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
Excerpts
Tesco's Global Operations and Strategy
Tesco's international foray began with its entry into Ireland in 1979 through the acquisition of a 51 percent equity stake in 3 Guys stores owned by Albert Gubay . In 1986, Tesco divested itself of its stake in the stores when it found that customers were rejecting the British products sold there. Tesco's next international foray, its entry into France, proved to be as unsuccessful. In December 1992, Tesco entered France by acquiring an 85 percent equity holding in Catteau SA , which operated under the Cedico brand with 72 superstores, 7 hypermarkets, and 24 small stores...
Tesco Enters China
According to newspaper reports, Tesco had been harboring ambitions of entering China since the early 2000s. It had planned to venture into the country only with a local partner and was on the look out for a suitable partner from 2002...
Expansion Strategies
Initially, Tesco decided not to sell its private-label brands in the Hymall stores. According to Lucy Neville-Rolfe (Neville-Rolfe), Director, Corporate Affairs, Tesco, "At first we will sell what is in stores at present... then look to bring in our own brand." In late 2006, Tesco launched its private label, Tesco Value in China. The label was used on more than 500 products, including pre-packed foods, convenience foods, noodles, biscuits, and tissue papers...
Store and Merchandise Management
A typical Tesco store in China occupied two floors, with the ground floor stocking food and the first floor stationing other items like clothes, consumer durables, and bicycles. A store in Shanghai had a parking lot that could accommodate around 400 bicycles, one of the most preferred modes of transportation in China...
Localization Strategies
As in its other international ventures, in China too, Tesco aimed at combining some of the core strategies of its UK and international operations and adapting them to local conditions. It was of the view that to succeed in any country, it was important to understand the local culture, habits, and customs and to modify the products and services accordingly. Leahy was of the view that a single top-down model would not work in any country and local people were necessary to understand and function in the local markets. In China, more than half of Tesco's senior management personnel were Chinese...
The Challenges
According to the RNCOS market research report 2005, China's retail market was valued at around US$ 756 billion, with organized retail accounting for only 20% of the market. In 2005, China was the seventh largest retail market in the world, and by 2010, it was expected to rise to the fifth position, ahead of France and Germany...
Exhibits
Exhibit I: Tesco - Store Formats
Exhibit II: Top Ten Grocery Retailers in the World (2006)
Exhibit III: Tesco Values
Exhibit IV: The Tesco Way
Exhibit V: Retail Industry in China
Exhibit VI: Regulations in the Retail Industry in China: Pre and Post 2004
Exhibit VII A: Carrefour in China
Exhibit VII B: Wal-Mart in China
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