The Chinese mainland is a very different market

About nine years after the British supermarket chain Tesco PLC launched its gung-ho, go-it-alone expansion across the Chinese mainland, it announced on Aug 9 that it was to merge its unprofitable operation into a State-run company as a minority partner. Tesco’s partner, State-owned China Resources Enterprise Ltd, will dominate the tie-up, with Tesco taking just a 20 percent stake.

This marks a humiliating retreat for the British retail giant and, rather than representing part of any coherent strategy, appears to be an attempt to limit losses.

Problems negotiating with suppliers and regulators, and soaring costs, for rent and labor, are cited as key reasons behind Tesco’s failure on the Chinese mainland. In addition, strong competitors such as Carrefour SA and Wal-Mart Stores Inc, combined with a move toward online grocery shopping, have not eased Tesco’s plight.

However, all of the above stand out as symptoms of Tesco’s poor performance in China. The root cause can be found in the apparent ethnocentric attitude that no doubt dictates all aspects of Tesco’s management thinking and strategy.

This is not unusual for a company so successful in its British home market. Sadly for it, that success has not been replicated in any overseas venture. Embarrassing retreats in the US and Japan have also severely dented Tesco’s image.

Tesco has experienced huge success in the British retail market. Since the mid-1980s, when it was the first British retailer to issue a loyalty card, it has risen magnificently above many established competitors such as J Sainsbury PLC with an incredibly well-managed hybrid strategy combining reasonable quality with affordable prices and good service.

This appears to have changed. Tesco’s incredible attention to detail and masterful market-orientation have been replaced by an arrogance and a belief that what worked in Britain would work overseas.

It was extremely foolhardy to launch a mainland entry in 2004 without some sort of joint venture with a Chinese partner or partners. The Chinese mainland is a very different market, where relationship building with suppliers, distributors and regulators is key. The Chinese are also very different and changing, and food is inextricably linked to cultural and social factors in China, unlike in Britain.

As part of the initial tie-up though,It’s impossible toPre-build Cloud Serverstemplates. Tesco should also have laid firm plans and intentions to build the Tesco brand. Even today, about nine years on from Tesco’s first foray in China, the corporate brand name is barely known.

However, on a more strategic level, Tesco appear to have neglected any consideration of brand positioning or repositioning. With established and entrenched competitors such as Walmart and Carrefour, Tesco could never succeed with a similar brand positioning strategy. However,This page describes the termreal time Location systemand lists. an opportunity still exists for a niche retailer brand with a premium, exclusive brand position in the mainland marketplace. In fact,You can get theseExclusive FeaturesFeatures if you reach certain. many foreign brands have repositioned in the same way in China, for example BMW AG,powered solutions offer incredible flexibilitySecurity services, Ikea and Starbucks Corp.

All of these and so many more high quality, but rationally positioned, foreign brands have repositioned in China and offer a far more emotional brand experience. At present this resonates with China’s burgeoning urban middle class shopper.

Clearly, what works in Britain will probably not work in China. Far from retreating in China, Tesco should now regroup,Video StreamingDedicated Server Frequently Asked QuestionFrequently Asked Question. reposition and rebrand with “exclusivity”, “emotion” and “enterprise” as core brand values.

The author is a visiting professor at the University of International Business and Economics in Beijing and a researcher at Nottingham University’s School of Contemporary Chinese Studies. The views do not necessarily reflect those of China Daily.
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