6IBCS Suggested Answers

7/30/2019 6IBCS Suggested Answers

1/7

Please note that these are not fully-worked model answers, but they are

intended as a guide to the type of answer expected.

The Association of Business Executives

QCF

International Business Case Study

December 2011Suggested Answers

STRUCTURE OF PAPER: Answer ALL FIVE QUESTIONS

SECTION A: Answer ALL FIVE questions Q1Q2Q3Q4Q5

20 marks15 marks25 marks20 marks20 marks

TOTAL MARKS AVAILABLE FOR THE PAPER100

marks


2/7



Candidates are required to answer ALL FIVE questions

Question 1

Q1 Prepare an outline plan for the international development of Tesco. The plan is to coverthe period from 2012 to 2022.

Outline Plan for the International Development of Tesco plc 2012 to 2022

1 Executive Summary Tesco Plc in line with the published team objectives intend tobecome a global brand leader within the next ten years.

2 BackgroundAnalysis of strengths and weaknesses.- See question 3 belowThe International Retail Environment - including Opportunities and Threats seerelevant parts of questions 2 and 3 below.Mission Statement not given explicitly in the case material but could be summarised as to be the leading global grocery retail brand.

Stakeholder Expectations Tesco has a big impact uponReview of current activitiessee relevant section in case study

3 The International Business Objectives to enter as many markets as possible certainly to match the presence of Walmart and the Carrefour Group to replicate thedominance experienced in the UK market internationally - to be seen as a global brandin the same way as Coca Cola Whilst defending the UK strength.

4 Strategic Options consider all market entry options to adopt segmentation asappropriate to particular markets.

5 Strategic Implementation aim to extend global presence to the grocery markets on all

continents (except Antarctica and the Artic) within ten years and to break even withinthree years of entry.

Functional ConsiderationsMarketing establish the Tesco Brand globally with sub brands as dictated by localconditionsHuman Relations create a global Tesco culture within all staff not only management the Tesco Way!Operational Implement and control a global supply chainFinancial ensure the Tesco Group return on investment grows by at least 0.5% perannum, including the impact of new investments reflecting the increased benefit ofeconomies of scale to a sustainable level of 20%

6 Evaluation and Control the plan will be monitored both internally and externally on aquarterly basis in a transparent manner as dictated/expected by external stakeholders

Q1 Total Marks for Question20

marks


3/7



Question 2

Further to the outline, you are required to:

Q2

(a)

Describe the international competitive environment as it relates to Tesco.

The international retail environment that exists is a combination of threeglobal players Walmart, Carrefour and Tesco. and domestic operatorsWalmart and Carrefour (market leaders) are the leading corporations byvirtue of their global coverage particularly in terms of their presence in threeof the BRIC nations with Tesco being considered as a market follower.,Carrefour attempts to operate as a global brand with Walmart beingconsidered a holding company with local brands such as Asda in the UK.Tesco wants to operate under umbrella brands as shown by the UK. All threecompanies have more than adequate financial resources.A key reason for global development for Carrefour and Tesco is the limitedopportunities in their respective domestic markets although Carrefour has astrong regional presence in Europe. 5 marks

Q2

(b)

Analyse the international competitive environment as it relates to Tesco.

An International Drivers framework must be applied. Similarly with PortersFive Forces. Focus must be on the competitive environment. Answers shouldshow a clear understanding on both global the big three players, andnational/regional competitors. The impact of the hard discounters should beacknowledged. Substitutes will not be a significant factor.

10marks

Q2 Total Maximum Marks for Question15

marks


4/7



Question 3

Q3 Evaluate Tesco in terms of its external and internal situation using the followingframeworks:

(i) PESTLE

Political: aspects such as instability in certain areas such as North Africaand Middle East making investment risky for Tesco, currently not present inthese areas.

Economic: aspects such as fluctuating exchange rates and the impact uponrepatriation of profits; growth in BRIC nations lead by retail/consumer sector Tesco can exploit this trend; Car ownership will dictate the type of outletTesco can use e.g. Extra versus Local.

Social: aspects such as impact on the communities and local High St retailbusinesses such as Tesco and Walmart; CSR Tesco especially as a multi-

national, has a very robust strategy with a proven record of activities; busylifestyles leading to home delivery; initiatives to develop a retail model forremote rural communities; basic differences in cultures leading to the needfor adaption strategies.

Technological: the need for traditional retailers to adopt internet/ onlineordering such as Tesco click and collect and home delivery(see social);continued use of technology such as automated checkouts to bring aboutcost reductions; rise of m-commerce (mobile commerce for pre-ordering andpayment.

Legal: Office of Fair Trading concerns about market power of top 5

(especially Tesco in UK) becoming an international issue. Retail pricemaintenance in certain countries such as India impacting upon Tesco pricecutting strategy.

Environmental: Large retail units consumption of energy and packaging.15

marks

(ii) SWOT

Strengths - Scale advantages; reaches key segments, strong leadership;Innovative strategies Club Card; brand leadership in UK.

Weaknesses - Difficulty in entering US market; New leadership; monopoly

activity OFT; image affected by US operations.

Opportunities- New countries markets; new sectors such as HardDiscounters possibly under another Tesco name Victor Value?

Threats- Aggressive local competitors; multinational competition withdominance in target markets; Counter cultural factors leading to actions suchas direct action G7 protests; hard discounters, access to countries blockedby other retailers.

10marks

Q3 Total Maximum Marks for Question25

marks


5/7



Question 4

Q4 Evaluate the current strategies as outlined in the six team objectives from the 2011annual report.

Point one recognises the need to keep the UK market profitable as described by the

Boston Consulting Group as a Cash Cow, which provides funding for other operations (which could be categorised using the Ansoff matrix off strategic options) especiallyinternational expansion.

Point two states the bold strategy of becoming the leading international brand and thisshould be described as a bold objective in the light of the competitive and culturalenvironment and maybe considered in the light of the US experience as a bold /unachievable objective.

Point three focuses on the need to accept a multi-channel approach in the reaching ofits customers particularly via the internet and the ability to replicate the click and collectinitiative in the developing markets.

Point fouris in essence the market development strategy and credit should be given tothe applicability of these to international development and debate whether the brandname of Tesco can be leveraged to the same extent in new markets.

Point five refers to the organisational capabilities, particularly of being able to gainsignificant competitive advantage based upon their domestic business model.

Point six recognises the need to continue to offer higher returns to the shareholderswhich, in an international context, would mean that new market developments must offerearly and high returns on investment to ensure higher returns overall.

Q4 Total Marks for Question 20marks


6/7



Question 5

Q5 Propose specific actions to respond to any three of the key factors identified in the futureissues section of the case study.

Specific Actions for the Future Issues note answer offers actions for all six factors

although only 3 were required.

The future issues are identified on page 10 of the case study identify a range of issuesthat the three global players need to consider.

As far as Tesco is concerned their responses could be as follows:-

Supply Chain there are particular problems in many developing and populouscountries for the grocery retailer used to more sophisticated logistical infrastructures intheir domestic markets. This is a good example of the concept of self referencing criteria,It may be that as Tesco has found in India that changing its position the emd retailer tobecoming a wholesaler (middleman) may be an option. In certain countries the structure

of the supply chain may mean that Tesco may have to adapt its product range to suit thelimitations of the chain for example fresh and frozen foods may be difficult to managethrough the supply chain. This may mean that more packaged / dry goods would besold. Tesco may have to be more involved in the actual development of the supply chainthan would be expected in its domestic market.

The stage of economic development will vary between countries and thus Tesco mayhave to reinvent itself and revert to lo-tech solutions to satisfy the market need, e.g. theselling of small sizes to communities with limited personal financial resources andaccess to their own personal transport. Tesco need to determine whether it attempts tosupply the total population or to look to satisfy the more affluent classes such as theburgeoning middle classes in countries such as China and India.

The availability of suitable retail locations globally is an issue given the competition forspace and the differences in property law between countries. Tesco are used to beinginvolved in developed commercial property markets. The ability to have the correctlocation can be a critical success factor. Actions such as building good relations withlocal property developers and indeed extending their own property developmentbusiness globally will go a long way to overcoming this issue.

The issue of customer service is particularly important to Tesco where this is a keyaspect in Tescos basic offering. The success of their Clubcard initiative in the UK isbased around instilling in their staff how important the relationship with the customer isand that by ensuring these on a long term basis will lead to profitable repeat purchasing.This is key to the growth of the company globally and indeed in some markets wherecustomer service is lacking, having a good customer service reputation as Marks andSpencer have done in India will give them a USP (unique selling proposition). Anotheraction would be to fully embrace the 7Ss framework in the implementation of internalmarketing in order to sell the concept of customer service.

Corporate Social Responsibility (CSR) is an increasingly important issue for internationalbusinesses particular as a response both to global consumer movements such asFriends of the Earth and initiatives such as Fair Trade. Tesco have a proven record ofCSR initiatives such as Computers for Schools and have the necessary expertise toextend these to other countries which they should do either by adopting a standardistion

strategy or also seizing upon local opportunities that may present themselves. Also as acompany with global objectives they should consider global CSR activities such as theone undertaken by the Microsoft Foundation.


7/7



Availability of Suitable Local Managers this is a key issue for a company such asTesco in the development of a standardized / globalised brand. Other organisations suchas McDonalds, IBM and Dell have faced such challenges in HR. Solutions such asestablishing a university, recruitment of managers locally with the potential to manage inother countries and creating an organisation with no easily identifiable country heritagehave been implemented with success. Tesco should adopt these strategies. All

management training should be standardized, local managers should expect as part oftheir development to manage in other regions and the company name having beenuniquely created, lends itself to be culturally free.

Q5 Total Marks for Question20

marks

Documents

6IBCS Suggested Answers