Tesco Case Analysis

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TESCO: FRESH AND EASY

The rise of Tesco, from a mediocre supermarket company into an outstanding, world-class, multi-faceted organization, has been a remarkable one. Since 1929, when Jack Cohen opened the 1st Tesco store, the company has seen tremendous growth and success. Customer centric approach, which has been adopted by the company since its very inception, along with strategic vision and innovation under the leadership of CEO Terry Leahy has been some of the underlying factors of Tesco’s sustained success. Leahy was the architect of the idea “The Tesco Way”, which included the company’s core values, principals and goals among other things and which aimed to establish Tesco as a “Value retailer”. Right from the concept of store formats to the investment in information technology to the diversification of products and services, Leahy emphasized on innovation in all aspects of business. The Tesco Clubcard, which was first launched in 1995 to analyze consumer purchase data and target appropriate promotional offers, increased customer loyalty by leaps and bounds. Tesco created different formats of stores to cater to the different segments and different needs of its customers. Tesco’s strategy to gain international presence through expansion has been one of the cornerstones of their success. The company expanded in countries of Eastern European and in emerging economies of Asia and in all these countries it aimed for market leadership ahead of profitability and based their strategy into such distinct elements which led to sustained growth. Being flexible and unique to each market, acting local, maintaining focus, using multiple formats, developing capabilities and building brands were some of the strategies used to form a long lasting relationship with customers. The fact that Tesco strategically added new products and services in its portfolio worked to its advantage. In addition to its popular in store food and beverage selection, Tesco diversified into financial services, telecommunication services and travel services. The launch of Tesco’s online grocery store made the company, Britain’s largest online store. So to summarize strategic vision, innovation and lasting customer relationship has helped Tesco to become the most dominant UK retailer and the third largest retailer in the world. Tesco had all the technical know-how, expertise and experience needed to succeed in US retail market. The strategy the company adopted while expanding in international markets is very much applicable to the US retail market as well. Tesco’s policies of acting local and catering to local customers and cultures along with leveraging the brand value of the company to attract customers are of prime importance if it has to succeed in US. Tesco’s decision to enter the U.S. market as Fresh and Easy was very feasible and based on sound theory, research, and projections. However, the company’s expectations did not translate into similar performance. Based on prior research, the company had identified a geographic niche market in California, Arizona, and Nevada where there was no dominant player. Tesco had even sent employees to live with 50 families and conducted 200 focus groups at one of the company’s facilities. Despite prior unsuccessful attempts by other British companies to enter the U.S. market, Tesco presented a compelling case regarding its ability to penetrate the U.S. market in California, Arizona and Nevada. Overall, Tesco did not enjoy the success it had anticipated because it did not account for cultural and perceptual differences between the U.S and Europe. Although Fresh and Easy was right to include a higher percentage of produce in its stores, many other strategies found in Exhibit 12 from the case, likely prevented additional sales and growth. For example, presenting a merchandise mix comprised largely of store-label brands combined with an everyday low pricing strategy likely caused American consumers to perceive Fresh...
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