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IM Tesco (Management & Strategy in China (STRATEGY (Operating model…
IM Tesco
Culture in China
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TOM model
"The UK management sent over some people to try to tell the Taiwanese what to do and in the end they just got rid of them all. Since then, it has all been running well.”
Objectives of the Operating Model Programme:
• Exploit UK operational expertise
• Leverage group assets
• Build a common platform for innovation
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chinese cultural attitude to have multiple store cards for loyalty to ensure the best deals - the clubcard didn't seize the market --- Paul French, retail analyst
the joint venture with Hymall was an important part of Tesco's market entry strategy as by working with Chinese managers, it was able to create strong relationships within the local communities where stores have been sited
analysts name tescos biggest mistake to be not understanding and researching chinese culture before they signed the deal for a joint venture
63% of people who participated in a survey about loyalty cards have 4 or more - which shows that they do not tie themselves to a certain chain
Qing Wang - a lecturer at Warwick University says that clubcards do not appeal to chinese consumers very much based on previous research.
CSR & Ethics in China
Food culture- tesco tried to sell turtles and frogs in the shanghai store to be met with criticism and then failure in 2013
ANIMAL WELFARE
Pesticides above legal limits - supplier using illegal pesticides. Issue to raise its standards to those in Europe.
Tesco in Eastern Europe
One Europe Strategy
In 2015 Tesco created a one business unit working on four markets in Czech Republic, Poland, Hungary and Slovakia, with one managing team (Called the One Europe Strategy). This business team is made out of top performing Tesco staff and managers in the region. Tesco believes this transformation allowed them to create a stronger, more balanced European business. Tesco also believes this allows to harness the best expertise and ideas from across the region to improve efficiency and how they operate in the region. Adam Manikowski the director of Tesco operations in Poland describes the creation of the business unit as making Tesco more agile and competitive, allowing us to respond more quickly to customers’ needs in the region which is why Tesco is so successful in the region today.
Tesco has the 2nd largest market share in Hungary and Slovakia and 3rd largest market share in Czech Republic and Poland
It currently operates from 450 stores in the region
Tesco in 2016 employed 76,000 staff directly in the Visegrad four countries (Czech Republic, Hungary, Poland and Slovakia), and boasts combined revenues of £6.9bn.
Some of the reasons for Success
The location of Tesco stores in city centers become a major feature for high amount of consumers and the launch of the Club card which become first such system on the Polish and Slovakian market
Similar consumer characteristics and culture between the UK and the region also provided success
Clubcard loyalty scheme was introduced to central Europe in 2009, Tesco now has more than 6m active Clubcard holders in the Central European region.
Tesco found that in the Czech Republic products like water and milk are most commonly bought via Internet. This began the online delivery service to be available to all four countries in the region. This has become very successful with increased sales of meat, fish and bread being purchased online.
In Poland Ezakupy service (Online Delivery) is available since 2012. 81% of customers declare that they choose this form of shopping because is much more comfortable and helps them save time.
In Slovakia Tesco developed a unique range of traditional Slovak foods, with special logos and packaging designs to help customers identify where the product comes from.
In 2016 Tesco introduced the scan & shop technology in Hungary and Poland. This is the first such technology in the region and so far has been reviewed by the consumers as a major success.
online shopping strategy - has risen by a million in 2 years (2013-2016) and is a strong source of revenue for Tesco, with groceries alone over £600,000. (mintel)
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Hofstede model - comparison between China and UK
INDIVIDUALISM
Score of 20-China is a highly collectivist culture where people act in the interests of the group.
Compared UK scoring 89 - people do not tend to worry about what others think and buy much more willingly.
POWER DISTANCE
Score of 80 - China - a society that believes that inequalities amongst people are acceptable. Individuals are not listened to by superiors. Individuals are influenced by formal authority and sanctions and are in general optimistic about people’s capacity for leadership and initiative.
Score 35 - UK - voices tend to be listened to in most organisations to help them grow.
Hofstede model - China, Czech Republic, Slovakia
INDIVIDUALISM
The Czech Republic - score of 58 is an Individualist society. This means there is a high preference for a loosely-knit social framework in which individuals are expected to take care of themselves and their immediate families only.
POWER DISTANCE
The Czech Republic has a relatively high score on this dimension (57). This means it is a hierarchical society - accepts a hierarchical order in which everybody has a place and which needs no further justification.
INDIVIDUALISM
Slovakia -score of 52, is right in the middle of this dimension, thus it points to no clear preference.
POWER DISTANCE
With a score of 100 points Slovakia is at the highest end of this dimension compared to other countries.
Hofstede model - China, Poland, Hungary
INDIVIDUALISM
Poland - 60 - is an Individualist society = high preference for a loosely-knit social framework in which individuals are expected to take care of themselves and their immediate families only.
POWER DISTANCE
Poland - 68 - is a hierarchical society = accept a hierarchical order in which everybody has a place and which needs no further justification.
INDIVIDUALISM
Hungary - 80 - Individualist society. This means there is a high preference for a loosely-knit social framework in which individuals are expected to take care of themselves
POWER DISTANCE
Hungary scores - 46 -Hungarian style: Being independent, hierarchy for convenience only, equal rights, superiors accessible, coaching leader, management facilitates and empowers.
Tesco in UK
Has suffered in the UK in recent years due to rise of discounters, scandals, change in consumer shopping habits, economic environment.
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2017 drop in non food sales, discontinuation of club card boost promotion
2017 taking of market share from competitors, 8th successive quarter of growth
Tesco efforts to rationalise and simplify their business strategy has paid off. Examples of slimining include sale of chinese joint ventures, and closures of loss-making stores. Also sold business in south korea, even though it was profitable and had good potential
Tesco has also become more efficient logistically; they identified that their warehouses were too big and they had too much unused space. To counter this, they started subletting their warehouses to other firms such as those in the Arcadia group.
General increase in performance over recent years in European ventures, but still heavily competitive environment as per Aldi/Lidl/Schwarz groups.