Culture is the key to successful international expansion of Tesco
People and cultural differences are all too often overlooked when retailers expand overseas but this is a serious mistake because concentrating on these factors can be a key determinant of success. By Glynn Davis
One of the world’s leading international players Tesco is fully aware of this and before making any expansionary decisions it ensures it fully understands the cultures of any new markets it is considering entering.
Therese Procter, personnel director for retailing services at Tesco, is due to speak at the Retail Bulletin International Expansion Conference on March 27th and ahead of the event she cites how it took 18 years of research before Tesco decided to enter China.
In 1986 the company employed a graduate to investigate the emerging needs of the Chinese consumer and over the course of numerous visits to the country she kept the director of business strategy at Tesco constantly updated on developing trends.
Only when the customer was ready did the business finally launch a high-value Tesco hypermarket proposition in 2004. “When Tesco are looking at a new opportunity, the first thing we do is get to understand the needs of customers – not in a superficial way, but in a meaningful way that delivers real insights. [In China] we waited 18-years for the customer to be ready,” says Procter.
But even after that amount of time and patience, she says Tesco still believed it necessary to link-up with a local partner to “ensure that the product we were offering was absolutely relevant for our Chinese customers”.
This involved a 50:50 partnership with Ting Hsin International Group that was operating around 20 large supermarkets in the country at that time. This approach is not unusual for Tesco, according to Procter, who says it typically looks to develop a joint venture with an established partner in all the new markets it enters.
The strategy is to then take an increasing share of the joint venture and so in China it increased its stake to 90 per cent after just two years and in Thailand it bought-out its joint-venture partner after five years.
This slowly-slowly approach, combined with partnering with local operators, ensures the cultural aspects of the new business entity fit with that of the market it has entered and with that of Tesco: “In every instance, these joint-ventures have proven successful for Tesco – and for our partners – because they were allowed to take as long as was required to ensure that the new businesses became fully integrated into culture of the wider Tesco organisation.”
A vital component in the success of this approach is the role of HR, which at Tesco seeks to align an international workforce (within many markets) around a commonly held set of values and a culture of customer service.
In contrast and regardless of country, Procter says she is “amazed at quite how many HR practitioners seem to spend their lives focused on HR rather than being focused on the business”.
At Tesco the team is focused on outcomes rather than inputs: “Our training teams are judged by the impact of their programmes on business performance rather than on the number of courses they deliver.” All HR personnel across the business collaborate to ensure that everything is performed in a consistent and aligned manner to ensure the desired business outcome.
This joined-up approach helps ensure the cultural elements are at the forefront of its overseas activities, which in turn provide the necessary support that business expansion needs in order for it to achieve the desired success.
Don’t miss the Retail Bulletin’s International Expansion Conference 2012, sponsored by GfK. The theme of the day is: Driving sales and market share, mitigating risk and strengthening your business through international multichannel growth strategies. Sharing expertise and best practice will be speakers from Tesco, New Look, Coast, WHSmith, Debenhams, Carphone Warehouse Group, JD Williams, Hamleys Group, TUI Travel, French Connection, GfK, Javelin Group, Field Fisher Waterhouse LLP, Chase Paymentech. For full details and to register for this interactive event in London, March 27th, click here.
