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Case Study_TESCO Homeplus

Case Study_TESCO Homeplus

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Published by: rnsbakhiet on Mar 12, 2012
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Case Study: TESCO Homeplus
TESCO Hoepus:AddCreatvty to the DscoutReta Store Busess
When TESCO, Britain's global retailer, openeda new store oering household goods and elec-tronic products in Manchester, England, in Oc-tober 2005, customers soon realized that theywere in or a new kind o shopping experience.First, the Manchester store’s 4,700-square-meterlayout covered two loors rather than a single
KIM Jin-Hyuk
oor and had a moving walkway, allowing cus-tomers to travel between oors. In England, thetendency had been or discount stores to have asingle oor, as multiple oors were viewed to beinconvenient. The second attention grabber wasthe dierence in design and content. Only asmall part o the store was dedicated to reshproduce, a TESCO hallmark. Instead, most o product lineup consisted o non-ood items suchas clothing, kitchen utensils, bedding, industrial
 April 2009
SERI Quarterly
KIM Jin-Hyuk
products, and toys. The goods were also dis-played dierently. For example, cosmetics werearranged by brand name, while bedding andchinaware displays were charmingly decorated,unlike other TESCO stores. Wooden tiles gavethe ooring a sophisticated look, and the interi-or was lit brightly with lighting set up over eachdisplay stand. The lighting was showcased in avariety o shapes and sizes instead o standardorescent lamps. The ceiling, painted white, wascleanly fnished.Even the store’s name incorporated a departure.Ater careul deliberation, TESCO’s head ofcemade the somewhat surprising decision to add“Homeplus” to the store’s name, relecting itsheavy emphasis on non-ood, household goods.What happened was a wholesale adoption byTESCO o know-how that had been accumu-lated in running its Homeplus store, a joint ven-ture with Samsung Corporation, in Korea. Thetwo-oor layout, product line selection, productdisplay, and even the name o Homeplus wereall imported rom the Korean store. The know-how o store management accumulated in theKorean operation had been recognized as supe-rior in efciency and taken on board whole. So,what were the management secrets o SamsungTESCO – the Korean operation – that even aglobal retailer like TESCO could learn rom?
Jup to a Crowded maret Sector
In 1997, Samsung Corporation opened its irstthree retail stores, including Homeplus Taegu.However, the 1997-98 Asian inancial crisis putthe new operation in serious diiculty by May1999. The company decided to seek oreign in-vestment. At the same time, TESCO PLC wasseeking ways to expand in Asia ater successul-ly gaining a oothold in Thailand. On May 1,1999, Samsung TESCO was launched. TESCOPLC injected more than US$200 million intoHomeplus and Samsung provided US$40 mil-lion worth o goods.Even i the fnancial crisis had not occurred, theaisles were not clear or Samsung Corporation’spush into retail. E-Mart, Korea’s irst discountretailer, had a six-year head start on Homeplus,while deregulation opened the door or Wal-Mart in 1997. In 1998, the US retail giant openedin Korea by purchasing our local stores and
 A nightviewof HomeplusSangdong,Bucheon
Case Study: TESCO Homeplus
planned the quick construction o six brandnew stores. Lotte and LG, two more ormidableKorean retailers, also joined the rush into theKorean discount market along with French re-tailer Carreour. In total, there were 12 dis-counters in Korea by 2000 and Homeplus rankedNo. 12 in terms o number o stores and salesbeore the TESCO deal.Korean customers are considered by many tobe the hardest in the world to please and are ahighly demanding customer group in that theywant both the low prices o discount stores, andthe high level o service typical o departmentstores. Wal-Mart and Carreour, the two maincompetitors or the top spot in the global dis-count industry, were unable to meet the de-manding requirements o Korean customers,and eventually had to withdraw rom the Kore-an market. Korea was even called the grave o global retailers at one time. Samsung TESCOexpanded rapidly despite the tough conditions.It opened fve stores in 2000 and seven more be-tween 2001 and 2003.Not only did Samsung TESCO break throughthe KRW 1 trillion mark (US$664 million) insales two years ater opening the irst store in2000, but it hit new highs o around US$1.4 bil-lion and US$2 billion, respectively, in sales inthe shortest time in discount industry. In ouryears, the company jumped rom 12th to sec-ond in the discount retail segment.As o April 2008, Samsung TESCO had 66 largeo-price chain stores and 73 express supermar-kets, with total sales estimated at US$4.05 bil-lion. With such extensive market reach, Sam-sung TESCO is currently aiming or the No. 1slot among major discounters within the nextew years. O all the countries that TESCO en-tered, Korea was the only one where stores didnot operate under the TESCO name. Instead,stores were simply called “Homeplus” in the Ko-rean market. The impetus behind SamsungTESCO’s impressive growth consists o ive dis-tinct elements.
‘Vaue Store’
Jumping into a Red Ocean as a latecomer, Sam-sung TESCO prepared a resh concept. At thetime, other discount warehouse stores empha-sized two strategic eatures to market them-selves: a wide variety o products and low pric-es. However, this strategy required trade-os.The stores lacked interior designing and sold inbulk, which enabled the stores to negotiate
 Korean customers areconsidered by many to bethe hardest in the world to please and are a highlydemanding customergroup in that they want both the low prices of discount stores, and thehigh level of servicetypical of department stores.

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