Entry & Expansion Strategy: Tesco in Japan
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Case Code: BSTR297 Case Length: 18 Pages Period: 2000-2007 Pub Date: 2008 Teaching Note: Not Available |
Price: Rs.300 Organization: Tesco Industry: Retail Countries: Japan Themes: International Business, Globalization Business |
Abstract Case Intro 1 Case Intro 2 Excerpts
"I'm not surprised that Tesco have gone into the Japanese market because they've gone about it in a very different way. They took the sensible approach of studying the market and going with other stores without using their name, so it's not a rash decision to open the Express stores. They've looked at case histories like Carrefour and learned from them."
- Ian De Stains, Executive Director, British Chamber of Commerce, Japan, in 2007.
"We are not looking to succeed here as a foreign supermarket. In Japan, we aim to succeed as a Japanese supermarket."
- Shizuko Ota, Spokeswoman, Tesco Japan, in 2007.
Introduction
In March 2008, UK-based retailer, Tesco Plc. (Tesco), relocated Michael Fleming, Business Development Director, to Japan as the Chief Executive of its Japanese venture. Analysts were of the view that the move indicated Tesco's plans of aggressive expansion in the market. "Tesco really struggled to get the right people in place. They were forced to extend their feasibility study there, but now it seems that they are really committing to the business as it was looking to expand more aggressively in the world's second-biggest economy," said an analyst.
Another reason cited by the analysts for major changes in the top management was poor returns from Tesco's Japanese operations. In 2007, Japan accounted for only about seven percent cash returns on investment. The returns in Japan were lower, compared to other markets like Thailand and South Korea, where the returns were more than 15 percent. Tesco entered Japan in July 20036, after spending considerable time understanding the nuances of the Japanese retail market, the second largest in the world. Tesco acquired 78 retail outlets of C Two-Network Co., Ltd that operated under the brand name 'Tsurukame' and continued to operate under the same name. The venture faced several hurdles, and Tesco had a tough time finding the right head for the venture as two CEOs left in quick succession...
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