Question 1 – Email

Subject: Journey As Homeplus, The Challenges, Strategies And Future Outlook

Dear Managing Director,

Welcome you to Homeplus on behalf of the entire management and staff. We are very excited and
looking forward to working with you.

Please find attached report that we have made to provide you an overview of Homeplus. The report
provides you who we are, the challenges that we have faced and the strategies that we have
implemented over the period which have contributed to our growth. The report also provides the
future outlook, anticipated challenges and the proposed solutions.

We are always available to give any further information and discuss the report.

Best regards,

Seung – Han Lee

CEO of Homeplus

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Question 2 - Report Writing

OUR JOURNEY AS HOMEPLUS

THE CHALLENGES, STRATEGIES AND FUTURE OUTLOOK

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Table of contents
Executive Summary................................................................................................................................ 4
Introduction .............................................................................................................................................. 5
Overview of the Company.................................................................................................................... 5
The Challenges and Strategies ........................................................................................................... 5
Future outlook.......................................................................................................................................... 6
Conclusion.................................................................................................................................................. 7

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Executive Summary
Homeplus is retail Company that commenced its operations in 1999. It started its operations as a
joint venture between British retail giant Tesco and Samsung Group. The joint venture propelled
the Company growth by leveraging off the local expertise and connection derived from Samsung,
while taking advantage of the liquidity, technical know-how from Tesco. The Company started
operating with 2 stores in 1999 with staff compliment of 1,140, by 2011, the Company had 124
stores with a staff compliment of 27,814. The success and growth of the Company had its
challenges.
 Cultural diversity, Communication barriers and Merger uncertainties: At the onset of
operations, employee morale was low due to cultural diversity, communication barriers and
uncertainity about the future prospects of the Company. A special task force was
constituted which created a new hybrid organization culture called ‘Shinbaration”.
Shinbaration advocated for harmony between teamwork culture of Korea, “Shinbaram” and
the professional culture of the west, “rationality”.
 Adverse Nationalistic sentiments: There were the negative sentiments that the foreign
company was driving out small local companies and externalizing profits. Tesco and
Samsung developed the brand name “Homeplus” to dispel such sentiments while hiring of
local people to work and develop products that will relate to the locals. It derived
“localization” strategy aimed at luring customers.
 Customer expectation and retention: Koreans are considered the most demanding customers
in the world. A local acceptance plan was rolled out that was coined “Glocal” standard.
Glocal (Global + Local) was a compound word that combined localized marketing and a
globalized marketing and administration system.
 Manufacturers bargaining power: Manufacturing bargaining power poses a threat to the
operations of the Company as they provide most of the desired goods. Through the
partnerships with Samsung, the Company leveraged off local networks to ensure stability in
its supply to avoid disruption.
 Private Brands (PB): Private Brands provide similar goods but at lower cost. Quality
management of PB has become complex. Reputational risk and legal risk that could arise
from the default product can threaten the financial stability of the Company.

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Introduction
The purpose of this report is to provide an understanding of Homeplus as a retail giant in Korea, the
challenges and strategies implemented in its growth journey. It also mentions the upcoming
challenges that the Company is likely to face and proposed solutions. This report has been prepared
for the new incoming Managing Director for the appreciation of the Company and its future outlook.

Overview of the Company

Homeplus was latecomer in Korea but within one decade Homeplus had become the leading player
in the retailing industry as the second largest retailer. Homeplus store not only offered a wide range
of products but also put many facilities inside their store. This provided a more pleasant shopping
environment for customers by making “you can do it all in one stop” possible. Homeplus had got
many highly prestigious awards for years.

The Challenges And Strategies

The success and growth of the Company has had its challenges. The following have been some of
the notable challenges that the Company has gone through and strategies implemented to address
them.
 Cultural diversity, Communication barriers and Merger uncertainties: Homeplus is the foreign
company majority ownership that managed to establish itself as a major player in the South
Korean retail market. At the onset, employee morale was low due to the cultural differences
that arose from the merger of Tesco and Samsung group. This was coupled with
communication barriers and uncertainties around the future prospects of the Company.
A special task force was constituted which created a new hybrid organization culture called
‘Shinbaration”. Shinbaration advocated for harmony between teamwork culture of Korea,
“Shinbaram” and the professional culture of the west, “rationality”. This initiative bridged
the gap and boosted employee moral by enabling employees to develop and maintain an
emotional attachment to the Company and to go beyond their limits, while advocating for
rational management practices by adopting elements of the British Business Culture.
 Adverse Nationalistic sentiments: Tesco the majority shareholder of the Company was a
foreign entity. Potentially negative sentiments of domestic buyers that believed that foreign
companies were not only driving out small local stores but also transferring all their wealth
outside the country, could adversely affect the growth of the Company.
Tesco and Samsung group developed the name “Homeplus” to mitigate such sentiments.
Further, the Company employed local staff to lure local customers through its ‘localization’

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 strategy. In 2002, only 4 managers out of 7,509 employees were from Tesco. The use of local
employees enabled the Company to position itself to service its customers.
 Customer expectation and retention: Koreans are deemed to be among the most demanding
customers in the world. Retention of customers was crucial for growth.
A local acceptance plan was rolled out that was coined “Glocal” standard. Glocal (Global +
Local) was a compound word that combined localized marketing and a globalized
marketing and administration system. Glocal ensured customization of service offerings to
the local environment while leverage off the Global standards as well. The Company
expanded its product range to pursue the localization of distinct products. It also
incorporated convenience facilities, service facilities and culture centres. The goal was to
build stores that provided a more pleasant environment for customers by making “you can
do it all in one stop” possible. The outcome of these measures earned the Company the
highly prestigious Korea Service Award for 5 consecutive years.
 Manufacturers bargaining power: The Korean market is characterized with manufacturers
who have very strong bargaining power over retailers. This is mainly due to most of the
bestselling products been provided by a few dominant manufacturers controlled by
Chaebols (Business groups). Homeplus was no exception to this threat.
Homeplus actively sought to localize sourcing by leveraging off the Samsung local networks
while also pursuing benefits of having Tesco global purchasing scale for standardized
products. The threat was further matched with Tesco know-how in operational skills and
efficiencies which foster innovations to service customers and manager suppliers better.
 Private Brands (PB): The offering of private Brands ensure that we offer to our customers
similar products but at lower cost. While this product offerings have positively contributed
to the growth of the Company, quality management of PB has become more complex than
ever. The reputational and legal risks that may arise if the Company was caught up in a legal
suit related to product defaults or hazardous effects on products or consumers may create a
financial burden that would threaten the Company’s stability.

Future outlook
Expansion: In 2010, Homeplus led in this market segment with total of 258 SSM outlets, greatly
exceeding 7 SSMs that of E-Mart, the largest retailer in Korea. SSMs had been increasing sales
revenue over the past years. This was very promising for Homeplus, as there were still many
business sites available for SMMs for at least the next few years.

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Future Challenges: The implementation of the SSMs while positively contributing to the growth of
the revenues for the Company has its challenges.
 Impact on mom-and-pop stores and new regulations: Mom-and-pop stores are the traditional
Korean small grocers. According to statistics, revenues of Mom-and-pop stores dropped on
average by 42.2 percent after an SSM opened in the neighborhood. This caused serious
protests among small store owners all around the country. They were doing everything to
prevent SSMs from settling in their neighborhoods. There were two bills in the National
Assembly that if their enactment would severely hurt Homeplus. Additionally, a new law
introduced in March 2012 forced large retailers to keep their stores closed on the second
and the fourth Sunday of every month. Lawmakers had not finalized their decision yet, but
whatever the result, Homeplus had to prepare how to respond to the grow opposition.
 Change in customer consumption trends: Customers have started to use various channels for
consumption mostly through online and smart phone orders. Apart from shopping online,
the demand for convenience store and SMMS was rising for convenience reason. The
increasing in small families that had only one or two members (almost five times from 4.8
to 23.9 percent over the period 1980 to 2010), double-income families and the elderly also
had reinforced consumption preferences to short distant shopping in smaller quantities.

Conclusion
To enforce the growth of SSMs in the future amid very strong competition, there were proposed
solutions as following:
 Set up a team solely dedicated to seeking permissions for SSMs in case the first bill gets
passed until they find a long-term solution.
 Plan the store locations in such a way that they are accessible to multiple localities and
support them with delivery.
 Offer online delivery services with inventory in the SSMs even on the days the stores are
closed.
 Set up a centralised delivery system that connects SSMs with customers and using which
they can get delivery from anywhere.
 Set up a delivery service for faster and efficient delivery by Homeplus—something that the
other small stores lack.
 Get more involved in the community and build connections with the locals. If possible, give
franchise rights to the locals.
 Create a decision-making system that gives more autonomy to local store owners for taking
decisions on the items to be sold in the local stores.
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