Strategic Management Assignment Example | Topics and Well Written Essays - 1250 words

Strategic Management - Assignment Example So by the time the other European retail giants realized the real benefit associated with international diversification, Tesco has already established in more than 6 international markets. Diversification itself did not stop the very problem for which Tesco decided diversify in the first place itself. The problem is depleting revenue margin in almost 70% of the international markets where Tesco has operational base. Tesco realized that the mere diversification is not going to solve the problem of decreasing level of profits from the international markets (Collinson, 1999). It quickly came up with the idea to form strategic alliance with retail giants in the international markets like Asia. Asian countries like India and China represents an untapped market segment. It is known that the propensity to buy in China is the highest among the Asian countries. Tesco realized that without the help of any local partner, it will not be able to gain the knowledge about the local demographics of these regions. Tesco’s main aim is to use the knowledge of the local demographics to improve its customer relations with the customers. The local retailers have enormous knowledge about the demographic characteristics of the land. Tesco will benefit by utilizing the knowledge of the local retailers. 2.0The benefits arising out of the international strategic alliance 2.1Supply and distribution channel Presently there are more than 3000 local retailers in China. The local retailers range from medium to small scale enterprises. Apart from these there are about 5 big retailers who have considerable influence over the local markets. Through the use of these local retailers Tesco can gain an upper hand in the supply and the distribution channel. Tesco can use the supply and distribution chgannel of the local retailers to procure the raw materials and supply the products. This leads to cost cutting (Soh P. H., 2003). If Tesco is not utilizing the supply and distribution networks of the local retailers then it will take months before Tesco can finally realize what works and what does not work in the supply and distribution channel. 2.2 Launch of products under own brand name The local retailers have set up outlets in the posh areas where the buying propensity of the local people is comparatively more than the other regions. The strategic alliance equips Tesco with the ability to utilize the same outlet to sell the Tesco products or can even partner up with the local retailers to sell combined products. Tesco can also set up its own outlet and sell the Tesco brand products or the local products. In United Kingdom Tesco is a home grown brand where the people have some perception of the brand value. So when new products are launched under the brand name Tesco, customers can easily identify the products with the brand image of Tesco. While in Asian countries the scenario is a bit different. The customers don’t a have very strong perception about the brand Te sco (Youssef and Hansen, 1994). If Tesco decides to produce and sell products under its own brand name, it is not known for sure, what the results might be. Through strategic alliance