Nowadays, business can be characterized as international because of the continuous quick development of markets. It is a fact that markets have become truly competitive by providing many goods and services.
International business refers to any kind of business activities that take place across national borders. This definition takes into account both the very small and the very large global company. Also, we should mention that international firms, in comparison to domestic, operate in an environment that it is highly competitive and uncertain and the rules change, depending on the circumstances.
Important part of international business environment is national culture which reflects the beliefs, values and norms that a nation share. Usually, those beliefs and norms refer to history, religion, language, geographic location and government that a society has. Additionally, national culture influences the corporate governance, internal organization and business strategies of international companies.
The aim of this assignment is to analyse the internal organization of Tesco in United Kingdom and in China and to illustrate how culture and institutions influence the environment of this firm.
Company Description of Tesco
Tesco PLC is an international retailer and the largest grocery chain in UK with 470,000 employees and 4,331 stores worldwide. Also, it operates in fourteen markets globally and provides a large amount of food products and non- food products as well as retail services.
History of Tesco
The first Tesco Company founded by Jack Cohen in 1932 in the UK. In 1947, Tesco stores began to sell shares on its stock to the public. The most important fact for Tesco happened in 1959 with the first acquisition where Tesco took over more than 350 stores in the UK. In 1968, Tesco built up its first supermarket store in Sussex which was the largest in Europe. The name Tesco PLC changed in 1983 and in 1991 became the biggest petrol retailer in the UK. Finally, the millennium was the year that Tesco launched its e- commerce business and Tesco.com which proved one of the most popular services.
Tesco's Economic Growth and Performance
Various information from the official website mention that Tesco has achieved rapid economic development and strong performance the last two decades. The firm's performance enhanced by worldwide acquisitions and by entrance in new markets through Foreign Direct Investments and Joint Ventures. Furthermore, the continually increased number of Tesco stores and its globalization reflect the economic growth. The rise of sales and profits prove that Tesco knows how to be successful.
It is important to refer that, although Tesco has expand its operations in many countries, its main interest remains Europe and Asia. Tesco in China showed great performance in 2008/2009, with the rise of both group sales and operating profit (14,9%).
Tesco's Corporate Strategy
Corporate strategy is particularly important for multinationals firms because of the relationship that created between customers, suppliers and stakeholders with companies. Trust is a fundamental element in relationships and firms try to behave responsibly.
Tesco, according to Coriolis Research (2004), follow two main strategies in order to achieve its purposes. The first has to deal with the phrase "How Tesco sells for less" and the second with the famous "Steering Wheel".
As far as concern the first one, Tesco's purpose is to sell more volume through a various range of products and services. This can be achieved with the use of economies of scale which is connected to sales and mass production. This means that Tesco can reduce prices and can compete on global markets importantly. (Sascha Christensen et al, 2008)
The second strategy is responsible for four main areas of Tesco which are people, customers, operations and financial.
It is a fact that customers play the most important role and Tesco tries to create a relationship of trust and loyalty. In other words, Tesco as a company wants to provide the best products in cheapest price with the best staff behaviour.
The second part of strategy is about its employees. Fundamental role in retailing is staff and this is why Tesco gives much attention in motivation and in creation of a friendly and team- working environment.
The third part has to deal with Tesco's operations. According to Sascha Christensen et al (2008), operations should be simple in order to provide to customers the best possible service. Also, the motif "cheaper for Tesco" is another point of operations which refers to all processes that exist in a company and have to be completed in time in the most efficient way.
The fourth and last part is about firm's financial characteristics and purposes. Obviously, Tesco's aim is to increase its sales and develop its profits. Of course, this can be achieved through economies of scale. Investments are the final point of management.
Lastly, it is important to mention that Tesco's corporate strategy is followed, generally, by all subsidiaries. However, it is difficult for Tesco to centralize all its operations in UK and obviously, gives a relative autonomy in each country. This is what Tesco do in China in order to balance the benefits of centralisation and local autonomy. China is a completely different country as far as concern culture, habits and needs.
Tesco in China
Tesco entered in the Chinese market in 2004 with the help of a joint venture. Ting Hsin is the name of the business partner with whom Tesco made the agreement and he owns the Hymall chain of stores in China with the name Le Gou. At the beginning, Tesco acquired only 50% of the share capital of Ting Cao in Hymall and in December 2007 acquired a further 40%. This gave to Tesco the opportunity to expand its market control and eventually make those stores its subsidiary.
According to various studies, the Hymall supermarkets located mostly in the east and north of China and were the biggest retailer in Shanghai with 10 hypemarkets. Until that time Tesco operated in China through its partner brand name because Tesco had not the necessary knowledge of Chinese market, compared to domestic partner and it was a good chance for it to facilitate its entry. The result of this venture was to gain knowledge of the market before imposing its western brand name.
The first store that launched in Chinese market with the western brand was Tesco- Fascia in Beijing. But, until that time Tesco logo was unknown to customers. After that, Tesco authorized by the Chinese government to re- brand all the stores with its own name. However, it would be better for Tesco to keep the name Le Gou in order to make the difference between the other western competitors, to keep a low a profile and to give customers a sense of trust and loyalty.
Internal Organisation of Tesco
The internal organization of a business is essentially the way that firms structure and organize their various activities in order to achieve their goals. Each firm has created its own internal environment which consists of its employees, management and corporate culture which is particularly significant because it determines the staff's behaviour.
Organizational structure takes into account the relationships inside the company between individuals, the production lines that a firm follows as well as the processes and the functions and finally, the decision- making responsibility process.
Concerning Tesco's activities and size globally, we can assume that its internal structure would be interesting. Firstly, Tesco divide its employees into departments in order to achieve better performance and efficiency. The functional departments inside Tesco are: Administration, Distribution, Finance, Human Resources, ICT, Marketing, Sales, Production, Customer Service and Research and Development. Each area has different activities and responsibilities.
Administration staff is responsible for a wide range of daily tasks. Distribution ensures that all products will be to the right place on time and in best condition. Finance is responsible for the transactions of Tesco and HR for the work of people within it. ICT ensures that all functions as far as concern computers perform perfectly. Marketing tries to find out the consumer's needs and arrange to place the right products. Sales staff is responsible for selling products and services to consumers. Production makes sure that the commodities of Tesco are produced in time in right quality. R&D tries to..... Finally, customer service takes care customers if they have questions or complaints.
Secondly, large firms such as Tesco that produce a wide range of different products try to divide them into categories according to specific characteristics such as price, quality and packaging design. Tesco is using six different brands which are Tesco Finest, Tesco Organic, Tesco, Tesco Value, Tesco Healthy Living and Tesco Kids. The first one sells best quality and expensive products; the second, healthy and environmentally friendly products; the third, middle class products with good quality; the fourth, basic products in very low prices; the fifth, healthy products for athletes and those who follow a healthy lifestyle; and the last, products for kids such as toys.
Additionally, it is known that Tesco exist in some markets for many years and consumers can easily understand the value of each product line. However, Chinese consumers cannot easily understand this difference due to the fact that Tesco established some parts of the product lines later. Thus, those consumers will need more time to be aware of the value offers of the product lines.
The third part of organizational structure has to deal with processes that a product requires and division of a firm in departments in order to perform each process even better.
Another part is the geographical area. Tesco is a multinational firm with many subsidiaries all over the world. This means that the main functions and processes will not change significantly but they may form locally according to culture of different places.
The last and most important part has to deal with different types of customers. It is a fact that, there are sets of customers who need more attention and time than others concerning their needs. Tesco knows very well that customer's needs change day-to-day rapidly and tries to be innovative and imaginative.
Importance of Culture
Culture refers to beliefs, values, attitudes and knowledge that shared by a group of people. For many years culture was relatively connected to communication. Various studies have shown that people who shared the same culture could easily communicate. In this part is important to mention that culture plays a significant role in business environment because of the expansion of companies in many countries. It is vital for firms to understand the culture of every place in order to succeed.
Nations can be defined by geographical, ethnic, linguistic and political criteria. In this situation, Chinese culture characterized as complex and difficult to distinguish it according to the above criteria. As a consequence of this complexity, Chinese consumers might need a different approach compared with other countries. Hence, Tesco might need to follow a different approach concerning China's culture, needs and values.
Corporate culture refers to values and beliefs of a firm and essentially is the personality of a firm. This is about the specific characteristics that distinguish it from the competitors. In this point, we refer to Tesco which made its name a great brand between others.
Tesco's core aim is to create value for customers in order to remain loyal to this brand. This can be achieved through the employees and customers. In every country, Tesco tries to understand their needs and to act responsibly in each community. Each country that Tesco operates has a community plan and based in four important subjects: climate change, local communities, responsible sourcing and healthy nutrition. For example in UK, Tesco gives more attention now in green policy but, in China, in buying power in accordance with trust and loyalty of consumers in Tesco products. In all operations of Tesco, its employees possess an exceptional position.
Ethical trading is another significant part of Tesco's culture and has to deal...............(not yet completed)
Culture of Chinese Consumers
Culture, apart from all we mentioned until now, can influence the buying behaviour of people. According to Hofstede, there are five important cultural dimensions that may be suited to specific national culture and institutions. Those are Collectivism/Individualism, Uncertainty Avoidance, Masculinity/ Feminity, Power- Distance Tolerance and Long- Term Orientation. Each of these has its own meaning and applied differently.
Overall subject in Chinese culture is collectivism which means that important decisions are taken by groups. Also, collectivism can be divided into subgroups in order to affect consumers' behaviour.
Collectivism means not to express personal interests and desires in public without the "permission" of a group. This odd aspect is part of ancient Chinese history and it is still applied in China. The same route is followed by Chinese consumers. They do not express any idea or will in public. Hence, they buy commodities according to what their parents, friends or leaders choose to use. Obviously, this means that the products that are used by many people are more successful than others.
Moreover, traditional family is an integral part of Chinese culture and has an active and powerful role in social life. The buying behaviour of Chinese people is influencing by power- distance people who are very respectable and can be seen as examples for others.
Chinese consumers believe that western products are better and respect everything that it is advanced and developed than them.
Multinational firms that operate in Asia should into account three important dimensions that influence the Chinese culture and consequently, the buying behaviour. Chinese consumers admire symbols and people that have power; feel that products should have identity, origin and social status to make the difference; do not make any decision on their own and follow other people; and, are concerned about companies' image.
In China, Tesco built up large stores in order to provide the necessary, daily products that are suitable in consumers. This was a result of an extent research concerning Chinese culture, habits, preferences and tastes. For instance, Chinese consumers prefer to eat fresh foods and Tesco is willing to provide them. Also, they like to see what they are buying and Tesco as a well- informed company knows how to satisfy them with fancy packages. Finally, Tesco's different product lines help to serve different types and needs of the customers. All of these activities indicate that Tesco, as a large retailer knows how to approach a completely distinctive culture and how to influence consumers to trust the brand.
To conclude, culture and institutions play a very significant role in companies by influencing all parts of those.
Nowadays, the continuous quick development of international business can be thought as one of the most important trends that appeared in business environment.