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Case Study of a TNC – TescoBackground/history of TescoFounded in 1919 by?Jack Cohen?as a group of market stalls.?Name first appeared in 1924. First Tesco store opened in 1929 in?Burnt Oak,?Middlesex.By 1939 there were over 100 Tesco stores across the country. Originally a UK-focused grocery retailer, since the early 1990s Tesco has increasingly?diversified?geographically and into areas such as the retailing of books, clothing, electronics, furniture, petrol and software; financial services;?telecoms?and internet services; DVD rental; and?music downloads.Tesco sells value to finest ranges so appeals to most consumers. As result Tesco has grown from 500 stores in mid 1990s to 2500 stores 15 years later.At end of 2012/13 – Tesco had 3143 stores (an increase of 166 on the previous year). Thus the expansion continues and type of stores built/acquired depends on geography and what management think will be most profitable. Tesco keep up to date with product range – e.g.In September 2013, Tesco launched its first-ever?tablet computer, a seven-inch model called?Hudl. In November 2013, Tesco announced they are going to use face-scanning technology developed by?Amscreen?at all of their 450 UK petrol stations to target advertisements to individual customers.It has a Telecoms operation – Mobile with O2, Broadband with BT etc. Launched Tesco tyres with Black circles (over 1200 fitting centres).Tesco tries to serve local population e.g. As of August 2012, around 27 UK Tesco superstores have?halal?meat counters. The meat sold is advertised as "stun-free", which puts the meat sold in contradiction of?RSPCA?standards on animal welfare. The sale of such meat would be illegal in the UK were it not for an exemption in the law granted to Jews and Muslims. Tesco has come under criticism for not selling stunned Halal in its stores and because stores with Halal counters do not always have non-Halal fresh meat counters as well - such as the Edgbaston store in Birmingham.As one of the world’s largest retailers with over 530,000 colleagues worldwide. Tesco has over 310,000 employees in UK.Value of company and latest data on profits: ?72.4b in group sales and ?3.5b – trading profit before tax.Internet Retailing Shows keeping up to date with shopping habits and trends to be market leader.Tesco has operated on the internet since 1994 and was the first retailer in the world to offer a robust home shopping service in 1996. was formally launched in 2000.Grocery sales are available within delivery range of selected stores, goods being hand-picked within each store, in contrast to the warehouse model followed by Ocado. Tesco offers an internet-based DVD rental service, which is operated by LOVEFILM and a music download service. In 2011, Tesco bought Blinkbox, an online movie streaming service in which selected DVD's which are purchased in store can be streamed online for free as well. In June 2012, the company acquired the music streaming site We7.As of November 2006, Tesco was the only food retailer to make online shopping profitableLocation of its Headquarters and Main BusinessTesco PLC is a British multinational grocery and general merchandise retailer headquartered in Cheshunt, Hertfordshire, England, UK.It is the second-largest retailer in the world measured by profits (after Wal-Mart) and third-largest retailer in the world measured by revenues (after Wal-Mart and Carrefour). It has stores in 12 countries across Asia, Europe and North America and is the grocery market leader in the UK (where it has a market share of around 30%), Malaysia, the Republic of Ireland and ThailandIt is also in partnership with Esso to sell petrolDiffering Stores in the UK (depending on geographical location).Tesco Extra stores are larger, mainly out-of-town hypermarkets that stock nearly all of Tesco's product ranges, although some are in the heart of town centres and inner-city locations. The number of these is now being increased by about 20 a year (currently over 200.) Most Tesco Extra stores have a café and all stores have a Tesco Tech Support Team.Tesco superstores are standard large supermarkets; stock a much smaller range of non-food goods than Extra stores. Tesco Metro stores are sized between Tesco superstores and Tesco Express stores. They are mainly located in city centres beside train stations, the inner city and on the high streets of towns. Tesco Express stores are neighbourhood convenience stores, are much smaller and stock mainly food with an emphasis on higher-margin products (due to small store size, and the necessity to maximise revenue per square foot) alongside everyday essentials. They are found in busy city centre districts, small shopping precincts in residential areas, small towns and villages and on Esso petrol station forecourts. (1,000th opened in July 2009) One Stop which includes some of the smallest stores. The business has attracted some controversy, as grocery prices in these shops, often situated in less well-off areas, can be higher than nearby Tesco branded stores. Why Tesco is a TNC?Tesco is a TNC as it has stores in many countries as shown below (2011 so bit dated!) more recent in table below:Tesco branched overseas in the 1990’s. Opened stores in in Hungary and Poland, then entered the Asian market in 1998. However, to be sensitive to local expectations in other countries by entering into joint ventures with local partners, appointing a very high proportion of local personnel to management positions. In 2004 the first Tesco stores opened in China, where rising wealth among the elite means that there is a growing number of affluent customers. Created partnerships to provide cheaper productsIn late 2004 the amount of floor space Tesco operated outside the United Kingdom surpassed the amount it had in its home market for the first time, although the United Kingdom still accounted for more than 75% of group revenue due to lower sales per unit area outside the UK.60% of Tesco’s international profits now come from Asia. In total the firm has over 1250 stores and employs 450 000 people.In September 2005 Tesco announced that it was selling its operations in Taiwan to Carrefour and purchasing Carrefour's stores in the Czech Republic and Slovakia. Both companies stated that they were concentrating their efforts in countries where they had strong market positions.Tesco entered the United States grocery market in 2007 through the opening of a new chain of convenience stores, named Fresh & Easy, on the West Coast (Arizona, California and Nevada). Established its U.S. headquarters in El Segundo, California, and the first store opened in Hemet, California in November 2007, with 100 more planned in the first year; a store opening every two-and-a-half days. Although the planned rate of expansion was not maintained, largely because of the recession, as of August 2011 Fresh & Easy operated 182 stores across Arizona, California and Nevada. 4585970-8445500In April 2013, Tesco put the Fresh & Easy chain on sale, booking losses of ?1.2bn. It announced the sale of 150 of the stores in the 200 strong chain to private equity firm Yucaipa Companies in September 2013. The BBC reported that the remaining stores were expected to close. Tesco Stores overseas at end of April 2012 but now out of Japan:Recent facts show they now have over 6,700 storesWhy Tesco has Not Spread to Some Continents?Lack of wealth / customer base e.g. in AfricaConcentrating on making more profits elsewhere e.g. UK and Asian marketsPossible obstacles to market entry in South America / Africa e.g. political instability and conflict or trading laws / disputes / trade bloc ideas Hence only goes into markets which appear to be viable (although did make losses in USA as outlined above – but has made provision to re-enter should the successor company turn the business around).Has sold off stores in USA (?1bn write-down to exit from its loss-making Fresh & Easy business in the US) and Japan as did not become profitableWhy it is expanding overseasReports in 2010 - Tesco and foreign rivals such as Wal-Mart, Carrefour and Metro are expanding rapidly in emerging markets to make up for sluggish growth at home. The prize in China is huge, with grocery sales expected to hit ?600bn this year and 1,200?supermarkets?and hypermarkets to open by 2014. Tesco is looking to its foreign stores to drive future sales growth. In most markets, Tesco has started by opening a small number of very large hypermarkets. Once it has built sufficient sales and customer awareness, it has opened other formats such as smaller convenience stores or specialist outletsAt the same time, it has used its global supply chain and retail expertise to manage stock and to keep overheads to a minimumIn most markets Tesco has to work with a local partner and, in most cases, it has retained that company's store identity. But there are exceptions e.g. In Turkey they are known as Kipa Having a more diverse empire means that it has not hostage to fortunes of one country and thus has spread its risk profile.Allows cheaper product costs and import these into the UK market, there are some problems such as horse meat scandal in January 2013. To work within trade barriers (e.g. quotas) and to gain grants that some governments give for companies that invest in their economy.List the positives of Tesco expanding overseas for the companyContinue to grow and flourishBusiness in many countries means risk profile is diluted (so more able to survive downturns in profitability in one country).More able to control supply chainsList the positives of Tesco expanding overseas for the UKAble to bring cheaper imports into host country due to buying power.Creation of jobs in home country (e.g. need more admin staff to control the stores in foreign countries).Builds confidence in the UK business and economyList the positives of Tesco expanding overseas for the host countryRecord of job creation, lowering prices and raising standards.The wages in the Asian factories are low, but so are living costs and many of Tesco’s overseas employees are shop managers who receive good wagesMay bring more variety of goodsTesco promises to go with the culture – so will have own culture but new good as well.Ripple effect on economy of the jobs created.May result in higher exports should some of the goods produced be exported to other Tesco stores in different countries.Reduce inequality if paid men and women same wage (or may continue the inequality)May spread wealth more equally (if properly invests in the country) and introduced minimum wage.List the negative impacts of the expansionCritics insist multinational retailers are squeezing out small stores and threatening diversity of products and consumer choiceThere are concerns that firms such as Tesco are taking advantage of weaker regulation in developing countries to expand rapidly (e.g. In September 2011 a Greenpeace report revealed that Tesco supermarkets in China were selling vegetables that contained illegal pesticides or at levels exceeding the legal limit.)As Tesco grows ever bigger in more countries, it has inevitably faced criticism from consumer activists and environmental groups.Critics often cite taking advantage of cheap labour (i.e. no legislation on minimum wage for these workers as there is in UK).Has power to take on any criticism – e.g. Tesco have been criticised for aggressively pursuing critics of the company in Thailand. Writer and former MP Jit Siratranont is facing up to two years in jail and a ?16.4 million libel damages claim for saying that Tesco was expanding aggressively at the expense of small local retailers. Tesco served him with writs for criminal defamation and civil libelShipping goods around the world on this scale makes the firm a huge emitter of greenhouse gases, but it has pledged to reduce its impact by cutting the packaging on its own-label productsClaims that Tesco is eroding local cultures as imposing same goods in its shops. The company claims not – it says it makes sound business sense to pay attention to local customer’s cultures and to use local supply chains. For instance, Thai customers are used to shopping at traditional ‘wet’ vegetable markets, rummaging through piles of produce to choose what they want. Rather than forcing the European approach of neatly packaged, convenient portions, Tesco stores in Thailand contain a ‘wet market’Uses its size to overcome laws and regulations – e.g. tax avoidance schemes have included: In May 2007, it was revealed that Tesco had moved the head office of its online operations to Switzerland. This allows it to sell CDs, DVDs and electronic games through its web site without charging VATJune 2008, the government announced that it was closing a tax loophole being used by Tesco.[135] The scheme, identified by British magazine Private Eye, utilises offshore holding companies in Luxembourg and partnership agreements to reduce corporation tax liability by up to ?50 million a year.Another scheme previously identified by Private Eye involved depositing ?1 billion in a Swiss partnership, and then loaning out that money to overseas Tesco stores, so that profit can be transferred indirectly through interest payments. This scheme is still in operation and is estimated to be costing the UK exchequer up to ?20 million a year in corporation tax.To find out more about the countries Tesco has stores in: ................
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