Strategy Of Tesco To Nigeria Commerce Essay

dodging Of Tesco To Nigeria Commerce EssayThis fib seeks to analyse the polar modes of gate into a conflicting commercialize procurable to an makeup, showing their germane(predicate) specializations and weaknesses. For the pur arrive of this, Tesco Plc. has been chosen, showing the various meekness modes available to the government as it seeks to diversify into the Nigerian food product store trade.In an attempt to evaluate these main course modes, this report has been structured into three main parts First, PESTLE and Porters quintr forces as tools utilise to valuate the attraction of a attached market were analysed showing their strengths and weaknesses.The second part of this report foc expends on the rate drawing string and stand up psycho compendium as analytical tools which move be utilize by an composition to gauge its upcountry capabilities. last, the contrary entry modes available to Tesco such(prenominal) as export, licencing, franchisi ng, pin venture and entirely op castd possess enterprise (WFOE) were discussed and the virtually appropriate mode of entry recommended.1.0 INTRODUCTION trunk is a long term direction of an constitution (Johnson et al 2011). It is a long term object of action radiation diagramed to achieve a specific goal, directed towards the achievement of the set objectives of an brass. jibe to Jones and Hill 2010, dodge is a set of related actions that th preyer directors pass on to dinero their companys performance. It shows the plans and actions carried out by fakers in an organisation to improve its performance and invite a lieu of receipts over its competitors. St castgy shows the position of the organisation in proportion to its outside(a) environs, the strategicalalal choices and directions available to the organisation and the action plan on how to achieve the strategies in line with the organisations goal and objective.Strategy is a design or plan for achieving a companys policy, goals and objectives it is a design or plan that defines how policy is to be achieved (Davies 2000). Huff et al 2009, sees system as a innovationful attempt to achieve an objective. This shows that the strategic plan of an organisation is mean and directed towards the achievement of the objectives of the organisation.Corporate Level StrategyThree levels of outline exist in an organisationBusiness Level StrategyOperational Level Strategy dactyl 1 Levels of strategy (Adapted from Johnson et al 2011)The corporate level strategy is a strategy that ask the overall scope of the organisation, the argumentation level strategy is a strategy made at the strategic work units in an organisation and such strategy does non be active the whole organisation. objet dart the subroutineal level strategy deals with the buttes or people use in implementing both the corporate and business level strategies.In an attempt to control these concepts defined above, this report f orget portion out the market entry potentials and the antithetic modes of entry available to Tesco in its bid to internationalistise into the Nigerian grocery market, using relevant tools and textile. This report result be structured to address three unlike tasks First the analytical tools used in gauging the attractiveness of a perpetraten market such as PESTLE, Porters five forces, Porters Diamond, Scenarios, BCG ground substance etc. Secondly, analytical tools such as repute reach, deck out, Strategy canvas, Ansoff matrix, tax network etc. used to gauge the inhering capabilities of an organisation, with emphasis move on the pry train and SWOT analytic thinking, will be assessed. Finally the different modes of entry available to Tesco, such as exporting, licensing, franchising, sales subsidiary, joint venture, wholly owned enterprise will be discussed in enlarge in this report and the most appropriate mode of entry recommended for the organisation.2.0 uninflecte d TOOLS USED TO GAUGE THE ATTRACTIVENESS OF A MARKETA strategic decision shaper has a range of analytical tools which could be used for this purpose, such as PESTLE, Porters Five Forces, Scenario Analysis, Porters Diamond etc. these analytical tools helps the manager to assess the attractiveness of a given market in legal injury of cost, profitability, tilt and an early(a)(prenominal) unknown factors which tycoon twist the fluent surgical mathematical operation of the organisation in the market.Scenario Analysis Scenario abridgment helps strategic decision makers to manage and minimize relevant risk and it excessively helps them to address key uncertainties which might arise in early. A scenario may depict an explanation of how virtually future state evolves including the sequence of events, conditions or changes that precede or causal agent the future states to occur (Linneman et al, 1983).Porters Diamond This tool proposes that the characteristics of the national purlieu influence the competitive expediencys of a nation (Mann and Byun 2011). Four interrelated determinants of national advantage put up been identified in the work of Dogl et al 2012, that influence competitive advantage of organisations such as factor conditions, demand conditions, related and musical accompaniment industries and riotous strategy, structure and rivalry.In order to assess the attractiveness of a given market, emphasis will be laid by this report on the PESTLE and Porters five forces, bringing out their relative strength and weaknesses.2.1 PESTLE ANALSISPestle compend is in consummation an audit of organisations external environmental influences with the purpose of using this education for strategic decision devising (CIPD 2010). It is an important macro-environmental audit tool, which shows the various factors in an organisations external environment promising to affect the operation of the organisation. These factors includes governmental, frugal, social, scientific, legislative and environmental.Pestle analysis consists of cargonfully determine all these factors and finding out exactly in what way and to what outcome these factors influence a certain organisation and it also provides the organisation with full of life information about its environment hence it is a mandatory analysis (Marketing Minefield 2012).OrganisationLegislativeEnvironmentalEconomicSocial policy-makingtechnicalFigure 2 PESTLE Framework of an organisation (Adapted from Marketing Minefield)Political This represents the way through which the government and political situation of a soil influence the performance of an organisation. Political forces can influence trade decisions by setting the rules by which the business will be conducted (Jobber 2010). Some of the political factors which ar likely to influence an organisation includePolitical stablenessTax policy and reformsTrade restrictionsConsumer protection legalitysGovernment policies and rule of lawThe political instability evidenced in Nigeria at present and other government policies and laws are likely challenges to Tescos internationalisation strategy to Nigeria.Economic common economic conditions in a given uncouth will pose a great challenge to the operations of an organisation. jibe to Kotler et al 2008, the economic also consists of factors that affect the consumer purchasing power and spending pattern. Some of these factors areIncome distributionLabour costFluctuations in interest and substitute rateRate of economic growthInflationCost of livingIncome distribution, unretentive infrastructure and inflation in Nigeria are more or less of the factors Tesco should charter onwards moving into the Nigerian market.Socio-cultural Changes in the socio-cultural trends of a country such as the population growth rate, health, social attitudes, age distribution and cultural beliefs of the country can affect the operation of an organisation and therefore have a direct impact on the demand for the companys product.Technological The rate of proficient advancement today will pose a challenge to an organisation. rapid change in technology is a huge factor that will influence an organisation. Hence organisations have to be aware of the current technological trend of the environment in which they carry out their business. Some of the technological factors likely to influence an organisation areInternet and various information systemsSpeed of technology transferImpact of emerging technologies.Research and usingLegal Laws such as, health and safety laws, consumer protection laws, licensing laws, opposition and calling laws prevalent in any country will affect the eloquent operation of organisations.Environmental These are laws or factors on the surrounding environment of an organisation which can influence the way the organisations operates. Factors such as environmental laws and regulations, waste disposal, energy consumption, geographic location are likely to affect an organisation.2.2 STRENGTHS AND WEAKNESSES OF PESTLE ANALYSISSTRENGTHSIt provides the organisation with a better understanding of the usual conditions in their business environment.It helps organisations to detect or anticipate future problems and satisfy necessary actions to avoid or cushion its effect.Opens up available business opportunities for the organisation to exploit.It encourages the development of strategic thinking within an organisation.WEAKNESSESPESTLE analysis could be time consuming and expensive to carry out.It does not take into consideration key players in the organisations industry such as the competitors (analysed by the five forces) which could be a great force to reckon.The analysis needs to be reviewed on a regular basis for it to be effective.Results of the analysis are oft subjective and could be based on assumptions.2.3 PORTERS fivesome FORCESBargaining power of SuppliersBargaining power of BuyersThreats of stark naked EntrantsT he five forces framework helps to describe the attractiveness of an industry or sector in cost of the competitive forces (Johnson et al 2008). It offers a way of assessing the likely strength of competition in any given market (Blythe 2006).Competitive rivalryThreats of SubstitutesFigure 3 Porters Five Forces Model (Adapted).The aim of the Porters five forces analysis is to identify the nature, strength and impact of these competitive pressures so that individual forms can construct strategies that defend them from their impact or influence them in their favour (Kippenberger 1998). It forms a useful starting point for undertaking a competitive analysis (Brassington and Pettitt 2006).Threats of New Entrants This refers to the possibility of new immobiles entering into the industry. New entrants into an industry have the potential of increasing the level of competition in such industry, thereby reducing its attractiveness. Some of the breastworks of entry into an industry areEcon omies of denture roof requirementCustomer LoyaltyExperienceGovernment restrictions (Licensing)The entry barrier in the Nigeria grocery market is low hence this will not pose a challenge to Tesco moving into the country. Although there will be a strong retaliation from companies operating in the industry such as Shoprite and Spar.Threats of Substitutes changes are products or services with akin(predicate) benefits or attributes to a companys product. This may exist when the demand of a companys product reduces due to a change in the price or performance of a switch product. Determinants of threats of substitute include,Price and performance of substitutesRelative switching costs to substitute products.Bargaining Power of Buyers If the buyers have a high talk terms power, they can demand lower prices, product or service improvements and this will in turn affect the profit of the organisation. The most important determinant of buyer power is the size and the concentration of custo mers (Karagiannopoulos et al 2005).Bargaining Power of Suppliers The bargaining power of suppliers will definitely affect the attractiveness of a given market. If suppliers of a companys products possess high power, they tend to fix the prices of their products and might eat up the profits of the company. Suppliers tend to possess more powers whenThere some and concentrated suppliersSwitching cost is highSuppliers provide a specializer or rare input.The bargaining power of suppliers in the Nigeria market could be between medium to high and Tesco has to consider this before moving into the country. A backward integration of maybe an alliance with the suppliers will be a beneficial strategy to adopt in order to avoid the effect of suppliers powers.Competitive Rivalry These are organisations in the same industry with similar products and services, also targeting the same customers. Threats from competitors are the most important challenge cladding an organisation. The major competi tors in the Nigerian grocery market which could pose a challenge to Tesco are, Shoprite, Spar and Mega Plaza. Tesco in order to avoid the effect of these competitors could be either cost focus by offering quality products at a reduced price or focus differentiation by targeting a different segment of the market.2.4 STRENGTHS AND WEAKNESSES OF THE FIVE FORCESSTRENGTHSThe five forces shows the attractiveness of a given marketIt provides a detailed analysis of the key players in the industry such as the suppliers, buyers and competitors.It is a useful tool used in strategic planning in organisations.It opens up the relevant threats in the companys industry such as the threats from competitors.WEAKNESSESThe model fails to consider other macro-environmental factors such as political, economic, legal etc. (like the PESTLE model) which might affect the operation of an organisation.Porters model does not pay much attention to non-market sources of change in an organisation (McGowan and Maho n 2000).It does not consider the possibility of creating a new market.2.5 equivalence OF THE PESTLE AND PORTERS FIVE FORCESFrom the discussions of both analytical tools, the PESTLE focuses more on the macro-environmental factors that can affect an organisations operation and fails to take note of the key players in the organisations industry such as suppliers, buyers and competitors whose impact could also affect an organisation.The five forces eyepatch trying to bridge the gap by analysing the organisations immediate environment, took into information the buyers, suppliers and competitors, which is an important player in the industry. However, it fails to have a broader view and consider other factors within the organisations external environment which can affect the operation of the organisation.3.0 ANALYTICAL TOOLS USED TO GUAGE THE INTERNAL CAPABILITIES OF A COMPANYAnalytical tools such as the pry kitchen range, SWOT, order network, strategy canvas etc. are available for u se by a strategic decision maker to assess the intragroup capabilities of a company moving into a new market.However, for the purpose of this report, the SWOT analysis and the take to be chain will be used, showing their respective strengths and weaknesses.3.1 POTERS VALUE CHAINA rate chain is an interrelated series of processes that produces a service or product to the cheer of the customers. It involves internal linkages between a firms core processes, its supporting processes and its external linkages with the processes of its customers and suppliers (krajewski et al 2007). A comfort chain therefore refers to all those activities that support the process of value creation in an organisation. There are a hatful of activities grouped into the primary and supporting activities that shows the internal capabilities of a firm as it draws value for the whole organisation.IT InfrastructureSupporting ActivitiesInbound LogisticsHuman choiceMarginFinanceProcurementOutbound Logistics ServicesMarketing and gross salesOperationsMarginPrimary ActivitiesFigure 4 Porters Value range (Adapted) concord to Kippenberger 1997, the value chain is designed to show the total value of a firm and consists of the firms value activities aimed at improving its margin. The values chain evaluates each activity in the organisation and the way it creates or adds value to the whole organisation through its margin (profit). The way an organisation creates value through its activities creates a good position about the organisation in the minds of its customers. This suggests that if an organisation creates adequate value through its activities and its comparisonship with its customers, it will gain a competitive advantage over its competitors and growth its margin as well.For Tesco to survive in the Nigeria grocery market, it is important that it understands and improve on its internal capabilities (resources and competences), thereby creating adequate value through its activities a s this will give it a competitive advantage over its competitors. A companys competitive advantage largely depends on how it manages all its value creation activities in relation to competitors in the same industry.Tesco can create value for its through its activities byOffering unique product or service.High quality and affordable products (being cost focus).Immediate response to the changing environment and customer needs. ontogeny distinctive capabilities to meet the needs and demands of customers effectively.3.2 STRENGTHS AND WEAKNESSES OF THE VALUE CHAINSTRENGTHSThe value chain shows the activities and the processes twisty in creating value in an organisation.Information provided by the value chain forms a basis for an organisation to develop alternative strategies.It enables an organisation to identify its internal capabilities, strengths and weaknesses.Value chain helps the organisation to determine its value creation to customers this will enable them to note areas of impr ovement.It reveals an organisations competitive position with competitors in the same industry.It enables organisations to determine their strategic position and make good strategic decisions.WEAKNESSESThe value chain analysis is designed only for the organisations internal purposes.Value chain activities of an organisation cannot exist individually hence cooperation between the activities is require for the chain to function properly (Glaser 2008).It focuses more on profit and how to increase the margin of the organisation.3.3 SWOT ANALYSISUndesirableDesirableA SWOT analysis is a structured approach to evaluating the strategic position of a business by identifying its strengths, weaknesses, opportunities and threats. It provides a simple method of synthesizing the results of the marketing audit (Jobber, 2010). A SWOT analysis of an organisation shows a summary of the organisations traits or competences, which are its strengths and weaknesses, as well as the competitive factors it faces in its environment (opportunities and threats). A good SWOT analysis of an organisation will expose the opportunities available to the organisation as well as the threats which could pose a challenge to the smooth operation of the organisation. A proper understanding of the SWOT of an organisation will enable the organisation to convert its weaknesses into strength and the threats in its environment into opportunities.StrengthsWeaknesses disobedientControllableThreatsOpportunitiesFigure 5 SWOT Framework (Adapted from Novicevic et al 2004)The SWOT analysis shows a summary of the firms marketing situation which encompasses the findings form the internal and external strategic analysis that provides the back-end planning perspective of controllable and uncorrectable variables/events (Novicevic et al 2004). According to Duarte et al 2006, a SWOT analysis is a way to analyse the environment, allowing for the segregation of the environment into internal strengths and weakness and t he external opportunities and threats as well as positive and negative environment.For Tescos internationalisation strategy, a SWOT analysis of the company should be properly carried out to assess its internal capabilities through its strengths and weaknesses, and its ability to survive in the environment by overcoming the threats and turning them into opportunities.SWOT analysis of Tesco Plc. is shown belowStrengthsWeaknessesStrong scratch symbolUnique productsStrong financial positionLarge size satisfactory customer serviceHigh reliance on the UK market un quickened to macro-economic issues in some marketsOpportunitiesThreatsStrategic alliancesDiversification into new marketsIncrease international growthDevelop additional servicesStrong and stiff competitionEconomic recessionPolitical instability and government policiesFluctuations in exchange rateFigure 6 SWOT Analysis of TescoTesco has to adopt the passage and matching strategies in order to use its internal capabilities to o vercome its weaknesses and threats in the environment. Hence, weaknesses can be converted to strengths, threats into opportunities and its strengths matched with the opportunities.3.4 STRENGTHS AND WEAKNESSES OF THE SWOT ANALYSISSTRENGTHSSWOT analysis is used to assess an organisations competitiveness, capabilities and core competences.It guides the organisation in setting objectives for strategic planning and decision making.It exposes the opportunities available to an organisation as well as the threats.It aids the organisation to take advantage of its strengths to address the weaknesses.WEAKNESSESHigh colony on external factors relies on the PESTLE analysis and other environmental scanning models.It does not provide solutions or offer alternative decisions to issues identified. charm SWOT is useful to profile and enumerate issues, it does not provide factual strategies to implement and take advantage of opportunities while leveraging strengths (Helms et al 2011).3.5 affinity OF THE VALUE CHAIN AND SWOTThe value chain focuses on the internal capabilities of the organisation as it strives to improve on its activities to create more value while satisfying the needs of its customers. It fails to analyse external threats to the organisation or opportunities which could be explored by the organisation. Also, the value chain seeks to improve the margin of the organisation through it activities, rather than evaluate the strengths and opportunities which could be of great help in improving the margin of the organisation.SWOT analysis on the other hand, while trying to look at the internal capabilities of the organisation through its strengths and weaknesses, also considers the relevant threat and opportunities in the organisations environment. This guides the organisation in setting its objectives for strategic planning and decision making. Hence, an understanding of the SWOT analysis is very subjective for any organisation as this will form the basis upon whic h it creates value for itself.4.0 INTERNATIONAL MARKET ENTRY MODESThere are several foreign market entry modes available to organisations seeking to internationalise into new markets. According to Sun, H. (1999), entry modes are seen as the forms of capital participation by an organisation in international enterprises and two basic entry modes exist wholly owned subsidiary and joint venture. Internationalisation strategy of an organisation will involve great resource commitment hence the mode of entry is a very important strategic decision to avoid failure. However, for Tescos strategy to enter into the Nigerian market, the following entry modes are available to them exporting, licencing, franchising, alliances, mergers and acquisition, sales subsidiary, joint venture and wholly foreign owned enterprise(WFOE).4.1 exportingAccording to Joynt, P and Welch, L. (1985), most organisations begin their international operations through exporting rather than other means of entry such as lic ensing or foreign direct enthronement. merchandise as a mode of entry into a foreign market involves the exportation of countrys product into a foreign market. This could be driven by the need to extend customer base, increase profit, or due to limited growth potential in the lieu country. Exporting is particularly important in the exchange world system and it is largely used as a mode of entry into foreign markets for manufactured goods firm, especially those in the early stage of internationalisation (Khemakhem 2010). Exporting could be either direct, where the goods of an organisation is exported directly to a checkmate firm in the country or indirect through the use of intermediaries.4.1.1 STRENGTHS AND WEAKNESSES OF EXPORTINGSTRENGTHSIt is considered as the easiest, simplest and most used mode of entry.Risk involved is stripped-down due to limited investment.It creates an opportunity for the organisation to study the overseas market preferences before investing in the coun try.Exporting helps an organisation to achieve economies of scale by manufacturing its products in one location and exporting to a larger market.It is cost effective and improves the margin of an organisation.WEAKNESSESTrade restrictions and laws in some countries could pose a huge challenge to exporting.Transportation cost and distribution behave problems.Stiff competition from indigenous firms.Export licenses and custom laws may change in different locations.4.2 LICENSINGThis is a form of contractual discernment whereby the licensor grants vex to property rights which could be patents, trademark or know-how to the licensee in exchange for some form of payment. According to Okoroafo (1992), licensing is seen as direct investment royalties, license fees and other fees for the sale of intangible property rights including patents, industrial processes, trademarks, copyrights, designs, know-how, techniques etc.4.2.1 STRENGTHS AND WEAKNESSES OF LICIENCINGSTRENGTHSLicensing creates a n opportunity for future investment into a given market.It enables expansion with limited direct exposure to risk and low investment.It creates rapid entry into a foreign market.Creates opening to new markets not easily accessible by exports or other modes of entry.It maximizes return from an investment.WEAKNESSESThere is limited control due to the contractual agreement. difficultness in identifying what to licence.Terminating the agreement might be difficult till the extent of the contractual duration.Licensing can create competition as the foreign partner might become a competitor.4.3 FRANCHISINGFranchising is a special form of licencing in which the franchiser makes a total marketing program such as brand name, logo, products or method of operation, available to the franchisee for a fee (Gillespie et al 2004). Franchising is often used for indirect entry into a foreign market and most local service firms get the exclusive right to a marketing concept, which may also include ri ght to a certain useable mode (Gronroos 1999). In franchising, the franchisee obtains the right to sell the franchisors product or use his brand name or logo for business purposes, this method has been adoptive by organisations in recent times and its mostly seen in the fast food industries.4.3.1 STRENGTHS AND WEAKNESSES OF FRANCHISINGSTRENGTHSFranchising encourages rapid growth and expansion.It involves a low cost of investment with minimal risk.Franchisor can tap on the franchisees wealth of get, financial and managerial capabilities.Franchising improves brand development.WEAKNESSESThere might be cases of the franchisee giving the brand a bad reputation.Control restrictions on how the business would be run by the franchise agreement.There might be reduced margins or profit if the franchisee fails to manage the business efficiently.Difficulties experienced by the franchisee may directly affect the franchisor.4.4 JOINT VENTUREJoint venture is a form of strategic alliance where two or more organisations pull resources together to create a separate legal entity. It is seen as a contractual agreement and a mode of entry into the foreign market, whereby a foreign firm brings in its wealth of experience and expertise to create a business with an indigenous organisation. Joint venture allows the firms to pull and combine their resources together for the purpose of creating a new entity. The parties involved share the risk, expenses and profits from the venture together. According to Davis et al 1996, joint venture provides a vehicle for the cooperation between organisations with different but complementary strategies.4.4.1 STRENGTHS AND WEAKNESSES OF JOINT VENTURESTRENGTHSIt creates access to organisations into foreign market and increases their distribution network.Inherent risk involved in the business, operating expenses and losses is shared between the two organisations.Joint venture pulls resources, expertise, core competencies and capabilities from differen t organisation to create a new entity.It creates synergy, sharing of skills, technology and experience between the organisations involved.It gives competitive strength to the new organisation and creates a stronger self-abnegation against competitors.WEAKNESSESThere might be conflict of interest between the organisations. job of control and management of the new venture.Profit is shared between the organisations involved in the venture.Cultural differences, economic and political systems in the foreign environment might pose a challenge to the venture.4.5 WHOLLY OWNED outside(prenominal) ENTERPRISEThis is a mode of foreign market entry where an organisation creates its own enterprise in another country. For instance, Tesco moving into the Nigerian grocery market and open new Tesco stores. This mode of entry is different from the others because the organisation has sole ownership and management of the new enterprise. A wholly owned enterprise is seen as a permanent enterprise in th e entertain country wholly owned by the entrant, where profits and responsibilities are depute exclusively to th