Tesco: Lithuania Becoming a Successful International Retailer.

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TESCO: LITHUANIA

Becoming a successful international retailer.

SUMMARY:

1. Executive Summary

2. Economic Situation

a. Company Overview

b. Lithuanian Macroenvironment

c. Lithuanian Market Analysis

3. Market Strategy

a. Market Entry

b. Rimi’s overview

c. Marketing Mix

4. Future moves

5. Conclusion

6. Bibliography & Reference

1. Executive Summary

This report aims to present Lithuania as a potential new market for TESCO international growth. Since achieving strong positing in other Easter European countries such as Poland, Czech Republic, Slovakia and Hungary; Lithuania presents itself as the most attractive new market among other Baltic States where TESCO is not present at the moment.

When looking for a new market for TESCO all three Baltic States where taken under consideration, however due to high slump in Estonian and Latvian GDP – currently reaching negative level – Lithuania was consider as the strongest and most appropriate new market. on the other hand, it is not said that TESCO should not consider entering Estonia and Latvia in the future.

Hopefully this report will give you a good understanding of the country, which will enable you to decide whether on not to enter Lithuania.

2. Economic Situation

Countries of Eastern Europe have been affected in some cases more severely by the economic crisis than the countries of ‘Old Europe’. Their high GDP growth - in some countries reaching double figures – slumped rapidly to negative level or in best scenarios reaching minimal growth for the region's best off economies such as Poland, Czech Republic and Lithuania (The Baltic Course, 2009).

a. Company Overview

From mid 1990s company has started its international expansion from Europe (Ireland, France, Czech Republic and Poland) then progressing into Asia (South Korean, Malaysia and Japan) and latterly into the China and west coast of the United States in 2008 (Clark 2008).

In terms of food and non-food the TESCO’s non-food sales have grown by 12% to £11.8billion and now account for 23% of sales.

In terms of entering new markets where the company can bring simplicity and value, Tesco Mobile has become profitable and Tesco Personal Finance has returned to a faster rate of growth.

International operations are an important driver of growth for Tesco, in 2008 international sales increased compared to the previous year by 25.3% and increase in profit was 24.3%. (Tesco Annual Review 2008:5)

This compares to UK growth in sales of 6.7% and 7.1% in terms of growth in profits. For Tesco, the UK is obviously a large market, but one whose rate of growth is slower than other international markets. (Tesco Annual Review 2008:5).

b. Lithuanian Macroenvironment

Since becoming a member of EU Lithuania has grown on average 8% per year, driven by exports and domestic consumer demand (CIA, 2009). In 2008 unemployment was lower comparing to some EU states (Germany, Sweden, Finland or Hungary) and stood at 4.8% in 2008, while wages continued to grow at double-digit rates (Statisticos Departaments, 2009; CIA, 2009).

As a mean of attracting foreign investors Lithuania has one of the lowest corporate tax rate in EU at 15%.

The national currency litas has been fixed to the Euro since February 2002 at the rate of € 1.00 = Lt 3.4528 (Lietuvos Banka, 2009). It is expected that Lithuania will join the Eurozone on January 1, 2013.

Despite this high growth Lithuania is among those EU states, which were heavily hit by the credit crunch. In 2008 GDP slumped from high 8.9% in 2007 to low 3%. Despite this fact...
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