Supply Chains.
Question one.
Walmart might counter the actions of Tesco by planning alternative store initiatives across the world and creating barriers to the US market entry for Tesco. Clearly, Tesco has higher market significance in all markets shared with Walmart (Hill, 2012), but Walmart can maintain and raise its market shares in these markets by establishing small stores in local towns both in the US and across the globe. Establishment of small supermarkets in local towns can create important outlets for local populations that might be underserved by Walmart. By using small supermarkets, Walmart could gain a wider reach of the unexploited markets in countries where Tesco has already scooped the major cities. In the US for example, Walmart is yet to establish small or large stores in about 25 major cities including Arlington, New York City, Detroit, and San Francisco, amongst others (Ausick, 2014). These towns have significant numbers of shoppers who cannot be reached by Walmart, and they form a significant target for countering Tesco’s actions. Such reaction by Walmart can record significant success because the company has an already well-established supply chain management system that is necessary for the immediate establishment of small stores, branches and supermarkets in local towns to counter Tesco’s actions. By establishing supermarkets in these cities and replicating the same in other countries apart from the US can go a long way in strengthening Walmart’s global leadership against Tesco’s presence.
The second way through which Walmart might counter Tesco’s actions is by creating market entry barriers in the US market. Tesco has already indicated the plan to enter the US market even though the plan was temporarily halted by economic recession (Hill, 2012). In this case, Walmart can use its Pioneer advantage to strengthen its competitive advantage in order to reduce odds of Tesco’s success in the US market after entry. In this case, Walmart can adopt three strategies to hurt Tesco’s US endeavors. One of the strategies is the further reduction of price in America. Currently, Walmart is among the cheapest stores in the US, but there still is room for a price reduction to safeguard and increase its market share in the country (Kalyanaram and Gurumurthy, 1998). By reducing, the prices Walmart could attract new customers besides retaining the existing ones and bar Tesco from recording significant market share upon entering the US market. The second strategy that could be applied by Walmart to make it difficult for Tesco to enter the US market is by improving its products to gain further focus in different market niches in the US.
For example, Walmart may adopt incremental innovation to improve the existing products to cater for specific needs of existing consumers in the US and attract more consumers. Such a reaction could deny Tesco an opportunity to hurt the market share already held by Walmart in the US (Kalyanaram and Gurumurthy, 1998). If Walmart uses this strategy to attract more customers, it could make it difficult for Tesco to gain significant market share upon its entry into the US market. The third strategy that Walmart might use is to target new geographical markets for its products. The US market is almost mature, and therefore Walmart may not record significant growth by intensifying its operations in the country. As a result, it may not counter Tesco’s actions without expanding its reach to the emerging markets in South America, East Asia, and Africa. By aiming to gain leadership in the emerging markets Walmart could create a competitive advantage against not only Tesco but also other globalized grocers.
Question two.
Walmart would be less vulnerable to competition from a non-food retailer that employs similar strategies to Tesco’s because of several reasons. One of the reasons is that private labels employed in Tesco’s strategy are less popular compared to brands, and this could be replicated in food versus non-food business (Quelch and Harding, 1996). Popularity private labels differ depending on the prevailing economic conditions, where they become popular during economic recessions, but the popularity reduces at the end of economic downtime. In the US, the private-label market share averaged 14 percent, with a peak of up to 17 percent in such economic recessions as the 1982’s and 2008’s. It is also difficult for a non-food retail business that uses private labels to win a competition against Walmart because of the interference placed by brand manufacturers.
In the US, for example, 50 percent of the brand manufacturers also make private-label goods. On the other hand, Walmart’s brand name would take on the Tesco’s format of non-food business with ease because of the already existing solid foundation. Such a foundation is difficult to break for Tesco’s lookalike because Walmart has already developed consumer equities over long periods of product promotion as well as consistent delivery of quality. Another reason that would create an advantage for Walmart’s business competition from Tesco’s lookalike non-food business is the complementary nature of brand strength and economic strength. During economic downtimes, private labels may have an advantage that would be overcome by brands immediately after the economic recession as a result of the favorable economic conditions (Quelch and Harding, 1996). However, if the new rival presents better quality as well as diversified categories, it could overcome the brand strength of Walmart.
Question three.
Tesco’s plan to expand enter the US market was slowed down by global economic recessions. The harms of the global economic recession might have been more pronounced on Tesco as compared to Walmart as it could have been difficult for Tesco to raise the capital required for the plan. During the economic crisis, both capital expenditure and capital investments fall sharply, and this hurts a business’s ability to raise capital for expansion purposes. In such a cause, the smaller businesses are affected more than, the larger ones, and thus economic recession might affect Tesco’s capital accumulation endeavors more than Walmart’s because of their size differences. In situations where, the company wishes to raise capital from external sources a difficulty of getting enough for investment is imminent because of the limited access to disposable income in the public (Iron, 2009). Another reason that slowed the Tesco’s endeavors to expand to the US, and that might have affected Tesco more than Walmart is the public buying capacity. During the economic recession, the amount of money in the circulation is low, and products may have to stay a little longer on market shelves without finding suitable buyers. As a result, any investment made during the economic recession may require a longer time for payback (Kilmister, 2008). This problem escalates further if the business is a startup or is a new branch in a specific country and therefore Tesco would have been affected by the economic recession more than Walmart if it executed the plan in the US.
References.
Ausick, P. (2014). Eight Largest Cities without Walmart. Retrieved July 12, 2016, from http://247wallst.com/retail/2014/06/16/eight-largest-cities-without-walmart/
Hill, C. W. L. (2012). International business. New York: McGraw-Hill Professional.
Iron, J. (2009). Economic scarring: The long-term impacts of the recession. Retrieved July 12, 2016, from http://www.epi.org/publication/bp243/
Kalyanaram, G., and Gurumurthy, R. (1998). Market Entry Strategies: Pioneers versus Late Arrivals. Retrieved July 12, 2016, from http://www.strategy- business.com/article/18881?gko=64116
Kilmister, A. (2008). The Economic Crisis and its Effects. Retrieved July 12, 2016, from http://www.internationalviewpoint.org/spip.php?article1581
Quelch, J., and Harding, D. (1996). Brands versus Private Labels: Fighting to Win. Retrieved July 12, 2016, from https://hbr.org/1996/01/brands-versus-private-labels-fighting-to-win
