Tesco is one of Britain’s most popular running chains of convenience stores. After running a full depth research and analysis and studying the growing popularity of such stores in the US and France namely Walmart and Carrefour, Tesco finally decided to make a mark in the US itself. It decided to make smaller supermarkets that offer every day basic grocery items to gourmet food. One of the spokesperson at the main headquarters of Tesco at Cheshunt, England said that the company had been thinking of entering the US market for about 20 years.
Tesco’s strategy was to open Fresh and easy, a chain of convenience stores in unlikely neighborhoods, although it is a very modest approach for such retail giant, Tesco wanted to start with subtlety as it had seen the downfall of many other successful British retail chains such as Marks and Spencer’s and J Sainsbury. (The Economist, 2007) Generally when retailers as big as Tesco want to step into the international market, they carry out many experiments, analysis and research. However all that research and hard work can fail if a proper strategy is not used to implement a new chain.
Tesco’s fresh and easy targets small neighborhoods in the United States so that it can make its presence slowly and gradually. Although this is a risky step considering the fact that Walmart has an extremely strong presence and customer loyalty but they believe that it is better to tart with small burst rather than entering the market with a huge splash. (Craig, 2007) Another issue that they might face is tough labor unions; California has some major issues when it comes to labor unions and the power that the employees can have, however according to The New York Times, Tesco hopes to avoid that situation and is hiring local employees.
If they are successful in doing so they might be able to overcome a major hurdle in the path to success. (Chow. com, 2007) Another problem that Tesco’s Fresh and Easy might face is the kind of packaging of food and other items. Generally the people from the small neighborhoods that they are in are not used to the brightly colored packaging and the small portions of fish neatly put in a box of ice. This does not translate into the traditional American grocery stores and this is not what the customers are used to. Therefore this might have created some problems for Fresh and Easy to make a customer base. (Chow. com, 2007)
“One of the dangers for any company producing a lot of cash flow from their home market is that they invest poorly overseas,” said Alastair Johnston, a retail analyst at JPMorgan. This means that the strategy to enter the US markets by Tesco might have been an irrational decision as it has happened with a lot of retail markets in the US. Royal Ahold which is one of the leading Dutch supermarket chains encountered a lot of problems when they entered the US market including accounting mismanagement and restless labor force. In their previous attempts to go Global, their decision has not been fruitful and they have had to move out of the market.
Tesco can also face these issues and may have slight more problems as their strategy was not to jump into hyper markets but into small neighborhood markets where there will be more employee hiring due to more no. of stores, more union issues, more accountability problem and a serious clash of culture. They would have to be extra careful either their operations in such a saturated market. (Craig, 2007)
1. Craig S. (2007) Smith British Grocer Set to Dip Toe in U. S. Market, New York Times June 6, 2007 2. The Economist, Tesco come to America, June 21, 2007 3. Chow. com, The British are coming, Nicholos Day, November 9, 2007