Compare How Cultural Differences and Foreign Business Environments Affect Multinational Corporations
M2-Compare how cultural differences and foreign business environments affect multinational corporations In this report I will be stating the differences of how Tesco function in South Korea compared to how they function in the United Kingdom. Tesco have to adapt to the local culture, traditions and tastes and have to recreate an environment in which shoppers will feel at home. Tesco’s local adaption strategy in South Korea involves selling products and services based not on the UK experience, but on Korean customer demand.
Tesco in South Korea provides live octopus, pet iguanas, fish chopped up alive sushi-style, and dental services as a way of their adaption strategy to appeal to South Korean’s culture. Hofstede’s Uncertainty Avoidance (UA) theory, states deals with the degree to which members of a particular society feel uncomfortable with uncertainty. The theory relates to the fact that the future can never be known. Countries that exhibit strong UA , such as South Korea, maintain strict codes of belief and behaviour. They are intolerant of unorthodox ideas.
By adopting the approach Tesco have chosen, they are allowing for a society such as South Korea’s to be more welcoming to the arrival of the company, which in turn invites a greater scope of custom. Tesco was helped in developing this approach by entering the market through a joint venture with Samsung, a powerful brand name in its own right and one of the leading conglomerates in South Korea. This will help build the recognition for Tesco in South Korea and build a relationship with new customers. As per the Hofstede theory referred to earlier, Samsung represents safety and security within the South Korean market.
Therefore, UA is likely to be severely reduced when partnered with such an established brand within the target community. The localised approach means a lot more fresh food than in the UK to recreate a market atmosphere, as well as fast food outlets, coffee shops and toddler play areas. However, the Tesco home stores in South Korea have been located as ‘culture centres’ where mothers and customers can take classes; learn new skills and have access to the internet cafe. This is because Tesco are aware that the majority of South Korean mothers prefer to look after their children rather than work.
Having this available will attract more customers and help be more suitable for South Korean customers. Overall the Tesco in South Korea’s aim is to create value to build and retain store feminism and collectivism. Tesco in South Korea generally sell products that will appeal to South Korean customers, which will include branded products and live animals including fish and octopus. As South Koreans are recognised as not having a great deal of time to shop due to heavy workloads, they employ a scan system.
This allows customers to scan products off posters on their phones, so they can get the products delivered to them by the time they are home from work. The posters mainly appear in train stations, as this will get the most usage via people travelling to and from work. Tesco use many strategies to adapt to the culture they are working in, which will encourage more customers to shop from their and beat their local competitors. However, Tesco in the UK provide many different products to appeal to different ethnicities and cultures including their own branded food.
Tesco operates differently in both South Korea and the UK as both countries are very different. However they have the same aim, which is to create value, to build loyalty among their customers. Tesco in South Korea has a very different infrastructure compared with the UK, as in South Korea they offer the scan system. This is very different to the UK because they have many Tesco supermarkets; many being 24 hours where customers can go to buy their products. They do also offer online shopping, where they can place their order online and get it delivered.
Also in the UK they have self-scanner which has become very popular and other big branded supermarkets are now using. This is where customers scan their products and make the payment by themselves. To conclude, after conducting research on how Tesco functions in both South Korea and the UK, there are many more differences than similarities. Due to the different cultures, Tesco have to adapt their shop to reach the needs of the customer, so their strategies are very different in each country. Tesco is a successful company and due to the changes they make to adapt to different cultures it has made them a well-known international brand.
D2-Evaluate the impact of cultural differences on international business performance in the market In this report I will be evaluating the impact of cultural differences on international business performance in the market. This includes evaluating the strategies Tesco use in both South Korea and the UK, which are very different. If Tesco did not adapt their strategies in different countries they wouldn’t fit in with their cultures, therefore people will be less likely to shop there. Tesco need to provide certain foods that will appeal to the country they are in.
For example, Tesco in South Korea have branded products, and a lot of meat including octopus and sushi-like fish. Tesco in the UK provide products for wide range of cultures and offer many branded foods including Tesco’s own. If Tesco did not adapt to different cultures they could lose out on business and potential customers might go to their local competitors. This may also give Tesco a bad reputation for their supermarket, and their recognition as a company could be negative. Going into a new market can be difficult due to the local competitors and getting people to change where they currently shop.
If Tesco did not come up with such unique ideas in South Korea, they wouldn’t get the customers they do today, and they would struggle to make enough money to keep a Tesco running there. However, due to such unique ideas that local competitors do not offer, they are a very well-known international brand. In the UK Tesco have three other main supermarkets that they have to compete with; Asda, Morrison’s, and Sainsbury’s. Surrounded by such strong competitors, Tesco are always thinking of new strategies to gain more recognition and greater market share than their rivals.
Tesco offer a Clubcard; which is where customers can collect points from the products they purchase. These Clubcard points will allow customers to get money off future shops, and receive vouchers after saving up a certain amount. In South Korea Tesco have established their way of life and learnt to adapt their strategies to appeal in South Korea. Tesco have had to undertake much research, in order to find out more about South Korea. It is regarded as the second hardest working country in the world, which means that many people do not have time to go food shopping.
Tesco have thought of a solution which is for customers to shop at Tesco, and get their food delivered to them. If Tesco did not offer such a unique strategy it would be hard to get people to change where they get their food from. However, this appeals to many people in South Korea, and therefore Tesco have become a very successful company. In South Korea, Tesco has defined research to establish that mothers prefer to look after their children rather than working, and so they have adapted their Tesco to ‘culture centres’, which gives the opportunity for mothers to bring their children in-store, and have access to the internet cafe.
They also have the opportunity to take classes and learn new skills. This strategy shows the quality of how well Tesco have learnt to adapt to different cultures, as they know most of their customers will be mothers, thus giving more appeal to the target audience. Time would suggest that the business model adopted by Tesco, has been largely successful. The first Tesco store in South Korea opened in 1999, and they have since gone on to open a further 457, with 59 opened in 2011/12 alone. They are presently the second largest retailer in all of South Korea, just behind the Shinsegae Group.
These figures point to a highly successful campaign in Asia; proving that they were right to undertake a project based on reducing UA. (ref Wikipedia) Over the years, many different companies have been unsuccessful in trying to launch their various brands in certain countries. Most of these failures have been the result of poor product naming, but they still give an insight into the importance of research, and implementing strategies that conform with normal ways of life in those countries. For example, American Motors tried to market its car, the “Matador,” in Puerto Rico based on an image of strength and courage.
However, in Puerto Rico the word, literally translated, means “killer. ” The inappropriate name is linked to the car’s lack of popularity because of the many hazardous roads in the country, and the correlation with death made by consumers. (ref www. worldpress. com) To conclude, after evaluating the strategies Tesco produce in both South Korea and the UK, it is clear that Tesco are an adaptable business that can appeal to different cultures. Without changing their strategies they wouldn’t be such a successful well-known international brand.