The International Strategies of UK supermarkets: The possibility of entering Africa

The International Strategies of UK supermarkets: The possibility of entering Africa

Research Results

International strategies

Tesco can employ a number of international strategies in its expansion drive into Africa. First is Foreign Direct Investment (FDI) – This is a strategy of international expansion whereby the supermarket chain can control interest in assets, property or companies overseas. This strategy entails a number of business arrangements such as wholly owned subsidiaries, joint ventures and strategic alliances. The second one involves Management Contracts – These are agreements whereby Tesco can offer technical expertise, managerial assistance or specialized services to another retail company in Africa for a percentage of sales or a flat fee. The third likely international strategy is licensing and franchising – Licensing refers to an arrangement whereby a company seals the right to use intellectual property to another company. This form of business expansion will help Tesco to minimize risk and expenditure. On the other hand, franchising refers to an arrangement whereby Tesco can supply another retail business in Africa with intellectual property as well as ongoing support.

Fourth strategy is setting ambitious goals. Using this crucial strategy, Tesco can aim to generate at least 32% of its revenue in Africa within a specific period of time for instance three to five years. Fifth involves the company going multilingual – As it opens new chains in Africa, the company would have to recruit employees who are conversant with the local languages in the different African countries. This would make the company to easily identify with the locals, something that could translate into increased sales and customer loyalty. Finally, it can employ the mergers and acquisitions (M&A) strategy – Acquisition is a quick method through which Tesco can use to enter a new market in Africa since it would do so simply by acquiring an already established firm. In this way, Tesco can take advantage of channels of distribution, management experience, a qualified labor force, an established brand name/reputation and local knowledge.

Marketing and business strategies Tesco can employ in Africa

Tesco PLC can also employ the marketing and business strategies they use in the UK which would be indispensable in their expansion drive into Africa. These include diversification – This can be accomplished when Tesco specializes in both food and non-food items within the African retail market just as it does in the UK and other international markets. Secondly, it can use the Customer Relationship Management (CRM) strategy – This could be employed for nurturing and managing Tesco’s interactions with its customers. The primary goal of CRM will be to look for, attract and bring in new customers, meet all their expectations and then retain them the way it does in the UK market. This will definitely help in reducing the costs of marketing and customer services. Another strategy is using e-commerce. Tesco PLC’s online supermarket Tesco.com has been very crucial in increasing the sales of the company every year. In the UK, a large number of households have used and continue to use Tesco’s online services. This could be replicated in the African market if the company also makes use of its online supermarket services to serve its African customers. Another strategy is the use of loyalty cards. In the UK, Tesco utilizes clubcard, and users obtain Clubcard credit card which they use in making payments. This strategy can as well be used in the African market and it will greatly help in attracting and retaining customers.

The impact that an international retail chain will have on the African market

An international move into the African continent would be beneficial to the African country in several ways. When an international supermarket chain such as Tesco PLC opens a subsidiary or a branch of its stores in Africa, this move could serve to make room for more investors into African countries who will view the countries as being friendly to international corporations and businesses. The entry of multinational retail chains into Africa comes with socio-economic factors that will help with the developments in the target African countries. The main benefits for the African countries include: First is job creation – Upon entry into the African country and opening stores and subsidiaries there, Tesco will have to employ people from the native country for several job positions. This will lead to the creation of jobs for many local Africans who would otherwise have been jobless if Tesco had not entered their countries.

The second major benefit is increased revenue – As Tesco carries out its business operations in the African countries and profiting from the same, it will be expected to pay taxes to the respective local African governments. This source of revenue will be very essential to the African governments largely because it will help in the development of their economies. Thirdly, increased competition – Tesco’s entry into the African countries will without doubt lead to stiff competition between local retain chains and Tesco PLC. This will most likely result to improved services and products offered by the retail companies – both local and international –, improved customer service and most importantly, lowering of prices of the services/products offered. Consequently, this will be beneficial to the African customers who will get high quality services/products at competitive/good prices.

Intangible and tangible benefits Tesco would derive in an African market

Intangible benefits are the qualitative advantages of operating in Africa. These include a business-friendly environment which exists in a number of African countries such as Mozambique, Botswana, Ethiopia, South Africa, Ghana, Angola, Tanzania and Nigeria. The business friendly environment in these countries will facilitate smooth operations of Tesco’s business without any difficulties or with very little difficulties. Tangible benefits are typically in a quantifiable form. This includes tax reliefs whereby the company will pay little tax for a specific period of time upon entry into an African market. For instance, in Kenya, when an international company enters into the country and opens a store or a production plant, it is entitled to pay half of its taxes in the first five years. It will then start paying the full tax after the 5 years of its operations in the country. For Tesco PLC, this will be an imperative tangible benefit.