Benefits And Importance Of International Business - Case Study Of Tesco Company Essay.

Discuss about the Benefits And Importance Of International Business.

International business strategy means the plans that assist the commercial transactions between companies in different nations. The international business strategy is very important for the development of the company and its offerings (Buckley and Ghauri, 2015). The time companies feel that the domestic market has become saturated and there is no scope for increasing the level of profit then they think of international expansion (Bhasin, 2018). This report is being in order to highlight the international expansion strategy for Tesco Company that will help it in increasing its market share and customer base. This will be done by analyzing the strength and weaknesses of a present business model of the company and making improvements. Besides this, it will suggest Tesco to enter in Vatican City where it can offer its services and products to the customer.

Tesco is one of the famous grocery and merchandise retailers and has its headquarters in the United Kingdom (Tesco PLC, 2018). The company is the third largest retailer in terms of profits and ninth largest in terms of revenue. The company operates its business activities in Europe and Asia and is one of the market leaders in these markets. Jack Cohen is the founder of the company and it was established in 1919 (Tesco PLC, 2018).    

Keynesian Economics- It is said to be an economic theory of overall expenditure in economic and its influence on the inflation and output. The theory was developed in the 1930s by John Maynard Keynes who was the British economist. It was established to understand the great depression. According to this theory, it business is suffering from poor financial conditions or facing losses it may decrease its capital investment, rather than taking the full benefits of inferior prices in order to invest in the new equipment and new plants. This also results in decreasing the overall employment and expenditures.

Tesco Company was facing a downturn from last some years despite being the biggest supermarket chain in Britain. However, there is growth in the sales first time since 2014 as the company was dealing with high competition in terms of wages price in the market. There is 0.3% rise in the supermarket’s sales as published by Kantar Worldpanel. This has also resulted in increasing the prices of shares to 2% due to increase in the investment by Tesco. Besides this, the executives of the supermarket also planned to close some stores and reduce the range of products in order to enhance the Tesco's fortunes amid an increasing supermarket price war. Tesco has planned to close 40 stores which are placing 2000 jobs at major risk, along with this it has sold its non-core business such as Blinkbox Music to Guvera, and Blinkbox Movies to TalkTalk (Thomas, 2015).

Economic Theories

From the above recent activity of Tesco, it can be observed that the executives of the supermarket have followed Keynesian Economics theory according to which it has reduced its expenditures and employment to increase the sales.  

E-business is not just an application of the technology for a business model of existing business however but it is comprised of the formation of the new model of e-business that is dependent on the utilization of new technology. The business model offers the construction for the service; information and product flow where the revenue sources are defined and the advantages to the numerous actors of business are clear (Sreedhar, 2018). The business model is defined in the simple terms as the method through which a business can stand itself by generating the revenue and recommend the methods through which business can make money by identifying where it stands in the supply chain (In, 2007). From last some years, various models of business have developed which were not imagined before the development of recent advanced and digital technology.

There are numerous e-business models which are adopted by the retailers. Tesco Company makes use of an interactive model which is known as Market Portal Model. This model helps in integrating the supplier and buyer side and enhances features and functions which allows both of them or groups to perform the business operations effectively (Griffin, 2018). It is also utilized by the business such as Walmart because it is effective in the management of inventory and distribution. The Market Portal model is also called a transactional model through which purchases can be done through the website of the Tesco (as it is security enabled). The data in relations to the transactions of the customers go to the suppliers at the same time to the Tesco Company. The suppliers of the company can only see the important information which is of their use and remaining data are hidden. Then suppliers directly operate deliveries and distribution. Market Portal model need completely integrated website such as like Tesco.com.

E-business application of Tesco also involves the management of financial value chain that helps in tracking the invoicing, cycles of payment, and pricing.

Relationship marketing strategy- The biggest strength of Tesco is in its use and collection of the data. Tesco Company gathers the transactional data of customers by the Club-card which is transformed into data and knowledge that can be converted into action.

Recent Economic Event

Tesco.com- The online retail store of Tesco i.e. Tesco.com is the world's fourth-largest store of online grocery after Argos, Dell, and Amazon. The delivery service of the Tesco's online store appeals to the consumers which are physically unreachable for the retail stores. It also focuses on the ‘time-poor' customers who like to have their grocery at their doorstep. Tesco.com accompaniments the strategy of Tesco appropriately and offer best customer experience.

Weak management of Inventory- Inventory management of Tesco is one of the operative weaknesses. The company has to revolve its inventory quicker and make effective and efficient inventory management.

The strength of Tesco lies in its capabilities to loom what customer is purchasing. It is broadly trusted that consumer's present and past behavior is an effective predictor of the customer's future intentions. While the Tesco's Club card may be offering as an important tool, however, there are some areas where it needs to do some improvements. The Tesco's Club card only helps in analyzing the items that are purchased by the consumers and not the reason behind those purchases. This reflects that it only analyze the behavior of the customers and not their attitude. In order to have complete knowledge of the consumers, Tesco has to understand the behavior of the customer before the event. It has to understand the reason behind the purchase of the customers.

Tesco has a system of business intelligence on its website that suggests pertinent offers to the consumers the time they log in their account. But the suggestion of the website is dependent on the past behavior of the customers. It is recommended that it needs to adopt advance technology that can help in predicting the future consumer behavior.

With the execution of the e-business model, Tesco Company is able to do some cost cutting of operational costs which will increase its revenue and sales. As there are reductions in the overhead, this resulted in the reduction in the cost for the consumers, which is one of the aspects for which Tesco is famous and therefore it is the largest retail store of grocery in the whole world. The setting up cost of the systems, upgrades, retraining, maintenance, security and staff training has been decreased to some extent that offers a competitive advantage to the Tesco, therefore, increasing the sales in long-term. The global outreach of the company has also offered it an edge over its competitors such as Asda, Sainsbury’s, etc. Along with this, the outsourcing functions such as rent, recycling, energy management, logistics, website functions, etc. overheads have decreased. The commission of the competition gas confirmed that business creates other ways of controlling the prices of the products deprived of any single business dominating the market.

E-Business Model of Tesco

Vatican City is known as the independent state established in the city of Rome. In terms of area, it is of 44 hectares and said to be the world's smallest state in population and area (Klein, 2013).

The risk in Vatican City- The risk that Tesco Company can face is that country possess very less population and there is no largest area to expand the business. Business needs to take a risk in establishing its business by assuming that the population will increase in near future or there is no competition in the market.

The Vatican City population majorly involves males (Iexplore, 2018). It reflects that any business which is entering in this country need to focus majorly on the male as they can be the primary target market which can create some issues for Tesco Company as it offers a variety of products for both males and female. Besides this, the company needs to follow all the culture of the country as they are very particular about their values, believes and culture. For example, there is a proper dress code to enter the church (Every Culture, 2018).

Further, the country faces some warnings of a terrorist attack which is one of the major threats for the company to enter.  

Mitigations for Tesco’s e-business model- In order to enter in the Vatican City Company needs to have permission of the country’s government. The company can make use of biometric devices which will increase the security of the personal information of customers. Besides this, the Club card facility can be applied in the e-business model and can be used to analyze the behavior and attitude of the customers towards purchases in Vatican City. Besides this, the area and population are very limited in the location so the company will not require a large number of employees to maintain the information of the customer, delivery of products.

Conclusion

In the conclusion, it can be said that Tesco Company is the leading brand in the market offers best quality and services to its customers. The above report has presented the e-business model for Tesco that will help the company to reach those customers who cannot visit the stores. Besides this, the report has suggested the market entry for Tesco in Vatican City in order to increase its number of locations where it offers services.

References

Bhasin, H. (2018). Importance of International Business – Benefits of International Business. Retrieved from https://www.marketing91.com/importance-international-business/

Buckley, P.J., and Ghauri, P. (2015). International Business Strategy: Theory and Practice. 2^nd edn. U.S: Routledge.

Every Culture. (2018). Vatican City. Retrieved from https://www.everyculture.com/To-Z/Vatican-City.html

Griffin, D. (2018). What Is a Portal Business Model? Retrieved from https://smallbusiness.chron.com/portal-business-model-3869.html

Iexplore. (2018). Vatican City — History and Culture. Retrieved from https://www.iexplore.com/articles/travel-guides/europe/vatican-city/history-and-culture

In, L. (2007). E-Business Models, Services and Communications. 1^st edn. Pennsylvania: IGI Global.

Klein, C. (2013). 10 Things You May Not Know About the Vatican. Retrieved from https://www.history.com/news/10-things-you-may-not-know-about-the-vatican

Sreedhar, G. (2018). Improving E-Commerce Web Applications Through Business Intelligence Techniques. 2^nd edn. Pennsylvania: IGI Global.

Tesco PLC. (2018). About us. Retrieved from https://www.tescoplc.com/about-us/

Tesco PLC. (2018). History. Retrieved from https://www.tescoplc.com/about-us/history/

Thomas, N. (2015). Tesco sales return to growth. Retrieved from https://www.ft.com/content/127d320e-b10c-11e4-9331-00144feab7de