Tesco have performed less well and in some instances exited the market where they could not reach a sufficiently critical size. For example, management cited this as a reason for their divestment of Catteau in the French market. Second, Tesco's actual sourcing efforts within the broader international context also shows several visible attempts by the company to aggregate scale across multiple markets and establishing pan‐regional presence in contiguous markets. Third, attempts to re‐organise their global sourcing activities practises by establishing buying centres in emerging markets to develop the product range. Tesco has encouraged local food suppliers to develop retail brands, under the Tesco own brand. On the one hand, this prohibited the degree of global sourcing efforts, but on the other, it has substantially improved the overall diversity of the company's product mix which was increasingly being exported into other international markets.
Discussion
Section:
As Tesco accumulates knowledge while internationalising, important insights and lessons have been learned from stimuli internal and external to the company. By reflecting on these different learning experiences, particularly when contextualised within detailed single case‐level research, various dimensions of retailer internationalisation have emerged. In spatial terms, it appears that Tesco concentrated their efforts with more experience on dissimilar markets in key regions or clusters aiming to achieve a market leading position. One explanation for this activity may be that as Tesco accumulated more experience they recognised the importance of local and regional scale economies for achieving profitability. In other words, retaining spatial focus was therefore more important than capitalising on opportunities in diverse markets. The decision of selecting a particular market may depend as much on the availability of suitable acquisition targets and the conditions of potential sellers as it does on the attractiveness of the market (Dawson, 2001). For Tesco, market selection was thus entangled with entry mode choice. Evidently, acquisition‐driven expansion had been a form of “postrationalised opportunism” where both management and the financial institutions partisan to the acquisition rationalise the acquisition after it is accepted by the other company. Market selection decisions mirrored this opportunistically‐driven behaviour. In this respect, the main lesson that Tesco had learned is that they must be in a position to quickly take advantage of unexpected events (threats or opportunities). How Tesco dealt with unexpected successes, miscalculations, mistakes and serendipity was of critical importance to the international operations succeeding. The preceding evidence of Tesco also suggests that acquisitions have proved to be an important prism for learning. On several occasions Tesco used small‐scale, nothing‐to‐lose acquisitions to minimise their own human and financial capital in the face of potential economic and political uncertainty in developing markets and to accumulate local market knowledge. These acquisitions have provided Tesco with invaluable experiential opportunities to be “surprised” by the marketplace and so to learn. The case evidence revealed that a willingness to experiment and feedback input on the results from local store managers and expatriate managers is a meaningful lesson.
The case of Tesco also indicates that the internationalisation process of retail multinationals is not always a progressive and straightforward process (Alexander and Quinn, 2002; Burt et al., 2002, 2003; Mellahi et al., 2002). The findings add new insights into the complexity of the international retail divestment process. It appears that Tesco had learned rather valuable lessons from their own divestment experiences, while other retailers’ international market withdrawals provided an opportunity to observe overt behaviour. From the Catteau experience, Tesco became locked into an inappropriate acquisition through various acquisition‐related contractual (earn‐out) clauses with Catteau's management which in turn prohibited a swift and timely exit. A lack of experience as an internationalist was visible in the Republic of Ireland when faced with the task rejuvenating, re‐branding and re‐launching relatively weak store operations as well. While it is true that such operations offer undeniable opportunities to improve the operations, Tesco later recognised that, in reality, these “turnaround” acquisitions were disproportionately demanding of critical management's time and resources.
Apart from underestimating the level of effort required for these “turnaround” operations, Tesco painfully learned from employing an inappropriate corporate model in the French market. Alexander and Myers (2000) have remarked that the differences between ethnocentric (centralised) and geocentric (decentralised) operating structures will impact the international learning process. Tesco viewed their early international moves abroad as a business extension and a redirection of free cash flow – effectively limiting organisational learning opportunities. From the mid‐1990s onwards however, publicly‐listed retailers had come under intense pressure from their shareholders to demonstrate where and how value could be added to the international operations. This had a catalysing effect. A lack of clarity in this respect would have severely undermined the strategic credibility of the retail multinational and inevitably placed financial cost of capital restrictions (Palmer, 2002a). Tesco were initially unclear and less confident about the most appropriate corporate model with which to proceed. Effectively, Tesco passed through a number of iterations of organisational structure before finally adopting a hybrid structure between centralised and decentralised operations, before ultimately adopting an aggressively industrial model. Perhaps more importantly, the initial experiences of Tesco's control capabilities have proved that it is impossible successfully to adopt both corporate models simultaneously.
What is clear from an analysis of the findings regarding learning structures and processes is that an organisational‐led learning multinational goes beyond the “official corporate line” that executives may use to justify minority entry positions or failures in new markets and deliberately establishes systematic internal learning processes to support international learning. Within the context of international retail expansion in Europe, Alexander (1997) suggested that retailers have lacked systematic internal processes to support their decisions with respect to appropriate host market strategies. The present study would largely support his findings at least as far as the development of internal learning structures is concerned. It is proposed that innovations and continuous improvements are more successfully absorbed by the proactive formalisation and development of internal learning mechanisms. The formalisation and development processes for learning were seemingly rather fortuitous insofar as market expansion into eastern Europe coincided with their ambition to broaden the non‐food merchandise in the UK. The impetus was then on the diffusion of what the company had learned from developing a new format which accommodated non‐food items in the overseas markets.
By considering Tesco's competitive behavioural dynamics within the context of the strategic international moves it was apparent that retail multinationals are frequently engaged in exchange of threats at the corporate spatial level. At the corporate level, learning takes place at a much faster pace, often precipitated by a catalysing event in the retail environment which could fundamentally alter the strategic authority of the company and ultimately investors’ evaluation of the company's worth. An illustration of a catalysing event was Wal‐Mart's entry into Germany which dramatically changed the status quo and the structural competitive dynamics for European retailers and Tesco in particular (see Palmer, 2000; Arnold and Fernie, 2000; Burt and Sparks, 2001; Fernie and Arnold, 2002). At the local spatial level, intense competitive rivalry for securing regional market share also existed. At this interface, retailers learned from each other, particularly with respect to competitive responses from in‐store and supply‐chain initiatives. It is proposed that much of this learning takes place as the expansion unfolds and the competitive situation evolves. This learning‐by‐doing activity indicates that learning at the local spatial level will be a gradual and reiterative process. Experience has taught Tesco to adjust to the deregulatory/regulatory related spatial pressures, but also covertly shape rather than respond to regulatory frameworks to obtain their desired spatial outcomes in international markets. A regulatory lesson, particularly in emerging markets, was the importance of investment in developing and maintaining good political relationships, while embarking on PR campaigns to facilitate the expansion efforts in new markets among stakeholders.
It is evident from the findings that from the mid‐1990s onwards, publicly‐listed retailers have come under intense pressure from their shareholders to internationalise. On the institutional front, the findings appear to suggest that shareholders insist that retail multinationals deliver not just instant sales growth from their foreign ventures but also substantial cross‐border synergies and thus more profits. By definition, these synergies can only flow through an industrial or “global category killer” model (see Wrigley, 2002). It is concluded, therefore, that those employing a federal structure model will realise the economic benefits of internationalisation immediately, while the industrially aggressive multinationals will take longer to realise tangible cr