Cultural awareness the key to success (and failure)

HSBC has run a ‘local knowledge’ campaign for years and years – highlighting the importance of cultural awareness when taking business ventures overseas – yet it seems the message still isn’t getting through to some major businesses; not least Tesco, which recently found out the hard way that a successful operation in one country doesn’t necessarily translate to the same result in another.

Despite the supermarket chain dubbing its clubcard a ‘secret weapon’ in China, it seemingly underestimated the vast differences between consumers in this part of the world and those back home in the UK. Specifically, shoppers in China don’t show as much brand loyalty – instead preferring choice and variety – which changes the entire dynamic of Tesco’s strategy.

Qin Wang, a professor of marketing and innovation at the Warwick Business School, comments, “The value of the clubcard, or indeed any loyalty programme in the Asian market, may have been grossly overestimated.

“We found that almost all consumers participated in at least one loyalty programme and 63% of those who participated had loyalty cards from four or more retailers. They believed larger choices gave them more power of control, more motivation to make decisions, more chances to have programmes that suit their needs and a more satisfying shopping experience. This means that any customer information held on one store card is incomplete at best and misleading at worst, and is thus not fit for the purpose as Tesco intended.”

So for now, it’s back to the drawing board for Tesco. Information gleaned from customer loyalty cards can make a huge difference to a supermarket’s operation – as has been demonstrated in the UK for over a decade – but as shown by its Chinese venture, there are certain nuances that need to be accounted for. In hindsight, it seems easy to suggest that Tesco should have been aware of this fundamental difference prior to opening stores on the continent, but hopefully the experience has proved valuable and it can now tackle the market in a different manner.

Wang concludes, “Tesco believed its clubcard would give it an advantage over local rivals. However, the news that Tesco is now set to merge its Chinese operations with a local supermarket chain, shows that perhaps it could have focused more on the cultural differences between Chinese consumers and those in the West.

– Simon Rowley