Entry & Expansion Strategy: Tesco in Japan


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Case Details:

Case Code : BSTR297
Case Length : 18 Pages
Period : 2000-2007
Pub Date : 2008
Teaching Note :Not Available
Organization : Tesco
Industry : Retail
Countries : Japan

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Introduction Contd...

Another reason cited by the analysts for major changes in the top management was poor returns from Tesco's Japanese operations. In 2007, Japan accounted for only about seven percent cash returns on investment. The returns in Japan were lower, compared to other markets like Thailand and South Korea, where the returns were more than 15 percent.

Tesco entered Japan in July 20036, after spending considerable time understanding the nuances of the Japanese retail market, the second largest in the world. Tesco acquired 78 retail outlets of C Two-Network Co., Ltd7 that operated under the brand name 'Tsurukame'8 and continued to operate under the same name.

The venture faced several hurdles, and Tesco had a tough time finding the right head for the venture as two CEOs left in quick succession...

Excerpts>>

6] Ian Rowley, "Tesco Takes a Fresh Look at Japan,"www.businessweek.com, May 23, 2007.

7] C Two-Network Co., Ltd. was a Japanese food retailer operating 78 stores based around the metropolitan area of Tokyo. It traded under the brand names Tsurukame, Tsurukame Land, Foodlet Tsurukame, and Kamechuru. Food retail accounted for 87 percent of its total sales, with the focus on retailing of packaged foods, both grocery and refrigerated. For the year ending March 31, 2003, C Two-Network reported revenues and operating profits of £286 million and £20.5 million respectively. (Source: "Tesco PLC to Enter Japan through Tender Offer for C Two-Network, C Two-Network Board Expresses Full Support,"www.internetir.jp, June 10, 2003)

8] The store name Tsurukame meaning "Crane and Turtle"comes from a popular belief in Japan that cranes and turtles bring people fortune and long life. Tesco believed that the name implied that it would offer services and products to customers which would fulfill their expectations for many years to come and help Tesco grow as a company.

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