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Tesco Globalization
 

Tesco Globalization

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  • Think about the processes of developing and implementing strategy of international business. (resources & capabilities)A strategy doesn’t matter if you don’t have the means to do it.Tesco’s success is due in part to delivering a consistently strong customer offering on every visit and every transaction, and by focusing on thecompany’s core purpose: to create value for customers to earn their lifetime loyalty.
  • -Ahold-peapod-Amsterdam
  • -Largest grocery retailer in the UK
  • -$72 billion in revenue, 2008Overseas expansion = most successful abroad compared to the other 3
  • -Tesco knew its key points well enough to know what they were capable of and what they were not capable of-influences international strategy, entry strategy, and organization of the business
  • -Demographics-Purchasing power
  • -TESCO: Emerging markets - Eastern Europe & Asia-Good growth potential-Lacked competitors-Hungary, Czech Republic, Slovakia-Thailand, South Korea, Taiwan, Malaysia, China
  • -Quick to execute,enable a firm to preempt competitors, involve buying a known revenue/profit stream-Facilitate entry into foreign markets, enable partners to share costs and risks, share management know-how
  • -Local managers supported with operational experts from the UK-Hungary, strategic alliance with Global (43-stores, state-owned) = 60 stores now-Poland, acquired 13 stores from Stavia-Czech Republic & Slovakia, acquired 13 stores from Kmart-Thailand, acquired 75% of Lotus = 64 stores now-Korea, joint venture with Samsung-China, joint venture with Hymall
  • -Carrefour is the largest hypermarket chain in the world in terms of size, and the second largest retail group in the world in terms of revenue after Wal-Mart.
  • -Pepsi was one of the earliest multinational companies to set up shop in China under the Open Door policy.-Pepsi expanded more aggressively after setting up the Pepsi (China) Investment Company in Shanghai in 1994, an umbrella to oversee all its operations on the mainland.
  • - Beijing protects domestic beverage companies and tries to spread competition evenly throughout the country
  • - Pepsi recently sent auditors twice to Sichuan Pepsi to check its finances but they were not allowed in. It argued that it needed new products to meet the increased competition from Taiwan producers of juice and tea-based drinks that stormed into
  • -Opened in November 2007-Currently 115 stores on the West Coast (mostly Cali)-Smaller in size, 1/3 the size of a normal store-Modeled after Tesco Express-High-quality neighborhood grocery outlets that feature a large selection of prepared and healthy foodshttp://en.wikipedia.org/wiki/Fresh_%26_Easyhttp://findarticles.com/p/articles/mi_m0FNP/is_4_45/ai_n16089195/
  • -doesn’t get ahead of themselves-cost reduction, local responsiveness-core competencies shaped strategies

Tesco Globalization Tesco Globalization Presentation Transcript

  • 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
  • Questions?
    Thanks for listening.