The Case of Tesco and its Global Expansion

Discuss About The Consumer Perception Different Certification.

Business environment can be referred to the combination of external and internal forces of the business which influence the operations and profitability of the business. With the advent of globalisation, the organisations have begun to develop cross border relationships in order to improve their position in the global market. Tesco, the largest supermarket of UK is one such company which is operating in different countries in order to have global presence and to be at the peak of the global retail industry (Tesco, 2018).

Tesco is the leading retailer of the world which works for millions of customers. The company have come a long way since year 1919 and works in countries like Poland, India, Malaysia, Ireland, Hungary and many more. The company is made in London and since then it has developed itself into a giant supermarket brand which rules the industry (Clark and Chan, 2014). The company recently faced its first annual profit drop in 20 year in 2013. The company also had tough competition from the other emerging discounters like Aldi and Lidl. The company recently showed 28% rise in its annual profits which were better than the expected growth (Butler, 2018).

The main objective of Tesco is to serve the shoppers a little better every day by meeting their needs. They aim at providing easier way of living to its customers and to deliver best services to them when they visit their stores (Tesco, 2018). The multinational retailer follows hierarchical structure as the organisation is huge which includes the top level, middle level and the base level employees who work in collaboration with each other. The top level have the CEO and board of directors, middle level consist of the managers and heads of different departments and the base level employees are the workers and employees who work as per the instructions of the middle and top level management of the company.  The company provides various products ranging from groceries, homeware to electronic items. The company wants to cover each and every section of the society by providing them a wide range of products. The company also provides services like Banking and financial services, telecommunication services and retail services to the masses.

In 1994, Tesco launched their first international expansion. After that in 1995, Tesco entered in Polish market with the objective of further expansion in international market. Growth and success of Tesco could be measured by its international expansion. Company always seeks new and emerging markets with an early growth stage in order to expand their business. This is because, new and emerging markets have weak and few competitors and the opportunity to acquire the market share and customer base is huge. Relationship amongst Tesco and Poland is quite old and strong. Main motive of Tesco in relevance with entering into Polish market was the investment incentives offered by Polish government to large companies. Polish government invited all those companies who could invest more than £10 million (Peck, et. al., 2013). This attracted the Tesco due to their old policy of acquiring new and emerging markets with high growth opportunities. In return to the investment made by Tesco in Poland, Polish government offered Tesco various grants such as employment grant, grants for infrastructure development, training grants, etc. Along with these grants, Tesco also faced political unrest which resulted in civil unrest and violent crimes. Violence and civil unrest is one of the major issues which Tesco faced in Far Eastern Europe (Rogers, Ghauri & George, 2005).

Tesco’s Objectives and Organizational Structure

It has been reviewed that in December 2001, an antitank missile hit the office of EL AL Israel Airline. Later on, it was confirmed by the Thai authorities that the initial target was Tesco building which is adjacent to the EL AL Israel Airline building. Apart from the violence and criminal activities, Tesco faced several religion related issues. In Poland, where most of the Population is of Roman Catholic belief and leftwing political parties accused Tesco hurting the morals, traditional Polish volumes of home, church, and family. Thus, it could be said that the relationship between Tesco and Poland are strong enough to handle these types of issues without affecting their trade relationships. This is the reason that today; Tesco has many stores in Poland along with a head office in Krakow which was shifted in 1997 from Bielsko Bia?a. Apart from this, various stores were opened and are performing well. This has made the Tesco strong and made a unique and more balanced image in European market (Peppard, 2000).

PESTLE analysis framework evaluates the dynamic and unpredictable external business environment in which Tesco operates. This framework will present the impact of external business environmental factor over organizational performance.

Political environment of Poland is stable and this attracts industries to invest in Polish market. Government policies of Poland are effective enough for industries. They are useful for the industries to survive for a longer period of time along with enhancing the performance in terms of revenues, market share, profitability, etc. Apart from this, government of Poland has introduced certain policies and regulations in order to match up with the standards of developed economies. In relevance with this, government has invested a big part of their revenues in R&D department for further development of Polish market (Grunert, et. al., 2012).

With the evaluation of these factors, it could be determined that Tesco will be able to expand its market share in Polish market along with grabbing the opportunities generated by Polish government for sustainable development. Poland is a developing economy and they are continuously amending their policies and regulations with the objective of getting in the list of developed countries as soon as possible. Thus, political factors’ impact over Tesco’s performance is positive and encouraging in order to enhance their investment for getting better outcomes.    

Tesco operates in six countries in Europe. In relation with this, Tesco’s performance is highly affected by the political as well as legislative factors of governments of these countries. During the global economic crisis, Poland’s economic growth is constantly increasing from past decade. It was assumed that the GDP of European countries was expected to grow to US $96.5 trillion in 2017 but expectations for GDP for Poland was US $736.3 by 2017 along with an increase of 3.9% in CAGR during the same period. With these factors, there are lot of opportunities are available for Tesco to enhance its market share in Poland (Janssen & Hamm, 2011).

Poland’s Political and Economic Environment and its Impact on Tesco

Economic conditions of Poland are not stable yet as they are moving towards for being developed country at rapid rate. In relevance with this, government has announced to invest 100% foreign direct investment in major industries. This will help the Tesco to enhance its product offerings along with expanding its market share in the domestic market of Poland. Tesco has opened several stores in Poland with the help of support from Polish government. This has also helped the Polish market because Tesco has generated various employment opportunities for local public which will directly lead to decrease unemployment rate of the country. Ultimately, Tesco will be able to uplift its position in the domestic as well as in international market (Burt, 2010).

The factors which affect the performance of business through people of the country are known as sociological factors (Metzger, 2014). Distribution of income is one of the crucial aspects of sociological factors. For example: if in Poland, population of low level income are high, then the market share for inferior goods will be large as compared to the market of superior quality goods. Another sociological factor that affects Tesco’ performance is that of the attitudes in which the population has on such aspects as work and leisure. It is the duty of businesses like Tesco to undermine all social factors and to analyse the resolutions because every country has unique people with different attitudes. Mobility of population is another crucial segment of sociological factors which affects organizational performances. In Poland, population is less mobile, thus, Tesco has opened its retail store outlets near to the most densely populated areas (Elg & Hultman, 2011). This will help the organization to fulfil large number of people’s demands and wants. Ultimately, it will enhance the performance but Tesco needs to consider all these factors into consideration while performing its activities because in areas where most of the population is low level income group, selling superior quality goods will be a waste and vice versa (Reinartz, et. al., 2011).

Technological factors plays crucial role in terms of enhancing organizational efficiency as well as in reducing cost of production. New development opportunities are encourages by technological advancements. Polish government are looking for these types of advancements so that development could be made at rapid rate. Most of the European countries have sufficient technological measures through which growth and development rate could easily be enhanced. Along with the government, Tesco needs to adopt several advanced measures and techniques which could be able to enhance productivity of the organization along with the decrease in cost of production. Tesco has created an efficient program through which production capacity will be increased along with decreasing the consumption of energy and other resources. Tesco has launched its .com services in UK and in other countries such as Poland in order to cover large part of the market as well as to fulfil their demands and wants. Another technological development that Tesco has recently been apart of is a new information technology (IT) system named the Intactix space planner. Planning team will be able to generate better results in relation with setting up new stores. The space planner uses 3D technology to create planners for store and shelving layout (Halik, 2012).

Sociological Factors and Their Impact on Tesco’s Performance

These advancements have been made up due to effective support obtained from Polish government. Apart from this, various other effective measures have also been adopted by the Polish government in terms of IT to improvise the condition of the economy as well as of the industries present in the country.

Factors such as land, air, etc. are considered as environmental factors. Today, pollution rate across the globe is increasing at fast rate. In this manner, Polish government has launched certain policies to reduce the consumption of natural resources. There are certain regulations imposed by the Polish government in terms of the disposition of waste. These are some factors which affect Tesco’s performance.

Legal factors are highly influenced and linked with political factors. In order to reduce the chances of occurrence of glitches, it is necessary for the Tesco to comply with the legal policies introduced by Polish government. Safety measures at workplace, fair treatment with labour, etc. are certain crucial aspects of legal factors in Poland. These are required to be adopted by Tesco so as to sustain for a longer period of time (Mrozowicki, Roosalu & Sen?ar, 2013).

Amongst the above discussed external business environmental factors, political factor have the great potential which could affect organizational performance in future. This is because, a regional incident has already taken place under which Tesco was proclaimed by the leftwing political parties in relevance with hurting the morals, traditional Polish volumes of home, church, and family. Thus, it is recommended to Tesco to adopt appropriate measures so that all the political compliances could be fulfilled to avoid glitches in its operations. This will help the organization to grow and attain success along with expanding the business in international as well as domestic market.

References

Burt, S., 2010. Retailing in Europe: 20 years on. The International Review of Retail, Distribution and Consumer Research, 20(1), pp.9-27.

Butler, S (2018). Tesco beats forecast with 28% rise in annual profits. The Guardian.

Clark, T and Chan, S P (2014). A history of Tesco: The rise of Britain’s biggest supermarket. The Telegraph.

Elg, U. and Hultman, J., 2011. Retailers’ management of corporate social responsibility (CSR) in their supplier relationships–does practice follow best practice?. The International Review of Retail, Distribution and Consumer Research, 21(5), pp.445-460.

Grunert, K.G., Wills, J., Celemín, L.F., Lähteenmäki, L., Scholderer, J. and genannt Bonsmann, S.S., 2012. Socio-demographic and attitudinal determinants of nutrition knowledge of food shoppers in six European countries. Food Quality and Preference, 26(2), pp.166-177.

Halik, J., 2012. The application of PEST analysis based on EBRD and IBRD methodology. Central European Business Review, 1(3), p.14.

Janssen, M. and Hamm, U., 2011. Consumer perception of different organic certification schemes in five European countries. Organic Agriculture, 1(1), pp.31-43.

Metzger, K., 2014. Business analysis of UK supermarket industry.

Mrozowicki, A., Roosalu, T. and Sen?ar, T.B., 2013. Precarious work in the retail sector in Estonia, Poland and Slovenia: trade union responses in a time of economic crisis. Transfer: European Review of Labour and Research, 19(2), pp.267-278.

Peck, H., Christopher, M., Clark, M. and Payne, A., 2013. Relationship marketing. Taylor & Francis.

Peppard, J., 2000. Customer relationship management (CRM) in financial services. European Management Journal, 18(3), pp.312-327.

Reinartz, W., Dellaert, B., Krafft, M., Kumar, V. and Varadarajan, R., 2011. Retailing innovations in a globalizing retail market environment. Journal of Retailing, 87, pp.S53-S66.

Rogers, H., Ghauri, P.N. and George, K.L., 2005. The impact of market orientation on the internationalization of retailing firms: Tesco in Eastern Europe. The International Review of Retail, Distribution and Consumer Research, 15(1), pp.53-74.

Tesco (2018). About Us [Online]. Available at: https://www.tescoplc.com/about-us/ [Accessed 27 April 2018].