Tesco's Globalization Strategies and its Success in South Korea
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
Tesco's success in the country was of key importance in light of the fact that other leading global retailers operating in South Korea including Carrefour7 and Wal-Mart8 had exited the market as they were unable to achieve the expected levels of growth in the country. According to Na Hong Seok, analyst with Good Morning Shinhan Securities, Seoul, "In contrast to Wal-Mart, the British retailer Tesco is a remarkable case of succeeding in localizing."9
The Retail Price Maintenance (RPM) Act12 in Britain prohibited large retailers from pricing goods below a price agreed upon by the suppliers. To overcome this obstacle to price reduction, Tesco introduced trading stamps. These were given to customers when they purchased products and could be traded for cash or other gifts. RPM was abolished in 1964, and from then on, Tesco was able to offer competitively priced products to its customers in a direct manner. The first Tesco superstore, with an area of 90,000 square feet, was opened in 1967.
7] France-based Carrefour is the second largest
retailer in the world and operates globally through its 12,217 stores,
including franchised stores. For the year ending December 2005, Carrefour
generated revenues of US$ 94.45 billion and profits of US$ 1.78 billion. The
company entered the South Korean market in 1996 and exited in 2006, by
selling its operations to a local retailer E.Land.
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