tesco south korea case study

Despite the popularity of globalisation in retailing, most retailers are still struggling to develop competencies to succeed in global markets. To what extent should the "original" format and merchandise be adapted is a major issue. Walmart learnt this the hard way when its initial entry into China had the wrong merchandise. On the other hand, Mexican customers were disappointed when they did not find enough imported US merchandise in the Walmart stores. Toys R Us has learnt that there are differences in consumption patterns. The Japanese demand electronic toys, other Asian consumers demand educational toys, Europeans favour traditional toys, while American kids prefer television- and movie-endorsed toys.

The Tesco case in South Korea demonstrates that despite the company's many problems, it has been a leader in developing multichannel solutions. With consumers preferring the convenience and selection of e-commerce, traditional brick-and-mortar retailers are challenged to address how to serve this customer profitably. The home-delivery option is much valued by consumers but cannot be as profitable as the traditional store. Therein lies the dilemma.

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tesco virtual supermarket in a subway station

tesco homeplus opened a virtual grocery store in a south korea subway station, where users shop by scanning QR codes on their smartphones

in a campaign designed by the seoul branch of advertising agency cheil , tesco homeplus supermarket opened last fall a virtual grocery store in a south korea subway station, permitting users to shop using their smartphones.

a large, wall-length billboard was installed in the station, designed to look like a series of supermarket shelves and displaying images and prices of a range of common products. each sign also includes a QR code. users scan the code of any product they would like to purchase, thereby adding it to their online shopping cart. after the web transaction is completed, the products are delivered to the user’s home within the day.

the strategy makes productive use of commuters’ waiting time, while simultaneously saving shoppers time spent going to the supermarket.

video footage documenting the concept and actualization of the virtual supermarket

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Tesco Corporation’s Internationalization Strategy Case Study

Introduction, analysis of the existing strategy, costs and benefits of the strategy, environmental challenges, resources/capabilities, new strategic directions.

Tesco is one of the leading UK retailers that started its international expansion in the 1990s. The company’s focus on internationalization was a successful strategy that led to remarkable growth in many regions and considerable profits that reached $3.8 billion in 2011 (Wrigley, Lowe, & Cudworth, 2013). However, success in some regions was accompanied by major failures in other areas, which led to significant losses, both financial and reputational. This paper includes a brief analysis of the company’s strategy, as well as challenges the company faces and new strategic directions to adapt to address these challenges.

The focus on international expansion was determined by the growing regulatory and competitive pressures Tesco had to handle in the domestic market. The first areas of expansion were countries of Central Europe that were undergoing major transformations in the 1990s after the collapse of the Soviet Union. Regulations in those countries were minimal, and competitors were also quite a few, which enabled the company to earn a significant share of the market (up to 27%) in 2011 (Wrigley et al., 2013). At that, Tesco experienced the most unprecedented growth in Asia, specifically in South Korea. The company is now the second-largest retailer in the country, with revenues of over £5 billion (Butler & Neville, 2013). The company is successfully penetrating the markets of India and China.

Nevertheless, the expansion into the US market that started in 2007 proved to be a failure as the company announced that all the stores would be closed and sold in the near future (Ruddick, 2013). It is noteworthy that Philip Clarke, the company’s CEO, understood the complexity of operating in the USA as the market was saturated, and the competition was rather fierce. However, the decision was to enter the American market with a focus on fresh food (which was quite expensive).

The internationalization of Tesco has a number of peculiarities. First, the company made some partnerships. One of the most successful partnerships was implemented in South Korea (Wrigley et al., 2013). Tesco and Samsung collaboration was successful as Tesco managed to address various issues associated with operating in new markets. First, the retailer managed to learn the peculiarities of the country’s legislation and regulatory policies.

Customers’ needs and characteristic features were also acknowledged. Tesco also managed to establish a retail chain that seemed fully domestic. Another peculiarity of Tesco’s expansion was the focus on its private labels rather than manufacturers’ products. The company also tried to be customer-oriented. However, in many regions, Tesco failed to achieve this goal, which led to failures and losses (Yoder, Visich, & Rustambekov, 2016). The company did not meet the needs of customers in the USA, Japan, and other regions.

It is necessary to note that internationalization is often an effective strategy used when the competition in the domestic market becomes too fierce, or other environmental challenges come into play (Wrigley et al., 2013). The expansion to other markets allows companies to improve profits through the increase in sales. The company can allocate funds wisely and invest in profitable projects. Operating in new markets helps companies become more flexible and innovative.

On the one hand, businesses learn about different regulatory policies and laws. On the other hand, they learn how to adjust to such environments. This flexibility is essential in the contemporary globalized world as regulations and norms existing in some countries tend to be adopted in other regions as well. There are chances that the norms and regulations existing in a foreign market will be used (with some differences) in the domestic market as well.

Nonetheless, the costs associated with the use of this strategy are also substantial. First, any expansion requires significant financial investments (related to acquisitions, alliances, construction of facilities, and so on). For instance, Tesco invested £1.25 billion to enter the American market (Wrigley et al., 2013). Clarke stated that this kind of investment was affordable for the company, and it could become transformational for Tesco in case of success. The CEO also stated that the major reputational loss in case of failure was associated with his name, not the company. Nevertheless, the reputational loss is apparent, and its negative effect can become visible soon. Unsuccessful expansion can come at a high cost, and Tesco’s failures in some regions can be seen as illustrations of these costs.

Tesco’s failures are associated with a number of wrong decisions as well as environmental challenges. First, the company entered the American market a year before the global financial crisis of 2008 (Butler & Neville, 2013). The environmental factor was accompanied by the inability to adjust and the inability to address customer needs (Yoder et al., 2016). For example, Fresh & Easy stores offered high-quality products, but they became unaffordable for price-sensitive Americans.

Furthermore, the focus on private labels was also ineffective in the US market. Martinez-Ruiz, Gonzalez-Gonzalez, Jimenez-Zarco, and Izquierdo-Yusta (2016) stress that American customers often become loyal to particular brands. People’s needs and preferences were not addressed, which resulted in failures. Customers’ peculiarities were not taken into account in other regions as well. For instance, in Poland, people prefer convenience stores to large hypermarkets while Tesco focuses on this type of retail units in that region (Ruddick, 2013). Apart from the inability to identify people’s needs, Tesco also faced issues related to the introduction of new regulations.

For instance, the changes in the Indian legislature has a negative effect on the development of the company and its further expansion in the region (Butler & Neville, 2013). Finally, many countries are trying to address serious financial issues and introduce new taxes, which also has an adverse impact on the company’s growth.

When discussing the resources and capabilities of the international retailer, it is necessary to note that Tesco has substantial funds to invest in numerous projects. The company’s billion profits show that significant funds can be allocated to innovate and expand. Apart from the obvious financial resources, the company also has other resources and capabilities. For instance, Tesco has a positive experience associated with the collaboration with companies operating in new (for Tesco) regions (Wrigley et al., 2013).

This experience can be helpful when expanding to new markets (in India and China). Tesco’s experience in collaborating with other companies can generate value as the company will be able to employ it in other regions (collaborating with other companies). The use of this strategy can help the company reduce costs, understand new markets better, and develop a proper image in the new market.

The company also tries to innovate and come up with new products and services. The development of private labels is one of the areas where Tesco has succeeded in many regions. For example, its tablets have acquired significant popularity (Warman, 2013). Hence, the development of private labels can help the company meet the existing and potential customers’ needs in a more efficient way.

The company is also expanding its e-commerce operations. Tesco’s management claims that being online is one of the major competitive advantages in the retailing industry (Warman, 2013). The company has quite effective information systems that can be used to implement marketing research, share knowledge within the company, and so on. The data obtained can help the company create value-added products and services that can attract more customers and meet the needs of the existing customers.

It may seem that the most appropriate strategy for Tesco is the focus on the domestic market and the most successful foreign markets (such as South Korea). However, the UK market is saturated, and the competition is very serious. The company needs to expand, but the expansion strategy should be based on the lessons learned from previous years. First, Tesco should launch large-scale market research with a focus on customers’ characteristic features (profile).

It is essential to understand what people need and want. One of the successful methods to learn more about new customers is the development of partnerships and alliances. Tesco can collaborate with local businesses to develop a successful marketing strategy.

Yoder et al. (2016) note that ineffective supply chain management contributed to Tesco’s failures. The company should implement research concerning the most efficient locations of stores and other facilities. This task is closely connected with another area of concern. The company should analyze the existing competition in new markets. Tesco should properly evaluate the existing competition and (based on this analysis) decide whether new Tesco stores can be set or other locations should be chosen. It is also important to identify Tesco’s competitive advantage to be able to win the competition or, at least, remain a successful player in the market.

Finally, Tesco should focus on innovation as this strategy has proved to be effective in South Korea and many other countries. The use of technology is instrumental in achieving this goal. For example, South Korean customers enjoy so-called virtual stores (Wrigley et al., 2013). These advances can be equally successful in western countries as well. The use of mobile technologies is also on the rise. E-commerce is another area to develop.

In conclusion, it is possible to state that Tesco has chosen an effective strategy that implies internationalization. This strategy is associated with numerous opportunities, including larger profits, growth, flexibility, organizational learning, etc. However, it is vital to avoid the mistakes the company has made. For instance, Tesco should reconsider its supply chain management, especially when it comes to the choice of location. The company should implement extensive research concerning customers’ needs and preferences.

It is also critical to evaluate properly the existing competition in different markets as well as environmental issues as macro and micro-economic factors affecting the development of countries and regions. Tesco should maintain its focus on innovation, but the use of advanced technologies and marketing strategies should be based on extensive market research. Although the company is still facing numerous internal and external issues, Tesco can still retain its leading position and improve its operations in different markets.

Butler, S., & Neville, S. (2013). Tesco’s empire: Expansion checked in UK and beyond . The Guardian . Web.

Martinez-Ruiz, M. P., Gonzalez-Gonzalez, I., Jimenez-Zarco, A. I., & Izquierdo-Yusta, A. (2016). Private labels at the service of retailers’ image and competitive positioning: The case of Tesco. In M. Gomez-Suarez & M. Martinez Ruiz (Eds.), Handbook of research on strategic retailing of private label products in a recovering economy (pp. 104-126). Hershey, PA: IGI Global.

Ruddick, G. (2013). Is Tesco’s dream of building an international empire unravelling? The Telegraph . Web.

Warman, M. (2013). Tesco Hudl tablet takes on Kindle and iPad . The Telegraph . Web.

Wrigley, N., Lowe, M., & Cudworth, K. (2013). The internationalization of Tesco: New frontiers and new problems. In G. Johnson, R. Whittington, D. Angwin, K. Scholes, & P. Regner (Eds.), Exploring strategy: Text and cases (pp. 657-661). Harlow, UK: Pearson.

Yoder, S., Visich, J., & Rustambekov, E. (2016). Lessons learned from international expansion failures and successes. Business Horizons , 59 (2), 233-243.

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IvyPanda. (2021, July 21). Tesco Corporation's Internationalization Strategy. https://ivypanda.com/essays/tesco-corporations-internationalization-strategy/

"Tesco Corporation's Internationalization Strategy." IvyPanda , 21 July 2021, ivypanda.com/essays/tesco-corporations-internationalization-strategy/.

IvyPanda . (2021) 'Tesco Corporation's Internationalization Strategy'. 21 July.

IvyPanda . 2021. "Tesco Corporation's Internationalization Strategy." July 21, 2021. https://ivypanda.com/essays/tesco-corporations-internationalization-strategy/.

1. IvyPanda . "Tesco Corporation's Internationalization Strategy." July 21, 2021. https://ivypanda.com/essays/tesco-corporations-internationalization-strategy/.

Bibliography

IvyPanda . "Tesco Corporation's Internationalization Strategy." July 21, 2021. https://ivypanda.com/essays/tesco-corporations-internationalization-strategy/.

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Tesco in Korea - a classic case study in international expansion

6th September 2009

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A great article in The Sunday Times today examines the strategy behind the success of Tesco’s expansion in South Korea…

International expansion is a key topic in the new A2 specs and the case study of Tesco’s approach to building market share in Korea is a great example to use.

The Sunday Times article is here

Some of the key points I noted down are:

- Tesco’s investment in Korea was set up as a joint venture partnership with Samsung - the leading Korean conglomerate

- Tesco will soon achieve market leadership, with more than a third of the market

- Tesco’s share of the Korean business’ profits is forecast to rise to almost £0.5bn by 2014

- Of the 23,000 staff, just 4 are from the UK!

- The success of the business is all about Tesco operating it as a local business, taking full account of the Korean way of life

- The Korean stores also double-up as community centres, even including schools!

- 25% (13million) Koreans are signed up to the Tesco customer loyalty scheme

Students can learn more about Tesco’s international strategy here

Jim co-founded tutor2u alongside his twin brother Geoff! Jim is a well-known Business writer and presenter as well as being one of the UK's leading educational technology entrepreneurs.

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Tesco’s Success in South Korea: A Case Study in Strategic Localization

Posted on Apr 30, 2024 in Economy

Tesco’s Entry into the South Korean Market

Joint venture with samsung.

Tesco’s successful entry into South Korea was marked by a strategic joint venture with Samsung, operating under the established “Homeplus” brand. This move proved crucial in overcoming negative perceptions associated with foreign companies and provided Tesco with several advantages, including prime locations, government support, and local market expertise.

Leveraging Global and Local Best Practices

By early 2006, Tesco emerged as the second-largest retailer in South Korea. This success can be attributed to its ability to combine global best practices in supply chain management, customer service, and private label products with local expertise and manpower.

Location and Product Strategies

Focus on fresh food and local preferences.

Tesco stores in Korea prioritized fresh food products, catering to local preferences. They offered a wide range of products, including food and non-food items, with a focus on private label products tailored to Korean customers. Additionally, they strategically placed ready-to-eat foods at store entrances for convenience.

Adapting Store Layouts and Locations

Tesco deviated from international display standards by lowering product stands for easier customer access. Recognizing the preference for local shopping, Tesco initially opened stores in city centers but later shifted to locations with convenient public transport access, even establishing “subway stops” for some stores. To further expand its reach, Tesco implemented virtual supermarkets, allowing customers to shop online using QR codes.

Additional Services and Customer Focus

Tesco enhanced the shopping experience by offering car servicing facilities and play zones for children. The company also recognized the importance of customer satisfaction and loyalty, aiming to improve its ratings compared to competitors.

Strategies for Maximizing Competitiveness and Profitability

Several strategies were identified to enhance Tesco’s competitiveness and profitability:

• Industry Diversification: Expanding into other industries, such as banking, to mitigate risks associated with focusing solely on retail.
• Customer Satisfaction: Prioritizing customer satisfaction and loyalty through improved service and offerings.
• Clubcard Utilization: Leveraging the “Clubcard” to gather customer data for improving convenience, store layouts, and shopping times.
• Dual Delivery Stream: Implementing an effective online retailing system to complement physical stores and broaden the delivery stream.
• Training Programs: Investing in training programs to enhance employee skills and adapt to local market dynamics.

Learning from Competitors’ Mistakes

Tesco learned valuable lessons from the failures of competitors like Wal-Mart and Carrefour in the South Korean market. These competitors made critical mistakes, including:

• Failure to Adapt to Local Tastes: Neglecting to understand and cater to local preferences, assuming Western strategies would suffice.
• Ignoring Customer Acquisition Strategies: Opting for simpler store appearances compared to the more stylish and luxurious designs of competitors.
• Slow Store Expansion: Losing market share and customer base due to a slow pace of store openings.
• Ineffective Sales Techniques: Selling products in bulk rather than creating appealing displays and engaging sales approaches.
• Wrong Market Entry Strategy: Choosing not to pursue joint ventures, which proved crucial for Tesco’s cultural adaptation and success.

Key Takeaways for Success

Tesco’s experience in South Korea highlights several key takeaways for success in international markets:

• Avoid a Know-It-All Attitude: Approach new markets with humility and a willingness to learn.
• Adapt to Local Culture: Understand and respect local customs, preferences, and business practices.
• Implement a Swift Strategy: Act quickly and decisively to gain a competitive edge.
• Consider Joint Ventures: Leverage local partnerships to navigate cultural nuances and gain market insights.

By embracing these principles, Tesco successfully established itself as a major player in the South Korean retail market, demonstrating the importance of strategic localization and cultural adaptation.

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Tesco's Virtual Store: From South Korea to the United Kingdom

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Tesco's virtual store: from south korea to the united kingdom description.

After the successful launch of their virtual grocery stores in South Korean metro stations, Tesco UK is trying to determine whether the virtual grocery store concept should be launched in their home market. In order to make this decision, Tesco needs to determine the role of the virtual store(s), the location(s) of the store(s) and the product range. At the same time, Tesco needs to compare the Korean and U.K. markets in order to determine whether the virtual store concept is viable.

Case Description Tesco's Virtual Store: From South Korea to the United Kingdom

Strategic managment tools used in case study analysis of tesco's virtual store: from south korea to the united kingdom, step 1. problem identification in tesco's virtual store: from south korea to the united kingdom case study, step 2. external environment analysis - pestel / pest / step analysis of tesco's virtual store: from south korea to the united kingdom case study, step 3. industry specific / porter five forces analysis of tesco's virtual store: from south korea to the united kingdom case study, step 4. evaluating alternatives / swot analysis of tesco's virtual store: from south korea to the united kingdom case study, step 5. porter value chain analysis / vrio / vrin analysis tesco's virtual store: from south korea to the united kingdom case study, step 6. recommendations tesco's virtual store: from south korea to the united kingdom case study, step 7. basis of recommendations for tesco's virtual store: from south korea to the united kingdom case study, quality & on time delivery.

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Case Analysis of Tesco's Virtual Store: From South Korea to the United Kingdom

Tesco's Virtual Store: From South Korea to the United Kingdom is a Harvard Business (HBR) Case Study on Sales & Marketing , Texas Business School provides HBR case study assignment help for just $9. Texas Business School(TBS) case study solution is based on HBR Case Study Method framework, TBS expertise & global insights. Tesco's Virtual Store: From South Korea to the United Kingdom is designed and drafted in a manner to allow the HBR case study reader to analyze a real-world problem by putting reader into the position of the decision maker. Tesco's Virtual Store: From South Korea to the United Kingdom case study will help professionals, MBA, EMBA, and leaders to develop a broad and clear understanding of casecategory challenges. Tesco's Virtual Store: From South Korea to the United Kingdom will also provide insight into areas such as – wordlist , strategy, leadership, sales and marketing, and negotiations.

Case Study Solutions Background Work

Tesco's Virtual Store: From South Korea to the United Kingdom case study solution is focused on solving the strategic and operational challenges the protagonist of the case is facing. The challenges involve – evaluation of strategic options, key role of Sales & Marketing, leadership qualities of the protagonist, and dynamics of the external environment. The challenge in front of the protagonist, of Tesco's Virtual Store: From South Korea to the United Kingdom, is to not only build a competitive position of the organization but also to sustain it over a period of time.

Strategic Management Tools Used in Case Study Solution

The Tesco's Virtual Store: From South Korea to the United Kingdom case study solution requires the MBA, EMBA, executive, professional to have a deep understanding of various strategic management tools such as SWOT Analysis, PESTEL Analysis / PEST Analysis / STEP Analysis, Porter Five Forces Analysis, Go To Market Strategy, BCG Matrix Analysis, Porter Value Chain Analysis, Ansoff Matrix Analysis, VRIO / VRIN and Marketing Mix Analysis.

Texas Business School Approach to Sales & Marketing Solutions

In the Texas Business School, Tesco's Virtual Store: From South Korea to the United Kingdom case study solution – following strategic tools are used - SWOT Analysis, PESTEL Analysis / PEST Analysis / STEP Analysis, Porter Five Forces Analysis, Go To Market Strategy, BCG Matrix Analysis, Porter Value Chain Analysis, Ansoff Matrix Analysis, VRIO / VRIN and Marketing Mix Analysis. We have additionally used the concept of supply chain management and leadership framework to build a comprehensive case study solution for the case – Tesco's Virtual Store: From South Korea to the United Kingdom

Step 1 – Problem Identification of Tesco's Virtual Store: From South Korea to the United Kingdom - Harvard Business School Case Study

The first step to solve HBR Tesco's Virtual Store: From South Korea to the United Kingdom case study solution is to identify the problem present in the case. The problem statement of the case is provided in the beginning of the case where the protagonist is contemplating various options in the face of numerous challenges that Virtual Tesco is facing right now. Even though the problem statement is essentially – “Sales & Marketing” challenge but it has impacted by others factors such as communication in the organization, uncertainty in the external environment, leadership in Virtual Tesco, style of leadership and organization structure, marketing and sales, organizational behavior, strategy, internal politics, stakeholders priorities and more.

Step 2 – External Environment Analysis

Texas Business School approach of case study analysis – Conclusion, Reasons, Evidences - provides a framework to analyze every HBR case study. It requires conducting robust external environmental analysis to decipher evidences for the reasons presented in the Tesco's Virtual Store: From South Korea to the United Kingdom. The external environment analysis of Tesco's Virtual Store: From South Korea to the United Kingdom will ensure that we are keeping a tab on the macro-environment factors that are directly and indirectly impacting the business of the firm.

What is PESTEL Analysis? Briefly Explained

PESTEL stands for political, economic, social, technological, environmental and legal factors that impact the external environment of firm in Tesco's Virtual Store: From South Korea to the United Kingdom case study. PESTEL analysis of " Tesco's Virtual Store: From South Korea to the United Kingdom" can help us understand why the organization is performing badly, what are the factors in the external environment that are impacting the performance of the organization, and how the organization can either manage or mitigate the impact of these external factors.

How to do PESTEL / PEST / STEP Analysis? What are the components of PESTEL Analysis?

As mentioned above PESTEL Analysis has six elements – political, economic, social, technological, environmental, and legal. All the six elements are explained in context with Tesco's Virtual Store: From South Korea to the United Kingdom macro-environment and how it impacts the businesses of the firm.

How to do PESTEL Analysis for Tesco's Virtual Store: From South Korea to the United Kingdom

To do comprehensive PESTEL analysis of case study – Tesco's Virtual Store: From South Korea to the United Kingdom , we have researched numerous components under the six factors of PESTEL analysis.

Political Factors that Impact Tesco's Virtual Store: From South Korea to the United Kingdom

Political factors impact seven key decision making areas – economic environment, socio-cultural environment, rate of innovation & investment in research & development, environmental laws, legal requirements, and acceptance of new technologies.

Government policies have significant impact on the business environment of any country. The firm in “ Tesco's Virtual Store: From South Korea to the United Kingdom ” needs to navigate these policy decisions to create either an edge for itself or reduce the negative impact of the policy as far as possible.

Data safety laws – The countries in which Virtual Tesco is operating, firms are required to store customer data within the premises of the country. Virtual Tesco needs to restructure its IT policies to accommodate these changes. In the EU countries, firms are required to make special provision for privacy issues and other laws.

Competition Regulations – Numerous countries have strong competition laws both regarding the monopoly conditions and day to day fair business practices. Tesco's Virtual Store: From South Korea to the United Kingdom has numerous instances where the competition regulations aspects can be scrutinized.

Import restrictions on products – Before entering the new market, Virtual Tesco in case study Tesco's Virtual Store: From South Korea to the United Kingdom" should look into the import restrictions that may be present in the prospective market.

Export restrictions on products – Apart from direct product export restrictions in field of technology and agriculture, a number of countries also have capital controls. Virtual Tesco in case study “ Tesco's Virtual Store: From South Korea to the United Kingdom ” should look into these export restrictions policies.

Foreign Direct Investment Policies – Government policies favors local companies over international policies, Virtual Tesco in case study “ Tesco's Virtual Store: From South Korea to the United Kingdom ” should understand in minute details regarding the Foreign Direct Investment policies of the prospective market.

Corporate Taxes – The rate of taxes is often used by governments to lure foreign direct investments or increase domestic investment in a certain sector. Corporate taxation can be divided into two categories – taxes on profits and taxes on operations. Taxes on profits number is important for companies that already have a sustainable business model, while taxes on operations is far more significant for companies that are looking to set up new plants or operations.

Tariffs – Chekout how much tariffs the firm needs to pay in the “ Tesco's Virtual Store: From South Korea to the United Kingdom ” case study. The level of tariffs will determine the viability of the business model that the firm is contemplating. If the tariffs are high then it will be extremely difficult to compete with the local competitors. But if the tariffs are between 5-10% then Virtual Tesco can compete against other competitors.

Research and Development Subsidies and Policies – Governments often provide tax breaks and other incentives for companies to innovate in various sectors of priority. Managers at Tesco's Virtual Store: From South Korea to the United Kingdom case study have to assess whether their business can benefit from such government assistance and subsidies.

Consumer protection – Different countries have different consumer protection laws. Managers need to clarify not only the consumer protection laws in advance but also legal implications if the firm fails to meet any of them.

Political System and Its Implications – Different political systems have different approach to free market and entrepreneurship. Managers need to assess these factors even before entering the market.

Freedom of Press is critical for fair trade and transparency. Countries where freedom of press is not prevalent there are high chances of both political and commercial corruption.

Corruption level – Virtual Tesco needs to assess the level of corruptions both at the official level and at the market level, even before entering a new market. To tackle the menace of corruption – a firm should have a clear SOP that provides managers at each level what to do when they encounter instances of either systematic corruption or bureaucrats looking to take bribes from the firm.

Independence of judiciary – It is critical for fair business practices. If a country doesn’t have independent judiciary then there is no point entry into such a country for business.

Government attitude towards trade unions – Different political systems and government have different attitude towards trade unions and collective bargaining. The firm needs to assess – its comfort dealing with the unions and regulations regarding unions in a given market or industry. If both are on the same page then it makes sense to enter, otherwise it doesn’t.

Economic Factors that Impact Tesco's Virtual Store: From South Korea to the United Kingdom

Social factors that impact tesco's virtual store: from south korea to the united kingdom, technological factors that impact tesco's virtual store: from south korea to the united kingdom, environmental factors that impact tesco's virtual store: from south korea to the united kingdom, legal factors that impact tesco's virtual store: from south korea to the united kingdom, step 3 – industry specific analysis, what is porter five forces analysis, step 4 – swot analysis / internal environment analysis, step 5 – porter value chain / vrio / vrin analysis, step 6 – evaluating alternatives & recommendations, step 7 – basis for recommendations, references :: tesco's virtual store: from south korea to the united kingdom case study solution.

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Case study solution – Tesco’s korean venture

I. Introduction

A. Overview of Tesco

Tesco is a UK-based multinational grocery and general merchandise retailer having presence in more than 12 Countries. Founded by Jack Cohen in 1919 as a market stall in London, since then Tesco has grown and become one of the largest retailers in the world having a market capitalization of $24.94B till May 12, 2023. B. Importance of International Expansion for Companies like Tesco International expansion is one of the most crucial aspects for firms like Tesco to tap into new untouched markets to increase their revenue and diversify their business. To expand their business companies needs to adapt to the culture, local market’s culture, laws and regulation, language, and customer preferences to succeed in local markets. Expansion into new markets can help companies to reduce their dependencies on a single market and help them to spread across a large part of the total market of different countries. C. Purpose of the Case Study

The purpose of this case study is to analyze Tesco’s Korean venture, the challenges faced, and the lessons learned from this experience. The case study will examine the reasons behind Tesco’s decision to enter the Korean market, the strategies adopted, the challenges encountered, and the eventual failure of the venture.

II. Background on Tesco’s Korean Venture

A. Founding of Tesco’s Korean Venture

Tesco entered the Korean market in 1999 through a joint venture with Samsung Group, forming Homeplus, which became the second-largest retailer in Korea after Lotte Mart. Tesco saw an opportunity in Korea’s rapidly growing retail market, and Homeplus became the company’s largest overseas venture, with over 400 stores and employing over 30,000 people.

B. Expansion and Growth of the Venture

Homeplus saw significant growth in the early 2000s, with an innovative approach to online grocery shopping and home delivery. In 2008, Homeplus became the first Korean retailer to open a virtual store in a subway station, allowing commuters to shop using their smartphones and have their orders delivered to their homes. Homeplus continued to innovate and expand, with plans to open over 200 new stores by 2015.

C. Key Players and Stakeholders in the Venture

The key players in Tesco’s Korean venture were Tesco PLC and Samsung Group, who formed the joint venture, Homeplus. The stakeholders included Tesco’s shareholders, employees, and customers, as well as Samsung Group’s shareholders and employees. The Korean government and regulators were also stakeholders, as they had a role in regulating the retail market and foreign investment in the country.

III. Cultural and Market Differences

A. Cultural Differences between the UK and South Korea

Cultural differences can have a significant impact on the success of a company’s international expansion. Tesco’s Korean venture encountered several cultural differences that affected the company’s operations. In South Korea, relationships and trust play a crucial role in business, and building and maintaining strong relationships with customers and suppliers is vital for success. Korean consumers tend to prefer local products over foreign products, and they are highly selective in their purchases.

B. Market Differences between the UK and South Korea

The market differences between the UK and South Korea are significant. South Korea is a highly competitive and complex market, with a strong domestic retail industry. Tesco faced intense competition from established players such as Lotte Mart, Homeplus, and E-Mart. Korean consumers have high expectations when it comes to product quality and customer service, and companies must meet these expectations to succeed.

C. Impact of Cultural and Market Differences on Tesco’s Korean Venture

Tesco’s Korean venture faced several challenges due to the cultural and market differences between the UK and South Korea. The company struggled to establish strong relationships with local suppliers, which affected its ability to secure the products that Korean consumers preferred. Tesco also faced challenges in developing products that appealed to Korean consumers’ tastes and preferences. Additionally, the company faced intense competition from well-established local players, which affected its ability to gain market share.

IV. Key Components of Tesco’s Korean Venture

A. Product and Services

Tesco’s Korean venture offered a range of products and services, including groceries, fresh produce, household goods, and clothing. The company developed several private label brands to appeal to Korean consumers, such as “Homeplus” and “No Brand.” Tesco also offered online grocery shopping and delivery services, which were popular with Korean consumers.

B. Marketing and Branding

Tesco’s Korean venture developed several marketing and branding campaigns to appeal to Korean consumers. The company focused on offering competitive prices, high-quality products, and excellent customer service. Tesco also developed several private label brands, which were designed to appeal to Korean consumers’ tastes and preferences.

C. Supply Chain and Logistics

Tesco’s Korean venture developed a sophisticated supply chain and logistics system to ensure the efficient delivery of products to its stores. The company operated several distribution centers throughout South Korea and developed partnerships with local suppliers to ensure a steady supply of products. Tesco also implemented a “Scan as You Shop” system, which allowed customers to scan items as they shopped and then pay for their purchases at a self-checkout.

D. Financial Management

Tesco has invested heavily in its Korean venture in South Korea, intending to become the top player in the South Korean retail industry. However the company struggled a lot to achieve profitability and due to intense competition from local markets, other big players, and the challenges posed by differences in culture and market differences the company faced major losses and ended its operation in 2015. The Company sold its Korean operations to a local consortium for $6.1 billion eventually leaving the South Korean market. In conclusion, Tesco’s Korean venture highlights the challenges that companies face when expanding into international markets. Cultural and market differences can have a significant impact on a company’s operations, and companies must adapt to these differences to succeed. Tesco’s experience in South Korea provides valuable insights into the importance of building strong relationships with local suppliers, developing products that appeal to local tastes and preferences, and implementing efficient supply chain and logistics systems.

V. Challenges and Risks

A. Cultural and language barriers : The cultural and language differences between the UK and South Korea posed significant challenges for Tesco’s Korean venture. Korean customers have different preferences, tastes, and habits when it comes to grocery shopping, which Tesco had to take into account. Additionally, the Korean language posed a significant barrier to Tesco’s marketing and communication efforts, as well as its hiring and training of Korean employees.

B. Competition and market risks : Tesco’s Korean venture faced intense competition from well-established domestic competitors like Lotte Mart and E-Mart. Tesco also struggled to differentiate itself in the crowded market, and its initially aggressive pricing strategy ultimately hurt its profitability. Moreover, the Korean grocery retail market had unique features, such as the prevalence of small, independently owned shops that offered personalized services and were located closer to customers’ homes.

C. Regulatory and legal risks: Tesco’s Korean venture had to navigate the complex and constantly changing regulatory and legal environment in South Korea. The government imposed strict regulations on foreign companies, making it difficult for Tesco to establish and operate its stores in the country. Additionally, the company faced legal challenges related to its business practices, including allegations of unfair labor practices and improper sourcing of products.

D. Mitigation strategies: To mitigate the challenges and risks associated with its Korean venture, Tesco adopted several strategies, such as investing heavily in market research to understand the needs and preferences of Korean consumers. The company also implemented an aggressive marketing and advertising campaign, including the use of social media, to build brand awareness and customer loyalty. Additionally, Tesco worked to improve its supply chain and logistics, streamlining its operations and investing in new technologies to improve efficiency and reduce costs.

VI. Future Outlook

A. Key growth opportunities and challenges: Despite its challenges, Tesco’s Korean venture presents significant growth opportunities for the company, particularly in the e-commerce and online retail space. The Korean market has a high penetration of mobile and internet usage, and Tesco’s focus on digital innovation and technology could help the company tap into this growing segment of the market. However, the company also faces challenges related to intense competition, changing customer preferences, and regulatory and legal risks.

B. The role of international expansion in shaping the future of Tesco’s business : International expansion has been a critical part of Tesco’s growth strategy, and the company has entered into several new markets in recent years. The Korean venture provided Tesco with valuable experience in navigating cultural and market differences and developing a successful business model in a foreign market. Going forward, Tesco will likely continue to look for new international opportunities to expand its footprint and reach new customers.

C. Strategies for sustainable growth and success: To achieve sustainable growth and success, Tesco will need to continue to invest in technology and digital innovation, while also building strong relationships with customers and local partners. The company will also need to remain vigilant to changing market conditions and customer preferences and be prepared to adapt its business model accordingly.

VII. Conclusion

A. Summary of the case study and key takeaways : Tesco’s Korean venture provides valuable lessons for companies looking to expand into new markets, particularly those with significant cultural and market differences. Tesco’s experience demonstrates the importance of investing in market research, adapting to local preferences, and building strong partnerships with local stakeholders. Additionally, the case highlights the challenges of navigating complex regulatory and legal environments and intense competition in foreign markets.

B. Implications for other companies in the retail industry: Other companies in the retail industry can learn from Tesco’s experience and apply similar strategies to their own international expansion efforts. In particular, companies should prioritize market research, customer engagement, and digital innovation, while also being prepared to adapt their business models to local conditions.

C. Future outlook for Tesco and the retail industry as a whole.

Tesco has demonstrated the potential benefits and risks associated with international expansion, and its experience in South Korea provides valuable lessons for other retailers looking to expand into new markets. Going forward, the company will need to continue to adapt to changing market conditions and consumer preferences in order to remain competitive.

One key trend that is likely to shape the future of the retail industry is the continued growth of e-commerce and online shopping. Tesco has already made significant investments in its online platform, and will need to continue to do so in order to compete with other retailers in this space. The company will also need to ensure that its supply chain and logistics infrastructure can support the growing demand for online orders.

Another trend that is likely to impact the industry is the increasing emphasis on sustainability and ethical business practices. As consumers become more aware of the environmental and social impacts of their purchasing decisions, retailers will need to adapt in order to meet these changing expectations. Tesco is taking certain steps to reduce food wastage and packaging but they will need constant innovations and improvements to prioritize sustainability to remain a relevant competitor in the market. Overall, Tesco’s experience in the South Korean market is an example of how the importance of local culture is relevant for expansion in new markets. To expand in a new market a company has to learn, adapt and innovate according to the market’s culture and understand the demands of the market to establish a long-term connection with their potential customers. In that way, a company can remain competitive in an increasingly dynamic and competitive industry.

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Tesco exists South Korea Case study Contents

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ORIGINAL RESEARCH article

Deconstructing subjective unmet healthcare needs: a south korean case study with policy implications.

• 1 Department of Health Policy and Management, Graduate School of Public Health, Yonsei University, Seoul, Republic of Korea
• 2 Korea Peace Institute, Seoul, Republic of Korea

Background: Despite widespread efforts by many countries to reduce the prevalence of unmet healthcare needs within their populations, there remains a scarcity of research systematically exploring the components of these needs.

Objectives: This study aims to deconstruct subjective unmet healthcare needs into two distinct components: the experience of subjective healthcare needs (the “Needs” component) and the experience of unmet needs contingent on those healthcare needs (the “Unmet” component).

Methods: This analysis utilizes data from 13,359 adults aged 19 or older, collected through the 2018 Korea Health Panel survey, with the aim of minimizing the influence of the coronavirus disease 19 pandemic. The two dependent variables are the experience of subjective healthcare needs and whether these needs have been met. The independent variables include 15 socio-demographic, health, and functional characteristics. The study employs both a population proportion analysis and a multivariable bivariate probit model with sample selection.

Results: In South Korea, 11.6% (CI [confidence interval] = 11.0–12.3%) of the population experienced subjective unmet healthcare needs. Upon deconstructing these, 96.7% (CI = 96.2–97.1%) of the population exhibited the Needs component, and 12.0% (CI = 11.4–12.7%) displayed the Unmet component. Each independent variable showed different associations between the two components. Furthermore, effective interventions targeting the characteristics associated with each component could reduce the proportion of the population experiencing subjective unmet healthcare needs from 11.6 to 4.0%.

Conclusion: South Korea faces a significant challenge due to the considerable prevalence of subjective unmet healthcare needs. To address this challenge effectively, the universal healthcare coverage system should adapt its approach based on the characteristics associated with both the Needs and Unmet components of subjective unmet healthcare needs. To achieve this goal, it is highly recommended that the government prioritize strengthening community-based primary healthcare, which currently suffers from insufficient resources.

1 Introduction

Universal health coverage (UHC) continues to be a crucial objective in contemporary global health policy. The UHC system aims to provide essential, high-quality healthcare and ensures unrestricted access to safe, effective, and affordable medications and vaccinations, regardless of an individual’s socio-demographic status ( 1 , 2 ). This system is anticipated to improve access to healthcare services for those previously unable to do so, thereby reducing overall unmet healthcare needs in the population ( 3 , 4 ).

The measurement of unmet healthcare needs in a population is often conducted from the perspective of subjective unmet healthcare needs (SUN, hereafter). In this context, SUN is derived from survey responses collected from a diverse cross-section of the population, assessing whether they perceived a need for healthcare in the past 12 months and, subsequently, whether they were unable to access it. The primary rationale for the widespread utilization of SUN data is their ability to gather information on unmet healthcare needs from individuals, regardless of their status as patients or non-patients ( 5 – 9 ).

Despite significant efforts by most countries to address unmet healthcare needs within their populations, data from the Organization for Economic Co-operation and Development (OECD) reveals a wide variation in the prevalence of SUN across countries. For instance, as of 2019, Spain reported a mere 0.2 percent SUN rate. In contrast, Greece and Estonia registered 8.5 percent and 15.5 percent, respectively ( 5 ). Numerous studies conducted in diverse countries have examined the individual characteristics associated with SUN, focusing on gender, age, marital status, education, income, economic activity, health insurance, self-rated health, chronic illnesses, depression, and functional limitations ( 6 – 10 ).

However, prior research has not extensively explored the two key components of SUN: the experience of subjective healthcare needs (the “Needs” component, hereafter) and the experience of unmet needs contingent on those healthcare needs (the “Unmet” component, hereafter). While one study delved into the role of social capital in addressing SUN across the entire population of 20 European countries ( 11 ), a more nuanced understanding of the associations between different characteristics and SUN continues to elude us, especially at the country-specific level. To effectively reduce SUN within a country’s population, governments must undertake comprehensive efforts to address either the Needs component, the Unmet component, or both, considering the intricate associations between these components and individuals’ characteristics. Therefore, this study aims to bridge the gap between previous research and the requirements for policies to reduce SUN across various countries. This study utilized a nationally representative survey dataset focused on healthcare utilization in South Korea (Korea, hereafter) to achieve this goal. Additionally, it employs a multivariable bivariate probit model with sample selection to analyze the study sample. Furthermore, based on the resulting findings, this study compares the proportions of population individuals experiencing SUN, the Needs component, and the Unmet component between European countries and Korea.

The anticipated outcomes of this study include guiding researchers in formulating and evaluating novel theories related to healthcare access by dissecting SUN into its Needs and Unmet components. Additionally, these findings are expected to provide policymakers in each country with insights to assist their populations in reducing SUN compared to that in the previous initiatives. This study is part of a research series aimed at contributing to the development of each country’s UHC systems by addressing the challenges posed by rapid demographic and social changes ( 7 , 8 , 12 ).

2 Overview of South Korea’s universal health coverage system

Korea introduced its social health insurance program following a Bismarck-type model with multiple payers, similar to the systems used in Germany, France, and Japan. The National Health Insurance (NHI) system, established in 1989, plays a pivotal role in achieving UHC. Complementing this, the Medical Care Aid (MCA) program, designed to assist the economically disadvantaged, covers approximately 3% of the population. In 2000, a transition occurred, consolidating the NHI into a single-payer system, and the NHI and the MCA are now overseen by the National Health Insurance Service (NHIS). This centralization of governance ensures uniformity in contribution and benefit packages nationwide ( 7 , 13 ).

In Korea, approximately 90% of medical facilities are privately owned, and physicians and hospitals are primarily reimbursed through a fee-for-service payment model. The government refrained from regulating the number of hospital beds nationwide ( 13 ). These factors contribute to high rates of healthcare utilization. In 2019, the annual doctor consultations per capita stood at 17.2, the highest among 34 OECD member countries (average 6.8). The average length of hospital stays was 18.0 days, which was the highest among 38 OECD member countries (with an average of 7.6 days). Additionally, the consumption of second-line antibiotics (measured in terms of the defined daily dose per 1,000 people) reached 9.4 in 2019, second only to Greece’s 10.6 among 30 OECD member countries (with an average of 3.3) ( 5 ).

While Korea’s UHC system excels in objective measures of physical health status, it falls short of assessing citizens’ emotional and mental well-being. In 2019, life expectancy at birth reached 83.3 years, surpassing the OECD member countries (with an average of 81.0 years). However, 15.2% of adults rated their health as “bad” or “very bad,” the second-highest among 36 OECD member countries (with an average of 8.5%). Similarly, the suicide rate per 100,000 people (age-standardized) was 24.6, the highest among the 38 OECD member countries (with an average of 11.0) ( 5 ).

In 2019, despite the population aged 65 and above accounting for 14.9%, which is lower than the OECD member-country average of 17.3%, Korea witnessed the most rapid growth in this age group among OECD member countries. Consequently, the annual growth rate in health expenditure per capita between 2015 and 2019 reached 7.8%, ranking second highest among the 38 OECD member countries (with an average of 2.7%). As a result, health expenditure as a percentage of the gross domestic product reached 8.2% in 2019, closely approaching the OECD member-country average of 8.8% ( 5 ).

Primary healthcare (PHC) effectively addresses various healthcare needs, provides non-emergency care, acts as a gatekeeper for secondary or tertiary care, prevents avoidable hospital admissions, reduces unnecessary healthcare utilization and expenditure, and improves outcomes ( 14 ). However, in stark contrast to most OECD countries, Korea’s UHC system lacks a well-established framework for PHC ( 13 , 15 ). In 2019, the proportion of general practitioners among all medical doctors was merely 6%, the lowest among 32 OECD member countries (with an average of 23%) and approximately one-eighth of Canada’s 47%. Consequently, most physicians in Korea are specialists, although their numbers are limited. The density of practicing doctors per 1,000 people was 2.5, which is significantly below the OECD member-country average of 3.6 ( 5 ). Consequently, individuals seeking healthcare typically first encounter specialists across various healthcare facilities authorized to provide outpatient and inpatient services competitively ( 13 , 16 ).

Data for this study were extracted from the Korea Health Panel (KHP) Survey (version 1.7), a nationally representative survey encompassing the non-institutionalized civilian population. The KHP survey, jointly administered by the NHIS and the Korea Institute of Health and Social Affairs (a government research institution), operates under the supervision of the Ministry of Health and Welfare. Since 2008, the survey has been conducted biennially. The survey selects households via a two-stage cluster probability sample method guided by population census data provided by the National Statistical Office. The survey collected information from all eligible household members on the following: individual healthcare utilization, health-related expenses, socio-demographic characteristics, lifestyle choices, and health-related attributes. Data were collected through personal computer-aided interviews conducted annually on designated weekdays.

In this study, data from 2018 was utilized to avoid potential transient effects introduced by the emergence of the coronavirus disease 19 (COVID-19) pandemic in 2019. The initial dataset included 14,262 observations of individuals aged over 19 years. However, 903 observations lacking information on the SUN were excluded, resulting in a final study sample of 13,359 observations, representing 93.7% of the original dataset.

To conduct a comparative analysis between Korea and European countries regarding SUN, the Needs component, and the Unmet component, this study assessed data from 22 European countries using the European Union Statistics on Income and Living Conditions (EU-SILC) dataset ( 9 ). These data encompassed individuals aged 16 years and older, and data for 2018 were analyzed to mitigate the potentially varying influence of the COVID-19 pandemic across diverse countries. Among these 22 European countries, 18 were ultimately selected for comparative analysis, with the Czech Republic, Slovenia, Spain, and Germany excluded because of variations in the SUN experience questionnaire used in the EU-SILC survey.

This study used secondary data obtained from the KHP survey, which is publicly available on the survey website ( https://www.khp.re.kr:444/eng/main.do; accessed on May 20, 2020). All the interviewees in the survey were anonymous, and all procedures involving human participants followed the ethical standards of the relevant institutional and national research committee and the 1964 Declaration of Helsinki and its later amendments, or comparable ethical standards.

3.2 Variables

3.2.1 dependent variables.

In the KHP survey questionnaire, a specific question was asked: “Have you ever experienced not receiving the necessary medical treatment or examination (excluding dental care) in the past year (12 months)?” Respondents had several answer options: Option (1): “Yes, I have experienced it at least once.” Option (2): “No, I have not experienced it” and Option (3): “No medical treatment or examination of any kind was needed.”

Two dependent variables were created based on the responses. First, for the Needs component, the individuals were categorized into two groups. Those who chose Option (1) or Option (2) were classified as the “Needs” group, while those who selected Option (3) were placed in the “non-Needs” group. Subsequently, a binary dependent variable was established, with a value of “1” for individuals in the “Needs” group and “0” for those in the “non-Needs” group.

Second, regarding the Unmet component, a second dependent variable was formed among individuals in the “Needs” group. Those who answered Option (1) had healthcare needs; however, they did not receive the necessary care, indicating unmet healthcare needs. These individuals constituted the “Unmet” group. Conversely, those who selected Option (2) experienced healthcare needs and received the necessary care and were categorized as the “non-Unmet” group. A binary dependent variable was then created for individuals in the “Needs” group, with a value of “1” for individuals in the “Unmet” group and “0” for those in the “non-Unmet” group.

3.2.2 Independent variables

This study employed a comprehensive set of independent variables, including socio-demographic, health, and functional characteristics, largely consistent with previous research ( 7 , 8 , 12 ), with minor adjustments tailored to the specific objectives of this study.

3.2.2.1 Sociodemographic characteristics

• Gender: Man or woman

• Age: 19–44 years, 45–64 years, 65 years or older

• Marital Status: Married or unmarried (including never married, separated, widowed, or divorced)

• Residential Region: Northern (Seoul, Incheon, Gyeonggi-do, Gangwon-do), central (Daejeon, Sejong, Chungcheongbuk-do, Chungcheongnam-do), western (Gwangju, Jeollabuk-do, Jeollanam-do, Jeju-do), or eastern (Busan, Daegu, Ulsan, Gyeongsangbuk-do, Gyeongsangnam-do)

• Education: Less than college or college and higher

• Occupation: No job (unemployed or not engaged in economic activity), blue-collar job, or white-collar job

• Household Income: Lowest quintile, medium (three middle quintiles), or highest quintile (adjusted for household size using the square root equivalence scale)

• National Health Security Program Status: NHI or MCA

• Private Health Insurance Holding Status: Yes or no

3.2.2.2 Health and functional characteristics

• Current Smoking: Yes or no

• Alcohol Consumption: Yes or no

• Regular Physical Exercise: Yes or no (defined as participating in any of the three types of physical exercises—walking, moderate-level, or high-level exercise—for 30 min or longer, at least three times a week)

• Obesity: Yes or no (defined as a body mass index (BMI) of at least 25 kg/m 2 according to the Asia-Pacific criteria for obesity status provided by the World Health Organization Western Pacific Region) ( 17 ).

• Self-Assessed Health Status: Poor or no (among the options of “excellent, very good, fair, poor, or very poor”)

• Presence of Chronic Disease: Yes or no (based on self-reported responses regarding physician diagnosis)

• Functional Limitations: Yes or no (based on an individual’s response to the question, “Is your daily living routine (conducting work, housekeeping, study, and social, leisure, or familiar activities) limited due to a disease or an injury?”)

3.3 Analytical strategy

Acknowledging that experiencing healthcare needs is a prerequisite for SUN is essential. Without this prerequisite, the model could be affected by a sample selection bias, potentially leading to inefficient estimates ( 18 ). To address potential sample selection bias, this study initially employed the Heckman two-step estimation method, which is commonly used for such purposes. However, Heckman’s estimator is unsuitable due to sensitivity to multicollinearity between the estimated Mill’s ratio and independent variables ( 19 ), and its applicability is further complicated by a binary dependent variable in the second step of the procedure.

Therefore, this study used a multivariable bivariate probit model with sample selection consisting of two sequential equations ( 20 ). The first equation, associated with the Needs component, deals with a binary dependent variable that determines whether an individual has experienced healthcare needs. In contrast, the second equation, associated with the Unmet component, concerns another binary dependent variable that determines whether the healthcare needs of the individuals who experienced them were unmet. This two-equation system addresses both unconditional and conditional situations. The unconditional situation determines whether an individual experiences healthcare needs based on one set of independent variables and one error term, whereas the conditional situation assesses whether the healthcare needs of the individuals who experience them remain unmet, relying on another set of independent variables and another error term. The error terms were assumed to follow a standard bivariate normal distribution with a correlation coefficient. Estimates of the coefficients associated with the independent variables and correlation coefficients were obtained using the full-information maximum likelihood estimation method.

After establishing the statistical model, the study addressed several statistical aspects. Regular physical exercise was excluded from the second equation to account for identification restrictions in the multivariable bivariate probit model with sample selection ( 21 , 22 ). Population proportions and their 95% confidence intervals (CIs) for individuals experiencing SUN, the Needs component, and the Unmet component were estimated ( 23 ). Variance inflation factor values were reduced to 2.15 in both the first and second equations to mitigate multicollinearity ( 24 ). The best-fitting model was selected through comparison with Akaike information criterion ( 25 ). Using the average marginal effects analysis method ( 26 ), predictive probabilities and their 95% CIs were estimated, representing the probabilities of individuals experiencing SUN, the Needs component, and the Unmet component. Lastly, the study compared the proportions of individuals experiencing SUN, the Needs component, and the Unmet component between Korea and 18 European countries. For Korea, a population proportion analysis was conducted to make these comparisons. Unlike European countries, Korea did not provide necessary data for direct comparisons with the proportions of the 18 European countries ( 9 ).

Cross-sectional weights from KHP survey data were used in the analysis. Statistical significance was defined as p  < 0.05, and analyses were conducted using the SAS software (version 9.4; SAS Institute, Cary, NC, United States) and STATA 17 software (StataCorp, College Station, TX, United States).

4.1 Summary statistics and population proportions of experiencing SUN, the Needs component, and the Unmet component

In the initial statistical analysis, the categories showing the highest proportion in each variable are: women, individuals aged 45–64 years, married individuals, residents in the northern region, individuals with education levels below college, those with blue-collar jobs, individuals with a medium level of household income, people covered by the NHI, individuals holding a private health insurance plan, non-smokers, individuals with no regular physical exercise, those who are not obese, individuals with no poor self-assessed health, those without chronic diseases, and those with no functional limitations (columns 1 and 2 in Table 1 ).

Table 1 . Summary statistics and population proportions of experiencing healthcare needs and experiencing unmet needs contingent on healthcare needs.

The proportion of people experiencing SUN was estimated to be 11.6% (CI = 11.0–12.3%). The proportion of the Needs component was 96.7% (CI = 96.2–97.1%). This proportion varied significantly across the categories for all characteristics except occupation, regular physical exercise, and obesity (columns 3 and 4 in Table 1 ). Furthermore, the proportion of the Unmet component was 12.0% (CI = 11.4–12.7%). This proportion varied significantly across the categories for all characteristics except marital status, private health insurance, alcohol consumption, and regular physical exercise (columns 5 and 6 in Table 1 ).

4.2 Proportions of people experiencing SUN, the Needs component, and the Unmet component in selected countries

Among the 18 European countries analyzed in this study, the average proportion of people experiencing SUN in 2018 was 4.3% ( Figure 1 ). This proportion ranges from 0.5% in Malta to 11.2% in Latvia. By contrast, Korea had a proportion of 11.6%. For the proportion of the Needs component, the 18 European countries had an average value of 65.5% ( Figure 2 ). This proportion ranges from 33.3% in the Netherlands to 86.4% in France. By contrast, Korea had a proportion of 96.7%. Regarding the proportion of the Unmet component, the 18 European countries had an average of 6.8% ( Figure 3 ). This proportion ranges from 0.9% in Malta to 22.7% in Greece. Korea’s proportion was 12.0%.

Figure 1 . Proportions of people experiencing “unmet healthcare needs” in selected countries as of 2018.

Figure 2 . Proportions of people experiencing “healthcare needs” in selected countries as of 2018.

Figure 3 . Proportions of people experiencing “unmet needs contingent on healthcare needs” in selected countries as of 2018.

4.3 Characteristics associated with the Needs component

Various individual characteristics were associated with the Needs component (columns 1 through 3 in Table 2 ). Men exhibited a lower likelihood of the Needs component compared to that in women (coefficient [COEF], −0.360; p  < 0.001). The likelihood was higher for individuals aged 45–64 (COEF, 0.122; p  = 0.024) and those aged 65 years and older (COEF, 0.641; p  < 0.001) than that for individuals aged 19–44. Unmarried individuals had a decreased likelihood compared to that in married individuals (COEF, −0.415; p  < 0.001). Living in the central (COEF, 0.169; p  < 0.001), western (COEF, 0.362; p  < 0.001), and eastern regions (COEF, 0.299; p  < 0.001) represented an increased likelihood compared to living in the northern region. Holding a private health insurance plan was associated with an elevated likelihood (COEF, 0.251; p  < 0.001). Current smokers had a lower likelihood compared to current non-smokers (COEF, −0.162; p  < 0.001). Conversely, individuals with poor self-assessed health had a higher likelihood than those without (COEF, 0.688; p  < 0.001). Individuals with a chronic disease had a lower likelihood compared to those without it (COEF, −0.630; p  < 0.001). However, having a functional limitation increased the likelihood compared with that in not having functional limitations (COEF, 0.356; p  = 0.003).

Table 2 . Associations of characteristics with healthcare needs and unmet needs contingent on healthcare needs.

4.4 Characteristics associated with the Unmet component

Regarding the likelihood of the Unmet component (columns 4 through 6 in Table 2 ), unmarried individuals demonstrated a higher likelihood compared to that in married individuals (COEF, 0.061; p  < 0.001). Living in the central region (COEF, −0.183; p  < 0.001), western region (COEF, −0.257; p  < 0.001), or eastern region (COEF, −0.235; p  < 0.001) represented a reduced likelihood compared to that in the northern region. Having a blue-collar job increased the likelihood compared to that in being jobless (COEF, 0.220; p  < 0.001), while having a white-collar job decreased the likelihood (COEF, −0.153; p  = 0.001). Those in the lowest quintile of household income were more likely to exhibit the Unmet component compared to those in the medium-income group (COEF, 0.160; p  = 0.036). MCA beneficiaries were more likely to do so compared to NHI beneficiaries (COEF, 0.276; p  = 0.032). Current smokers (COEF, 0.224; p  < 0.001) and alcohol consumers (COEF, 0.079; p  = 0.043) encountered an increased likelihood compared to their contrary counterparts. Individuals with poor self-assessed health had a higher likelihood than those without (COEF, 0.362; p  < 0.001). Individuals with chronic diseases had a higher likelihood than those without (COEF, 0.098; p  < 0.001). However, having functional limitations increased the likelihood compared to that in not having functional limitations (COEF, 0.501; p  < 0.001).

5 Discussion

5.1 insights from international comparisons of proportions of people experiencing sun, the needs component, and the unmet component.

The results of this study, covering 18 European countries and Korea, reveal that Korea had higher proportions of people experiencing SUN (11.6%) and the Needs component (96.7%) compared to that in any other European country. In addition, the proportion of the Unmet component in Korea (12.0%) exceeded the European average ( Figures 1 – 3 ). These findings provide valuable insights into the unique challenges faced by the Korean UHC system and offer important lessons for addressing healthcare access issues. To reduce SUN in the Korean population, the government should consider a comprehensive reform of the country’s UHC system, focusing on both healthcare needs and the unmet needs contingent on those healthcare needs. However, it is particularly important to prioritize efforts to reduce healthcare needs, as they represent a more significant portion of the population.

5.2 Four groups of characteristics associated with the Needs component and/or the Unmet component

For each characteristic, it is important to emphasize its association with the Needs component may or may not differ from its association with the Unmet component. Therefore, this study categorizes their associations into four distinct groups: Group A comprises characteristics associated with the Needs component but not the Unmet component; Group B comprises characteristics associated with the Unmet component but not the Needs component; Group C comprises characteristics associated with both the Needs and Unmet components; and Group D comprises characteristics associated with neither the Needs component nor the Unmet component, such as education level and obesity.

Group A included characteristics such as gender, age, and private health insurance status. Women were more likely than men to exhibit the Needs component, consistent with previous studies ( 27 , 28 ). Several reasons may contribute to this finding: women tend to have higher morbidity rates, are more likely to rate their health as poor or very poor, are more health conscious, and are more proactive in seeking healthcare for their conditions ( 28 , 29 ). Older individuals appear to require more healthcare services, possibly because of increased health concerns associated with aging and declining health ( 11 ). However, a recent study in Korea showed a negative relationship between age and healthcare needs in men aged 20–35 ( 8 ). This could be attributed to intense job demands and competition in Korea’s labor market, which may lead younger men to neglect their healthcare needs ( 8 , 30 ). Holding a private health insurance plan may increase healthcare needs. This could be because individuals who purchase private health insurance may be more health-conscious or because having private health insurance potentially leads to moral hazards in healthcare utilization ( 31 ).

Characteristics such as occupation, household income, national health security program status, and alcohol consumption fell into Group B. Among individuals experiencing healthcare needs, those in the labor market (either in blue- or white-collar jobs) were more likely to experience unmet needs than those who did not. This finding aligns with previous research showing that employed individuals use healthcare services less frequently than unemployed individuals because of the limited time available for healthcare visits, which can be influenced by living conditions or workplace environments ( 8 , 32 ).

The likelihood of their healthcare needs going unmet was higher for individuals in the lowest quintile of household income than for those in the medium-income group. Similarly, it was higher for MCA program recipients than for NHI beneficiaries. Individuals with a lower socioeconomic status tend to face challenges in accessing healthcare when needed, often due to the financial burden of healthcare expenses ( 10 , 33 – 36 ). The healthcare needs of alcohol consumers were more likely to be unmet than those of nonconsumers. Due to time constraints during outpatient visits, a few individuals may turn to alcohol consumption as a coping mechanism for health issues, even when they recognize the need for healthcare ( 37 ).

Group C included characteristics such as marital status, residential region, current smoking status, self-assessed health, chronic disease, and functional limitations. Within Group C, both poor self-assessed health and having a functional limitation exhibit consistent associations with the Needs and Unmet components. Individuals reporting poor health or functional limitations are more likely than their counterparts to experience both the Needs and Unmet components. This may be because these individuals are more likely to have low incomes, making it difficult to afford healthcare expenses ( 10 , 33 – 36 ). Inadequate treatment due to financial constraints can lead to an ongoing vicious cycle in which individuals continue to experience healthcare needs without meeting them, further deteriorating their health.

In contrast, marital status, residential region, current smoking, and chronic disease show different associations between the Needs and Unmet components. Unmarried individuals, compared to that in married individuals, show a lower likelihood of the Needs component; however, they had a higher likelihood of the Unmet component. This result aligns with previous findings suggesting that marriage may increase healthcare needs through spousal care and encouragement to visit a physician ( 38 , 39 ). Residents in the three other regions were more prone to demonstrate the Needs component than those in the northern region; however, they showed a lower likelihood of displaying the Unmet component. In particular, the disparity between the northern and western regions was striking. These findings warrant further investigation as they may be related to regional disparities in healthcare systems such as stewardship, financing, resource allocation, and service delivery ( 12 , 40 ). Current smokers may be less likely to seek healthcare for health issues than current non-smokers (never or ex-smokers) ( 41 ). This may explain why current smokers are less likely to be associated with the Needs component and more likely to be associated with the Unmet component. Similarly, individuals without chronic diseases may be less likely to seek healthcare for health issues than those with chronic diseases. This may explain why individuals without chronic diseases are less likely to exhibit the Needs component and more likely to display the Unmet component.

Based on these results, this study examined how the Korean government could reduce SUN by intervening in specific individual characteristics. To address this question, the study identified categories of characteristics that can reduce SUN by lowering either the Needs component, the Unmet component, or both based on the results from the multivariable analysis ( Table 2 ). Additionally, it estimated the predictive probabilities (along with their 95% CIs) for experiencing SUN when individuals belonged to each of the selected categories. Finally, Wald tests were used to assess whether the predictive probabilities of experiencing SUN were significantly lower than the current level of 11.6%.

Consequently, the following characteristic categories have the potential to significantly decrease the predictive probability of experiencing SUN from the current level of 11.6%.

• Lowering only the Needs component: Being a man (to 10.4%) and not having private health insurance (to 10.3%)

• Lowering only the Unmet component: Having no job (to 8.9%) and being a non-alcohol consumer (to 10.3%)

• Raising the Needs component and lowering the Unmet component: Living in the western region (to 9.6%) and being a current non-smoker (to 10.9%)

• Lowering both the Needs and Unmet components: Having non-poor self-assessed health (to 10.4%), and having no functional limitation (to 11.0%)

Considering all the mentioned categories of characteristics in Korea (excluding gender, which is not influenced by policies), the predictive probability of experiencing SUN decreased from the current level of 11.6 to 4.0%.

5.3 Addressing SUN reduction: establishing a foundation for community-based primary healthcare in Korea

Based on the previously mentioned categories of characteristics, this study developed specific strategies for reducing unmet healthcare needs in Korea as follows:

• Discourage individuals from obtaining private health insurance plans to reduce the Needs component.

• Provide assistance to jobless individuals to consult a doctor to reduce the Unmet component.

• Improve health promotion efforts to encourage alcohol consumers to reduce or quit alcohol consumption to lower the Unmet component.

• Detect healthcare needs and help coordinate treatments for people living in other regions using the methods used for people living in the western region to increase the Needs component and lower the Unmet component.

• Improve health promotion efforts to encourage cigarette smokers to reduce or quit smoking to increase the Needs component and lower the Unmet component.

• Work on reducing the number of individuals who perceive their health as poor even when they are healthy to reduce both the Needs and Unmet components.

• Implement preventive measures to reduce the incidence of functional limitations to lower both the Needs and Unmet components.

To implement these strategies, Korea must establish a foundation for community-based PHC. Strengthening PHC is essential for universal healthcare access because it encompasses various healthcare dimensions and is a fundamental element of health systems ( 1 , 2 , 42 , 43 ). The transformation of healthcare in Korea requires addressing five pivotal issues: persuasion and promotion, resource allocation, organizational changes, incentives, and measurement tools ( 44 ).

First, a critical aspect is transitioning from a disease-centric healthcare model to one centered on people. The government must garner support from stakeholders and the public to emphasize the advantages of expanding PHC, highlighting the importance of generalism, inclusivity, and continuity of care. Strategies should be devised to navigate potential opposition to this transformative process ( 42 , 43 , 45 ). Second, policies should prioritize increasing the total number of doctors and ensuring the equitable distribution of PHC doctors to ensure an adequate workforce. Leveraging nurse practitioners and pharmacists trained in PHC for initial patient interactions is essential, particularly in underserved areas ( 5 , 46 , 47 ).

Third, the adoption of team-based PHC delivery models is highly recommended. Multidisciplinary PHC teams comprising doctors, nurses, and pharmacists effectively address complex healthcare needs. Digital technology should be harnessed to facilitate proactive treatment and enhance access to care ( 44 , 48 , 49 ). Fourth, establishing payment mechanisms that promote quality PHC and incentivize providers to deliver people-centered care is crucial. Exploring various models based on the local healthcare environment, such as fee-for-service, pay-for-performance, bundled payments, and population-based payments, is essential ( 44 , 50 ). Fifth, developing comprehensive measurement tools (including patient experience measurements) is essential to improving the quality of PHC. Collaboration with other developed countries is indispensable for advancing research methodologies related to PHC ( 47 , 51 – 54 ). By addressing these pivotal aspects, Korea can lay a robust foundation for community-based PHC and effectively contribute to SUN reduction.

5.4 Limitations

This study has certain limitations. Firstly, self-reported SUN data may be subject to recall bias ( 10 , 23 , 55 ). Secondly, respondents who lacked information on SUN were excluded from the study. This exclusion reduced the proportion of individuals aged <45 years from 34.5 to 31.7% in the final study sample. The age distributions were significantly different before and after the exclusion ( p  = 0.002). Therefore, the results of this study should be interpreted with this consideration. In contrast, gender distribution did not differ significantly. Thirdly, the scope of the study was restricted by the lack of information regarding the assurance of unmet healthcare needs by the public health security system, the specific symptoms associated with SUN, and demographic factors such as race, immigration status, religious affiliation, religious devotion, social capital, social support, and emotional satisfaction with healthcare ( 11 , 33 , 56 ).

Fourthly, to maintain simplicity and clarity in achieving the objectives of this study, gender- or age-specific analyses were not conducted. Fifthly, the Korean data included individuals aged 19 years or older. In contrast, the European national data included individuals aged 16 years or older. This age discrepancy should be considered when interpreting the results of this study. Sixthly, comparisons with Japan were impossible due to the unavailability of Japanese data. Japan shares many demographic, social, and cultural characteristics with Korea and exhibited a similar unmet medical need experience rate in 2018. Future research should further explore this topic. Finally, data from 2018 was analyzed to minimize the impact of the COVID-19 pandemic. Subsequent studies using more recent data should examine the validity of these findings.

6 Conclusion

This study describes a comprehensive analysis of subjective unmet healthcare needs in Korea, marking the first utilization of Korean data to dissect these needs into two essential components: the experience of subjective healthcare needs and the experience of unmet needs contingent on those needs. In addition, it offers a valuable comparison of these experiences with those of European countries. These findings underscore the significance of targeted public health strategies to address the characteristics associated with each of these two components, thereby reducing the prevalence of subjective unmet healthcare needs in the Korean population. These strategies are closely linked to strengthening community-based primary healthcare, which is currently lacking in the Korean universal healthcare coverage system. The insights gained from this study are expected to provide policymakers in each country with valuable information regarding their healthcare coverage systems and enable them to establish more nuanced, targeted public health policies to promote equitable healthcare access for their populations.

Data availability statement

Publicly available datasets were analyzed in this study. Data is from the Korea Health Panel survey, which is available to the scientific community with a signed data access agreement from the Korea Institute for Health and Social Affairs and the National Health Insurance Service database ( https://www.khp.re.kr:444/eng/main.do , accessed on 20 May 2020).

Ethics statement

The studies involving humans were approved by the Institutional Review Board of the Severance Hospital, Seoul, Republic of Korea. The studies were conducted in accordance with the local legislation and institutional requirements. Written informed consent for participation was not required from the participants or the participants’ legal guardians/next of kin in accordance with the national legislation and institutional requirements.

Author contributions

WC: Conceptualization, Data curation, Formal analysis, Funding acquisition, Investigation, Methodology, Project administration, Resources, Software, Supervision, Validation, Visualization, Writing – original draft, Writing – review & editing.

The author declares that no financial support was received for the research, authorship, and/or publication of this article.

Conflict of interest

The author declares that the research was conducted in the absence of any commercial or financial relationships that could be construed as a potential conflict of interest.

Publisher’s note

All claims expressed in this article are solely those of the authors and do not necessarily represent those of their affiliated organizations, or those of the publisher, the editors and the reviewers. Any product that may be evaluated in this article, or claim that may be made by its manufacturer, is not guaranteed or endorsed by the publisher.

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Keywords: unmet healthcare needs, universal health coverage, sample selection model, Korea Health Panel, South Korea

Citation: Chung W (2024) Deconstructing subjective unmet healthcare needs: a South Korean case study with policy implications. Front. Public Health . 12:1385951. doi: 10.3389/fpubh.2024.1385951

Received: 14 February 2024; Accepted: 17 April 2024; Published: 10 May 2024.

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*Correspondence: Woojin Chung, [email protected]

Disclaimer: All claims expressed in this article are solely those of the authors and do not necessarily represent those of their affiliated organizations, or those of the publisher, the editors and the reviewers. Any product that may be evaluated in this article or claim that may be made by its manufacturer is not guaranteed or endorsed by the publisher.