Presentation of how Tesco launched its business in South Korea.

1. Profile of Studies: Bachelor of
International Business
Student: Slawomir Starzec
Date: 5th December, 2014
How Tesco used the PESTLE analysis
to launch its business in South Korea?

2. 1) Tesco case study: ESRC, 2005. School of Environment,
Education and Development.
Available at:
http://www.sed.manchester.ac.uk/geography/research/gpn/gp
nwp11.pdf
2) Datamonitor.com, 2008. Republic of Korea: Country
Analysis Report – In-depth PESTLE Insights.
Available at:
https://www.kdevelopedia.org/download.do?timeFile=/mnt/ida
s/asset/2012/01/30/DOC/PDF/04201201300000234070791.p
df&originFileName=PESTLE%20ANALYSIS.pdf.
Tesco Homeplus in South Korea

3. Tesco before…
 Tesco was founded in 1919 by Jack Cohen in
London’s East End as a market stall.
 The first own-brand product sold by Jack was
Tesco Tea (1924) - before the company was
called Tesco. The name comes from the initials of
TE Stockwell, who was a partner in the firm of tea
suppliers, and CO from Jack's surname.

4. Tesco at present
 Tesco operates in 12 countries around the world,
employs over 530,000 people and serves tens of
millions of customers every week.

5. Tesco in South Korea
 In 1999 Tesco, encouraged by successful
expansion of Carrefour (1996) and Wal-Mart
(1998), entered the South Korean market with a
partnership of Samsung under the name of
Homeplus.
 The new retail chain expanded to 113 branches
thorough South Korea and became the second
largest retailer in the country .
 In 2011, responding to Korean changing lifestyle
and buying habits, Tesco opened the first virtual
store in the world on a subway station in Seoul.

6. Tesco Homeplus in South Korea

7. PESTLE analysis and its impact on
Tesco’s decisions
 The PESTLE analysis provides project
management with an in-depth insight into macro-
environmental factors in which the projects are
conducted. Tesco undertook the project to launch
its store chain in South Korea in 1999.

8. Political
 Political factors refer to political situation of the
country and the extent to which it may affect and
interfere with the project.
 Scanning the political climate and attitudes is crucial
as the government units may approve or reject
projects.
 The political system of South Korea has undergone a
huge transformation.
 Due to centralization of the power and implementation
of economic reforms , the political system of South
Korea became faster and effective which allowed the
country to focus on economic development and
attract foreign investments.

9. Economic
 The economic factor plays a critical role in
compiling a business case for the project as this
document indicates whether or not the project is
worth investment. The analysis of the economic
variables helps to determine the profitability of
the project and its deliverables.
 The economic situation of the country, its growth,
inflation rate and also market demands must be
considered at early stage in order to provide the
project with up-to-date project charter.
 In case of South Korea the strong export, high
GDP (2.1% in 2012) and positive investment
climate played the crucial role for Tesco’s
decisions.

10. Social
 The project management must consider social conditions
in order to determine whether the project and its product
will stand for benefit or risks in the country it is conducted.
The social factors posing the impact on projects include
the population growth rate, demographic landscape,
education level, staff availability, spending power, lifestyle,
attitudes to work.
 The number of inhabitants of South Korea reached 50
million in 2012.
 The minimal wage in South Korea is one of the highest in
Asia and amounts to 868 US dollars per month.
 Large agglomerations provide with access to educated
staff and their buying power.
 The rapid urbanization and industrialization of South Korea
was a factor which impacted localization of Tesco stores
as most of them are located in urban areas where the
traffic volume is high and attitude to foreign brands more
positive.

11. Social
 From the Project Human Resource Management,
the merge with Samsung was highly beneficial for
Tesco as it allowed to utilise local human
resources and their expertise.

12. Technological
 The technological readiness of a country, the
availability of infrastructure, communications systems,
the rate of technological change but also the level of
adoption of new technologies stand for important
elements for the project management as these
determine the required tools to conduct the projects
effectively and timely.
 South Korea provides with highly effective
infrastructures and communications systems.
 The average internet connection speed noted at
14.2Mbit/s in 2013.
 98% of Korean population owns mobile phones
which became a part of the Korean lifestyle.

13. Legal
 Legal factors include current and impending
legislation that may affect the industry and
projects in areas such as employment,
competition, health and safety.
 The South Korean legal system provides with one
of the most attractive regulatory incentives for
industrial investments among The Organisation
for Economic Co-operation and Development
(OECD).
 The wide array of incentive solutions provided by
the government of South Korea stand for the
major attraction for foreign investors (tax
reductions or exemptions, cash grants).

14. Environmental
 The environmental factors become increasingly
important in recent years as there is a direct
dependency between such aspects as weather,
climate, natural resources, environmental
awareness and legislation. The project
management needs to scan environmental issues
in order to determine whether the project poses a
risk to the environment and how to address the
arising issues.
 Key environmental issues of South Korea include:
limited good quality soil and vegetations (80% of
land is covered by mountains), air pollution.

15. Conclusions
 Tesco launched its stores in South Korea after the
political landscape of this country was improved
to the extent that it allowed to conduct business
operations with supportive attitude of the
government.
 The PESTLE analysis impacts the project
management through providing an in-depth view
into the global markets in which the projects are
undertaken.
 Even though the enterprise environmental factors
are not under the control of the project team, they
should be monitored and analysed in order to
identify risks and ensure the project is worth
investment.