Tesco’s entry into the Korean market contains valuable lessons for anyone doing or wishing to do business in Korea. While other foreign brands like Wal-Mart and Carrefour have failed, Tesco’s Korean brand, Homeplus, is moving from strength to strength as it closes the gap with the market leader, E-mart.
From its early partnership with Samsung, to an extraordinary level of office culture localization, as well as matching uniqueness of the Korean consumer market, Tesco and Homeplus have achieved an amazing success.
What has done TESCO in Korea?
After careful deliberation for Korean retail market TESCO’s head office made the surprising
decision to add “Homeplus” to the store’s name, reflecting its heavy
emphasis on non-food,
household goods.
What happened
was a wholesale adoption by TESCO of
know-how that had been accumulated in running its
Homeplus store, a joint venture with Samsung Corporation, in Korea. The two-door layout, product line selection, product display,
and even the name of
Homeplus were all imported from the Korean store. The know-how
of store management accumulated in the Korean
operation had been recognized as superior in efficiency and taken
on board whole.
Korean customers
are considered by many to be the hardest in the world to please and are a highly
demanding customer group in that they want both the low prices of discount stores, and the
high level of service typical of department stores.
Wal-Mart and Carrefour, the two main competitors
for the top spot in the global discount
industry, were unable to meet the demanding requirements of Korean
customers, and eventually had to withdraw from the Korean
market. Korea was even called the grave of global
retailers at one time. Samsung TESCO expanded rapidly despite the tough
conditions. In four years, the company jumped from 12th to second
in the discount retail segment.
‘Value Store’
Jumping into a
Red Ocean as a late comer, Sam-sung TESCO prepared a fresh concept. At the time, other discount
warehouse stores emphasized two strategic features to market them-selves:
a wide variety of products and low prices.
However, this strategy required trade-offs. Reacting
decisively to consumer demands, Homeplus executives decided to create a completely
new discount market through brand positioning analysis. This led to the new
concept of a “Value Store,” which implied a store that
provides customers with a new, higher level of value.
‘Artience’
Homeplus’
marketing edge was eventually lost as rivals imitated the concept in their
subsequent store openings. The adoption of Home-plus’ innovations by its rivals turned
the Blue Ocean into a Red Ocean. This led Samsung
TESCO to try to create a new Blue Ocean through another transformation. Homeplus’ third-generation
discount store integrated emotion and culture. It was characterized by “Artience,”
the integration of art and science.
Homeplus introduced the
next generation store with four
concepts – Art, Well-being, Touching, and
Hi-tech – to appeal to customers’ eyes and hearts. The entire fourth floor was an art gallery
that is not operated or intended to generate revenue. This was first for
a discount store in the world. The store also contained
a culture center, which offers
evening and weekend courses. The purpose was not
to grab customers, but become a local center for continued education. It was unprecedented
to find a store offering fresh produce and organic foods and also
provide a fitness club, sauna and golf
driving range. Finally, a high-end wine bar allowed
customers to enjoy their purchases in the store itself.
Scientific Approach to Distribution
Homeplus is also
famous for retaining information and communication technology. The
stores introduced a self-checkout
system and a smartcard system which automatically counted products in a
shopping cart, for the first
time in discount industry.
The self-order and self-pay system in a food court was
another distinguishing change. Through the product positioning system, by which
customers could find the location of
products with a touch screen, and an auto
product supplement system. TESCO headquarters in England quickly saw the benefits
of adopting high-tech
in running its stores. Indeed, during 2002-03, Samsung TESCO sent around 70
experts of this high-tech management
system to transplant it in TESCO’s operations in other countries.
Customer
focus management
Homeplus places
great importance on seven types of customer surveys conducted
200 times annually. Homeplus thus listened to the customers’
voices, which competitors had failed
to heed attentively, employing many consumer surveys
and elaborate analysis. Based on the results, they were able to create new
stores with the new concepts that customers wanted.
Synbaration and global management
The pairing of Samsung and TESCO meant two distinctive
corporate cultures had to be bridged, as Asian
corporate culture stresses personal connection, self-sacrifice and teamwork while Western business
culture emphasizes rationality, individual
expectations, principles, and transparency. To reconcile the differences, Samsung-TESCO launched
“synbaration,” combining the Korean word “synbaram” and English word
“rational.” Synbaram expresses the high spirits or high emotion that leads a
person to overachieve.
Another
important combination is “glocal,”. This reflects the idea that Samsung will pursue localization
while making the greatest possible use of the advantages of a global corporation.
The example of glocal
management is the combination of
British store management with Korean-style format and techniques of dealing with customers. A major factor behind the failure of Wal-Mart and Carrefour in Korea
was the lack of localization.
Source : "Tesco enjoys a Korea break with homeplus", September 9. 2009 The Sunday Times
APRIL 2009 Quaterly SERI
http://www.youtube.com/watch?v=hGKoW-ouQlY&feature=related
http://www.youtube.com/watch?v=nJVoYsBym88
http://www.youtube.com/watch?v=hGKoW-ouQlY&feature=related
http://www.youtube.com/watch?v=nJVoYsBym88
