Teco in Greece

1.INTRODUCTION

Globalization involves a variety of links expanding and tightening a web of political, economic and cultural inter-connections. Most attention has been devoted to merchandise trade as it has had the most immediate (or most visible) consequences, but capital, in and of itself, has come to play an arguably even larger role than the trade in material goods. Human movements also link previously separate communities. Finally, there is the cultural connection. All the individual data would indicate that we are undergoing a process of compression of international time and space and an intensification of international relations. The separation of production and consumption that is the heart of modern capitalism appears to have reached its zenith. Globalization is not just another "buzz-word" (globaloney), but very much a real and significant phenomenon.

But, what does it mean? What does a globalized world look like? Despite the extensive discussion on globalization and international interdependence, we still have a relatively limited idea of what this new world looks like. We understand that there are more international connections taking place, that a wider variety of goods and services are being exchanged across boundaries, that more and more people live their professional, family, and intellectual lives in more than one country, and that cultural autarky is no longer possible.

At its most basic, there is nothing mysterious about globalization. The term has come into common usage since the 1980s, reflecting technological advances that have made it easier and quicker to complete international transactions--both trade and financial flows. It refers to an extension beyond national borders of the same market forces that have operated for centuries at all levels of human economic activity--village markets, urban industries, or financial centers.

Markets promote efficiency through competition and the division of labor, the specialization that allows people and economies to focus on what they do best. Global markets offer greater opportunity for people to tap into more and larger markets around the world. It means that they can have access to more capital flows, technology, cheaper imports, and larger export markets.

2. REASONS FOR GOING ABROAD

Generally, the reason for even considering an international expansion fall into four separate areas:

1. Market size (leading to product effectiveness and competitive advantage)

2. External influences (Economic healthiness or less intense competition than home markets)

3. Geographical diversification

4. Product longevity

(Paul Gibbs, 1992)

It is extremely important to understand the direction and the stability of the environment that we try to get in. This environment consists of socio-cultural, political, economical, legal and government traits.

Awareness of social and cultural norms has helped major multinational companies such as Coca-Cola, IBM, Marlboro and Pepsi succeed in being recognized as truly international brands. (Paul Gibbs, 1992)

In this assignment, we aim to investigate in which extent an organisation must appreciate cultural differences before entering a market.

For that, we chose Tesco a very well established multinational company. Our goal is to expand Tesco's operations in Greece.

3.TESCO A MULTINATIONAL ORGANISATION (source:www.tesco.co.uk)

Tesco is one of Britain's leading food retailers and has 586 stores. From 1992, Tesco has grown greatly and has increased its market share from 10.4% to 15.2%. This increase in customers has also given Tesco a large amount of profit.

Tesco has 164500 shareholders and its profit is about 505 million pounds after the tax has been deducted. Fifty per cent of its profit is distributed to the shareholders as dividends and the rest is held back for investment in stores and improving services for the customers.

Tesco's group capital expenditure is 841 million pounds. This was mostly ploughed back into Great Britain.

Great Britain 737 million pounds

Ireland 63 million pounds

Europe 41 million pounds

Although Tesco has started an over seas investment program since 1994, success did not come. For example, the first investment in France in 1994 was not of great success, as the expenditure was not recovered as quickly as the management has aimed. The competition and the cultural differences was for Tesco the main reason of failure.

Before entering the Greek market we will therefore investigate all the cultural differences and focus on how Tesco will benefit from this investment

4. TESCO IN GREECE

Our vision is to bring Tesco in Greece mainly because Tesco is a profitable company, which has seen steady growth over the years in UK and is now expanding worldwide.

Moreover, Greek people like British products a fact that is proved from the great success of Marks & Spencer and other companies.

Paul Gibbs, in his book 'Doing Business in the European Community' states that in Greece households spend about twice the average proportion of their income on food, drink and tobacco. The above also proves that the Greek market might be an opportunity for Tesco. The fact that the Olympic games of 2004 will take place in Athens is also a positive factor for any investment in the area.

Our entry option will be a foreign direct investment through Joint Ventures. Tesco aims to cooperate with the Greek supermarket chain 'Sklavenitis'. Sklavenitis is the key to success because if its substantial experience and its extensive sales and service network.

5.THE GREEK ECONOMY (www.flash.gr)

Fundamental economic changes are altering lifestyles, increasing incomes and heightening demand for food convenience and variety.

Greece has a population of 10.6 million, a workforce of about 4 million and an unemployment rate of roughly 10.5%.

Per capita gross domestic product (GDP) reached $12.480 in 1999.

Although lower