Geography Unit 1, Going Global Case Study 2 - Transnational Tesco

Tesco began life in 1919 as a grocery stall in the East End of London, run by Jack Cohen (his first day's profit was £1). By 1956, the first Tesco self-service supermarket had opened in a converted cinema in Maldon. Throughout the 1970s and 1980s success followed success in the UK market. Key to the firm's growth has been a strategy of diversification into new markets, becoming a 'one-stop' shop for electrical goods, toys and home products in addition to its traditional business of food. Tesco products are usually manufactured in low-wage countries.For instance, Tesco sold Value Jeans for just £3 in 2007. Low-cost items like this are sourced via Teso agents in Hong Kong, which use suppliers in China, Thailand, Mauritius, Bangladesh, Sri Lanka and India (where Shivam, a garment manufacturer based in Fairidabad, produces clothes for the supermarket chain). Average hourly wages are only 50p in China and India, and even less in Sri Lanka, which explains why products can be sold so cheaply in the UK, driving up Sales and profits.The UK is no longer Tesco's only market. The firm increasingly sees overseas nations not just as places to source goods from, but as markets to sell its products to. After opening eastern European stores in Hungary and Poland, entry into Asian markets began in 1998. In South Korea, Tesco set up a joint venture with Korean Transnational Corporation (TNC) Samsung to found a chain of stores called HomePlus. In 2004 the first Tesco stores opened in China, where rising wealth among the elite means that there is a growing number of affluent customers. In 2007 it moved into the USA, where it is called Wal-Mart.60% of Tesco's international profits now come from Asia. In total it has over 1 250 overseas stores and employs more than 450 000 people. Over the last 10 years it has quadrupled its profits to become the UK's leading retailer and a major TNC. Worldwide sales topped £47 billion in 2006, resulting in an amazing £2.7 billion profit. Technology has also played a role, with the advent of online shopping.Is Tesco exploiting people in Asia, or helping to spread wealth? The issues are complex. Wages in factories are low, but so are living costs and many of Tesco's overseas employees are shop managers who receive good wages.Does Tesco damage the environment? Shipping goods around the world on this scale makes the firm a huge emitter of greenhouse gases, but it has pledged to reduce its impact by cutting the packaging on its own-label products. The firm's chief has acknowledged that 'these issues are of growing importance to our customers. It is sound business sense.'Is Tesco responsible for eroding local cultures by making people all over the world buy identical products? The company claims not, saying that it makes sound business sense to pay attention to local customers' cultures and to use local supply chains. For instance, Thai customers are used to shopping at traditional 'wet' vegetable markets, rummaging through piles of produce to choose what they want. Rather than forcing the European approach of neatly packaged convenient portions, Tesco stores in Thailand contain a 'wet' market. This way of adapting international stores to suit local cultures is called 'glocalisation'.Countries in which Tesco had stores in 2007, and the year they first opened them there:~United Kingdom; 1919~Czech Republic; 1996, 84 stores.~Poland; 1995, 280 stores.~China; 2004, 47 stores.~Japan' 2003, 109 stores.~South Korea; 1999, 91 stores.~Taiwan; 1998, no data.~Malaysia; 2001, 19 stores.~Thailand; 1998, 370 stores.~Turkey; 2003, 30 stores.~Hungary; 1994, 101 stores.~Slovakia; 1996, 48 stores.~Ireland; 1997, 95 stores.

Transnational Tesco