This paper compares the different localization strategies of Carrefour and Tesco in the Korean market from four aspects: brand culture, operation mode, marketing technology, human resources and operation management, and analyzes the reasons for the success or failure of the two companies, so as to draw a series of experiences and inspirations worthy of reference for China retail enterprises.
Keywords: multinational retail enterprises; Localization strategy; Korean market
I. Introduction
Since the 1990s, the international business strategy criterion of "globalization of thoughts and localization of actions" of multinational corporations has been a hot topic for entrepreneurs and scholars. The two seem contradictory, but in fact they complement each other. In particular, the localization strategy is undoubtedly the most important thing to realize the transnational operation of enterprises.
The so-called "localization" means that in the process of overseas production and operation, multinational enterprises implement localization strategies in technology development, fund raising, human resources, business management, marketing and other aspects in order to quickly adapt to the local economic, cultural and political environment and fully meet the needs of the local market. Specifically, it can include adapting to local culture, using local business talents and resources to organize production, sales and provide products and services adapted to specific regions, and so on.
Retail industry is a circulation industry that directly provides goods to consumers, and its production and operation activities are to meet the needs of consumers. If the retail industry wants to achieve international expansion, on the one hand, it must set up branches in other countries, and the service targets it faces are ordinary consumers deeply influenced by the domestic cultural environment; On the other hand, compared with other industries, the retail industry is often more restricted by the policies and regulations of the host country. Therefore, localization strategy is particularly important for multinational retail enterprises.
Second, the localization strategies of Carrefour and Tesco in South Korea are compared.
(1) background of the case.
Carrefour is the largest international retailer in France and the second largest chain retailer in the world. In 2008, it ranked 33rd in Fortune Global 500. On the other hand, Tesco is the largest retailer in Britain, ranking third in the world. The two companies entered Korea in 1996 and 1999 respectively, but their fates were quite different. In 2006, the former issued a statement that "Carrefour officially confirmed its withdrawal from South Korea" and admitted its business failure; At present, the latter has 66 hypermarkets and 72 fresh food stores in Korea. As of February 2008, it has achieved sales of about 2.7 billion pounds, making it the only large foreign retailer that has successfully operated in Korea. It is also a world-renowned retail enterprise with mature business philosophy and rich practical experience, but its operation in the Korean market is quite different. There are many reasons for this result, but by comparing the localization strategies of the two major retail enterprises in South Korea, it is not difficult to find that the success or failure of localization strategies is the biggest reason for the different fates of the two major enterprises.
(2) Comparative analysis.
This paper compares Carrefour and Tesco from four aspects: brand culture localization, operation mode localization, marketing technology localization, human resources localization and operation management localization.
First, the localization strategy of brand culture. In fact, Carrefour and Tesco invest in Korea in completely different ways. The former is an independent capital injection and directly enters the Korean market; The latter is a joint venture with South Korea's well-known Samsung Group. Although Tesco already held 89% shares in the enterprise at the beginning of the cooperation, they still added "Samsung" before the brand name and named its store "Samsung-Tesco Home Plus". According to relevant research, the value of Samsung, the first brand in Korea, reached 5.2 billion dollars in 2000. Tesco pays Samsung an extra $400 million a year as a brand use fee. However, they saved a lot of pre-promotion expenses and customer development expenses, and quickly gained consumer resources. Facts have proved that this practice of Tesco has achieved great success. The popularity of "Samsung" in South Korea can not only offset people's antipathy to Tesco, a foreign brand, but also quickly win the trust and favor of domestic consumers. In contrast, Carrefour is the leading brand in France and even the world, but for Koreans with strong xenophobia, the degree and speed of accepting a foreign brand is far less than that of accepting a mixed brand like "Samsung-Tesco".
In fact, Tesco's choice of Samsung as a partner is the biggest factor of its success. Samsung's successful background in Korea not only brought Tesco's brand effect, but also brought great convenience and benefits to its business activities. Tesco has established a joint venture with the retail enterprises in the host country, and then sought the controlling stake in the joint venture to achieve the goal of fully entering the host country. This way has proved to be a very effective and steady strategy.
Second, the localization strategy of operating mode. "Scientific site selection" is known as one of the six golden laws of Carrefour. According to the strategy of "the suburbs surround the city center", most of them open their own stores in the suburbs with relatively cheap unit rent and large area. It is one of the principles of their site selection that the bus ride is 8 kilometers and the psychological endurance is no more than 20 minutes. However, Korean consumers will not drive to the supermarket on weekends to purchase the goods they need for a week, like European and American consumers. Koreans, especially a large number of housewives, attach great importance to novelty. If they go to a remote suburb with inconvenient transportation to buy food every day, even if the price is cheap, they will not be attracted. Most of Samsung-Tesco's stores are located near the city center, with convenient transportation, which is more in line with Korean shopping habits in location strategy. In addition, in peer competition, Korean local retail enterprises are the strongest competitors. Tesco chose to open stores in second-tier cities outside Seoul, and gained confidence and strength by winning the competition with weaker competitors, thus fully occupying the Korean market.
In the business model, Tesco put forward the concept of "multiple shopping". Its shopping malls are divided into multi-floors. In addition to large supermarkets, there are various restaurants, clothing stores, photo studios and flower shops. This makes it have a function similar to that of a department store as a whole. In Korea, people go shopping in shopping malls not only to buy daily necessities, but also to get more entertainment and leisure there. This practice is exactly the same as the operation mode of local retail enterprises in Korea. Carrefour completely lacked this consideration at the beginning of its operation. Their store is huge, but it simply completes the function of a supermarket, ignoring the demand of Koreans for compound consumption.
In addition, the degree of cooperation with local suppliers determines the operating costs of multinational retail enterprises. Carrefour, Tesco and other large retail enterprises mainly rely on low-price strategy to make profits. Therefore, cost control is a crucial step in operation. However, South Korea is a special market, the economy is mainly controlled by a few family groups, and its business scope is all-encompassing. Only Samsung Group has a considerable number of such manufacturing enterprises. Thanks to the cooperation with Samsung Group, Tesco has established contact with local suppliers quickly and conveniently, and has abundant and low-priced commodity resources. In contrast, Carrefour, which goes it alone, is naturally at a disadvantage. Failure to achieve low-cost control is undoubtedly fatal for Carrefour, which takes small profits but quick turnover as its strategic advantage. In addition, the entrance fee charged by Carrefour from suppliers is a big source of its profits. However, this is not feasible in Korea. Because Korean law stipulates that "large sales enterprises shall not ask suppliers to bear the expenses that are not directly related to suppliers when promoting the goods provided by suppliers." Therefore, Carrefour suffered a loss in disguise.
Third, the localization strategy of marketing technology. Retail enterprises need to face consumers directly, and their service is mainly to provide goods for consumers to buy, so this requires retailers to meet the habits and requirements of local consumers as much as possible in product structure and service. Generally speaking, Koreans go to the supermarket every day to buy the food they need that day, so there must be a lot of fresh food in the goods. Tesco provides about 40% fresh food in its stores, while Carrefour only provides 30%. Although supermarkets in Korea are not as good as high-end department stores in decoration and commodity display, the quality of service provided is the same. Compared with Samsung-Tesco, Carrefour seems to have a wider range of services, which has virtually narrowed the distance with consumers. In addition, the height of product display stands in South Korea is generally 1.6 m to 1.8 m, while the height of Carrefour's display stand is 2.2 m, which is in line with the height of Europeans, and Koreans generally feel unaccustomed to it. Similar details can easily reflect that Carrefour lacks the spirit of "do as the Romans do" in its business philosophy, which is a serious mistake.
Fourthly, the localization strategy of human resources and operation management. Carrefour has set up a branch in Korea, but it has never let go of using its own people to hold important positions. At first, its general manager and manager were French. For the fast-running retail industry, the specific business must be negotiated with the head office, and the company's decision-making process is slow, resulting in low business efficiency. The general manager of Samsung-Tesco is a Korean and has been working at Samsung. Except for three people sent by the British head office, the rest are Korean natives. Tesco not only boldly hired local employees in manpower distribution, but also handed over the management and decision-making power to the management team of the British head office in South Korea. In addition, the contradiction between Carrefour and ordinary employees is also very prominent. According to the statistics of the Korean Labor Department, on July 1 day, 2004, 5,600 Carrefour employees in South Korea went on strike due to salary issues, which led to the closure of all Carrefour stores in South Korea for one day.
To sum up, it is not difficult to find that Carrefour still stubbornly follows its global unified model to carry out business activities after entering the Korean market, especially ignoring the consumption habits and preferences of Koreans in its operating model and marketing technology. Tesco cooperated with Samsung Group and adopted circuitous tactics, but achieved ultimate success.
Third, the enlightenment of the success or failure of the two major retail enterprises in South Korea
First of all, for multinational retail enterprises, the localization strategy should be based on meeting the needs of local consumers. It is not difficult to see the importance of localization strategy for multinational retail enterprises from the comparison between Carrefour and Tesco. In the final analysis, the localization of retail enterprises is to meet the needs of local consumers and thus occupy the consumer market of the host country. Carrefour and Tesco, as two international enterprises, have their own perfect business philosophy. However, since Carrefour entered the Korean market, it has always adhered to its global business model and neglected the needs of consumers in many details such as operation and marketing, which is the biggest reason for its failure. For multinational retail enterprises, if they don't understand the habits of consumers in the host country and blindly cater to the preferences of local consumers, they will lose the possibility of successful development.
Secondly, through appropriate localization strategies, cultural conflicts in transnational operations can be solved. Culture deeply affects the operation of enterprises, especially in transnational operations. People with different ethnic backgrounds have different ways of thinking and behavior habits, and it is easy to form friction inside and outside enterprises, which is cultural conflict. How to solve the conflicts brought by different cultures is a problem worthy of consideration for enterprises in the process of transnational operation. In the process of Carrefour's operation in Korea, because the main management is French, their cultural understanding is different from that of ordinary employees, which leads to a series of labor disputes. In addition, Carrefour sticks to its international business philosophy and ignores many details in the marketing process, such as shelf height, mall function, product structure and so on, which has lost the favor of local consumers. In fact, cultural conflicts can be solved by some localized strategies. For example, enterprises evaluate the cultural environment of the host country before investing. A comprehensive understanding of the environment of the host country, focusing on local customs, historical traditions, religious beliefs, etc., can make relevant plans according to local conditions. Another example is to establish a good image in the host country, assume certain social responsibilities, and deepen the good impression of some organizations such as customers, suppliers and the government in the external environment with a healthy and upward corporate image. Only in this way can we solve the conflicts brought by different cultures to enterprises from both internal and external aspects.
Third, in the process of international expansion, the way of curve entering the host market is an effective and steady way. Joint venture and cooperation is a shortcut for retail enterprises to realize transnational operation. Generally speaking, the biggest reason for Tesco's success in Korea is to choose the right partner. What Samsung Group brings to Tesco is a mature and resounding brand name, improving the low-cost purchase channels. These two points alone are already huge benefits for a foreign-funded retail enterprise. Although Tesco was the third largest retailer in the world before entering the Korean market, they showed good patience in the Korean market. 1999, Tesco and Samsung Group jointly established the Samsung-Tesco Home Plus Store. At that time, Tesco held 89% of the shares in the joint venture, and by July 2007, its shares had risen to 99%. In contrast, Carrefour entered the Korean market earlier than Tesco, but actually entered directly, showing a series of "acclimatization" and eventually withdrew from the Korean market. After cooperating with local retailers to pry open the hard Korean market, Tesco modestly gradually localized itself, changed itself to adapt to the market, and finally gained a place in the strong local retail industry. Its internationalization and localization business philosophy and attitude have been recognized by Korean consumers. Tesco, a transnational business model, has also achieved success in other Asian countries such as Thailand. With the continuous development and maturity of retail enterprises in China, more and more enterprises will go abroad in the future. The step-by-step management strategy of joint venture and cooperation is a way worth learning.
References:
[1] Cao Huiping, Meng Qingchao. Localization Strategy of Multinational Corporations and Its Enlightenment to China Enterprises [J]. Heilongjiang Foreign Trade and Economic Cooperation, 2007, (12).
[2] Chen Hongfu. On the localization strategy of transnational retail industry and its influence [J]. Enterprise Economy, 2006, (1).
[3] Chen Yanyan Tesco speeds up in China [J]. China New Era, 2008, (8).
[4] Jin Zhuxian. Tesco's strategy of entering the Korean market through legal person cooperation [EB/OL]. /ak573.cafe？ iframe _ URL =/article read . nhn % 3f itec leid = 252 1
[5] Chen Shehao. The operating characteristics of Carrefour and its enlightenment to the retail format in China [D]. Huazhong University of Science and Technology, 2006.
[6] Jin Yingzhen, Zheng Zhehuan. "Korea" strategy is gradually based on the world [N]. Chosun Ilbo, 2007.6438+00.6438+08.
[7] Wang Guiduo. Reasons and enlightenment of Carrefour's withdrawal from Japan and South Korea market [J]. Shopping Center Modernization, 2006(8).