A Bold Course
All global companies need to customize their products to a certain extent. The McDonald’s Corporation has sold beer in Germany, wine in France, mutton pies in Australia, and McSpaghetti in the Philippines. Even Coca-Cola Company, where standardization was once a point of pride, has begun to adopt a “glocal” strategy of its own. Over the last few years, Coca-Cola has formed alliances to expand its offerings to fruit juices and other beverages in the hope of better tailoring products to local tastes.
By pushing localization further than companies in other industries or even its own competitors, Tesco is charting a bold, but inevitable, course. In the food area, a large amount of local content is to be expected. Yet even for non-food items, the company prefers to use domestic suppliers. In Slovakia, 60 percent of non-food products are locally manufactured. In Poland, where the company has relationships with 1,300 local businesses, the number is close to 95 percent. Furthermore, 95 percent of employees in Tesco’s foreign stores are local nationals. Tesco boasts that all of Warsaw’s directors are Polish, and this pattern is repeated in other countries, including South Korea, Thailand, Malaysia, Hungary, and the Czech Republic.
The strategy has clear benefits. Local nationals like to see bosses from their own country: It gives them the sense that they, too, can advance. Employees say they also feel more comfortable reporting to individuals from the same culture. “I had a lot of French bosses before I moved to Tesco,” reflects Mich Aguieszka, who worked at French-based Géant Casino before becoming produce manager at Tesco’s Warsaw store two years ago. “Here it’s mostly Poles. It’s much better.”
Yet having a high number of foreign managers presents complexity for headquarters. Local hires are not as well versed in the Tesco corporate culture. And if top management does not wholeheartedly accept the company’s values, workers at the bottom may have a harder time swallowing certain corporate practices. For example, Tesco mottoes such as “Ask more than tell,” “Trust and respect each other,” and “Enjoy work, celebrate success” seem overly touchy-feely for the typical Polish worker, who tends to be plainspoken and direct. “In Poland, there’s a lot of skepticism about some of the Tesco training programs,” says Mara Chojnacka, a Tesco communications manager in Poland.
The language barrier can be a challenge, too. Mr. Reid, working from his office outside London, spends many mornings listening to broken English from foreign Tesco executives. And he is not always certain his own comments are comprehended. “Sometimes you think they understand, but you’re not sure,” Mr. Reid says. “In some cultures it’s a loss of face for them to say they don’t understand. You have to be persistent, coach them, support them. But the difficulties are outweighed by the benefits. They know their customers; we give them the authority to act,” he says.
The conviction that local is better seems to have permeated all levels of Tesco’s work force. Tesco’s attention to local culture sounds like a matter of corporate pride when Mr. Hutchins scoffs at Carrefour’s selection at its Warsaw store. “They seem to have a lot of French brands there,” he remarks. At Warsaw’s Carrefour, a number of French products can, indeed, be spotted on the shelves: petits pains grillés, biscottes, and other foods, as well as a large selection of French cheese.
Trading Best Practices
Still, Tesco’s customization raises an important question: If the company is adapting so well to local markets, why go global at all? And if it’s truly global, What good does a U.K. headquarters do?
The answer is, as the saying goes, there is no point in reinventing the wheel. It would be prohibitively expensive for Tesco to force foreign managers to come up with entirely new ways of running their stores. To offset the costs of localization, Tesco management has focused on standardizing management methodology to achieve gobal economies of scale.