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Contents
Chapter One.......................................................................................................... 3
1.0 Introduction..................................................................................................... 3
2.0 Wal-Marts Failure in Germany.........................................................................4
2.1 Germanys cultural attitudes........................................................................4
2.2Customer Service.......................................................................................... 5
2.3 Market structure and business model...........................................................6
3.0 Wal-Marts Failure in Japan...............................................................................7
3.1 Cultural misunderstanding...........................................................................7
3.2 Supply chain inefficiencies........................................................................... 8
3.3 Pressure from competition............................................................................9
4.0 Wal-Marts Failure in South Korea..................................................................10
4.1 consumer preferences and culture.............................................................10
4.2 Location...................................................................................................... 10
4.3 Marketing................................................................................................... 11
5.0 Conclusion..................................................................................................... 12
Chapter Two......................................................................................................... 13
1.0 Introduction................................................................................................... 13
2.0 TESCO Failure in Japan................................................................................... 14
2.1 Deviated from hypermarket strategy.........................................................15
2.3 Strong competition..................................................................................... 15
2.4 No acquisition............................................................................................. 16
3.0 TESCO Success in South Korea......................................................................17
3.1 Buy successful companies abroad, not ones that need turning around......17
3.2 Market synergies and market share...........................................................18
3.3 High quality production at low cost............................................................19
4.0 Conclusion..................................................................................................... 20
5.0 References..................................................................................................... 21

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Chapter One
1.0 Introduction

Wal-Mart was founded by Sam Walton in 1962; it was

incorporated on October 31, 1969, and listed on the New York Stock Exchange in 1972. It
started with a single store in Rogers, Arkansas in 1962 and has grown to what is now the
worlds largest and arguably, the most emulated retailer. Some researchers refer to Wal-Mart
as the industry trendsetter. Today, this retailing pioneer has annual revenues of over $100
billion, 3,000 stores and more than 750,000 employees worldwide. Wal-Mart operates each
store, from the products it stocks, to the front-end equipment that helps speed checkout, with
the same philosophy: provide everyday low prices and superior customer service. Lower
prices also eliminate the expense of frequent sales promotions and sales are more predictable.
Wal-Mart has invested heavily in its unique cross-docking inventory system. Cross docking
has enabled Wal-Mart to achieve economies of scale which reduce its costs of sales. With this
system, goods are continuously delivered to stores within 48 hours and often without having
to stock them. This allows Wal-Mart to replenish the shelves 4 times faster than its
competition. Wal-Mart's ability to replenish their shelves four times faster than its
competition is just another advantage they have over competition. Wal-Mart leverages its
buying power through purchasing in bulks and distributing the goods on it' own. Wal-Mart
guarantees everyday low prices and considers them the one stop shop, (Wal-Mart, 2014).
Wal-Mart operates in Mexico as Walmex, in the UK as ASDA, and in Japan as Seiyu.
It has wholly owned operations in Argentina, Brazil, Canada, and Puertorico. Wal-Mart's
investments outside North America have had mixed results: its operations in South America
and China are highly successful, while t was forced to pull out of Germany and South Korea
when ventures there were unsuccessful, (Wal-Mart, 2014).

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2.0 Wal-Marts Failure in Germany
There are many reasons why Wal-Marts business model failed in
Germany, such as Cultural attitudes, Customer Service, and Cultural
arrogance all contributed to what one economist referred to as a failure.
But under these basic economic decisions were a host of basic crosscultural mistakes that fuelled the companys poor strategic planning.

2.1 Germanys cultural attitudes

Wal-Mart failed to take into account Germanys cultural attitudes,
especially with regard to such matters as labor law and the role of unions.
While the companys anti-union stance has been core to its US success in
holding down costs and thus its ability to offer discount pricing, Germans
generally see a closer link between labor unions and democracy. When
Wal-Mart exported its domestic labor and cultural attitudes regulations
that discourage or stop fraternization among employees, this was
considered in Germany to be anti-democratic and an impermissible
involvement into the private lives of employees. Europeans, in general,
tend not to generally accept corporate work rules that regulate their
private lives. In Germany, companies typically enjoy a close connection
with their unions. Wal-Marts failure to appreciate and adjust to this
attitude was the start of its adverse image in Germany. Worse than the
damage done to its employee relations was the spread of this negative
image through the media to the German society and thus to German
consumers.
Some of Wal-Marts employee practices may have been standard
practice among companies in the US but they served to exasperate
Workers

Councils

in

Germany,

and

were quickly

challenged.

The

challenges included costly and well-publicized litigation damaging to the

Wal-Mart image.
A labor court in Wuppertal ruled in a lawsuit filed by local employees
that parts of Wal-Mart Germanys ethics and cultural attitudes code
contravened German law. The code of conduct included a ban on
relationships at work and provided a hotline for employees to report on
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rules violations by co-workers. Wal-Mart also runs afoul of requirements
that workers representatives be consulted before introducing changes in
working conditions.

2.2Customer Service
Wal-Mart failed to appreciate whether and how American consumer
habits and expectations might differ from those of consumers in new
markets. It is not difficult to understand, for example, that what is
considered

customer

service

in

one

country

may

be

wholly

inappropriate or even offensive in another. Thus, Wal-Marts German

competitors gleefully observed Wal-Mart offend its new customers by
bagging their purchases. These competitors knew that thrifty German
shoppers prefer this task not be done by strangers. While more affluent
German shoppers might appreciate this service, German discount
shoppers regarded this as an intrusion into their privacy for which they
were paying a hidden labor cost. Wal-Marts gaffe was compounded by its
use of plastic bags in a society highly sensitive to issues of sustainability
and matters of ecology. Thus, for reasons of both privacy and ecology,
Germans will take their own large bags to supermarkets to bag and carry
their own purchases. This example is representative of Wal-Marts failure
to appreciate its customers. The companys use of greeters and its
employment of the ten-foot rule whereby employees would offer
support to shoppers were counter-productive choices in a discount market
environment. Many shoppers were unnerved by these practices. Some
even felt molested.
For example, grocery store chain, Aldi, which originated in Germany,
is a good example of what Germans expect from a discount store. At Aldi,
customers bag their own groceries, shopping carts are available with the
deposit of a quarter, and the store hours are reduced to save on
operational costs. The shelves are lined with products still in the boxes
they were shipped in, to cut down on stocking labor. Boxes are even
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available for customers to use to carry their purchases to their cars, in
place of plastic bags.
Overall, the perception of Wal-Marts targeted customer group was
that the company did not deliver on its proposition to offer the lowest
prices and excellent customer service. In its retreat, Wal-Mart admitted
that its formula is not a fit for every culture.

2.3 Market structure and business model

A retailer that wants to follow Wal-Mart's strategy of low prices needs to
expand rapidly. In Germany, there were not enough appropriate locations
to support such expansion. Wal-Mart did not build their own stores, but
took over existing supermarkets that had a completely different business
model - they were very small and had a limited range of goods. They were
also located far apart, which resulted in high logistical costs.
With their strategy of "everyday low prices," Wal-Mart is very successful in
the United States and elsewhere. However, due to the extreme
competition, Germans are accustomed to the low prices that are offered
by numerous discount supermarket chains. For this reason, Wal-Mart's low
price strategy did not create sufficient competitive advantage.

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3.0 Wal-Marts Failure in Japan

3.1 Cultural misunderstanding
Wal-Mart failed to grasp the consumer and retail environment in
Japan. With a population of 127 million, the highest per capita income and
the second largest economy in the world, Japan is a very smart market for
retailers. The opportunity exists, but there is much more research and
planning that needed to be done before expansion began. Instead of
adapting business operations to the Japanese culture, the company
essentially assumed the Japanese would readily adjust to Wal-Marts. For
example, in Japan there is a much larger need for local store
customization. Consumer buyer behaviour is much different than in the
United States, with purchasing patterns and product selection varying
greatly between regions. They have a trend to buy smaller quantities in
regular intervals rather than the more American idea of stocking up.
Similarly, the concept of large retail stores is foreign. Retailers with the
highest growth rate are small specialty stores; quite the opposite of WalMart. The culture tends to buy more fresh produce than pre-packaged
goods as well.

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Lastly, the Japanese view high price as equalling high quality. This
mentality causes them to purchase 40% of the worlds luxury goods
annually. Packaging and appearance of goods play a huge role in their
purchasing decisions. When looking at Wal-Marts product selection, it is
obvious they do not usually cater to luxury-brand customers. All of these
cultural misunderstandings lead Wal-Mart away from success in Japan.
Perhaps more research into their cultural values and patterns could have
helped avoid some of these mishaps.

3.2 Supply chain inefficiencies

In Japan there are strong and strong supplier webs that provide
retailers with their goods. This country puts a higher value on close, local
relationships, making it very difficult for foreign firms to enter the industry.
With so many changes in products due to local store specifications, it
forces firms to deal with many different suppliers. This is not favourable to
large retailers, as they dont have the time or national presence to make
the necessary relationships to do business. Wal-Mart is not used to this
high level of supplier power. Their value usually comes from cutting costs
with suppliers enough to pass onto their customers while using synergy to
increase efficiencies. Difficulties managing their supply chain are another
substantial reason Wal-Mart is struggling in Japan.

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3.3 Pressure from competition

The types of competition in Japan include both domestic and
international players. Its biggest Japanese competitors are 7-Eleven Japan
Co. Ltd., Aeon Co. Ltd., and Ito-Yokado Co. Ltd. As of 2008, all of these
companies drastically outperformed Seiyu Ltd. (Wal-Mart). Although all of
these companies have different strategies, much of their success can be
credited to their experience in understanding how their country buyers
and sellers interact. Two main international competitors are Carrefour from
France and Tesco from the United Kingdom. These firms had similar
challenges to Wal-Mart with their international expansions, but each faced
them differently. While Carrefour had complications so complex that it
exited the market in 2004, Tesco was able to gradually expand and
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prosper. Tesco made large investments in market research that allowed
them to build stores that better met the Japanese consumers needs. Their
cautious expansion and well thought out plans have helped them succeed
in the Japanese retail industry. It is imperative for Seiyu and Wal-Mart to
recognize their competitions advantages and formulate better ways to
respond.

4.0 Wal-Marts Failure in South Korea

4.1 consumer preferences and culture
Most individuals believe that Wal-Mart failed to understand South
Koreans consumer preferences. Wal-Mart had relied on its proven
business model and its strategy in offering low prices for products.
However, low prices alone were insufficient to make a successful business
case in South Korea. South Koreans have different consumer preferences
than Americans do; they are not necessarily interested in the same
products. For instance, South Koreans like fresh vegetables and fresh food
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rather than dry products and the type of clothing that Wal-Mart sells. The
South Korean culture is also very tied into its markets; they are one of the
largest countries that are deeply involved in local markets.

4.2 Location
Most Wal-Mart outlets in South Korea were placed outside instead of
in the cities. South Koreans expect easy accessibility to shopping facilities
within the larger cities without the need to travel. Also, South Korean
consumers shop more frequently than most Americans do. They may not
purchase many things at once, but they will usually get at least one item.
Some individuals felt that Wal-Mart should have been located in the center
of the cities where consumers felt more comfortable with their shopping

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needs. South Koreans do not distinguish between discounts and normal
prices. Thus, they may not see a compelling reason to shop at Wal-Mart.

4.3 Marketing
South Korean marketing professional observed, Wal-Mart put off
South Korean consumers by sticking to Western marketing strategies that
concentrated on dry goods, from electronics to clothing, while their local
rivals focus on food and beverages, the segment that specialists say
attract South Koreans to hypermarkets. South Koreans are also visuallyoriented customers. They tend to purchase products not just because of
the product itself, but also because of its appearance or the service the
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customer receives in the store. In fact, some South Korean ladies do not
like the warehouse-like atmosphere of Wal-Mart, which the American
consumers seem not to mind since the products are still cheap. They
prefer

the

department

store-like,

neat,

clean,

and

sophisticated

atmosphere. If you go to E-mart which is the biggest South Korean

supermarket, you never think of it as a discount market.
These and other characteristics seem subtle and intricate to the
foreign observer, yet are obvious, even standard to local marketers. As a
result, local perspective among Koreans is that Wal-Marts failure in South
Korea was primarily due to its inability to understand the shopping
preferences of local consumers and to adjust its business model to the
prevailing domestic culture.

5.0 Conclusion
When first Wal-Mart opened its doors in South Korea in 1998, it was
sensational with mixed welcome by competitors and consumers. Wal-Mart
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simply failed to deliver the basic quality expectation so shoppers stop
visiting as there is no reason to come. A shopper says Yes, it is low price.
But, I would rather pay for quality food in E-Mart.
necessity when I am there to buy food.

I will buy my daily

I dont want to make another

shopping trip just to save a little more dollar as it is too cumbersome and
time is money.
Many global managers who have tried to crack Japanese markets
would know how tough the market is. The biggest challenge is highly
sophisticated and demanding consumers.

It takes huge effort to

understand, design and deliver to satisfy its needs. It is even tough task
for Japanese firms to do so. Foreign companies who enter into Japan will
need to fight for another barrier of their global practice and challenges
caused by lack of headquarters understanding of Japanese consumers
and unwillingness to be flexible to adjust their operation strategy only to
meet Japanese consumers. On top of that, Japan has another layer of
challenges to deal with.

Japanese perception of good value.

If value

equation is quality over price, Japanese seems to put more weight on

quality within a certain price range. The quality is perceived quality, and
brand plays a critical role in providing the perception in Japan.
Looking at Germany, there seem to be more macro reasons of how
to deal with such as entry model, labor union relationship and competitive
landscape.

Wal-Mart tried to apply its U.S. success formula in an

unmodified manner to the German market. As a result, they didn't have

sufficient knowledge about the market structure and key cultural / political
issues. In addition, structural factors prevented Wal-Mart from fully
implementing its successful business model. The final outcome was that it
had to abandon its offerings in Germany. Had Wal-Mart paid careful
attention to these issues prior to entering the German market, it could
have had a very different outcome.

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Chapter Two
1.0 Introduction

Tesco is Britains leading food retailer and the third largest in the
world. Its first store was opened in 1929 in London and by the early 1960s
Tesco was a familiar feature of most UK high streets. After joining the
eighties trend for large out-of-town supermarkets, in the 1990s the
company started pioneering many new innovations. It developed new
store concepts such as Tesco Metro, a city centre store meeting the needs
of local shoppers, and Tesco Express, the first UK petrol station
convenience store. In 1995 the company introduced its Clubcard, the UKs
first customer loyalty card, and two years later formed a joint venture with
the Royal Bank of Scotland to offer a range of financial services. 2000
marked the start of Tesco.com which was built on the back of existing
stores and, with low capital spend, was profitable from the start a key
internal requirement. Tescos international operation, which started in
1994, has steadily expanded and now accounts for half of its total retail
space. Since 2000 there has also been an increasing focus on building
non-food sales both in store and online with the result that, for example,
Tesco is now the UKs largest CD retailer.
Tesco also aims to improve service and provide better value rather than
concentrate on pricing alone. These principles are carried across the
business into non-food, services and its international operations. To enable
this, the company pays considerable focus on harnessing the creativity of
its workforce and encourages staff to come forward with ideas. The
companys prowess in process management applies just as much to its
idea management as it does to logistics and store layout.

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A key ingredient to Tescos growth is the use of well-targeted own-label
brands including the up-market Finest and low-price Value labels. To
drive this Tesco has led the field in market insight. Its Clubcard, the most
successful loyalty card in the sector, provides Tesco with a class-leading
ability to spot emerging trends, attract consumers and influence the
behavior of secondary customers to bring them into the fold.

2.0 TESCO Failure in Japan

In the almost decade-long period (it entered in 2003 through
acquisition of local player C Two-Network) it was operating in the market,
the retailer never seemed able to gain scale and traction in a notoriously
difficult retail sector. This was despite Tesco launching its private label
products (2006) and its Express format (2007) into the market .

2.1 Deviated from hypermarket strategy

Elsewhere in Asia, Tesco has had most of its success through
establishing itself through hypermarkets. Thailand, S Korea, Malaysia,
China,

these are all markets where Tesco first built up a strong

hypermarket chain before then filling in the gaps with smaller stores.
Japan was an exception, C Two-Network operated small, value-orientated
stores typically trading from units of around 100-300 square metres in the
Tokyo metropolitan area. This was fine for Express stores, but meant that
Tesco could never gain the scale it needed quickly that a chain of large
hypermarkets would bring it. The revised City Planning Law, which came
into effect in 2007, restricted large store growth anyway.

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2.3 Strong competition

Japan is a unique retail market as other global retailers (such as
Carrefour) have also discovered. Launching Tesco Express seemed a
logical move given the existing store portfolio and the formats success
elsewhere. However, it faced stiff competition from local c-store giants
such as 7-Eleven, LAWSON, FamilyMart and Ministop. In addition, these
players have also expanded into residential price-focused supermarkets
LAWSON STORE 100 for example. Tesco was also banking on its private
labels as giving it a competitive advantage. However, rivals such as Seven
& I and AEON have really invested in improving their own PL ranges in
recent years.

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2.4 No acquisition
C Two-Networks small size meant that even with rapid organic
expansion, Tesco would have found it impossible to become a major
player in Japan. Tesco management initially talked about plans to open a
store a week, taking the total up to 500 stores by 2010. Clearly this never
happened store openings have remained relatively stagnant in recent
years, peaking at about 142. This begs the question why didnt Tesco
acquire once it had a foothold in the market. It acquired 27 Frec stores in
2004, but clearly missed out on larger opportunities which would have
given it scale.

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3.0 TESCO Success in South Korea

3.1 Buy successful companies abroad, not ones that need
turning around
There followed a strong expansion overseas in the 1990s, with ever
more significant movement into growing markets such as South Korea.
Here Tesco was buying into successful companies, but also ensuring
neighboring markets were targeted and that its expansion strategy
included eventual market domination. Hence the second lesson for
internationalization success.
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3.2 Market synergies and market share

One of the chief concerns for retail strategists is market selection.
Tesco decided to enter into markets where local competition was soft,
hence the initial forays into Eastern Europe and South Korea, away from
the unkind look of other expanding giants such as Wal-Mart. Tesco also
adapted to opportunistic events, and decided on different entry modes in
order to develop knowledge.

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3.3 High quality production at low cost

Similarly high quality production at lower cost and the

availability of cheap labour is another pull factor that attracts
foreign investment. To look at South Korea labour is very cheap
and the country is capable of producing high quality products at
competitive cost, there for it is very advantageous for Tesco to
invest in Koreans market. South Korea is the prime location of
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sourcing for Tesco products within china and for its business in the
rest of the world.

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4.0 Conclusion
Japans retail sector has seen stagnant (and even negative growth)
in recent years. Sales growth has been hard to come by even for the
largest players, who have typically relied on a series of acquisitions to
keep growing. In this climate is it any wonder why Tesco decided to cut its
losses and instead focus on faster growing markets with higher potential.
Tesco is one of the largest retailers in the world. This success has
not come about by chance but is the result of effective leadership and
management in South Korea. The setting of a clear vision is central to
Tescos success, supported by a commitment to establishing and
monitoring specific objectives and devising strategies to ensure these are
achieved. All aspects of the business are regularly monitored and, when
necessary, plans are adapted to ensure targets are ultimately met. At the
heart of all Tesco does is a commitment to being a responsible retailer.

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5.0 References

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