The Key Aspects of Company and Country Analysis - Assignment Example

Company and Country Analysis Name Institution Professor Course Date 1.0 Introduction Tesco is a British multinational grocery as well as general merchandise retailer with headquarters in Welwyn city, Hertfordshire England in the United Kingdom (Tesco PLC 2016). Measured in terms of profits Tesco is the third largest retailer as well as the second largest retailer in the globe when retailers are measured based on the revenue that they generates. The retailer has stores in about 12 countries across Europe and Asia and it is also a market leader in the grocery market in UK. Argentina is termed as a federal republic that is located in the southeastern South America, the country have a mainland of approximately 2,780, 400 km2 and it is termed as the 8th largest country in the globe as well as the second largest in the Latin America. This seems to be the main motivating factor for Tesco to base their operations in Argentina. This paper sets out to offer a brief background of Tesco; this will be followed closely by the SWOT analysis to help in their international expansion and a discussion of the business environment in the Argentina. Lastly there will be a conclusion to sum up the main points that have been discussed in the report and also to offer a recommendation. 2.0 Discussion 2.1 Company overview Tesco is among the largest food retailers in the globe and it operates stores totaling to 2,318 and have an employee base that exceeds 326,000 individuals. In addition to the stores in the UK, the company has stores on the rest of Asia and Europe. Currently, Tesco sells approximately 40,000 different food products in their stores in addition to clothing as well as other non-food lines (Data Monitor 2004). At the same time the company have its own-label products and they are divided into three main levels that so the normal, value and the finest and the own brands tend to account for about half of the sales made. The company also has operations in Europe including Poland, the republic of Ireland, Czech Republic, Hungary and Slovakia. In Asia Tesco operates in South Korea, Thailand, Taiwan and Malaysia (Data Monitor 2004). 2.2 SWOT Analysis For Tesco to sustain their position and also increase their profitability there is a need to carry out the SWOT analysis of the company. SWOT analysis is termed as a structured planning method that sets out to evaluate the threats, opportunities, strengths and weaknesses of a business or a venture. The strengths and weaknesses tend to focus more on the internal factors that are likely to affect the company, contrary the threats and opportunities tend to come up with a number of external issues that are affecting the company and that the company can make use of to their advantage (Jeffs 2008). Consequently, SWOT analysis is essential in that they play an essential role ion ascertaining how a company is performing and in this case it will also help in knowing what aspects to use in their venture into Argentina. For instances they can apply their strengths and opportunities and at the same time try to address the weaknesses and threats for them to be competitive and successful in their internalization process. The table below shows the SWOT analysis of Tesco and a discussion will be offered below it Strengths Weaknesses Increase in market share Tesco online Insurance UK market leadership Brand value Great reliance in the UK market Lack of experience in some markets Huge debts Opportunities Threats International growth Venture into other markets such in non-food retail Online shopping International expansion Returns from overseas may reduce The structural change in UK which is likely to spur a price war Fierce completion from Asda and Wal-mart 2.2.1 Strengths 2.2.1.1 Increase in market share This seems to be a major strength that Tesco have over its competitors in the industry, Tesco has a market share of about 13% in the retail market in the UK. This is greatly attributed to the company multi-format capability and this will help the company in growing their share in the food market. The company also has plans to open up new stores (Data Monitor 2004). 2.2.1.2 Tesco online Tesco.com is termed as the globes biggest online supermarket and the sales. Tesco online operates in a great number of stores and covers approximately 96% of the UK market. Additionally over one million households have made use of the online services offered by Tesco and the company has a strong platform in place to ensure that they develop other revenue stream even further (Data Monitor 2004). 2.2.1.3 UK market leadership Tesco acquired the number one rank in the year 1996 and since then it has develop a multi-format strategy aimed at accelerating its advantage (Clark & Chan 2014). 2.2.1.4 Brand value Tesco has a strong brand image and it is mostly associated with trustworthy goods and quality products that are available in excellent value. Additionally, over time Tesco have been coming up with innovative ways of ensuring that their customers shopping experience is at its nest and also there have been efforts to ranch put into other sectors such as insurance and finance which have proved to be successful (Data Monitor 2004). 2.2.2 Weaknesses 2.2.2.1 Great reliance in the UK market Though international business of the company seems to be on the rise and it is also expected that it will contribute greatly to the profits made by Tesco in the coming years, the company still relies greatly in the UK market. Any changes in the UK market may have adverse effects on the company (Data Monitor 2004). 2.2.2.2 Lack of experience in some markets Tesco lack experience in some of the markets it intend to enter for example in the own brand of tablets and smart phones (Albright 2008). 2.2.2.3 Huge debts Based on the fact that the company have a wide range of products, this model tend to have its own weaknesses in that their profits a greatly impacted on by the debts as a results of insurance claims and debts for credit cards. 2.2.3 Opportunities 2.2.3.1 International growth Additionally, Tesco need to engage in overseas expansion, for example, in Argentina and this is greatly supported by the idea that the retail market in this country tend to have a limited level of competition but at the same time it is severely price sensitive (Data Monitor 2004). 2.2.3.2 Venture into other markets such in non-food retail Tesco needs to venture into other markets such as engaging in digital entrainment to keep up with the changes that are occurring globally and they can achieve this through the 80% investment in Blinkbox (Kiss 2011). These moves can intersect well with the own brand tablets and smart phones. 2.2.3.3 Online shopping Through online shopping the company can target a large group of customers who are busy and help them in dealing with the mobility issues. 2.2.4 Threats 2.2.4.1 International expansion Though international expansion comes along with some benefits it also has some challenges. International expansion seems to be expensive due to the heavy investment, marketing, operation expenses and extra distribution expenses. 2.2.4.2 Returns from overseas may reduce Tesco high sales are predicted based on their investment in the overseas countries and this investment tend to drive the group returns high as each of the country surpasses the critical mass. Tesco faces a threat in that this may at times fail to happen due to competitor action and economic conditions. 2.2.4.3 The structural change in UK which is likely to spur a price war The price followers that so Safeway and Sainsbury tend to be more aggressive investors in regard to price. Due to decrease in prices Tesco also need to decrease their prices which would ultimately means a reduction in the profitability of the industry. 2.2.4.4 Fierce competition from Wal-mart Tesco faces fierce competition from Wal-Mart and the retailers top ranking seem to be threatened in that Wal-Mart can compete well in regard to price and the wide range of goods. Tesco need to address this by offering the consumers with competitive prices and high quality products. 2.2.5 PEST Analysis The PEST analysis is the measurement tool and it the word PEST is an acronym of the political, economic social and technological aspects and they are used in assessing whether the market that a company plans to venture in. Through the analysis the company is able to decide whether they can venture in the market or not (Albright 2008). 2.2.5.1 Political The economy of Argentina has been on the rise and it seems to have recovered fully from the economic crisis. Additionally, efforts have been made to eliminate the security disputes that existed between Argentina and its neighbors. Additionally, the country also plays an active and essential role in the Latin American context and this has been achieved through a great number of inter-American Organizations. Additionally, Argentina seems to be reasserting itself internationally. This means that the country is committed to maintain peace for them to e back on track and this will be beneficial for Tesco operations in that they will operate in a country free from political risks and even though the risks occur they will be minimal (Armstrong, 2012). 2.2.5.2 Economic Since the year 2002, Argentina has ensured that they are trending on a path to ensure their gradual economic recovery. The economic environment of Argentina makes it to be among the most attractive and probable market when compared to other national economies in the Latin America. Since taking a path to recovery the country have received a great number of investors giving jobs to a great number of people (Rohter 2006). Consequently, it is clearly evident that the economic environment e and as well as the Argentinean market ought to be considered as being favorable for the start up of a new business or also as a favorable area to invest funds. This means that when Tesco base their operations in the country they have a wide range of consumers to consume their products based on the fact that a great number of them are earning a living through the employment. Additionally, Tesco will in a way lead to a decrease in the number of unemployed people since they will also need employee to work for them. 2.2.5.3 Social Argentina is ranked as to have the second highest level of human developed when compared to other countries in Latin America and at the same time it is ranked in the 34th position by the UNDP human develop index. With continued economic growth the government has been able to reduce the unemployment rates though there are still employees who are underemployed. In Argentina there is a moderately distribution of wealth (Rohter 2006). A great number of people are in the middle class and this means that at least they can make purchases from supermarkets since they have the purchasing power. This is supported greatly by the fact that there are a wide range of graduates in the country and they are aware of the big brands thus it is more likely to Tesco to succeed in Argentina since people are willing to pay a greater value for their products. 2.2.5.4 Technological When compare to other countries such Russia and Brazil, Argentina tend to have weaker technological infrastructure. But efforts are being made to ensure that the country achieves considerable improvement in the technological infrastructure and they have done this by privatization of some of the state run industries. The usage of the internet in the country is not at par with the other countries at its level. This shows that a lot need to be done to improve the technologically aspects of Argentina, for instance, there need to be a higher uptake of the use of the internet and a great number of homes needs to be connected to the telephones system. This aspect seems to be crucial since they are essential to the effective running of business such as Tesco which tend to have a high reliance on technology. For instance, Tesco makes use of the online system which they may also wish that it is applied in their operations in Argentina. Conclusion Tesco have based their operations in a number of countries but they rely greatly on the UK market. In respect to these Tesco need to take note and advantage of the strength and opportunities that are available to them to ensure that they have a competitive advantage over their competitors in the industry. Additionally, they need to address the threats and the weaknesses so as to succeed. Based in the PEST analysis Argentina seems to be a favorable place for Tesco to invest and this is mainly supported by the fact that the country political future seems to be promising since they have maintained relation with their neighbors. This means that Argentina is likely to have a stable country free of conflicts from their neighboring countries. Economically, Argentina seems to e on the path of recovery and its economy seems to be improving over time, Tesco also need to take note that a great number of investors are already in the country and this shows that the country is a good place to invest in. but the technological issue need to be treated as a matter of urgency and the government of Argentina need to devote some resources to enhance and ensure that their technology is at par with others countries and this will enhance the business operations of companies based in the area. References Albright, K 2008, ‘Environmental Scanning: Radar for Success’, Information Management Journal Armstrong, G 2012, Principles of Marketing, Pearson Australia, N.S.W. Clark, T. & Chan, P 2014, ‘A history of Tesco: The rise of Britain's biggest supermarket’, The telegraph, 4 October, viewed 22 May 2016, http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/2788089/A-history-of-Tesco-The-rise-of-Britains-biggest-supermarket.html Data Monitor 2004, Tesco PLC: Company Profile, Data Monitor, USA http://www.staffs.ac.uk/sgc1/faculty/understand-change/documents/swot-analysis-tesco.pdf Jeffs, C 2008, Strategic Management, SAGE Publications Ltd, Thousand Oaks. Kiss, J 20 April 2011, ‘Tesco's Blinkbox deal shows video on demand is headed for the mainstream’, The guardian, 20 April, viewed 22 May 2016, http://www.theguardian.com/media/pda/2011/apr/20/tesco-blinkbox Rohter, L 2006, ‘Despite recovery, inequality grows in Argentina-Americans-international Herald Tribune’, The New York Times, 25 December, viewed 22 May 2016, http://www.nytimes.com/2006/12/25/world/americas/25iht-argentina.4007058.html?_r=0 Tesco PLC 2016, Contacts, viewed 22 May 2016, https://www.tescoplc.com/contacts/general/ Read More