The International Development of Tesco PLC during the Period 1995-2012
This essay will focus on the period of international development between 1995 and 2012 for Tesco PLC, the retail company that has expanded gradually to become the world’s third largest retailer behind Wal-Mart and Carrefour by revenue (Tesco PLC). This period has seen Tesco’s sales rise to £67.6 billion in 2011 with 5,380 stores worldwide and a trading profit of £3.7 billion (Tesco PLC Annual Report and Financial Statements, 2011). ‘In 1997, our international businesses generated 1.8% of the Group’s profits. Today they represent 25% and we’re now either number one or number two in eight of our 13 markets outside the UK.’ (Tesco PLC, 2012) Tesco have always had, ‘strategic intent,’ and have shown the, ‘core competencies,’ to balance this in accordance with the theory by Prahalad and Hamel (1990). They have always laid their strategy out clearly, with CEO Phillip Clarke recently updating it to a seven-part strategy, one section focusing solely on international excellence (Tesco PLC Strategy, 2012). Tesco have routinely insisted that they are a growth company and that this would be continued via international expansion but that it would certainly not be rushed. With careful strategic planning, addressing challenges cautiously along the way, Tesco have slowly grown internationally to rank second in the world behind only Wal-Mart in terms of profits and expand their footprint into 14 countries in Asia, Europe and America (Tesco PLC, 2012). As will be discussed in depth, Tesco have dealt particularly well with the common challenge facing Multi-National Corporations (MNCs) of, ‘reconciling the advantages of global integration with those of national differentiation.’ (Grant, 2010) Following a brief history of Tesco’s international expansion, the motives behind it and the strategies undertaken will be analysed. A discussion of the main challenges faced and how Tesco overcame these will ensue, succeeded by an evaluation of their success and whether the utilisation of core competencies and resources laid the foundations for that success as theorised by Prahalad and Hamel (1990). Tesco was founded by Jack Cohen in East London in 1919 and gradually rose to become the UK’s largest retailer with a 30.6% market share (Askew, 2011). Tesco’s international expansion began with unsuccessful explorations into Ireland in the 1970’s and France in 1992. However, they began their sequential, gradual global expansion successfully in 1995 in Hungary through the acquisition of S-Mart stores. Tesco continued their European foray with expansion into Slovakia, Poland and Czech Republic in 1996, followed by re-entry into Ireland in 1997. Having identified unexploited and attractive markets in Asia, Tesco moved into Thailand (1998), South Korea (1999), Malaysia (2002) and Japan (2003) in the ensuing years. They also expanded into Turkey in 2003, China in 2004 and the US most recently in 2007. Tesco undertook a variety of different strategies regarding entry, the brand they operate under and localisation during their international expansion, which will be discussed later. The pattern the company undertook is clear, beginning in culturally similar countries in Europe and venturing further into Asia and America only after many years of research. They are continuing to expand slowly, adhering to their key strategy: to be a growth company. (Tesco PLC, 2012) Bartlett and Beamish (2011) identify traditional motives for international development. Traditional motives include resource seeking and market seeking, where companies look to expand globally in order to gain key supplies and low-cost factors of production and increase their global market share respectively. Tesco’s motives relate more to increasing their market share as they state that they are a growth company and in order to grow they must expand internationally as they close in on saturating the UK market. Dunning’s (1981)...
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