Internationalization Process |
Case study: Tesco entering the Chinese Market|
Prepared by: 1021034|
Module title: International MarketingModule leader:Module code: MOD001194Table of contents Introduction2
1. Tesco: company background3
2.1. Tesco Worldwide3
2.2. How does 3
Type chapter title (level 1)4
Type chapter title (level 2)5
Type chapter title (level 3)6
Globalization is a revolutionary process that refers to progress, integration cooperation, stability and development. The first step to globalization is the internationalisation process; this involves the transfer of policies and cultural beliefs across borders, sharing the knowledge and skills, leading to cultural stability and cooperation, a release from socio-political control and a major opportunity to operate in a free global market. The internationalisation process is defined by three key elements. * Shrinking space. The lives of all individuals are increasingly interconnected by events worldwide. Employees recognise that their jobs, income levels, health and living environment depend on factors outside national and local boundaries. * Shrinking time. Due to rapid developments in information technologies and communication, events occurring in a foreign economy can impact the local market. * Disappearing borders. Currently, the regional trading blocs such as EU, NAFTA have the authority to override national policy making in economic exchanges, human rights and law enforcement. Forecasted to become the world’s largest economy, China is an emerging force in today’s business; the Chinese domestic market shows huge growth potential making it attractive for foreign investors. China is the second largest economy in the world with a GDP of $10.09 trillion (purchasing power parity) in 2012, and a very low unemployment rate of 4.3% (the Richest, 2012). Table 1 below shows the World’s largest economies in 2012. Country| UK| Brazil| Russia| Germany| India| Japan| China| USA| GDP in trillion ($)| 2| 2.1| 2.2| 2.9| 4| 4.3| 10| 14.6|
Figure 1. The world’s largest economies in 2012. Source: adapted from The Richest, 2012
1. Tesco: company background
Founded in 1919 by Jack Cohen, Tesco began as a market stall in London East End making a profit of £1 for a £4 sale (Tesco PLC, 2012), and it is now the third-largest retailer in the world measured by revenues after Wal-Mart and Carrefour (Reuters, 2011) and the second-largest measured by profits (Deloitte, 2012). From the first store opened in 1929 in Burnt Oak, Middlesex (ODNB, 2009), Tesco is now the British leading food (including their own label range), groceries and general merchandise retailer operating 3,054 shops only in the United Kingdom (Tesco PLC, 2012).
2.1. Tesco worldwide
Due to the imminent market saturation in the home country, the business has rapidly expanded into more developing markets. Today Tesco runs in 14 countries across Asia, Europe and North America, being the only UK-based supermarket chain that operates overseas (figure 1). However, unable to compete with the local retailers and adapt to the local needs Tesco had to withdraw from France and Taiwan (Tesco PLC, 2012).
Figure 2. Tesco in the world. Source: adapted from Tesco PLC, 2008
Tesco is not retailing a singular, physical product that can be easily exported, but sells many brands by many manufacturers and offers the customers an experience, an intangible service component, making the internationalisation process difficult and expensive. While food remains a largely local product, consumers’ tastes in segments such as clothing and electronic goods differ from culture to culture, communities maintaining their distinct ethnic preferences. In one of the interviews offered to The Telegraph (2009), Mr Towle classified the Chinese consumers as some of the most demanded and strong- minded in the world: “People’s instinct is to...