Tesco's Globalization Strategies and its Success in South Korea

Tesco's Globalization Strategies and its Success in South Korea
Case Code: BSTR242
Case Length: 20 Pages
Period: 1995-2006
Pub Date: 2006
Teaching Note: Not Available
Price: Rs.400
Organization: Tesco
Industry: Retail
Countries: South Korea
Themes: Globalization, International Business
Tesco's Globalization Strategies and its Success in South Korea
Abstract Case Intro 1 Case Intro 2 Excerpts

Background Note

Tesco was founded in 1919 by Jack Cohen (Cohen), who invested his serviceman's gratuity of £30 in a grocery stall. The first private label product introduced by Cohen was Tesco Tea. The name Tesco was a combination of the initials of the tea supplier TE Stockwell, and the first two letters of Cohen's name. Tesco opened its first store in 1929 in Edgware, London. In 1947, Tesco Stores (Holdings) Limited was floated on the Stock Exchange with a share price of 25 pence and the first supermarket was opened in 1956 in Maldon, Essex. The first superstore was opened in 1968 in Crawley, West Sussex. In the 1960s, Tesco went on an expansion spree and acquired several store chains.

The Retail Price Maintenance (RPM) Act 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. The company's driving force was the idea: 'Pile it high and sell it cheap.' Though this strategy helped it to attract a large number of customers, it also served to brand it as a store for middle class customers giving it a low-end image. By the 1970s, shoppers no longer found Tesco's 'Pile it high, sell it cheap' strategy appealing. People were getting richer and were looking for more expensive and luxury items. Tesco's fortunes took a turn for the worse and the expression "doing a Tesco,"came to be considered an equivalent to failure. Tesco's image took a further beating when the Imperial Tobacco Company which had considered acquiring Tesco as a part of its diversification strategy, did not go ahead with the deal as it felt that Tesco might damage its image...

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