Global Marketing Assessment Answer

Executive Summary

Tesco is considered the 3^rd 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.

Introduction

Tesco is a UK-based retail corporation established in 1919. It constitutes the 3^rd 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.

Methodology

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.

Discussion and Findings

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.

Pestle framework

1. Political factors – Functioning in a globalized setting with outlets across the globe. Tesco functions in six nations in Europe in accumulation to the UK and also operated in Asia: Thailand, South Korea, Malaysia, Taiwan and Japan (Zhang and Hardaker 2021). Its position is highly impacted by the legislative and political situations of such nations, including the EU. For employment regulations, government tend to encourage vendors to propose a combination of job prospects from lower-paid, flexible and locally based occupations to extremely competent, extremely paid and core positioned jobs. Tesco failed to understand that retailing had a prodigious influence on jobs and individual factors, being the inherently local and labour-intensive segment (Dakhli et al. 2019).
2. Economic factors – Japanese grocery merchandising is a developed market appreciated at $370 billion and it constitutes the 2^nd chief across the globe behind the US marketplace. Japanese grocery trade per capita boosts up to the uppermost in the sphere at over $3300 in a term. However, the market still stays troubled. Since the trouble burst in 1990, the Japanese economy has stagnations, followed by a devaluation in customer prices in the following years. From the drop-down of the economy, customer confidence has never completely recovered. Moreover, one of the greatest impactful aspects on the economy is higher stages of unemployment, which declines the operative demand for numerous goods, destructively impacting the demand desired to manufacture such goods. The higher unemployment rate has provoked individuals to migrate to cities that provide more job options. The consequence of which is an amplified demand for newly made and convenient Japanese-style food items.
3. Socio-cultural factors – In context to demographic aspects, population progress has been stagnant in current years, leading to the decreased volume progress prospect, in the retail marketplace. The patterns of consumption of the Japanese have altered together with demographic modifications and fluctuating lifestyles. The Japanese market has not greatly incorporated Western cuisines ensuing in a rough ride and ultimate consequence on both foreign and domestic retailers like Tesco. As per the analysis by Philip Clarke, CEO, Japanese spending habits were quite distinct from those projected in the business processes and strategies of Tesco. British customers tend to appreciate resounding out big-shop once a week as there is sufficient space to keep their spending (Hammond 2017). However, for the majority of Japanese, space is the finest and carrying out a bigger shop is not the alternative. Similar to other overseas retail corporations, Tesco was unsuccessful to adapt completely to the local shopping behaviours of Japanese customers. Numerous Japanese customers swapped from purchasing exclusive luxury products in Tesco and emphasized higher reasonably rated private label goods (Fujiko 2013). However, such failure has offered Tesco appreciated insights into the complication of the global markets.
4. Technological factors – Technology is the major component in the PESTLE analysis of Tesco. The company has greatly benefitted from the technological progressions over the year. For example, it made the introduction of Clubcard a long time ago. This card of loyalty has been a major force behind the accomplishment of the corporation (Yawson and Yamoah 2022). A large number of people use it in both the UK and other nations where Tesco carry out its operations. Tesco has made the introduction of more self-service checkouts wide across its outlets in past various years. Its self-service offers consumers convenience and assistance itself decreasing operating costs. However, various consumers are not happy with self-service things as evidenced by aggressive reviews on social media. Technological glitches can stall business processes and hurt the confidence of customers. For example, the website and application of Tesco were hit with outages leading consumers unable to put their orders. Identically, home deliveries for a large number of consumers were stand cancelled due to technical glitches.
5. Legal factors – The advent of Bovine Spongiform Encephalopathy in cows in Japan, the usage of non-permitted extracts in packed foods and product sources being mislabeled worn customer faith and instigated a succession of food security shocks in the grocery merchandizing marketplace. The UK business arrangement of Tesco botched to cope with supermarket and departmental outlets in Japan (Son et al. 2018). Japanese people intend to put special prominence on the freshness and quality of food matters. Therefore, they like to shop numerous times during the week rather than buying all items in a single shot. Government legislation and policies influence Tesco's operations directly. EU and UK competition legislation restrict anti-competitive actions and thus, Tesco cannot merely hitch with or buy another superstore of its size in the UK as the rivalry regulator of the nation can slab all such interchanges. Tesco cannot recompense any worker less than the lowest wage rate as set by the Japanese government. Similarly, it cannot vend alcohol to minor age customers. Any break of the same might attract significant penalties and fines. It has been found that Tesco was prosecuted and penalized in past for falsifying consumers and other issues.
6. Environmental factors – Corporations in Asia, the UK and in fact, various nations across the sphere are encountering huge pressure from administrations to address ecological problems. Such heaviness is not only from the administrations but also from the society that is highly concerned regarding the environment. The main social issue intimidating the food retail companies has been the ecological issues, the main area for corporations to act in a communally responsible manner. The government has envisioned to start a new policy for sustainable consumption and creation to cut waste, decrease consumption of resources and reduce environmental damage (Liberadzki et al. 2021). This legislation created a new tax on marketing largely processed and greasy food items. This fat tax directly exaggerated the product varieties of Tesco that have subsequently been adapted, impacting the associations with both customers and suppliers.

SWOT Analysis of Tesco

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.

Strengths

1. Market share in the UK – Tesco is a well-reputed retailer in the world. It is at the first rank in the UK and has over 27.3% market share in the grocery market (Sughra, 2020).
2. Brand recognition – Tesco act as a household name in the UK that has greatly invested in its brand. Its logo is easily recognizable and advertising campaigns are highly known.
3. Store format – Tesco has distinct store formats like Metro, Express and Extra to cater to distinct forms of customers. It does not hesitate in bringing substantial variations when needed (Dimitrova et al., 2021).
4. Diverse products – Tesco markets everything from groceries to electronics and clothing. It has allowed it to appeal to a wide array of customers, which has been extremely helpful for its expansion and growth.

Weaknesses

1. Failures in a few markets – Though the corporation has worldwide victory sections to share, it has also perceived a few disappointments over the years. It botched in Japan, US and Poland. Failure in such nations demonstrates that Tesco has specific weaknesses in comprehending overseas markets (Zhang and Hardaker 2021). It witnessed failures in the UK and closed several stores across the nation in the last few years.
2. Quality control issues – Deficiencies in excellence control in a few stores have also impacted the picture of Tesco. It was penalized £7.5 million for vending off various food items after expiry at 3 stores in the UK (Siawsolit 2020).
3. Suppliers' treatment – Tesco has also encountered criticism for its treatment of suppliers. It has been accused of making use of its buying power to negotiate lower prices from suppliers that have placed pressure on them to cut costs.

Opportunities

1. Discovering emerging economies – There are various evolving economies that Tesco can discover. Nations like Turkey, Indonesia, Brazil, South Africa and Mexico and several others nations are worth discovering.
2. Growth at the home market – Additional development within the UK is also probable even when Tesco is undertaking cautious measures because of changes in customer behaviour and the challenges post Brexit setting.
3. Strategic alliance – Strategic alliance with other corporations is another prospect worth discovering. It must help Tesco in attracting more clienteles and enjoy various other advantages (Al-Suraihi et al., 2020). It is worth noting that Tesco is already taking into consideration various strategic avenues for future growth and development.

Threats

1. Competition – The grocery marketplace is highly viable in the UK. Where Tesco is the market front-runner in the UK with over 27% market share, rival firms like Sainsbury and ASDA are making vigorous efforts to close the gaps (Dawson & Meehan, 2021). The pricing strategies of competitive firms have a substantial impact on profits of Tesco.
2. Higher inflation and living cost – There are various factors like higher inflation, changing customers’ spending habits and higher cost of living. All these are impacting Tesco as evidenced by downgraded profits projections.
3. Lawsuits – Tesco was penalized millions of pounds in the past. In case it incurs fines due to a lawsuit, the impact on its finance might be substantial.

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.

Hofstede model

1. Power distance – It is described as the degree to which lesser influential members of companies and institutions within nations expect and receive that power is unevenly disbursed. Japan scores 54 in this dimension which signifies that Japan is a borderline hierarchical society. Japanese are aware of their classified position in social settings and perform accordingly. On the other hand, the home country, the UK scores only 35 which signifies that the UK believes that inequalities among individuals must be minimized (Hofstede insights, 2023).
2. Individualism vs collectivism – The main issue addressed by this dimension is the extent of interdependence the society upholds among its associates. Japan scores 46 on the individualism measurement. Japanese society does not have an expanded family system that forms a ground for more collectivistic societies like Korea and China.
3. Masculinity vs feminity – Japan scores 95 in this dimension indicating that the Japanese society is obsessed by achievement, competition and success, with accomplishment being described by the best in the field. Japan is the driver for excellence and brilliance in their physical services and creation and performance in each facet of life.
4. Uncertainty avoidance – Japan scores 92 in this dimension which indicates that Japan is one of the most uncertainty-avoiding nations on earth (Hofstede insights, 2023). It is often featured in the circumstance that Japan is continuously threats by natural tragedies from tsunamis, earthquakes, and volcano eruptions to typhoons. In the corporate sector, a lot of effort and time is placed into feasibility studies and all the risk aspects should be worked out before any project can begin. Whereas, the UK scores lower at 35 which shows that in the UK, people change plans as some new information comes to light.
5. Long-term orientation – It defines how each society has to maintain a few links with its past while dealing with present and future issues. Japan scores 88 showing that it is one of the most long-term orientation-oriented societies. Japanese people tend to see their life as a very short-term moment in the long history of mankind.
6. Indulgence – Japan has a lower score of 42 indicating a philosophy of restraint. Societies having a lower score in this dimension have a tendency to pessimism and cynicism. Whereas, restrained societies do not place much focus on relaxation time and regulate the gratification of their wants. While the UK scores 69 showing that it is a more indulging society. It exhibits preparedness to realize its requirements and instincts in relation to having joy and relishing life (Hofstede insights, 2023).

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.

Recommendations

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.

Conclusion

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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