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The organization which has been selected in this study to do the research is UK’s one of the biggest and leading retail named as Tesco. The company is known for dealing with variety of products starting from groceries, garments to readymade foods. The product which has been selected to enter an international destination to establish its new products there is ready to eat meals. Post Covid the demand for ready to eat meals has been extensively increased in India and many companies in India are joining hands with Tesco in producing these kinds of produces. The name of new product selected is HomeMeal.
The two of most important theories related with the international expansion of business are absolute advantage theory and comparative advantage theory. Both the theories has been used in this study to describe the situation as well as also helped in in identifying what sort of point’s needs to be remembered while creating and expansion a new business in an international location.
The international market which has been selected to create this new product is India. India is known for dealings in variety of products starting from retail based items to food items. Recently after this pandemic it has been seen that the demand for ready to eat meals has been increased by USD 751.43.
The entry mechanism which has been selected for the product is joint venture with other ready to eat brands found within India. This will help the product in getting more reach within a short span of time.
The organization that has been selected in order to further develop the study is namely Tesco. Tesco was founded by Jack Cohen in the year 1919 who was the son of a Jewish expatriate from Poland. The business initiated by selling extra daily usable items from a small stall at Well Street Market. The brand name initially came into noticed in the year 1924. Initially, the company started its business dealing in eatable items along with drinks, afterward, it stretched its business into sectors, for example, garments, gadgets, monetary administrations, telecoms, retailing and leasing DVDs, CDs, music downloads, Internet administrations, and programming (Tesco, 2022).
As per the current year the major rivalries of Tesco are Sainsbury's, ASDA, Waitrose and Morrison's. Considering the strengths of Tesco it can be said that it has some of the maximum number of dealing as well as profits as contrasted to other retail giants within UK. The company has also got a pretty good international reach too. As per the 2018 financial report the yearly functioning revenue increased by 28%. Also in between the four big retail giants, Tesco control the grocery retail business sector of UK with 27% of the total business sector portion. Some of the notable weakness of Tesco includes a drop down in the functioning cost for the financial year 2021. The share price drop down to 8% within the first half of the year 2022. Secondly In spite of the fact that Tesco is the cost leader within the UK market, its minimal expense system can prompt diminished overall revenues (Hub,Business Strategy , 2022).
The product line which has been selected to make an international entry in India is ready to eat meals. Though the product concept within Tesco is not new but the range of product which has been selected is new. This product has been develop keeping in mind the current pandemic situation where people who got infected with Covid-19 need ready to eat food this ready to eat meal will help them with a great taste and health too. This product is not just usually frozen food rather all the ingredients that will be used to manufacture this will have good amount of protein and carbs that will help the people in getting recovery faster with no hustle.
As discussed in the previous for doing any sort of international product launch companies need to focus on using some the theories or model which will help them in setting the business more firmly. In case of this particular study it has been seen that the company Tesco is going for international product launch and this will be supported by two of the important theory which are absolute advantage theory and comparative advantage theory.
According to Frithiof Svenson (2015), the hypothesis of comparative advantage states that business safeguarding does not work over time. The following pioneers are for the most of the time is beneath stress from the national law to safeguards the work from worldwide rivalry by raising the tax (Svenson, 2015). The Theory of Comparative Advantage has been utilized to elude the business stream among two nations. There are two significant issues deserving of evaluate, the job organizations and the origination of products delivered. Some of the benefits of using comparative advantage theory are discussed in detail below:
This theory will work well for Tesco because as the company is already belongs to highly developed country thus producing the product in India will cost them very reasonable price which will help them in gaining comparative advantage.
The second theory related to international expansion of business is the absolute advantage theory. The theory of absolute advantage states that a country’s economy will perform best when it captures all of the benefits of trade with other countries. It does this by specializing in the export of goods and services where it has a comparative advantage and importing the goods and services where it has an absolute advantage. The theory was developed by Adam Smith to show how the different countries gain profit by exporting the goods they produce more efficiently. The basic idea of absolute advantage is that each country has a unique comparative advantage in producing a certain good or service. This means that a country can produce more of a good or service than it consumes, and trade with other countries that specialize in producing other goods that they consume more of. This allows a country to grow and become more productive. The absolute advantage theory also helps in doing business and it mainly includes:
Thus it can be said that the use of the absolute advantage theory and comparative advantage theory is efficient and enhances the level of productivity of business which creates a valuable impact on the people. Fewer resources are required to produce the actual amount of goods and services with lower costs for the economies. It is important to apply the absolute advantage theory as it will help to produce more goods and services for the people.
So, from the overall discussion it can be said that particularly for Tesco selecting the comparative advantage theory will be the best as it fit with the Indian business scenario and that will also help them in gaining overall cutthroat advantages.
The host country which has been selected to expand the new business of Tesco is India. In this segment of study a brief about the India’s financial state, non-financial environment will be discussed in detail.
The financial environment within India measures the financial factors which motivates the business as well s client amenability. The phrase financial environment shows the entire of the exterior financial states which provides an impact of the buying exercise of the client as well as the business sectors. Following the subsequent covid wave that crested in May 2021, the recuperation is picking up speed and GDP is projected to develop at 9.4% in monetary year (FY) 2021-22 preceding returning to 8.1% in FY 2022-23 and 5½ percent in FY 2023-24 (Ma, 2018).
Considering the major sectors of Indian financial segment it can be divided in three main economies which are the primary, secondary and tertiary financial system. The primary sector is usually consisting of the industry which are for the most parts relied over the accessibly of natural asset with intention to produce the products. This sector usually denotes the farming sector. The secondary sector is usually relied on the natural stuffs that are deployed to generate the amenities as well as goods accessible and that at the final point deployed for use. This sector usually entails vehicle and production industries. Lastly the tertiary sector makes a payment the major share to the Indian GDP. This sector usually entails the IT and consulting amenities (toppr, 2022). Also the main reason behind selecting India as the host country by Tesco to introduce its ready to eat meals because of the reason that India provides an ease of doing business there. International companies like Tesco putting resources into India might savour the low functional expense since the expense of creating up a business which includes web charges, telephones, framework and in addition the work cost is relatively low that creates putting resources into India profitable as well as useful (Kumar, 2020).
The non-economic environment usually describes the political, legal as well as cultural ecology of a nation. In this segment of the study a brief about the Indian political system and cultural system will be discussed so as to give an idea how much advantage or pressure will get from this part.
Considering the government it can be frequently see that voting is an extremely pivotal aspect for the Indian financial system. That is the reason the sort of regime controlling the middle of the nation has a bigger effect over any sort of business or trading. Finally the government of India only take the final decision regarding al the monetary strategies. Thus for Tesco in order launch its new product like they have to comply with all the governmental rules so as to run a smooth business. As a result the kind of regime in command immensely affects the financial system as well as the organizations that work and contend in the economy. Like for instance, this administration has the Make in India drive which is really great for the production and retail area.
A good lawful framework is vital for the progress of any business. As a result, a nation should have a sound and working general set of laws with regulations that similarly safeguard the two shoppers and makers. Worldwide regulations and so forth likewise affect the matter of firms. For instance, the new GST regulations will essentially affect the organizations within India. The Foreign Direct Investment Policy (FDI Policy) of the Government of India recommends the intentional speculation cap in determining modern areas. Yet, in the new times, numerous exercises have been moved to unlimited areas in which 100 per cent Foreign Direct speculation is allowed.
Now acknowledging the political environment of India it also plays a very important role in shaping the future of any business. As per the Indian economy political constancy in the nation is very important for a consistent financial system and stock market. In addition to these different following groups additionally holds numerous impacts over the trading system in India.
India is considered to be as one of the most culture based nation which welcomes any sort of culture within its area. Although an excess of 80% of the nation distinguishes as Hindu, all religions and societies are acknowledged in this country which makes foreign business flourish here. India is a common state, which eludes the nation inclines toward no specific religion. You'll observe everybody from Buddhists and Sikhs to Jains and Muslims to Christians and Jews calmly rehearsing their belief. The most common language speaks in India is Hindi after that English and other state wise languages. In India a class is usually used to define a set of people relied on the earning as well as qualification level. The values and attitude of Indian culture is purely depend on the people human dignity and tolerance as a result it will be important for Tesco to keep in mind this point that in order to make their new line of product a hit in the market they will first need to satisfy the client (Ferraro, 2018).
The leading retail brand in the UK, Tesco, after its launch of the ready meals in the UK market will try to make its entry into the Asian market, especially in India. The global Covid-19 pandemic and frequent lockdowns have increased the demands and requirements for ready to eat meals including in India. That is why, India, having a huge population, will be a suitable new market entry for Tesco’s ready meals product line to launch and increase its sales in India. Besides this, the above-mentioned different factors show that India will be a suitable country to host the new product line of Tesco due to its moderate to the high economic and non-economic environment along with a rich cultural environment. Thereby, they can take upon the business form of partnership or joint venture with another India-based firm to ensure increased sales of the new food product line in the Indian market.
Joint venture in the form of a partnership
Being a retailing brand with hundreds of supermarket chains, Tesco does not manufacture its own ready to eat meals. They sell the ready foods manufactured by the UK-based company; Kettleby Foods in their retail supermarket stores (Food Processing Technology, 2022). However, the sold food packets are under the name of Tesco which shows that they are in a joint venture or partnership with the food manufacturing brand, Kettleby Foods. As Tesco already has expanded and good knowledge of the partnership form in business due to its joint venture with several other companies in the UK, it can also establish successful joint ventures with other companies in India.
Partnership with Indian food brands: According to the article in Indian Local Food (2022), India has hundreds of ready to eat meal manufacturing brands which include Haldiram, Ashirwad, Gits, MTR, TATA Q, Kitchen of India, and several other well-known brands. Among them, the companies like Haldiram, Gits and MTR are very well-known food brands offering ready meals in India’s almost all retail market stores. Haldiram is a very popular and successful food business in India that was established in the year 1937. As per the report of Raj (2020), the sales mark of Haldiram doubled since 2016 making it reach approximately £76 crores. Similarly, Gits is also a famous food business that started its journey in 1970 by selling different types of Indian ready meals in different Indian retail stores. This made its business grow its annual revenues by double digits by the end of the financial year 2020 (Buch, 2019). In addition to this, another oldest popular food brand is MTR which established its business in 1924. These data show that these food ready meals manufacturing brands will be suitable for Tesco to start their venture of partnership in India with the ready meals products. Tesco can take the ready to eat food items from these ready meal manufacturing brands and sell them in the stores of Tesco in India with appropriate profit-sharing between Tesco and the associated brands.
Sharing of profits and losses: The most advantageous element of a partnership business form is the higher gaining of profit and enjoying of the profit by both the goods manufacturing companies along with the brands reselling in their physical stores, online stores or e-commerce sites. Even in any case of loss, both companies under the partnership contract have to face the losses in the business (BK Law Group, 2019). By undertaking the joint venture with Gits, MTR and Haldiram to expand its business in India, Tesco can enjoy some shares of the profits of these Indian food brands through the increased sales of the ready meals in India’s Tesco stores. Likewise, Tesco also has to face shares of losses if these food companies face any. However, Tesco can make suitable agreements with these Indian food brands for the percentage of the profits shared in their partnership business venture. This legal agreement regarding profits-loss shares will help the business Tesco to get clear about its business operations and management in the marketplace of India.
Liabilities for business growth: According to Oren (2018, p.617), different liabilities of sales and business success also get shared in the form of the partnership business which provides clarity to the functions and actions of the businesses. The partnership business of Tesco with other food companies will also allow it to have shared liabilities for the sales and growth of both businesses in the Indian market. Tesco can take these liabilities and can efficiently perform digital marketing enhancing the sales rate of its new product line, ready meals in India amid this pandemic environment. This action of digital marketing can be appropriately done by developing content marketing through the own websites of Tesco in India in addition to the approaches of email marketing and social media marketing. These forms of digital marketing on various digital platforms for the new launching product line of ready meals in India will help Tesco to make aware and attract a huge number of targeted potential customers for increasing the demands for these ready meals. This will result in gaining higher sales rates of the ready meals manufactured by the other brands such as MTR, Haldiram, Gits and others through Tesco’s stores. Thus, the partnership business will also enjoy profitability along with Tesco with these increased sales of ready meals in the Indian marketplace. Moreover, the increased demands for these types of delicious ready meals by the trusted and popular manufacturing brands of India due to the Covid-19 pandemic situation will also allow Tesco to increase its rates of sales of their newly launched product line.
Thus, the partnership with these three above-stated ready meals manufacturers’ organisations will need to be done by Tesco by proper legal approaches and regulations to ensure its successful expansion and growth in the Indian market through the launching of its new product line, ready meals. Tesco can efficiently utilise the above discussed strategic action plan for ensuring its effective growth in this new demographic market of India.
So, it can be concluded from the above dome study starting up a new segment of product into a different country comes with its own set of opportunities and threats. Based on the study it has been identified that Tesco will receive a lot of opportunities to launch the new line of product that is ready to eat meals in India. However they will also some of issues related to administration to seize the occasion. In order to administer as well as deal with the threats within the Indian market they need to adopt the following strategies:
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