Market And Industry Attractiveness Of Brazil And Vietnam For Tesco

Map-scope the study – set the theoretical boundary of the study, signpost the consumer goods company, host country and emerging markets focus etc. Also, provide an overview of the structure of the writing.

Section 1: you have to evaluate the overall attractiveness of two emerging markets of your choice at the country level (Brazil, Vietnam) in which the selected company is not yet active.

Section 2:  you have to evaluate the distance (CAGE framework: cultural, administrative, Geographical, economic distance) between the home-country of the selected company and the two emerging markets (distance between UK and Brazil, and distance between UK and Vietnam).

Section 3: you have to evaluate the attractiveness at the industry level.

Section 4: After having summarized the results of the preceding steps, you have to provide a recommendation which emerging market to enter.

Section 5: you have to provide a recommendation with regard to the appropriate entry mode (e.g., joint venture, acquisition or Greenfield venture).

Market and Industry Attractiveness of Brazil

The current business scenario poses huge challenges for the contemporary business organizations due to the reason that competition is much intense in the current time with the presence of huge number of players. Thus, it is important for the business organizations to look out for new markets in order to cut off the intensity of the competition in the local market and to enhance the customer base in the global market. Contemporary business organizations initiate the strategy of internationalization in order to enter in the foreign markets and enhance the customer base (Cavusgil and Knight 2015). In the recent time, developing economies are being targeted by the business organizations in order to tap the growing opportunities in these markets. Moreover, developing markets are having higher growth rate compared to the growth rate of the developed countries. Thus, the business opportunities are more for the business organizations in the developing countries.

Tesco is one of the leading chains of supermarkets based in the United Kingdom. They are one of the major retailers in the European regions and have their market base in the Asian region (www.tescoplc.co 2018). However, in the recent time, they are in the urgent need of developing new markets to enhance the customer base. They are targeting Brazil and Vietnam as new market to enter. Both these markets are showing huge market growth in the recent time. However, prior to entering in these markets, it is important to determine the various aspects of these markets. This essay will discuss about the industry and market attractiveness of these countries. In addition, the distance between the United Kingdom and the host countries will also be discussed. Recommended country and entry mode will also be discussed.

According to the Global Competitiveness Report, Brazil is having the ranking of 6 in terms of domestic size. This is due to the reason that they are having the total population of 198.3 millions. Thus, Tesco will have huge market opportunities in the Brazilian market. Moreover, in terms of the GDP, Brazil is having the ranking of 7 and GDP per capita currently stands at US$ 11,311. Thus, economy is having favorable position in Brazil and it will help in having favorable business environment for Tesco.

According to global competitive index, Brazil stands at 38 in terms of country credit rating. Thus, it will less risky affairs for Tesco to invest in this country. Moreover, Brazil is having the ranking of 110 in terms of the inflation, which is quite favorable compared to some other countries.

Market and Industry Attractiveness of Vietnam

However, there will have some negative factors that to be faced by Tesco in entering in Brazil. The most problematic factor in Brazil will be the tax regulations. Tesco will face the challenge of higher rate of tax and complex taxation process. In addition, inadequate supply of infrastructure is also one of the major issues in Brazil. This is another area of concern for Tesco in entering in Brazil.

Vietnam is having less population compared to Brazil. Thus, the potential market size for them will also be lower compared in Brazil. Moreover, the GDP per capita is also lower for Vietnam compared to the Brazil. However, it is also should be noted that economy of Vietnam is also growing at a positive rate.

According to the reports, Vietnam is having credit ranking of 72 in terms of credit rating. Thus, the investment in Vietnam will be mote risk affair for Tesco compared to investing in Brazil. However, the ranking of inflation is similar between the two countries. In this case, Tesco will find similar level of impact on both the countries.

According to the reports, the major issue that will be faced by Tesco in entering in Vietnam is the access to the financing. Thus, they will face the challenge of garnering finance for business operation in Vietnam. Another issue to be faced is the corruption. This will have serious implications on the business operation of Tesco in Vietnam in the long run.

This framework will help to identify the distance between the home and host county of Tesco in terms of different elements. This is important due to the reason that the less will be the distance between the home and host country, the more will be the business potentiality for the business organizations.

From the above cultural analysis, it is seen that majority of the dimensions are having more or less similar ratings. However, dimensions such as the power distance, individualism and uncertainty avoidance are having larger differences (Dikova and Sahib 2013). Thus, inequality is more in Brazil compared to the United Kingdom. In addition, Tesco should strongly adhere to the social rules in Brazil compared in the United Kingdom. In terms of the languages, major language of Brazil is Portuguese and the United Kingdom is having English as dominant language (Beugelsdijk et al. 2014). Thus, gap is their between the two countries in terms of language. However, English speaking population is rapidly increasing in Brazil reducing the gap.

Comparison of Brazil and Vietnam

Cultural gap between the United Kingdom and Vietnam is more compared to the Brazil. According to the above data, majority of the dimensions are having huge gap between the two countries (Zhang 2013). Vietnam is more conservative compared to the United Kingdom. Thus, the business approach should be different for Tesco in Vietnam. Majority of the population has Vietnamese as their official language and number of English speaking population is also less compared to Brazil.

Brazil and Vietnam are having democratic government but the approach is different. This is due to the reason that Brazil follows more fundamental and capitalist style of government, while Vietnam is having communist style of government. In comparison to the government of the United Kingdom, Brazilian administration is having fewer gaps compared to the Vietnam. United Kingdom and Vietnam are having agreement of double taxation between them. On the other hand, agreements between Brazil and the United Kingdom are more diverse and cover more trading aspects (Zhou and Guillen 2015). Thus, the administrative gap between Brazil and the United Kingdom is less compared to the United Kingdom and Vietnam.

Brazil is located in Latin America and Vietnam is in the eastern Asian region. However, the distance between the host countries and the United Kingdom is having less difference. Distance between Brazil and the United Kingdom is 5,568 miles, while distance between Vietnam and the United Kingdom is 6230 miles. Thus, the distance gap is not more. However, for Tesco the distance to both the host countries is huge and time consuming (Burgoon, Henderson and Wakslak 2013).

Economic gap is less between the United Kingdom and Brazil compared to the United Kingdom and Vietnam.

According to the reports, Brazil is growing through rough phase of retail sales mainly due to the higher rate of unemployment and economic recession. This is causing dent in the retail industry. However, from the starting of 2017, the market is rebounding and showing positive growth after the steps taken by the government in attracting investments and employment opportunities.

According to the reports, Vietnam stands at rank 6 in terms of potentiality of global retailing. Thus, they are having huge potentiality for the retail business organizations such as Tesco. It is estimated that the retail sales value of Vietnam will stands at US$ 180 billion by 2020.

Industrial competitiveness in Vietnam

The above sections evaluated and analyzed the market and business potentiality of both Brazil and Vietnam. It is concluded that both the countries are having merits and demerits for the business organizations such as Tesco. However, from the above discussion, it can be concluded that Vietnam will be more effective and suitable for Tesco compared to Brazil (Vu-Thanh 2014). This is due to the reason that economy growth of Vietnam is much more than that of the Brazil. Thus, the business potentiality is growing in Vietnam more rapidly than that of Brazil. Though the total population of Brazil is much more than that of Vietnam and thus the market opportunity will be more in Brazil but the growth is much lower than in Vietnam (Tran 2013). In addition, Vietnam is in the developing phase and it will be an advantage for Tesco to be the first mover in Vietnam, which they will not get to achieve in Brazil. The CAGE framework concluded that in terms of the gaps, both the host countries are standing at same position with the United Kingdom. Retail market of Brazil is more saturated compared to that of Vietnam. Thus Tesco will be able to have more untapped market compared to Brazil. The intensity of competition is also less in Vietnam than in Brazil (Thi Hong Nguyen, Wood and Wrigley 2013). Thus, Vietnam will be more applicable for Tesco to enter.

Conclusion

Another advantage identified for Vietnam over Brazil is the non existence of western brands. This is due to the reason that in the above analysis, it is found that Brazil is already having the retail brands such as Carrefour and Wal-Mart, but Vietnam is majorly having Japanese brands of retail chains. Thus, the concept of the western retail chains will be new in Vietnam. This will provide huge comparative advantage for Tesco in operating in Vietnam (Evangelista and Thuy 2013). In addition, entering in Vietnam will help Tesco to also target the South East Asian countries or the ASEAN countries. Vietnam will act as their gateway to the ASEAN regions. These regions are currently having leading developing countries.

It is recommended that Tesco should go for direct investments in Vietnam. This is due to the reason that Vietnam is currently not having any local retail brands, with whom Tesco can go in to joint venture. On the other hand, majority of the retail business in Vietnam is controlled by the foreign companies. Thus, it will be much better option for Tesco to directly invest in Vietnam. It will also help them to gain the government incentives for direct investments, which Vietnam started after joining WTO in 2015. Having the direct investment in Vietnam will help Tesco to leverage their brand value more effectively. This will also help them to cater the market according to the local requirements and preferences (Samiee 2013). Associated risk with the direct investment will be less due to the reason that major portion of the retail sector in Vietnam is controlled by the foreign brands.

Tesco should enter the Vietnamese market in minimal time possible. This is due to the reason that it will help them to gain the advantage of first mover in the Vietnamese market. Tesco will be able to be the first western retail chain to enter in Vietnam. Thus they will be able to have an added competitive advantage in the market of Vietnam.

It is recommended that Tesco should first open their stores in HO Chi Minh city, the financial hub of Vietnam. This city being the financial hub is having huge business opportunity, favorable infrastructure and diverse population. Thus, entering in this city will be more option for Tesco. Afterwards they can enter in other metro cities followed by the tier II cities. Phased process of entering will ensure minimum risk associated with Tesco. 

Conclusion

This essay discussed about the market and business potentiality to be faced by Tesco in entering in Brazil or Vietnam. Both these countries are being targeted by Tesco to expand their global operation. These countries are being shortlisted due to the reason that both these countries are witnessing huge economical growth in the recent time and both these countries are developing at a faster rate. This essay evaluated the effectiveness of both these markets by using different concepts such as CAGE framework, Porter five forces and Hofstede’s cultural dimensions. In addition, the date from the global competitive index is also being used to determine the business environment of Vietnam and Brazil. This report concludes that Vietnam will be more effective and applicable for Tesco to enter compared to the Brazil. This is due to the reason that the recent economy of Brazil is going through rough phase and is not favorable for the foreign investment. On the other hand, Vietnam is one of the leading economies in the South East Asian regions and is currently ranked at 6 in the global retail index. Thus, the market potentiality of Tesco will be more in Vietnam compared to Brazil.

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