Question1: Email

Dear Mr. Christian

It gives us great pleasure to welcome you to Korea!

We sincerely hope you enjoy your new adventure and achieve great success with
Tesco and HomePlus. For your information, I have attached a consolidated report with
the following key points to give you an overview of the HomePlus business, its
opportunities, challenges, and strategic approaches.

1. Home Plus business review: you will find key factors of success and key drivers of
the growth that contributed to our business

2. Home Plus opportunities and challenges: you will find a consolidated report of market
opportunities, as well as the major obstacles that our team is encountering that, may
slow our growth.

3. Suggested solutions for moving forward that our team has discussed based on
previous practical experiences

Please look into the report. I think it will be a great asset to recover our role in the
Korean market. Additionally, our team will be able to meet you at the monthly
management meeting later this week. I hope you will take the time to get to know our
team, including myself and our direct managers, to better understand the company.
Likewise, if you have any questions or clarifications, please do not hesitate to contact
me. Me and HomePlus hope you enjoy your new adventure and succeed with us.

Yours sincerely,
Seung-hun Lee
CEO of HomePlus

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By: Nisha Rai

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Table of Content

Content Page
Summary 4
Objectives of the Report 4
HomePlus Business Review 4-5
The Challenges 5-6
The Strategic Solutions 6-7
Key Factors to Drive Success 7-8
Conclusion 8-9

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Summary

Tesco, the multinational retail giant, chose a joint venture with the Samsung Group as
its strategy to enter the South Korean market in 1999 and launched a new brand,
Homeplus. Homeplus management has implemented a set of corporate localization
policies, combining localized marketing with globalized management and administration
system.

Homeplus initially encountered a number of challenges, including cultural differences,

language barriers, communication issues and potentially negative nationalistic
sentiments among local buyers.
Homeplus has grown rapidly, becoming the second-largest retailer in the Korean market
in less than a decade, with a network of 124 discount stores and 27,874 employees,
tapping into the potential of the $196 billion Korean retail markets. This edition of
"Homeplus - An Overview of HomePlus in the Korean Retail Market" provides a
brief overview of current market shares, market trends, competition, and identifies
sources of future market growth for the retail market Korean.

This report also helps identify hidden potentials in the latest retail audit data and
provides comprehensive solutions HomePlus should consider developing, expanding
and acquiring or maintaining growth in the Korean retail market.

Objectives of the Report

The 2 main objective of this report is as follow:

• To provide a short overview of current great achievements, with clearly defined

success factors and challenges.
• To define the strategic approaches for growth and retention of competitive
strengths in the coming years

HomePlus Business Review

HomePlus has had numerous achievements in the Korean retail market over the years
and below are some to be name:

1. Ranking the second-largest retailer of Korea with 124 discount stores

and 27,841employees (Exhibit 3 – 2011)

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 2. Being a key driver in the development of the Korean retail market: switching retail
format from department stores to discount stores after the 1990s and innovating
the online shopping experiences of consumers with advanced technology thanks
to the mixed "Glocal" power of investment on both financial, operation, and
management, product-selection wisdom from Tesco, and local advantages from
Samsung.

3. Homeplus stores were successfully established as "value stores," not only

offering low-priced and diverse products.

4. Having the highest Personal brand ratio of 28 percent (Exhibit 5 – 2011),

Homeplus gained a competitive advantage over local chaebol-affiliated
manufacturers, giving Homeplus greater control over price, margin, and product
selection.

5. With a total of 258 SSM outlets in 2010 (Exhibit 7), it successfully led
the market segmentation of super-super market (SSM) among the big three
retailers, exploring the potential of the lower-income market previously owned by
convenience stores of other retailers

The Challenges

Just like every other organization, homePlus had its own list of challenges and below
are few problems and challenges that needs to be resolved by HomePlus is a long term
growth market is anticipated.

First is the Lottle and Shinsegae group hash competitions against Homeplus. While
both have their own manufacturing and distribution units in local areas, which could
support retailing faster by providing synergies, processes Shorter decision times and
more flexible approvals with an in-depth knowledge of Korean provide a business
environment for a more efficient store format. They could expand their business areas
through their chaebol subsidiaries, as they benefit from a local supply network and
strong cash flow from their chaebols.

Secondly, there is an intense relationship between the SSM Homeplus and the corner
stores (small traditional Korean grocers). As the SSM sells the same variety of products
at lower prices, sales at convenience stores fell by 42.2% of sales, according to the
government's statistical report. As a result, many people protested against the new SSM
site in the area. 18 petitions have been signed against Homeplus and the other retailers.

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Finally, in an effort to protect local grocers, lawmakers tabled two bills in the National
Assembly:

• One bill requires local government permission to open an SSM within 500meters
of a traditional outdoor market.
• The second bill gives small business owners the right to demand the temporary
closure of SSMs if they can demonstrate that they have harmed their
operations. Furthermore, a new law enacted in March 2012 required large
retailers to close their doors on the second and fourth Sundays of every
month.
Lastly is the change in consumer behaviors, particularly among the young, transitioning
from traditional to online and smartphone purchases. When purchasing products, there
was an increase in demand for more "convenience" and "instant or quick delivery" to
their doorstep. As a result, the demand for convenience stores and SSMs is increasing
due to the following reasons: (Exhibit 8)
• located close to consumer households
• smaller quantities
• very reasonable pricing.

The Strategic Solutions

Below are a list of possible solutions to the current problems and challenges.

Problems/ Challenges Solutions

Improve flexibility and shorter decision- Set up a local senior team that can revert
making/ approval processes for product quickly on related policies of products,
and sales policies sales promotion

The long procedure of approval Set up a team solely dedicated to seeking

permissions for SSMs in case the first bill
gets passed until they find a long-term
solution

Out-sighted stores with slow delivery of Plan store locations to be accessible to

stock multiple locations and support them with
delivery.

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 Home Plus has improved its online
service by making it available on mobile
devices and reducing distractions by
using the virtual store for both its online
and offline shoppers. In other words, the
combination of the virtual shop, QR code,
and online site is justified by an improved
product as it provides a better solution for
the old market.

Homeplus uses a market penetration

strategy to increase market share through
the availability of mobile devices and
location coverage without adding new
physical stores. Set up a delivery service
for faster and more
efficient delivery from Homeplus,
something that other small shops lack

Intensive relationship with local stores Increase community involvement through

charitable work. Have membership
benefits that will be useful for local
residences.
Ease franchising opportunities for locals.

Key Factors to Drive Success

There are three key factors that influence customer behavior and marketing tactics in
the Korean market.

Firstly, consumers in many other countries, including Korea, has started to prioritize
convenience when making purchasing decisions therefore incorporating the
requirements of customer’s convenient is one major factor while planning the business
expansion towards digitalized mode of shopping will drive success.

Secondly, the size of Korean households has changed significantly over the years
resulting in household with lesser members and since more Koreans are now internet

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savvy, they prefer ordering their products online or purchase them from convenient
stores and SSMs near to their home.

According to a 2002 prediction by Park, Kim, and Ko, the typical Korean household will
shrink from 3.12 people in 2000 to 2.73 people in 2020. People choose to buy little
packages and daily since there is a shortage of storage and refrigerator space (Kim
2008).

Finally, as the popularity of physical stores declines and the conventional online
business loses its competitive edge, mobile retailing emerges as the dominant trend
hence the success factor of HomePlus could be determined based on these three
factors.

Conclusion

In conclusion the above report, Tesco’s core strategy that enabled it to achieve fast
growth was not only to expend geographically but to also expend its general
merchandise range to provide customers with great appeal. It’s comprehensive range of
products and services allowed them to provide more value to customers.

However, the success of HomePlus came with a range of challenges while venturing
into the Korean market mainly due to the change in culture and customer’s expectations
and also because there were local pre-existing competitors in the Korean Market and
the political factors added to the burden however, it’s joint venture with Samsung was
the new entrant strategy used since Samsung is one of the largest Business Groups in
Korea. The joint venture too resulted in certain negative backlashes initially from
employees of the both companies due to cultural differences which was later sorted out
to create a more cohesive environment and secondly facing biases from customers due
to it being a foreign brand. These attitudes were mainly from people outside of the city
area as they felt that foreign companies were affecting the local brands however despite
the negative lash backs, HomePlus managed to become a leading player in the Korean
retail industry and eventually becoming the 2nd largest retailing company in Korea with
10 yers.

Since Koreans are amongst one of the most demanding customers with high
expectations, Samsung Tesco has worked towards a high local acceptance in Korea,
channeling its business differently to convenience purchases however each step of
success comes with newer challenges such as the change in consumption trends and
the increase in digitalization within the retail industry.

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HomePlus should study the current market trend and work towards the needs of their
consumers while incorporating digitalization such as online retail apps or websites
where retails and make their purchases and the goods can be delivered to their homes.
Since this add on to the convenience of the locals, it is highly likely that HomePlus will
be able to lead the market once again despite growing competition.