David Hughes
Professor of Agribusiness and Food Marketing, Imperial College, London
• “they’ve got nowhere else to go. Their
domestic markets are saturated, so they are
looking for countries with large populations,
high population growth, per capita GDP
edging toward consumer levels, high income
levels, and low supermarket presence.
Countries with all five of these characteristics
are a good bet, and companies rush to get
there before everyone else.”
Tesco
UK
1. Main competitors
2. Tesco’s market share
International expansion strategy
1. Why?
2. Where? [USA; Poland; Slovakia; Japan; South Korea;
China]
3. How?
Market share
Total Grocers
Tesco
Asda
Sainsbury’s
Morrisons
The Co-operative
Waitrose
Somerfield
Total Independents
Iceland
Aldi
Lidl
Netto
April 2009
%
100.0%
30.6%
17.2%
16.3%
11.5%
4.4%
3.8%
3.3%
2.5%
1.8%
2.9%
2.4%
0.7%
Tesco in Japan
• 2001-03: research in retail markets and
consumer purchasing patterns
• Entry in2003 by acquisition: bought a
Japanese discount supermarket chain with 78
stores using brand name Tsurukame
• Continued expansion through acquisition
Tesco in Poland
• Entry in 1995
• Now has 100+ hypermarkets
• 2006 bought 220 convenience stores from
Casino [a French rival]
2005
Vodafone buys into India's Bharti
Vodafone Group, the world's
biggest mobile phone company,
has agreed to buy a 10% stake in
Indian firm Bharti Tele-Ventures
for $1.5bn (£841m).
2007
India now Nokia's second market
Mobile phone maker Nokia
says India has overtaken the
US to become its second
largest market in terms of
sales.
2005
Vodafone buys into India's Bharti
Vodafone Group, the world's
biggest mobile phone company,
has agreed to buy a 10% stake in
Indian firm Bharti Tele-Ventures
for $1.5bn (£841m).
2007
India now Nokia's second market
Mobile phone maker Nokia
says India has overtaken the
US to become its second
largest market in terms of
sales.
Why have companies such as Vodafone and Nokia chosen to
target developing countries as a source of revenue?
To examine the meaning of global sourcing and its impact on different stakeholders
Benefits And Risks Of “Make” v “Buy”
“Make” - insource
“Buy”-outsource
Benefits:
• Low risk of intellectual capital loss and
technical know-how
• High level of control
• Cost savings retained in the business
Benefits:
• Guaranteed and significant cost reductions
• Focus on core competencies
• Supplier will get Increased scale advantages
from having many clients
Risks:
• Large investment required to establish
infrastructure, technology and personnel
• High systems/technology maintenance costs
Risks:
• Higher risk of loss of intellectual capital and
technical know-how
• Costs savings shared with supplier
To examine the meaning of global sourcing and its impact on different stakeholders
Make v. Buy Decision
Pressures to Insource/Outsource
Outsource
Insource
High value added
High levels of control required
High risk/uncertainty
Low value added
?
No need/desire to control
Low risk/uncertainty
To examine factors which have made increased globalisation possible
What is Globalisation ?
The increased freedom and capacity of
individuals and firms to:
 undertake economic transactions with
residents of other countries
operate on a global scale
To examine factors which have made increased globalisation possible
Examples of Globalisation
Firms moving to lower cost locations
People moving to higher wage locations
Goods moving more freely around the
world
Information moving more freely around the
world
To examine factors which have made increased globalisation possible
Permissive factors
Improvements in transport links
Improvements in communication links
A reduction in official obstacles/barriers and
costs in conducting business with foreigners
To examine factors which have made increased globalisation possible
To examine factors which have made increased globalisation possible
Containerisation
To examine factors which have made increased globalisation possible
To examine factors which have made increased globalisation possible
Permissive factors
Improvements in transport links
Improvements in communication links
A reduction in official obstacles/barriers and
costs in conducting business with foreigners
To examine factors which have made increased globalisation possible
To examine factors which have made increased globalisation possible
To examine factors which have made increased globalisation possible
Permissive factors
Improvements in transport links
Improvements in communication links
A reduction in official obstacles/barriers and
costs in conducting business with foreigners
To examine factors which have made increased globalisation possible
Average Tariffs
in Industrial Countries
50
40%
40
30
20
15%
10
4.5%
0
Post. War
1960's
Now
• The WTO deals with the rules of trade between
countries
• It developed from the General Agreement on
Tariffs and Trade (GATT)
• WTO agreements set the ground rules for
international commerce
To examine factors which have made increased globalisation possible
Since WW2 there has been an exceptional
growth in world trade.
Total trade in 2000 was 22-times the level of
1950.
The ten benefits
1. The system helps promote peace
2. Disputes are handled constructively
3. Rules make life easier for all
4. Freer trade cuts the costs of living
5. It provides more choice of products and qualities
6. Trade raises incomes
7. Trade stimulates economic growth
8. The basic principles make life more efficient
9. Governments are shielded from lobbying
10. The system encourages good government
1.
How does trade help
a. firms stay competitive
b. consumers improve their living standards
2.
What does ‘liberalisation of world trade’ mean?
3.
How does the ‘safe harbours’ example illustrate the work of the WTO in making
trade easier?
4.
What is a boycott? Would it be a good idea to boycott goods made by child
labour?
5.
What is meant by trade sanctions? What examples are there of trade sanctions
having been used?
To examine factors which have made increased globalisation possible
the impact of reduced trade and other barriers in the EU
The European Union
the impact of reduced trade and other
barriers in the EU
the impact of reduced trade and other
barriers in the EU
Japan, the EU, and the USA
130m
500m
the impact of reduced trade and other
barriers in the EU
300m
Trading within the EU bloc
Benefits of trading blocs
The economies of scale
argument
Greater efficiency
argument
Consumer benefits
Problems with trading
blocs
The Common External
Tariff
‘We pay more for our
food’ argument
Protection imposes costs
upon others and is
inefficient
the impact of reduced trade and other
barriers in the EU
Trading within the EU bloc
Benefits of trading blocs
The economies of scale
argument
Greater efficiency
argument
Consumer benefits
the impact of reduced trade and other
barriers in the EU
Trading within the EU bloc
Problems with trading
blocs
The Common External
Tariff
‘We pay more for our
food’ argument
Protection imposes costs
upon others and is
inefficient
the impact of reduced trade and other
barriers in the EU
Trading within the EU bloc
Benefits of trading blocs
The economies of scale
argument
Greater efficiency
argument
Consumer benefits
Problems with trading
blocs
The Common External
Tariff
‘We pay more for our
food’ argument
Protection imposes costs
upon others and is
inefficient
the impact of reduced trade and other
barriers in the EU
Different views
UK interests best served
within the EU
[1973 position]
UK should leave the EU
[pre-1973 position]
the impact of reduced trade and other
barriers in the EU
Different views
The European market in
goods, labour and capital
[1993 onwards] has
benefitted the majority of
Europeans
The EU should be just
about free trade in goods
[pre 1992 situation]
the impact of reduced trade and other
barriers in the EU
Different views
The EU single market
works best with a single
currency [the euro since
2002] and a European
Central Bank which sets
interest rates for the
Eurozone.
The European single
market in goods, labour
and capital [1993
onwards] has benefitted
the majority of Europeans
the impact of reduced trade and other
barriers in the EU
Different views
The European single
market needs to integrate
further by introducing tax
harmonization
The EU single market
works best with a single
currency [the euro since
2002] and a European
Central Bank which sets
interest rates for the
Eurozone.
the impact of reduced trade and other
barriers in the EU
the impact of reduced trade and other
barriers in the EU
the impact of reduced trade and other barriers in the EU
The European Union
the impact of reduced trade and other
barriers in the EU