What is the case talking about in brief:
The case focuses on the entry and expansion strategies of Tesco in the Chinese market. The Chinese retail sector offered huge opportunities for international retailers with the average annual growth in the last 20 years being around 15%. Tesco entered China in 2004, after several successful Asian ventures including Thailand, South Korea and Japan. The Chinese market was a very different market in terms of tastes and preferences from the other markets that Tesco operated in. Therefore, it decided to enter the country through a joint venture so that it could learn about the market through its partner, which had operated in the market for several years. Also, by the time Tesco entered China, other multinational retailers like Wal-Mart and Carrefour were already well-established in the market. The case discusses how Tesco faced the challenges in an emerging market like China by adopting strategies to suit that market. The case ends with a discussion on the challenges that Tesco faces in the country.
Evolution of current business :
Owner: Jack Cohen
Year of Idea: 1919
Year of establishment: 1929
Product in initial stages: Grocery store
Initial market: UK
Growth of Business: started with acquisition of many companies in UK Present businesses: Different types of stores across the globe Increase in growth:
Tesco was ranked 4th among the top retailers in the world with retail sales of 86,827(in US$ mn) and global market share of 1.5%
Analysis of the case with respect to:
Company’s various international strategies for expanding in different countries. •
Having consistent processes and policies across all the countries in which it exists. •
Well laid Values and The Tesco Way of doing business.
Proper customer service facilities.
Proper store and merchandise management.
Localized its stores in accordance with the demands of local consumers.
Integration of stores.
Stores were not maintained well.
Regarded as stores for the middle-class.
Local population was not familiar with the Tesco brand.
Customers rejected British products in certain countries. •
Tesco brand isn’t well known around the globe as Wal-Mart is. OPPORTUNITIES:
China being the fastest growing economies in the world.
Eastern parts of China are comparatively wealthy.
Expected rate of growth in retail sales by more than 13% in China. •
Increasing growth of supermarkets in China.
Olympic Games in 2008 and Shanghai Expo of 2010.
In 2004 China allowed wholly-owned foreign retailers to own their Chinese subsidiaries and open unlimited stores without government permission and without any minimum criteria for sales, capital or assets to enter in Chinese market.
Chinese market continues to be fragmented with mom-and-pop stores dominating the market. •
Hard to displace the traditional wet markets in China.
Inflation in 2008 causing food and fuel prices shooting up, making it difficult for Tesco to maintain low prices that helped to attract customers. •
Some of Tesco’s localization efforts such as the way of slaughtering turtles seemed to be going against the company. •
Company faced competition from Wal-Mart and Carrefour.
Reports by media that government was drafting new rules to restrict expansion of large foreign retailers.
Porter’s five force model
Industrial Rivals: Wal-Mart and Carrefour
Threats from new entrants: New local stores
Threat of substitute: Local grocery stores and supermarkets
Bargaining Power of Suppliers: Merged and acquired companies were their suppliers initially and then they introduced their brand in the market. Bargaining Power of Buyers: Customers were the end users of their product and Tesco made sure that it provided low priced food and non food items to its customers. It also gave its consumers best customer service facilities.
Forces affecting the business...
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