By Christin Ahlfeld
In our last article we looked at markets where Tesco failed
This week we take a look at how Tesco used strategic partners to successfully enter South Korea and Thailand.
South Korea in Numbers
- 350 stores
- £300m profits on sales of £5bn according to www.ft.com
[caption id="attachment_2992" align="alignright" width="300"] South Korea
South Korea is one of Tesco’s proudest success stories.
Tesco expanded to South Korea in 1999, operating under the brand Home Plus. The brand is co-owned by Samsung, with Tesco holding 94% of shares.
By partnering up with Samsung, Tesco were able to take advantage of many cultural benefits.
The Samsung brand is strong and reputable in South Korea, and is one of the country's finest exports. This gave Tesco immediate kudos with the new clientele.
Samsung possessed something else that Tesco didn't: local knowledge. Because many Samsung employees live in South Korea, Tesco was able to get to grips with the culture and character of the local people more easily. More than using data analysis and market research, Tesco was able to get firsthand experience of the market they were set to enter.
As a result of the partnership, Tesco was able to tailor its approach to the new market.
The stores not only offer food and clothing, but also general home products, electronics and sporting goods.
Thailand in Numbers
- Around 1,092 stores
- Revenues of £2.34bn in 2009
Since 1998, Tesco has operated in Thailand under the name ‘Tesco Lotus’, a joint venture between Tesco and the Charoen Pokphand Group. It has steadily become Thailand’s biggest retailer.
[caption id="attachment_2993" align="alignright" width="300"]
After working with the partner to better understand local tastes, Tesco adapted their product range to the demands of the customers, by adding durian, dragon fruit and guava to their fresh fruit selection. They also introduced a selection of chilli varieties and 34 types of rice, a dozen of them ‘own-brand’ (www.ft.com
By considering local tastes, Tesco immediately gained a strong following and the steady growth in Thailand has led to revenues of £2.34bn in 2009.
What can we learn from Tesco?
Investing in foreign markets can be profitable when thoroughly planned and researched.
As the example of Tesco illustrates, when you have local knowledge brought by partnering with a local company, you have a better chance of success.
When Tesco went into Japan and the USA without the support of a local partnership, they made assumptions about those markets which cost them a lot of money.
It may seem attractive to keep all of the share to yourself but, as the examples from Thailand and South Korea show, it’s better to have a smaller share of a big cake, than no cake at all.
Before expanding your business, you always need to consider how different the consumers are from the market you already know. It is important to be open-minded to foreign cultures and habits.
While Tesco has had some failures during its expansion process, it has proven it can be successful abroad – with the right approach.
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