Illustrative cases ----Drivers for divestment
Tesco
Tesco is the third largest retailers all over the world. It was founded in 1919 by Jack Cohen from a market stall in London’s East End. Now it operates in 12 countries around the world with over 530,000 employers and serve tens of millions of customers every week (http://www.tescoplc.com/index.asp?pageid=11). The revenue was £70.9bn and profit before tax was £2.3bn in 2013 (http://www.tescoplc.com/index.asp?pageid=71). Tesco enter China in 2004 by acquisition 25 supermarkets from Ting Hsin International Group in China and acquisited 90% of shares in 2006 (http://www.cn.tesco.com/AboutTesco.html). So the entry mode of Tesco is joint ventures (JV). After nine years in China, Tesco folds …show more content…
To start with, there are some unsuccessful experiences from the view of resources-based. It continues to use the British model instead of localization in China. Tesco uses British executive instead of Chinese, set its stores at the outskirts while Chinese customers prefer shopping in the city center, using centralized management makes stores in china have less decision-making power. This is mainly due to the not very big area in the UK and the convergence of commodity needed and consumption habits. However, China is such a large country that people in different province can have different tastes and habits, that is why centralized management mode fails in China. As to the retailing industry in China, a report from IFENG shows that the average profit margin was only 1% of the retailing industry in 2014 in China. This is mainly due to the decrease of consumption ability and the demographic dividend while the increase of cost and the development of e-commerce. As the whole retailing industry encounter challenges since the financial crisis, Tesco can not immune. As to the institutional factors, the government in China gives subsidies to foreign investors to attract them at the start, but China and the home country have different regulations, rules and cultures. As a result, the lesson we can learn from the experience of Tesco is that foreign retailers should adjust their plan and strategies according to the different market environment of
Tesco
Tesco is the third largest retailers all over the world. It was founded in 1919 by Jack Cohen from a market stall in London’s East End. Now it operates in 12 countries around the world with over 530,000 employers and serve tens of millions of customers every week (http://www.tescoplc.com/index.asp?pageid=11). The revenue was £70.9bn and profit before tax was £2.3bn in 2013 (http://www.tescoplc.com/index.asp?pageid=71). Tesco enter China in 2004 by acquisition 25 supermarkets from Ting Hsin International Group in China and acquisited 90% of shares in 2006 (http://www.cn.tesco.com/AboutTesco.html). So the entry mode of Tesco is joint ventures (JV). After nine years in China, Tesco folds …show more content…
To start with, there are some unsuccessful experiences from the view of resources-based. It continues to use the British model instead of localization in China. Tesco uses British executive instead of Chinese, set its stores at the outskirts while Chinese customers prefer shopping in the city center, using centralized management makes stores in china have less decision-making power. This is mainly due to the not very big area in the UK and the convergence of commodity needed and consumption habits. However, China is such a large country that people in different province can have different tastes and habits, that is why centralized management mode fails in China. As to the retailing industry in China, a report from IFENG shows that the average profit margin was only 1% of the retailing industry in 2014 in China. This is mainly due to the decrease of consumption ability and the demographic dividend while the increase of cost and the development of e-commerce. As the whole retailing industry encounter challenges since the financial crisis, Tesco can not immune. As to the institutional factors, the government in China gives subsidies to foreign investors to attract them at the start, but China and the home country have different regulations, rules and cultures. As a result, the lesson we can learn from the experience of Tesco is that foreign retailers should adjust their plan and strategies according to the different market environment of