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TESCO

Tesco PLC is a British multinational grocery and general merchandise retailer headquartered in Cheshunt, United Kingdom. It is the third-largest retailer in the world measured by revenues (after Wal-Mart and Carrefour) and the second-largest measured by profits (after Wal-Mart). It has stores in 14 countries across Asia, Europe and North America and is the grocery market leader in the UK (where it has a market share of around 30%), Malaysia, the Republic of Ireland and Thailand. Tesco currently operates around 3,729 stores employing more than 440,000 people in 13 countries across the globe, including Hungary, Slovakia , Malaysia and Thailand excluding UK. Tesco has had a limited presence in India with a service centre in Bangalore, and outsourcing. In 2008, Tesco announced their intention to invest an initial 60m ($115m) to open a wholesale cash-and-carry business based in Mumbai with the assistance of the Tata Group. Barriers to Entry Legislation: A major hurdle for Tesco and other big giants to open up their own stores in India is the legislation. Large overseas retailers are currently barred by law at the retail level in India, and are limited to either wholesale, license or franchise arrangements. Should the legislation change, Tesco said it would look to open its own consumer retail business using the experience gained from its wholesale venture and deal with Tata. Under the deal with Tata retail arm Trent, the Indian firm hoped to increase the number of Star Bazaar hypermarkets it runs from four to more than 50 in the next five years. Tesco's new wholesale operation will also supply the Star Bazaar stores. Critics

The decision to open up India's lucrative retail sector to international supermarket chains has come as a major surprise as last year; the government suspended a similar plan after fierce opposition from its allies and political rivals. It was among a slew of key economic reforms announced by the government and is seen as vital to reviving the country's slowing economy. For months the decision has been held up by political gridlock, especially because it was opposed by the government's own allies. But it now appears the government has decided to bite the bullet, especially as its own credibility - and that of Manmohan Singh - is at an all-time low following a series of financial scandals. Before this moment the giants were restricted to investing in wholesale operators that cannot sell to the public, or backing franchise partners. Tesco was doing the latter: it had an agreement with Trent, the retail arm of the giant Tata group, since 2008. Earlier, 100% FDI was allowed only in the wholesale (cash & carry) market but now 100% FDI is allowed in Single brand retailing. This means now companies are allowed to own 100% of their retail businesses in India. Benefit International firms such as Walmart and Tesco will now be able to buy up to a 51% stake in multi-brand retailers. The policy of allowing 100% FDI in single brand retail can benefit both the foreign retailer and the Indian partner foreign players get local market knowledge, while Indian companies can access global best management practices, designs and technological knowhow.

The reforms were made to spur economic growth and to attract foreign investment. ''I believe that these steps will help strengthen our growth process and generate employment in these difficult times," PM wrote on his Twitter account, appealing for public support. It will generate large numbers of jobs in rural India for our men and women. Farmers would benefit because less of their produce would rot, small retailers would become more competitive and efficient and consumers will get lower prices and better quality. The policy would also bring in badly needed inflows of investment and foreign currency. Prime Minister Manmohan Singh said: "I believe that these steps will help strengthen our growth process and generate employment in these difficult times." Analysts say the government has reintroduced the measure in an effort to revive a flagging economy. It will transform the way Indians shop and will provide the much needed momentum to the economy. India's government is opening its huge retail market to foreign retailers such as Wal-Mart, Tesco, and Carrefour. The Indian cabinet, though, seems persuaded that foreign retailers will bring better logistics and help to put a cap on inflation in food prices. Opponents point of view However, there are some serious concerns that the global retailers may wash the mom and pop kiryana stores of India which caused a lot of discussions in the Parliament. ICRIER has rejected the idea of opening up FDI gates, as they said it will cause harm in the long term to the small traditional retailers in India. This is a very big move by the Govt. of India, and its affects have to be seen in the next few decades.

Opponents of the action said it would hurt India's many very small retailers and cost many jobs. Supporters say foreign investment could modernize the sector, improve food quality, and reduce food prices.

Hurdles Reports suggest that other conditions have also been imposed on groups wanting to invest in India. For instance, -companies will have to invest at least $100m (67m), -open outlets only in towns with a population of more than one million and -source at least 30% of produce from India. Similar conditions were suggested when the government first attempted to introduce the plan last year. References:
i.

http://57thstresearch.wordpress.com/2011/11/28/india-opens-upconsumer-markets-further-which-companies-and-sectors-willflourish-in-the-coming-years/

ii. http://en.wikipedia.org/wiki/Tesco iii. http://www.bbc.co.uk/news/world-asia-india-19596091 iv. http://www.retail-week.com/international/india/indian-foreign-

investment-law-relaxation-opens-the-door-fortesco/5040774.article?referrer=RSS#
v. http://news.bbc.co.uk/2/hi/business/7555530.stm

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