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MD4100 Strategy And International Management

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MD4100 Strategy And International Management

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MD4100 Strategy And International Management

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Course Code: MD4100
University: University Of Central Lancashire

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Country: United Kingdom

Question:
Describe the Strategy and International Management.
 
 
Answer:
“Tesco in India”
The idea of a multinational company has been around for centuries but in the twentieth-century multinational companies is becoming important enterprises for the nation. Multinational companies have their origin in one country but it expanded their business beyond the boundaries. Multinational companies normally function with headquarter which is placed in one country (Prasad, and Prasad, 2018). There are many companies expand their business beyond the nations to earn the profit in the market. To earns the high profit; Tesco expands the business by entering into the Indian market. The company entered with the various reasons and motives such as goodwill, high profit and many others. After the liberalization, globalization and global products were getting more accustomed to the Indian market.  The multinational company takes the advantages by entering into the Indian market as same Tesco also takes the advantage by entering the new market (Mukher, 2018).
Tesco is entered into India’s retail market through a wholesale business with the country largest company the “Tata group”. It entered with a franchise agreement, in the arms of the Tata group in the Indian market.  Tesco entered with the Tata group company with the joint venture approach. The company based in England, it provides the grocery product in the market with the Tata to analyse the market or build the goodwill (Tesco PLC, 2018). In this paper, the discussion will be made on the overview of Tesco with their strategies and goals to enter the Indian market. The strategies of the company to enter the India market will be discussed by analysing them. The company did not meet success in the Indian market; the reason behind the business failure will also be discussed in the last section of the report.
It has been analysed that the Tesco has revealed plans to enter the market. The company enters the Indian market by developing the relationship with the Tata Group. Tesco helps the Tata group in expanding the business of Tata Group’s hypermarket Chain Star Bazar by investing the high capital in the company. The company announced the reason to enter the Indian market by establishing the wholesale cash and carry business in the India retail sector. Tesco deal with the Tata group to invest in dozen stores of north and south; due to expanding the business in another cities and states the company earned the high revenue. It is observed that the joint venture is beneficial for both the companies. The joint venture makes the Tesco first foreign supermarket in India due to enter into the market with the high branding company. The company invests $85 million in 12 existing Star Bazaar stores of selling the food and groceries like kitchen products, fashion items and home wares (Papadopoulos, and Heslop, 2014).
India is a developing economy with nominal GDP and the third largest purchasing power party. The long-term growth of the Indian economy is positive just because of its young population, low dependency ratio, and investment rates into the global economy. India is the world fast growing service sector with its annual growth rate. Since 1991, the adoption of industrial policy and multinational companies has been recognised the rapid growth of the Indian economy and it is beneficial for the multinational companies as well due to enter into the new market. The rapid growth of the Indian economy is beneficial for the Tesco Company to enter into the new market (Solberg, 2017).
The multinational companies have bought new technologies with the new product to attract the consumer and create a wider choice for the consumer. Indian companies work more efficiently and the consumers of the economy aware of the international markets. In 1991, the Indian government gave permission to the multinational companies to enter the market and boost the economy. The multinational companies improve the lifestyle of Indian consumers. The companies promote the food industry of the Indian market with the help of strategies and objectives like Tesco entered the Indian market with food and grocery products. Tesco entered as a joint venture company with the Tata group to supply the food and grocery product in the supermarkets (Malhotra, 2014).
Indian consumers market has higher disposable income which has a positive impact on the multinational companies. Increase consumer awareness affected the buyer behaviour of the consumers. The credit facility of commercial banks has been increased at a rapid rate which increases the consumer’s demand. It is observed that Multinational companies have the advantage to enter the Indian market (Dwivedi, and Kumar, 2017). Tesco is taking place in India at the tremendous pace in the starting phase of entering into the new market. It influences the lifestyle and buying behaviour of the consumer. Tesco focused on improving the food and grocery product. Indian consumers attract the western trend and buy the Tesco product. Indian consumers were spending their money on the various products which were changed after the multinational companies. Tesco influence the customer to spend their money on food and non-food. In India, the higher class people spend more amounts on their income or luxury goods and trendy products. The middle-class people spend more on necessary products. Tesco offers the product as per customer behaviour (Parsons, Maclaran, and Chatzidakis, 2017).
It has been analysed that India has a lack of franchise and wholesaler agreement which is an advantage for the Tesco Company to enter the Indian Market. In 1991, the Government of India offers the chance to the multinational companies to enter the Indian market and invest in the economy. Tesco takes the advantages of the permission of the government by selling their product in the north and south of India. Walmart has also walked away from India due to an argument with the Bharti Enterprises. At that time, Tesco enters the market with the 50% stake in the Tata Group’s Trent Hypermarket Ltd. to open the stores in the north and south (Srivastava, 2008). The decision taken by the company is marked as the victory. After taking the decision by the government of reforming the supermarket sector, it is the first foreign investment victory in the Indian market which is achieved by the Tesco Company. It has been seen that the government of India opened its doors to foreign companies to invest in the economy. Many big retailer companies entered the Indian market but Tesco is the first foreign supermarket; this victory is beneficial for the company. Tesco spread its business in the Indian retail market by established the wholesale business in the market. It becomes the third largest supermarket group and it also uses the slogan for promoting the company that is ‘every little help’. Tesco operates in 12 countries across the globe; it expands its business at the international level. India is included in 12 operating countries of Tesco. The company takes the advantage of decision of Indian government (Firstpost, 2018).
It has been seen that the company makes the strategies to achieve success in the Indian market. The company strategy is to set up the shops in the market with the wholesale cash and carry business. Wholesale cash and carry business strategy helps the company to achieve success in the Indian market. There is limited wholesale or franchise agreement in India which was the advantages for the Tesco to enter the Indian market. The company take the advantage to established wholesaler cash and carry business in the Indian market. Wholesaler business reached at the many retailer companies which help in selling the high amount of services. By taking the advantages, Tesco expands its business in the large area. According to the strategy, the company opens its first outlet in Mumbai. The company set the small networks in Delhi and Bangalore to support the wholesale business of Mumbai. These small networks support the company by providing the thousand small retailers and restaurants. Tesco competes the other wholesaler companies like it compete with the cash and carry operation of Germany Metro AG and Shoprite Holdings as well as Wal-Mart venture. The companies set their plans to enter the wholesale market. Tesco cashes and carries business supplies the services to the stores (Independent, 2018).
One of the major strategies of the company is to help the Tata group in expanding its hypermarket business.  Work with the Tata group is beneficial for the company at the time of entering into the Indian market. Tata Group gives the great experience to the Tesco Company. Tesco was the first foreign company who invest in the Indian supermarket since FDI was allowed that was the biggest advantage for Tesco. The objective of the Tesco is to enter as a joint venture with the Tata group is to take the existing portfolio of Star Bazar stores in Maharashtra and Karnataka. Tata group has high capitalization in the Indian market which has an advantage for the company. Trent hypermarket has a franchise and a wholesale supply arrangement with the Tesco. Tesco earns revenue by supplying the 80% stock to the Star Bazaar stores. Tesco supplies their products with the good name of Star Bazaar. This strategy of the company supports the company to achieve success in the Indian market (Deshpande, Gaddi, and Patil, 2014).
Supplying the products and services to the Kirana stores and restaurant is another strategy of Tesco. The distribution channel of the company provides wholesale product to Indian retailers, kirana stores, small retailers, small farmers, and other business. It is an efficient way of selling the product in the Indian market or to promote the company in a large area. The company supplies their product with the goodwill of Star bazaar which is an easy way for the company to expand the business in the Indian market. It helps the company in its wholesale cash and carries business. Delhi and Bangalore are the small networks that help the company by supplying the through small retailers and restaurants. It is observed that the small retailer attracts toward the Tesco with the name of Star Bazaar. The strategy of the Joint venture is a good step taken by the company to achieve success in the Indian market (Solomon, Dahl, White, Zaichkowsky, and Polegato, 2014).
The main aim of the company is to smooth the running of its business in the Indian market. It ensures that their stores are well stocked with the products from Indian suppliers. The company sourcing team helps the company to maintain the stock in their stores. It is observed that the Tesco Bengaluru provides the key business services for the smooth running of the company or operate globally. Tesco Bengaluru team helps in creating and executing strategies by covering IT, financial, property, commercial and others. Strategies are the good step to take by the Tesco Bengaluru; it helps the companies in promoting the sales and increasing the supply of the product in the large area (Wood, Coe, and Wrigley, 2016).
PESTLE Analysis is a tool which is used by the company to analyse the Indian economy or to plan their strategies. Within the context of Pestle analysis, Tesco has to adopt the market strategies which promote the brand name in the Indian market. It can be said that the company analyses the consumer behaviour of the Indian market to sell the product. It also analyse the government policy of the new companies in the Indian market which helps the company to satisfy the consumer demand and increasing the supply in the market. Tesco comes with the joint venture approach that was a good strategy of the company to supply the product with the good brand name of Tata group. Supply the product to small retailers, restaurants, and others through the Star Bazaar is remarked as a good strategy for the company (Hornerand Swarbrooke, 2016).
It has been said that the position of the Tesco in the Indian market is good. But after a time Tesco suffer the huge amount of loss which affects the company. The company goal to operate in India is failing due to a change in government policy. The policies of Indian government were changed due to entering the new government with the new policies which cause the loss for the company. The previous government of India has opened the door for the Foreign Direct Investment from which Tesco comes in the market but in next few years’ governments was changed and it opposed the Foreign Direct Investment (Chan, 2016).  The two states in which Tesco operates its business is ruled by the new government which is opposed the multinational company. Political opposition is a reason for the failure in Indian operation. Due to ban on the foreign Direct Investment the company suffer loss and high import tax rate is the main reason of heavy loss.  Tesco chairman Johan Allan agreed that the political factors affect the business of the company. 
The recession is another reason for failing in the Indian operations. Indian retail sectors were changed with the recession period. With the more online sales, hypermarket visit by those consumers who have money or time. It shows that the few consumers remain in the market to visit the hypermarket and corners shop of the market. Recession decrease the consumers of the retail market. A customer did not attract towards the discount given by the company. Tesco competitors face the loss earlier thus; they came back and try harder to satisfy the customer needs. But Tesco did not prepare for the loss however it faces the loss and failing in the operation of India. Although, Indian market is beneficial for the company because labour cost is minimum(Gay, 2016).
Competition with e-commerce is one of the major reasons for the declining sales chain. E-commerce attracts the customers toward the product, it decreases the sale the Tesco companies. Tesco business operations fall with the decline in sales or declining profit. The company is not prepared for the competition with the e-commerce. E-commerce is the more beneficial factor for those people who have not time or money to visit the retail shops in the market. Tesco faces huge losses which show that the company has to close their stores. 8000 stores of Tesco close continuously due to suffering loss and decrease the staff of the company. As per the research, it has been analysed that the India is far back in social media and e-commerce technology which is not beneficial for the company and it was a reason of the company in failing in Indian business operation (Lapoule, 2010).
It has been analysed that the strategies made by the company is good but the company is not prepared for the losses and new policies. The company entered the market at the right time and achieve many advantages but in the period of recession, the company suffered loss due to online sales increases in the market. Joint venture strategy of the company helps the company to attain success in the market by supplying the product and services to the Star Bazaar. Foreign countries have advance technology which is far better than the India. However, technology is the main factor which increase or decrease the cost of the company (Mookherji, 2015). 
It has been evaluated that the company faced the legal actions for accounting fraud and misleading the investors. The company follows all the legal actions of the India government. It is observed that the company van drivers use fuel saving routines which are good for the environment and it also collect unwanted plastic bags from customers and recycle them which are beneficial for the environment.
From the above analysis, it has been analysed that the company takes the advantages by entering and operating the Indian market. It can be said that the strategies set by the company help to achieve the success in the Indian market but for the short term only. There are many reasons behind the failure in the operation. The company used Pestle analysis tools to analyse the market but the company faced the loss. Internal and External analysis of the company identified the causes of failure. Political opposition is the major reason which affects the retail sector of the Indian market. New government banned the company to operate in the Indian market. Online sales change the life standard of the consumers which affect the company and cause failure. The Indian market was fascinated with the Tesco products in an early stage. The Indian food market is developing which create more options for the customers of Tesco. India has a lack of wholesaler agreement which attracts the Tesco Company but nowadays there are many brands of a similar product which is better than each other. Due to the lack of effective and innovative strategies companies faced the loss. The reason behind the failure in the Indian market is highlighted in this paper which shows that lack of strategies planning. The strategies adopted by the company in outsourcing their business in the Indian Market. Indian food market is growing fast.   
References 
Chan, S.  (2016) Foreign direct investment in a changing global political economy. New York: Springer.
Deshpande, M., Gaddi, A. and Patil, S. R. (2014) Inference of FDI in Indian retail sector: Some Reflections. Journal of Entrepreneurship, Business, and Economics, 2(2), pp. 82-97.
Dwivedi, S. and Kumar, V. (2017) Role of Foreign Direct Investment and Indian Banking System. Journal of Bank Management & Financial Strategies, 1(1), pp. 1-5.
Firstpost. (2018) All you need to know about the Tesco-Tata Trent deal. [online] Available from: https://www.firstpost.com/business/all-you-need-to-know-about-the-tesco-tata-trent-deal-1293267.html [Accessed 12/08/18].
Gay, R. D. (2016) Effect of macroeconomic variables on stock market returns for four emerging economies: Brazil, Russia, India, and China. The International Business & Economics Research Journal (Online), 15(3), p.119.
Grönroos, C. (2016) Internationalization strategies for services: a retrospective. Journal of Services Marketing, 30(2), pp.129-132.
Horner, S., and Swarbrooke, J. (2016) Consumer behaviour in tourism. Oxon: Routledge.
Independent. (2018) Tesco enters India with cash-and-carry. [online] Available from: https://www.independent.co.uk/news/business/news/tesco-enters-india-with-cash-and-carry-891979.html [Accessed 12/08/18].
Lapoule, P. (2010) Carrefour and its competitors in India. Management Decision, 48(3), pp. 396-402.
Malhotra, B. (2014) Foreign Direct Investment: Impact on Indian Economy. Global Journal of Business Management and Information Technology, 4(1), pp.17-23.
Mookherji, N. (2015) Tesco to go slow on India operations. [online] Available from: https://www.business-standard.com/article/companies/tesco-to-go-slow-on-india-operations-115042700050_1.html [Accessed 12/08/18].
Mukher, S. (2018) Role of Multinational Corporations in the Indian Economy. [online] Available from: https://www.economicsdiscussion.net/multinational-corporations/role-of-multinational-corporations-in-the-indian-economy/10917 [Accessed 12/08/18].
Papadopoulos, N. and Heslop, L. A. (2014) Product-country images: Impact and role in international marketing.  Oxon; Routledge.
Parsons, E., Maclaran, P., and Chatzidakis, A. (2017) Contemporary issues in marketing and consumer behaviour.  Oxon: Routledge.
Prasad, E. H. and Prasad, G. V. (2018) Impact of foreign trade on indian economy-a study. Journal of Commerce & Accounting Research, 7(4).
Solberg, C. A. (2017) International Marketing: Strategy development and implementation. Oxon: Routledge.
Solomon, M. R., Dahl, D. W., White, K., Zaichkowsky, J. L. and Polegato, R. (2014)  Consumer behavior: Buying, having, and being. London: Pearson.
Srivastava, R. K. (2008) Changing retail scene in India. International Journal of Retail & Distribution Management, 36(9), pp. 714-721.
Tesco PLC. (2018) About us. [online] Available from: https://www.tescoplc.com/about-us/ [Accessed 12/08/18].
Wood, S., Coe, N. M. and Wrigley, N. (2016) Multi-scalar localization and capability transference: exploring embeddedness in the Asian retail expansion of Tesco. Regional Studies, 50(3), pp. 475-495.

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