Tesco in India - Essay Example

Tesco in India Table of Contents 1. Introduction 2 2. General Cultural Differences between the UK and India 2 2.1 Geert Hofstede’s National Cultural Dimension 3 3. Critical Appraisal of Different Solutions and Impacts to a Proposed Joint Venture 6 4. Evaluation of Issue of Cultural Compatibility of the Partners 7 5. Conclusion 9 References 10 1. Introduction In the recent time, multi-brand retail is viewed to be a major sector attracting foreign investment in India. Tesco has submitted an application to India's Foreign Investment Promotion Board for opening multi-brand stores in India with a plan to invest US$ $110m. Tesco is the second largest retail chain after the United States giant Walmart and is the leading retail chain in the United Kingdom. The company is involved in offering both food and non-food products to its customers. Tesco with the proposal to open multi-store in India is the first international retailer interested in penetrating the Indian market after the resolution pass by the Indian government to allow foreign investment in the multi-brand retail in 2012. The government of India has revealed its positive approach towards this initiative of Tesco. If the application is approved by the government of India, Tesco intends to enter in the country in 50-50 partnerships with the India's Tata group. Tata group owes Trent Hypermarket Limited, that majority operates Star Bazaar and Star Daily in the western region of India namely Maharashtra and its neighbouring state of Karnataka (BBC, 2013). In this backdrop, the report intends to research Tesco’s proposed international joint venture in India applying relevant cross cultural models and theories. Furthermore, with the application of cross cultural models and theories, the report intends to assess the importance of the issue of the cultural compatibility of the partners for the strategic implementation of the project. 2. General Cultural Differences between the UK and India Culture is defined as a complex set of knowledge, beliefs, perceptions, morals, attitudes, customs and any other capabilities or habit acquired by an individual as a member of society. Correspondingly, cross-culture represents the differences between the countries in terms of culture acquired by the people of the respective country (Soares & et. al., 2007). Schein (2009) regarded culture as the key source of organisational culture. Accordingly, culture affects the business in every stage of organisational operations. It is thus argued that understanding culture is of prior importance for the business particularly those intending to or operating in the foreign market. Moreover, it has been noted that corporate culture can impose serious constraints on strategy and act as an impeding factor in the course of achieving the business objectives (Schein, 2009; Rashid & et. al., 2004). It is thus crucial for Tesco to identify the differences in the UK and Indian culture for deriving considerable understanding regarding the cultural issues that may affect the business process of the proposed joint venture. In order to identify the cultural differences between cultural models and theories in this regard Geert Hofstede’s national cultural dimension has been used. 2.1 Geert Hofstede’s National Cultural Dimension It has been argued that national culture has a significant impact on the firms operating in the foreign country. However, it does not directly impact the firm but it tends to impose certain constraints on the organisational culture. In other words, it is claimed that national culture is a crucial determinant that shapes the organisational culture (Gerhart, 2008). Thus, the differences in the national culture of the UK and India are identified below based on the Geert Hofstede’s national cultural dimension. Power Distance The dimension of power distance relates with the fact the not all individuals within the society are equal. Accordingly, the UK scores 35 in power distance dimension which is relatively low as compared to India which ranks 77. In this regard, people in the UK hold the belief that inequalities in the society should be minimised while Indian people are more inclined towards valuing status and position (The Hofstede Centre, n.d.; Hannay, n.d.). Individualism This dimension deals with the amount of interdependence that a society values among its members. Observably, individualism in the context of the UK is relatively higher than India which implies that people in the UK are more concerned about themselves and the family members. On the other hand, India is categorised as a collectivist society where people place importance on group efforts (The Hofstede Centre, n.d.; Hannay, n.d.). Masculinity This dimension reveals the degree of value placed by the people on achievement and success. Correspondingly, the UK society can be found to be driven by achievement, success and competition. On the contrary, India although does not represent a feminist society but it ranks lower in terms of masculinity as compared to the UK (The Hofstede Centre, n.d.; Hannay, n.d.). Uncertainty Avoidance The UK ranks low in terms of uncertainty avoidance which implies that people in the UK are more enthusiastic and are likely to conduct the activities that are governed by low regulations. On the other hand, India ranks comparatively high than the UK which implies the people in India are more inclined towards revealing risk avoiding behaviour (The Hofstede Centre, n.d.; Hannay, n.d.). Short-Term Versus Long-Term Orientation It has been ascertained that people in the UK are short-term oriented while the people in India understand all social interactions within the context of long-term interactions (Ryu & et. al., 2009). Comparative Analysis of UK National Culture with Indian National Culture Source: (The Hofstede Centre, n.d.) 3. Critical Appraisal of Different Solutions and Impacts to a Proposed Joint Venture The cross–culture aspect of international business is ascertained to have a significant impact on conducting business in the overseas markets. In this regard, multinational companies such as Tesco are faced with certain imperative challenges arising due to the differences in interaction pattern and communication styles as well as differences in business goals and rationality (Hatmy & et. al., n.d.). It is argued that such differences are required to be taken into consideration while crafting management practices and strategies (Gerhart, 2008). Concerning the proposed market entry strategy of Tesco which seeks to establish international joint venture in India with Tata group, it may face the common challenges of managing cultural differences and cross cultural negotiation and decision-making along with inter-cultural communication. In this regard, it is vital for Tesco to place individuals in the professional and managerial rank who are trained on the skills of cross-culture communications competencies (Okoro, 2013; Deng & et. al., 2008). International management and cross-cultural communication is ascertained to be strongly related with each other. It has been advocated that both international managers and domestic managers are required to have a sound understanding of the intercultural aspects. Notably, certain imperative challenges such as miscommunication, misinterpretation, or misunderstanding can occur while opening a joint venture with Tata group in India by Tesco amid the managers due to the differences in the ethical background along with nationality. Thus, Tesco should duly consider that managers assigned with the role of rendering their services in India are adequately flexible as well as trained to adjust their communication pattern according to the foreign market (India) audiences (Plessis & Beaver, 2008; Firkola & Lim, 2003). Internal business etiquette can be considered as another major component of cross-culture which has a radical influence on the international business domain. Internal business etiquette refers to attitudes, behaviours and manners that are widely accepted in global social and business situations and is determined to have a radical influence on managers when interacting with colleagues and counterparts (Okoro, 2012). Considerable understandings regarding the internal business etiquette as well as the customs of the host nation (India) are crucial for the managers of Tesco for ensuring enhanced performance of the synergy (Lovett & Jones, n.d.). Besides, cross-cultural negotiation and decision-making is ascertained to be another critical factor necessary for ensuring success of the international business. It is argued that failure of the managers of Tesco to engage in effective negotiation and decision-making process may result in the failure of the joint venture. It is therefore essential that managers of Tesco in India need to display skills in strategic negotiations and cross-cultural interactions. Moreover, the managers of Tesco should lucidly comprehend about the complexities connected with cultural nuances and values in order to achieve fruitful result from the joint venture (Sebenius, 2009; Brett, 2000; Gulbro & Herbig, 1995). 4. Evaluation of Issue of Cultural Compatibility of the Partners It has been observed from the analysis of Geert Hofstede’s national cultural dimension that entrepreneurs tend to mature within a societal context, and their attitudes towards cooperation are likely to be affected by the underlying values existing within their society (Mark & et. al., 2000). As stated earlier, the UK ranks high in terms of individualism and moderate in masculine. Hence, it can be identified that they rely more on their own view for determining actions. At the same time, based on these dimensions, it can be ascertained that managers from the UK are often inclined towards working alone rather than in groups. Conversely, Indian managers generally depend more on the cooperation of group and are generally willing to cooperate particularly for avoiding risk situation. Thus, these differences may influence the success of the proposed joint venture of Tesco in India. In order to bridge the gap, it is essential that both the parties are engaged in deriving an understanding regarding the cultural background of each other. However, the need for Tesco’s managers is greater as they require adapting in the Indian cultural environment. At the same time, differences in conflict management can also be identified between the two varying cultures i.e. Indian culture and the UK culture. In this regard, it can be ascertained that Indians share strong collectivism and are moderate in feminine perspective as compared to the UK wherein harmony and relationships are prioritise. Notably, they may seek to resolve conflicts in an indirect manner. On the other hand, the UK ranks high in terms of individualism and masculine dimensions as compared to India and is engaged in direct and open conflict resolution or prefer to use tactics for resolving conflicts. The differences in the conflict management approach revealed by the UK and Indian culture may cause friction in between the managers of the two firms as well as between expatriate managers and the employees. Moreover, Indians rank high in the power distance dimension hence they may use less tactics for resolving conflicts while UK ranks high in the power distance thus, they may use considerable extent of tactics (Ting-Toomey, 2012; Lather & et.al., 2010). Besides, Indian managers greatly differ in terms of their perception to risks as compared to the UK managers due to the differences in the degree of uncertainty avoidance. These differences may be reflected in their decision making approaches. In this regard, Indian managers lack in terms of adventurous aspect and are more risk avoiding due to which they are deprived of availing the benefits of opportunities that may come in their way but UK managers are more adventurous and are willing to take risks particularly in developing new products and markets along with adoption of technologies (Sabri, 2012). It has been ascertained that Indian managers place importance on personal relationships and are often engaged in developing relationships with employees, while on the other hand UK managers are highly individualistic in nature and due to this feature they place nominal priority on spending time on building relationships. Culture also has a radical impact on the aspect of motivation. Since Indian managers’ value collectivism, they view that cooperation and working in a group facilitate employees to contribute their best to the organisation. On the other hand, the UK managers are individualistic in nature and believe in competition and rewards as a source of motivation (Mooij & Hofstede, 2010; Sledge & et. al., 2008). 5. Conclusion By applying Hofstede's cultural dimensions along with other relevant theories, a cultural comparison between the UK and India has been conducted which has revealed a few interesting inferences. In this regard, it has been observed that there exist several cultural issues that may impede Tesco’s proposal to open a joint venture with Tata group in India. Cross-cultural negotiation and communication differences between the two cultures are ascertained to have a considerable impact on the joint venture. Besides, differences in cultural context are also identified to raise issues pertaining to cultural compatibility. Notably, cultural differences can create conflicts amid the expatriate managers and the host managers as well as it may result in differences in the decision making process of the synergy. Additionally, the differences in the culture may also contribute to an increase in the complication associated with employee motivation. In order to overcome the challenges of cultural compatibility expatriate managers should be provided with adequate cross-cultural training for enhancing intercultural communication and they need to be flexible in adapting to the host culture along with customs. References Brett, J. M., Culture and Negotiation. International Journal of Psychology, Vol. 35, No. 2, pp. 97-104. BBC, 2014. Tesco to Open Multi-Brand Stores In India. News. [Online] Available At: http://www.bbc.com/news/world-asia-india-25417261 [Accessed April 23, 2014]. Deng, L. & et. al., 2008. A Qualitative Evaluation on the Role of Cultural Intelligence in Cross-Cultural Leadership Effectiveness. 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