Critical Issues in TESCO Business Management: A South Korea Case Study

This report provides an in-depth analysis of TESCO's business management challenges and strategies, particularly focusing on its operations in South Korea. It begins by introducing the concept of globalization and its impact on businesses, using TESCO as a case study. The report examines the critical issues faced by TESCO, including the application of the VUCA framework (Volatility, Uncertainty, Complexity, and Ambiguity) and the key drivers of globalization such as technological, political, economic, cost, and customer demand factors. The report details TESCO's expansion into South Korea through a joint venture with Samsung, highlighting the reasons behind its initial success and market growth. It then contrasts TESCO's approach with the failures of competitors like Walmart and Carrefour. The report also explores the factors that led to TESCO's eventual exit from the South Korean market, including changes in government regulations and market dynamics. The conclusion summarizes the key learnings and the impact of these issues on TESCO's business performance.

Critical Issues in Business
Management

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Reason behind TESCO growth when other companies failed.........................................................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................7

INTRODUCTION
Every business organisation faces several issues and problems in their working
environment. There are various number of critical issues which affect management of business in
present and future context (Maylor, Blackmon Huemann, 2016). Thus, managers have to take
proper steps which enable a business organisation to deal with them properly. Hence, business
gets affected due to several major reasons which are related with a theory of VUCA. A basic
description will be provided for this relation by using case study of TESCO who exist South
Korea at the time of Globalisation. There are various drivers identified for every concern which
are helpful in expansion and exit. Along with this, a major reason behind exit of a company from
South Korea market is also assessed here.
Globalisation is defined as a process in which people change their ideas, views, goods
and services by spurring a more relation with world’s culture, economy and government as well.
This process is helpful in making a business expansion in other country so that their economy
will get improved and business would become able to ascertain more profit with proper time
frame. One of the major examples of globalisation is Military Cooperation between countries.
One of a best example of this context is MacDonald whom are one of the largest food chain
organisation in the world. They are already dealing at vast level in different regions of every
country. Thus, globalisation made a positive impact on business as well as in a country where an
organisation will be going to start venture (Mouraviev and Kakabadse, 2017). Along with this, if
a business exits from other country then their economy also get affected which is another major
reason of Globalisation. Brexit is one of the main examples which can be considered as a
negative impact of Globalisation on both country’s economy.
For explaining about the generic condition and situation, every business organisation
used an acronym. The word which denote such thing is VUCA which reflect on volatility,
uncertainty, complexity and ambiguity. This get utilise by many large business association
whose major aim is to ascertain more and more profit through strategic leadership concept.
Several major key drivers of globalisation are as follow (What are five major kinds of drivers for
globalization of firms? 2017): Technological drivers: Technology plays an effective role in shaped a business through
globalisation. Many new inventions and rapid growth of internet is an example of
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technological driver’s impact on business modification. TESCO have to use many new
inventions which enable an entity in maximise their operations of working. Along with
this, every new technology is volatile in nature and get changed with time frame. Thus,
managers have to analyse such fact and make appropriate modification in their
production through that. Political Drivers: Every government has to liberalise their rules and regulations so that
foreign companies can directly come for trade and contribute in the economy of a country
as well as increase their area of trade (Peppard and Ward, 2016). A major reason behind
TESCO exit from South Korea is government whom changed their policy for large super
market entity. Thus, government situation is uncertain in nature and also get volatile as
well. Although, by winding up business from South Korea their competitive market
growth get decline which might be not appropriate for their future context. Rapid economic growth in South Korea market: Economical condition of South Korean
market is good when TESCO enter into such market world. Along with this, South Korea
have good relation with all their belonging nations which enable in making operations
effective and invite many such association for further production and development as
well. Cost drivers: Global companies can take advantage of cost drivers and thus, prices get
vary country to country. Hence, cost drivers also made a vast impact on the globalised
business firms. Many large association whom are dealing in other countries put their
prices low so that chances of gaining market share get increases. TESCO choose an
option under which they are lowering their prices. Hence, a major reason behind their
success is offering low prices.
 Customer demand: Demand is define as the process which enable an association to
produce appropriate quantity of product in relation to target market. It is simply a
quantity which enable to satisfy user needs and wants appropriately. Thus, every business
manager and entrepreneur operating business in such market world where customer are
more demanding about goods and services. TESCO managers analyse that needs and
wants of every user is high in South Korea as compared to several other nations. Thus,
they start rendering activities over there and create a good consumer base as well.
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Globalisation works as a major factor through which many businesses will become able
to expand their operational activities in other countries. It creates a framework and provide a
platform for managing business transactions at a large scale. Every business firm has a motive to
generate more profit in defined time period so that they will ascertain their targets in perfect time
course. Many small businesses identify several areas for maximising their revenue and thus, for
this, global market entry is helpful.
Drivers of globalisation are supportive to analyse various facts which made a vast impact
on every business firm. Hence, for preparing strategies and gain competitive advantage in keen
competitive world, globalisation drivers are helpful (Yeoh and Popovič, 2016). Following is the
major description about all these drivers which are related with expansion of business by TESCO
in South Korea with a joint venture scheme with Samsung: Technological drivers: Every business concerns variety of technologies in their business
so that they would become able to interact with target users properly. Technology plays
an effective role in attaining all goals and targets in an effectual manner by increasing
profitability of business. Thus, change in transportation facility enables many big chaos
to maintain activities at big level. With this aim, TESCO chooses South Korea market
where they collaborate their working with Samsung and apply various techniques through
which customers get attracted. Political Drivers: Every government has to be liberalised with all such large firms that
are contributing their amount in different countries to gear up an economy. Thus, all rules
and regulations have to be followed in a proper manner and framed according to
multinational companies and small vendors as well. Although, if a country has weak
political stability then their business get affected (Daspit and et. al., 2016). In 1999,
TESCO combine their working with Samsung to operate business with a new name
which is Home shop. But later, this political circumstance has become the major reason
behind their exit from South Korea.
 Market drivers: Change in local and domestic market will directly affect the business and
number of opportunities for them get raised as well. TESCO has opened many small
stores in South Korea which made a vast impact on their operations and working as well
as their profitability get raised but many small stores also complaint about this fact.
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These are several reasons behind expansion of TESCO in South Korea. TESCO started
their business under a well-established banner which is “Home plus”. Initially, TESCO invested
around £130m to take an 81 per cent stake. Over the past 16 years, Home Plus introduced more
than 100 hypermarkets which is high as compared to their rivalries (Simatupang and Sridharan,
2016). Along with this, business also started 702 small neighbourhood stores in South Korea but
this caused a backlash towards a company. Firm’s operations grow rapidly in a country and they
have become the second largest retailer outlet in all over South Korea.
Reason behind TESCO growth when other companies failed
TESCO, UK analyse that expansion of business in more adequate manner so that they
can maximise their sales and revenue. For this perspective, they identify South Korea as a
beneficial market. In the year 1999, management started their business in a Joint venture concept
with Samsung under which a successful business entity took place. A famous brand of Samsung
Home plus get collaborate with this consent and then both went to operate activities by
delivering quality based services. On the other hand, major competitors of a company are
Walmart and France’s Carrefour which pulled out their struggling business in the year 2006.
Their failure reason is concern with not to merge business with leading market segments. They
do not conduct proper research about market and neither frame strategies to execute plan
effectively (Dar, Ahmed and Raziq, 2017).
In contrast to this, TESCO tried to win shopper’s heart by making business South Korean
from its establishment. This plan is implemented by preparing a business idea with a joint
venture identify and making business as one of the largest company group in country and further
in world as well (Tesco set to close door on South Korean success story, 2017). Samsung was
already an established brand in South Korea from its existence and put all of its small retail
corporations into it as well- two existing Home Plus stores and other sections as well. Hence,
business organisation has become a joint venture entity in which TESCO invested £130m which
is helpful for them in gaining more than 805 stakes of company.
In every event, name of a business is concern as Samsung- TESCO joint venture and
many people believe in such organisation due to good brand image (Maylor, Blackmon
Huemann, 2016). Along with this, many people think that such corporation is run only by
Samsung and this is the major reason behind company’s growth in South Korean market. This
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strategy is helpful for them in running and making one of the most successful business venture in
Korean market.
All these things state about different number of things which signifies the positive
working of TESCO in South Korea which is helpful in maximise business opportunities for them
in new market which are as follow: Strong branding:A strong branding is one under which one product get differentiate from
others. For increasing a competitive market an effective brand name is must. TESCO
used this strategy properly by collaborating their work with Samsung which was an
establish organisation in South Korea. Adapting to culture needs: TESCO adapt culture of other country through which they
become able to interact with customers in more appropriate manner. Localising stores: Samsung localise all stores by collaborate working with TESCO. They
open as many stores as they can by using name of Homeshop. This localising stores with
major association in South Korea support to TESCO in maintain growth and development
where as other not. This is a major reason behind TESCO growth in keen competitive
market when other large stores get failed.
 Joint venture: Another major thing through which company facilitate their growth is Joint
venture. TESCO combine their operations with Samsung which was a well establish
brand in United Kingdom. This stated and finalise a step towards growth and better
opportunity world.
CONCLUSION
In South Korean market, everything was taking place in a right frame but sudden changes
in market environment directly affected many large business sectors. Due to this, many large and
settled business organisations wind their business up by suffering heavy loss. One of the best
examples of this context is TESCO who leaves South Korean market in year 2016 due to low
profit generation on weekends after the act passed by parliament in 2012.
TESCO has sold Home plus, its South Korean business, for £4.2bn as the troubled
supermarket chain seeks to shore up its balance sheet (Mouraviev and Kakabadse, 2017). In the
year 2011-2012, company earned a record profit with £3.8bn but in the year 2015 record loss get
determine which is £6.4bn (Tesco posts record £6.4bn annual loss, 2017). It is the highest gross
loss by UK retailer in their history.
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Government of South Korea passed an act on the basis of various small retail owners
which is Distribution Industry Development Act, 2012 under which every large business
organisation has to close their stores on two weekends. This is considered as a time in which
maximum sales is taking place. Thus, this political driver influence business to wind up from
South Korean market by suffering heavy loss. Although, this decision was appropriate for a level
of extinct due to change in policies and global recession as well (Peppard and Ward, 2016).
But this fact is not stop yet and story has begun in negative sense towards the
organisation. This rapid growth of business harms the interest of many small store owners which
further affects their working. Small shop’s owners complain about the impact of such large
organisation activities on business and South Korea parliament passed a law since 2012. Every
retailer has to close their stores on Sunday which is identified as a day when sales is about
double on weekends. Thus, this law affects business in a negative manner and thus, management
has to suffer a loss during year 2015. Along with this, other factors which made a vast impact on
business is global recession under which a huge decline got measured in the private spending
(Richter and et. al., 2016).
This is analysed as a major reason behind exit of business under which total value of a
company also get declined. Their stock values are getting down around 18% from past one year.
Unpredictable change in legislation made a vast impact on every business operation. This
make a business to operate in adverse manner. TESCO never predict that legislation in South
Korea lead to get changed in near future course which directly made impact on their market.
Their profit also get affected from such consent which is not appropriate for long term context.
Along with this, this modification made negative impact on company market share. Their brand
value get decline which harms business organisation in future context.
It can be concluded from the above report that every business organisation has to analyse
business environment properly. Along with this, they have to clearly identify all rules and
regulations as well. For entering in any new market, joint venture is consider as an effective way
through which target gets ascertained. Along with this, it has been assessed that in case if
management starts suffering with loss then they have to close business and shift it to some other
place. All these points state about that business environment and all associated elements are
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unpredictable in manner and change into them is harmful. Thus, to deal at new market and for
maintaining share it is essential to use effective strategy for dealing with them. Strong branding
and good promotional strategy with appropriate idea enable management to increase
effectiveness and efficiency of business.
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REFERENCES
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Online
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Tesco set to close door on South Korean success story. 2017. [Online]. Available through:
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