Tesco Globalization
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Transcript of Tesco Globalization
Jennifer Noinaj, Valentina DeLoof, Seun Kale EzeagborTESCO GOES GLOBAL
Overview: Tesco
Case #1
Case #2
Strategy Concepts
Tesco Today
Tesco Successe
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Agenda1.Our Argument2.Tesco’s Background3.Entry Strategies4.Tesco’s Successes5.Carrefour6.Pepsi7.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.
Overview: Tesco
Case #1
Case #2
Strategy Concepts
Tesco Today
Tesco Successe
s
Overview: Tesco
Case #1
Case #2
Strategy Concepts
Tesco Today
Tesco Successe
s
Overview: Tesco
Case #1
Case #2
Strategy Concepts
Tesco Today
Tesco Successe
s
Overview: Tesco
Case #1
Case #2
Strategy Concepts
Tesco Today
Tesco Successe
s
$72 billion
http://economictimes.indiatimes.com/News/News_By_Industry/Services/Education/Tesco_comes_calling_at_Indian_B-schools/articleshow/1289287.cms
Overview: Tesco
Case #1
Case #2
Strategy Concepts
Tesco Today
Tesco Successe
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Competitive AdvantageStrong competencies
Marketing Store site selectionLogisticsInventory managementTesco product offerings
Overview: Tesco
Overview: Tesco
Case #1
Case #2
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Tesco Today
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Which foreign markets?>200 nation-statesBalance: benefits, costs, risksVariables
SizePresent wealth Future wealthLiving standardsEconomic growth
Long-run profit potential
Strategy Concepts
Overview: Tesco
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Tesco Today
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Which entry mode?Joint Ventures
Strategic Alliances Facilitate entry into foreign markets Share costs & risks Share management know-how
Wholly Owned SubsidiariesGreenfield VenturesAcquisitions
Quick to execute Investing in known revenue/profit
Strategy Concepts
Overview: Tesco
Case #1
Case #2
Strategy Concepts
Tesco Today
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Success StrategiesStrong integrationAsian companies with experience in the
marketFinancial backingRetailing capabilities
Transnational strategyAdapting to the marketStaying on track
Tesco Successe
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Overview: Tesco
Case #1
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Carrefour’s BackgroundCarrefour 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
Overview: Tesco
Case #1
Case #2
Strategy Concepts
Tesco Today
Tesco Successe
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Going GlobalFor 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
Overview: Tesco
Case #1
Case #2
Strategy Concepts
Tesco Today
Tesco Successe
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Business StrategiesIn 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
Overview: Tesco
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Tesco Today
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Entry into South KoreaCarrefour 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
Overview: Tesco
Case #1
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Strategy Concepts
Tesco Today
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What Went WrongThe 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
Overview: Tesco
Case #1
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ConsequencesOn April 28, 2006, France based
Carrefour SA (Carrefour) sold its 32 hypermarkets in South Korea to E.Land Corporation for $1.3 billion (1.75 trillion Won).
The sale marked the exit of Carrefour from the South Korean organized retail market.
Case #1
Overview: Tesco
Case #1
Case #2
Strategy Concepts
Tesco Today
Tesco Successe
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Unlike TescoCarrefour failed in the store site
selectionDid not offer customers the
appropriate productsVentured to an international market
without a local partner Failed to understand the new marketEmployed most of their management
personnel from France instead of hiring local people
Case #1
Overview: Tesco
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Strategy Concepts
Tesco Today
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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
Overview: Tesco
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Strategy Concepts
Tesco Today
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Global BusinessPepsi 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
Overview: Tesco
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Entry into ChinaEntered 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
Overview: Tesco
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What Went WrongPepsiCo’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
Overview: Tesco
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ConsequencesAs 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
Overview: Tesco
Case #1
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Strategy Concepts
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Unlike TescoPepsi’s partner for joint ventures and
strategic alliances undermined them.Did not have clear agreements with
one anotherLacked local responsivenessLacked understanding of the political
climate: China’s government
Case #2
Overview: Tesco
Case #1
Case #2
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Tesco Today
Tesco Successe
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Overview: Tesco
Case #1
Case #2
Strategy Concepts
Tesco Today
Tesco Successe
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Tesco RecommendationsStrong , established competitors
Trader Joe’s &Whole Foods, County Market
Competencies AdvantagesStrong brand identityExpanding store sites: lower-incomeRegional employee selectionVaried product offerings
Tesco Today
Questions?Thanks for listening.