UK Investment in China - Essay Example

However it is observed that the new emerging markets have socio-cultural contexts much different from the parallel contexts in western countries. Such cultural differences present themselves both as an opportunity and threat to those organizations expecting to find niche in these markets. If properly researched and read into the cultural dimensions of the foreign market can be woven into the international marketing mix and help establish the global supplier as a trustworthy supplier who understands the local realities.

Inadequate research into these aspects and thereby deficient weaving of cultural dimensions in the international marketing mix can prove to be an expensive marketing mistake. This paper takes up the case study of TESCO, the major UK supermarket chain and undertakes a China market PEST analysis for TESCO.Paper goes on to suggest the standardization or adaptation in the international marketing mix that may be required to be brought about by TESCO looking at China market.TESCO entry strategy in Chinese market is also discussed with listing of various pros and cons of various entry strategies.. TESCO, the UK retail giant follows a standard strategy of expansion and growth comprised in four pronged action format: growth in the core UK business; expansion through international growth; maintain strength in non-food and in food trade and follow customers into new retailing services.

As a consequence of this strategy TESCO targets : a better deal for its customers; makes it simpler for its staff; ensures that it reaps the fullest economy to make its overall operations cheaper and reaches all its supplies faster to market. Five years prior to TESCO's formal entry into the Chinese market, BBC News (1999) reported the following about UK China trade ties and collaborations," UK businesses have won contracts worth $3.5 bn in China. The UK is the sixth largest investor in China, with $13bn of direct investment.

"Thus a long learning curve had preceded the formal entry of TESCO in the Chinese market in 2004.Thus by taking on China TESCO was taking up a pathway leading to a blind alley. TESCO made its first foray into China, in the year 2004, with the purchase of a 50% stake in a 25-strong hypermarket chain for 140m ($260m) entering into a joint venture with the Ting Hsin after a long three years' search for an appropriate Chinese partner. (BBC News, 2004).TESCO top management, at the time of entry, clearly made no secret of the lucrative and huge Chinese retail market.

In the year 2004 it was reckoned that this retail business served around two million customers a week and was valued at 280m, with sales of 330m. (BBC News, 2004). TESCO had researched its Chinese partner thoroughly before taking up the joint venture stake. Ting Hsin was the largest food supplier in China and owned the Hymall chain of stores, of which Tesco was to have a 50% stake. Hymall had opened its first outlet in September 1998 and had rapidly grown to be the leading hypermarket operators in the country, with French chain Carrefour and US-owned Wal-Mart among its rivals.

Most of its stores were located in "high quality" shopping mall developments in the east, north and northeast of China. (BBC News, 2004)The joint venture was premised on the logic that, Ting Hsin