Subject category:
Strategy and General Management
Published by:
IBS Center for Management Research
Length: 16 pages
Data source: Published sources
Abstract
One of the largest retailers in the world, UK-based Tesco Plc (Tesco), operated in several countries across the world. Its international strategy was to acquire local companies, turn them into subsidiaries, and operate them while maintaining the local ethos. At the same time, Tesco brought some of its time-tested best practices into these countries. One such country where Tesco operated was Turkey, which it entered in 2003 attracted by the huge growth potential, high purchasing power, and growing young population that the market presented. Tesco acquired a local store chain, Kipa, in the country and operated as Tesco Kipa. However, Tesco was not able to perform as per its expectations in the country - it failed to expand rapidly and its presence stood limited to only certain regions. It also faced huge competition from other international retailers like Germany-based Metro and France-based Carrefour, which had a formidable presence in Turkey. The local stores and traditional markets with their strong and wide presence across the country also provided products and services on a par with the multinational retailers. Tesco Kipa failed to make profits and the losses started to mount after 2010. The solution lay in expanding rapidly and gaining a pan-Turkey presence, which called for huge investments. The parent company, which itself was facing problems in its home market, was not keen on investing more funds in expanding its Turkish operations. At the same time, Tesco witnessed a change in leadership and the new CEO, Dave Lewis, wanted to shed some non-core assets, including loss-making international operations. This made Tesco decide to exit Turkey. The case discusses in detail the retail landscape of Turkey, the factors that made the country attractive to several international retailers, the entry and expansion strategies of Tesco in Turkey, the changing face of competition in the market, and the factors that led to Tesco's exit.
About
Abstract
One of the largest retailers in the world, UK-based Tesco Plc (Tesco), operated in several countries across the world. Its international strategy was to acquire local companies, turn them into subsidiaries, and operate them while maintaining the local ethos. At the same time, Tesco brought some of its time-tested best practices into these countries. One such country where Tesco operated was Turkey, which it entered in 2003 attracted by the huge growth potential, high purchasing power, and growing young population that the market presented. Tesco acquired a local store chain, Kipa, in the country and operated as Tesco Kipa. However, Tesco was not able to perform as per its expectations in the country - it failed to expand rapidly and its presence stood limited to only certain regions. It also faced huge competition from other international retailers like Germany-based Metro and France-based Carrefour, which had a formidable presence in Turkey. The local stores and traditional markets with their strong and wide presence across the country also provided products and services on a par with the multinational retailers. Tesco Kipa failed to make profits and the losses started to mount after 2010. The solution lay in expanding rapidly and gaining a pan-Turkey presence, which called for huge investments. The parent company, which itself was facing problems in its home market, was not keen on investing more funds in expanding its Turkish operations. At the same time, Tesco witnessed a change in leadership and the new CEO, Dave Lewis, wanted to shed some non-core assets, including loss-making international operations. This made Tesco decide to exit Turkey. The case discusses in detail the retail landscape of Turkey, the factors that made the country attractive to several international retailers, the entry and expansion strategies of Tesco in Turkey, the changing face of competition in the market, and the factors that led to Tesco's exit.