GSRM7223 Marketing Management

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Instruction: Read Article 1 and 2 for current updates on Tesco Malaysia. Answer the following
questions.

Describe how these marketing environmental factors, such as demographic, economic, socio cultural
and technological forces, affecting the supermarket and hypermarket industries, that influence Tesco
to divest its business in Malaysia and Thailand, given that Tesco is one of the pioneers to introduce
online purchase and delivery among other hypermarkets through its Grocery Home Shopping Service.
Support your answer with examples.

5 3-4 1-2 0 Total

Marketing Excellent Acceptable Correct but Wrong
environment 1: answer with answer with no answer
complete facts basic facts Supporting
facts
Marketing Excellent Acceptable Correct but Wrong
environment 2: answer with answer with no answer
complete facts basic facts Supporting
facts
Marketing Excellent Acceptable Correct but Wrong
environment 3: answer with answer with no answer
complete facts basic facts Supporting
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Marketing Excellent Acceptable Correct but Wrong
environment 4: answer with answer with no answer
complete facts basic facts Supporting
facts

Article 1
Tesco sells businesses in Thailand, Malaysia for US$10.6b

• CORPORATE NEWS
• Monday, 09 Mar 2020, 3:14 PM MYT, By Joseph Chin
KUALA LUMPUR: Tesco, Britain's biggest
retailer, is selling its businesses in Thailand
and Malaysia to Thailand's CP Group entities
for an enterprise value of US$10.6bil.

The disposal involved Tesco’s entire

shareholding in Tesco Stores (Thailand) Ltd,
Tesco Stores (Malaysia) Sdn Bhd, it said in a
statement on Monday.

The companies under the CP Group are C.P.

Retail Development Company Ltd, Charoen
Pokphand Holding Co., Ltd, CP All PLC and
C.P. Merchandising Co., Ltd.

“The disposal will simplify the Tesco Group, enabling a stronger focus on its retail businesses in the
UK and Ireland and in Central Europe. The disposal also realises material value for Tesco’s
shareholders and allows the Tesco Group to further de-risk the business by reducing indebtedness
through a significant pension contribution of £2.5bil, ” it said.
 GSRM7223 Marketing Management

Tesco said the disposal represents an enterprise value of US$10.6bil (equivalent to £8.2bil) on a
cash and debt free basis, representing an EV/EBITDA multiple of 12.5 times. The net cash proceeds
are expected to be US$10.3bil (£8bil) before tax and other transaction costs.

To recap, Tesco began operating in Thailand in 1998 through Ek-Chai, which operates under the
name “Tesco Lotus”, a network of stores comprising various formats across Tesco Thailand as well
as an online shopping platform and third-party applications such as Lazada and Happy Fresh.

Tesco Lotus generated approximately £4.1 billion in revenue (excl. VAT, incl. fuel) in the financial
year ended 23 February 2019, operates a network of 1,967 stores across Tesco Thailand and serves
over 13 million customers each week. As part of its offer to customers and to support the core grocery
business, in many large freehold and leasehold stores Tesco Thailand has developed an attractive
and profitable mall business, which in its own right is one of the largest such operators in the market.

As for Malaysia, Tesco began operating in the country under the name Tesco Malaysia in 2002, as
part of a joint venture with Sime Darby Bhd. Tesco Malaysia is a leading grocery retailer in the
Malaysian market and one of the most recognised retail brands in Malaysia.

“It generated approximately £800mil in revenue (excl. VAT, incl. fuel) in the financial year ended 23
February 2019 and operates a network of 68 stores across Malaysia. Tesco Malaysia supplies its
stores from two distribution centres in Malaysia, with its stores and distribution centres located on
and within land and buildings either owned, leased or tenanted by Tesco Malaysia, ” it said.

As in Thailand, Tesco Malaysia operates a highly successful mall business alongside its retail stores
from its freehold and leasehold estate. Tesco said the consideration payable to Tesco after the
disposal represents an enterprise value of US$10.6bil on a cash and debt free basis, representing
an EV/EBITDA multiple of 12.5 times.

The transaction values Tesco Thailand at an enterprise value of US$9.9bil, including US$400mil of
net cash. The transaction values Tesco Malaysia at an enterprise value of US$700mil, including
US$600mil of net debt. “Following completion, the board intends to return c.£5bil to shareholders by
way of special dividend, ” it said.

Source as on 31 March 2020

https://apicms.thestar.com.my/uploads/images/2020/03/09/597604.jpg
https://www.thestar.com.my/business/business-news/2020/03/09/tesco-sells-businesses-in-
thailand-malaysia-for-us106b
 GSRM7223 Marketing Management

Article 2
Malaysia

Tesco opened its first store in Malaysia in May 2002 with the opening of its first hypermarket
in Puchong, Selangor. Tesco Malaysia currently operates 49 Tesco and Tesco Extra stores. Tesco
has partnered with local conglomerate Sime Darby Berhad, which holds 30% of the shares.[31]

In 2007, Tesco acquired the Malaysian operation of the wholesaler Makro, which was then rebranded
as Tesco Extra and provides products for local retailers. There has been plans to relaunch all its
stores in Malaysia to Tesco Extra. Besides giving the store a contemporary design and a brighter
look, the new Tesco Extra brand features a shop-in-shop concept with an optic shop, pharmacy,
bistro and phone shop. Till date, 7 out of the 52 outlets have been rebranded to the new format
namely: Tesco Extra Mutiara Damansara, Tesco Extra Bandar Bukit Puchong, Tesco Extra Ara
Damansara, Tesco Extra Seberang Jaya, Tesco Extra Desa Tebrau, Tesco Extra Bandar Bukit
Tinggi in Klang, Tesco Extra Mutiara Rini and Tesco Extra Ipoh Garden.

Tesco Malaysia offers a value range, its own branded range, electronic goods, the loyalty clubcard
and clothing. Tesco Malaysia's Clubcard introduced Green Clubcard Points in 2007 making Tesco
Malaysia the first Tesco international business to introduce the Green Clubcard Points scheme. [32]

In April 2013, Tesco Malaysia launched the Grocery Home Shopping Service, where it delivers
groceries ordered via the Internet to consumers, with no minimum purchase imposed. There will be
a RM10 service charge for each delivery and online customers may choose a delivery time slot from
10 am to 10 pm daily. Payment is made via credit or debit card. The service is currently offered to
customers living within the 20 km radius of Tesco Extra outlets.[33]

The Malaysian operation of Tesco also includes a convenience store, Tesco Pernama Ekspres,
which began its operation in February 2015.[34]

Source: https://en.wikipedia.org/wiki/Tesco_International_operations

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