In 2006, after a considerable amount of research, Tesco announced that it will finally enter the U. S. market branded as “Fresh & Easy”. A year later, Tesco entered the U. S. market by applying new strategies for success and market entry compared to the ones that were used in the past. In the past, Tesco’s strategies for global expansion were (1) to aggressively enter markets in developing nations, (2) focusing on markets that were less competitive, and (3) entering through acquisitions. Tesco used completely different strategies to enter the U.
S. market. First, the company announced that they will grow softly by entering markets on the west coast. The grocer entered the California, Nevada, and Arizona markets less aggressively compared to the growth seen in other markets. Second, the U. S. market is a highly competitive market for grocers, and one of the major reasons for Tesco’s previous successes was due to the lack of competition. By entering the U. S. market, Tesco was facing significant competition such as national competitors, local and regional grocers, and discounters.
In order to compete more effectively in the U. S. market, Tesco branded itself differently to the American consumers. The grocer marketed itself as a convenient and express grocery retailer with hopes to set itself apart from national grocers such as Wal-Mart, Kroger, and Albertsons. Finally, Tesco entered the U. S. market organically rather than through acquisitions. When Tesco made the decision to go global they did so by acquiring grocery chains in other countries and through joint ventures, therefore, growing organically was going to be a new venture for the retailer.
Although Tesco has seen successful returns through acquisitions in previous ventures, it decided to avoid this strategy for the U. S. market because of previous failures by other foreign retailers. One of the earlier entrants into the U. S. market were the British grocers Sainsbury’s and Marks & Spencer who entered the U. S. through acquisitions. Tesco was able to identify the “first-mover disadvantages” and avoid them as they prepared to make their entry. The main reason that Tesco decided to grow organically in the U. S. is because early British grocers “entered the U.
S. market by making an acquisition, choosing to acquire a retailer that already had problems…. this gives the company several advantages including the fact that there are no inherited problems to address, so the whole process is under Tesco’s control, and it is cheaper” (The British are Coming). Finally, unlike the other British companies, Tesco carefully studied the U. S. market for years before making the decision to grow within it, which gives them an advantage over other competitors. In March 2006, Tesco announced that it would enter the U. S.
This represents a departure from its historic strategy of focusing on developing nations. How is the U. S. market different from others Tesco has entered? What are the risks here? How do you think Tesco will do? Tesco’s decision to enter the U. S. market is vastly different from its entrances in developing nations. The reason that Tesco was focusing on developing nations in earlier years was because “there were few capable competitors but strong underlying growth trends” (Hill). Tesco felt that they could gain higher market share in developing nations vs. eveloped nations due to lack of presence of strong competitors. The grocer also foresaw the growth that it would experience in developing nations since many of the markets were emerging ones that could allow the retailer to compete better with other international leaders. The U. S. market is much different than the other markets that Tesco entered. The U. S. market is much more competitive, “In 2006, there were approximately 34,000 traditional supermarkets, each with sales of over $2 million, offering a full line of groceries, meat, and produce” (U.
S. Bureau of Labor Statistics – Grocery Stores). Tesco concluded that they would have higher returns and much more success in developing nations because there was more to gain vs. competing in developed nations where there was tighter competition and less market share to gain. Competing in a highly competitive market is one of the risks or disadvantages that Tesco will endure in the United States. Another risk that Tesco could face in the U. S. arket is the limited growth due to the fact that the company entered on a later and smaller scale vs. on an “earlier and larger scale that would allow them to capture significant first mover-advantages that will bolster their long-run position in that market” (Hill). Although Tesco is expected to have less of the long-term rewards due to the choice of entry, it will ultimately endure less risks and will have the chance to learn more about its new markets. We believe that Tesco will succeed in some of the U. S. arkets where convenient and express grocery stores are in demand such as in major metropolitan areas but could struggle in areas where competitors such as Wal-Mart dominate, for example the Midwest. Tesco Today Tesco has moved from being the number 4 competitor in the international market to the 3rd largest grocery retailer in the world. Tesco currently operates in 14 markets worldwide, with a total number of 3,956 locations. The grocer employs 440,000 people and is shopped by millions of customers every week. The U. K. s Tesco’s number one market with locations totaling to 2,115. In addition to operating in the United Kingdom, the grocer currently operates in the United States, Ireland, Czech Republic, Poland, Slovakia, Hungary, Turkey, Japan, South Korea, China, Thailand, and Malaysia. The company’s focuses on five core strategies for success, which include: International, non-food, Retailing services, core U. K. , and community (Tesco). The company’s international strategy focuses on the local customers by finding out what they want.
Non-food focuses on maintaining strength in non-food as they do in food by applying the same customer service, product quality, and affordable prices. Retailing services strategy focuses on bringing simplicity and value to each complex market in order to succeed. The company insures to focus on the U. K. since it is the strongest market for them by maintaining and exceeding the level of excellent value, choices, and service that they offer. Finally, the company added community to their strategies for success by going green.