Tesco’s Entry into Qatar
Table of Contents
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- Company’s Profile
- Industry Drivers
- Host Country’s Profile
- The Joint Venture Company
- PESTLE Analysis of the Retail Industry
- Political Factors
- Economic Factors
- Socio-Cultural Factors
- Technological Factors
- Legal Factors
- Implications for Company and Its HRM
- Why Qatar Is Preferred Choice
- Tesco’s HRM Strategy
- Recruitment and Selection
- Related Free Business Essays
In order for a company to survive in the present business environment, going global is a mandatory step, since there is much to gain from the international markets. However, before a company ventures into a new host country, it needs to consider a number of success determinants in that new market. They include the relevant economic drivers, effects of HR at an international level and the transformation practices of HRM from local to global spheres without compromising the situation in the new host country. Economic drivers are mainly those factors that significantly affect the economy, and in each country there are at least two relevant factors that always need consideration. They include inflation and exchange rates, since the company will need to continue dealing with the current suppliers for consistency and reliability. Other than these two, there are more factors that influence the economic situation and they will be discussed later in the paper. In relation to the effect of HR on business, it can be noted that the HRM policies adopted by a company in its home country may not automatically apply when going global. It means that while a given practice may make the company successful in one country, it could just as easily destroy the business in another country. HR policies and practices define the company, and in the retail business, they actually build the company. This is especially true because retail chains depend on their employees for building customer loyalty and increasing sales volumes, but with bad HR policies and practices, it is unlikely that these employees would be interested in doing their best while interacting with customers. Transforming HR concepts within the company to an internationally acceptable format may require more than just a decision of the management team. International HRM is rather complex and in most cases very detailed in its considerations of the host country’s cultural dimensions. Therefore, the company must fully appreciate what it is getting into before formulating the right policies for HRM.
Tesco PLC is a British company that mainly operates as a retail chain organization with other lines of business including banking and telecommunications. The company has been founded in 1919 and has been trading consumer goods since then (Tesco PLC, 2015). Currently, Tesco has its branches in 12 countries and employs about 500,000 people across the globe (Tesco PLC, 2015). The company also operates more than 6000 stores in all parts of the world, and has recently been ranked amongst the top 30 companies in the London Stock Exchange by market capitalization (Clark & Chan, 2014). It can thus be appreciated that Tesco has been around for a very long time, and the company has been able to grow exponentially from a small group of market stalls into an international retail chain with more than 6000 stores (Tesco PLC, 2015). As a matter of fact, the management was fully aware of what is was doing. In order to survive in a highly competitive industry, the company has had to take on a number of strategic policies that often set it ahead of its competitors in the market. It can be noted that the firm currently owns over 28% of the UK groceries retail market and a similar number in other parts of the world including Hungary, Malaysia, Thailand and even Ireland (Clark & Chan, 2014). With its impressive reputation in their current markets, it is only natural that this company will seek to expand further into the international market with new locations in most, if not all of the emerging markets.
Host Country’s Profile
Qatar is a small Arab state in the Southwest region of Asia. The country is rather small, with a population of 1.8 million, 1.5 million of whom are expatriates (U.S. Department of State, 2014). What is more, Qatar is an absolute monarchy that has been under the Al Thani family for over two centuries. The country is also considered to be amongst the most conservative states in the Gulf region as well as the world’s richest state in terms of GDP per capita. More than 14% of the Qatari households fall under the category of millionaires (U.S. Department of State, 2014). The national language is Arabic, while English is the second language which is especially used because of the non-Arab expatriates in the country. The country’s nationals are only 13% of the total population, and most of the expatriates are there for the economic opportunities and impressive living standards that the country’s government has been able to create (World Bank Group, 2015). The country owns some of the largest oil and gas reserves in the world giving it much economic power thus making Qatar a great choice for Tesco to go global. The purchasing power parity in this country is quite high ranging above $100,000 (World Bank Group, 2015). Another important fact about Qatar is that the people have become accustomed to the high life standards, since they mostly have enough money. They are thus attracted to luxury products and international standards. The entire population is hypothetically wealthy, and it is quite difficult for a retailer to sell on the basis of discounts and price-related offers. What matters the most in this culture is quality and brand names, and international brands are considered more powerful than the local ones.
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The Joint Venture Company
Spinneys is a supermarket chain operating in North Africa and the Middle East. It is thus an international retail chain that has been in existence since 1924 (VCPOST, 2013). The company is Egyptian found and has grown into the Middle East as well as the rest of North Africa owing to the impressive market dominance that it has been able to enjoy since the 20th century (VCPOST, 2013). Like many other Arabian companies, however, Spinneys is mainly a private business and its affairs are often kept away from the public eyes. The majority of the company is currently owned by the Abraaj Group from Dubai (VCPOST, 2013). At the moment, this firm only has one store in Qatar and it may be a good time for it to expand considering that Qatar is the only stable country within the Arabian Gulf. Owing to the events of the Arab Spring, the expansion plans have been put on hold. Therefore, the company has been suffering some major setbacks that could have been solved or at least mitigated by going in Qatar with a foreign partner like Tesco (Morley, 2009).
PESTLE Analysis of the Retail Industry
The retail industry is unique in many ways. First, it is one of the few industries that entirely depend on the quality of service to drive sales and create customer loyalty (Kotler & Armstrong, 2013). Consumers do appreciate high quality products, but helpful agents and attendants that answer their questions and respond to their complaints effectively are appreciated even more. As a result, the retail industry has set itself apart, and the companies looking to operate retail chains are having hard times gaining competitive advantage. A PESTLE analysis of this industry will reveal that the industry is very sensitive to the political and socio-cultural dimensions.
The politics of a country often affect such spheres as educational standards and economic stability. However, the most influential aspects of the political landscape in the retail industry are peace and stability ensued in a system where politics are definitive and foster peaceful co-existence of the nation. In Qatar, for example, the population comprises of almost 87% of expatriates from different parts of the world (World Bank Group, 2015). The remaining 13% are the nation’s citizens (World Bank Group, 2015). The political situation enables the citizens to co-exist harmoniously with the expatriates, and, thus, the nation is considered peaceful. Retail chains thrive where there is peace, as instability often leads to vandalism, which affect the retail industry significantly.
Companies in this industry do not really have much to worry about when it comes to the economic factors. Grocery stores sell all basic commodities that are required by the local population. Thus, they are not likely to be affected by bad economy unless they are selling high-end products that have cheaper substitutes available in competing stores. Poor economy, however, is likely to limit the size of the stores, since the company will not be able to register significant growth. The customers will only be able to buy within their economic limits thus producing lower profits for the company in question. Fortunately, Qatar is not a country that would worry about the economy considering its GDP per capita, which exceeds $100,000, and some of the world’s largest oil and gas reserves (World Bank Group, 2015).
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Social and cultural dimensions are significant for the analysis of retail industry. First, it must be noted that this industry mainly depends on the quality of service. Thus, for a company to offer the best possible customer service, it must fully appreciate and embrace the society in which it is operating. In the Muslim state like Qatar, for example, it is important to comprehend that women will probably not be comfortable being attended to by male shop attendants (U.S. Department of State, 2014). They would be more comfortable if approached by females, while men will also prefer to be attended to by male staff. If the company fails to appreciate this cultural peculiarity, it will not be able to generate any customer loyalty, since the customers will not be comfortable at the stores.
Another important factor regards the staff members. A country like Qatar is an economy where people are used to the high standards of life. Thus, the employees expect high compensation packages compared to their counterparts in a country like India. It thus follows that retailers willing to enter Qatar should be willing to improve their compensation practices. The retail industry especially appreciates high quality employees, and the best companies would compete for the industry’s best workers. It may not only be reflected through the compensation practices, but also other motivational concepts, such as training and development among other things (Kotler & Armstrong, 2013).
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It can also be noted that decision making is an important factor in this industry. In order to know whom to target with the marketing campaigns, the companies have to find out how decisions are made in this society. Qatar, for example, has high power distance, meaning that there is a lot of inequality tolerated in the society. As heads of the home, men would be responsible for brand choices within the household. With regards to organizational management, the employees will not be expecting participative leadership, but rather its transactional form, where they just respond to the given orders without asking too many questions.
The retail industry is highly dependent upon the technology for organizational transactions and online sales. Therefore, the industry is likely to thrive within the countries that have a great technological infrastructure including internet connection as well as other functions like mobile networks and smartphone usage. Qatar is highly developed in terms of infrastructure and it can only be expected that the majority of the population will be just as comfortable with internet shopping as the rest of the world.
The law affects the retail industry, as it regulates the quality of products and the kinds of entry strategies that the company may apply when venturing into the new market. In this case, Qatar is a flexible legal system with the Amir being at the forefront when it comes to encouraging foreign investments (World Bank Group, 2015). The country has friendly policies and investing is often considered a wise move. The infamous Sharia laws only apply to the personal matters and conflicts, and, thus, they barely affect business organizations in the area.
Implications for Company and Its HRM
The fact that there is political stability in the country implies that Tesco will not be putting its investment at risk by venturing into Qatar. The country is fully capable of staying stable even in times of revolution, as it has been demonstrated during the Arab Spring. The stable political environment has also led to the thriving of the educational system, and the company will be able to find many qualified employees (U.S. Department of State, 2014). It means that there will be no need to hire from the overseas. The country’s demographics also imply that the customers’ needs and expectations will be based on the international standards owing to the fact that more than 80% of the population comprises of foreigners (U.S. Department of State, 2014). The impressive economy will allow the company to anticipate reasonable sales volume as long as high quality is offered.
Regarding the socio-cultural status, the company is able to exercise religious tolerance in recruitment and selection processes. The idea is to ensure that there is a balanced workplace where all the customers feel equally valued and respected. Qatar is an Islamic state, but its population is not entirely Muslim. Due to the booming of the economy, the people here also expect to be paid well, and, thus, the company will have to revise its compensation practices. Regarding the leadership styles, the most effective one here would be the transactional style, as the population has grown accustomed to taking orders without explanations (Appendix 1). Additionally, due to the great technological infrastructure, the company should be able to hire tech savvy individuals who can operate advanced technology effectively. Legally, the company has impressive expansion prospects, and, thus, its HRM policies should be flexible enough to accommodate a larger Qatari unit (White, 2014). The firm must also incorporate diversity management, since the majority of the Qatari labor force consists of expatriates from various parts of the world.
Why Qatar Is Preferred Choice
There is a number of reasons as to why the company should go to Qatar. First, the Middle East is a really wealthy region that has remained unexplored by international businesses owing to the recently experienced political instability with the waves of rebellion and revolution that have cut across the entire Arab Gulf. Qatar was the only country considered to be on the right side of this wave and accused of funding the revolution and trying to force the rest of the Arab nations into the 21st century in terms of politics (World Bank Group, 2015). It may be noted that the country is still a monarchy, but the citizens are rather peaceful and content with their political system. Therefore, Qatar is possibly the only nation within this wealthy region that does not face large risks when it comes to investment. However, the returns are consistent with the impressive economy and luxury dependent population.
Moreover, the joint company has had some experience in Qatar as it has even looked into an ambitious expansion until the plans have been derailed by the Arab Spring. As a predominantly Arabic organization, Spinneys was unable to continue with its plans while most of the region was embroiled in political turmoil. As a result, it took a while to recover in terms of profits and growth rates. Thus, the collaboration with an international retail giant would be a great opportunity for both organizations to move forward in the retail industry.
Qatar’s economy is really impressive, and so is its culture and education. The people of this country are very modern and will thus embrace Tesco as a brand. It is possible that the Tesco brand will dominate the market owing to its association with international brands that offer high quality. The level of education of this nation also implies that the company will be able to find the right people easily and will not have to hire from abroad. These features make Qatar a better host country than any other state where the company would have to bring its own workforce incurring significant costs.
Tesco’s HRM Strategy
Recruitment and Selection
In order to ensure that the organization continues to thrive in a highly competitive industry, the management of Tesco has ensured that recruitment and selection match the Fraser model. It means that the first considerations when hiring are the individual’s impact on others and physical make-up. The candidates are evaluated by their appearance, speech as well as their manners. The idea is to hire people who would be approachable and pleasant to interact with, since these people who will represent the company to the clients. The second consideration is the acquired education where the company especially considers those with some level of experience in direct sales and customer service. It should be considered that the company does not dwell as much on academic qualifications as it does on skills and competencies. It also considers innate abilities, where people with an aptitude for learning or teachable spirit are given a priority in the recruitment and selection processes. The company especially values fast learners, because they speed up the induction training process and are able to start working shortly after recruitment (Bratton & Gold, 2012). The candidates who have set relevant individual goals and have so far been able to achieve them are also at an advantage. Consistency and determination in as far as individual goals are concerned are considered as great indicators of the candidate’s ability to reach objectives and contribute towards steering the organization. Emotional stability is also considered very significant occupying the last but not least position in the Fraser model (Hutchinson, 2013). The organization looks for employees who are able to not only cope with stress and handle work-related pressures, but also for those who have the ability to deal with different types of people including very difficult customers that are always complaining and are impossible to please. All these considerations ensure that the company gets to hire some of the very best individuals within the retail industry.