Samsung-Tesco: A Strategic Alliance Different from Their Competitors

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Tesco is the largest hyper market retailer in the United Kingdom, ranked around 10th in the global retail markets. Samsung C&T is the parent company ofSamsung which is the largest conglomerate in South Korea. Samsung C&Tstarted its hyper market retail business in 1997. In 1999, two companies established a joint venture, “Samsung-Tesco” as a latecomer in Korea, where other global leading retailers such as Wal-Mart andCarrefour had been unsuccessful. However, starting with only two stores under Home Plus brand,Samsung-Tesco had grown as the second largest hyper market chains in Korea within 5years after establishment, ranked 1st in terms of revenue per store and brand awareness. In this case study, we analyzed the strategic alliancebetween Samsung and Tesco, which had a market entry strategydifferentiatedfrom those of other competitors and which led to a successful entrance into the Korean hyper market.

Strategic rationale behind the strategic alliance
Aftermath of the Asian financial crisis of1997– 1998,undervalued Asian companieswere very attractive targets for the U.S and European acquirers. As the United Kingdom’s retail markets had been saturated, Tesco, No. 1 retailer in the United Kingdom, planned to advance intoEast Asian markets. At that time, Wal-Mart has dominated the North American markets, so Tesco has turned an eye toward East Asian markets, targetingthe Chinese market as the final destination. For the first step, Tescoacquired a major supermarket chain in Thailand at $350 million. Next, Tesco targeted South Korean market, which was the best place to create a strong foothold to advance into the Chinese market.At that time, Korea’s hyper markets had been growing rapidly. In 1999, aggregated sales of 155stores recorded nearly $8 billion, showing an average growth rate of 18.7%. The hyper market size at the end of 2000 wasapproximately $10 billion, which wasalmost 10% of the domestic retail market, accounting for 70% of department store...
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