Chinese Resources Enterprise discuss with Tesco about joint venture Tesco's supermarkets in China.

Foreign Direct Investment (FDI) is became one of the most common and popular tool for business to invest in host country. FDI enable companies to obtain overseas resources, increase access to return markets, increase local capital markets and drive economic growth. FDI have 4 types of method:

1. incorporating a completely owned subsidiaries or company anywhere 
2. acquiring shares in an associated enterprise
3. through a merger or acquisition of an unrelated enterprise
4. participating in an equity  joint venture with another investor or enterprise

 The example I give  below is related to joint venture. 

China Resources Enterprise (CRE) talks with the UK retailer Tesco to merge the Tesco's hypermarkets and supermarkets in China. This joint venture is created so that both parties would be the leading multi-format retailer in China. CRE would control 80% of the new chain while Tesco only got 20%. 

CRE said the venture would benefits "deep understanding of local customers, establishing nationwide infrastructure and proven track records as a partner with Tesco's global retail expertise, international sourcing scale and supply chain capabilities". 

An analyst said that the joint venture will allow Tesco to reduce the amount of committed capital  to its China business.

Tesco started to operate in China in 2004 but over the years Tesco has been struggling in China and lose money. This is similar to Carrefour because they had issues in their home market that they had to resolve. 

"This may look win-win, but in reality , Tesco is saying ' I can't figure out China'," said one of Hong Kong based banker to Reuters news agency. 

My opinion  regarding this joint venture between Tesco UK markets and China Markets that  Tesco should do joint venture with CRE because this can increase business profit and improve market performance in China which Tesco have problem in the past years. Moreover , Tesco can be the leading multinational retailer company in China because with the help of Chinese Retailer Enterprise they can know better of the local customers, the infrastructure of China and many others that can improve the Tesco's products in China and the distribution methods.

 Also, this opportunity can help Tesco to reduce their debts, minimize amount of capital, increase stock prices and improve their weak business performance in China since it is forecast the Chinese markets will grow 50% in the next three years. Even though there are many tough competitors such as Sun Art supermarket , this joint venture can bring benefits and advantages for Tesco, UK retailer. Also this joint venture might help Tesco not to closed down their overseas markets like In Japan and US.