The Carrefour and Tesco Swap Deal
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Case Code: BSTR285 Case Length: 14 Pages Period: 1989-2005 Pub Date: 2008 Teaching Note: Not Available |
Price: Rs.300 Organization: Carrefour, Tesco Industry: Retail Countries: Taiwan, Czech Republic, Slovakia Themes: International Business, Globalization Business |
Abstract Case Intro 1 Case Intro 2 Excerpts
"After the group's (Carrefour's) exit from Mexico and Japan, we are not surprised for one moment by this fresh exit from two central European countries."
- Guy Francheteau, Retail Analyst, Fideuram Wargny, in 2005.
"Strategically, this is the right thing for Tesco to do; to have a market-leading position in central Europe is more important than having a presence in Taiwan."
- Sanjay Vidyarthi, Retail Analyst, Teather & Greenwood, in 2005.
Tesco and Carrefour Swap Stores
In October 2005, two of the world's top retailers, UK-based Tesco Plc (Tesco) and France-based Carrefour SA (Carrefour), entered into a deal that involved swapping their stores in some countries. Under the terms of the deal, Tesco was to take over Carrefour's stores in the Czech Republic (11 stores) and in Slovakia (4 stores). In exchange, Carrefour would take over six stores and two of Tesco's sites in Taiwan. Carrefour's stores in the Czech Republic and Slovakia were valued at € 189.4 million, and Tesco's Taiwanese operations were valued at € 132 million. Tesco agreed to pay Carrefour the difference of € 57.4 million.
Although the Slovakian part of the deal was unable to get regulatory approval, the swap allowed Tesco to consolidate its position in the highly competitive Czech market, where it was going strong, and to exit from Taiwan where its progress had not been up to expectations. Tesco entered Taiwan in 2000, but could not withstand the competition from local players and other international players, who had established themselves firmly in the market by then. On the swap deal, Andrew Higginson, Director, Strategy and Finance, Tesco, said, "This is a positive strategic move for Tesco which will allow us to focus on doing an even better job for customers in central Europe and our other Asian markets."
Carrefour, on the other hand, was doing well in Taiwan. It successfully operated several hypermarkets and was one of the largest retailers in the country. However, in the Czech Republic and Slovakia - markets that Carrefour had entered in 1998 - the company was struggling to gain market share. As of 2004, Carrefour had managed to garner less than a five percent market share in these fast growing East European markets. Commenting on the deal, Allan Tien, Spokesman for Carrefour in Taiwan, said, "If you find yourself struggling hard to make headway in certain countries, why keep doing it? We're late in breaking into the Czech Republic and Slovakia, and Tesco faces the same situation in Taiwan. I think this new breakthrough will facilitate these two groups' healthy operations."...
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