Module code and title: |
Business Environment - GBEN3005 |
Module leader: |
Md Asif Iqbal
|
Assignment No. and type: |
1500 word written Report (individual) |
Assessment weighting: |
100% |
Submission time and date: |
Sunday 6th October 2024 23:59 |
Target feedback time and date: |
Sunday 27th October 2024 23:59 |
Student Name:
Student ID.:
Total Word Count: 1500
Executive Summary
In this study, there has been an assessment of the external environment of the market of the USA. This has been followed by the assessment of the competition in the same for the company Tesco to be able to expand in the market. The challenges which can be encountered by the company in the USA have been noted and recommendations have been provided for the company to be able to overcome these issues. It has been understood that the market of the country is lucrative and Tesco will be able to have a good scope for growth. For this, they have to understand the business regulations, issues with the supply chains and the expectations of the customers.
Introduction
This report is an analysis of the external environment of the market of the USA will be assessed to determine whether the company Tesco can enter the market of the same. Tesco operates in the retail industry and has more than 10,000 employees working for the (Tesco, 2024). The headquarters of the company is in Hertfordshire in Welwyn Garden City. The company started of as a grocery stall when the founder Jack Cohen came back from war in 1919. Eventually, with consistent investment, the company has been able to grow and become the supermarket it is today. According to Statista (2024), Tesco has about 4,942 stores all across the world.
Figure 1: Total Number of Stores Tesco has Around the World
(Source: Statista, 2024)
Analysis of the External Environment
PESTLE Analysis
Political
According to Statista (2024), the quality of regulations index in the UK is 1.42 (The Global Economy, 2024). This indicates that the government of the USA are careful about the kind of regulations they release and the impact of the same on the people. The index of political stability stands at -0.04 (The Global Economy, 2024). This shows that the country is not particularly stable and the country is susceptible to falling in a state of political violence. For Tesco, this means that although the government of the country takes efforts to make sure that there is law and order, the enforcement of the same is not strong.
Figure 2: Quality of Regulations index of the UK
(Source: The Global Economy, 2024)
Economic
The rate of annual inflation in the USA was 8.3% in the year 2022 (Statista, 2024). This is an indication of the reduction of the power of purchasing of the USA dollars. For Tesco, this means that the rate of profit generation would be less and people would appreciate more discounts on the part of the store. According to Statista (2024), the rate of growth of the GDP of the USA was 2.5% in 2023. This shows that the economy of the country has been recovering after the COVID-19 pandemic and the company will be able to conduct business well in the market.
Figure 3: Rate of Inflation in the USA
(Source: Statista, 2024)
Social
The average disposable income of the people of the USA is £50,069 (Statista, 2024). This indicates that the people of the country have significant level of disposable income. This means that Tesco will have the scope for generating high revenues, as the people will be able to afford the services of the same if there are good discounts in the store. The population of the USA stood at 332.18 million in the year 2021 (Statista, 2024). This shows that the company will have the scope to cater to the needs of a wide range of people.
Figure 4: Average Disposable Income
(Source: Statista, 2024)
Technological
According to Statista (2024), the USA is the third most innovative country in the world. This is an advantage for Tesco, as they will be able to incorporate technology, as the same is necessary to make business easier. The rate of penetration of the internet in the USA is 97.1% as of the year 2024 (Statista, 2024). This shows that the company will easily be able to promote the company on online platforms. This could make their marketing procedures easy and the company will be able to generate high volumes of sale.
Figure 5: Rate of Penetration of The Internet
(Source: Statista, 2024)
Legal
One of the most important employment acts of the country are the Immigration and Nationality Act for foreigners working in the USA (DOL.GOV, n.d.). The Fair Labor Standards Act and Wage and Hour Division lay down ground rules on how the expectations which the companies can have from their employees. Occupational Safety and Health Act states all the workplace regulations which have to be laid down for the safe working of the employees of the country. These are some of the laws and have to be followed by the company for them to be able to manage their human resources efficiently.
Environmental
Some of the environmental laws of the USA which have to be taken into account are Atomic Energy Act of 1954, Clean Water Act, Clean Air Act and so on (EPA. GOV, n.d.). These are meant to make sure that the market is sustainable and the future generations have the opportunity to perform in the market. The company will have to follow these laws as the government is particular about adherence to these and this will make sure that the company is able to continue in the market for a long time (Neck, Neck and Murray, 2023).
Porter’s Five Forces
Forces |
Impacts |
Competition |
High |
Supplier Power |
High |
Consumer Power |
High |
Threat of Substitute Products |
Moderate |
Threat of New Entrants |
Low |
Figure 6: Porter’s Five Forces of the USA Market
(Source: Created by the Learner)
According to the ESM Magazine (2024), the most popular supermarket in the USA is Walmart, whose turnover was $421.8 billion in the year 2023. This is followed by Costco, which generated revenue of $173.5 billion in the year 2023. Some of the other popular supermarkets of the USA are Kroger, Target, Albertsons, AholdDelhaiz and so on. These companies have the chance of proving to stand in the way of the growth of the Tesco in the USA. The people of the USA are not uniformly receptive to foreign brands, which mean that Tesco will have to stand out to the customers of the country.
This indicates that the customers of the USA have a lot of power over the company, as does the suppliers. This is done to the abundance of supermarkets in the country, which provides a wide range of choices to the both. The fact that Tesco is going to be a new entry in the market means that they will have to market themselves significantly and stand out to the audience to gain popularity similar to what they have in the UK (Hamilton and Webster, 2018). This can be done by the application of discounts and other offers which would be attractive to the people. The threat of new entrants entering the market is significantly low, as this is a capital-intensive industry. The only new entrants can be other foreign supermarkets; however, they may not have the strategy to succeed in the market. The threat of substitute products is moderate due to the presence of things like corner shops, farmer’s market and so on.
Challenges of expansion in the USA
There are some challenges which can be faced during expanding into the market of the USA:
The company can initially face issues with the disruption of the supply chain and some of the causes for the same can be things like port congestion, lack of enough labour, delays in delivery and so on (Panwar, Pinkse and De Marchi, 2022). As the company is entering the market newly, it may take some time for them to smoothen and standardise the processes.
The company will have to get used to the culture of the country and this will be important, as the people will have varying expectations from the company (Akpuokwe et al., 2024). One of the things which will affect the business is the varying terminologies which the Americans have for each product. One such example is that what the Americans call chips are known as crisps in the UK and what they call fries are chips for the British. Training the staff with the culture of the company is important good service.
The regulations of the country are widely different from that of the UK and this is another thing the company have to adapt to. Some of the regulations which have to be complied with have been listed above. Other regulations which have to be taken into consideration are that of things like taxes, economic and the business policies which have been laid out by the government.
Strategic Recommendations
There are certain recommendations which can be provided to the company:
To deal with the issues of disruption of the supply chains, the company will have to be mentally prepared for all kinds of situations which may arise from the same and then allocate resources accordingly. This would be able to reduce the impact of the disruption of the supply chains (Panwar, Pinkse and De Marchi, 2022).
Studying the culture is the only way in which the company will know how to approach the people of the USA. They will have to train their employees accordingly and my even take consultations to learn about things which they are yet to learn. This will allow them to regulate their services and be popular among the customers of the country (Akpuokwe et al., 2024).
To learn about the business regulations and taxes of the country, the best method which can be adopted is seeking the services of a management and business consultant company. They will also be able to give information about the cultural expectations and there will be detailed reports on the considerations which have to be made.
Conclusion
In this study, the methods which can be used by the company Tesco to expand into the market of the USA have been noted and this has given an idea of the external environment of the country. The environment of the market of the UK has been studied, along with the kind of competition which can be expected from the same. The challenges which can be faced by the company have been listed and recommendations to overcome the same have been provides accordingly. This has given a fair idea on the considerations which have to be made by the company.
References
Akpuokwe, C.U., Adeniyi, A.O., Eneh, N.E. and Bakare, S.S. (2024)‘Gun control laws in the USA: a comparative global review.’ International journal of applied research in social sciences, 6(3), pp.240-253.
DOL.GOV (n.d.) Summary of the Major Laws of the Department of Labor. Available at:https://www.dol.gov/general/aboutdol/majorlaws(Accessed: 17 September 2024).
EPA. GOV(n.d.)Laws and Executive Orders. Available at:https://www.epa.gov/laws-regulations/laws-and-executive-orders(Accessed: 17 September 2024).
ESM Magazine (2024)Top 10 Supermarket Retail Chains in The United States. Available at:https://www.esmmagazine.com/retail/top-10-supermarket-retail-chains-in-the-united-states-238904(Accessed: 17 September 2024).
Hamilton, L. and Webster, P. (2018) The international business environment. Oxford University Press.
Neck, H.M., Neck, C.P. and Murray, E.L. (2023) Entrepreneurship: The practice and mindset. Sage publications.
Panwar, R., Pinkse, J. and De Marchi, V. (2022)‘The future of global supply chains in a post-COVID-19 world.’ California Management Review, 64(2), pp.5-23.
Statista (2024)Annual growth of the real gross domestic product of the United States from 1990 to 2023. Available at:https://www.statista.com/statistics/188165/annual-gdp-growth-of-the-united-states-since-1990/ (Accessed: 17 September 2024).
Statista (2024)Monthly 12-month inflation rate in the United States from July 2020 to July 2024. Available at:https://www.statista.com/statistics/273418/unadjusted-monthly-inflation-rate-in-the-us/#:~:text=The%20annual%20inflation%20rate%20in,available%20funds%20to%20make%20purchases(Accessed: 17 September 2024).
Statista (2024)Most innovative countries in 2023, by global innovation index score. Available at:https://www.statista.com/statistics/1102558/most-innovative-countries-gii-score/(Accessed: 17 September 2024).
Statista (2024)Per capita disposable personal income in the United States from 2000 to 2023. Available at:https://www.statista.com/statistics/710215/us-disposable-income-per-capita/#:~:text=This%20statistic%20shows%20per%20capita,16.78%20trillion%20dollars%20in%202023(Accessed: 17 September 2024).
Statista (2024)Percentage of population using the internet in the United States from 2000 to 2024. Available at:https://statista.com/statistics/209117/us-internet-penetration/#:~:text=As%20of%202024%2C%20approximately%2097.1,nearly%2075%20percent%20in%202012(Accessed: 17 September 2024).
Statista (2024)Tesco's number of stores worldwide from 2008 to 2024. Available at:https://www.statista.com/statistics/238667/tesco-plc-number-of-outlets-worldwide/(Accessed: 17 September 2024).
Statista (2024)Total population of the United States from 2015 to 2027. Available at:https://www.statista.com/statistics/263762/total-population-of-the-united-states/#:~:text=The%20statistic%20shows%20the%20total,to%20approximately%20332.18%20million%20inhabitants(Accessed: 17 September 2024).
Tesco (2024) About Us. Available at: https://www.tescoplc.com/about (Accessed: 17 September 2024).
The Global Economy (2024) USA: Regulatory quality.Available at:https://www.theglobaleconomy.com/USA/wb_regulatory_quality/(Accessed: 17 September 2024).
