Tesco in the United States
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Case Code: BSTR291 Case Length: 13 Pages Period: 2005-2008 Pub Date: 2008 Teaching Note: Not Available |
Price: Rs.300 Organization: Tesco Industry: Retail Countries: USA Themes: Business Strategy, Globalization Business |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Tesco's International Ventures
Tesco began its international foray in 1979 when it entered Ireland by acquiring a 51 percent stake in 3 Guys stores. However, the venture did not succeed as the customers rejected the British products sold in the stores. In the early 1990s, with the domestic market stagnating, the company again started to explore international opportunities. In 1992, it entered France by acquiring an 85 percent stake in Catteau S.A, a supermarket chain...
Tesco in the US
Tesco had been eyeing the US market for a long time - even from as far back as the 1980s, according to some reports. However, serious efforts to enter the US market began only in the 2000s. In mid-2006, Tesco reportedly sent around 50 senior officials from its British operations to live with American families "recruited" by the company in California so that they could study the shopping and consumption habits of these families...
Differentiation
The research that Tesco had carried out in the US had thrown up the fact that US shoppers looked for neighborhood stores that stocked fresh, healthy and inexpensive foods. "When we talked to people, and went into their households, we heard a fairly consistent message. That message was that what people wanted was fresh, affordable food - wholesome food - but they wanted it close to home." Therefore, it was decided that Fresh & Easy would differentiate itself from other retailers on convenience, freshness, and affordability...
A Good Neighbor
Fresh & Easy also took a number of initiatives to reduce the impact of its operations on the environment. Every Fresh & Easy store recycled or reused all its display and shipping materials. The stores partnered with the Resource Management Group in its waste reduction program. Also, it used only energy efficient light bulbs. The solar-power driven distribution center at Riverside, California, was also part of its environment-friendly initiatives...
Challenges
In spite of all its pre-launch planning, Tesco's Fresh & Easy received mixed reactions from critics and shoppers. While there were some who appreciated the layout and convenience of the stores, many people were not happy with the choice of brands that Fresh & Easy offered. According to some analysts, a major problem with the stores was that they stocked too many private label products - reportedly, around 45 percent of all the items in the stores were private label...
Outlook
Sir Terry Leahy - Tesco's CEO - had high ambitions for the Fresh & Easy business and wanted to make it as big as the UK business. According to a report dated March 14, 2008, Mason outlined plans to grow the chain into a network of 1,000 stores stretching across the West Coast from California, Nevada, and Arizona up to Washington. Tesco announced in early March 2008 that it was expanding Fresh & Easy into northern California and had identified 19 sites around Sacramento...
Exhibits
Exhibit I: Tesco's Store Formats
Exhibit II: Top Grocery Retailers in the US in 2006
Exhibit III: Tesco's Financials
Exhibit IV: Tesco Stock Performance from July 2005 to May 2008
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