International Business
Introduction
Globalization has led to major changes in the ways businesses reach out to their customers. With increased competition, firms have to be innovative and continue meeting consumer needs and expectations in a timely manner. Global firms have no choice but to work towards creating a brand that is able to attract more customers and retain the already acquired ones in the global markets. The grocery retail industry is growing as firms strive to reach out to untapped markets to be able to expand their scope and shift away from saturated markets. This implies investing financial resources in advertisements and development of infrastructure that are imperative in making it easier to achieve long term success. However, a major threat to successful global operations is the difficulties faced in aligning objectives with the culture of consumers since most firms are forced to wind up their operations for lack of clear knowledge on the cultural aspects. Tesco is among the firms that have successfully penetrated global markets through ensuring it understands consumer culture in the foreign markets as well as developing its product portfolio depending on the needs and expectations of the customers. The paper, therefore, discusses the concept of international business operations while using Tesco as a case.
Tesco has made significant efforts in making a global presence through its over 3000 retail stores in over 12 nations. With major emphasis on taking care of the needs and expectations of customers by understanding their culture, Tesco ensures that it provides its customers with the best shopping experience and treats the customers with much respect.
Founded in 1919, Tesco has made significant steps in transforming into an innovative organization with multiple retail stores consistent with the culture of consumers. The company deals in a wide range of products and services including insurance, banking, food stores, electronic and clothing lines such that diversification plays a critical role in sustaining its profits levels. The global success of the company is therefore attributed to the ability to remain competitively superior by fulfilling the needs of the foreign customers who always look out for firms that have the capacity to provide them with superior products.
India is a preferred target market for Tesco considering the growth in the economy and the population of the nation. The Indian market is still fresh compared to saturated markets such as United Kingdom and the US where Tesco has been operating for a longer period. With growth in the number of middle income earners in India, the market offers strategic options for Tesco to invest in. Innovativeness is key to making Tesco successful in the Indian market since modern changes in marketing strategies create the need to understand the aspects of enhancing flexibility among customers. The Indian online grocery market is on an upward trend hence implying that Tesco will have to rely on online techniques as a major technique to exploit segments in India. The food and grocery industry in India is growing with estimates suggesting the current worth to be over $385 billion while future estimates expect the worth to rise to $ 1 trillion. Competition is intense with large firms such as Amazon and Ola already operated in the Indian market. There are also small unorganized firms but their small scale operations makes them a lesser threat for Tesco in the urban settings since the latter operates on economies of scale. Modern grocery retailing in India continues to grow because of an increasing number of urban consumers who prefer shopping that the supermarkets and hypermarkets.
The young population is a key segment in the grocery industry and are often involved in bulk purchasing and repeated purchases. However, a major concern that should worry Tesco is the fact that most of consumers in India still prefer traditional retailers when it comes to daily purchases since they believe that they spend less time in terms of the shopping and billing processes. However, there are huge prospects of growth for both traditional and modern grocery retailing which implies that Tesco needs not to worry as it can capitalize on its innovativeness for advantage. Cities such as Delhi, Mumbai and Bangalore are among the modern markets Tesco could invest in since there are higher number of consumers in the urban dwellings. However, the cities only account for 30 % of the total population with 70 % of locals living in the rural areas. This then calls for considerations on diversity in languages, religions, ethnicities and culture that significantly influence customers purchasing decisions. The main issue is coping with the local grocery kiosks ‘kiranas’ that are embedded within the rural communities. The local kiosk boast of the deeper understanding of the local demographic components and the great rapport that make consumers loyal to them.
Cultural dimensions Tesco needs to be aware of in the Indian Market
Consumer culture affects the perceptions, values, trends and adoption of digital technologies in purchasing groceries from retail stores. India has witnessed major transformations in the recent years largely influenced by the changes in socio-cultural factors, preferences, norms and behavior of consumers. The modern Indian consumers are keen on gaining utility for products that offer comfort and a new form of personal fulfillment.
The middle class is improving as a result of increase in growth of the service sector, increase in per capita income that raise the disposable income that lead to demand for a wide range of goods and services mostly provided by modern retail firms. The younger group with financial independence is growing thereby enhancing the need for organizations to be able to meet the needs of the young population who prefer dynamic product offerings. Since the young customers always seek for better ways of shopping, firms are left with no choice but to offer unique shopping experiences that include reduced information search costs as well as modern shopping pleasure. The modern metro women are also shaping the consumer culture across India since women no longer stay at homes to provide household services. Women are involved in seeking for job opportunities thereby further increasing the market share across India. Postmodern consumerism has led to consumption patterns where consumers are more exposed on the digital form of communication. This implies growth in technological media such as the social media platforms that are widely used in the modern society to attract customers. The dynamic nature of the modern consumers create the need for organizations to be able to be innovative in the ways they proved information to customers. Other aspects that are raised by issues of consumer culture include; social class, gender, ethnicity and the age of consumers. The consumer culture in India has been revolutionized with the urban consumers adopting western retailers such as Tesco. However, the majority living in rural areas still prefer the unorganized retail kiosks since they believe traditional kiosks are closer to their homes, open for longer hours and offer credit to the familiar customers. The customers are also aware of the fact that the traditional retail stores delivery the groceries at no cost hence providing motivation to the customers.
However, the modern consumers are adopting the need for shopping in the modern retail stores such as Tesco while at the same time realizing the need for bulk purchasing. India has made significant steps in global diffusion of consumerism with the foreign investors playing a critical role in changing the culture among consumers. Unlike in the past where many customers were reluctant on accepting western retails formats, more Indians are involved purchasing from the modern retailers with urban population rising to over 380 million people. Traditionally, Indians lived in large extended families where women were expected to stay at homes and prepare food for the entire family. However, with the growing economy, women are finding employment with an increasing number of nuclear families creating the need for convenience in access to healthy foods.
Reliance on consumer culture to gain competitive advantage
Tesco is a global retailer of groceries with efforts to ensure operations are built on innovativeness. The fact that the modern consumers across India are exposed to digital technologies implies that Tesco could rely on its well established website and social media platforms to capture the dynamic consumers. The urban population is growing in India such that through penetration into the urban markets, Tesco will be able to fulfill the needs and expectations of the consumers. Tesco has established a reputation of assisting customers in making purchasing decision through disclosing the prices and product information on the website. The main intention is to ensure that customers experience quick search when looking for information which then motivates customers to remain loyal to Tesco. This implies that the key to maintaining a competitive advantage is through offering modern shopping pleasure to customers in the urban areas and maintaining customer loyalty.
The other key aspect to consider is that local consumers in the rural areas are reluctant on embracing products from modern retailers. This then implies that Tesco has to consider the needs and expectations of the rural consumers through offering the customer experiences that many believe could only be offered by the traditional retailers. There is need to design market orientations to cater for the needs of rural populations who form a larger part of the Indian consumers. The best ways to convince rural consumers is by bringing products closer to their homes, operating for longer hours and delivering products free of charge or at subsidized after sale prices. However, to be able to convince locals of the ability to serve their interest, there is need for Tesco to work closely with key traditional retailers in India such as Tata. Since customers are familiar with Tata, Tesco is likely to achieve higher sales in the rural areas as customers will be assured that the operations of Tesco are aimed at fulfilling the needs and expectation depending on the people’s cultural norms. Tesco will also need to work closely with the unorganized retailers in India to be able to identify with the culture of Indian consumers in the rural areas. Rural customers are important in creating continuous flow in the inventory of Tesco since they purchase dairy products, vegetables and fruits at an average three times per week. By working closely with unorganized retailers, Tesco will achieve a competitive advantage over other modern retailers such as Amazon. This is because Tesco will be able to understand what to bring to the market and the need to avoid selling of products such as meat that are against Indian religious practices. By having precise information on the consumer culture in the Indian market, Tesco is able to identify local innovative suppliers who understand the needs of the different segments across India thereby improving ability to reach out to more customers.
Innovative suppliers are important for the firms success in the foreign markets since they help in coming up with insights on the ways to fulfill the different needs of customers depending on their social class, age, religion and ethnic belonging.
Conclusion and Recommendations
Globalization has played a key role in influencing postmodern consumerism, making customers in the developing economies keen on adopting modern lifestyles. This means that firms must be able to build a higher wall around their competitors. As such, understanding consumer culture becomes a critical aspect for every organization penetrating global markets. Changes in consumption patterns create a necessity to understand social structures, gender and their effect on consumption, perceptions and the adoption of new technologies among consumers. The main concern for every business penetrating global segments is on provision of services that enhance customer value. Firms need to assist customers in making shopping decisions by disclosing prices and product information in a way that reduces information search cost on the websites. It is also imperative to provide modern shopping pleasure to the growing economies to take advantage of the increase in consumer demand and fulfill the needs of customers to lead a comfortable lifestyle.
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