Executive Summary
This paper is a market research proposal for Tesco PLC as it seeks to venture into the UAE market. This research is motivated by Tesco’s foreign market expansion strategy which has been successful in most parts of Europe and America.
In establishing if Dubai, UAE is a good market for Tesco, this paper proposes a qualitative research design that encompasses various dynamics of the UAE market. Comprehensively, the paper affirms that Dubai, UAE market is a feasible market for Tesco PLC.
Background Information
It is evident in numerous research articles that, consumers are increasingly complex and do not share a uniform behavioral pattern (Twedt 1983, p. 2). It is therefore increasingly difficult to predict customer reactions towards a given product or service.
However, the use of appropriate market research data enables managers to link internal marketing variables, external business environments and unpredictable consumer behaviors. In this regard, the common feeling of uncertainty regarding the introduction of a new product or service is effectively eliminated (Hamersveld 2007).
Many companies today are increasingly faced with the problem of determining potential opportunities or threats existing within a market (before the introduction of a new product or service). Due to this reason, many companies undertake market research to evaluate the feasibility of a potential market (with regards to the launch of a new product or service) (McDaniel 1998).
From this analysis, we see that, organizations increasingly need to know information relating to a market’s relevance and reliability (with regards to their product or service offing). However, for companies to introduce accurately their products in a potential market, they need to have accurate, reliable and valid information relating to the target market (Bennett 2006).
To undertake a correct assessment of the marketing environment, and to ascertain the best product or service strategies, it is crucial to undertake a comprehensive market strategy to ascertain the right strategy a company should use to penetrate a given market (McQuarrie 2006).
This mode of analysis is supported by the DECIDE model which articulates the managerial decision-making process as a product of six steps (Federal Aviation Administration 2008). The first step is characterized by the definition of the problem (or opportunity) a given market poses (with regards to the market opportunities several regions pose to a company) (Lakhnech 2004, p. 363).
The second decision factor is characterized by the identification of numerous business alternatives, with regards to the product or service strategies to be adopted. These strategies may be based on controllable or uncontrollable factors, but both categories should be enumerated, and information regarding each category availed to determine the possible outcomes expected (after the pursuit of several alternatives) (De Boer 2009).
After the ascertainment of these alternatives, the best criterion should be chosen after considering which alternative poses the best outcome. A feasible marketing plan should therefore be developed to implement the chosen strategy and finally, an evaluation program developed to determine the success or failure of the marketing strategy should be adopted (Mouncey 2009).
These are the motions that characterize the decision-making process, when trying to determine the best strategy to adopt when coming up with the best product or service strategy (Nicosia 2006). These variables require the use of accurate information regarding the market potential of accommodating a new product or service (ESOMAR 2009).
From the understanding of the importance of market research in the introduction of new products and services, this study seeks to carry out a research study to analyze Dubai, UAE market, with regards to its feasibility in accommodating Tesco’s products.
Problem and Motivation
Tesco has had a successful stint of market expansion in most of its European, Asian and American markets. The most recent expansion strategy was in America where the company opened its first outlet in 2007 (Best 2008).
However, the company’s expansion strategy into these new markets is part of its corporate strategy of ensuring the long-term sustainability of the company.
So far, the company has had its fair share of success in its current markets but with the growing competition in the food industry, Tesco is set to direct more of its company resources in staying above its competition if it does not come up with other ways of generating more revenue (Page 2004). This factor has initiated the exploration of new markets in the global scene to sustain the company’s growth.
It is from this understanding that an expansion into the UAE market seems highly necessary for the company. However, UAE has its unique dynamics which are seemingly very different from Tesco’s traditional markets.
UAE bears a lot of potential for Tesco’s market expansion strategy because it harbors a growing middle class which is increasingly wealthy, as a result of UAE’s robust economy which is supported by Tourism and the oil trade (Rehman 2007).
According to the US department of Commerce, the Middle Eastern market (and more specifically, the UAE) is an important market destination for savvy investors (USA International Business Publications 2007, p. 1).
The potential for a thriving food industry is even greater because most of UAE is semi-arid or arid in nature and therefore, most of the food which is consumed in the region is imported. Considering Tesco is a global company in the food industry, this fact poses a tremendous potential for the company because it is a global leader in the supply and sale of grocery items.
Doing business in the UAE is not only fruitful for Tesco, in the sense that it will have access to UAE’s seven Sheikhdoms (Abu Dhabi, Ajman, Dubai, Fujairah, Ras Al Khaimah, Sharjah, and Umm Al Quwain), but it will also have access to other regions of the world including the Persian gulf states, East Africa and other regions of the world because it is a gateway to these regions (Rehman 2007).
This opportunity provides a platform for the company’s future expansion into other regions of the world where it has never explored.
Also, considering most countries in Middle East bear similar social, economic and political dynamics, the recommendations to be provided in the UAE market research can be easily generalized for most parts of the Middle Eastern region. Considering the above dynamics of UAE and Tesco’s lead in the market, a high level of success is expected in Tesco’s venture into the UAE market.
Analysis of Success Factors
The UAE market has changed tremendously over the last few years. Its economy has become highly dynamic and the traditional reliance on oil has significantly decreased because of the emergence of other business sectors such as tourism.
The UAE is now a strong export processing zone for the wider Middle Eastern market and foreign investors willing to invest their money in the region find the market highly lucrative.
Dubai is therefore a gateway to most of the Middle Eastern region and companies which have enjoyed a high business success in this region have equally enjoyed a high level of success in the wider Middle Eastern market (Oxford Business Group 2009, p. 86).
From this understanding, experts recommend that, investors should strive to achieve a higher level of success in Dubai before they venture into the wider Middle Eastern market (Rehman 2007).
Dubai’s shift from a closely-knit economy to a diversified and liberal economy, characterized by liberal market policy is also another success factor for Tesco’s venture into the UAE market. The liberal policies support foreign direct investments in the Middle Eastern country through the reduction of operational costs, bureaucratic requirements and such like foreign trade requirements.
This factor, coupled with infrastructural sophistication, pits Dubai as a lucrative market destination for Tesco’s foreign market expansion strategy. From this understanding, many economists recommend that foreign companies should take advantage of Dubai’s market liberalization (Rehman 2007).
Tesco Company History
Tesco is rated the third biggest grocery store in the world (based on revenue collection); coming second to Wal-Mart and Carrefour (Corporate Watch UK 2004). However, with regards to profitability, the company only comes second to Wal-Mart when it is compared to companies dealing in its line of business (grocery) (Humby 2008).
The company’s headquarter is in the United Kingdom (UK) but its outlets are found in over 14 countries across the globe, with a market presence in three continents (Reuvid 2005). However, most of the company’s sales are derived from the UK because about 30% of its revenues are derived from this market (Child 2002, p. 2).
The company’s strong presence in the UK market is partly attributed to its presence in the London stock exchange under the name TESCO, but its presence is also felt in the Irish stock exchange where it trades in the same name (Terterov 2005).
Tesco started expanding into overseas markets in the 90s, through a rapid expansion strategy that was initially focused on venturing into Eastern European markets and the Southeast Asia (Thompson 2010).
These markets were initially perceived to have an undeveloped grocery market, thereby posing a lot of opportunities for the company; however, this did not materialize in some markets such as France where the company unsuccessfully tried to venture into (Raab 2008).
Nonetheless, the company only recently ventured into some of the world’s most developed markets such as the United States (US) where it commenced business in 2007 (Heinemann 2010, p. 203). This makes Tesco an unprecedented British grocery company (in terms of international growth) because no other grocery company from the same region has ventured into overseas markets (Humphery 1998).
Research Questions
Main Objective
- To establish if Dubai UAE market is a feasible market destination for Tesco Plc.
Specific Objectives
- To ascertain the impact of Dubai, UAE’s market size in the introduction of new products and services
- To ascertain Dubai, UAE’s market growth rate and its impact on the introduction of new product brands
- To establish Dubai, UAE’s market profitability and establish its impact on the introduction of new products and services
- To determine the industry cost structure of Dubai, UAE’s market and its impact on the introduction of new products and services
- To establish Dubai, UAE’s existent distribution channels and their impact on the introduction of new products or services
- To establish Dubai, UAE’s market trends and the potential impact of such market trends on the introduction of new products and services
- To investigate Dubai, UAE’s key success factors and determine how they impact the introduction of new products or services.
Literature Review
Tesco’s motive for venturing into emerging markets is largely centered on its expansion strategy and its profit-making aim (Meek 2007). For instance, in the Indian market, Tesco was largely attracted by the fact that the Indian food retail industry was worth about $202 billion (an attractive market for any international company) (Pringle 2004, p. 247).
Currently, half the company’s profit is estimated to be driven by its emerging markets and more potential is still said to be unexploited in these markets. Tesco also perceives its emerging markets (especially China and India) as a platform to propel its expansion and growth plans. For instance, Best (2008) declares that “entering the wholesale market and forming links with Tata, Tesco is setting the stage for future growth” (p. 9).
The company also perceives its venture into emerging markets as an opportunity to learn about emerging markets, but more importantly, emerging markets provide the company with an opportunity to establish a supply chain system that enables it effectively carry out its global operations (Ryans 2009).
However, for any company to achieve effectively product or service success in a new market, extensive market research ought to be carried out (City staff 2010). Nonetheless, it is not enough to carry out marketing research and determine the success or failure of a new product in a new market; it is also important to determine the variables to watch in a new market (Just-food 2009).
Finding the right consumers in the United Arab Emirates market for Tesco’s products and services can be a difficult thing, and according to some marketing literature, very time consuming (if the right target market is not identified – because of the diversity in customer characteristics) (USA International Business Publications 2007, p. 1).
The difficulty with introducing a new product or service in the UAE market is that, United Arab Emirates (UAE) being an Arab state is subject to unique behavioral traits among its population, emanating from the influence of the Arabic culture and Islam religion (USA International Business Publications 2007, p. 1).
Considering many investors or multinationals around the world are looking for new growth opportunities, there is increased pressure among most multinationals to go global and expand their operations beyond their primary business environments (Wachman 2006, p. 3).
There are many regions around the world which pose excellent investment opportunities and the UAE is no exception because the region stands out as one lucrative and highly profitable market destination (USA International Business Publications 2007, p. 1).
For instance, the UAE remains a very profitable market due to its increasing population and its increased financial wealth, which has also seen the emergence of a strong middle class, bound to increase the demand of goods and services in future (USA International Business Publications 2007, p. 1).
This positive market outlook of the UAE economy is further complemented by the high consumer confidence among consumers in the UAE (Rehman 2007).
In fact, statistics show that, UAE has a high consumer confidence when compared to other countries across the globe (USA International Business Publications 2007, p. 1). This statistic shows that, UAE consumers are very optimistic about various aspects of the economy, such as future employment opportunities, economic growth and such like aspects of the economy.
Identification of Tasks Necessary to Complete Work
Task One: Market segmentation
This research will be accomplished within a period of six months. Since the target market (Dubai, UAE) is a big economy, the market will be subdivided into several regions and research data regarding these regions effectively quantified. The first two months will therefore be allocated for this purpose.
Task Two: Data Collection and Appointment Booking
The third month will be allocated to collecting relevant data regarding the subject study. In the same month, there will be a concurrent attempt to book appointments of market experts who have the knowledge about the target market being studied.
Task Three: Data Analysis
From the third month of conducting the study, a thorough data analysis will be done to come up with a summary of the relevant research information regarding the topic of study. This goes on until the sixth month of study when the data integration process commences.
The data analysis process proceeds for four weeks and after completion, interviews will be done to ascertain the information obtained from the market experts, or to provide new information or insights regarding the target market (which were probably never showed in the first phase of research).
Task Four: Data Integration
The last month of study will be used to integrate the research findings and come up with a final presentation of the findings. The resources needed for this entire research to be a success, include unlimited sources of online and offline publications regarding the target market.
Methodology
This research will be qualitative in nature. The major mode of research data to be used in this study will be secondary research data. In this regard, there will be widespread consultations of people who have the knowledge about Dubai, UAE market.
In the same regard, there will be extensive research done to ascertain information about Dubai, UAE market, through existing documents like textbooks, journals and the likes. Majorly, the secondary research data to be used involves research information from external sources of information (out of the organization); in the form of directories, databases, industry reports and the likes.
To analyze the sourced data, business intelligence will be used as a computer-based technique to analyze the relevant data. Business intelligence as a data analysis tool has often been used with a high level of efficacy and reliability. Its reliability is traced from its past reliance by multinational companies to identify existing business opportunities and areas of cost cutting.
The software has also been used to identify areas of key organizational metrics so that companies can be able to predict future business performance (Nigel 2007, p.121).
These characteristics of the business intelligence software (for data analysis) are tailored towards ensuring this paper provides the most relevant information for Tesco’s expansion into Dubai, UAE.
For instance, the fact that the software is keen on identifying cross-selling and up-selling opportunities or it gives a comprehensive insight into customer behavior is a useful advantage in the data analysis process because such data is beneficial in understanding the UAE market.
The above research methodology is unique to most research studies done in the UAE market because it will be specific to the feasibility of the UAE market, with regards to how it is responsive in accommodating Tesco’s core business sectors.
Therefore, as opposed to several research studies done to expose the main areas of competency for Dubai, UAE, this paper is more detailed by focusing on the food industry market where Tesco’s main business specialty lies. Most of the existing literatures show how Dubai, UAE, market is good for business but they fail to be specific to how the market is ready to accommodate various business sectors (Nigel 2007, p.121).
The methodological approach for this study is also more comprehensive and broader than the methodological approaches used by many researchers in the past. This methodology is skewed to collect data from all stakeholders of the UAE market and it is not biased in estimating the relevance of information according to specific time periods.
Historical and current information is collected and analyzed according to how it affects Tesco’s plans of venturing into the UAE market. This is obtained from analyzing published materials from national libraries and making use of national statistics like census information to have a proper understanding of the UAE market and how it supports Tesco’s activities (Nigel 2007, p.121).
From the above information, it is therefore crucial to note that the methodological approach for this study is poised to give credible, relevant and reliable information about the UAE market.
Conclusion
This paper identifies Tesco’s valuable experience in the global market as crucial to its success in the UAE market. As a result, this paper suggests that Tesco stands a high chance of succeeding in this market, considering the growing market potential for Dubai.
Moreover, Dubai is not a saturated market in the UAE and it is also a crucial gateway to the rest of Middle East. These factors make the UAE an important market for Tesco’s expansion.
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