Strategic management questions require an in-depth understanding of business concepts and detailed analysis of case studies to derive relevant responses. The four questions presented below represent examples of what you may be asked to respond to in the course of your management studies. In case these are the exact questions that your professor has posed to you in the latest assignment, you can derive insights from the way the writer responded and come up with your own responses. Alternatively, you can hire one of our writers to do original answers for you. 

Strategic management

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Question 1

Critically evaluate the international opportunities and threats for retailers such as Tesco over the last 30 years. Applying structured analysis frameworks where appropriate, discuss the implications for retailers in developing and maintaining their internal competencies to be able to operate successfully in today’s dynamic and competitive operating environment. What are your overall conclusions?

Tesco has encountered numerous opportunities as well as threats over the last 30 years (IBS Center for Management Research, 2012). During the early 1980s, Tesco bounced back into the path of recovery and growth after years of massive failure (Vida, 1998). In this recovery and growth process, the UK-based retailer encountered both opportunities and threats. One of the opportunities arose from the fact that Tesco acknowledged the need to reorient its image in order to move forward towards growth and expansion in the international retail market. To promote its image, Tesco has had to hire the services of various creative agencies to spearhead its marketing strategy. The company had an opportunity to make better use of its existing stores instead of rushing to add new space. It also needed to refresh its stores, to prioritize on food items, and to increase staffing levels to provide timely and satisfactory assistance to customers.

Over the years, Tesco also has been facing a new opportunity in the form of banking services (IBS Center for Management Research, 2012). This opportunity arose after the UK public became increasingly disenchanted with the country’s biggest banks. It has also been at the glare of opportunities in areas such as banking services and mortgage products particularly for its exclusive club of loyal customers (IBS Center for Management Research, 2012).

The biggest threat in Tesco’s efforts to venture into the international market has been competition from other established retailers. For example, in Turkey, Tesco was unable to venture into many highly populated areas because another international retailer, the French-based Carrefour S.A., had already established a foothold there (IBS Center for Management Research, 2012). In most areas within Turkey, Tesco has always been trying to re-position itself in response to the local people’s needs by focusing a lot on fresh food. So far, the company has not succeeded in its goal of being one of the top retailers in the country. This is why Tesco seems to be at crossroads as far as its forays into the Turkish retail market is concerned.

In many international markets including Turkey, Tesco has not been successful in breaking through to the top and the bottom market segments. This is because these segments have already been taken over by local retailers that are properly adapted to local cultural needs as well as foreign retailers that have properly established their operations.

Tesco has also been encountering problems that were hitherto unseen in the UK market. For example, the recent Eurozone crisis has made Tesco vulnerable to economic fallout, particularly in central Europe. In South Korea, the company has been facing numerous problems because of government restrictions relating to hours of operation while China also remains highly problematic for the retailer. Recently, the company had to withdraw from the Japanese market. Despite its short-term success, its top executives were pessimistic about the company’s growth prospects in Japan in the long run, hence the decision to close down all operations in that country. Moreover, in a world that is becoming increasingly vulnerable to economic crises, there is a tendency by governments to impose tougher restrictions on trade. This continues to hurt Tesco’s international ambitions in a very profound way. In the future, these challenges may compel Tesco to withdraw from the U.S, as well as from poorly performing European and Asian countries.

One of the solutions to these threats may consist in the development and maintenance of internal competencies (Evans and Mavondo, 2002). To appreciate the need for developing and maintaining internal competencies, it is worthwhile to apply strategic analysis frameworks that facilitate the identification of Tesco’s fundamental weaknesses. This is particularly the case with those weaknesses relating to the lack of internal competencies. In light of these frameworks, one of the weaknesses is about management uncertainty. The current Chief Executive Officer, Philip Clarke, is under pressure because of too much workload in managing the UK division as well as the international divisions. This pressure increase has been occasioned by the departure of numerous experienced senior managers in recent years.

The overall conclusion is that Tesco faces two tough choices. The first one is to close down all loss-making retail centers. The second one is to continue pursuing an aggressive expansion strategy in countries like Turkey, China, South Korea, and the U.S. while remaining optimistic about future trends in the retail market. In a world that is increasingly vulnerable to economic crises, the best option is for Tesco to close down all loss-making stores and focus on short-term survival. At the same time, the company needs to address the problem of lack of internal competencies by hiring more experienced senior executives to manage its growth strategy in the international market.

Question 2

Using examples from retailing, discuss the advantages and disadvantages of localization as part of a globalization strategy. What do you conclude?

Localization as a globalization strategy is highly advantageous because it enables a foreign company adapt to the needs of local customers. For example, in Turkey, Tesco adopted this strategy to enable it respond appropriately to the needs of Turkish customers. As part of this strategy, Tesco acquired 21 stores operated by Ardas, a Turkish retailer in 2011 (IBS Center for Management Research, 2012). When Tesco first entered into the Turkish market in 2003, it acquired the Kipa chain of retail stores, sometimes simply known as Kipa. The company also retained the name “Kipa” and became known as Tesco Kipa. During its operations in Turkey under this new name, Tesco Kipa has been embracing localization by conducting research about consumer needs and responding appropriately. For example, one consumer research study showed that the Turkish people are very careful about the food they eat. This prompted Tesco Kipa to start stocking more fresh produce, fresh food, and bakery products.

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According to Coe (2006), retailers are increasingly pursuing the goal of strategic localization as part of their internationalization process. A culture of localization has already been established in most industries as part of the internationalization process. This culture is driven by the need to meet the peculiar requirements of various local and national markets. However, the imperative for localization remains particularly strong for today’s retail transnational corporations (Rogers, 2005). This is because their activities tend to be territorially embedded to an extraordinarily high degree. This embedded nature is evident in the way retailers seek to create store networks as well as to adapt their products and services to local cultures.

Maskell (2001) discusses the notion of co-located firms that tend to operate within related industries. Using the theory of the geographical cluster, Maskell (2001) argues that such firms succeed in enhancing labor practices in the localities in which they operate. This point is useful particularly when viewed in the context of the labor disputes that Tesco encountered in its Turkish operations. The company’s opposition to workers’ quest for unionization brought it a lot of negative publicity, thereby harming its brand image.

In this debate, it is evident that a major disadvantage of localization is that the foreign retailer may lack the requisite knowledge of local labor practices, leading to bitter labor disputes that irredeemably injure the company’s reputation. Nevertheless, the conclusion to be made here is that localization is a critical part of the globalization strategy of transnational retailing firms. However, these firms must always take the time to understand the local market in its entirety to avoid conflicts and bad publicity.

Question 3

The case study describes Tesco as being at a crossroads in Turkey. What recommendations would you make for its future operations in Turkey, and why?

Tesco faces a major challenge of deciding on whether to continue with its operations in Turkey or to withdraw from this market. Turkey is a poor-performing market for Tesco. Although the retail sector in the country continues to grow at an alarming rate, this may not be the right time for Tesco to launch a market-expansion offensive. Although this is the right thing to do, the timing is poor. By pressing on, the company would be seen to be pursuing the expansionist agenda on the wrong footing.

It is highly likely that the effects of the Eurozone crisis may end up creeping into Turkey. The European market remains volatile and Turkey is no exception. Although Turkey survived the adverse effects of the European economic crisis of 2010, there are fears that the recent Eurozone crisis may end up affecting the country. According to Yüksel (2013), European economies may end up contracting by about one percent. If this happens, the crisis will have negative effects on Turkey. This slowing down of growth is likely to have a negative effect on the retail industry. Moreover, Tesco Kipa has in the recent past been strongly criticized in Turkey for its decision to refuse to recognize the union of which most of the company’s employees are members. Analysts argue that this bad publicity could end up hurting the growth prospects of the company in the long run.

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Furthermore, Tesco continues to face challenges not only in Turkey but also at home in the UK. Additionally, the company has to deal with the challenge of underperforming Polish and Chinese markets. In the UK, Tesco’s recovery seems to have stalled. During the first quarter of 2013, sales had dropped by 0.5 percent while the profit margin stood at 5.2 percent (Yüksel, 2013). Currently, the company is fighting hard to hold onto this profit margin during the next trading update. On the other hand, it is reluctant to return to sales growth because of fear that this will start price wars in the country.

By failing to reset its margin, Tesco’s senior executives may create the impression that they have for a long time been underestimating the gravity of the company’s problems. The recovery process may not be as smooth-sailing as the top leaders of the company suggest. Furthermore, these growth recovery efforts come at a time when  pressure on Tesco’s CEO Philip Clarke to prove the viability of his grand strategy is ever-increasing. In light of this reality, the best thing for Tesco is to with draw from all its poorly performing markets including Turkey. After withdrawal, the company would be able to rethink its internationalization strategy before reentering those markets.

Question 4

Describe and discuss how Tesco can manage the cultural issues that result from being a global player.

For Tesco to succeed as a global retailer, it must manage various cultural issues. One of the ways to achieve this success is through strategic localization (Coel, 2006). It must adapt not only its products and services but also its labor and management practices to the local culture. According to Coel (2006) Tesco should also localize staffing in addition to sourcing products locally in order to succeeding in adapting to local culture. Moreover, strategic decision-making should be profoundly influenced by local cultural sensitivities. In Suh’s (2009) view, Tesco should start to view localization as a two-way undertaking that may end up having a far-reaching effect on the parent company. For instance, today, Tesco’s failure to manage its forays into the international market has started affecting the performance of the parent company in the UK.

The joint-venture approach can also enable Tesco manage cultural issues at the local level. The company can achieve this goal by forming mergers and acquisitions with successful local companies. However, attention should be on the level of compatibility between the organizational cultures of the two business organizations. Girod (2005) adds that regional business networks can greatly contribute to the success of the transnational retailers such as Tesco. Kim (2008) stresses the same point but instead uses the term “ network relationships”. These relationships can constitute a flagship network on which future market expansion strategies are anchored.

References

Coe, N. (2006). The Strategic Localization of Transnational Retailers: The Case of Samsung-Tesco in South Korea. Economic Geography, Vol. 82, No. 1, pp. 61–88.

Evans, J. & Mavondo, F. (2002). Psychic Distance and Organizational Performance: An Empirical Examination of International Retailing Operations. Journal of International Business Studies, Vol. 33, No. 3, pp. 515-532.

Girod, S. (2005). Regional Business Networks and the Multinational Retail Sector. Long Range Planning, Vol. 38, No. 6, pp. 335-357.

IBS Center for Management Research. (2012). Tesco in Turkey. ICMR, Hyderabad

Kim, J. (2008). The impact of Knowledge transfer on the setting up and operating a Joint venture: A case study of Samsung Thales and Samsung Tesco. Routledge, London.

Maskell, P. (2001). Towards a Knowledge‐based Theory of the Geographical Cluster. ICC, Vol. 10, No. 4, pp. 921-943.

Rogers, H. (2005). The Impact of Market Orientation on the Internationalization of Retailing Firms: Tesco in Eastern Europe. The International Review of Retail, Distribution and Consumer Research. Vol. 15, No. 1, pp. 53-74.

Suh, Y. (2009). Restructuring retailing in Korea: the case of Samsung-Tesco. Asia Pacific Business Review, Vol. 15, No. 1, pp. 29-40.

Vida, I. (1998). International expansion of retail firms: A theoretical approach for future investigations. Journal of Retailing and Consumer Services, Vol. 5, No. 3, pp. 143–151.

Yüksel, E. (2013). Interest rate pass-through in Turkey and impact of global financial crisis: asymmetric threshold cointegration analysis. Journal of Business Economics and Management, Vol. 14, No. 1, pp. 98-113.