Jennifer Noinaj, Valentina DeLoof, Seun Kale EzeagborTESCO GOES GLOBALTESCO GOES GLOBAL

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Agenda1.Our Argument2.Tesco’s Background3.Entry Strategies4.Tesco’s Successes5.Carrefour6.Pepsi7.Tesco Today

Tesco's Tesco's core competencies core competencies have influenced their have influenced their process of developing and implementing process of developing and implementing international business strategiesinternational business strategies. This has lead . This has lead to success in to success in global expansionglobal expansion. .

Using their past experiences, Tesco can Using their past experiences, Tesco can monitormonitor and and analyzeanalyze the situation in the United States the situation in the United States to be successful in the market.to be successful in the market.

Overview: Tesco

Case #1

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Strategy Concepts

Tesco Today

Tesco Successe

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Overview: Tesco

Case #1

Case #2

Strategy Concepts

Tesco Today

Tesco Successe

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Overview: Tesco

Case #1

Case #2

Strategy Concepts

Tesco Today

Tesco Successe

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Overview: Tesco

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Tesco Today

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http://economictimes.indiatimes.com/News/News_By_Industry/Services/Education/Tesco_comes_calling_at_Indian_B-schools/articleshow/1289287.cms

Overview: Tesco

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Competitive AdvantageStrong competencies

Marketing Store site selectionLogisticsInventory managementTesco product offerings

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Overview: Tesco

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Which foreign markets?>200 nation-statesBalance: benefits, costs, risksVariables

SizePresent wealth Future wealthLiving standardsEconomic growth

Long-run profit potential

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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

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Success StrategiesStrong integrationAsian companies with experience in the

marketFinancial backingRetailing capabilities

Transnational strategyAdapting to the marketStaying on track

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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.

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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.

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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.

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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.

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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

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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.

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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

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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.

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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

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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.

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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.

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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.

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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

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Overview: Tesco

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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

Thanks for listening.