Published on July 8, 2009
TESCO GOES GLOBAL
Jennifer Noinaj, Valentina DeLoof, SeunKaleEzeagbor
Agenda Our Argument Tesco’s Background Entry Strategies Tesco’s Successes Carrefour Pepsi Tesco Today
Tesco's core competencies have influenced their process of developing and implementing international business strategies. This has lead to success in global expansion. Using their past experiences, Tesco can monitor and analyze the situation in the United States to be successful in the market.
$72 billion http://economictimes.indiatimes.com/News/News_By_Industry/Services/Education/Tesco_comes_calling_at_Indian_B-schools/articleshow/1289287.cms
Competitive Advantage Strong competencies Marketing Store site selection Logistics Inventory management Tesco product offerings Overview: Tesco
Which foreign markets? >200 nation-states Balance: benefits, costs, risks Variables Size Present wealth Future wealth Living standards Economic growth Long-run profit potential Strategy Concepts
Which entry mode? Joint Ventures Strategic Alliances Facilitate entry into foreign markets Share costs & risks Share management know-how Wholly Owned Subsidiaries Greenfield Ventures Acquisitions Quick to execute Investing in known revenue/profit Strategy Concepts
Success Strategies Strong integration Asian companies with experience in the market Financial backing Retailing capabilities Transnational strategy Adapting to the market Staying on track Tesco Successes
Carrefour’s Background Carrefour is a French international hypermarket chain, with a global network of outlets. Carrefour operates mainly in Europe, China, Colombia, Brazil, Argentina and in the Dominican Republic, but also has shops in North Africa and other parts of Asia. Case #1
Going Global For its international expansion, Carrefour adopted the route of forming alliances with local partners. Its first international venture was in Belgium, where it opened an outlet in association with Delhaize Fréres-Le-Lion , in 1969. Carrefour's first venture outside Europe was its hypermarket in Brazil in 1975. Case #1
Business Strategies In foreign markets, Carrefour was careful to customize its operations to the preferences of local customers. In 1978, Carrefour developed a hard discount store format, under the name Ed, in France. Instead of selling imported French products, Carrefour sold local products through its stores. Case #1
Entry into South Korea Carrefour chose to venture into the Korean market on its own without a local partner, due to which it failed to understand the market. The company employed most of the top management personnel from France and this was not viewed favorably by the local employees. The company failed to localize its stores and the products sold according to the needs and preferences of Korean consumers. Case #1
What Went Wrong The company wanted to attract the customers by providing them high quality products in bulk at low prices. Initially, customers in South Korea were enthusiastic about the warehouse style of Carrefour stores, but most of them were not bulk purchasers. In contrast to other countries where Carrefour was successful, South Korean customers especially housewives, preferred a clean and sophisticated atmosphere along with low prices Case #1
Consequences On April 28, 2006, France based Carrefour SA (Carrefour) sold its 32 hypermarkets in South Korea to E.Land Corporationfor $1.3 billion (1.75 trillion Won). The sale marked the exit of Carrefour from the South Korean organized retail market. Case #1
Unlike Tesco Carrefour failed in the store site selection Did not offer customers the appropriate products Ventured to an international market without a local partner Failed to understand the new market Employed most of their management personnel from France instead of hiring local people Case #1
Pepsi’s Background An American multinational corporation with interests in manufacturing, marketing and selling a wide variety of carbonated and non-carbonated beverages The Pepsi Cola Company began in 1898 by a Pharmacist and Industrialist Caleb Bradham, but it only became known as PepsiCo when it merged with Frito Lay in 1965. PepsiCo is a world leader in convenient snacks, foods and beverages with revenues of more than $39 billion, over 185,000 employees, in various countries. Case #2
Global Business Pepsi adopted a route of forming alliances with local partners. In 1966 Pepsi enters Japan and Eastern Europe which were its first international ventures. In 1972 Pepsi became the first foreign product sold in, the then, U.S.S.R. In 1985 Pepsi enters China. Case #2
Entry into China Entered into a joint venture with a Chinese partner: Sichuan Pepsi-Cola Beverages Company Limited. Pepsi proceeded cautiously, taking small stakes in joint ventures, because of China’s difficult and unpredictable investment climate. Pepsi was a beverage giant in China, with 40 wholly-owned and joint ventures, including 15 bottling plants and four snack-food factories, and employs 10,000 people. Case #2
What Went Wrong PepsiCo’s joint venture with Sichuan, its partner, was brought down by disputes over profits, government intervention and management style. PepsiCo accused Sichuan of financial irregularities and keeping Pepsi out of the management. Making life tougher for Pepsi was the government’s heavy intervention in the market. The government requires them to devote 30% of their investment to developing local brands. Case #2
Consequences As the majority shareholder, Sichuan appointed all important personnel positions – legal representative, managing director and general manager. Pepsi and Sichuan fell out over future strategy and management style. It invested over $800m with annual revenues of $700m. It pays an average of $50m in taxes to the Chinese government each year. Pepsi is losing a lot of money. Case #2
Unlike Tesco Pepsi’s partner for joint ventures and strategic alliances undermined them. Did not have clear agreements with one another Lacked local responsiveness Lacked understanding of the political climate: China’s government Case #2
Tesco Recommendations Strong , established competitors Trader Joe’s &Whole Foods, County Market Competencies Advantages Strong brand identity Expanding store sites: lower-income Regional employee selection Varied product offerings Tesco Today
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