Tesco's Experience in the Middle Kingdom
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Case Code: BSTR303 Case Length: 20 Pages Period: 2002-2008 Pub Date: 2009 Teaching Note: Available |
Price: Rs.300 Organization: Tesco Industry: Retail Countries: UK Themes: International Business, Globalization Business |
Abstract Case Intro 1 Case Intro 2 Excerpts
"China is a great place for customers and has a lot of competition. We hope our share is as good as that of our competitors."
- Ken Towle, CEO, Tesco China, in 2007
"Tesco's entry is particularly ominous for Wal-Mart. Even though the company is not as big as Wal-Mart or Carrefour, it's proven it can successfully expand internationally, particularly in Eastern Europe, and in Korea where Wal-Mart's struggled."
- Frank Badillo, Director, Global Research Program, Retail Forward Inc., in 2006
Introduction
In March 2008, Tesco Plc. (Tesco), Britain's largest retailer, opened a convenience store at Shanghai, its first in China. Till then, Tesco had been operating only through hypermarkets in the country. By opening the convenience store - Tesco Express - Tesco tried to attract customers who still preferred the traditional wet markets for buying fresh food. According to Ian Longden, head, Tesco Express China, "We think we can create a new type of neighbourhood store in China by taking the guarantee of quality and consistency that a big western brand can bring and combining that with convenience and value for money."
Tesco announced that it planned to open several such stores across the country over the next few years. Tesco's experiment with the store format was an attempt to differentiate its stores from those of its rivals, Carrefour6 and Wal-Mart, which operated in China through hypermarkets and discount stores. Tesco entered China in 2004 through a 50-50 joint venture with a local retailer, and began operating under Hymall, the banner of the joint venture partner.
Tesco considered China as one of its most important markets owing to the country's rapid economic growth and high potential. In December 2006, Tesco increased its stake in the JV to 90%. The entry into China and the subsequent expansion there was part of Tesco's strategy of seeking new opportunities for growth. Tesco was able to emerge as one of the top international retailers in the country by concentrating on localizing its offerings. By February 2008, Tesco was operating in the country through 56 hypermarkets. During the first half of the year 2007-08, its Chinese venture had begun making profits. For the year ending February 2008, sales from China were at £ 702 million...
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