Tesco PLC, the largest retailer in the United Kingdom, was pondering India with its booming economy and the absence of major retail chains which provides an opportunity for both domestic and foreign firms. However, restrictions on foreign direct investment (FDI) in retailing limit the entry of foreign retailers. Although India had done away with such restrictions on FDI in other sectors, it had not done so in retailing in consideration of the fate of small retailers. Yet, it is inevitable that FDI retailing restrictions would soon be removed. Thus, many large Indian industrial groups entered the retailing sector before global retailers could. Global retailers then are faced with the dilemma of entering the Indian market now with constraints on their investments or wait until such time when FDI regulations are further relaxed. Tesco PLC had to decide whether to enter the market, how to enter it, and when to do it.
Baron, David P.
Stanford University (P62-PDF-ENG)
10/20/2008
Case questions answered:
- How should Tesco PLC sustain the advantage of being the first global multi-brand retailer to be allowed to invest in India? (Who are Tesco’s current competitors in the UK? In India? Why does this matter?).
- How should Tesco fine-tune its tried and tested global business model to suit the Indian retail market?
- How should Tesco avoid the kind of failure it had recently experienced in its U.S. business? (There are various short articles available on the Internet that highlight the reasons for Tesco PLC’s failures. How can Tesco learn from these?).
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Tesco PLC in India? Case Answers
Tesco PLC in India: Will the Sun Set on This British Food Empire?
Even into the 21st century, businesses in the United Kingdom cannot resist branching into markets in India. Britain’s largest grocery retailer, Tesco PLC, set its sights on expanding into the food-retailing sector of India as a way of continuing their international expansion.
Having failed in its attempt to make this same entrance into the market of the United States, Tesco PLC could not afford to disregard any of its advantages nor half-heartedly utilize its previously implemented expansion strategies.
The British brand will have to consider current competitors in the Indian market, adjust to consumer tastes and preferences in a large foreign nation, and hit the right proverbial notes to reach a breakeven point fiscally.
Tesco PLC ought to strive to sustain its distinct advantage of being the first global multi-brand retailer to be allowed to invest in India.
This first-to-market advantage is pivotal in promoting the success of the brand in a foreign country, as this sort of investment can prove challenging if not maneuvered correctly.
While Tesco had over two decades of internationalization experience with the company, it had not been able to recover the cost of its capital outside of the United Kingdom, where the brand originated.
Beginning their foray into the market of India, Tesco PLC had certain advantages that were not present in their previous attempts for expansion.
For instance, India was the second-largest country in the world by population, and the food retailing industry in that country was growing at a compound rate of 10% per…
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