![]() ![]() Tesco operates in six other countries of the EU apart from the UK so its performance is now affected by the European Union (EU). How is Tesco affected by international Political, Economic, Sociocultural, Technological and Legal forces? ![]() This would have influenced Tesco to increase its performance as even though Asda is not as big in the UK, Wal-Mart is the biggest company in the world and would have the financial capacity to increase the competitiveness of Asda – ‘The takeover has far-reaching consequences for British retail as other companies react to it and find new ways to compete’ (Corporate Watch, 2004). By 2007 after having investments in 46 stores, they had enough customer awareness to be to open their own branded store (Asda is Tesco’s biggest rival in the UK, in 1999 it was taken over by the American superstore Wal-Mart. This was their biggest move yet as there was so much potential to expand at a much faster rate in a growing economy. ![]() After much deliberation with potential partners, Tesco settled on a joint venture with Hymall who had been operating in china for 6 years. China, being one of the world’s BRIC economies would clearly be of interest to a fast expanding western company, this is because of its advances towards capitalism and its low labour costs. In 1998, Tesco expanded again into Taiwan and Thailand, with the same business venture of acquiring shares of well knows retailers. This strategy of expanding was clearly successful as Tesco now have over 205 stores in Hungary, one of which is the biggest store in the world and over 21,000 employees (By merging with domestic retailers there was a lot less risk than building new supermarkets as these companies had a deeper understanding of the markets they were participating in and allowed Tesco to gain an understanding of specific consumer demands in different countries, but without the financial strength of Tesco these companies would not have been able to expand much further. Tesco expanded into Hungary as well as the Czech Republic, Slovakia and Poland by acquiring large stakes in domestic retailers. So in 1995, according to, Tesco’s first port of call was Hungary, this was also the year they introduced the Tesco Clubcard (this shows that as well as wanting to expand abroad, Tesco still wanted to build and retain a customer loyalty in the UK. Tesco initially expanded into Ireland and France but ‘The perceived success (or otherwise) of their early venture abroad would have been considered insignificant to the company’s fortunes at home, and as a result, this largely undermined the company’s (perceived) efforts in the eyes of the financial markets as being a peripheral and/or even a distraction to the core UK business’ (Palmer, 2005). ![]() They decided to expand into emerging economies where there was little competition such as Eastern Europe and Asia. Unless Tesco invested heavily into research and development (R+D) in these established markets, they would not be able to compete with domestic chains that would already have a clear understanding of the needs and wants of their consumers. When Tesco researched into international markets they decided that entering into countries where there were already well established supermarkets would not be the best option as they would struggle with tough competition. In 1995, Tesco overtook Sainsbury’s as the UK’s largest supermarket (so as the company grew stronger and generated a larger cash flow, management decided that the only way to expand even further was to invest abroad. It was one of the first to recognise that there was a gap in the market for unbranded value goods, which helped it to fast-track to the leading position in the UK in the early 1990’s. The company has become successful through strong marketing techniques, good store location and efficient inventory management. Tesco is the largest chain of supermarket within the UK it dominates the market with a share of 25%, making it a monopoly. Deregulation of global financial markets allows for FDI and an increase in the free flow of money. There has been a major improvement in transportation, for example, containerisation greatly reduces the expense of international trade and increases its speed, especially of consumer goods and commodities, bringing prices down in the country of manufacture and closer to the prices in the export market. Trading blocs allow for the free trade between countries within it, the EU has become the most powerful trading bloc in the world with a GDP nearly as large as that of the United States. Barriers to international trade are falling, tariffs and other import controls have declined making it cheaper and easier to trade between countries. ![]()
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