Tesco: from Domestic Operator to Multinational Giant

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1. Tesco’s international strategy is focused on becoming the market leader. Tesco’s strategy was to increase its market share by increasing its market presence. This was done through acquisition in Asia. While in UK, this was done through opening new stores. Tesco’s international strategy was to expand to as many countries as possible because this helped in increasing profits as it gave new areas to explore. Tesco spread itself into Asia, UK, neighboring European countries and the US, making it stronger and larger. It is now one of the biggest multinational stores across the globe and faces competition from similar big names such as Wal-Mart, Carrefour etc. Tesco came up with solutions as and when required in order to meet what the situation demanded. For eg: Opening low cost stores when there was no scope of growth for large hypermarkets in Thailand. Opening out-of-town superstores, when required by the UK laws and regulations. Tesco did fail in Taiwan but otherwise their strategy has fallen into place and helped them become stronger and bigger. Tesco’s international expansion was mainly driven by UK government policies.

2. There are 3 drivers of diversification:
a. Exploiting Economies of scope
This focusses on efficiency gains through applying the organization’s existing competences and/or resources to new services or markets. When Tesco saw that opportunities to develop large hypermarkets were decreasing in Thailand, focus was shifting to development of value or low cost (express) shops. This helped Tesco to enter smaller markets.

b. Stretching corporate management competences
The operations of express stores in Asia were similar to the operations in UK. Tesco used its management competencies and experience to develop a similar model in Asia and succeed as well.

c. Increasing market power
This has been the main focus of Tesco’s strategy. Tesco has increased its market power by buying a majority stake in domestic retail chains (like...
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