Tesco Entry Mode in China

Powerful Essays
All foreign entry modes have advantages and disadvantages. Select a company and explain why it chose a particular entry mode among all the possible alternatives.

Introduction

Due to international market integration, over the last three decades there has been a dramatic change in the ever-expanding global market place. Leading scholars propose 3 main causes to explain this phenomenon; increased cross-border trade, multinational production, and international finance (Garret, 2000).
This paper discusses the main aspects involved in a firm’s decision when entering new foreign markets. The main focus is to draw on previous literature and theoretical frameworks that identify several factors that determine a specific market entry.

We focus our study on Tesco’s presence in China, an emerging global super power with major influences in today’s global market place. Many multinationals have been frequently expanding operations to China with the vision of potential long-term growth. We will draw on the advantages and disadvantages it gained from the original mode of entry firstly in 2004 through its Joint Venture (JV) Acquisitions. We aim to demonstrate Tesco’s market-seeking motives behind its foreign expansion into emerging markets.

It’s appropriate to focus our study specifically on the emergence of Tesco’s in China as the organization had already learnt from past success and failures through different entry mode strategies (mostly JV’s). The example of China allows us to view a well-regarded successful expansion through strong alliances and a JV, while gaining a ‘late mover advantage’ to Carrefour and Wal-Mart (Its biggest global competitors) who were already in China before Tesco entered in 2004.

We are able to fully understand the real risks associated with this type of entry mode applying it to the worlds most prominent emerging market, gaining an essential insight into the cultural factors that effect Tesco’s global strategy.

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