Tesco PLC in India?

By David Baron
2008 | Case No. P62
Tesco PLC, the largest retailer in the United Kingdom, was pondering India. India’s booming economy and absence of major retail chains provided opportunity to both domestic and foreign firms. Entry of foreign retailers, however, was limited by restrictions on foreign direct investment (FDI) in retailing. India had gradually been removing its restriction on FDI in other sectors but had not done so in retailing because of concerns about the fate of small retailers. Removal of FDI retailing restrictions was inevitable, prompting many large Indian industrial groups to hastily enter the retailing sector before global retailers could. In 2006 Reliance Industries, the largest business group in India, explained that its strategy was to establish “a pan-India footprint of multi-format retail outlets” with large rural hubs to purchase produce and dairy products directly from farmers as part of its “field-to-fork” control of the supply chain. This posed a substantial problem for the global retailers. They could enter the market now with constraints on their investments and hence on their organizational forms, or they could wait for further relaxations of the FDI regulations. India was Tesco’s last remaining major market opportunity—Tesco had to decide whether to enter the market, how to enter it, and when to do it.
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