Tesco Expanding in Dubai - Case Study Example

Tesco expanding in Dubai Table of Contents Introduction 3 A of Tesco Plc and its offerings of products and services 3 Discussion 4 Description of the organisational context of Tesco Plc 4 A brief description of Tesco’s home country, UK 5 A description of chosen host country, Dubai 7 An analysis of how Tesco Plc and its offerings fit with the environment of the host country 10 An analysis of how Tesco Plc intends to enter into the host country market, the critical risks involved, and plan for mitigating the risks 11 Conclusion 12 References 14 Introduction A description of Tesco Plc and its offerings of products and services Tesco Plc is recognised as one of the international grocery as well as general merchandise retailer, since 1919. In-spite of extensive rivalry and competitiveness, it positioned itself as the renowned brand in retailing industry mainly because of its offerings of various ranges of products such as Cash & Carry or warehouse club, department store, discount department store, convenience or forecourt store, hypermarket, discount store, supercenter, supermarket, superstore, and many other speciality stores. It mainly desired to present value-added products such as consumer electronics, clothes, consumer financial services, internet services, gas, consumer telecoms and many other useful articles. Other than this, Tesco Plc also expanded in varied other segments such as retailing of books, furniture, petrol and software; financial services, DVD rental, music downloads and telecoms and internet services. Not only this, Tesco Plc also operates in many other segments such as banking, fuels, tech-support, film making, technika and Tesco tyres. Therefore, due to the presence of varied types of essential articles, the retailer of Tesco Plc became successful to position itself as one of the renowned brand in the entire globe among many other rival retailers. This helped the organization of Tesco Plc to fulfil its vision to offer qualitative products at lowest price so as to maintain its portfolio in this segment effectively (Tesco, 2013). However, in order to enhance its brand value and dominance within the rival players of the retailing segment, Tesco Plc decided to enter and expand into the competitive markets of Dubai. This might proved effective for the organization of Tesco Plc to reduce its threats and enhance its strengths. Products of Tesco Plc Discussion Description of the organisational context of Tesco Plc Tesco Plc is a multinational retailer of grocery and general merchandise of United Kingdom, founded by Jack Cohen. Being headquartered in Cheshunt of United Kingdom, it operates successfully in many regions and markets in the entire globe. It includes stores in 15 countries such as Asia, Europe, North America, Malaysia, Republic of Ireland and many others. So, it is spotted as one of the leading British retailer in terms of total sales and brand image as compared to many other rival players. Along with this it also comprises a market share of 14.6 % and customer base of more than 1 million in both domestic as well as international markets. As a result, the market value and distinctiveness of Tesco Plc is enhancing at a rapid pace as compared to other retailers such as Wal-Mart and Carrefour. Thus, it helped in enhancement of the revenues by £64.826 billion by the year 2013 (Tesco, 2013). Apart from this, being a public limited organization, the net income and total assets enhanced by £124.0 million and £50.129 billion by 2013. And the total turnover of Tesco Plc in domestic or UK market is £3.5 billion and in global market is £8.6 billion. Along with this, it includes employees of more than 270,000 in domestic market and 150,000 staffs in global markets. This acted as one of the vital strengths of the organization of Tesco Plc that enhanced its market image and position in international perspectives. Therefore, in order to present the advantage of its value-added products, it decided to enter into Dubai (Tesco, 2013). Although, the retail market of Dubai is extremely competitive, Tesco Plc decided to enter into this market. The prime reason behind such objective is to offer qualitative products to the customers at a fairly low price in order to attract more and more customers towards this brand. And such a strategy proved extremely effective for the organization thereby amplifying its brand image and revenues to a significant extent. This is because, as numerous rival players are present in retailing segment, so the customers desired to satisfy their changing needs and wants mainly through value-added products. Other than this, due to enhancement in the per-capital income and disposable income of the citizens, the craze and growth of retail segment increased. As a result, the gross domestic product (GDP) and gross national product (GNP) enhanced thereby amplifying the economic condition of the country of Dubai among other neighbouring countries. Thus, it might be stated after analysing and evaluating the above scenario of retailing segment in Dubai that it is extremely beneficial as well as useful for a new entrant like Tesco Plc to enter. As, it might prove effective for Tesco Plc to increase its customer base and market share as compared to other rivals. Moreover, the total profit margin and brand image of the organization might also get enhanced thereby amplifying its total portfolio and revenue. A brief description of Tesco’s home country, UK In-spite of extreme economic meltdown, the segment of retailing experienced stiff up-thirst mainly due to its strategy to present good quality of products at a competitive price. This is the prime cause, for which, in-spite of extreme fragmentation, the retail organization attained a significant growth rate and market value (Rugman, 2009, pp. 456-478). Moreover, in this age of fashion conscious individual (youths with age group of 15-35) are the prime customers of retail chains as presented in the graph. It is mainly due to the presence of varied types of trendy and fashionable products at a quite lower cost in retail chains such as Tesco Plc, ASDA, Sainsbury, M&S and many others. Therefore, due to such underlining causes, the demand and profit margin of retail chains enhanced with significant leaps and bounds as compared to many other organizations operating in diverse segments. Other than this, the buying power of the customers in UK market is also extremely high due to improved wage structure and per capita income of the individual. As a result, the rate of disposable income enhanced resulting in amplification of the reputation and craze of retail chains as compared to others. Along with this, the retail chains attained a profit margin of 21, 000 core in the market of UK among other regions (Tesco, 2013). Apart from this, in this age, the definition of shopping is changing with a significant extent. It is because, nowadays, the trend of shopping is not only to fulfil the needs and requirements but to attain pleasure and satisfaction. Moreover, maximum extent of the customers in today’s age desires or likes shopping only to spend freely on luxurious products so as to live happily and pleasantly. Such a mind-set is mainly due to the excess exposure to global lifestyles. Therefore, such a mindset acted as a boon for the retailing sector thereby amplifying its demand and market value to a large extent among other segments. Along with this, the market size of UK also enhanced from 350 billion $ to 450 billion $ by the end of 2012-2013. This proved extremely effective for the organization operating under the huge umbrella of retailing as compared to others. Other than this, the total sales of the retailing industry in 2012-2013 increased to 8.8% along with a profit margin of 6.8%. This helped the retailing segment to prosper and grow with a significant extent thereby amplifying its sustainability and equity in the market among others. This is mainly due to the presence of strategy of discounts, free-gifts etc along with the purchase of varied types of products in retail chains. This acted optimistically over the retail segment thereby attracting large array of customers towards it as compared to other local companies. So, it fascinates large scale of health-conscious individual towards the retail chains in order to fulfil their buying requirements. All these above mentioned reasons proved extremely beneficial for the retail chains to enhance its prosperity and image in UK market among others (Wall & et. al., 2010). A description of chosen host country, Dubai In order to analyse and evaluate the market scenario of Dubai, an analytical technique is used, PEST. It is one of the best known methods among many others. The entire description is presented below: Political- due to the introduction of varied types of laws in favour of retailing, the growth rate and image of retail chains enhanced to a significant extent among others. As a result, this enhanced the buying behaviour of the individual that amplified the market share and demand of the retailing organizations by 15% and 36% significantly. Along with this, it also helped in enhancement of the profit margin and reputation of the retail chains in the regions of Dubai among many other local players. And so it might be depicted that the laws of retailing proved extremely beneficial for the retail chains, operating within the regions of Dubai (Tesco, 2013). Economic- the harsh effects of economic meltdown smashed the profit margin and demand of the organizations operating under retail segment. This took place due to lowering of the buying behaviour of the customers of the region of Dubai. Apart from this, the rate of unemployment, per capita income and disposable income reduced to a significant extent thereby declining the power of purchase to a certain extent (Tesco, 2013). Social- due to the introduction of the retail chains, the craze of social gatherings enhanced to a significant extent. As a result, the craze of shopping also enhanced to a significant extent thereby amplifying the profit margin of the retail organizations. Moreover, the retail chains also offer the opportunity to view and compare the features and benefits of numerous brands, which is extremely preferred by the buyers or customers. Therefore, it acted positively on the total sale and profitability of the retail chains thereby amplifying its prosperity and competitiveness among others. Therefore, it might be depicted that such types of social gatherings might prove effective for Tesco Plc in the market of Dubai (Tesco, 2013). Technological- the introduction of online sites of the retail chains sharply changed the spending behaviour of the customers. As a result, the online sales of these retail players enhanced by 18% in the year 2012- 2013 as compared to the organizations operating in other segments. Moreover, another significant reason that might enhance the market share of retailing in the regions of Dubai is the printed version of the quantity of ingredients present within each and every product. This might help the health-conscious individual to select the best one, to maintain a healthy physique. This might help the industry of retailing to grow rapidly among many other local players. Therefore, it might be clearly stated that the introduction of information technology proved extremely beneficial for the retail chains of Dubai. Environmental- as plastic bags or carry bags act as an important source of pollution, so maximum extent of the retail chains desired to stop utilising it. Such an act might prove effective in reducing the impacts of pollution on environment thereby amplifying the level of reliability of these brands within the minds of the customers (Tesco, 2013). Legal- introduction of various laws and policies by the higher authorities of Food Retailing Commission (FRC) enhanced the functioning and operations of retail chains in Dubai. SO, it might be effective for Tesco Plc. Thus, it might be stated that the market scenario of Dubai is extremely advantageous and effective for a new player like Tesco Plc to enter and operate. PESTEL Analysis of Host country (Dubai) Political Introduction of laws in favour of Retail chains that proved effective for Tesco Plc in Dubai Economic Economic meltdown reduced the buying behaviour, per capital income and unemployment also declined the total sales of retail chains Social Retail chains act as a source of social gathering that improved the total sales Technological Introduction of online sites and bar codes improved the total sales and buying behaviour Environmental Non-utilisation of plastic carry bags proved effective for the retail chains in Dubai in terms corporate social responsibility Legal Introduction of varied governmental policies and laws proved effective in improving the operations of retail chains An analysis of how Tesco Plc and its offerings fit with the environment of the host country In this age of competitiveness, each and every organization desires to enhance its sustainability and profitability. In order to do so, expansion into new market regions is the most essential requirement of any organization (Rugman, 2009, pp. 456-478). By doing so, it might enhance its range of customers and brand image as well. Keeping this criterion in mind, the management of the retail chain of Tesco Plc also entered into the markets of Dubai (Tesco, 2013). Other than this, as the disposable income and per capita income of the citizens of Dubai is extremely high, so their life style is extremely high. Along with this, as their life style is extremely high, their buying behaviour is also comparatively higher among other regions. This is quite beneficial for the retail chains like Tesco Plc in the market of Dubai as it might enhance the profitability and demand of the brand in this region among others. Moreover, the reputation and equity of the organization of Tesco Plc might get enhanced to a significant extent thereby amplifying its loyalty and reliability within the minds of the customers (Rugman & Collinson, 2012, pp. 234-345). Apart from this, as the number of competitors operating in the segment of retailing in the region of Dubai is quite lower, so it is another noteworthy advantage for Tesco Plc. This is because, then a wide range of customers might visit the products offered by the retail chain of Tesco Plc thereby amplifying its brand value and efficiency in the market among others. And as the number of competitors of Tesco Plc in Dubai market is quite less then, the rate of rivalry might also be quite lower. This is also another significant advantage for the Tesco Plc as compared to other retail players. However, in order to create its position and image in the market, it need to offer extremely trendy and fashionable products for the customers in order to satisfy their changing taste and preferences. Apart from this, the facility of online shopping might also proved extremely advantageous for the organization for Tesco Plc in the markets of Dubai (Tesco, 2013). Moreover, as the threat of introduction of new substitute products is extremely high, so the management of Tesco Plc need to offer high attention over research and development. Only then, it might present varied types of innovative products in order to retain its prosperity and demand in the market of Dubai among others. And it might also present varied types of discounts and offers at festive seasons, so as to increase its range of customers and brand image to a significant extent. This might also prove effective for the organization of Tesco Plc to enhance its market position and supremacy in the region of Dubai among other rival players such as GOCCO, M& CO, GALVANNI and many others (Tesco, 2013). Another significant reason that might enhance the productivity and distinctiveness of Tesco Plc in the market of Dubai is the wide access of tourists or visitors. As a result, the range of total sale of the products of the retail chains might get enhanced thereby amplifying the net income and total revenue considerably (Tidd & Bessant, 2010, pp. 345-351). Therefore, it might be clearly stated from the above mentioned points that the market scenario of Dubai is extremely advantageous and effective for the retail chain of Tesco Plc among many others (Tesco, 2013). An analysis of how Tesco Plc intends to enter into the host country market, the critical risks involved, and plan for mitigating the risks After analysing and evaluating the market scenario of Dubai, it might be depicted that, joint venture (JV) might be the best option for any retail player to enter in this region. This is because, JV is the sort of business agreement in which two parties get united for a certain period of time, so as to attain supremacy in a specific market (Porter, 2008, pp. 234-247). Moreover, in this type of agreement, temporary partnership takes place thereby amplifying the profit margin and brand value of the organization. And, in such type of agreement, both the parties invest their revenues and time in equal perspectives so as to improve their reputation and equity significantly. So, it acts as a boon for the organization to improve its profitability and distinctiveness in the region of Dubai. Therefore, it might be depicted from the above mentioned points that Tesco Plc might also go with the strategy of joint venture (JV) at the time of entering the market place of Dubai (Johansson, 1997, pp. 453-567). Only then, Tesco Plc might improve its market share and profit margin to a certain extent among others. Along with this, the strategy of JV might also prove effective for Tesco Plc to amplify its position and supremacy in the region of Dubai thereby enhancing its revenue and total sales. And JV might also reduce the threat of selecting wrong suppliers and incorrect promotional campaigns by analysing the market trends and buying habits of the customers through market research. However, the market research might be performed by the other local party, present within the JV. Only then, such type of research may not create any sort of negative impacts such as huge range of investment of revenues and time (Tesco, 2013). The similar technique of JV is followed by Majjid Al Futtaim fashionable retail store at the time of entering the markets of Dubai. It made JV with Abercrombie & Fitch and Hollister apparel retailer and enhanced its brand value and reputation in the region of Dubai among many other retail players. Moreover, implementation of such strategy also amplified its net income and total sales to a certain extent among other rival players. Therefore, it might be stated that, JV is the best strategy among others to enter into a new market. Conclusion Conclusively, it might be depicted that the market of Dubai might be the best place for Tesco Plc in terms of profit margin and reputation. Along with this, it might also be the best place for increasing its range of customers, so as to improve the rates of sustainability. Apart from this, the strategy of JV might also prove effective for Tesco Plc thereby increasing its customer base and market share as compared to other rivals. Moreover, the total productivity and brand image of the organization might also get enhanced thereby amplifying its total portfolio and revenue among others. Therefore, it might be clearly revealed from the above paragraphs that, in-spite of extreme rivalry the retailing industry of Dubai is expanding and growing among other players. And due to which the economic scenario of the nation is also getting enhanced thereby amplifying its image among other nations. References Johansson, J, K. (1997). Global Marketing: Foreign Entry, Local Marketing, and Global Management. New York: McGraw-Hill. Porter, M., E. (2008). Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York: Springer. Rugman, A, M & Collinson, S. (2012). International Business. New York: Springer. Rugman, A, M. (2009). The Oxford Handbook of International Business. Boston: Harvard Business School Press. Tesco (2013). Vision and Strategy. 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