Contents

Executive Summary 2
1.0 Organization Profile 3
2.0 Tesco’s Unique Strengths 3
2.1 Globally Diversified: 3
2.2 Advanced Packaging Techniques: 3
2.3 Financial Strengths: 3
2.4 Network of Suppliers: 4
3.0 Tesco’s Internationalization Period 4
4.0 Identified Problems 5
4.1 Market Positioning Strategy: 5
4.2 Name Selection for the UK Venture: 5
4.3 Cultural Differences: 5
4.4 Aggressive Expansion Strategy: 5
4.5 Competitors Analysis: 6
3.6 Vague Mission & Vision: 6
3.7 Consumer Market research: 6
5.0 Recommendations 7
5.1 Strategies Based on Market Research: 7
5.2 Specific Consumer Market: 7
5.3 Finer Segmentation Strategies: 7
5.4 Competitors Analysis: 7
5.5 Specified Objective: 8
6.0 Conclusion 8
Executive Summary

This case study report is an analysis of Tesco Case, which mainly covered the
operational activities and its problems during its expansion in the USA. Tesco is the
leading food retailer company in the UK and it has been running its business
successfully for quite a long time. This report analyzed the case study and covered
the background of the business and its global operations. Also, some of the unique
strengths of this company were identified which has been mentioned in this report.

As the UK’s leading company, Tesco has many unique characteristics that are
popular in many countries. That is why they were able to expand their business
globally. From the analysis, some major marketing strategic problems were found,
which have been discussed briefly in this report. The expansion strategy to the USA
was not a smooth journey for Tesco. They had faced a lot of trouble because of
improper market research, cultural differences, wrong market positioning, failure of
competitive analysis, and more. Based on the problems that have been identified,
some of the recommendations have also been suggested in this report. Some of the
recommendations mentioned in this report might have helped the company to be
able to sustain in a competitive marketplace like the USA.

This report concludes with a statement that is, in the marketplace, the consumer is
always the king. No matter where the business place is, consumer market analysis
and decisions based on those analyses will work for sure. That is why marketing
strategies are helping a lot of businesses to understand the operations of the real
marketplace and also it is helping business owners to be able to sustain their
business in this era of global competitiveness.

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1.0 Organization Profile

Tesco is the UK’s leading food retailer, taking around 30% of the national grocery
markets, and the company has become the UK’s biggest retailer of non-food items.
Also, Tesco is one of the world’s most successful internet retailing models with
850,000 customers with a growing rate of 30%. Though Tesco is mainly a UK based
food retailer, they have expanded their operations geographically and they have also
worked for product differentiation such as clothing, food, electronics, internet
provider etc. The company has more than 34000 stores in the UK with approximately
300000 employees working for them. Tesco’s core purpose of the organization is
“Serving shoppers a little better every day”.

2.0 Tesco’s Unique Strengths

Tesco UK's biggest retailer by sales and also the nation's biggest private employer. It
has seen quite an ups and downs while operating their business globally. Still, they
are running a sustainable business for quite a long time. By reading the Tesco case
6-8, some of the strong points of this company has been identified and those are
given below:

2.1 Globally Diversified: Tesco has diversified geographically and entered

into various areas such as the retailing of books, clothing, electronics,
furniture, and software; financial services; telecoms and internet services etc.

2.2 Advanced Packaging Techniques: Tesco follows new advanced

packaging techniques for their products which creates a unique differentiated
position in the consumer market. Also, they create private label brands which
create high brand equity in the consumer market.

2.3 Financial Strengths: The Company has more than 34000 stores across
14 countries in the UK with approximately 300000 employees working for
them. They are also known for their financial strengths which can be seen on
the London Stock Exchange & FTSE Index.

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 2.4 Network of Suppliers: Tesco has always been alert of suppliers, that’s
why they have been maintaining a network of suppliers. During their journey
to the USA, they brought suppliers from the UK which was a great strategy.
Even, when they were producing food, they set up two suppliers near their
distribution campus so that they can smoothly work on their supply chain
management.

3.0 Tesco’s Internationalization Period

In the 1990s Leahy, the CEO of Tesco, started to develop strategies for expanding
their business globally. The company has a growing business in Eastern Europe -
the Czech Republic, Poland, Slovakia, and Hungary. Tesco operates 50
hypermarkets in China. The journey to the USA was not so smooth for Tesco. They
have been expanding based on only markets with fragmented local competitions and
entering into the USA is a major departure from this strategy.

The USA is a very competitive marketplace, where many companies have lost their
businesses. Nonetheless, Tesco is dedicated to spending 1.25 billion pounds over
five years of its fresh & Easy convenience store in the USA. Their goal is to open
200 stores by the end of 2008 or 2009. But the business environment in the USA is
not very friendly. When they were entering this new market, they were well aware of
the competitiveness. That is why they used some wicked strategies. Again, there
were some of the strategies which didn’t work for them, for which they had to
undergo one of the biggest failures of their company. In the next section, some of the
major issues while expanding to the USA will be covered.

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4.0 Identified Problems

Being the third-largest retailer, Tesco didn’t have a smooth journey while expanding
its operations to the USA. By analysing the case, some of the major issues were
identified and those are debriefed below:

4.1 Market Positioning Strategy: Defining a market positioning strategy is a

prerequisite for any company to start its operations in a different country.
When Tesco started their journey on the west coast, they set up some mock
stores to study the local people and their buying characteristics. American
people like to buy their groceries from distant places, not from their local
small-format shops. But Tesco started their ‘Fresh & Easy’ Venture around
California with small-format shops, claiming to provide the best quality
products at low prices. American people didn’t like this type of convenience
stores around their locality.

4.2 Name Selection for the UK Venture: Leahy’s idea was to expand their
operation to the USA, his idea was to start their venture named as ‘Fresh &
Easy’ so that the local competitors would be unaware of their business. But
the name of the venture was mostly disliked by American people. They often
complained about it saying that it sounded like a chain of chicken ranches or a
tampon. The name selected for this venture created a bad image among the
Americans.

4.3 Cultural Differences: There is a huge cultural difference between the UK

and the USA. That is why, the needs of the customers and the value that
Tesco offered to the people in the USA, didn’t meet consumers expectations.
For example, the American people like to buy their groceries from a big format
convenience store which is normally away from their colony and also,
American people like to be served by other helping hands. On the other hand,
Tesco small format convenient store was near the colony and they offered
self-service which was not culturally accepted by the Americans. Moreover,
they also ignored the power of the trade union in the USA.

4.4 Aggressive Expansion Strategy: In the 1990s, Leahy decided to

develop serious efforts to expand its operations, which resulted in good terms.
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They were successful in establishing their company in Eastern Europe and
some of Asia's developing countries. But this created nervousness in the
stock market which resulted in shares undervalued by its stock market. If their
share value had fallen off, this would’ve been an opportunity for aggressive
investors.

4.5 Competitors Analysis: During the USA expansion period, Tesco didn’t
consider that the local competitors would give them a push back. At first, it
seemed like they were muted but Walmart started planning on small-format
grocery shops in the Phoenix area and Safeway is launching theirs in northern
California. They didn’t take any unique strategy to fight back their competitors
but the competitors were already in the game.

3.6 Vague Mission & Vision: Tesco, from the very first, claimed to offer low-
cost fresh food. But they were in a dilemma whether they were providing them
properly or not. It was mentioned in that case that they were confused about
whether they have found a profitable and defensible market place or they
have created a ‘stuck in the middle’ operation that is neither the fresh food
nor the low-cot. There were times when Tesco was confused that their pilot
venture in the southwest USA, in the form of Fresh & Easy will be capable of
successful expansion elsewhere in America. But they were unaware of the
fact that the USA is a country consisting of 51 states and all of them have
huge cultural differences.

3.7 Consumer Market research: For establishing a market in a different

country, consumer market analysis is a must. Based on that, one company
can create specific strategies for finer segmented groups of consumers. But in
the case of Tesco, they only studied one consumer market and took decisions
based on that which was not an effective step. Consumer Market research not
only helps to identify consumers but also helps to build relationships with
customers. For this reason, Tesco Company had to face failures in their
business expansion of the USA.

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5.0 Recommendations
In this section, some of the recommendations have been suggested for Tesco
Company. As they have tried their best to sustain in the USA marketplace, but there
were some strategic problems identified through this analysis. Based on those the
recommendations are given below:

5.1 Strategies Based on Market Research: Strategic market segmentation

is the process of identifying groups of buyers and analysing subgroups of
buyers in a product market. This market analysis gives the power to make
stronger strategies to offer better propositions than competitors. Tesco should
have keenly analysed the marketplace in the USA. This analysis would have
given information on customer preferences, target market, how to segment,
purchasing behaviour etc. If they would have properly taken this, they might
have found out that the American people like to do all their activities by using
their cars. They don’t like small-format shops and self-services etc.

5.2 Specific Consumer Market: Specific consumer markets help to target a

group of buyers who are willing to buy the products and they help to earn
profits. Market segmentation helps to identify buyers' needs and preferences,
attitudes, brand awareness, brand preferences etc. F&E didn’t start like this,
they ignored customers' brand awareness and their preferences.

5.3 Finer Segmentation Strategies: Finer segment strategy is to focus on

the segmented consumer market and to offer them better services. This
could’ve been done by F&E, by offering customized services, creating close
relationships with the customers by offering them discount coupons which are
normally popular among the American people.

5.4 Competitors Analysis: Competitors analysis gives the power to sustain

in a competitive marketplace. The USA is a highly competitive market where
Walmart, Safeway, and other retailing stores have already created brand
obsessions. It was also important for F&E to focus on their competitors but
they had ignored them by thinking that their competitors would consider them
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 as radical local grocery shops. But that wasn’t the case. That’s why they faced
a push back from Walmart, Safeway.

5.5 Specified Objective: F & E market positioning is between the discounts,

cut-price, organic food stores, they claim to offer low-cost high-quality food.
For maintaining these value propositions, they had to rent smaller shops, offer
self-service checkouts, etc. But their classic dilemma was if they had been
able to create a profitable new market space. That’s why having a clear vision
and a mission helps to identify goals and objectives. F&E should have
focused on only one specific objective. This would have helped them to create
strategies to achieve those objectives.

6.0 Conclusion

Tesco is a diversified company having a lot of stores globally and it has shown some
of the greatest achievements in the past. But due to some of the marketing strategic
problems they had to walk a long run in this globally competitive marketplace.
Sometimes, luck works better than strategies but at the time of F&E venture, both
didn’t work at the time.

If the company had been a little bit aware of their decisions, they could’ve taken
much more effective strategies to sustain in the USA marketplace. Through this
report, the importance of marketing strategies have been highlighted, and it can be
said that a market-driven strategy will always work for any market segmentation.
That is why the popularity of market research and market-driven strategies are
increasing day by day.