Analysis of TESCO's South Korea Operations: Entry, Growth, and Exit

This report provides a comprehensive analysis of TESCO's experience in the South Korean market. It begins by outlining the drivers of globalization and how they influenced TESCO's entry strategy, including the joint venture with Samsung. The report then examines TESCO's growth and performance in the market, highlighting its initial success and the strategies employed. A significant portion of the report is dedicated to analyzing the reasons behind TESCO's eventual exit from South Korea, focusing on the impact of unpredictable legislation, particularly the Distribution Industry Development Act of 2012, and the challenges posed by the VUCA (Volatility, Uncertainty, Complexity, Ambiguity) world. The report utilizes concepts such as PESTEL analysis to understand the external factors influencing TESCO's operations. It also discusses the competitive landscape and the importance of adapting to local market conditions. The report concludes by summarizing the key findings and offering insights into the complexities of international business operations and the importance of adapting to changing market dynamics.

Critical Issues in Business
Management

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Overview to the drivers of Globalisation in relation to TESCO exit and entry in South Korea
market..........................................................................................................................................1
TASK 2............................................................................................................................................3
Analysis of growth and performance of TESCO when other global competitors got failed......3
TASK 3............................................................................................................................................4
Reasons behind TESCO exit from South Korea.........................................................................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
Business is a composition of various number of operations which are helpful for an entity
in making their operations sustainable. But many times, it is analysed that an organisation faces
several problems which affect the business badly (Maylor, Blackmon Huemann, 2016). This
issue is related with finance of a business organisation which is the backbone or life blood cell.
According to several theories, business world is full of uncertainty which is getting changed with
a course of time. Outcomes for getting right answer is low which state the ambiguity of market
world. Thus, every business organisation is full of VUCA world in which they have to maintain
flexibility to deal with them. In this project, globalisation is identified as the major factor for
generating more profit and revenue by business. Although, recently a major issue gets analyse
towards this concept which is TESCO exit from South Korea. Thus, all such aspects are going to
be analyse in this project by taking this problem.
TASK 1
Overview to the drivers of globalisation in relation to TESCO’s exit and entry in South
Korean market
Globalisation is helpful for every business organisation and it also supports a concern to
deal at wider level in other conditions. It is helpful in binding culture, economy and politics of
other countries to each other (Mouraviev and Kakabadse, 2017). Thus, organisation becomes
aware about different tastes and preferences of users who have distinct interest from each other.
This will also enable a firm to maximise their area of business and ascertain objectives properly.
Globalisation made a positive impact on business through which more revenue gets generated.
This concept takes into account the starting of 1492 and this process began out at such time when
people came out from Africa to other parts of world. This gets introduced in the 19th century first
time and after that, many business organisations adopt this concept to execute their operations at
a wide level.
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1MARKETING THEORIES – PESTEL ANALYSIS, 2017
(Sources: MARKETING THEORIES – PESTEL ANALYSIS, 2017)
There are various globalisation drivers found which are helpful for a business in making
and executing all things properly.
Technological driver: With change in technology and time frame, it is essential to
identify all new inventions and innovations which are helpful in making quality based
products (Peppard and Ward, 2016). TESCO is operating at new market phase where they
have to launch many new technologies over there and start producing more quality
products as well. Hence, production of goods and services have to take place according to
consumer preferences. With the increase in technology, various new opportunities have
been arise for Tesco. They have entered into online shopping and also they have tries to
make the services more convenient for the customers by using latest technologies.
Political driver: Frequent change in political powers will affect business due to rapid
modification in existing policies and introducing many new schemes as well. Thus, such consent
is not appropriate for business.
Cost driver: Every business solely focus on overall low and cheap cost of products. It support in
gaining competitive advantage and support business to grow and develop. TESCO utilise the
local people for rendering services to users this enable them in providing better and appropriate
services to customers. This support them in making things appropriate in nature.
Market Drivers: According to this context, it get identify the every user have different lifestyle
as well as their gaining offerings are also differentiate from each other. Thus, for entering into a
new market world, organisation have to use appropriate step through which their sustainability
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become easy. For entering into new market world, TESCO collaborate working with Samsung
which support them in gaining high market share. Tesco is providing so many new offers to the
people for making a stable position in the market. They have come up with existing offers so as
to attract large no. of customers.
Competitive driver: Number of rivalries in business are also high which clearly state about
competitive rivalry of business. Management have to measure all their competition in market and
prepare their globalised strategies according to them as well. Competitive drivers enable a firm
to driving business according to specific nature by using some specialised tools to deal with them
(Nyssen and et. al., 2017). Thus, TESCO prepare an action plan under which they facilitate their
operations with Samsung which aid them in gaining market share.
Growth opportunity and Competitiveness: Another major thing for TESCO which have to take
in account by management is to work in more appropriate manner through fulfil all drivers
requirement. This enable them in gaining competitiveness and opportunity to get developed in
new market world. This factor will support them in performing things in a corrective manner.
Along with this, it has developing market range aid in analysing that customer’s level of
spent is high. Business idea get started with a concept of Joint venture under which merger took
place with Samsung which is one of a well-established and born company of Korea. Hence, most
number of customers have blind faith towards Samsung and thus a rapid growth in organisation
revenue get determine. The business gets started with a name of Home plus which was an
existing running store of Samsung. Initial investment of TESCO is around £130m to take an 81
per cent stake and year per year, company gained higher market share. Samsung was just used as
a brand name for maximising the sales and revenue. Home plus launched 140 super markets
which is after E mart that has 155 only. Along with this, business also established 702 small
neighbourhood stores which later become reason of business wind up (Yeoh and Popovič, 2016).
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Illustration 1: Stories and Strategies from the VUCA
World, 2017
(Sources: Stories and Strategies from the VUCA World, 2017)
Volatility and uncertainty in business took place with change in government and their
policies as well. Distribution industry development act, 2012 signifies that in a month on two
weekends, every large retail store has to close their operations. Thus, such concept was not
acceptable by TESCO and they took a decision towards exit from South Korean market. This
fact gets identify in year 2015 when TESCO bear heavy loss. Align with this fact, business got
affected due to global recession as well which is not appropriate for business. Although stock
values of company also get reduce which is around 18% and this downfall in stock affect their
profitability as well.
Moreover, when the business was commencing in market it is essential to determine
about the rate of change in market. Hence, TESCO is operating in new market and thus it is
important for them to analyse the rate of change or volatility of market. This will support them in
taking beneficial judgements which enable them to get sustain at market for long term context.
Thus, business managers did not have any sort of idea regarding this change in legislation
process. TESCO complete operations get impacted after the act passed in year 2012. Their
activities get promoted towards negative frame which restrict them in long term context. Thus,
all such sort directly affect organisation under which they have to get exit from South Korean
market.
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TASK 2
Analysis of growth and performance of TESCO when other global competitors failed
Growth and performance of every firm matter when they are dealing in diverse business
environment. Business should have to prepare proper strategies which enable them to deal at any
market situation. Hence, growth get ascertain through identify nature of market which is
beneficial to gain whole market share. Along with this, competitive advantage gets placed by
implementing each and every strategy in appropriate way (Daspit and et. al., 2016).
TESCO is operating a successful business organisation in all over the United Kingdom
and they expand business many times as well for maximising their profitability of business.
Although, management always target developing market which have good growth rate as
compared to others. In 1999, TESCO analyse that South Korea have a market which aid them in
gaining sufficient market share than any other entity. Thus, authority prepare a plan under which
they merge business with Samsung which is an establish business brand rather than others in
South Korea. This work as a beneficial tool through which company ascertain maximum profit
and remain sustain at market for long term.
Reason behind TESCO existence is making a image of South Korean business entity
from its establishment and thus, management choose joint venture strategy in relation to
maximise sales and maintain place at market world (Tesco set to close door on South Korean
success story, 2017). Samsung was already an establish 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 become joint venture entity in which TESCO
invested £130m which is helpful for them in gain more than 805 stakes of a company.
With every business identify, Samsung name was used before TESCO and pronounce as
Samsung – TESCO joint venture which enable users to analyse that Samsung have another
brand. Along with this, many people think that business is operating under premises of Samsung
which support in making more and more profit and revenue generation (Richter and et. al.,
2016).
Preparation of brand related strategy: TESCO prepare a perfect market enter plan
under which they merge their business with Samsung which was an established brand and
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organisation in Korea and other nations as well. This brand strategy enables them in
maximise their share value and they become able to compete at market.
Localising many stores: TESCO introduce many new outlets in South Korea by merging
business with others. Along with this, they already open more than 700 stores in Korea.
This localising store helpful for them in making expansion of operation and ascertain
proper growth and performance as well.
 Hiring Local leadership: Local leaders are better know about the market situation
through which chances of gaining appropriate results will enhance as well. TESCO can
recruit local leaders and managers whom have better and appropriate understanding about
scenario. This will aid them in making things corrective in a manner so that they become
capable to deal with every consent in an appropriate way. Along with this, local leaders
also have better knowledge about all regulations and legislation which aid in making
things corrective in nature.
TASK 3
Reasons behind TESCO’s exit from South Korea
Business and its environment is uncertain in nature and get changed with time. This states
that managers and authorities have to take steps which help them in dealing with all such
situations in a proper manner (Dar, Ahmed and Raziq, 2017). Along with this, taking accurate
decision at the right time is another major duty of manager which has to get accomplished
properly. With dynamic environment in business, many large firms and entities suffer heavy loss
which is not good for an organisation to sustain for longer duration. This gets done due to pass of
an amendment in the year 2012. Following are several points which are analyse as major reason
behind the exit of TESCO from South Korea which made a vast impact on business and their
dealings:
 Unpredictable legislation: One of a major outcome behind such exit is change in
legislation policy which passes by the Korean government. According to act, super markets
dealers have to close their shops every two Saturday and Sunday of a month. This was a
time in which sales at high level. Thus, this unpredictable change in legislation made a vast
impact on TESCO operation and thus their market share gets decline as well.
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 Public protest: Many small shops owners profit rate gets reduce due to opening of these
large stores which directly made a negative impact on business. Hence, many entrepreneurs
start protesting against this and thus, a negative image get reflect in front of global users.
Parliament of South Korea passed an act under which every business has to close their operation
during two weekends in a month. This act gets imposed after complaints of many small retailers
of business whom business went affected due to these large ventures. TESCO has sold Home
plus, its South Korean business, for £4.2bn as the troubled supermarket chain seeks to shore up
its balance sheet. In the year 2011-2012, company earned a record profit with £3.8bn which
states that venture is operating and generating more revenue but later, business got affected due
to heavy loss during the year 2015 which was about £6.4bn (Tesco posts record £6.4bn annual
loss, 2017). This is identified as the highest loss earning capacity by any UK based retail
business segment in history.
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 time in which
maximum sales is taking place.
CONCLUSION
This report emphasises on globalisation concept through which it is analysed that how a
business gets promoted and expanded by using effective measures. Along with this, number of
drivers are also analysed which are helpful for globalisation but these facts also enable
management to operate business in more adequate manner. These drivers are the major reason
behind exit and entry of a firm in other market world which is helpful to derive a beneficial
judgement. Along with this, management has to determine all such reasons which are major
consent behind failure of an entity. These outcomes are helpful to prepare business segment in
such a frame which is helpful in executing operations in other nations.
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REFERENCES
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