Reference no: EM132881502

Tesco - Entry Into and Exit From Japan

• In September 2011, Tesco, the British supermarket group and the world's third-biggest retailer, announced its exit from Japan after 8 years in the country. In the event, Tesco became the latest in a long list of foreign retailers to exit from Japan. This case study highlights why many international supermarket chains like Tesco have been unsuccessful so far in a difficult Japanese market.
• "Let's be honest, Japan was a short, expensive adventure for us." - Jose Luis Duran, Chief Executive of Carrefour in March 2005 on its exit from Japan.
• "These retailers brought into Japan their business formats without adjusting for Japan. It's not as if a wholesale-club-type concept will not take off here, but there has to be some modification." - Masayoshi Saotome, research director at Mitsubishi® Research Institute Inc.
• Japan, the world's third-biggest grocery market, remains a difficult country to make money from, as international retailers Walmart® and Carrefour have found out. Walmart has not done very well in Japan with its presence since 2002 through Seiyu. When Carrefour entered Japan in 2000, it made huge claims on revolutionizing retailing in the country. However, in 2005, Carrefour swapped its Japanese assets for Tesco's assets in Taiwan.
• Seven & Holdings and Aeon dominate Japan. Even British drugstore chain Boots pulled out of Japan owing to increased competition and deflation. Additionally, Japan's Byzantine distribution system of closely knit web of suppliers and consumers' fickle taste is the reason behind many retailers struggling. Many analysts attribute the failure to misreading Japanese consumers' mindset. However, the competitive Japanese retail market is a tough arena, not just for foreign retailers but also for local Japanese department stores. Local stores also have been struggling with price deflation and ever-increasing specialty stores.

Discussion 1: Why are the Japanese retail markets so difficult to compete in?

Discussion 2: Why are Japanese customers reluctant to shop at foreign retailers versus local retailers?