Example Of Report On Tesco In China

INTRODUCTION

TESCO.
It is a British global grocery and overall merchandise retailer and the world’s third largest retailer measured by profit and the second world’s retailer measured by revenue. It was originally a grocery focused retailer, but today it has expanded and diversified geographically into ventures such as book retailing, clothes, electronics, furniture, toys, soft wares, financial and internet services. In the year 2014 TESCO was listed to have a market capitalization of £ 20.5 million on the London stock exchange through a sum of £ 63 billion and a net income of £ 0.970 billion having employed over 500,000 employees in 2015. It has stores in over 12 countries across Asia and Europe. Its key competitors are companies like Wal-Mart and Carrefour. It is because Wal-Mart is the biggest and the largest food chain in the world with its sales eight times as much in comparison Tesco. The key target market for TESCO is the high street market taking a great focus on the quality of products and as well as the process of innovation. It’s very intensive growth has been as a result of targeting own-label brands with the inclusion of the up-market with the finest products that come at low and affordable prices. Tesco targets consumers according to their wealth by the use of a Club card, which is the most fruitful loyalty card in the segment supplying Tesco with a class-leading ability to spot emerging trends, attract consumers and influence the behavior of secondary customers to bring them into the fold. The challenges and successes of Tesco as a large retail company in the ever changing dynamics of the business environment in China makes it worth studying (Thompson & Martin, 2010).

CHINA.

China’s demography is characterized by a large population, earning it the most populated country in the world. It has an estimated 1.3 billion people contributing to a fifth of the world’s population. In the 1950’s China was a developing country with very high birth rates and an estimated life expectancy of 44, today China is one of the most developed country in the world with a life expectancy of 73 years. There is a small division of the youths today due to the introduction of the one-child policy that was introduced to deal with China’s rapidly growing population. The population density in China is 133 person per sqr. KM with the east coast being densely populated followed by central China to the west of China being sparsely populated. There is a high urban population in China compared to other developed countries. The demographic targets will always differ based on the sex, education and the occupation of people in China. In the Chinese market women and men of the age between 30-45 shops differently with women appreciating value and convenience while on the other hand men will shop for the necessities of his family while those at the age of 30 and below show more interest in ownership and leisure and with a very minimal concern for price. The consumer market for women in China has changed drastically compared to that of men. The occupation and the education of the Chinese people also affect consumer traits with the educated population will more likely consume new products in the market in comparison with the less educated(Great Britain, 2009).
The understanding of the market segmentation is very important in determining the success of any company, and Tesco is no exemption. The understanding of human behavior helps a firm in the developing of adequate marketing and advertising strategies by focusing on the personality traits. China is a collective and a conservative country where people use a product to illustrate their belonging to a group; it defines both their values and their lifestyle. Based on its geography China is has a lot of regional difference in its economic development and also in its consumer purchasing power which greatly affect the consumption patterns which is important in firm marketing. The booming coastline is mainly composed of the middle-class population with standard living conditions while the island is mainly composed of peasant farmers who make up 70% of china’s population. With considerations that imported goods by the foreign companies like Tesco are more expensive than the local products, Tesco is most likely to make much more profit on the developed coast regions compared to other still developing areas in China. It is divided into six regions that are north, east, south, northeast, central, northwest and southwest. Each of this regions have their economic priorities, cultural values, lifestyles, natural resources, traditions among other things. The coastal regions attract a lot of foreign investment due to the consumer population and income. For Tesco and another foreign investor, it is very important to understand the six main regions of priority investment being in the developed areas and the areas with emerging economies to achieve maximum profits and avoid losses.
Behavior also determines how people consume goods in any given market. Consumer behavior defines the consumer preference for products. It is significant to comprehend what the customer needs and what affects their buying behavior. In China, people are more likely to buy a product through a referral or a recommendation from another consumer rather than from advertising the product. In-store, marketing is more likely to convince the consumers in China to buy a product (Pai, 2012). It is very important to understand because the Chinese culture is very ancient and very collective appearances matter to them, and people are more likely to buy products just to look good or feel important in a group. The face consumption in China is highly glorified, for example, when someone is entertaining guest they will buy products like alcohol, wine or food depending on the brand to satisfy their social needs. It is also significant to recognize the conduct of the young and educated in China who prefer the western lifestyle in comparison to the collectivism in China. Income and education contribute greatly to the consumer preferences in the goods and services they want and in it’s no different in China.
The benefit of targeting an overseas market and especially China is because of the tapping its market could bring a lot of profits, the growth of the company and long-term earning of revenue. With the population and the growth rate in China and the rising educated middle-class population, China offers a great opportunity for foreign investment.

CHINA’S TARGET MARKET CULTURAL VALUES.

With the increasing interdependence in the world trade barriers are slowly diminishing allowing different companies to invest in foreign countries. Tesco’s investment in the Chinese market is a very good example. Even with the concept of diminishing borders across the world the different dimensions of culture are today’s single most enduring feature that every company is supposed to analyze and understand fully. Tesco is a company from a totally different culture from that of China and trying to appeal for the consumption of its products can be especially difficult. There are various cultural differences in tradition, language, and preferences among the people of China hence the need for different strategies in marketing and advertising in different cities of China. The study and understanding of culture are extremely important for Tesco to enable it to come up with marketing strategies that suit the Chinese cultural perspective (Daft, Kendrick & Vershinina, 2010).
The Chinese culture has strong values which influence how they behave. It is composed of the value of communism. Culture is the characteristics and knowledge that identifies different groups of people and is well-defined by all from language, belief, cuisine, social behaviors, music, and arts. With the China becoming a consumer-oriented economy, it is extremely important for Tesco to understand the Chinese culture that will in the return translate to the success of the company. The Chinese food is heavily influenced by geography and ethnic diversity, and many Chinese dishes are widely known for their spiciness. Understanding the diversity of food in China will allow Tesco to improve or include its food supplies in the retail shops in China (Reuvid & Li, 2005).
According to Schwartz, there are several culture orientations and relations. China is an embedded culture where individuals live in a collective society and are defined through social relationship. In this culture, people participate in a shared way of life and strive towards the same goals. Tesco should understand that individual actions are to be avoided as they are seen to undermine the order of things. China is a hierarchical society and people are supposed to comply with the roles assigned to them, and they become subjects of sanctions for failure to do so. Understanding the cultural value orientations will help Tesco widen its perspectives in the consumer market without limitations.
The Trompenar’s model is a framework for cross-cultural communication in the context of general business and management. Human beings deal with each other differently and in China greater emphasis are put on relationships rather than rules, where it is important to know the people you’re doing business with especially during meetings, unlike universalism. Since Tesco is a western based company where universalism is high, for its investment in China to thrive and succeed it is good to understand the difference in the cultural dynamics. China is a also a communist country where people regard themselves as part of a group, and in this regards Tesco should consider itself a part of a larger group where its purpose is to serve the group and put the needs of the group before its needs. China is also an ascription culture with very high regards for status. Based on this understanding Tesco should have a specific order, with the presence of senior members with formal titles and also show respect for the Chinese counterparts (Holloman, 2013). The Hofstede model describes the effects of a society’s culture on the values of its members and how these value relate to behavior. In China, there is a high degree of the power distance where individuals accept hierarchies, and everybody has a place deprived of the need for reasoning. Tesco will hence understand its given position in China and with the content it should avoid consulted approaches. There is also lower uncertainty avoidance in China and Tesco can take advantage or exploit the high long-term orientation scores.
The organizational culture - One of the biggest problems in also with the Tesco’s culture. Culture drives people’s behavior that directly affects them in how they act and work in their working environment. The company’s reputation have been on the line including its value and the price of shares that can be blamed on the staff and the managerial team as whole who lack creativity and fear taking risks. Just like a chain of fire the culture have been passed off to the consumers and the shareholders as well creating an erosion of value to the company. Through time, the unrestricted and overlooking of the behavior have resulted in the crisis Tesco is now facing today. The toleration of these behaviors has led to the malfunction of Tesco, which have greatly affected the organizational culture. Tesco has ventured in so many businesses than the consumers can keep track of causing an identity crisis that have directly affected the success of the company. It is better for a company to be known for the one product they are successful in selling rather than venturing and trying to blend all types of products altogether (Seth & Randall, 2011). The documentation of people’s behavior in their places of work because it enables the company to keep up to date their employees knowledge of products so that they can attend to their consumers with no difficulties due to their confidence in what they do how they are trained creating the right workplace culture. The immediate response that is received by the consumer environment about any company is as a result of the values and the culture of the company that determines its brand image and the value of its products as well. The behavior in the working environment will result from the organizational culture and Tesco should look for its employees as well as the management.

TESCO IN CHINA.

Tesco ventured in China in the 2014 due to china’s large consumer market. It has since been able to open 131 stores in the last nine years. China has been a major importer of agricultural products in the last ten years which has been as a result of the rising incomes and the changing consumer preferences, as well as the rapidly growing demand for consumer goods. The increase in the consumer purchasing power has allowed the expansion of market size and growth that is anticipated to endure growing in the near future. Tesco’s largest competitor in China is Carrefour a French hypermarket which plans to invest heavily in the Chinese market.

SWOT.

Strengths - Tesco has a lot of strengths when it comes to its brand name and financial position in China. Its long existence in the china’s market since 2004 has enabled Tesco have a strongly established organization compared to the new venturing companies in the Chinese market. The company is known for its value in products which is very convenient for a wide range of products with well-localized management (Ryans, 2013).
Weaknesses – due to its poor preparation for overseas market, Tesco lacks experience in the new markets in China. China is a culturally rich nation that one needs to understand consumer preferences before venturing into business. Also Tesco has lost focus on its main core grocery market and instead diversified in other business ventures such as books, clothing, furniture, insurance petrol and financial services and thus creating a weak model where its profits have been impacted by bad debt from credit cards and high levels of household insurance claims. Its low brand awareness in Asia due to lack of advertisement is also another weakness.
Opportunities – its expansions into markets such as digital entertainment and its brand tablets and smartphones is a huge opportunity in foreign markets. Online shopping can offer a great flexible life to the working class who may not have time to go to the retail shops themselves. Also, investments in other countries oversee such as Australia where there is a high demand for consumer goods and less competition from other companies could be a great opportunity for Tesco.
Threats – the current position of Tesco as among the leading retail stores in the world means it faces fierce competition from other retail companies in China. The increased support of local companies in China by the government is also another major threat to Tesco. Support of the local competitors will lead to a decrease in prices of consumer goods in China leading to price wars among various companies. Also, the legal restrictions by the Chinese government hinder expansions and the taping of smaller markets as the government try to secure the growth of local companies is also a major threat. China is not a native English speaking nation and the language barrier hinders interactions and communications with consumers. With the use of a different currency that is prone to inflation is also another threat as it may end in a loss in case there is also increase in exchange rates (Gottlieb & Joshi, 2010).

RECOMMENDATION/ ADAPTATIONS (external).

Target market - Tesco should abort the competition on lowest prices with discounters and leave it to the local companies in China and rather put its focus on providing innovative, integrated and diversified range of medium to high quality products for the increasing middle class consumers in China. It should not rely only on private labels to achieve maximum profitability but rather organize a collection to create private labels whenever there is a gap or an opportunity in the existing high-quality brands. The wide range of products in Tesco’s collection should be revisited to kill unsuccessful product lines and introduce fresh, innovative and relevant products. It should also develop online operations to suit a market of the working class who may not have period shop in the stores (Martin, 2009). The
Brand image change- Tesco has a serious problem of its brand image that it needs addressed as soon as possible so as to connect a clear purpose that convinces its shoppers Tesco is much more than just a money-making company. Tesco should rebrand stores as Tesco Value, Tesco Finest stores, and midmarket to suit the shopping habits that are changing every day in China and Tesco should change its brand image to create a likable shopping experience. It should come up with compelling price prepositions and also an increment in innovation and product quality. To deal with competition Tesco should have a main focus on advertising and promotional messages that should have clear brand communication goals.
Marketing mix change- Tesco may have achieved success through its marketing mix oriented plan that is not the case anymore due to increased competition from other retailers. Tesco trying to be everything for everyone has caused its tremendous loss in China. Tesco needs to focus on the medium to high-quality products if it is to experience any changes.

INTERNAL RECOMMENDATIONS.

Education and training - education and training helps the employees, the consumers that translate into a success for the employer. Training increases a worker's sense of ownership in the business helping them become more organized, productive and flexible hence able to meet the needs of the customer. Through training and educating the workers especially about the Chinese culture that is different from the western culture will help reduce or eliminate ethnocentrism hence creating a better conducive environment.
Restructuring- restructuring of Tesco will help bring it back on track. Making Tesco, a decentralized organization will spread responsibility for specific decisions of numerous outlets and lower level directors, including divisions or units situated away from head offices. It will speed up the decision-making process increasing efficiency and improved services by Tesco.
Change of leadership and leadership style- Tesco is a customer oriented business hence its leadership and leadership styles is a key reflection of its success. Leadership influences motivate and inspire people and Tesco need leaders who can make fast and informed decisions if it’s to keep operating successfully in China. It should have different leaders to suit different types of work and also different audiences. Given that it’s a mix market-oriented business dealing with various different and diverse products it should hence have different leaders each qualified according to their posted department (Plunkett, 2006).
In conclusion, as we have seen from this paper this paper consumers vary greatly with a range of age, education, values among other things. Tesco’s achievement can only be built on a well-designed customer- centered marketing strategy with a lot of emphasis on the price, the product, location, and promotion. Tesco should pay a lot of respect to the Chinese culture because the key to a successful company is their level cultural awareness in different markets.

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