Key Issues in Tesco in United States
The first key issue found in this case study is that Tesco did not have a proper market research
before entering the US market. Market research is crucial for a better understanding of
customers in US. Other than that, through market research, Tesco can have knowledge about
their competitors, and how they approach the market. Other than that, market research helps
you comprehend the demands of their customers, detect more business opportunities, plan the
perfect marketing campaign, minimize losses, and keep track of the competition. It allows
Tesco to classify their objectives while following the current trends and take advantage by
reaching out to their target audience.
The second key issue found in this case study is that the former CEO, Sir Terry Leahy had an
over-ambitious vision, in which to have 10,000 small convenience stores on every junction, in
every major city in US. At beginning of entering new market, overly ambitious can lead to
many expectations and thus Tesco has spent lots of money without a proper vision.
The third key issue found in this case study is that Tesco have entered US market during the
economic downturn. The first store is opened in November 2007. As the economic environment
deteriorated. Tesco was forced to adjust its strategy. To appeal to budget-conscious shoppers,
Tesco used aggressive price promotions.
Summary of the Case Study
This case study tittle, “Fail! Tesco Strikes Out in the United States” is all about Tesco entering
into the U.S market. This case study also presents the former CEO’s vision in expanding the
business to U.S. The first stores in U.S. is named as Tesco Fresh and Easy and Tesco had their
own distribution network there. However, despite many ideas and strategies, Tesco in U.S
never met the market expectation, and thus Tesco incurred terrible loss in United States. Fresh
and Easy was highly dependant of private labels such as Nature Way Foods and 2 Sisters Food
Group, based from U.K. Other than that, this case study also emphasizes about the Tesco’s
around the world such as in South Korea and Japan, and its productivity.
QUESTION 2
The market-entry strategies that Tesco used in the United States is organic growth strategy.
Organic growth occurs when a company used its own resources to open a store on green-field
site or to acquire one or more existing retail facilities from another company. Tesco raised
eyebrows with an ambitious plan to establish its own distribution network. Thus, Tesco brought
two suppliers across the Atlantic: Natures Way Foods, which specializes in salads, and 2 Sisters
Food Group, a leading UK poultry purveyor.
In my opinion, due to high level of difficulty in entering the retail markets in the United States,
organic growth strategy is not an appropriate strategy to enter the market for Tesco. The US
market was markedly different from the various other markets that Tesco had targeted in its
spate of increasing its international presence. USA was a saturated and a mature market with
large players and intense competition in the urban as well as semi-urban/rural areas. The
demography and infrastructure though supported an inflating retail sector business; survival
would be difficult given the circumstances. A lot of other players from Europe and especially
from UK had failed to make an impact and were forced to fold up operations. Big players had
already made inroads into areas less explored and didn’t leave any scope for another player to
start operations in those markets without earning substantial losses in both short and long terms.
It was purely a game of first mover advantage. Moreover, the buying practices of US customers
were markedly inclined towards brands and they did not really care about proprietary products
of the retail companies. Brand consciousness was a major hindrance in the price game for a
new player in the turf of USA and would create obstacles to sustenance on an even level playing
field.
As Tesco was new to the USA market and was largely unaware of its buying practices, it would
have been better for it to go for strategic alliances and partnerships with existing retail
companies in USA. This would have given Tesco a necessary exposure to the market conditions
prevalent at the time of entry and therefore give it time and resources and all the local help
required to devise a suitable strategy for USA. Local expertise is a must in a mature market
because the new player must now eat into the share of the existing players as there is not much
scope for the overall growth of the market
References
Keegan, W. J., & Green, M.C. (2016). Global marketing, ninth edition. Essex, England:
Pearson Education Limited.
