La stratégie de mondialisation de Tesco

a. Identify the key drivers and risks behind Tesco’s globalization strategy. (2 points)

Tesco has mastered the art of international expansion and is now the third larger retailer in the world, it begins from a domestic operator to a multinational giant. At first Tesco conquer the UK market by making acquisitions of small rivals company and detain now 27,6% of the market, but Tesco faced growing regulatory pressure and had to focus his operations and capital investment in other country in order to attempt long term growth.

The key drivers of Tesco’s globalization strategy are :

The first expansion of Tesco in Europe in the mid 90’s, particularly in the post soviet countries, then his strategy goes to the second stage by entering the Asian market. Tesco looked for the potential growth of the asian market since years, but Tesco had to wait for an opportunity to make strategic majority share acquisition of fledging but potentially market leading retail business at discounted prices. This opportunity came with the asian economic crisis of 1997-98; 10 years later, more than 1047 stores are working which represent 33% of Tesco’s operations. What is more, Tesco is implemented in China since 2006 and success of making a partnership to enter the business with India even if there is a strict regulation about it.

Then the risk behind Tesco’s globalization strategy is the entry of Tesco in the USA market (the world largest consumer market, highly competitive); this is a high gamble risk, but Tesco managed to successfully enter the market with a total of 115 stores; another risk was the entry in Taiwan which was difficult because of the presence of Carrefour.

Those are the main drivers and risk behind Tesco’s globalization strategy.

b. Assess Tesco’s strategic decision to enter the markets of Thailand and South Korea. What were the key factors of its success in these markets? (5 points)

In the late 90’s, the Asian market was dominated by traditional form of retailers, so there was a huge potential growth of modern retailer form. As we saw in the previous question, thanks to the Asian economic crisis of 1997-98, a lot of local conglomerates urgently seek for cash injections and Tesco was able to enter both the market of Korea and Thailand via majority-share partnership in the non core retail of the leading conglomerates: CP group in Thailand and Samsung in South Korea. There was a rapid dilution of the local partners, but those partnerships offer Tesco the knowledge of local business regulatory conditions and the consumer culture, moreover Tesco was able to build upon the local appeal and customer image of the acquired chain, especially in South Korea where Samsung is an essential brand name.

By doing those post entry continuous investment, Tesco was able to build scale and accrue market leadership advantages. First, in Thailand by pumping the investment directly in organic expansion; because of different pressures (restrictions of ownership and control) Tesco transferred its UK developed small stores operating skills in Bangkok and then in other cities, thanks to regulations, stores had the benefit of having no restriction about opening hours contrary to large retailers. It offers to Thailand the coexistence of traditional and modern retailing concept; that’s why the entry of Tesco in Thailand was a success.

In South Korea, Tesco make the acquisition of 36 ex-Carrefour stores that allow the company to implement very well in the country alongside with E-mart, because Tesco was able to raise capital at an advantageous rate and made good investments, the company was able to successfully enter the South Korean market.

c. Why did Tesco fail in its attempt to implement itself in Taiwan? (2 points)

Tesco entered Taiwan in 2000 with 6 stores; the company leaves its operations in 2006, The reasons of the failure in Taiwan are that the key drivers of Tesco’s implementation in South Korea and Thailand were absent. Moreover the company entered the market against one of its main competitor which is Carrefour. Nonetheless, Carrefour had already established itself in Taiwan ten years ago, so the company was strongly present in the economy. In result Tesco had to implement itself by doing a de nuovo expansion strategy, however, the company failed to build its stores in attractive sectors since Carrefour already took the best places but this is not the only thing; the strict Chinese regulation of ownership system made the operations of Tesco difficult to make.

d. Assess Tesco’s strategic decision, to

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