From: CEO Lee

To: New MD
Subject: Korean Homeplus overall report (dated March 15, 2022)

Dear <New MD Name>,

My name is Seung-Han Lee, the CEO of Homeplus Korea. It is my pleasure to have a

chance towork with you.

I am writing this email to send you a comprehensive report about Homeplus and an
executivesummary for a general view (I attached the files to this email). The report
will consist of the below preliminary information:
1. Homeplus challenges over years and solutions executed and achievements
2. The future challenges
3. The recommendations

I hope this report will provide you with enough information to have a broader view of
Homeplus.Please do not hesitate to contact me if there are any other inquiries.

Best regards,
Seung-Han Lee (Mr. ), Homeplus CEO

Question 2: Prepare and submit a business report that provides a structured and
concise overview of
Homeplus success as a retail giant in Korea and its future challenges

Homeplus:
The Korean growth story & way ahead

Table of Contents
Executive Summary 6
Introduction 7
1. A Brief History in Time 8
2. The Korean Market 8
3. Homeplus Story 9
4. Key Milestones 10
5. Challenges Ahead 11
6. Proposed Strategy 11
7. Conclusion 12
Appendix
Exhibit 1 : The World Top 10 Retailers By Sales
Exhibit 2 : Tesco’s Sales And Total Store Space By Region (2011)
Exhibit 3 : Change In The Size Of Retail Formats In Korea (Unit: Trillion Won)
Exhibit 4 : Growth Of Homeplus In Korea
Exhibit 5 : PB Product Ratio Of Big Three Retailers In Korea (Per Cent)
Exhibit 6 : Sales Of Korea’s Three Largest Retailers (Unit: Trillion Won)
Exhibit 7 : Total Number Of Stores In Korea By Store Format
Exhibit 8 : Changes In Composition Of Korean Population By Household Size

HOMEPLUS
EXECUTIVE SUMMARY

Overview - The Quick Pitch

Homeplus is a joint venture–between Tesco and Samsung - retail chain founded in
1999,which became 1 of the three leading retailers in Korea, operated with glocal
(localized marketingand globalized management)standards and pursuing the “value
stores” vision that provides “youcan do it in one-stop” shopping environment along
with high service qualities.
The Problem1.Employee low morale due to new merger2.Adverse effects due to
nationalistic sentiments3.No business sites and the saturation of large discount store
market
The Solution1.The establishment of “Shinbaration” special task force to enhance
harmony between bothcompanies2.Pursuing glocal standards and “localization”
strategy3.Expanding to SSMs market with the smaller site and flexible product format
The Arising Challenges and Recommendations
1. The complexity of the Homeplus approval system compares to the competitors.
 A new decision-making system for local store owners should be developed
2. Conflicting with small retailers:
One bill required local government permission to open new outlets
One bill gives small store owners the right to demand SSMs to be temporarilyclosed
Focus on searching for SSMs opening permissions in case the bill is passed3.New
rule forces the larger retailers to close their outlets on the second and fourth Sundayof
every month

INTRODUCTION
The report is aimed at following objectives:
 A brief history in time to understand how we became what we are today
 Provide short overview of the current business scenario
 Challenges & business potentials ahead
 Strategy for sustained growth & sustaining the competitive edge in coming
years

A BRIEF HISTORY IN TIME

The Tesco Story
After outstripping its competition in United Kingdom and many other European
markets, Tesco started international expansion in 1990s and took the business to
emerging markets with high growth rates. Owing to the aggressive international
growth strategy of reducing dependence on domestic market & entering
markets with high growth potential, the total floor space of Tesco operating outside
UK surpassed that of its home market by the year 2004. However, the UK still
contributed to 66% of group sales due to lower sales per unit in other countries. By
the year 2009, Tesco clocked highest CAGR (10.9%) and became the 4th
largest retailer by 2009. By the year 2011, Tesco operated 5,380 stores in 14 countries
and employed 492,714 people with global sales increasing from £ 51.8 BN in 2008 to
£ 67.6 BN.
Tesco’s growth was a result of the strategy to:
1. Achieve fast growth not only by diversifying geographically but also by expanding
its general merchandise range to provide greater appeal to customers
 Started as a grocer, sold mostly food & drinks later on but diversified into areas
such as clothing, electronics, DVDs, petrol stations, telecommunications,
pharmacy and financial services
 Helped provide more value to customers with more competitive range of products
& services 
2. Developed private brand (PB) products in food, beverage, household appliances,
clothing and telecom devices category which helped pursue high profit margins
3. Follow multichannel strategy & expanding in a wide variety of store formats,
ranging rom hypermarkets to convenience stores, as well as online and catalog
channels
4. Achieve operational efficiency by technological innovations

Tesco also introduced loyalty program called <CLUBCARD= in 1995 and became
very popular with 15 MN active members.

THE KOREAN MARKET

Until the mid-1990s, traditional small shops, called mom-and-pop stores, dominated
Korean retailing with a market share of almost 80 per cent. However, post 1997 Asian
market financial crisis, the Korean government deregulated its retail market. The
liberalization resulted in retail market boom which grew from 90.9 trillion Won (US$
113 billion) in 1996 to 217.3 trillion Won (US$ 196 billion) in 2011 and attracted
many western multinational brands such as Carrefour & Walmart. In the year 1999
Tesco invested in Korean market.

However, unlike other countries, the Korean market challenges were different, such
as:
 CHAEBOLS (Local business conglomerate): Other than Homeplus, other two
major retailers were owned by Lotte Mart & Shinsegae backed E-Mart.
 Conflicting cultures & language barrier
 Nationalistic sentiments and inclination of domestic buyers towards local
suppliers
 Korean customers’ high expectations & quick to change their retailer when they
are unsatisfied Local manufacturers had very strong bargaining power over
retailers Korean customer’s buying preference: Korean customers preferred
buying in small quantities and at lesser price

HOMEPLUS STORY
In contrast to Walmart and Carrefour, Tesco entered into Korean market in joint
venture with Samsung (a CHAEBOL). Samsung had already ventured into retail
business in the year 1994, however, was experiencing liquidity crunch due to Asian
market meltdown. The JV initiated with 51% share in favor of Tesco, however,
by July 1999 additional 30% was taken by Tesco and it became dominant partner in
the JV. Initially the employees morale was also low due to cultural & language
differences and specially uncertainty due to them now being part of an unfamiliar
foreign company.

To overcome the conflict between the two different organizational cultures, we

created a new hybrid organizational culture, called <Shinbaration.= It pursued
harmony between the teamwork culture of Korea, <Shinbaram,= and the professional
culture of the West, <rationality.= It aimed to encourage teamwork and helped create
an exciting working environment and at the same time deterred the corporate culture
from leaning toward cronyism.

Tesco & Samsung came up with a new brand name <HOMEPLUS= in order to avert
potentially negative effect of nationalistic sentiments which believed that foreign
firms were not only driving out small local stores but were also transferring the wealth
derived from the local economy to their overseas headquarters.

Homeplus being a late comer had to adopt an <inclusive strategy= which was more
and more customer centric i.e. we provide products for customers of all income levels,
regardless of the store location. In other words, our hypermarkets have a standardized
format and have something to offer for every Korean customer.

We focused on GLOCAL (combination of Global & Local) standards which

combined localized marketing and a globalized management and administration
system. This approach emphasized that :
1. The company and its managers should not be indifferent to local stakeholders
when trying to achieve full-scale globalization
2. As Korean customers put more emphasis than Western buyers on everyday fresh
food such as meat and vegetables, more local products are included in the
portfolio. The warehouse- type stores of Walmart and Carrefour had very limited
offerings of fresh food items and Korean-style food such as kimchi, a traditional
and highly popular dish based on fermented vegetables.
3. As Korean consumers have a strong preference for buying goods displayed
within their range of view rather than shopping from the high stockpiles, the
layout of the stores were made accordingly

With only 4 out of 7,509 employees sent from Tesco & appointing a Korean CEO,
empowering him with considerable autonomy to determine wide range of strategic
issues the localization strategy was implemented. Tesco only provided an operating
platform, and important decisions such as where to locate new stores, how to choose
the right format and what kinds of goods to be displayed were delegated to local
managers. Homeplus also invested heavily on employee training & education and
CSR initiatives.
An important feature of the Korean retail environment was that manufacturers had
very strong bargaining power over retailers. This was because most best-selling
products were provided by a few dominant manufacturers controlled by CHAEBOLS.
As the demand for fresh food was very high in Korea, retailers had to buy most of
their food products locally. Unlike Carrefour and Walmart, Homeplus as a
joint-venture company between Samsung and Tesco actively sought to localize
sourcing to take advantage of Samsung’s local networks while also pursuing benefits
from having Tesco’s global purchasing scale for standardized products.

Owing to Tesco’s know-how in Internet grocery sales, Homeplus was number one in
supplying online groceries in Korea by 2013and established one of the most advanced
online home delivery services in the world, and it had signed a contract with Safeway
in the United States to develop its home- shopping service.

Homeplus also provided the highest ratio of PB products in the Korean retail market
with powerful CHAEBOL-affiliated manufacturers supplying a wide range of good,
PB products offered the advantage of giving us more control over prices and product
selection.

Homeplus began to open SSM (Super-Supermarkets) which offered much more

potential to grow in the Korean retail market by being nearer to neighborhood, selling
daily supplies like dairy, meat products, fish and other daily and operating on floor
space of between 1,000 sqm and 3,000 sqm, much smaller than large discount stores
but still bigger than conventional small grocery stores.

KEY MILESTONES
 1999: Homeplus a JV of Tesco, UK & Samsung, S. Korea was formed
 2004:
o Homeplus started SSM
o Green Management Award & Eco-friendly Management Award
 2007: <Respected Company= award by Korea Management Association
 2008:
o Tesco acquired 36 discount stores from Homever for 1.95 trillion Won, the
largest
acquisition in Tesco’s history, to strengthen its position in the Korean retail market
o <Respected Company= award by Korea Management Association
 2010: Homeplus led with 258 SSM outlets
 2011:
o With sales figure of 12.1 trillion WON, Homeplus is the second largest retailer
in Korea
(Exhibit 6)
o 124 discount stores (Exhibit 4)
o 27,000 associates employed (Exhibit 4)
o From meager 1% the PB ratio in Korean market is swelled to 28% (Exhibit 5)

CHALLENGES AHEAD

Two new retailing regulation bills were currently being discussed in the Korean
Parliament. If they became law, they might greatly hamper his company’s further
expansion in Korea. The proposed bills are:
  Bill No. 1 requires local government permission to open an SSM within
500 meters of a traditional
outdoor market
 Bill No. 2 gives small business owners the right to demand the temporary closure
of SSMs if they can demonstrate that they have harmed their operations.

Apart from the internal challenges, the recent global recession is also impacting the
business adversely because the buyers’ disposable income has decreased resulting in
low purchase power.

PROPOSED STRATEGY

In order to counter the challenges ahead of us, we propose following few steps which
will help us in mid to long term and support our growth plan in S Korean market:
1. Reducing the decision time by setting-up a local task force of senior team
members and empowering them in taking key-decisions. The main function of the
task force will be to:
a. Liaison with the local authorities to seek permission for SSMs
b. Formulating & implementing a local penetration strategy
c. Strategically setting up stores for easy access and delivery to local communities
2. Improving online channel for more penetration
3. Community-connect: establishing connect with local communities, providing
them with more job and business opportunities & bringing them closer to Homeplus.
Our past record must also be used to establish connect with local neighborhood.
4. Strengthen our customer loyalty program and extend some credit to our top
customers. This will reduce the burden of immediate cash issue with customers and at
the same time keep them attached to us

CONCLUSION

Basis the current scenario and past learning, we can conclude that in order to sustain
the Homeplus growth story in S Korea, we must innovate and deploy out-of-the box
ideas. It is time that we increase our digital footprints, make our online system more
robust and improve our delivery channel to cater to customer’s needs & demands. We
must also look into the factor that the purchase power of the customers has decreased
and find a way to keep our customers close to us and all the changes must be made
keeping in mind the local culture & beliefs.