TESCO in China
Article
The Australian Financial Review. 2013, ‘Tesco to form venture with Chinese retail giant’, The Australian Financial Review, 2 October, viewed 4 October 2013,
Summary
According to the Australian Financial Review (2013), Tesco has agreed to form a 20/80 joint venture with China Resource Enterprises. This initiative occurs in the light of the declining retail environment in Europe and aims to combine Tesco’s 134 Chinese branches with 2,986 outlets from the China Resources Vanguard business. This deal will provide a strong platform for Tesco to enter the Chinese market and establish market leadership by improving its offering for customers within the region.
Application
Tesco’s planned expansion in China is the direct result of the declining economic environment in Europe, which has lead to a dramatic shift in sociocultural spending patterns. This has impacted Tesco negatively as a 0.2% reduction in European private consumption from 2007 to 2011 (Roxburgh 2012) saw a £1 billion decrease in Tesco’s European sector revenue from 2009 to 2011 (Tesco 2009; Tesco 2011).
As a response, Tesco has initiated a strategic alliance with China Resource Enterprises in a bid to solidify its market position in China. This alliance greatly assists Tesco in overcoming cultural differences as Inkpen and Tsang (2005) explains that firms operating in culturally distant nations can leverage knowledge from local partners to better understand host markets. This is important as the UK and China are dissimilar in a multitude of cultural dimensions (Hofstede 1984). Through this alliance, Tesco can overcome its liability of foreignness by utilizing the existing brand reputation of its partner since 45% of Chinese consumers display a high level of brand loyalty (Magni and Atsmon 2012), prevalent in a long term orientation focused culture.
This alliance furthermore allows Tesco to transform into a multi-format retailer (Australian Financial Review 2013), which is consistent
The Australian Financial Review. 2013, ‘Tesco to form venture with Chinese retail giant’, The Australian Financial Review, 2 October, viewed 4 October 2013,
Summary
According to the Australian Financial Review (2013), Tesco has agreed to form a 20/80 joint venture with China Resource Enterprises. This initiative occurs in the light of the declining retail environment in Europe and aims to combine Tesco’s 134 Chinese branches with 2,986 outlets from the China Resources Vanguard business. This deal will provide a strong platform for Tesco to enter the Chinese market and establish market leadership by improving its offering for customers within the region.
Application
Tesco’s planned expansion in China is the direct result of the declining economic environment in Europe, which has lead to a dramatic shift in sociocultural spending patterns. This has impacted Tesco negatively as a 0.2% reduction in European private consumption from 2007 to 2011 (Roxburgh 2012) saw a £1 billion decrease in Tesco’s European sector revenue from 2009 to 2011 (Tesco 2009; Tesco 2011).
As a response, Tesco has initiated a strategic alliance with China Resource Enterprises in a bid to solidify its market position in China. This alliance greatly assists Tesco in overcoming cultural differences as Inkpen and Tsang (2005) explains that firms operating in culturally distant nations can leverage knowledge from local partners to better understand host markets. This is important as the UK and China are dissimilar in a multitude of cultural dimensions (Hofstede 1984). Through this alliance, Tesco can overcome its liability of foreignness by utilizing the existing brand reputation of its partner since 45% of Chinese consumers display a high level of brand loyalty (Magni and Atsmon 2012), prevalent in a long term orientation focused culture.
This alliance furthermore allows Tesco to transform into a multi-format retailer (Australian Financial Review 2013), which is consistent