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Conceptualising contemporary retail divestment: Tesco's departure from South Korea

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  • Neil M Coe
  • Yong-Sook Lee
  • Steve Wood

Abstract

In this article, we critically analyse the September 2015 decision of the UK retailer Tesco to sell its highly profitable South Korean subsidiary Homeplus to private investors. For over a decade since market entry in 1999, Homeplus had grown steadily to achieve a market-leading position through a process of strategic localization in which Tesco's global business practices were selectively adapted to meet the specific needs of the South Korean market. Against this backdrop, we explain the exit decision through theorising the dynamic intersection of home and host market factors that developed contemporaneously from 2010 onwards. On the one hand, worsening market conditions and financial pressures in a post-crisis UK domestic market drove Tesco to refocus on its home operations and, ultimately, identify saleable assets to offset mounting debts. On the other hand, steadily growing resistance within the South Korean market from competitors, regulators, labour and consumers caused sales growth to stall and then start to decline. Our analysis contributes to the economic geography literature on retail divestment by conceptualising the relational process of divestment decision-making that encompasses the intersection of home and host market pressures as well as conditions across the wider portfolio of subsidiaries. The research is particularly distinctive in its profiling of this coevolution of drivers, and in distilling the different ‘domains’ of host market contestation. The analysis also has wider significance in the context of the broader literatures on economic globalization that have tended to focus heavily on processes of expansion and market entry and far less on the instances of failure and exit that are an integral and inevitable part of these wider dynamics.

Suggested Citation

  • Neil M Coe & Yong-Sook Lee & Steve Wood, 2017. "Conceptualising contemporary retail divestment: Tesco's departure from South Korea," Environment and Planning A, , vol. 49(12), pages 2739-2761, December.
  • Handle: RePEc:sae:envira:v:49:y:2017:i:12:p:2739-2761
    DOI: 10.1177/0308518X17733265
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    References listed on IDEAS

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    Cited by:

    1. Burt, Steve & Coe, Neil M. & Davies, Keri, 2019. "A tactical retreat? Conceptualising the dynamics of European grocery retail divestment from East Asia," International Business Review, Elsevier, vol. 28(1), pages 177-189.
    2. Irina Surdu & Kamel Mellahi & Keith Glaister & Giulio Nardella, 2017. "Why Wait? The Speed of Foreign Market Re-Entry after Initial Entry and Exit," John H Dunning Centre for International Business Discussion Papers jhd-dp2017-05, Henley Business School, University of Reading.

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