Tesco Goes Global
Case: Tesco Goes Global 1. Why did Tesco’s initial international expansion strategy focus on developing nations?
They were looking for an area where there were few capable competitors but strong underlying growth trends. Such areas could provide Tesco with ripe ground for expansion. 2. How does Tesco create value in its international operations?
There are factors that create value for Tesco: 1. The company devotes considerable attention to transferring its core capabilities in retailing to its new ventures; 2. The company hires local managers and support them with a few operational experts from the United Kingdom; 3. The company’s partnering strategy in Asia is a great asset because the companies Tesco has teamed up with are good and have a deep understanding of the markets in which they are participating; 4. The company and its partners bring equally useful assets to the venture which increases in the probability of success; 5. The company focuses on markets with good growth potential but that lacks strong indigenous competitors.
3. In Asia, Tesco has a long history of entering into joint venture agreements with local partners. What are the benefits of doing this for Tesco? What are the risks? How are those risks mitigated?
In Asia Tesco settled on a 50/50 joint venture with Hymall, a hypermarket chain that is controlled by Ting Hsin, a Taiwanese group, which had been operating in China for six years. As Tesco has teamed up with good company that have a deep understanding of the markets in which they are participating, it compensated the lack Tesco’s financial strength and retailing capabilities. Moreover, large size and rapid growth of the Chinese market give Tesco the benefit of doing in this market.
In general the risks of entering into joint venture agreements with local partners are that the companies involved could pull out, steal Tesco ideas, or fail and leave Tesco with debt;
They were looking for an area where there were few capable competitors but strong underlying growth trends. Such areas could provide Tesco with ripe ground for expansion. 2. How does Tesco create value in its international operations?
There are factors that create value for Tesco: 1. The company devotes considerable attention to transferring its core capabilities in retailing to its new ventures; 2. The company hires local managers and support them with a few operational experts from the United Kingdom; 3. The company’s partnering strategy in Asia is a great asset because the companies Tesco has teamed up with are good and have a deep understanding of the markets in which they are participating; 4. The company and its partners bring equally useful assets to the venture which increases in the probability of success; 5. The company focuses on markets with good growth potential but that lacks strong indigenous competitors.
3. In Asia, Tesco has a long history of entering into joint venture agreements with local partners. What are the benefits of doing this for Tesco? What are the risks? How are those risks mitigated?
In Asia Tesco settled on a 50/50 joint venture with Hymall, a hypermarket chain that is controlled by Ting Hsin, a Taiwanese group, which had been operating in China for six years. As Tesco has teamed up with good company that have a deep understanding of the markets in which they are participating, it compensated the lack Tesco’s financial strength and retailing capabilities. Moreover, large size and rapid growth of the Chinese market give Tesco the benefit of doing in this market.
In general the risks of entering into joint venture agreements with local partners are that the companies involved could pull out, steal Tesco ideas, or fail and leave Tesco with debt;