This means there is a
lot of power distance between subordinates and superiors, but that it is
accepted and normal.
HOFSTEDE MODEL SCORE (CHINA: 80 UNITED KINGDOM: 35)
 Individualism/Collectivism (IDV) – This is whether or not people think with the
mentality of “I” or “We.” The American culture is very “I” focused, meaning
that we focus more on furthering ourselves and careers versus furthering our
department or group. On the other hand, China ranks 91 on IDV, meaning
that they are highly collectivistic and think as a group versus individually. This
can be seen with the high amount of in-groups and out-groups.
HOFSTEDE MODEL SCORE (CHINA: 20 UNITED KINGDOM: 89)
 Masculinity/Femininity (MAS) – This is the first dimension where the
Americans and the Chinese rank similarly. China ranks 66 for this dimension,
meaning they are very driven by successful, competition, and achievements.
49
The Chinese will often put work before family or leisurely activities. This
dimension can be seen in the fact that Chinese workers will leave their
families to go work at factories for 11 months out of the year, proving how
important work truly is to them
.
HOFSTEDE MODEL SCORE (CHINA: 66 UNITED KINGDOM: 66)
 Uncertainty Avoidance (UAI) – This is the second dimension where
Americans and Chinese rank similarly as well. China ranks 40, meaning they
accept ambiguous situations and are not deterred by them. It may seem like
China has a lot of rules and regulations in place to avoid ambiguous or
uncertain situations, however they are willing to bend and changes the rules
as situations require it. The Chinese language is also very ambiguous; the
Chinese characters are hard to interpret or understand if it is not your native
language.
HOFSTEDE MODEL SCORE (CHINA: 30 UNITED KINGDOM: 35)
 Long-term/Short-term Orientation (LTO) – The Chinese rank extremely high
on long term orientation at 118, meaning they focus on persistence and
50
perseverance, and that they will dedicate however much time is required to
achieve their goals. This is seen in the very time consuming Chinese
negotiation process, the time required to build trust and long-term
relationships, and their focus on long term results versus short term goals.
HOFSTEDE MODEL SCORE (CHINA: 87 UNITED KINGDOM:51)
These cultural dimensions are deeply embedded in a country’s culture and are
difficult to understand unless you are born and raised there. The Chinese culture
needs to be studied and taken into consideration before entering any binding
contracts. Not understanding these cultural dimensions can be damaging to any
relationship you are trying to build with the Chinese.
https://alexnstone.wordpress.coM
PROS AND CONS(CHINESE MARKET)
Wealthier shoppers
The London-based Economist Intelligence Unit (EIU) in its June 2004 "white paper"
on multi-national companies in China points out two other factors which make the
country a red-hot destination for Western retailers.
51
Firstly, the Chinese government does not view consumer goods as a strategic
sector, unlike steel or telecommunications, which are subject to greater scrutiny and
restriction.
French retailer Carrefour, the EIU says, has made little
secret of its bending of the country's retail rules.
Secondly, the Chinese are getting richer.
By the mid-1990s, around 350 million people had an
annual income of $500 or more, which helped create a
consumer market that could afford goods such as soap
and detergents.
"People used to buy from day to day," Nick Debnam, a partner at KPMG in Hong
Kong points out.
"For example, they would buy shampoo by the sachet. They would never buy a
bottle. But all that's changed.".
Pitfalls
But Tesco and other retailers face huge challenges by betting on China.
The Chinese are quick to copy a good idea.
Areas targeted by foreign
retailers
52
"Locals competitors see a hypermarket which works and then launch their own. They
are not giving up without a fight," said Mr Debnam.
Local stores are also very competitive on price and also often enjoy greater
government backing than their foreign counterparts.
More foreign retailers are likely to enter the market after the government lifts
restrictions on their activities at the end of the year.
Meanwhile, many companies underestimate the size of the market, analysts say.
There is no point for example advertising in a neighbouring province as the effort will
be wasted.
"Going into a province in China is like going into one country in Europe," Mr Debnam
adds.
The EIU report also points other difficulties:
Advertising costs are high.
But Tesco is undaunted.
Lucy Neville-Rolfe says there is certainly a "need to go local".
53
"We will be using word of mouth and fliers," she said, to promote the stores.
She says Tesco is used to competition, and has competed elsewhere in the world
with market leaders in China, which include the French chain Carrefour and the US's
Wal-Mart.
Chief executive Sir Terry Leahy echoed other retailers when he commented on
Tesco's China deal.
"China is one of the largest economies in the world with tremendous forecast
growth," he said.
Tesco CEO Philip Clarke, speaking at the recent World Retail Conference in
Singapore, said Tesco “wouldn’t simply grow by buying more real estate, but instead
change the way we engage our customers and embrace digital retailing.” Clarke
added, “In the future, app development is going to be just as important as property
development.”
POLITICAL RISK: two types of political risk. Macro political risk which affect all
companies operating in particular region or country. Or micro political risk which
affect only particular industry. define as a likelihood of political change in country
occurs and will result in negative impacts, such as expropriation of assets, changes
in tax policy, restriction on exchange of foreign currency or other change in business
54
environment. Business law may be non existent, incomplete or arbitrary, change
without due or transparent process. Senior bearucrat may interpret the law as they
please. Personal relationship and connection (in china is known as “guanxi”) to the
various govt officials, wealthy and powerful locals are more important and critical to
business executives. Beijing should move toward political reform if china want to be
a major global player. china has transformed itself completely from a poor nation
which completely abandoned international trade to the world largest supplier of
labour intensive. But the shortcoming of china is “socialist market economy”. We
view the political economy process in china as a trade-off between foreign direct
investment and the loss incurred by state owned enterprise due to such
liberalization.(gross man and help man 1994), the formal ban on FDI was lifted in
1972 ,however a number of several restriction were still in place until the policy
change in 1979,deng Xiao pinched aggravate his power in Chinese politics and
communist party.in the same year special economic zones were establish in which
foreign firms were offered preferential tax treatment and given usually free hand in
operation.in particular these zones charged a reduce tax of 15% on income of
foreign affiliated firm. All these business conducive policies enhance the rate of
foreign investment in china and bolster the growth rate dramatically.
55
REFERENCES
 Hooley, G.J. Piercy, N. and Nicoulaud, B. (2011). Marketing strategy &
competitive positioning. (5th edn). New York: FT Prentice Hall.
 Ehud menipaz&Amit menipaz, ( 2011) international business london city
road,oliver yard
 Dudly L et al. (2011)The population of modern china book[Online]Available
at:http://books.google.ie/books?isbn=1489912312[Accessed 29.Dec.2015]
 (gross man and help man (1994) The population of modern china
book[Online]Available
at:http://books.google.ie/books?isbn=1489912312[Accessed 29.Dec.2015]
 [Online]Available at: http://raconteur.net/business/why-tesco-failed-to-crack-
china[Accessed 30 Dec.2015]
 [Online]Available at: http://cid.econ.ucdavis.edu/Papers/pdf/chinafdi-
all.pdf[Accessed 30 Dec.2015]
 [Online]Available at:http://www.ukessays.co.uk/essays/business/factors-
affecting-retail-patterns-in-china.php#ixzz3viwIKVRr [Accessed 30 Dec.2015]
 [Online]Available at : http://www.cfr.org/china/chinas-environmental-
challenge-political-social-economic-implications/p5573[Accessed 26
Dec.2015]
 [Online]Available
at:http://news.bbc.co.uk/2/hi/business/3893469.stm[Accessed 30 Dec.2015]
 [Online]Available:http://www.brookings.edu/research/articles/2012/06/china-
demographics-wang[Accessed 30 Dec.2015]
56
 [Online]Available at http://www.foodmanufacture.co.uk/World-News/Tesco-
failed-to-understand-the-Chinese-consumer [Accessed 29 Dec.2015]
 [Online]Available athttp://www.chinaconnections.com.au/en/magazine/current-
issue/1951-tesco-in-china-failing-brand-loyalties [Accessed 30 Dec.2015]
 [Online]Available at https://alexnstone.wordpress.com/2012/01/14/hofstedes-
5-cultural-dimensions-for-china.ime[Accessed 25 Dec.2015]
 [Online]Available at
http://www.china.org.cn/english/features/38309.htm[Accessed 28 Dec.2015]
 [Online]Available:http://www.theguardian.com/environment/2014/apr/25/china-
strengthens-environmental-laws-polluting-factories[Accessed 30 Dec.2015]
 [Online]Available at
http://www.tescoplc.com/index.asp?pageid=638[Accessed 30 Dec.2015]
 [Online]Available at https://alexnstone.wordpress.com/2012/01/14/hofstedes-
5-cultural-dimensions-for-china/[Accessed 30 Dec.2015]
57

More Related Content

What's hot

Edita Food Industries - Re-initiation of Coverage - August 2016
Edita Food Industries - Re-initiation of Coverage - August 2016Edita Food Industries - Re-initiation of Coverage - August 2016
Edita Food Industries - Re-initiation of Coverage - August 2016Omneya El Hammamy
 
Tesco. how to improve its balanced score card. mario samuel camacho compressed
Tesco. how to improve its balanced score card. mario samuel camacho compressedTesco. how to improve its balanced score card. mario samuel camacho compressed
Tesco. how to improve its balanced score card. mario samuel camacho compressedMario Samuel Camacho
 
Edita.Logistics Management
Edita.Logistics ManagementEdita.Logistics Management
Edita.Logistics Managementsally sanhory
 
Group 7 Final: Target to Expand Internationally to Mexico (final draft)
Group 7 Final: Target to Expand Internationally to Mexico (final draft) Group 7 Final: Target to Expand Internationally to Mexico (final draft)
Group 7 Final: Target to Expand Internationally to Mexico (final draft) Kenneth Griffith
 
McDonalds SPACE Matrix, BCG Matrix, Product Positioning Map
McDonalds SPACE Matrix, BCG Matrix, Product Positioning MapMcDonalds SPACE Matrix, BCG Matrix, Product Positioning Map
McDonalds SPACE Matrix, BCG Matrix, Product Positioning MapMita Angela M. Dimalanta
 
29932770 strategic-management-of-tesco-supermarket
29932770 strategic-management-of-tesco-supermarket29932770 strategic-management-of-tesco-supermarket
29932770 strategic-management-of-tesco-supermarketkumerra
 
International marketing strategy (assignment) , ICM,U.K
International marketing strategy (assignment) , ICM,U.KInternational marketing strategy (assignment) , ICM,U.K
International marketing strategy (assignment) , ICM,U.KMohammed Azeem Azeez
 
The B2B Story of Maersk – How to Engage with Customers Online
The B2B Story of Maersk – How to Engage with Customers OnlineThe B2B Story of Maersk – How to Engage with Customers Online
The B2B Story of Maersk – How to Engage with Customers OnlinespotONvision - B2B Marketing
 
Intensive & integration strategies....mine
Intensive & integration strategies....mineIntensive & integration strategies....mine
Intensive & integration strategies....mineFarhan Ahmad
 
2-FINAL_DRAFT_Samsung_Electronics_Marketing_Audit_Report
2-FINAL_DRAFT_Samsung_Electronics_Marketing_Audit_Report2-FINAL_DRAFT_Samsung_Electronics_Marketing_Audit_Report
2-FINAL_DRAFT_Samsung_Electronics_Marketing_Audit_ReportHassan Wahdan (MBA,MAFB)
 
PROJECT ON SALES PROMOTION OF NESTLE
PROJECT ON SALES PROMOTION OF NESTLEPROJECT ON SALES PROMOTION OF NESTLE
PROJECT ON SALES PROMOTION OF NESTLEsima chopra
 
Tesco Case Study- Presentation- Marketing Management- MBA
Tesco Case Study- Presentation- Marketing Management- MBATesco Case Study- Presentation- Marketing Management- MBA
Tesco Case Study- Presentation- Marketing Management- MBAVineethJose5
 
Assignment Sample: Business Strategy of an Organization
Assignment Sample: Business Strategy of an OrganizationAssignment Sample: Business Strategy of an Organization
Assignment Sample: Business Strategy of an OrganizationInstant Assignment Help
 

What's hot (20)

Marks & Spencer Strategic Analysis
Marks & Spencer Strategic AnalysisMarks & Spencer Strategic Analysis
Marks & Spencer Strategic Analysis
 
Hassaan Assignment
Hassaan AssignmentHassaan Assignment
Hassaan Assignment
 
Edita Food Industries - Re-initiation of Coverage - August 2016
Edita Food Industries - Re-initiation of Coverage - August 2016Edita Food Industries - Re-initiation of Coverage - August 2016
Edita Food Industries - Re-initiation of Coverage - August 2016
 
HSBC Mini Case
HSBC Mini CaseHSBC Mini Case
HSBC Mini Case
 
Tesco. how to improve its balanced score card. mario samuel camacho compressed
Tesco. how to improve its balanced score card. mario samuel camacho compressedTesco. how to improve its balanced score card. mario samuel camacho compressed
Tesco. how to improve its balanced score card. mario samuel camacho compressed
 
Edita.Logistics Management
Edita.Logistics ManagementEdita.Logistics Management
Edita.Logistics Management
 
Group 7 Final: Target to Expand Internationally to Mexico (final draft)
Group 7 Final: Target to Expand Internationally to Mexico (final draft) Group 7 Final: Target to Expand Internationally to Mexico (final draft)
Group 7 Final: Target to Expand Internationally to Mexico (final draft)
 
McDonalds SPACE Matrix, BCG Matrix, Product Positioning Map
McDonalds SPACE Matrix, BCG Matrix, Product Positioning MapMcDonalds SPACE Matrix, BCG Matrix, Product Positioning Map
McDonalds SPACE Matrix, BCG Matrix, Product Positioning Map
 
29932770 strategic-management-of-tesco-supermarket
29932770 strategic-management-of-tesco-supermarket29932770 strategic-management-of-tesco-supermarket
29932770 strategic-management-of-tesco-supermarket
 
Kraft-Cadbury
Kraft-CadburyKraft-Cadbury
Kraft-Cadbury
 
International marketing strategy (assignment) , ICM,U.K
International marketing strategy (assignment) , ICM,U.KInternational marketing strategy (assignment) , ICM,U.K
International marketing strategy (assignment) , ICM,U.K
 
Tesco
TescoTesco
Tesco
 
The B2B Story of Maersk – How to Engage with Customers Online
The B2B Story of Maersk – How to Engage with Customers OnlineThe B2B Story of Maersk – How to Engage with Customers Online
The B2B Story of Maersk – How to Engage with Customers Online
 
McDonald’s Investor Relations Plan
McDonald’s Investor Relations PlanMcDonald’s Investor Relations Plan
McDonald’s Investor Relations Plan
 
Intensive & integration strategies....mine
Intensive & integration strategies....mineIntensive & integration strategies....mine
Intensive & integration strategies....mine
 
2-FINAL_DRAFT_Samsung_Electronics_Marketing_Audit_Report
2-FINAL_DRAFT_Samsung_Electronics_Marketing_Audit_Report2-FINAL_DRAFT_Samsung_Electronics_Marketing_Audit_Report
2-FINAL_DRAFT_Samsung_Electronics_Marketing_Audit_Report
 
PROJECT ON SALES PROMOTION OF NESTLE
PROJECT ON SALES PROMOTION OF NESTLEPROJECT ON SALES PROMOTION OF NESTLE
PROJECT ON SALES PROMOTION OF NESTLE
 
Tesco Case Study- Presentation- Marketing Management- MBA
Tesco Case Study- Presentation- Marketing Management- MBATesco Case Study- Presentation- Marketing Management- MBA
Tesco Case Study- Presentation- Marketing Management- MBA
 
Krispy kreme ihu
Krispy kreme ihuKrispy kreme ihu
Krispy kreme ihu
 
Assignment Sample: Business Strategy of an Organization
Assignment Sample: Business Strategy of an OrganizationAssignment Sample: Business Strategy of an Organization
Assignment Sample: Business Strategy of an Organization
 

Viewers also liked

Human.Res(MAIN)docx
Human.Res(MAIN)docxHuman.Res(MAIN)docx
Human.Res(MAIN)docxBilal Ahmed
 
Strgc .mang Final
Strgc .mang FinalStrgc .mang Final
Strgc .mang FinalBilal Ahmed
 
Consultancy Report Final
Consultancy Report FinalConsultancy Report Final
Consultancy Report FinalBilal Ahmed
 
MARKETING -Group Assignment
MARKETING -Group AssignmentMARKETING -Group Assignment
MARKETING -Group AssignmentBilal Ahmed
 

Viewers also liked (7)

merged (1)
merged (1)merged (1)
merged (1)
 
Human.Res(MAIN)docx
Human.Res(MAIN)docxHuman.Res(MAIN)docx
Human.Res(MAIN)docx
 
group HRM A1
group HRM A1group HRM A1
group HRM A1
 
final doc
final docfinal doc
final doc
 
Strgc .mang Final
Strgc .mang FinalStrgc .mang Final
Strgc .mang Final
 
Consultancy Report Final
Consultancy Report FinalConsultancy Report Final
Consultancy Report Final
 
MARKETING -Group Assignment
MARKETING -Group AssignmentMARKETING -Group Assignment
MARKETING -Group Assignment
 

Similar to I.B FINAL (20)

Martina brtnicka case_study_tesco
Martina brtnicka case_study_tescoMartina brtnicka case_study_tesco
Martina brtnicka case_study_tesco
 
Tesco
TescoTesco
Tesco
 
Case-Tesco-PLCformatv.pdf
Case-Tesco-PLCformatv.pdfCase-Tesco-PLCformatv.pdf
Case-Tesco-PLCformatv.pdf
 
Tesco - Every Little Helps
Tesco - Every Little HelpsTesco - Every Little Helps
Tesco - Every Little Helps
 
Tesco case study
Tesco case studyTesco case study
Tesco case study
 
Tesco
Tesco Tesco
Tesco
 
Tesco international global marketing
Tesco international global marketingTesco international global marketing
Tesco international global marketing
 
Supply chain of tesco
Supply chain of tescoSupply chain of tesco
Supply chain of tesco
 
Tesco-UK
Tesco-UKTesco-UK
Tesco-UK
 
TeSco
TeScoTeSco
TeSco
 
Hand In Version of Dissertation - FINAL COPY (1)
Hand In Version of Dissertation - FINAL COPY (1)Hand In Version of Dissertation - FINAL COPY (1)
Hand In Version of Dissertation - FINAL COPY (1)
 
Tesco (the econ. apr 2013) students' version
Tesco (the econ. apr 2013) students' versionTesco (the econ. apr 2013) students' version
Tesco (the econ. apr 2013) students' version
 
Tesco (the econ. apr 2013) students' version
Tesco (the econ. apr 2013) students' versionTesco (the econ. apr 2013) students' version
Tesco (the econ. apr 2013) students' version
 
Tesco Case-study
Tesco Case-study Tesco Case-study
Tesco Case-study
 
Complete topshop presentation
Complete topshop presentation Complete topshop presentation
Complete topshop presentation
 
Tesco
TescoTesco
Tesco
 
Arcadia group ltd. research pub
Arcadia group ltd. research  pubArcadia group ltd. research  pub
Arcadia group ltd. research pub
 
Clinical Depression In London
Clinical Depression In LondonClinical Depression In London
Clinical Depression In London
 
Tesco
TescoTesco
Tesco
 
WM Morrison Investment Note
WM Morrison Investment NoteWM Morrison Investment Note
WM Morrison Investment Note
 

More from Bilal Ahmed

More from Bilal Ahmed (6)

reportGenerator
reportGeneratorreportGenerator
reportGenerator
 
MA(eco)
MA(eco)MA(eco)
MA(eco)
 
HR
HRHR
HR
 
reportGenerator
reportGeneratorreportGenerator
reportGenerator
 
reportGenerator (1)
reportGenerator (1)reportGenerator (1)
reportGenerator (1)
 
Bilal Ahmed_WEBINAR
Bilal Ahmed_WEBINARBilal Ahmed_WEBINAR
Bilal Ahmed_WEBINAR
 

I.B FINAL

  • 1. 1 MASTER OF BUSINESS ADMINISTRATION- MBA INTERNATIONAL BUSINESS INDIVIDUAL ASSIGNMENT LECTURER–JOE FITZGERALD INDIVIDUAL ASSIGNMENT Bilal Ahmed - Nº 2159403 Full time Student Dublin- 08/01/2016
  • 2. 2 Contents EXECUTIVE SUMMARY...........................................................................................................4 TESCO AT A GLANCE..........................................................................................................4 BACKGROUND:................................................................................................................. 4 MAIN COMPETITORS:............................................................................................................. 8 PRODUCT RANGE:............................................................................................................... 9 SUBSIDIARIES................................................................................................................... 9 INTRODUCTION...................................................................................................................... 10 EXPANSION TO CHINESE MARKET:................................................................................ 11 INTRODUCTION.................................................................................................................. 11 GROWTH............................................................................................................................. 12 DECLINE.............................................................................................................................. 12 PREREQUSITE FOR FOREIGN TRADE:.............................................................................. 13 POLITITAL FACTOR:............................................................................................................. 14 POLITICAL SYSTEM IN CHINA:......................................................................................... 15 Democratic ........................................................................................................................... 16 Tesco.................................................................................................................................... 17 TESCO MUTUAL RELATIONSHIP (WITH CHINESE GOVERNMENT)............................ 19 ECONOMIC ENVIRONMENT:................................................................................................ 20 THE MARKET ECONOMY: ................................................................................................. 20 CENTRALLY PLANNED ECONOMY: ................................................................................. 21 MIXED ECONOMY: ............................................................................................................. 21 CHINA CASE: ...................................................................................................................... 21 TESCO................................................................................................................................. 23 STATISTICS:........................................................................................................................ 24 PER CAPITA INCOME: ....................................................................................................... 24 INFLATION........................................................................................................................... 24 TAX RATE............................................................................................................................ 25 SOCIAL ENVIRONMENT: ...................................................................................................... 26 DEMOGRAPHIC .................................................................................................................. 27 GREY MARKET:.................................................................................................................. 27 YOUTH MARKET:................................................................................................................ 27 Tesco.................................................................................................................................... 28 ADAPTATION STRATEGIES................................................................................................. 30 TECHNOLOGY........................................................................................................................ 31 TECHNOLOGICAL ADVANCES IN CHINA: ....................................................................... 32
  • 3. 3 TESCO................................................................................................................................. 33 ENVIRONMENTAL.................................................................................................................. 34 CHINA ENVIRONMENTEL POLICY: .................................................................................. 35 Tesco.................................................................................................................................... 36 Environmental Objectives: (Synopsis)................................................................................. 36 LEGAL ..................................................................................................................................... 38 SUPRA NATIONAL:............................................................................................................. 38 NATIONAL............................................................................................................................ 38 DOMESTIC........................................................................................................................... 39 CHINA .................................................................................................................................. 39 TESCO................................................................................................................................. 40 CONCLUSION......................................................................................................................... 41 RECOMMENDATION.............................................................................................................. 43 APPENDIX:.............................................................................................................................. 44 COMPETIVE POSTION:...................................................................................................... 46 CULTURAL CONTEXT:.......................................................................................................... 47 DETERMINANTS OF CULTURE: ....................................................................................... 47 CULTURAL DIMENSION..................................................................................................... 48 PROS AND CONS(CHINESE MARKET) ............................................................................ 50 POLITICAL RISK:................................................................................................................... 53 REFERENCES......................................................................................................................... 55
  • 4. 4 EXECUTIVE SUMMARY The aim of this report is to analyse the environmental factors (pestle) Analysis. This is the mnemonic of political, economic, social,technological,ecological and legal. Which every multinational organization confront when it outset its business abroad.it is interchangeably called environmental scanning.my purpose for this report is to analyse and evaluate Tesco (British food retail group) strategy with regard to its expansion of china. Where many experts said that Tesco fail to understand various macro factors in china market which lead to the divestment of his stake from 90% to 20%.furthurmore I will present recommendation and reasoned analysis that why Tesco fail to capitalise world largest growing market. Given below is introduction and broad facts of Tesco plc. Have a glance TESCO AT A GLANCE Tesco plc is a British multinational grocery and general merchandise retailer headquartered in Cheshunt and Hertfordshire, England, and United Kingdom. It is the third largest retailer in the world measured by profits and second big retailer measured by revenues. BACKGROUND: Tesco was founded in 1919 by Jack Cohen as a group of market stalls. The Tesco name first appeared in 1924, after Cohen purchased a shipment of tea from T. E. Stockwell and combined those initials with the first two letters of his surname, and the first Tesco store opened in 1929 in Burnt Oak, Barnet. His business expanded rapidly, and by 1939 he had over 100 Tesco stores across the
  • 5. 5 country. The first self-service store opened in st Albans, and the first supermarket in Maldon in 1956.In 1961 Tesco Leicester made an appearance in the Guinness Book of Records as the largest store in Europe. GEOGRAPHICAL COVERAGE: Tesco has presence in 12 countries across Asia and Europe and Tesco is the grocery market leader in the UK (where it has a market share of around 28.4%), Ireland, Hungary, Malaysia, and Thailand. GROWTH STRATEGY: During the 1950s and the 1960s Tesco grew organically, and also through acquisitions, until it owned more than 800 stores. The company purchased 70 Williamson's stores (1957), 200 Harrow Stores outlets (1959), 212 Irwin’s stores (1960, beating Express Dairies' Premier Supermarkets to the deal), 97 Charles Phillips stores (1964) and the Victor Value chain (1968) (sold to Bejam in 1986). CORE PURPOSE: Serving Britain's shoppers a little better, every day. Our business was built with a simple mission – to be the champion for customers, helping them to enjoy a better quality of life and an easier way of living. This hasn’t changed. Customers want great products at great value which they can buy easily and it’s our job to deliver this in the right way for them.
  • 6. 6 That’s why we’ve chosen ‘Serving Britain’s shoppers a little better every day’ as our new core purpose. As a business, serving customers is at the heart of everything we do – from colleagues in our stores to those of us in supporting roles. In the UK, we serve some 66 shoppers every second, so it’s our goal to ensure every one of those customers experiences just a little better service on each visit. VALUES IN PRACTICE:  No one try harder for customers  We treat people how they want to be treat  We use our scale for good VISION: To be the most highly valued business by: the customers we serve, the communities in which we operate, our loyal and committed colleagues and of course, our shareholders.’ “Tesco’s core purpose (mission) is simple: We make what matters better, together.”
  • 7. 7 MOTTO: Jack Cohen's business motto was "pile it high and sell it cheap", to which he added an internal motto of "YCDBSOYA" (You Can’t Do Business Sitting on Your Arse) which he used to motivate his sales force. MARKETS SERVE: Originally a UK grocery retailer, since the early 1990s Tesco has diversified geographically and into areas such as the retailing of books, clothing, electronics, furniture, toys, petrol and software; financial services; telecoms and internet services. MARKET POSITIONING: The 1990s saw Tesco reposition itself; it moved from being a down-market high-volume low-cost retailer, to one which appeals across many social groups, by offering products ranging from its "Tesco Value" items (launched 1993) to its "Tesco Finest" range. This broadening of its appeal was successful, and saw the chain grow from 500 stores in the mid-1990s to 2,500 stores fifteen years later. INCORPORATION: Tesco is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index. It had a market capitalization of approximately £18.1 billion as of 22 April 2015, the 28th-largest of any company with a primary listing on the London Stock Exchange.
  • 8. 8 As one of the largest retailer with around 480000 colleagues, Tesco serve millions of customers in week in stores and in online. BOARD OF DIRECTORS: Our Board comprises the Chairman, our Group Chief Executive, our Chief Financial Officer and a number of Non-executive Directors. Our Executive Committee comprises the Tesco PLC Executive Directors and a number of senior executives. MAIN COMPETITORS:  Walmart stores(Chinese market)  j.sainsbury  Carrefour(Chinese market)  Aldi  Lidl  dunes  marks &spencer  super value
  • 9. 9 PRODUCT RANGE:  books  clothing  electronics  furniture  toys  petrol  software  financial services  telecoms  internet services SUBSIDIARIES:  Tesco Stores  Tesco Bank  Tesco Mobile  Tesco Ireland
  • 10. 10  Dobbie’s Garden Centres  Tesco Family Dining Ltd.  Giraffe Restaurants  Dunnhumby  Home plus  Spenh INTRODUCTION: This purpose of this report is to identify swot analysis and pestel analysis. Both models are key consideration either you are diversifying your business in country or outside the country, thorough environmental scanning and identifying strength or weakness is key driver which stimulate business prospect. Due to increasing globalisation every large company is keen to exploit opportunities outside their domestic region. This lead to ever-increasing trade between countries and formation of treaties to regulate the trade. International trade is mutually beneficial for both countries because every country is not conferred by everything so law of comparative advantage and porter diamond of national advantage upheld. And
  • 11. 11 then we deal with the nature of change in the micro environment and examine its impact on our chosen company. The importance of understanding the Macro environment is twofold, first we recognise the change in business strategies due to market environment and be in a position to respond, and second we should also be alert to the fact that nature of change facing organisation is itself changing.(Graham Hooley, marketing strategy and competitive positioning, 2012) . EXPANSION TO CHINESE MARKET: The aim of this assignment is to analyse Tesco expansion in foreign market. I have chosen Tesco china expansion as it was very large market and Tesco top executives spend much of their time to analyse this market before moving forward to opening supermarkets, hypermarkets and convenience stores. Despite all of these efforts they fail to capitalise the expansion. Here Tesco life cycle outline in china; have a glance; INTRODUCTION: JULY 2004 Tesco enter in to a china market through purchase 140-m china hyper market HYMALL. JULY 2005 Tesco joint venture in china will reportedly open 15 new outlets in china including Beijing over the course of next year, according to sir terry leahy.(CEO)
  • 12. 12 JAN 2006 Tesco taken number of its outlets with its first store in Beijing, its venture with hymall operated 39 stores in china. GROWTH SEP 2006 ,Tesco says it will launch own label product in china under the name LE geo Tesco value. .DEC 2006 Tesco pays partner the Taiwanese retailer ting hsin increase stake in hymall from 50% to 90% by spending 180 million. Portfolio of stores reach to 36.Leahy says; we have seen exciting growth in china since announcing the joint venture two years ago and are looking forward to the partnership entering in to new phase. JAN 2007 new Beijing shop. The first store operating under the Tesco banner. Increase store portfolio to 46.set out plan to open 10 stores a year under the banner name TESCO. NOV 2009.joint venture come in to force, develop shopping mall in north east china, each with their own Tesco hyper market. Nov 2010 Company unveil target to quadrupled sales to 4 billion in next five years. DECLINE:
  • 13. 13 APR 2011 retailers cut Chinese store opening targets after local operation failed to break even in the second half. AUG 2011 Tesco raise 70 million to help fund Chinese expansion. AUG 2012 retailers reveal plan to close four hyper market claim tough “macro condition” June 2013 first quarter show that sales fell by 4.9%, food industry drop by bird flu and pork market hit by food safety scare. AUG 2013 Company confirm rumour that it will merge its operation with china resource enterprise, taking 20 % stake. MAY 2014 Tesco complete the deal with china resource enterprise. Relinquishing total control http://www.raconteur.net PREREQUSITE FOR FOREIGN TRADE: Chinese expansion was fail to capitalise this was partly due to lack of strategic depth of market and partly because of Tesco fail to understand the macro factors in account which the very first part to move forward, careful and meticulous scanning of market place, extensive research and development about the culture, society, politics is pre-requisite and necessary consideration before expansion. Every country is not identical and surrounded by
  • 14. 14 different environmental and cultural elements, which need to be clearly analyse before moving forward, every company which outgrow, looking for new markets and opportunities where it can sell its product and increase customer base and revenue. But opportunities does not come out from a thin air, it required careful monitoring of surrounding, continuous evaluation of environment and meticulous observation of core competencies. Profound strategic evaluation and careful consideration of all pros and cons, do and don’ts must take in to account before moving forward abroad to business. This evaluation generally surrounded by PESTEL analysis and competitive models (porter’s five forces) and swot analysis. For the sake of conciseness I draw my attention to pestel model which sufficiently covered all aspect of macro environment which shape the overall market. POLITITAL FACTOR: Politics is define as a science of governing especially the government of political entity such as nation and the administration and control of its internal and external afffairs.The political and legal environment has a profound effect on the operation and competitive positioning of MNC’S (multinational companies) We discuss the legal and political component together because of the interplay between the two make it difficult to disentangle their individual impact. The political environment determine the main participant in the environment, determine the relationship among
  • 15. 15 them and the rule of game that govern the political process. The political environment also influence the legal environment, since it is The governing bodies that are charged with the authority to create and impose rules and regulation, codes of behaviour, standards and practices. The political environment of country can be conducive to trade or anti trade. Or in some country there may be demand of some kind of goods and countries where restriction and ban on some product. Such as in Islamic societies the pork and wine is prohibited so it would not be prudent to embark that business in Islamic dominant societies. Political system mainly influence by the local history, geography, tradition and culture. There are three main political ideologies.Anarchiasm is a system that promote personal liberties and deemed public government unnecessary.Totaliatarianism is system that promote total control by public government (communism, fascism) and no concern for personal liberties at all. Pluralism is system that is based on belief that all groups, public, private should participate in political organization and process (democracies and monarchies) (Ehud menipaz&Amit menipaz, international business; 2011) POLITICAL SYSTEM IN CHINA: political system of china is take place in the framework of socialist republic run by the single party the communist party of china, the leadership of communist party is stated in constitution of people republic of china. Political power of china much less personal and more institutional based.
  • 16. 16 Many Chinese foreign observer see the transition from socialist china to the capitalist state in which private ownership play an important role. Economic right are granted gradually while maintaining complete control over political organization and allowing no political rights. This type of system is normally surrounded by tough regulation, strict adherence to rules and moderate competition. Democratic countries as oppose to china usually provide stable business environment, there is a less risk of military takeover.furthur more transparency, tax law ownership, profit repatriation and democratic institution contribute to the environment that allow free competition.as an example ,during first decade of 21st century intel got Chinese govt incentive of US two billion to setup a new fabrication plant. Tax incentive also offered in mainland areas of china. But North Korea and china still running totalitarian system in which govt has strong and stringent control over most aspect of people’s lives. Politics can effect things such as;  Fiscal policy (taxation, inflation, social infrastructure, business policies)  Import and excise duty  Provide grants(aid to struggling business)
  • 17. 17  Product safety standards(minimum level)  Labour law(pay,health,leaves) Tesco: Chief executive Sir Terry Leahy echoed other retailers when he commented on Tesco's China deal. "China is one of the largest economies in the world with tremendous forecast growth," he said. Political barrier for foreign companies in china is getting reduced gradually, china is becoming attractive market for retail business. Companies find it very difficult to do business in non-capitalistic economies due to their inherent weakness and less freedom of trade and business. But after becoming a member of WTO china pave the way for multinational companies to do business with reasonable freedom and less intervention by government. On 11 December 2001, China became the member of the World Trade Organisation (WTO). Mike Moore, WTO Director General said at the conclusion of the meeting of the Working Party on China's Accession to the WTO With China's membership, the WTO will take a major step towards becoming a truly world organization.
  • 18. 18 According to WTO negotiations, China commits to “liberalize its regime in order to better integrate in the world economy and offer a more predictable environment for trade and foreign investment in accordance with WTO rules”. With the openness of the Chinese market to the outer world, especially after joining the World Trade Organisation, China is becoming less restrictive to foreign investors in retail sector. Now foreign retailers are able to have the option to establish wholly- owned foreign enterprises (WOFEs) rather than operating through a joint venture (JV). This has resulted in increased confidence and now foreign retailers are not only enjoying organic growth by increase their store numbers but also entering into new agreements by acquiring or merging with other chains in the retail industry. In 2006, Ministry of Commerce decided to hand-over the centralised power from Beijing of approving the small and medium sized foreign invested retail operations to the local entities of the Ministry of Commerce at the provincial level. This shows a commitment by the central authorities that they are willing to give a sense of ease and freeness for the international retailers. Currently, there are at least 35 retailers in China out of top 50 global retailers. Ministry of commerce gave approval to more than 1,000 multinational retailers and wholesalers to operate in China with contractual foreign direct investment of USD 1.9 billion, in 2005 alone.
  • 19. 19 With the market easing policies of the Chinese Government by reducing restriction on the foreign companies to operate in China, international retailers like Tesco are increasing their share in the market. http://www.ukessays.co.uk TESCO MUTUAL RELATIONSHIP (WITH CHINESE GOVERNMENT) Tesco on political and legal ground did not find it difficult to survive and thrive, Tesco explore opportunities and obtain grant and concession several times from government. It’s also establish a network its local supplier to promote local growth and also use local fund to finance its growth. Tesco overall relationship with Chinese government were pleasing and productive. Here are some examples;  Tesco is the latest British company to have been enlisted by the Chinese government in its efforts to restore the reputation of its exports juggernaut.  Executives from Tesco are understood to have attended a meeting in Beijing last month with officials from China's Ministry of Commerce, at which issues such as sourcing and product safety were discussed.  The Chinese government is rallying support from Tesco and other multinational retail groups as it tries to head off the deepening crisis over the reputation of the country's consumer products.
  • 20. 20  The system will give Tesco total control, and also let it work with provincial Chinese governments in implementing their mind-bogglingly ambitious urban regeneration programmes.  Developments will happen at an alarming rate. When land is bought in auctions, developments must start within two years. There is no "land- banking" in China http://www.cfr.org/china ECONOMIC ENVIRONMENT: system consist of natural structure and process that allocate the use of resource and govern the conduct of business activities. Most economic system describe on a continuum from a market economy (promote individual point of view in structure, process and rewards) to the centrally planned economy (promote social wellbeing of community),in between is the mixed economy. THE MARKET ECONOMY: in which goods and services are freely traded and price is determined by market forces “supply and demand”.in a market based economy most of the resources such as land, labour capital etc. are owned by individual rather than govt.in a market economy, entrepreneurship which is the initiation of ventures based on business opportunities is encourage and rewarded. A market economy in its purest from, free from govt intervention is called free market.
  • 21. 21 CENTRALLY PLANNED ECONOMY: A centrally planned economy consist of institution and processes that allow government to centrally allocate resources and conduct business activities. A major assumption of this system is to ensure the welfare and prosperity of society as a whole over individual. Objective of this system is to achieve pre-determined political, social and economic goal through government control. MIXED ECONOMY: In a mixed economy natural resources, manufacturing plants, and land are normally split equally between private ownership and government. But government retain control of some strategic and key industries such as steel, military equipment’s, nuclear energy etc. And those which are quite necessary for country sustainability and survival.in mixed economy government intervene in maker through incentive and subsidies mechanism or through fiscal and monetary policies. This system is still operating in many develop and develop countries. CHINA CASE: china economic system previously based on centrally control economy. Toward the end of last century china decide to adopt capitalist mode of economy, investment and competition. China recognise the importance of science
  • 22. 22 and technology as a foundation for international competitiveness ,china economic growth is very fast after its join (WTO) IN 2008averaege growth of GDP is 8.7% which bound to double every 8 years. China is very attractive for foreign investors and provide significant grants and subsidies to bolster its internal growth. But it also has some weakness. Corruption is widespread in provincial governments, banking system is getting weak, rising poverty levels, environmental issues are neglected, social discontent is paramount, and energy crises also pose a big threat. China is also confined by some form of socialism and its economy is partly centrally control by government. Chinese key industries such as steel, automotive, toys, mobile are still being controlled centrally. But still private entrepreneurship is allowed and encouraged, but gradual relaxation of control over press and television has been reversed, government initiated content-censorship. (Ehud Menipaz&Amit Menipaz, International business;2011) FACTORS THAT CONSTITUE ECONOMICAL ENVIRONMENT: Factors that an influence overall economic condition, here is the brief list but this is not an exhaustive;  GROSS DOMESTIC PRODUCT  NATIONAL INCOME
  • 23. 23  PER CAPITA INCOME  LENDING/BORROWING RATES  SUPPLY/DEMAND OF LABOUR  PHYSICAL INFRASRTUCTURE  REAL WAGES  INFLATION TESCO: As an emerging economy and increasing GDP at the rate 8% and forecast to double every 5 years is really a mouth-watering indicators for multinationals. Tesco realise this and start up to explore this emerging market. There was a decline from 50 to 10 percent of population living near or absolute poverty. This high earning middle class is back bone to any country and business this constitute a high proportion of clientele. China GDP in year 2009 was relatively 7% higher than previous year and this was absolute 81% increase during five year period.
  • 24. 24 STATISTICS: As an emerging economy and increasing GDP at the rate 8% and forecast to double every 5 years By the mid-1990s, around 350 million people had an annual income of $500 or more, which helped create a consumer market that could afford goods such as soap and detergents. The changing economic outlook give eightfold increase in per capita and PER CAPITA INCOME: Year Yuan 2005 3255 2006 3587 2007 4140 2008 4761 2009 5153 INFLATION:In February 2010, in eight categories of commodities, six of them experienced prices rise and the rest two witnessed prices decline;
  • 25. 25 The consumer price index went up by 2.7 percent year-on-year  The food price went up by 6.2 percent while the non-food price rose by 1.0 percent  Prices for tobacco, liquor and articles up by 1.6 percent,  Price for clothing down by 1.3 percent,  Prices for household facilities, articles and maintenance services down by 0.8 percent,  Health care and personal articles up by 2.4 percent  Transportation and communication rose by 0.1 percent,  Recreation, education, culture articles and services up by 0.8 percent,  and housing up by 3.0 percent http://www.ukessays.co.uk TAX RATE:the corporate income tax rate in china is 25%.but special tax rates available for those countries who are investing in backward regions such as(west china)
  • 26. 26 All these leading indicators are business conducive and a great imperative ,increasing population required goods and services like household goods better infrastructure transport ,communication which required investment on the part of government, wise countries fulfil these needs by welcoming foreign companies to cope with local demand, stimulate them by lifting trade barriers ,tax concession, government aid/grants and so on. This can also be evident in china case which Tesco cognizant and move forward. Tesco sold well-known local brands along-with other locally sourced products in its stores. Tesco sourced about 60% of its international sourcing from China through more than 300 suppliers at the end of 2006. In 2007, Tesco sourced about 2.2 billion worth of goods from China and planned to source more than 4 billion in the next two years. http://www.ukessays.co.uk SOCIAL ENVIRONMENT: social environment of any country consist of various indicators and trends which guide business executives about future trends and anticipated demand for certain product.by meticulously identifying these pattern one
  • 27. 27 can surpass competitor in tough environment. Social environment has wider implication for conducting business activities examples include the following; CHINA INDICATORS: By 2002 foreign companies accounted for nearly one-quarter of major supermarkets in China, the country's State Economic and Trade Commission found. China has a population of 1.3 billion people - compared to Britain's 59 million - and an economy which is surging 9% a year. http://news.bbc.co.uk DEMOGRAPHIC: china today is demographically a rather young population, fertility and mortality two major factors that sharp population size and age structure.2010 census showed that china population growth is slowed down, china population inched up at just 0.57%annualy only about half the level of previous decade. GREY MARKET: by 2010 nearly 14% of Chinese population was over 60, and nearly 1 in 10 were over 65.china is already an aging society. China total fertility rate is amongst the lowest in the world 1.4 per women. (Dudly L et al,2011:P.P 5-6) YOUTH MARKET: Declining fertility levels reduced the availability of young workers, but this was exacerbated by the expansion of higher education. Sustained low
  • 28. 28 fertility and rising college enrolments mean that the supply of young workers will continue to decline beyond 2020. The size of the young population aged 20-24 will only be 67m by 2030, less than 60% of the figure in 2010. The middle class is said to outnumber the entire population of the United States," says a spokesman for Britain's Kingfisher which has introduced B&Q to the Chinese. The relevance of these figures to the current study is that these represents ever increasing consumers to which Tesco can attract towards its products to both its market share and its profits in the long term. http://www.brookings.edu Tesco: Despite exploiting every macro factor in its favour Tesco fail to evaluate and analyse cultural differences in depth which lead to curtail its stake in china market, it is evident that Chinese market required poly-centric approach on part of business executives, profound affinity to local culture and language is the key to break in to large market. Every foreign expansion required optimum use and arrangement of macro factors these variables are key to secure and realise market outlook, look at below statement; (Tesco should have look cultural differences in china before investing in second large economy of the world)Qing Wang “(Professor of marketing and innovation)
  • 29. 29 she said; Tesco which came late in to china, open first store in 2004 mistakenly believe that its secret weapon give its advantage over rivals. (Rick ponderous 6 Sep 2013) Research indicate that Asian consumers are ill-suited to club card approach. Although numerous number of consumers took part in loyalty programme but research indicate that 63% out of them have loyalty cards from other chains also, it means one can not bound Chinese consumer to specific chain. http://www.foodmanufacture.co.uk Tesco discovered that compare to western consumer, Asian consumers are variety seekers. Research concluded that these Chinese consumers “believed larger choices gave them more power of control, more motivation to make decisions, more chances to have programmes which suit their needs and a more satisfying shopping experience. http://www.chinaconnections.com.au
  • 30. 30 ADAPTATION STRATEGIES In China, Tesco combines its core strategies as in the UK with other of its international operations to adapt to local conditions. According to Tesco's CEO, Terry Leahy, it is important that operations are blended with the local circumstances and a single top-down model would not work. Moreover, Tesco also appointed Chinese senior management personnel to run it stores. Instead of changing consumers' preferences, Tesco modified its own practices according to consumers' needs. Moreover, Tesco also observed through its own research before entering into the Chinese market that to operate in the Chinese market is very different from other of its operations in Europe. In China, customers prefer to feel and touch the products before buying it as is said by Tesco's spokesman, Greg Sage. He also said that "We took four years to study the market. It's very different from other countries." Tesco designed its stores' interiors according to local customs and most importantly as per preferences of the local customers. However, exterior of stores resemble to those of in other countries. Individual customers greeted at stores in each stores entrances by staff in traditional Chinese manner. the fresh produce section in these Chinese stores was different as compared to in stores in Europe. Chinese staff shouted aloud in these sections to attract customers' attention for products which included live reptiles, for example, turtles, fish, toads,
  • 31. 31 jelly fish, etc. All these live animals were selected by the customers and then cut to cater the customers' needs. The purpose of selling such live animals was to counter the competition from the traditional wet markets, but in a more health conscious manner. According to Wei Ying Chiao, "It is a balance between a wet market and a supermarket. We have created a familiar feeling for the grand mums." Tesco tried not only to generate loyalty through its brand but also catering the needs of its Chinese customers by offering them local products. As in the words of Towle, "Our brand is very important for generating loyalty, but our customers are Chinese and we need to give them the local products they want, too." http://www.ukessays.co.uk TECHNOLOGY: An ever-increasing technology in 21st century has significantly transformed every element of society, from business to education and from transport to communication everything is revolutionised and this process is still moving at very fast pace. A shortening of commercialisation time of new innovation, photography for example took 100 years from invention to commercial viability. While World Wide Web took only 5 years to commercialise.technoloy is continue to develop at bewildering pace https://alexnstone.wordpress.com
  • 32. 32 distance are shrinking rapidly as firms are using internet to market their products.one result is that cross-national segment are now emerging for products and services from fast food ,through books and mobiles to computer and toys.(Ehud & Menipaz,2011:P.P 56) TECHNOLOGICAL ADVANCES IN CHINA: The development speed of China’s science and technology in the previous 100 years was regarded as unprecedented. By early 21st century, China has remarkably narrowed the gap in general between its development level of high technology and the world’s advanced level. Over 60 percent of China’s technologies have approached the international advanced level, and 25 percent have greatly progressed, though still lagging behind the international advanced level. The past five years the proportion of Chinese public with basic scientific quality has annually increased by 0.24 percentage point, from 0.2 percent in 1996 to 1.4 percent in 2001. In 2001, the government decided to focus its science and technology work on promoting the upgrading of traditional industries, propelling hi-tech researches, strengthening basic researches, deepening reform in the system of science and technology, and building a state system of innovation. http://www.china.org.cn
  • 33. 33 TESCO: Technological advance country by its nature exhibit a growth and opportunities in the sense that multinational like Tesco can equipped its store with modern computer-embed stores. Self-check out, can buy modern security equipment from local markets. Also the population of technologically advanced countries provide well verse work force which has understanding to operate modern equipment’s as well as awareness to ever changing and volatile business environment.  Tesco increase online shopping experience by using QR code technology for customer convenience.  Internet play a vital role in order to make those strategies workable.  Tesco has launched its online shopping store in china in 2013.  Tesco's china online business uses the same operational model and technological infrastructure as the UK business.  Mr Clarke said Tesco intends to increase its investment in digital technology to $750m (£492m) this year and added: "In the future, app development is going to be just as important as property development."  Although in china debit/credit card not prevalent, so Tesco is managing by accepting payments through alternate means cash/cheque payments.
  • 34. 34  In China, Tesco has created a digital-only version of its pioneering Club card loyalty program.  Every customer to be served quickly, therefore, check-our counter were designed in such a way to provide a quick service as most customers buy in small quantities but with regular intervals. The average spending per visitor per customer is about 5.25, mostly in cash, therefore, quicker check-out process required to be a necessity which Tesco tried to achieve. http://www.ukessays.co.uk ENVIRONMENTAL: This is very key consideration of 21st century. Industrialisation age give rise to pollution and large countries utilising earth resources at very fast pace, if we continue to exhaust resources at the same pace we would require three planets full of resources (dr.michio kaku, 2011) big companies are genuinely acting to cut waste, cut carbon emission, find sources of renewable energy and develop sustainable business models (senge et al,2008:P.P 5-6) and more focus concept of sustainability(meeting current needs without harming future generation)
  • 35. 35 CHINA ENVIRONMENTEL POLICY: To address the pollution that accompanies rapid industrial growth in China, a National Eco-industrial Park Demonstration Program was launched in 2000. Tianjin Economic-Technological Development Area (TEDA). The emergence of an environmental institution in TEDA is used as a backdrop to assess how TEDA has transformed itself into one of the top three national eco-industrial parks in China. Following two years of field research, a network of 81 inter-firm symbiotic relationships formed in TEDA during the past 16 years were identified involving the utility, automobile, electronics, biotechnology, food and beverage, and resource recovery clusters. http://www.china.org.cn The country has become the world’s second-largest economy and its biggest carbon emitter; decades of breakneck economic growth have left many of its rivers desiccated and its cities perennially shrouded in smog. Over the past year, the Chinese government has begun to emphasise environmental protection in its official rhetoric. The new law “sets environmental protection as the country’s basic policy,” state news agency Xinhua reported. http://www.theguardian.com/environment
  • 36. 36 Tesco continues to recognise climate change as the biggest environmental threat the world faces and by helping to develop initiatives such as the Energy Ambassador programme, we can reduce our impact on the environment. The energy ambassador programme led to an increase in the number of staff who understand how their jobs contributes to energy use and the costs of running stores. http://www.tescoplc.com Environmental Objectives: (Synopsis)  Tesco continues to recognise climate change as the biggest environmental threat the world faces and by helping to develop initiatives such as the Energy Ambassador programme.  In September the world’s attention was drawn to New York for the UN’s latest Climate Summit, where more than 100 world leaders gathered to pledge action to tackle climate change.  Commitments ranged from a plan by China to cut carbon intensity and reduce their greenhouse gas emissions by 40%.
  • 37. 37  At Tesco, we have made two medium-term targets to cut our carbon footprint, one of which is to halve the carbon emissions per square foot of our stores and distribution centres across all our operating markets by 2020 against a 2006/07 baseline.  With global energy prices due to almost double in the next five years, introducing innovative technologies like this will help manage challenging carbon and operating costs  . We aim to be a zero-carbon business by 2050 and also have interim carbon reduction targets regarding 'emissions per square foot of stores and distribution centres' and 'emissions per case of goods delivered.'  We have an excellent track record of trialling new energy efficient technologies, which if successful we can then incorporate into our future developments. We have set the target of being a zero-carbon business by 2050, and in order to do this we must continue to embrace new technologies and work with our partners to achieve new innovations in environmental design."
  • 38. 38 LEGAL Legal environment has profound effect on competitive positioning of MNC’S.both within home country and within target country. Well develop and business conducive legal infrastructure is very necessary for MNC’S to survive and thrive in foreign countries. These issues cover statues, legislation, regulation, common law, civil law etc. Which we have covered earlier in the context of political factors. Country legislative body has charge with authority to amend, review or revise law if consider necessary. There are normally three types of legislative bodies which multinational must observe; SUPRA NATIONAL:  WTO  INTERNATIONAL COURT OF JUSTICE  U.NO  EUROPEAN UNION NATIONAL  LAW MAKING AUTHORITY(PARLIMENTIARY)
  • 39. 39  BYE-LAW  DOMESTIC LAW DOMESTIC  COMPANIES ACT  LISTING REQUIRMENT  ACCOUNTIND AND AUDITING LEGISLATION  EMPLOYEMENT LAW  PRODUCT SAFETY STANDARDS CHINA: In the past western inner provinces of china were less friendly to free economy and corruption was prevalent in those areas. Now china is taking steps to eradicate corruption and also building infrastructure to offset disadvantages to western provinces. These changes will make western provinces more cosmopolitan and help attract MNC’S and foreign investment.it is the mayors and provincial rulers who exert pressure on the central government to allow MNES the freedom of operation ,appropriate ownership of rules, and the necessary development of supporting infrastructure for such venture to thrive in their territories
  • 40. 40 TESCO. Greenpeace personally presented a letter to Tesco's China headquarters in Beijing requesting the supermarket chain ensure its agricultural suppliers stop using harmful and, in some cases, illegal pesticides, and to make its produce supply chains are transparent. This latest round of tests came in response to claims by Tesco in September refuting Greenpeace's previous findings. It is the fourth test run by Greenpeace since early 2009. Greenpeace filed a public interest law suit against the supermarket giant in early September 2011 because of its continuing violations of Chinese food regulations. Greenpeace are calling on Tesco to take responsibility and ensure its produce doesn't harm people and the environment. Tesco should at the least raise its produce standards in China to the quality used at other Tesco stores around the world. http://www.ethicalconsumer.org More than 100 workers have blockaded a Tesco in east China, the latest incident in a wave of industrial action in the country. http://www.theguardian.com/world
  • 41. 41 CONCLUSION Every large organization spend much of their time to gain understanding external context in which company has to operate. These external factors can have power to influences organization at every stage of its life cycle. Organizations who judiciously analyse, evaluate and understand this wider environment better than competitor have greater chance to excel in specific market. PESTEL consideration play a vital role, it provide sense of direction and opportunity/threats, if forecast and analyse correctly stand out company and propel to make contingency plan. Opportunities not manifest itself it need to be explore and this overall understanding of wider environment itself bring a great opportunities. Tesco in its operation in china had vastly adapt its practices and procedures corresponding to Chinese culture and standards, its lay out of stores and courteous local staff, its replace simple hierarchical top down structure by eliminating management layers and appoint Chinese for senior management position, they give feel and touch sense of product by changing stores structures and make store interiors according to local customs, Tesco also change its product section and it was filled with reptiles where live animals cut in front of customer and present in courteous manner. Tesco recognise local food requirement and fulfil these according to prevailing culture, these all efforts intent to create loyalty and long-term relationship with Chinese customers. While adopting all local practices Tesco fulfil legal obligation and have a rapport
  • 42. 42 relationship with chines provincial and central government and attended many meeting whose agenda is to give preference to local suppliers and product safetystandards.tesco also took part in many urban development programmes alongside provincial government and substantiate urbanisation by building better infrastructure.it has partnership Lenovo group to develop green IT projects in china. These all efforts elevate Tesco reputation in china but there is a misconception which lead Tesco to ultimately curtail its stake in china. Which is the misobservation and incorrect assumption about chines consumer. Despite four years of preceding study and R&D about china market Tesco fail to analyse customer behaviour thoroughly in china. Tesco loyalty card scheme prove unsuccessful and as mention previously about 63% customers who had loyalty card also contain similar cards from other super chains, Asian consumers are variety seekers to enhance their power, bargaining and choice, its wrong perception that secret weapon would give it advantage over rivals were fail to capitalise.
  • 43. 43 RECOMMENDATION:  Every foreign expansion must be accompanied by extensive research.  Relationships and network building before moving give extra advantage.  Large organization should select joint venture partner before incorporating wholly owned enterprise.  Suppliers should be secure locally in order to minimise transportation and other related cost.  Finance should be secure locally, so currency fluctuation cannot wound organization.  Poly-centric or geo-centric approach must be pursue and also display loyalty to local customs and cultural values.  Recruit local employees and train them sufficiently. Promote them and give senior positions.  Establish and maintain relationship with top government officials and commerce bearucrat. Use lobbying power when situation warrants its usage.  Always follow norm and take ethical stance according to local customs in every aspect of company operation like marketing, sales, advertisement.
  • 44. 44  Only promote those products and services which is not strictly prohibited. E.g. ;pork and wine(Islamic countries)  Participate and sponsor local sporting events and take active part in philanthropic activities. APPENDIX: CSR Activities in china(at a glance) LABOUR WAGE CONTRACT:Britishretail giant Tesco has signed its first collective labor contract with employees in China. The contract reportedly covers Tesco's 30,000 employees in 109 supermarkets, 14 convenience stores, and six logistic centers in China. According to the collective contract, Tesco will establish a collective wage consultation system. Based on the increase of China's consumer price index, the profit conditions of the company, and the wage level of the entire industry, Tesco will discuss the salary increase rate with the labor union in February every year. The
  • 45. 45 retailer will also sign a wage-related special agreement to ensure that the employees can share the development benefits of the company. SUSTAINABLE RESOURCES:Britishretail giant Tesco has signed a letter of intent with the Department of Commercial Services Administration of the Ministry of Commerce of China to jointly promote the sustainable development of the Chinese retail industry. According to local media reports. the signing of the letter of intent shows that Tesco has reached a consensus with the Chinese government about the sustainable development of the retail industry. Meanwhile, it sets a good example for the cooperation between enterprises and the government. This move marks an active measure of Tesco's realization of its environment-related strategic goal, which is to achieve zero carbon emissions by 2050. GREEN I.T PROJECTS:The British retail giant Tesco Plc recently announced that it had established a partnership with Lenovo Group, to develop green IT projects in China. Under the agreement signed between the two sides, Lenovo will collect Tesco's used IT products in an environment-friendly, and outsource those products to its affiliated company for recycling process.
  • 46. 46 ENERGY EFFICIENT TECH:International retailing giant Tesco has opened a new store in Tieling in northeast China which is reportedly the first energy-saving Tesco outlet in the region. Built in accordance with Tesco's standard for energy-saving stores, the Tesco Tieling Guangyu Store has an advanced energy management system that makes large- scale use of a range of energy-saving equipment including a brand new ventilation system, electronic expansion valves, high efficiency energy saving draught fans, and high efficiency electronic ballasts to help reduce the power consumption of air- conditioners and refrigerators. It is expected that the store can reduce energy consumption by 25% http://www.chinacsr.com COMPETIVE POSTION: Local mention earlier local competitor in quick copying ideas and later use them for there advantage. Walmart had an advantage over Tesco because it entered in market very earlier, harmonise and grasp local knowledge and culture. Tesco was also a late entrant to the market and never caught up with Carrefour and Walmart. It bought its first stake in China in 2004, began with a relatively modest set of stores and was happy to operate the branding of its partner, Ting Hsing. It did not open an own name location until 2007.
  • 47. 47 Only three years ago, Tesco had a five year plan every bit as ambitious as the ones formulated by China's leaders, saying they would open more new retail space in the country than they had built up in the UK. http://www.theguardian.com CULTURAL CONTEXT: every country has its unique set values, beliefs and languages which is also influence the way of doing business. Management should have cross-cultural proficiency in order to manage affairs in foreign countries, among many issues international manager must be aware from variation in cultures. Every aspect of cultural determinants highly influence the way we doing business and shape the overall environment. DETERMINANTS OF CULTURE:  RELIGION  SOCIAL STRUCTURE  EDUCATION  POLITICAL PHILOSOPHY  ECONOMIC PHILOSOPHY (Graham Hooley, marketing strategy and competitive positioning, 2012)
  • 48. 48 CULTURAL DIMENSION  Power Distance (PDI) – Power distance is the extent to which less powerful people in an organization will accept and expect power to be distributed differently. China ranks 80 on PDI which is very high. This means there is a lot of power distance between subordinates and superiors, but that it is accepted and normal. HOFSTEDE MODEL SCORE (CHINA: 80 UNITED KINGDOM: 35)  Individualism/Collectivism (IDV) – This is whether or not people think with the mentality of “I” or “We.” The American culture is very “I” focused, meaning that we focus more on furthering ourselves and careers versus furthering our department or group. On the other hand, China ranks 91 on IDV, meaning that they are highly collectivistic and think as a group versus individually. This can be seen with the high amount of in-groups and out-groups. HOFSTEDE MODEL SCORE (CHINA: 20 UNITED KINGDOM: 89)  Masculinity/Femininity (MAS) – This is the first dimension where the Americans and the Chinese rank similarly. China ranks 66 for this dimension, meaning they are very driven by successful, competition, and achievements.
  • 49. 49 The Chinese will often put work before family or leisurely activities. This dimension can be seen in the fact that Chinese workers will leave their families to go work at factories for 11 months out of the year, proving how important work truly is to them . HOFSTEDE MODEL SCORE (CHINA: 66 UNITED KINGDOM: 66)  Uncertainty Avoidance (UAI) – This is the second dimension where Americans and Chinese rank similarly as well. China ranks 40, meaning they accept ambiguous situations and are not deterred by them. It may seem like China has a lot of rules and regulations in place to avoid ambiguous or uncertain situations, however they are willing to bend and changes the rules as situations require it. The Chinese language is also very ambiguous; the Chinese characters are hard to interpret or understand if it is not your native language. HOFSTEDE MODEL SCORE (CHINA: 30 UNITED KINGDOM: 35)  Long-term/Short-term Orientation (LTO) – The Chinese rank extremely high on long term orientation at 118, meaning they focus on persistence and
  • 50. 50 perseverance, and that they will dedicate however much time is required to achieve their goals. This is seen in the very time consuming Chinese negotiation process, the time required to build trust and long-term relationships, and their focus on long term results versus short term goals. HOFSTEDE MODEL SCORE (CHINA: 87 UNITED KINGDOM:51) These cultural dimensions are deeply embedded in a country’s culture and are difficult to understand unless you are born and raised there. The Chinese culture needs to be studied and taken into consideration before entering any binding contracts. Not understanding these cultural dimensions can be damaging to any relationship you are trying to build with the Chinese. https://alexnstone.wordpress.coM PROS AND CONS(CHINESE MARKET) Wealthier shoppers The London-based Economist Intelligence Unit (EIU) in its June 2004 "white paper" on multi-national companies in China points out two other factors which make the country a red-hot destination for Western retailers.
  • 51. 51 Firstly, the Chinese government does not view consumer goods as a strategic sector, unlike steel or telecommunications, which are subject to greater scrutiny and restriction. French retailer Carrefour, the EIU says, has made little secret of its bending of the country's retail rules. Secondly, the Chinese are getting richer. By the mid-1990s, around 350 million people had an annual income of $500 or more, which helped create a consumer market that could afford goods such as soap and detergents. "People used to buy from day to day," Nick Debnam, a partner at KPMG in Hong Kong points out. "For example, they would buy shampoo by the sachet. They would never buy a bottle. But all that's changed.". Pitfalls But Tesco and other retailers face huge challenges by betting on China. The Chinese are quick to copy a good idea. Areas targeted by foreign retailers
  • 52. 52 "Locals competitors see a hypermarket which works and then launch their own. They are not giving up without a fight," said Mr Debnam. Local stores are also very competitive on price and also often enjoy greater government backing than their foreign counterparts. More foreign retailers are likely to enter the market after the government lifts restrictions on their activities at the end of the year. Meanwhile, many companies underestimate the size of the market, analysts say. There is no point for example advertising in a neighbouring province as the effort will be wasted. "Going into a province in China is like going into one country in Europe," Mr Debnam adds. The EIU report also points other difficulties: Advertising costs are high. But Tesco is undaunted. Lucy Neville-Rolfe says there is certainly a "need to go local".
  • 53. 53 "We will be using word of mouth and fliers," she said, to promote the stores. She says Tesco is used to competition, and has competed elsewhere in the world with market leaders in China, which include the French chain Carrefour and the US's Wal-Mart. Chief executive Sir Terry Leahy echoed other retailers when he commented on Tesco's China deal. "China is one of the largest economies in the world with tremendous forecast growth," he said. Tesco CEO Philip Clarke, speaking at the recent World Retail Conference in Singapore, said Tesco “wouldn’t simply grow by buying more real estate, but instead change the way we engage our customers and embrace digital retailing.” Clarke added, “In the future, app development is going to be just as important as property development.” POLITICAL RISK: two types of political risk. Macro political risk which affect all companies operating in particular region or country. Or micro political risk which affect only particular industry. define as a likelihood of political change in country occurs and will result in negative impacts, such as expropriation of assets, changes in tax policy, restriction on exchange of foreign currency or other change in business
  • 54. 54 environment. Business law may be non existent, incomplete or arbitrary, change without due or transparent process. Senior bearucrat may interpret the law as they please. Personal relationship and connection (in china is known as “guanxi”) to the various govt officials, wealthy and powerful locals are more important and critical to business executives. Beijing should move toward political reform if china want to be a major global player. china has transformed itself completely from a poor nation which completely abandoned international trade to the world largest supplier of labour intensive. But the shortcoming of china is “socialist market economy”. We view the political economy process in china as a trade-off between foreign direct investment and the loss incurred by state owned enterprise due to such liberalization.(gross man and help man 1994), the formal ban on FDI was lifted in 1972 ,however a number of several restriction were still in place until the policy change in 1979,deng Xiao pinched aggravate his power in Chinese politics and communist party.in the same year special economic zones were establish in which foreign firms were offered preferential tax treatment and given usually free hand in operation.in particular these zones charged a reduce tax of 15% on income of foreign affiliated firm. All these business conducive policies enhance the rate of foreign investment in china and bolster the growth rate dramatically.
  • 55. 55 REFERENCES  Hooley, G.J. Piercy, N. and Nicoulaud, B. (2011). Marketing strategy & competitive positioning. (5th edn). New York: FT Prentice Hall.  Ehud menipaz&Amit menipaz, ( 2011) international business london city road,oliver yard  Dudly L et al. (2011)The population of modern china book[Online]Available at:http://books.google.ie/books?isbn=1489912312[Accessed 29.Dec.2015]  (gross man and help man (1994) The population of modern china book[Online]Available at:http://books.google.ie/books?isbn=1489912312[Accessed 29.Dec.2015]  [Online]Available at: http://raconteur.net/business/why-tesco-failed-to-crack- china[Accessed 30 Dec.2015]  [Online]Available at: http://cid.econ.ucdavis.edu/Papers/pdf/chinafdi- all.pdf[Accessed 30 Dec.2015]  [Online]Available at:http://www.ukessays.co.uk/essays/business/factors- affecting-retail-patterns-in-china.php#ixzz3viwIKVRr [Accessed 30 Dec.2015]  [Online]Available at : http://www.cfr.org/china/chinas-environmental- challenge-political-social-economic-implications/p5573[Accessed 26 Dec.2015]  [Online]Available at:http://news.bbc.co.uk/2/hi/business/3893469.stm[Accessed 30 Dec.2015]  [Online]Available:http://www.brookings.edu/research/articles/2012/06/china- demographics-wang[Accessed 30 Dec.2015]
  • 56. 56  [Online]Available at http://www.foodmanufacture.co.uk/World-News/Tesco- failed-to-understand-the-Chinese-consumer [Accessed 29 Dec.2015]  [Online]Available athttp://www.chinaconnections.com.au/en/magazine/current- issue/1951-tesco-in-china-failing-brand-loyalties [Accessed 30 Dec.2015]  [Online]Available at https://alexnstone.wordpress.com/2012/01/14/hofstedes- 5-cultural-dimensions-for-china.ime[Accessed 25 Dec.2015]  [Online]Available at http://www.china.org.cn/english/features/38309.htm[Accessed 28 Dec.2015]  [Online]Available:http://www.theguardian.com/environment/2014/apr/25/china- strengthens-environmental-laws-polluting-factories[Accessed 30 Dec.2015]  [Online]Available at http://www.tescoplc.com/index.asp?pageid=638[Accessed 30 Dec.2015]  [Online]Available at https://alexnstone.wordpress.com/2012/01/14/hofstedes- 5-cultural-dimensions-for-china/[Accessed 30 Dec.2015]
  • 57. 57