This case highlights Whirlpool’s problems in China during the 1990s and contrasts competitive advantage between global firms and local competition in the appliance industry. The case briefly discusses what went wrong in China for Whirlpool like not managing distribution channels, bribery problems, wrong product decisions, not understanding local competition and so on.

Case Contents

1. Introduction – Whirlpool’s entry into China
2. What went wrong in China?
3. Working with local partners and system hassles
4. Bribery Scandal
5. Numerous small local firms that dominated the market
6. Competing with Chinese Appliance Makers
7. Underestimating Local Competition
8. Not managing the distribution channels efficiently
9. Wrong product decisions – Not keeping local needs in mind
10. Foreign Managers not understanding Chinese management culture
11. Market Saturation
12. Distribution System and labor hassles
13. Whirlpool in Asia
14. Whirlpool – Quick Facts
15. Bibliography
16. Exhibit 1 – Whirlpool’s joint ventures with local companies in China in 1995
17. Exhibit 2 – Whirlpool’s leadership position in various regions in 1999
18. Exhibit 3 – Whirlpool – Globalization – Entry into Foreign Markets
19. Exhibit 4- Competitive Advantages of Global firms in the appliance industry
20. Exhibit 5- Whirlpool and GE between 1995 and 1997

Sample Case Page

1. Introduction – Whirlpool’s entry into China

“We entered China pretty early compared to most companies. It was pretty much an unknown.”
- Michael Todman, president of Whirlpool International in 2007

Since 1988, Whirlpool has followed an aggressive globalization strategy under the leadership of former CEO, David Whitman. China had been one of its main entry targets and also fit into its global strategy of becoming the market leader in Asia. Whirlpool formed several joint ventures in China and India in the mid-1990s signaling a big push into the Asian market. However, in 1996, revenues from Asian operations were far from being profitable and accounted for only 6 percent of the total revenues of $8.5 billion. The company made losses to the tune of $70 million in Asia alone that year. Between 1994 and 1997, it invested over $300 million in four JVs in China. Two joint ventures in China were unsuccessful and loss-making. A year later, in 1997, with tough competition in China’s market and continued losses, Whirlpool decided to pull out of two joint ventures in China as part of a global restructuring exercise. (See Exhibit 5- Whirlpool and GE between 1995 and 1997 on page 8 ) Whirlpool’s efforts in the world’s most-populous country were not fruitful. Whirlpool’s then CEO David Whitman remarked, “We are taking steps to align the organization with the marketplace realities of our industry.”

Download Case PDF to read more…

This case study/article, titled Whirlpool’s Problems in China, was originally published at Casestudyinc.com.

1. Introduction
2. Manufacturing – The first Dell ‘Made in India’ desktop
3. Dell’s Market Share in India
4. The Indian consumer and Local competition in India
5. DELL – Key Facts about the company
6. Dell – Company Overview
7. Dell – Business Segment Information
8. Dell Products and Services
9. Dell’s new retail strategy and Direct-only model
10. Dell’s New Marketing Strategy in India
11. Dell’s New Advertising Campaign for SMBs
12. Testimonial Advertising instead of Transactional
13. Dell’s CSR, Green Initiatives in India
14. Questions for discussion
15. Bibliography

Sample Page

“India is a great place to be in. It is growing faster than China for us.”
“We’re in 180 countries and I don’t track all of them because that can make you a bit dizzy. But I do follow our top 10 markets. India is in the top 10. In fact, it’s the fastest growing market of our top 10, ahead of everybody, including China. There are plenty of opportunities in India and we couldn’t be more excited.”
-Michael Dell in 2010

‘‘We’re very strong in the large enterprise segment, but over the next three years, we’ll also focus on consumers and small and medium (Indian PC market growing faster than China: Michael Dell news, 2010) businesses. That’s where we see a big part of the next billion dollars in India coming from.”
- Sameer Garde, India country manager in 2010

Introduction

Dell’s presence in India is no surprise. India is one of the most important emerging markets in the world. For years, selling PCs in Asia largely meant China . However, PC makers have recognized the importance of the giant Indian market , its booming economy and annual growth at more than 9%.

Dell started in India about seven or eight years back by opening a customer contact center at Bangalore in 2001. In 2003, the second contact center opened at Hyderabad. The company operates its services from four centers based at Bangalore, Hyderabad, Chandigarh and Gurgaon. Dell started in Bangalore providing customer support to English speaking countries and later also began providing technical support, procurement of financial back office and Knowledge process outsourcing. After the U.S., Dell India is the second biggest center with 23,000 employees. The strategic importance of India to Dell is evident from the fact that India was one among three locations (the other two being US and UK) where Dell’s Latitude E series and Precision notebooks were launched. In India, Dell already has a 23,000-strong workforce in about 10 years of operations and business from India is closing in on the $1 billion mark. Dell has nearly 13 per cent share of the Indian market.

Case Updates/Snippets

• Dell’s channel strategy is to make technology more available to small and medium businesses (SMBs). Dell’s channel partners contribute 22% to its total revenue globally. Out of 10 million SMB customers across the globe, Dell caters to 12,000 SMB customers in India. As per estimates, SMB market in India has over 7 to 13 million customers. Among the BRIC countries and U.S., India is ranked second for the number of SMBs.
• Stiff competion between Dell and HP in the Indian PC market: According to IDC, since 2005, HP has held the number one position in the Indian PC market every quarter (for the past six years). However, in the second quarter (April-June, 2010), Dell replaced HP for the first time with a 15.2 percent share. HP followed at 14.3 percent and Acer at 11.5 percent, though HP still led in the desktop segment. Dell was helped by strong marketing and its channel partners base while HP was disrupted by its move from a national distribution model to a network of regional distributors.
• PC Market in India:In 2009, 75 lakh PCs were sold. In 2010, the expected PC sales are 90 lakh. For the first six months ended June 2010, sales totaled about 45 lakh. [Note: 10 lakh=1 million, PCs include desktops and notebooks.]

This case study/article, titled Dell in India, was originally published at Casestudyinc.com.

This case study discusses how McDonald’s India managed to buck the trend in a struggling economy, its early years and business strategy to get more out of its stores in India. The case also briefly discusses how McDonald’s adapted to local culture in India, its localization and entry strategy, its strong supply chain and pricing strategy.

Table of Contents

1. Introduction
2. McDonald’s entry into India
3. Exhibit I: McDonald’s – Country – Entry Year
4. The Indian Market – Top 10 per cent of the busiest markets globally
5. Localization Strategy
6. McDonald’s JV in India
7. Initial Challenges – ‘Culturally Sensitive’ Food



8. Understanding Indian Customs and Culture
9. An Indianized Menu, Re-engineered operations and no beef burger
10. Competition – Major Competitors in India and Globally
11. McDonald’s – Quick Facts
12. Time line of McDonald’s in India
13. Pricing Strategy – The Rs-20 trap and ‘Purchasing Power Pricing’
14. Kiosks at store entrances for customers in a hurry
15. Home Delivery – McDonald’s Delivery Service or McDelivery



16. Out-of-home Breakfast – International McDonald’s format with local taste
17. McDonald’s Supply Chain Management (SCM)
18. Unique cold chain
19. Cutting costs
20. Exhibit II: McDonald’s Suppliers in India
21. Exhibit III: The Menu at McDonald’s India
22. Exhibit IV: McDonald’s – Early History and Growth
23. Exhibit V: Principles to McDonald’s business success
24. Questions for Discussion

Case Study Keywords: Fast-food Retailing, McDonald’s India, Joint venture, Amit Jatia, Vikram Bakshi, localization strategy, pricing strategy, McIndia, quick service restaurants, cultural adaptation, local culture, supply chain management, SCM, McDelivery, unique cold chain

Case Questions for Discussion

1. McDonalds has become the poster brand for recession-resilient business. What is McDonald’s doing right in India? What elements of its business strategy are working for it and how does it manage to get more out of its stores?
2. Does local adaptation contribute to business growth in a country? Explain McDonald’s efforts to adapt to the local culture in India. What challenges did McDonald’s face in India?
3. Have you ever visited a McDonald’s store? Compare and contrast your experience with another quick-service restaurant or fast-food joint you visited earlier. How can McDonald’s improve? Should it alter its strategy?

Case Updates/Snippets

• World’s leading food service retailer – McDonald’s has more than 32,000 restaurants serving over 50 million customers each day in more than 119 countries.
• McDonald’s competitors in India – McDonald’s competes with fast food chains like Pizza Hut, Domino’s Pizza, Papa John’s, Nirula’s and KFC in India.
• McDonald’s Supply Chain – McDonald’s has a dedicated supply chain in India and sources 99% of its products from within the country. The company has strong backward integration right up to the farm level.
• Quick service restaurants in India – By October 2009, McDonald’s India had more than 170 quick service restaurants in India. Domino’s Pizza, which began operations in India in January 1996, has over 275 stores across 55 cities in the country. KFC has 46 restaurants across 11 cities in India. (KFC is one of the 5 brands owned by Yum!. KFC is a $12 billion global brand and a leading quick-service restaurant (QSR) in many countries.) Nirula’s, one of India’s oldest food chains (completed 75 years in service in March 2009), has a network of around 62 outlets in five states across Northern India. Nirula’s, established in 1934 has interests in hotels, restaurants, ice cream parlours, pastry shops and food processing plants. Nirula’s was the first to introduce burgers in India.
• Food Industry in India – In India, food industry and particularly informal eating out market is very small. In India, over quarter of a million customers visit McDonald’s family restaurants every day. The Indian fast food market is valued at $1-billion (Rs 4,547 crore) aprrox.
• MFY (Made for You) food preparation platform – MFY is a unique concept (cooking method) where the food is prepared as the customer places its order. All new upcoming McDonald’s restaurants are based on MFY. This cooking method has helped McDonald’s further strengthen its food safety, hygiene and quality standards. McDonald’s has around 10 MFY restaurants in its portfolio.
• How McDonald’s manages to keep its prices down? – Fast-food chains face a tough time balancing between margin pressures and hiking prices which can hurt volumes. Consequently, the chains have to increase rates or rework their strategies. Affordability has been the cornerstone of McDonald’s global strategy. Some of its measures to achieve this include – Bulk buying, long-term vendor contracts, and manufacturing efficiencies.
• McDelivery Online – In India, McDonald’s first launched home delivery of meals in Mumbai in 2004. McDonald’s now has plans to launch web-based delivery service in India (across 75 McDelivery cities) in 2010, a pilot for which has already been tested by it in Hyderabad. The company hopes to add 5 per cent to sales via Web delivery. McDonald’s web-based delivery model will be based on serving the customer quickly wherein the drive time does not exceed seven minutes because its food has to be eaten within ten minutes of preparation. The footfalls in India are amongst the highest in the world, but the average bill is amongst the lowest. At present (March 2010), Domino’s Pizza (operated by Bhartia Group-promoted Jubilant Foodworks under a master franchise agreement) has a 65% market share in the home delivery segment.
• Most Preferred Multi Brand Fast Food outlets: In 2009, McDonald’s India won the CNBC Awaaz Consumer Awards for the third time in the category of the Most Preferred Multi Brand Fast Food outlets.
• McDonald’s India in 2010 – In 2010, McDonald’s India plans to open 40 more outlets. The company has also earmarked a budget of Rs 50-60 crore to market its new products and initiatives for consumers. Its new marketing campaign is titled – ‘Har Chotti Khushi Ka Celebration’ – in other words ‘celebrate little joys of life’ where it positions McDonald’s as a venue for enriching life of consumers. In South India, McDonald’s has 29 outlets and plans to add 10 more by end of 2010.
• Taco Bell in India – In March 2010, Taco Bell, the Mexican specialty chain owned by US-based fast food brands operator Yum! Restaurants launched its first outlet in Bangalore, India. The company which also operates brands like Pizza Hut and KFC plans for contract farming to open up to 100 outlets by 2015 and also expand into Tier-II and -III Indian cities eventually.
• Local Vegetarian Menu: In India, McDonald’s does not offer pork or beef-based products. It’s menu is more than 50 per cent vegetarian. The fast food retail chain has separate production lines and processes for its vegetarian and non-vegetarian offerings.
• High Real-Estate costs in India: In many countries, in a Quick Service Restaurant (QSR) a customer comes in, buys and then leaves. This is known as a revolving door concept. But an Indian customer believes in a dine-in culture. This adds to the real estate costs which goes as high as 20-25 per cent as compared to 10-15 per cent globally.
• The most important meal for QSRs- Morning Meals (Breakfast):According to market research company, the NPD Group, breakfast accounted for nearly 60 per cent of the restaurant industry’s traffic growth over the past five years in the U.S. Quick service restaurants sold 80 per cent of the over 12 billion morning meals served at US restaurants for the year ending in March 2010.
• OOH Branding: According to Rameet Arora, senior director – marketing, McDonald’s India (West and South), McDonald’s India may be the largest out-of-home branding (OOH) in the country. McDonald’s India has restarted OOH (out-of-home branding) after a 7 to 8 year break to reach to their target group.
• Employees and Customers: In India, McDonald’s employs 5,000 people and serves half a million customers a day via its 169 family restaurants. McDonald’s has 85,000 employees and serves 2.5 million customers a day in the UK.
• KFC – New Menu “Streetwise” – In February 2011, KFC, the fast food retail chain announced a new menu called “Streetwise” to offer products at more affordable prices to attract the college crowd. KFC has around 108 stores in India and Streetwise would help it compete better against McDonald’s youth brand offering in India (products priced at Rupees 20). KFC’s products were typically priced between Rs 65 and Rs 500 but with the new menu – between Rs 25 and Rs 100.
• New Business Channels – To boost sales, McDonald’s is looking at new business channels instead of rapid expansion. New business channels include home delivery, kiosks, breakfast, extended hours and drive-throughs. As per estimates, home delivery can increase store sales about 15% and drive throughs by 50%.

This case study/article, titled McDonald’s – Business Strategy in India, was originally published at Casestudyinc.com.

1. Introduction
2. Background Note
3. Exhibit I: H&M’s Growth (1974 – 2007)
4. Exhibit II: H&M’s International Expansion
5. H&M’s Supply Chain
6. Exhibit III: H&M’s Best Price Strategy
7. H&M’s Financial Performance Summary (Revenue and Net Income)
8. Exhibit IV: H&M’s Three Sales Channels – Stores, Internet and Catalogues
9. Exhibit V: Table showing some major retailers with # of stores in Japan
10. Exhibit VI: Comparison with major global specialty clothing retailers
11. H&M Quick Facts – Brief Company profile – Revenues, Industry, Employees, Operations, Total Stores, Sales Channels, Major Competitors, Major Brands/Labels, Business/Growth Strategy, Key Executives
12. H&M’s Entry Strategy into Japan
13. Hurdles when entering the Japanese market
14. Channel Issues – Will H&M’s strategy to go alone work in Japan?
15. Product Quality Issues — Will H&M’s fast fashion work in Japan?
16. Design Collaboration, Designer Brands
17. Understanding the Japanese consumer – group oriented culture, the price factor and the Japanese H&M fan club
18. In conclusion
19. Additional Reading and References

1. Introduction

"It has been H&M’s dream to open in Japan. I am very proud to say that we now have our very first store in Tokyo. Japan is a very strategic and exciting market with great fashion awareness. We hope that we can offer our Tokyo customers added value through fashion and quality at the best price. We’re not in a hurry in Japan but we see huge potential if we succeed. We’ll go step by step."
-Rolf Eriksen, CEO of Hennes and Mauritz at the ceremony to open the Japan flagship store.

"Our business concept is really what attracts the H&M customer: Fashion and quality at the best price. Because we do carry all these different lines in our stores, we allow our customer to address [his or her] personality, and that’s really important."
- Karen Belva, public relations manager and spokesperson of H&M in 2002.

"With H&M’s opening, everybody – the Gap and Zara – will have come to Japan"-
Tadashi Yanai, Chief Executive, Fast Retailing, referring to Inditex’s Zara apparel chain.

In April 2007, Stockholm-based Swedish fashion giant Hennes & Mauritz (H&M) opened its first flagship store in China. About a year later (in September 2008), this strategic move was followed by another first H&M outlet in Tokyo, Japan, the world’s second-largest economy. The H&M store – a four-storey shop was strategically located just a few buildings down from competitors Zara and Gap Inc stores. The new store with a floor space of more than 1,000 square meters was first in a series of stores that H&M planned to open in Japan. The world’s No. 3 clothing retailer had aggressive plans to open stores in Japan, as well as sites in regional shopping centers.

With the European markets saturating, H&M was pursuing a rapid international expansion strategy. But the timing of H&M’s entry strategy into Japan, especially when the economy was struggling with recession and customers were tightening their purse strings was open to discussion. Besides, Japan was regarded as one of the world’s most competitive fashion markets. Market reports also suggested a declining market for clothing and footwear. Some observers called it the toughest trading conditions in decades. However, H&M was confident of differentiating itself and competing with expensive brands like Christian Dior, Giorgio Armani and Chanel, as well as the more reasonably priced Gap and Japan’s hugely popular Uniqlo chain.

Background Note

H&M was founded in 1947 by Erling Persson, a salesman from Västerås – a small town in Sweden. He began his career working for his father delivering cheese to restaurants in Stockholm on a bicycle. He was attracted by the concept of clothes stores selling stylish garments at low prices when he once visited the U.S. He was amazed at the success of retailers like Macy’s in New York. He opened a similar store in Västerås selling clothes for women. He named the store ‘Hennes’ which stood for ‘hers’ in Swedish…

…Today, H&M is the world’s third-largest retailer by sales with around 1,600 stores in 32 countries with 68,000 employees. In the past two decades, H&M grew at an average rate of 20% annually. It managed to grow quickly into the world’s third largest clothing retailer by offering clothing that is seen as both fashionable and reasonably priced. It made its mark on the apparel industry, mixing the latest trends with fashion classics. H&M is popularly known as the king of “fast fashion” and the purveyor of quick-to-market trendy clothing. H&M’s business model is based on "Fashion and quality at the best price."

Will H&M be successful in Japan?

"I believe that the interest in a new change would be big in Japan. It’s one of the biggest countries we have entered. If we succeeded as we have done in all the other countries,[Japan] could be a huge market for H&M."- CEO, H&M

Download case study PDF file to read more…

Related Case Studies

• H&M’s Low-cost, High-fashion Supply Chain

Case Keywords: Hennes & Mauritz, H&M, Entry Strategy, Japan, Expansion into global markets, International Business, Competitive Strategies, local culture, Japanese apparel market, Fast Fashion, Best Price Strategy, H&M’s Three Sales Channels, Channel Issues, Product Quality Issues, Design Collaboration, Designer Brands, Japanese H&M fan club, Erling Persson, Zara, Uniqlo, Fast Retailing, Supply Chain

Case Updates/Snippets

• H&M in Asia- H&M has over 1,800 shops in more than 30 countries. H&M’s principal markets are in Germany, the United Kingdom and Sweden. In Asia (2009 figures), H&M has four stores in Japan, 15 stores in China and 6 stores in Hong Kong. It plans to set up its first store in Korea, sees potential in Taiwan and wants to up its store count in China by 30% in 2009. H&M’s top management considers Asia to be the newest and biggest market for H&M in future.
• H&M’s business model and focus on low-cost, fast-moving fashions, and geographic spread helped it to weather the economic downturn better than its competitors. During 2009, the Swedish fashion retailer H&M was the top-ranked global fashion retailer.
• In fiscal year 2009, H&M added a total of 250 new stores, 25 more than originally planned.
• H&M in China: In 2007, H&M entered China. By 2011 it had 64 stores in China out of a total of 2,410 world-wide. China has been more profitable to H&M than any other market and it expects to treble its store count by opening stores in smaller cities of China.

This case study/article, titled Hennes & Mauritz (H&M) in Japan – Hit or Mistake?, was originally published at Casestudyinc.com.

1. Introduction
2. eBay – Company Background
3. Pierre Omidyar – The founder of eBay
4. Early Days – From AuctionWeb to eBay
5. Meg Whitman and the growth of eBay
6. eBay – Quick Facts
7. eBay’s International Expansion
8. Exhibit I – eBay’s Net Revenue by Territory
9. eBay and its entry in Japan
10. Exhibit II – Yahoo Japan and eBay comparative data (in 2001)
11. Why eBay failed in Japan?
12. Stiff competition from Yahoo Japan
13. Not adapting to local culture and practices
14. No first-mover advantage
15. Low-key Marketing and Advertising
16. The return of eBay to Japan
17. Questions for Discussion
18. Exhibit III: Selected Financial Data for five years
19. Exhibit IV: eBay stock performance graph

Case Abstract

Issues/Information Covered

• eBay’s entry strategy in Japan
• eBay company background
• Why eBay failed in Japan?

Introduction

“We were late to the market and entered when Yahoo!/Softbank had gained a lot of momentum through its Internet portal. eBay is committed to the Asian market and may return to the Japanese market when economic conditions are better and when they have a strategy that addresses the issues they currently face in Japan.”
– an eBay spokesperson in 2002.

Ever since its entry in Japan in 2000, eBay, the US online auctioneer was struggling. By the end of 2001, many analysts felt that eBay Japan should admit defeat and sell a majority stake in the venture to a bigger local player. But even then, eBay would face an uphill struggle. In February 2002, eBay, announced its decision to exit from the Japanese market after it failed to gain a foothold in Japan lagging behind market leader, Yahoo Japan. The company also announced that its Japanese language site would be closed and 17 jobs would be cut. All its Japanese customers would be directed to its US based auction operations/site. At the time, eBay was the number one auction site in all of the other 18 countries in which it operated and one of the few successful internet companies, having seen its profits soar even amid the dot-com implosion. eBay’s strategy in Japan had failed. Japan was a rare failure for the company.

Japan was critical to eBay’s success because it was the world’s second-largest Internet market. The gap had to be closed soon otherwise Yahoo Inc. could easily beat it in the rest of Asia. Yahoo Japan was the No. 1 or No. 2 portal everywhere except China. In December 2007, Yahoo Japan and eBay made a deal to link their auction sites and make it easier for their respective users to bid on and buy goods available on each other’s sites. A new website by name “Sekaimon” (‘gateway to the world’ or ‘global shopping’ in Japanese) – www.sekaimon.com – was launched in December. The site allowed Yahoo Japan users to bid on items listed on eBay’s US site using their Yahoo Japan ID. The deal made cross-border bidding easier and gave eBay another chance to woo Japanese consumers…

Keywords: eBay, Japan, International Expansion Strategy, Entry Strategy, local culture and practices, Yahoo Japan, Pierre Omidyar, Meg Whitman, first-mover advantage, AuctionWeb, Sekaimon, Internet Auction, Online selling and bidding, Online Marketplaces, PayPal, Skype, Half.com, Rent.com, Shopping.com, StubHub, Alando AG, iBazar S.A., NeoCom Technology Co Ltd., EBay’s international operations, online shopping business, Sanook, TOM Online

This case study/article, titled eBay in Japan, was originally published at Casestudyinc.com.

The focus of this case study is the hurdles faced by retailing giant Wal-Mart in the Japanese market. WalMart’s best practices in retailing like Every Day Low Prices (EDLP) and Rollback to the Japanese market through its joint venture with Seiyu…In December 2005, Wal-Mart acquired a controlling 50.9 percent stake in Seiyu. However, Wal-Mart has since found it difficult to save the company even after investing more than one billion dollars. The company is revamping stores in hopes of drawing new customers. After exiting from Germany and South Korea last year (because it could not adapt to local tastes), Wal-Mart wants to maintain its presence in Japan. Success in Japan is important to Wal-Mart because a strong presence in the world’s No. 2 retail market is a key driver to future business growth.

Introduction – Wal-Mart in US Retail Market

Wal-Mart is the world’s largest retailer with $345 billion in sales for the fiscal year ending Jan. 31, 2007. Wal-Mart Stores, Inc. includes Wal-Mart Supercenters, discount stores, Neighborhood Markets and SAM’S Club warehouses. Wal-Mart employs 1.9 million associates worldwide ….

Case Study Contents

• Introduction – Wal-Mart in US Retail Market
• Wal-Mart – Company Background
• Wal-Mart – Timeline
• Wal-Mart: Quick Facts
• Wal-Mart's turnaround quest: Will Wal-Mart's mass-market formula work in Japan?
• Wal-Mart increases stake in Japan's Seiyu to 95%
• Localization Strategy – WalMart's failure in Germany and South Korea
• Cost-Leadership Strategy- WalMart's core philosophy – EDLP
• Cheap stuff at cheap prices – Japanese consumer mindset
• Is Wal-Mart the only one struggling in Japan?
• Will Seiyu get to U.S.-style EDLP in Japan?
• Store Formats
• Related Reading
• View sample pages of this case study

Case Study Keywords: Walmart, Wal-Mart Stores Inc., Japanese Retail Industry, Every Day Low Prices EDLP, Carrefour, Daeiei, Aeon Co., Sam’s Clubs, Consumer Behavior, Low cost strategies, Localization Strategies, Pricing Strategy, IT systems, Supply Chain and Logistics, supermarkets

This case study/article, titled Wal-Mart in Japan, was originally published at Casestudyinc.com.

Tesco Group is UK’s biggest retailer and operates more than 2,500 stores in the UK and 12 other countries in Europe and Asia. For years, Tesco had plans to enter the U.S. retail market. It was believed that Tesco even looked into possibly acquiring key parts of the Albertson’s grocery chain. But finally, Tesco announced that it would enter the US by 2007 and that its new stores would be based on its “Tesco Express” convenience store model. Tesco operates four different retail formats – Tesco Express, Tesco Metro, Tesco Supercenters and Tesco Extra. Tesco Express is a smaller store format of up to 3,000 sq. feet.

At the time many analysts predicted that the coming of Tesco – even though a new player was a quite accomplished retail entity – had the ability to impact the U.S. market over the long term. To the conventional supermarket channel and even Wal-Mart, Kroger, and Safeway it could only be viewed as a negative. For the traditional supermarket chains who were already struggling to compete with Wal-Mart and the growing popularity of organic food stores like Whole Foods (and other premium food chains), the competition was only going to get worse.

Taking on Wal-Mart

Tesco was serious about expanding into the U.S. as indicated by its initial plans to spend $400 million a year to build its U.S. stores. This investment could pay for 100 to 150 stores. It aims to build 1,000 stores in the US eventually. Tesco chose to enter U.S. through the West Coast first because that region of the country is not yet dominated by Wal-Mart. Like Wal-Mart, Tesco is nonunionised. Wal-Mart is planning to test similarly sized new grocery stores under the “Marketside” banner in the Phoenix area later this year.

Success of Tesco’s launch in the US?

There was growing speculation that the initial performance of Tesco’s new Fresh & Easy discount grocery stores concept was not up to the mark and that internal sales targets were not being met. Some reports in the US suggested that the small neighbourhood groceries, similar in concept to an Aldi hard-discount store, have been failing to attract customers at the rate needed. (The hard discount store, pioneered by Aldi, is a small outlet with only 700 to 1,000 lines of stock compared with 100,000 in a big Wal-Mart. The shelves are mostly filled with own-brand goods.)

Even competitors like Stater Brothers, a supermarket chain in south California (and where the first 20 Tesco stores opened) felt almost no impact from Tesco. The Fresh & Easy concept was being questioned. Fresh & Easy had claimed to be up to 25 per cent cheaper than its main supermarket competition and had expectations of average sales to reach $200,000 per store per week.

Will Tesco succeed in the U.S?

A spokesman from Tesco however maintained that its failure claims were “a bit ridiculous, given that we only opened four months ago”. Tesco is continuing to push ahead with its ambitious US store plans, with another 150 stores expected to open over the coming year in its initial markets. The group has committed £1.25bn ($2.48bn) over five years to its US expansion plans. It is signing leases on additional store sites in northern California, where it is also planning to open a second large distribution centre outside Stockton.

In the past, retailers from the UK like Marks & Spencer, Next, Dixons, and Sainsbury’s have all tried to expand in the US and failed. Tesco has already made the first change to its executive management team at Fresh & Easy. Jeff Adams is heading back to US. He was the chief executive of Tesco’s Lotus business in Thailand. He will be second-in-command to Tim Mason, Fresh & Easy’s chief executive. Meanwhile, Tesco has other things to worry about in its home UK market after it was accused of setting up an elaborate offshore tax avoidance scheme.

Related Reading

Tesco takes on US Wal-Mart [Pdf File]Wal-Mart’s supply chain management practices [Pdf file]Wal-Mart’s Marketside or Tesco’s Fresh and Easy stores in US
Corporate Social Responsibility at Tesco [Pdf file]Of Wal-Mart price cuts, Struggling Retailers and Weak 2008 Retail Sales Forecast

This case study/article, titled Will Tesco succeed in the U.S?, was originally published at Casestudyinc.com.

In 1994, China had 1.5 million subscribers across the country. Also in 1994, China transitioned from an analogue network towards a digital Global System for Mobile communications (GSM, originally Group Special Mobile) system. In 1998, Motorola, Nokia and Ericsson had 83% market share. Also in this year, Kejian introduced its (first local mobile brand) GSM mobile phone.

Keywords: Nokia in China, Domestic and foreign cell phone players in China, Nokia entry strategy in China, Chinese mobile phone market

Download Case Study: Nokia’s Business Strategy in India

This case study/article, titled Nokia and its Growth Strategy in China, was originally published at Casestudyinc.com.

Case Contents

1. Introduction – Tesco in US Retail Market
2. Tesco – Company Background and Timeline
3. TESCO at a Glance
4. Localization Strategy – Tesco in South Korea
5. Tesco’s Business Strategy in the US – Healthy food, No waiting
6. Store Formats
7. Financial Highlights
8. Related Reading

Download Case Study (in PDF format)

Case Abstracts

UK’s largest retailer Tesco and one of the top supermarket operators in the world plans to open a thousand-strong chain of discount stores in the US. Tesco plans to invest more than $250m (£120m) [$2.5 billion over the next five years] in its US business launch. This expansion plan and strategy places it directly against competitor retail giant Wal-Mart. Many UK retailers have found it difficult to survive or compete in the US retail market. The US retail market is most competitive in the world, a fact well-known to British retailers Sainsbury’s and Marks & Spencer which failed to attract US customers.

Tesco’s Business Strategy in the US – Healthy food, No waiting

Fresh & Easy stores

Tesco started operations in the US by opening 15 of its Fresh & Easy stores in Las Vegas, Los Angeles, San Diego and Phoenix. By 2009, Tesco plans to open 200 more outlets to expand the retail network. Tesco’s basic US stores will be similar to European discounters Aldi and Lidl though Tesco stores will be 75% smaller than most American supermarkets. Fresh & Easy stores about 10,000 square feet are one-third the size of a typical supermarket, but four times that of a convenience store. Tesco is adopting a hard-discount model in the US. Tesco’s convenience stores modeled on the Tesco Express blueprint target US grocers such as 7-Eleven and locally-run stores.

This case study covers the following issues:
1. Assess Tesco’s globalization strategies
2. Examine and analyze the entry and expansion strategies of Tesco in US
3. Study how Tesco localized its retail practices in US
4. Understand Tesco’s efforts to integrate its global best practices with local strategies in US

Case Study Keywords:
Tesco, Samsung, Globalization Strategy, Localization Strategy, International Business, International Expansion and Entry Strategies, Retail Store Formats, supermarkets

This case study/article, titled Tesco takes on US WalMart, was originally published at Casestudyinc.com.