Read the extract below and answer ALL the questions that follow: Entry & Expansion Strategy: Tesco in Japan In March 2008, UK-based retailer, Tesco Plc. (Tesco), relocated Michael Fleming, Business Development Director, to Japan as the Chief Executive of its Japanese venture. Analysts were of the view that the move indicated Tesco's plans of aggressive expansion in the market."Tesco really struggled to get the right people in place. They were forced to extend their feasibility study there, but now it seems that they are really committing to the business as it was looking to expand more aggressively in the world's second-biggest economy," said an analyst. Another reason cited by the analysts for major changes in the top management was poor returns from Tesco's Japanese operations. In 2007, Japan accounted for only about seven percent cash returns on investment. The returns in Japan were lower, compared to other markets like Thailand and South Korea, where the returns were more than 15 percent. Tesco entered Japan in July 20036, after spending considerable time understanding the nuances of the Japanese retail market, the second largest in the world. Tesco acquired 78 retail outlets of C Two-Network Co., Ltd that operated under the brand name 'Tsurukame'8 and continued to operate under the same name. The venture faced several hurdles, and Tesco had a tough time finding the right head for the venture as two CEOs left in quick succession. Tesco's Global Operations and Strategy.Tesco's international foray began with its entry into Ireland in 1979 through the acquisition of a 51 percent equity stake in 3 Guys stores owned by Albert Gubay. In 1986, Tesco divested itself of its stake in the stores when it found that customers were rejecting the British products sold there. Tesco's Entry into Japan Tesco's first Asian venture was in Thailand in 1998 through a joint venture with the Lotus chain. As it got a good response in Thailand, Tesco decided to expand into other Asian countries, and sensed an opportunity in the Japanese market. Japan was the world's second biggest retail market. There were several opportunities available for companies which provided products and services that offered quality, style, luxury, and convenience. It had a well developed consumer base with high amounts of disposable income. Expansion Strategies: In order to further strengthen its foothold and expand its presence in the Japanese market, Tesco went on to acquire a few more retailers which were not performing well in the market. In April 2004, it acquired Fre'c (Fresh and Cost), located in Chiba and Saitama. The company was not doing well and had an outstanding debt of $151 Million. As part of the acquisition,$45.3 Million of Fre'c's debt was paid by C Two-Network. Localization Strategies The look and feel of Tesco Express stores in Japan was very local and the stores were designed keeping in mind the Japanese mentality. They were located in central areas within the city as the Japanese did not like to travel long distances for shopping. RJ Outlook The markets of Asia, especially Japan, had proved tough for foreign retailers. This was mainly due to the inconsistent shopping habits of Japanese consumers and the fierce competition. The failed attempts by firms such as Carrefour and British drugstore Alliance Boots signified that the Japanese market was a tough nut to crack. Even one of the biggest local retailers, Aeon, witnessed an 18 percent fall in its operating profit to $156.04 billion for the year ended February 2008 in its supermarket business. QUESTION 1 (20 Marks) Do you think Tescos entry strategy in Japan was a correct move? What are the options for market entry modes for companies in International Markets? QUESTION 2 (20 Marks) What are the reasons for a company to choose Strategic Alliances? Differentiate Foreign Subsidaries from joint ventures