Case Study: Tesco's Withdrawal from Japanese and US Markets

This case study critically assesses the factors that compelled Tesco to withdraw from the Japanese market and evaluates its expansion into the US market. It also evaluates the attractiveness and challenges of the Indian food retail market to Tesco.

ESSAY
(TESCO)

CASE STUDY

INTRODUCTION
Tesco introduced in 1919, London
Hold top position in UK and 3 n the globe
Total 5400 stores 14 markets other than UK.

1. Critically assess those factors that compelled Tesco to withdraw
from the Japanese Market.
• Fluctuations in the economic variables
• High competition
• Unfavorable Demographic factors:
• Lower preference to Western cuisine:
• Failure of hypermarket format
• Limited scope
• Prospective threat of new clicks-and-mortar entrant
• Falling supermarket sales

REASONS TO WITHDRAW FROM JAPANESE MARKET

REASONS TO WITHDRAW FROM JAPANESE MARKET
1.Company failed to meet the
demand of customers
• The customers in Japan are
frequent shoppers.
• The Japanese buyers need wide
choice of offerings
• The target customers in Japan
were suspicious about the
quality of offering in
hypermarkets

Continue..
• Market state
• Intense and cut throat
competition.
• Declining market
• Low profitability

TESCO
PERFORMANCE

2 Critically assessment Tesco expansion into the US market
It was identified that company invested into expensive infrastructure
whose only 1/3rd capacity was used.
Due to lack of optimum use of physical resources it was stated that
venture was doomed from outset.
Thus, because of lack of materialization of economies of scale
company was forced to take withdrawal decision from US market.
The entity has to pay £150 million un addition to previous £1bn write
down of capital to leave the loss making US business.

REASON TO ENTER THE US MARKET
The intrinsic factors making the U.S. market fascinating for Tesco
• Size and growth of market.
• Increased market potential in rural areas.

Continue.
Intrinsic factors making the US market favourable for entity.
• Brand recognition.
• Effective knowledge of US market through studies etc.
• Good knowledge and experiencein retail industry.
• Creative store format that presnt rivals.
• Efficiency in managing risk

REASONS TO WITHDRAW FROM USA MARKET
1. Marketing and strategy issues
• Presence of many private brand label
• Lack of use of loyalty card and other scheme.
• No specific store location.
• Lack of loose produce
2. Market situation
• Highley price competitive
• No economy of scale.
• Sub prime crisis

Expansion style of Tesco in US market

Comparision of Tesco in US v/s Japan

Do you share the opinion of various retail analyst that the venture was doomed
from the outset.
In my opinion,I share the same thought of different retail analyst that
the venture was doomed from the outset.
On one hand, the company seemed doing better where significant
number of customer prefer the brand, sales were improving, loss were
narrowing etc
While on other the stores were operating less than half of there capacity.
The failure to attain economies of scale is among major reason for
withdrawal of Tesco.

3.1 Critically evaluate the attractiveness and challenges of the Indian
food retail market to Tesco.
Attractiveness in Indian market:
• Large target audience
• Increasing disposable income of customers
• Less competition in the market
• Increase in brand consciousness among customers
• Reduction in import duties

Reason for expanding in India

REFERENCES
Wild, J., Wild, K.L. and Han, J.C., 2014. International business. Pearson Education
Limited.
Birkinshaw, J., Brannen, M.Y. and Tung, R.L., 2011. From a distance and
generalizable to up close and grounded: Reclaiming a place for qualitative methods in
international business research. Journal of International Business Studies. 42(5).
pp.573-581
History of Tesco. 2016. [Online]. Available through:
<http://www.telegraph.co.uk/finance/markets/2788089/A-history-of-Tesco-The-rise-
of-Britains-biggest-supermarket.html>. [Accessed on 20th November 2016].

THANK YOU!!