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1 Exclusive summary

2 Introduction

As per Tesco (2012), Tesco is among the most famous retailers in the UK. Next to the Wal-Mart

of the U.S.A and Carrefour of France, this is taken into consideration to be the third biggest retail

chain stores all over the world. Tesco has a network covering fourteen countries all over the world

including Europe, Asia and North America and covers over 30% of the retail chain store market in

the UK.

3 Tesco Analysis

So as to understand well about the strength, weakness, opportunities and threats, carrying out

SWOT analysis is really essential, via which it is understandable how Tesco is implementing in the

market.

Strengths: Tesco appears to be an influential retailer in the market. It is famous as a corporation

which is worth for money, extremely well-located with a variety of cargoes of all kinds, every

product at one same premise. TESCO owns an extremely secured market stand in the worldwide

marketplace. Tesco as well made the expansion into various chain stores for example Tesco Metro,

Tesco Express which helped it to become much more accessible to the clients. Due to the size and

abilities, Tesco purchases wholesales, which is to say they make the most use of economies of scale.

This means that they could reduce their prices whenever they want so as to maintain attractive prices

and stay competitive with chain stores like Asda or Sainsbury. Via the creation of loyalty packages

for example club card, they win loyal clients which is essential and as a result, they become a

lucrative corporation.

Weaknesses: Bad debt from credit cards did impact a lot to the finance yield of Tesco and to a large

number of household insurance zones. As well by attempting to approach new markets except food

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sector for example books they are confronting difficulty since there are firms which have become

specialized for a long time in this section for example Amazon which could offer nicer service and

get more loyalty from clients in this section. Recently Tesco has been putting effort in several online

sales. Nonetheless, to set up online sales like other top online stores, it is necessary for Tesco to

make investment of a great deal of cash for the new website technologies, in which Tesco is in

shortage of free cash for the time being since they own a large sum of debts which might become

negative owing to the increase of interest rates.

Opportunities: Tesco has many chances. They had better stay attached to the tactic which they are

pursuing for the time being in terms of approaching new markets with new goods. Great chances are

on the Internet since Tesco is putting a lot of its efforts on meeting the requirements of the clients. As

well establishing brand names like Tesco value or Tesco finest which are aimed at desired group of

individuals who might be capable of buying in Tesco. Additionally, there is still prospect to grow

Tesco brand in Asia as well as other foreign markets.

Threats: A sizeable threat which is facing Tesco is the buyout of Asda by Wal-Mart. The reason for

this threat is due to the fact that Wal-Mart appears to be the biggest Global Competitor and thus owns

the needed expertise, resources, understanding and funds to make Tesco at difficulty. A chief threat

to the existent expansion tactics of Tesco is the state and the Monopoly and mergers commission. As

well there occurs an Emerging public worry and frustration that Tesco is creating threat to the

smaller retail chain stores. The smaller shops are vanishing owing to the development of

supermarkets and several persons find this bothersome. Therefore it indicates to the society and

legislation also.

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4 Industry/ sector analysis

4.1 Supermarket revolution

Below similar driving forces have led to the supermarket revolution in Asia, just like in other

areas: on the demand size by yield increase and urbanization and on the supply side by foreign direct

investment (FDI), format diversification to match the demands of each consumer segment,

competitive domestic investments, and implementation scheme modernization to lower costs.

Nonetheless, some issues appeared to be distinct in Asia. Particularly for third-wave nations – China,

India, Vietnam – the tendencies have become even more extreme and speedier. The third-wave

economies in Asia as well own proactive government participation in the growth of economy. In

China and Vietnam, and to smaller extent India, government investment in modern retail offered an

influential first fillip to the transformation. Even though supermarkets in other areas finally shifted

from the first urban base to rural markets and from the first providing of primarily processed

foodstuffs and clips into fresh manufacture, in Asia, particularly in the third-wave economies, such

transformations have become faster. Modern retail, either in modern – private or government

variants, has adjusted to formats to approach countryside premises, from time to time (as in India)

linking with services agriculturalists. Next of kin to the US and Latin America, Asian supermarkets

have previously begun their penetration of fresh manufacture markets, maybe due to the particular

vitality this gets for Asian clients. The connection of fast retail alteration and supply-side restrictions

requests connecting modernization of operating schemes in ways implemented in other areas

(distribution centres and networks, favoured provider schemes, utilization of dedicated wholesalers,

and private standards) and adjustment to conventional supply chains, concerning growth of

connections with wholesale markets. Further than this double method is the increasing presentation

of creative operating scheme and supply chain modernization resolutions by agribusiness firms,

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occasionally in association with state and donors, for example with countryside business platforms

and hubs.

4.2 Motives and Objectives

With a population of over 3.2 billion, there are a lot of prospects offered in Asia; therefore Tesco

has set up solid base in primary markets.

Therefore, the business ventures of Tesco in Asia will be making an influential dedication to the

firm aimed progress in Group ROCE.

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Key message

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Opportunity: Asia – along with its big and developing population and gradually lucrative

clients – will become an influential driving force of long term development and yields for

Tesco

Scale: There has been complicated and lucrative business venture of scale established in

three markets – Korea, Thailand and Malaysia

Growth: There have been outstanding expansion prospects for the company in Tesco three

top Asian markets yet with China and India they own development prospect on a totally

new scale

Foundations: In China the biggest Asian market – there has been solid bases established on

which they are growing a business venture for a long-term lucrative development

Property: A solid property tactic assists the success in Tesco three dominant Asian

markets. In China the Life space malls might aid Tesco to accomplish the vision of turning

to be the Best Retail Chain Store in China and might as well set up influential value from

property growth.

People: Tesco owns solid teams in the every corporation Asian business ventures with a

nice mixture of regional skill and global experience. It is shown from the new Asian

Academy the promise to develop the people.

5 Country Analysis

5.1 Overview

As can be seen from table 1 is the comparison of the performance of Vietnam supermarket

industry to that of other economies in Asia.

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In Vietnam retail market is developing at such an amazing pace, beyond surpassing a lot of other

countries all over the world, following just India and Russia. This region got a great deal of

investment from overseas, and the market is definitely set with the inauguration of a lot of trading

centres and bigger stores. The retail market in Vietnam might be unevenly separated into six kinds of

modern distribution with particular features, comprising including hypermarkets, supermarkets,

commercial centres, shopping centres, convenience stores and specialty supermarkets.

Hypermarket is expansive retail facility that covers a huge amount of kinds of goods –

groceries as well as non-groceries stuffs. Instances of hypermarkets are Loblaw and

Superstore (Canada), Fred Meyer, Meijer and Super Kmart (US), Asda and Tesco (UK),

Carrefour and NTUC Fairprice (Singapore), just to name some. The only brand name of

hypermarkets in Vietnam is Big C. Metro & Carry stores seem to be a hypermarket but it

is not. Metro’s consumers are primarily industry and wholesalers whilst the end-users are

clients of hypermarkets.

Supermarket, whose retail price is a little bit more in comparison with a hypermarket, is

better suitable for weekly shopper. In Vietnam, several of the most well-known

supermarket names are: Intimex, Co.opmart, Fivimart and Citimart. In Vietnam, more or

less same products and services are offered in supermarkets. Several provide regular

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purchaser card, with which consumers might earn points to be deducted on their next

buying.

Department stores trade luxury goods for example clothing, shoes and hi-class electronic

devices with brand names. In HCM City, Parkson and Diamond Plaza appear to be the two

most famous department stores whilst in Hanoi City Vincom, Trang Tien Plaza, Grand

Plaza, the Manor and the most recent one – Parkson are the most well-known ones.

Shopping malls are comparatively new concept in Vietnam, which might comprise of a

hypermarket, a supermarket, a department store, a cinema and special stores. Lotte Mart

in HCMC’s District 7 might be competent as a shopping mall, and there is as well a Lottle

Mart being constructed in Hanoi. In convenience stores daily demand for sundry stuffs is

served, and such stores might be sought out in every street. It is simple to buy water bottle

or other trivial stuffs for example toilet paper, shampoo, tissue and you-name-it.

Convenience stores in Vietnam are struggling with roadside stalls and conventional

markets: Co.opFood stores under the Saigon Co.op store system, G7 Mart and Shop & Go

can be listed as convenience stores. Nonetheless, it is the nameless convenience stores

which still establish the main part of the retail market in Vietnam.

5.2 Drivers of Change of the Retail Industry in Vietnam

The government’s control: Taking the role of representatives of the Ministry of Industry and Trade,

the Ministry is renovating the master strategy to boost up Vietnam’s trade 2009-2015 and direction to

2015 with the goal of growing infrastructure schemes in an appropriate duration of 2009-2015

material to establish an environment much more preferable, more civilized and more modern,

progressed business environment, market growth, comprising of organizing the retail market. Fixed

targets retail sales increase more than eighteen per cent in the duration 2010-2015 and raised to the

peak level is over 20 per cent annually in the following years. Along with the aid from the state and

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preferable client trust will expose new opportunity for retail chain stores in Vietnam. Conventional

retail channels will go on dominating the market place, yet state determination to permit 100 per cent

approach to overseas retail chain stores under WTO commitment will drive modern retail to

recognize impractical development (RNOS, 2009).

Consumer behaviour: Shoppers have favoured accessible hours and premises, wonderful services

and rational prices. It is the cause explaining why retail stores fight in searching well-situated places

and great quality and steady source of products.

The boom of FDI in Vietnam: The market of 86 billion of population appears to be a big pie which

a lot of foreign companies cannot keep their eyes off. This was obviously apparent in the actions of a

lot of players when they set up for the foreign penetration by targeting at offering more wonderful

service, improving goods quality, executing more marketing activities and reinforcing connections

with regional partners.

In the coming phase, there will be a lot of opportunities coming to the retail market in Vietnam. The

cause is that once clients have gone through the theory of “tighten consumption” during the

economic recession (VOV news, 2010). Aid from state and preferable consumer confidence will lead

to optimistic view for retail chain stores in Vietnam. Conventional retail channels will go on

dominating the market, yet the state determination to permit 100 per cent approach to overseas

retailers under the WTO promise will direct modern retail to recognize impractical development. The

new tendency for the retail market will be alliances via an accumulative speed of mergers (SIS

International Research, 2010). Although more than 70% of the population in Vietnam residents in the

countryside, retail chain stores have not been capable of approaching this market. Domestic retail

chain stores tend to penetrate to the markets in the countryside via setting up productive distribution

channels. Main elements which will add up to their accomplishment comprise of premise, provision

and the amount of purchasers.

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6 Analysis of regional organization

Vietnam has become among the speediest developing retail markets all over the world for the past

ten years. Here there is the mixture of young demographics, economic development and consumer

community provides prospects for global brands of goods and services. Altogether with the more

conventional licensed distributors, and a growing amount of franchises, joint venture and 100 per

cent foreign owned retail operating activities are turning to become an element of the regional

scenery. Nonetheless, to establish in the retail sector still means overpowering substantial obstacles.

Cautious understanding of the type of market approach and the legislative problems which emerge

for each are a critical pre-provision for an effective penetration of Tesco into the supermarket field in

Vietnam. Below are the ten most critical matters to take in to consideration:

Form of Doing Business: Via arm’s length licensed distribution and franchising

preparations it becomes definitely simpler for market penetration instead of an invasion

via a wholly owned retail subsidiary.

The Licensing Process: Licensing for foreign owned retail chain stores to establish their

own 100% foreign owned operations appears to be particularly difficult. The procedure is

greatly “front loaded” with regard to require the applicant to arrange every applicable

operation, finance, and other business venture and legislative plans in the first applying

phase.

Real Estate/ Premises. At least, a fixed assurance from a landlord for leasing space for the

retail actions of the foreign company is requested for the licensing procedure. Nonetheless,

due to Vietnam’s land law, it is extremely critical to check the legal ability and right of the

landlord (in fact, this is mandatory to show proof of that for the licensing procedure). Land

disputes are dependent on the exclusive jurisdiction of the regional courts – arbitration

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might not become a practical choice in terms of leases – yet the ability of regional

landlords to take into consideration in detail every related problem beforehand is missing.

Intellectual Property Protection. An effective retail operation stimulates copy cats, thus it

pays to arrange in advance and assure that every related trademark and domain name is

secured.

Consumer Protection: Recently Vietnam has employed a lot of global rules of consumer

protection into its domestic law and these are stably being executed via executing

regulations. Compulsory statutory warranties return and substitute policies are necessary to

be considered to prevent public relations issues.

Regional and Multilateral Market Integration: Vietnam has been proactively following a

strategy of developing economy basing on economic association with the international and

particularly the regional economies. This displays itself in an insistent usage of bilateral

and multilateral trade consensuses.

HR and Employment: Being a socialist country, Vietnam’s labor laws – lately revised and

still experiencing definition via executing regulations – are defensive to staffs.

Tax and Customs Duties: Wholly owned subsidiaries are “related parties” so as for transfer

pricing regulations, thus the selling and buying sharing between foreign parent and

Vietnam subsidiary might be severely inspected.

Online Sales, Data Privacy: Online sales are beginning to launch in Vietnam excluding the

nation’s still low ratios of credit card invasion, owing to its extremely high proportion of

the usage of internet.

Advertising and Marketing: Advertising and marketing practices are severely controlled

in Vietnam, so as to keep the State’s common viewpoint to management of the media and

social activities.

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7 FMSS/Mode of Entry and recommendation

In the coming phase, there will be a lot of opportunities coming to the retail market in Vietnam.

The cause is that whilst clients have accepted the theory of tightening consumption during the

economic recession (VOV news, 2010). State aid and preferable consumer confidence will lead to

optimistic view for retail chain stores in Vietnam.

Tesco is suggested to employ the joint venture method to be the market penetration mode to

Vietnam. This kind to market entrance is famous to offer influential understanding in terms of

clients, rules and contacts, particularly inside specific business environments. It is notorious three

types of joint venture appropriate for Tesco in Vietnam: (1) official joint venture; (2) unofficial joint

venture; and (3) renting joint venture.

Firstly, the establishment of the certified joint venture was performed which led to foreign

retail chain store’s officially funding capital to establish a third firm with a local partner.

This method has shown good results, not just the instance of Big C (Cora) and Seiyu

supermarkets in the “transitional” phase, yet as well in the “globalization” phase, whilst

the JV method turned out to be not so of a pre-requisite for market approach, with the

adores of Lotte mart, Circle K, Big C, SPAR and Familymart using the tactic. Nonetheless,

such preparations usually resulted in connections with a lot of local partners and

sometimes resulted in quite complex types of possession which are obvious from one

instance in the appearance of Vindemia’s partners.

Secondly, operators inside Vietnam might have followed informal joint ventures. Taking

into account of the free nature of such expansions, it is severe to accomplish accurate

details – nonetheless, in the report, it is proposed that several retail chain stores tactically

leased places in trade centers possessed by local firms and set up stores without getting the

authorized allowance of the related authority. In the circumstance of the Big C outlet in the

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Go Vap District of HCMC, the authorities did confirm that they would not offer a license

for a 100% owned foreign company. As a consequence, there was the development of a

Big C unit, in the whole except for name, since the outlet was concealed by the name of

the trade center possessed by a domestic company. The Big C website did not reveal this

unit till the end of 2009 whilst it came to the relaxation of the rules.

Thirdly, operators who have followed joint ventures inside Vietnam through the first rental

of stores with the short-term usage of a partner’s store fascia prior to later varying their

name to a favored retail brand name – a method employed by Hong Kong based retail

chain store, Dairy Farm. In July 2006, Dairy Farm got licenses to open chain stores in

Vietnam taking the role of a wholly foreign-owned enterprise. Being a member of Dairy

Farm International Holding Limited, Singapore’s Giant South Asia Investment Pte did

establish an enterprise called Giant South Asia (Vietnam) Ltd. with investment capital of

US$5 million to set up a chain of stores on the current locations of Citimart supermarkets.

The corporation got the permission to improve and control three Citimart supermarkets in

HCMC, one in Can Tho City and another in Kien Giang province. Nonetheless, the firm

could not develop other brand names further than the Citimart Fascia. The opening of the

initial store was done in Ho Chi Minh City in August with 10,000 SKUs, of which 90 per

cent were domestic. By using such approach, the company achieved a critical grip in the

market previous to regulatory relaxation which will help the retailer expand its own

Welcome brand and pull its competitiveness in the marketplace. Nonetheless, by the end

of 2010, just three supermarkets were opened under the Welcome banner by the retailer.

Taking Metro Group as an example, this retailer has approached the market using a 100-

percentage owned “cash & carry” implementation which technically requested clients to

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become wholesale buyers. On the other hand, if using this kind of investment, the retailer

got not permission for direct import into Vietnam.

Basing on the comprehension about the supermarket field in Vietnam, it is supposed that Tesco

take into consideration the below competence elements for the evaluation of the competence of their

supermarket chains in Vietnam, looking from the viewpoint of the clients:

In terms of position matters, this comes up as one of the initial concerns which influence

the competency of the supermarket chains, since motorbike has nowadays been the most

popular way of transport in Vietnam, it is as well the most usually employed for clients to

go shopping. Traffic convenience: In the modern environment, traffic convenience has

become a principle advantage which shoppers keep their eyes on. This is particularly

correct for a developing market like Vietnam in which it comes to under growing stage for

infrastructure. The provision of retail space yet gets restricted and a lot of shopping centers

are coping with the issues of parking services. Owning a suitable parking service will help

the retailers in Vietnam market enhance their competency.

Friendliness of salespeople: It becomes particularly a critical element of competency of

supermarket chains in Vietnam in terms of Vietnamese distinctiveness of being sociable

and kind. It is as well an extremely essential competitive element of supermarket chains

whilst Vietnamese clients take great consideration in terms of the quality of goods in

outlets. Moreover, dirt free and relaxing air and well-organized decoration will draw the

attraction of the clients to a retail chain store and therefore influence the competency of an

outlet.

Promotional programs: Generally speaking, Vietnamese clients take into great

consideration with regard to promotion programs whilst doing shopping in supermarket. In

some sides retailers receive much benefit from sales promotion tools. For instance,

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promotional tools are usually employed to generate unintentional buying; stimulate clients

to buy non-promotional products; speed up the amount of shopping visits to the outlet, or

enhance the clients of stockpiling, resulting in a decrease of the inventory costs for the

retail chain stores.

Competitive price: As per Vietnamese clients, it is indicated that they find attraction at

competitive rates whilst selecting supermarkets to go shopping. Low prices, maybe price

promotions or common price levels, might set up outlet traffic and raise category selling

volume. At any markets, price and quality are seen to be the principle elements in the

competency of the outlets. This is particularly correct for a developing market like

Vietnam that owns a powerful buying capacity but restricted capital.

Wide collection of products: A variety of set of goods might help to lower the supposed

costs (e.g., transportation time, attempt) in association with every shopping visit and

reduce the shopping role (e.g., via stimulating comparison shopping). In a supermarket

which provides a wide range of goods might enhance shopping ease and clients find it

simpler to mix their shopping with various outlets and thus might accumulate the

competency of shopping at supermarket.

8 Conclusion