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Issues For Tesco When Entering The Indian Market Marketing Essay

Introduction

For many years the world economy has become more global, but they remain significant cultural differences between countries and markets. Cultural values and social behaviour of a consumer affect their buying decisions made in the market (Banerjee, 2008). Moreover one of the important factors affecting consumer behaviour is culture (Gong, 2009). Hofstede described “culture” as a collective mental programming, a kind of behaviour one national shares with the other members of the same nation and not with those outside the nation (Alexander, 1997 p.235). In other words it is a way of acting, communicating and trading with same nationality members.

This research looks at how Tesco would need to address the particular culture of Indian shoppers if it sought to enter the Indian market. This research would be important because a leading researcher has noted that one of the key challenges for a western supermarket trying to enter the Indian market is to understand the mind set of an Indian consumer. India’s population is over one billion, with different religions, language, dialect, food habit, buying behaviour etc. which clearly gives a picture of its complex market Halepete (2008). Therefore if UK giant Tesco plans to enter the Indian market it needs to understand the Indian consumer’s culture (BBC news, 2008).

Literature Review

Tauber (1972) argued that consumer behaviour is a mixture of three activities: shopping, buying, and consuming (Ahmed et al 2007). Consumer behaviours also vary from country to country because of the different social, economical, educational etc. environment. It has also been noticed that different consumer behaviour reacts differently towards new products and services. Cultural influences are important from an organisation’s view as it needs to shape its structure and the thinking of their marketers according to the culture. Wright et al (2001) suggest that marketers need to realise that tension between deep rooted local culture and new choices from other countries is always possible in the changing world.

The Indian market has plenty of opportunities for retail industry. The unorganised retail structure of India consists of street shops, pavement shops, weekly markets, 'Kirana' stores (mom and pop stores), and a public distribution system (Srivastava, 2008). They are well aware of the likes and dislikes and the needs of the local consumers. They do not use any modern technologies, but they do add-on services like free home delivery and monthly paying systems.

The growth of a retailer depends on various factors. Management on its own cannot make any retailer successful; it is essential to understand the consumer and the way they act and make decisions in relation to various retail products and services. The study of consumers includes some of the following (Gilbert, 2003 p.46):

Customers’ buying motive

Location and market segment

Types of promotion and offers and their effect on consumers’ shopping patterns

Any organisation expanding in foreign markets and seeking to root itself strongly in foreign soil needs to get a good grasp of the country- specific culture and core values (Banerjee, 2008). Thus, if any western retailer wants to expand in India it has to see things according to the Indian consumer’s perspective.

India is a country with a mix of interacting, interrelated and interdependent cultures which makes it complex for marketers to find a common view. But still India is one of the most attractive countries for global retailers. Where there are more underdeveloped retail structures, there lie opportunities for retail expansion by organised retailers, including potentially by western businesses. In addition, India’s economy is developing and with the rise in middle class buying power consumer wants are also changing which gives further scope to develop the retail industry.

The food and grocery sector in India was a slow starter according to Images F&R Research (2007). It was as low as 0.8 per cent a year but with the efforts of the big Indian business groups like Reliance Group, Future Group, RPG Group (Spencer’s Retail), Aditya Birla Group, ITC Ltd, Godrej supermarket and with the Bharti-Wal-Mart Private Limited cash-and-carry store, remarkable growth in the industry is expected (Sengupta, 2008).

Evans et al 2008 lists a number of factors that need to be taken in to account by retailers when entering a foreign; merchandise quality, range and fashion, level of services, facilities, layout, atmosphere, location, quality of display, advertising, general reputation, reliability, price and image. Specifically in relation to India Halepete (2008), suggests that Indian middle class customer is a value-conscious shopper who is very hard to please- someone who wants “a world class product at Indian prices”.

Further studies by Sengupta (2008), for example, highlight some Indian consumers’ traditional buying patterns, which clearly show that they are not accustomed to buying food and grocery items or dairy products in packed form. They buy grain from local stores which they process into flour at the local flour mill; fresh milk is delivered everyday at doorsteps early morning by the milk man; meat and fish are generally bought from wet markets or speciality stores. Eggs and bakery products are bought usually from stand-alone shops or bakeries. In all these respects and others, India is very different from a western country such as Britain.

Research Questions

How would Tesco, a western supermarket, place itself in the different and diversified culture of India?

What product lines would Tesco have for consumers who are not accustomed to pre-packed food and grocery products?

What strategies should Tesco employ for the many Indian consumers who are vegetarian and who do not drink alcohol?

Research Method

A questionnaire survey method would be used for this research. A survey strategy is commonly used in business and management research because it answers questions like who, what, where, how much and how many (Saunders et al 2007 p.138). Cooper and Schindler suggest that survey methods allow researchers to measure a sample of respondents’ attitudes, opinions, intentions etc. which after collecting can be combined to represent the entire population (Ahmed et al 2007).

The main advantages of the survey method in this specific case are:

Allows collecting data from a large sample size, given the diversity within India (e.g. religion, income) it would be important to have a relatively large sample size.

A questionnaire survey can get views from a relatively large sample in a fairly easy and economical way by asking straightforward close questions.

Data collected can be easily standardised and can be used for comparison – this will allow comparison of results from Indian shoppers with survey evidence of Tesco’s UK shoppers.

The survey method is easy to explain and understand as the questions would be in a logical order and concise instructions would be given (e.g. in case respondents need to skip some questions).

The main limitations of the survey method and how they can be minimized are:

People talk more easily than they write this one of the limitations of a survey method but it could be minimised by members of the research team writing for the respondents as they talk. In addition it would also overcome the problem of misunderstanding the questions by the respondents.

Secondly the respondent are uncertain about the data, this could also be minimised by explaining them as for what purpose the data is been collected. And once the data is been collected for what purpose it will be used as questionnaire survey would be face to face, so can explain Tesco’s plan to enter the Indian market.

To minimize the quality and the development of the questionnaire it will be piloted and reviewed before it is made fair for the respondents, which will allow us to prepare the questionnaire in view of an Indian consumer. In addition it will allow us to eliminate questions which might be sensitive for them.

Generally long questionnaire receive low response rate so keeping this in mind questionnaire prepared will be short in length. Moreover to hold the interest of the respondents it will be made interesting by providing variety in the type of questions used.

Alternative method Rejected:

Interview is generally between two people where one is the interviewer who is seeking responses from an interviewee the other person for a particular purpose. From a research point interview is obtaining and recording responses of the interviewee on issues relevant to general aims and specific questions of a research project (Gillham, 2000 p.2).

Some of the reasons of eliminating interview as the research method are:

Sample size is typically smaller, which is not possible for this research as the outcome needs to be generalizing for the whole country India and hence the sample size needs to be larger.

Interview generates a formal atmosphere, where both the interviewer and interviewee know that it is not a conversation but a strategic process which might not interest the respondents. For this particular research it is quite essential to collect actual opinions of Indian consumers so have to keep their interest in the research.

Fixing a date and time suitable for both the parties could take time hence it is time consuming. In addition it could be expensive if the sample size is larger to arrange for a special place to invite all the respondents. And like discussed earlier sample size in this research is large.

Data collected is more complex in nature, which would not be easy to analyse if the sample size is larger.

Detail description of Research method

5.1. Sampling

The population is a set of individuals, items or data from which a statistical sample is taken. The population compromises of individuals, households, firms or other organisation. And sampling methods are classified as profitability or non-probability samples. The probability sample includes random sampling, systematic sampling, and stratified sampling. In this case would be Indian consumers, from whom the information is required in a clear and unambiguous term (Gofton and Ness, 1997 p.92). Only members relevant to the research topic should be included in the research and not all the members. It is called as sample frame, a list of the target population.

India is a multi cultured and has big differences between various groups of people. There are big gaps between rich and the poor, the highly educated people and those who are illiterate, different living standards, and different ways of life. Keeping this in mind random sampling would be done to get a final sample of 250 respondents. Sample size also depends of factors like time, budget, and the degree of precision required. For this research every 2nd person walking out of the hypermarket will be selected.

5.2. Designing the Questionnaire

A questionnaire can be represented as triangle or pyramid shape with general questions at the top, narrowing to specific questions at the bottom. In addition to measure the validity and reliability of the variables it is essential to ask appropriate questions that will correctly measure the phenomenon of interest and that they are interpreted in the same way by respondents (Yang and Miller, 2007 p.257). Based on Saunders et al (2007 p.369) the questionnaire will be in the following form:

Introduction: It will include the purpose of the questionnaire. Dillman (2000) argues that to receive higher response rate, this should be highlighted on the first page (Saunders et al 2007, p.383). It will also include information like the subject of the survey, and a reassurance about confidentiality.

It will be followed by awareness questions relating to the topic of questionnaire. E.g. Have they heard about supermarkets? have they heard about Tesco?

Followed by factual questions with single response or multiple choice e.g. Do they shop at supermarkets? How often they shop?

It is essential to maintain continuity and natural flow. So then we ask questions reflecting the Indian consumers’ knowledge e.g. Do they know what products are sold in a supermarket?

So far we hope that respondents have not found the questionnaire difficult so we offer ranking questions regarding their like and dislikes e.g. What do they like in supermarket? A) Wide varieties B) Low prices C) Promotions D) Customer Service E) Closest to residence.

The final selection will include relevant classification questions. In this case, these are like age, gender, race/ethnicity, education, income etc. Because data received through such questions can be divided in different groups and can be used for comparison with any previous surveys and note similarities and differences if any (Oppenheim 2001, p.132).

The layout also needs to be checked as it has to be easy-to-read and with sufficient space between lines and words.

Once the questionnaire is prepared it needs to be pre-tested before it is finalised. Because this would give us an idea as how the questions are understood by the Indian respondents and would it get answers what the research is looking for.

Administration of the questionnaire

6.1. Method Used

The questionnaire will be administrated via face-to-face interviews carried out by the researcher with Indian shoppers at Phoenix Mills in Mumbai. The researcher in this case will be noting down answers as the interview is in progress. Secondly, the interviewer will also be able to clear up misunderstandings and answer respondents’ questions (De Vaus 2002, p.122). The questionnaire will be printed in Hindi (the national language of India) and English.

6.2. Location

India is a highly populated country and Mumbai is city where people from different villages and other parts of India come to fulfil their dreams (BBC news, 2006), which could be the right place for the research. As discussed earlier, India is country of diversified culture and representative sample could be found in Mumbai. As Mumbai is a big business hub and it creates lots of job opportunities for which people from different parts of the country apply and come to work. And could likely be a location of a Tesco store.

In Mumbai it will be conducted in Phoenix Mills, Lower Parel as it is one of the busiest shopping area with lots of shops for clothes and, music and it, also has a 65000 square metres hypermarket one quarter of which is food market.

6.3. Who will Interview the Respondent

Cultural differences could make it difficult to gather reliable information on attitudes and behaviour. One factor could be translation differences (Gofton and Ness 1997, p.151). So it is suggested that I work with a local research agency as it would speed up the process by using their readily available resources such as:

Office location with available equipments and stationeries.

Projection room where team asking the survey questions to respondents will be briefed with slides and pictures of Tesco

Ready team members who would experience in conducting such surveys

Secondly the agency can also help us formatting the questionnaire based on the respondent view and literacy and achieving our objective.

In order to achieve our objective we would also be briefing the agency and the team who would be interviewing the Indian consumers face-to-face. They would be updated with information about Tesco and its function and operations.

6.4. Data Analysis

Data collected will be entered on a spread sheet. Clear headings will be given to each row and column. Each question will be coded and represented by a column on spreadsheet. Each questionnaire’s answers will be filled in its respective rows. Answers to the main questions will be analysed by classification data (e.g. to identify differences between the sexes). Techniques of quantitative research like charts, graphs and statistics which will be used which allows us to explore, describe, and present relationships between variables and trends in the data.

Ethical Issues

As the research will be conducted in an international market extra care needs to be taken of ethical issues. The following steps will be considered

Respondents will be assured that all the information given by them will be protected under the Data Protection Act 1998 (and corresponding Indian laws).

They also will be informed of the reason why information from them is being requested.

Personal data given by them will be kept safe and secure in the database.

The data will not be supplied to any other parties.

Respondents are entitled to ask for a copy of the information they have given. They will also be informed that the data will be held for 12 months and no longer than that.

Limitations of the research

8.1. Sample Size and Location:

India is one of the high populated countries in the world with a diversified culture. Many Indian consumers are vegetarian and non-alcohol drinkers. So the location with a right representative sample could be one of the limitations of the research. In order to minimize the effect of these limitations a spot in Mumbai is selected to do the questionnaire survey. Mumbai as discussed earlier is a business hub with people migrating from different parts of the country. A country of 250 is not enough to generate statistically significant data about (e.g. differences between age groups), but it is large enough to provide indicative results and to act as a sort of pilot study for a larger survey by Tesco later.

8.2. Complexity

India is also a country of many religions with different languages and with different dialects. The questionnaire should be easy and simple which is understood by the Indian respondents. We also need to think about the language and literacy barrier. Hiring a local research agency could help us overcome these barriers. We could format the questionnaire with the help of the local research agency in the local language and in simple English which is understood by the Indian respondent.

Conclusion

For any organisation to fulfil its stakeholders is prime objective. It thus becomes essential to know what their requirements are. In addition when it is a foreign market the challenge is bigger as it involves cultural differences, different customer profile, different government policies, political pressures etc. And above all it requires a great deal of investment and time.

India’s retail sector of India is fast growing and has a lot of potential for foreign entrants such as Tesco. In order to tap this market Tesco needs to understand the Indian market as Tesco may well have to implement new strategies and also look at its product line and the changes needed to suit the Indian market. The proposed research would be a very good way of identifying the main issues for Tesco in seeking to enter the Indian market.

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