Homeplus project

Ankit Jain

Question 1:

Dear Mr. Christan,

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.

I have prepared a consolidated report in the attachment for your information

with the following key points to provide you with an overview of the HomePlus
business, its opportunities,
challenges, and strategic approach.

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 take a look at the report. I believe it will be an excellent resource for you to
catch up with our role in the Korean market. Furthermore, our team will be able
to meet you at the monthly
management meeting by the end of this week. I hope you will take the time to
meet with our team, which includes myself and our direct managers, to achieve a
better understanding of the company. Likewise, if you have any questions or
clarifications clarification, please do not
hesitate to contact me.

I and HomePlus hope you enjoy your new adventure and achieve great success
with us.

Yours sincerely,
Ankit Jain

Question 2:
 A) Title:

Communicating to the new MD to understand Homeplus as a company its

challenges over the years, the strategies implemented by you, new
challenges that could occur by implementing these strategies, and the
possible solutions for them.

B) Content table:

1. OVERALL SUMMARY.
2. OBJECTIVES OF THE REPORT
3. HOMEPLUS BUSINESS REVIEW
4. THE CHALLENGES
5. THE STRATEGIC SOLUTIONS.
Here are the possible solutions to resolve the current challenges and
problems:

6. KEY FACTORS TO DRIVE SUCCESS

7. CONCLUSION

1. OVERALL SUMMARY:

Tesco, the multinational retailing giant, chose a joint venture with the
Samsung Group as its market entry strategy into South Korea in 1999 and
launched a new brand, Homeplus. Homeplus's management implemented
several policies aimed at localizing the business, combining localized
marketing with globalized management and administrative system.

Homeplus initially encountered several challenges, including cultural

differences, language barriers, communication issues, and potentially
negative nationalistic sentiments among domestic buyers. Homeplus has
grown quickly and become the second-largest retailer in the Korean
market in less than a decade, with a network of 124 discount stores and
27,874 employees, exploring the potential of the Korean retail market
valued at USD196 billion in 2011. (Exhibit 3).
This Homeplus- An Overview of Homeplus in the Korean retail market will
provide a brief overview of current market shares, market trends, and
competition, as well as uncover sources of future market growth for the
Korean retail market. This report also assists in identifying hidden
potential in the most recent retail audit data, as well as providing
comprehensive solutions that Home Plus should consider for developing
expansion and acquiring or maintaining their growth in the Korean retail
market.

2. OBJECTIVES OF THE REPORT:

1. To provide a short overview of current great achievements, with

clearly defined success factors and challenges.

2. To define the strategic approaches for growth and retention of

competitive strengths in the coming years.

3. HOMEPLUS BUSINESS REVIEW:

Some of Homeplus's achievements in the Korean retail market can be

briefly named as the followings:

● Ranking the second-largest retailer in Korea with 124 discount stores

and 27,841 employees (Exhibit 3 - 2011).

● Being a key driver in the development of the Korean retail market:

switching the 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.

● Homeplus stores were successfully established as "value stores," not

only offering low-priced and diverse products.

● 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.
 ● With a total of 258 SSM outlets in 2010 (Exhibit 7), it successfully led
the market segmentation of the 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.

4. THE CHALLENGES:

There are a few problems and challenges that Homeplus needs to resolve
if they want to grow the market in the long term:

● Firstly, it is the hash competition of Little and Shinsegae group

against Homeplus when both have their manufacturing and
distribution units in the local areas that could support the retail
business faster by providing synergy effects, shorter
decision-making processes, more flexible approval with insightful
knowledge of the Korean business environment for more effective
store format. They could expand their business domains through
their chaebol affiliates because they have the advantage of a local
sourcing network and strong cash flow from their chaebols.

● Secondly, it's the intensive relationship between Homeplus' SSM and

the mom-and-pop stores (the traditional Korean small grocers).
Since the SSM sells the same variety of products at lower prices, the
mom-and-pop stores’ sales out-take decreased by 42.2% of revenue
as per the government statistic report. As a result, many people
protested the new SSM location in the area, and 18 petitions were
signed against Homeplus and the other retailers. Last but not least,
to protect local grocers, lawmakers introduced two bills in the
National Assembly:

1. One bill requires local government permission to open an SSM

within 500 meters of a traditional outdoor market.

2. 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 on March
12 required large retailers to close their doors on the second and
fourth Sundays of every month.
 ● Thirdly, It is the change in consumer behaviors, particularly among
the young, from traditional to online and smartphone purchases.
When purchasing products, they need some more "convenience" and
"instant or quick delivery' " to their door. As a result, the demand for
convenience stores and SSMs is increasing for the following reasons:
located close to consumer households, have smaller quantities, and
have very reasonable pricing (Exhibit 8).

5. THE STRATEGIC SOLUTIONS:

Here are the possible solutions to resolve the current challenges and
problems:

Challenges/problems Solution

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

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 Plan the store locations in such a

delivery of stock way that they are accessible to
multiple localities and support
them with delivery.

Home Plus improved its online

service by make it available on
mobile and decrease distraction by
using virtual store for both its
online and offline shoppers. In
other words, combination between
Virtual store, QR code and online
site is accounted on an improved
product since it offers a better
solutions to the old market.

Homeplus employs a market

 penetration strategy to increase
market share through mobile
availability and location coverage
without the addition of new
physical stores.

Set up a delivery service for faster

and efficient delivery by Homeplus
something that the other small
stores lack.

Intensive relationship with local Get more involved in the community

stores and make friends with the people
who live there. Give locals franchise
rights if at all possible.

6. KEY FACTORS TO DRIVE SUCCESS:

There are three main factors affecting consumers' behavior and

marketing strategy in Korea.

First, Korean consumers as well as many other countries become

convenience-concern in shopping decision-making.

Second, there is a considerable change in Korean household size. Park,

Kim & Ko 2002 project that the average size of households in Korea will
drop from 3.12 persons in 2000 to 2.73 persons in 2020. Result people prefer
to shop daily and small size packages with limited storage and fridge
space(Kim 2008).

Finally, mobile retailing becomes the main trend since a retail outlet is
decreased in popularity and a typical online service is not competitive
and differentiates anymore.

7. CONCLUSION:

As a result, we conclude that businesses must innovate and develop new

marketing strategies to gain, maintain, or regain market share. Time has
an impact on the consumer's interests. However, when applying
management principles to marketing strategies, environmental effects
and consumer preferences must be taken into account.