Tesco is considered the 3rd largest retail corporation having its headquarters in the UK. The report offers an overview of Tesco Plc and its market expansion strategy in a competitive market, particularly, Japan. It briefly offers the reasons or the factors that compelled Tesco to leave Japan. It has been found that other overseas retail corporations had failed to perform in the Japanese marketplace due to the exclusive shopping behaviors of Japanese customers. Several frameworks like SWOT analysis, Pestle analysis and Hofstede model have been used to determine all possible threats and opportunities for Tesco. The information obtained from analyzing these models has been evaluated and recommendations have been made with the help of which Tesco can expand its operations in other nations. It has been suggested that Tesco must form a strategic alliance with local retailers in the UK and other nations to reduce costs and expand its operations.
Tesco is a UK-based retail corporation established in 1919. It constitutes the 3rd major in the world in regard to sales, after Walmart of the US and Chain Carrefour SA of France (Rosnizam et al. 2020). It has performed exclusive research and development activities for several years to expand its operations in markets to other already developed and emerging markets on an international level. The company boarded on enlargement, into new and evolving markets, developing new outlets in the United States, entering the evolving markets in Central Europe and Japan via procurement and inflowing markets such as Malaysia and South Korea via a joint venture. At end of 2011, Tesco announced its departure from Japan where it had come into the market via a mode of acquisition. Its existence in Japan was inspired by its disappointment to develop enough mountable business even after 8 years of operations, the demographic and economic factors that have adversely impacted buying drifts among Japanese (Kar et al. 2021). Japanese customers switched from buying branded prestigious goods in Tesco outlets and chose higher reasonable private labels. Furthermore, there was a sequence of food safety regulations that hit hard the retail marketplace of Japan and the British corporate format of Tesco. Tesco faced difficulty in competing with supermarket and departmental stores in Japan. The report aims at a critical assessment of factors that obliged Tesco to leave the Japanese market.
In order to analyze the factors that led Tesco to leave the Japanese market will be studied with the help of Pestle analysis and SWOT analysis. Pestle analysis has been chosen as it provides an evaluation framework that helps one in weighing the company's performance by looking into brand economic, political, technological, social, legal and environmental factors impacting it. Moreover, it provides a bird's eye view of the past stance of the company and a sneak peek into future trends (Tyagi 2023). Such insights also assist the business in making decisions concerning to near future and planning the course of action for the long period. The exploration of macroeconomic Pestle factors assists in determining the reason for organizational failure in a particular market (Zinecker et al., 2022). It offers insights into probable factors of such a failure and enables firms to undertake corrective action in advance.
SWOT analysis instrument is one of the most competent corporate and decision-making tools. It helps identify the external and internal factors impacting the Tesco business. The outcomes generated from SWOT analysis make up part of business scheduling. It can also aid in a better understanding of business, and determine the areas of Tesco that require improvement (Benzaghta et al., 2021). It also aids in understanding the market and competitors. And predict the changes that the company require to pact with to ensure that the business is fruitful. This analytical tool is chosen as it will offer the outline for understanding the state of corporate and the opportunities it has for development or fixing up any culpabilities in the operations.
Geert Hofstede's model act as a valuable tool for understanding how culture impacts business. This theory posits that there are 6 dimensions of culture and that such dimensions impact how individuals interact. The dimensions are uncertainty avoidance, power distance, masculinity/ feminity, collectivism/ individualism, short-term/long-term orientation and restraint/ indulgence (Petrenko, 2022). This model helps gain insights into the interplay between the organizational structure and culture. Companies that work in the international setting are often encountered new cultural and environmental settings. In numerous cases, the differences can be extremely challenging and can lead to miscommunication, friction and many more. This model can assist in illuminating the values of culture and as an outcome of that, aid leaders in learning to work in distinct cultures more successfully (Slade, 2020). A deeper understanding of the Hofstede model can aid managers in identifying the issues with Tesco that stem from cultural problems. They can then use such insights in designing the performance enhancement initiatives like communication strategies designed to minimize conflict.
The main business objective of Tesco is to extend the business in recognized markets and evolving markets across the globe. With an emphasis to enlarge its business functions, Tesco activated over 1400 provisions in Asian nations of China, Japan, Malaysia, South Korea and Thailand (Chawla 2020). Tesco extended its presence into the Japanese marketplace in 2003 by procuring the regulatory concentration in C Two-Network Co., a concession superstore chain. However, in 2011, Tesco made a verdict to pull out its retail corporate processes from the Japanese marketplace and sold off its processes comprising 129 chain outlets.
This sub-section is a thorough SWOT study of Tesco. It aims at examining the fortes and the negative things of Tesco. Also, it aims at exploring the prospects that the company must focus on and the threats towards which it must build robust walls.
In spite of the challenges, Tesco faces, the company has great potential for future growth. It intends to have a stronger brand, a well-framed supply chain, and a versatile product range. It can exclusively make use of its strengths to extend its online platform, make entries into new markets and lay emphasis on sustainability and innovation. Through this, it would be able to maintain its status as one of the largest retailers in the world and constantly grow its business.
From the analysis of the model, it has been found that there are major social differences between Japan from that of the UK. Tesco declared that Japan was a strenuous nation to merchandise in because of higher costs, and that client demands were complex to fulfil. The British business arrangement of Tesco neglected to contend with grocery and department stores in Japan. Japanese people are exceedingly requesting and fastidious purchasers that must be provided with a wider choice of food items and merchandise. Furthermore, the Japanese propensities were completely distinct from those imagined in the business process of Tesco.
Tesco has been acting quite well in the UK setting, specifically provided the current political problems and economic issues that followed. Rebranding the products of the company and enhancing its presence in UK retail sector must be seen as a big opportunity (Samdani, 2020). Provided the economic issues with Japan, other countries are assumed to appreciate the reasonable pricing strategy of Tesco and the quality benchmarks that it sets for its items, yet supplementary diversification thereof, together with the advent of digital services will be needed. The creation of online apps that will enhance the quality and speed of services will be required.
The joint venture with local retailers in distinct countries like the US, Brazil and Asian nation is another suggestion for Tesco to make an entry. Few Asian governments need foreign-based businesses seeking opportunities to have joint ventures prior to involving in the firm. The part of ownership would completely rely on governmental regulations and investors (Pucik et al., 2023). The strategic alliance can help in reducing the risk via sharing of costs. However, determining the right partner and agreeing on the condition would be a complex task as Tesco would require to review the capability of partners before involving in business.
Furthermore, to lessen the risks and not incur losses in future, the company must adopt a distinct strategy towards managing the supply chain (Liu et al., 2022). Particularly, the innovation-driven approach towards quality and information management should be introduced. After the suggested changes got implemented in the design of the company, Tesco will become able to address issues caused by economic, political, and social concerns observed in Japan.
It can be concluded that Tesco, the leading British superstore group planned its departure from Japan after operating in the Japanese marketplace for 8 years. It has been analyzed that other overseas retail corporations had botched to perform in the Japanese marketplace basically because of the unique shopping habits of Japanese customers. Japanese people prefer to buy foodstuffs from retailers they know. Because of this, small retail channels raised their market share as they were capable to fulfill the demand of customers. The introduction of Bovine Spongiform Encephalopathy in animals in Japan, usage of non-permitted flavors in packed foods and product source being mislabeled evaded the trust of customers and lead to a series of food security shocks in the grocery retail marketplace. Tesco failed to successfully contest with supermarket and departmental stores in Japan. Tesco has been performing well in the UK and there are prospects for the company to upkeep its effect in the retail sector. Furthermore, with an innovation-derived tactic and variations in current manufacture procedures, Tesco would be able to enhance its performance in the UK and other Asian nations, thereby leading to rising economic growth.
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