International Business Management Case: Tesco Goes Global

CASE: “Tesco Goes Global”

a. Why did Tesco’s initial expansion strategies focus on developing nations?

Tesco looked for a location with few competitors in the grocery retailer area but alsowith a high growth potential and large size of customers; developing countries had these qualities, especially in Asia.

b. How does Tesco create value in its international operations?

- Makesefforts to broadcast and incorporate their knowledge and skills in the new ventures.
- The managers of the joint ventures are mostly local, accompanied by some experts from UK. This helps them to adaptto the culture in a better way.
- The partners in the joint ventures have a deep understanding of the markets in the host
Countries. This makes Tesco less vulnerable in the new market.
- Thecompany is interested in markets with growth potential and few competitors.

c. In Asia, Tesco has a long history of entering into joint venture agreements with local partners. What are the benefits ofjoint ventures for Tesco? What are the risks? How are those risks mitigated?

Benefits: The local knowledge
The partner is already a member of the market with its brand and customers for thatcuestion:
- Tesco can use the existing distribution channels in the market that their partners are using.
- The initial investment in the project can be reduced
- The local staff works better and more- Local staff makes the company best suited to the country's culture

Risks:
- The partner can appropriate the way in which Tesco is managed and then leave the company.
- Cultural differencesmay reduce the performance of the company
- The image of the new partner or resources are not the most appropriate

Mitigation:
- To ensure the control over the partner Tesco must have moreparticipation to make decisions that it choose, also draft appropriate clauses in the contract to ensure better control

d. In March 2006, Tesco announced that it would enter the United States. This...