This feature describes Tesco’s international expansion strategy. Tesco, the Brit

Question

This feature describes Tesco’s international expansion strategy. Tesco, the British grocer, has established operations in a number of foreign countries. Typically, the company seeks underdeveloped markets in developing nations where it can avoid the head-to-head competition that goes on in more crowded markets, and then enters those markets via joint ventures where the local partner provides knowledge of the market while Tesco provides retailing expertise. Discussion of the feature can revolve around the following questions:

1. Reflect on Tesco’s decision to expand internationally primarily through establishing operations in developing countries. What makes these countries attractive to Tesco?

2. Why does Tesco believe it is important to transfer its core capabilities to new ventures? How have the company’s partners helped it find success in foreign locations?

Explanation / Answer

1. Tesco by venturing in geographies other than its home country, is exploring opportunities of organic growth. Increased expansion across countries offer the opportunity to enter different target market and capture multiple potential customers in those geographies. With a strong supply chain, and using the low cost labor benefit in the developing nations they are cashing heavily on the increasing demand from the growing middlecalss in these markets.

With expansion to global markets, they have now gained the opportunity to enter new ventures with the local players in thosse geographies.

2. Tesco believes in transfering the core capabilities to new ventures by establishing a joint ownership/ franchisee model. This offers the opportunity to gain high degree of understanding of the local markets, with high local integration. This enables a customised and localised sservice, which is highly valued by the customers and consumers. Also by involving the local pllayers, Tesco releases a large part of the risk from their portfolio.

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