Product details

The case discusses the entry of the UK-based retailer Tesco plc (Tesco) into South Korea and its subsequent exit. Tesco entered South Korea in 1999 by forming a joint venture with a well-established local retailer - Samsung. The joint venture helped Tesco acquire not only an in-depth knowledge about the market but also the best store locations. Tesco began operating in the country under the well-established 'Home Plus' banner. It localized its stores to suit the preferences of Korean consumers and brought some of its global best practices into the country. The company's operations grew rapidly in South Korea and it emerged as the second largest retailer in the country. South Korea became Tesco’s largest market outside the UK. However, changes in the operating environment in South Korea due to new laws that were enforced beginning 2010 to protect small retailers and merchants started to impact Tesco and other large retailers. These laws placed restrictions on the locations where supermarkets could be opened. The Distribution Industry Development Act passed in 2012 imposed restrictions on the time for which the stores could remain open and also specified that on two weekends every month the large retail stores should be closed. As most Koreans shopped during the weekends, these restrictions started to impact Tesco, which made losses in 2015. Under the impact of the global recession, the private spending in South Korea fell. Another factor that impacted Tesco in South Korea was its UK business, which was not doing well. In order to regain its competitiveness in the UK market and rebuild its business, Tesco decided to exit South Korea. It sold the venture to a consortium of companies led by MBK Partners, a South Korean buyout firm. The case discusses Tesco’s journey in South Korea and the strategies it followed to become the top retailer in the country. It then discusses the changes in the business environment due to new laws that were passed in the country and how these impacted Tesco. The case concludes with the exit of Tesco from South Korea, and discusses the main reasons for the exit.