International Strategy Report: Tesco's US Market Entry and Analysis

This report provides an in-depth analysis of Tesco's international strategy, focusing on its expansion into the US market. It examines the strategic planning process, market analysis, and various models such as the SPACE and Ansoff matrices used by Tesco. The report details Tesco's entry strategy, including the Fresh & Easy concept, and the challenges encountered, such as competition, cultural differences, and economic factors. It also discusses the reasons behind Tesco's failure in the US market, including strategic marketing issues, lack of consumer understanding, and financial losses. Furthermore, the report explores strategic issues, relevant theoretical concepts, and planning approaches, including the Boston Matrix and Value Chain Analysis. It highlights Tesco's attempts to adapt its strategy, build consumer trust, and improve product offerings. The report concludes by summarizing the key strategic planning problems, emphasizing the importance of effective planning, stakeholder commitment, and robust control mechanisms. This analysis is designed to help students understand the complexities of international business and the importance of adapting strategies to different markets.

Introduction
Due to rapid growth in the globalization, All companies are able to cross the national boarder
for doing business in the globally. The main aim of the industry is doing business in the
international market. An international strategy helps identifying international market to be
evaluated about how the resources are examined, objectives identified, understanding market
trends. International strategy helps to expand the business via applying best strategies. In this
report, Tesco Plc has been taken which is one of the largest retail chain in the world or more
specially in the Europe. By applying international strategy, Tesco Plc. could expand their
operations globally.
There are 5 steps to preparing an international strategy:
1. 1. The first step is to analyses or examine the markets in general, to establish an
international strategy. This research will helping to provide an overview of the country's
general macroeconomic statistics data , trade balance, trading partners, income per
capita, etc. or other beneficial information’s.
2. Next step, the organization should determine the resources for its global expansion. It is
evident that in all markets, not all products will fit. Resources with greater competitive
advantages must be chosen for higher income as well.
3. The third step in the international strategy is to set international and global targets,
which are not taken counter-intuitively in the first level. The explanation of business or
the target should be separated and inadequate for the business in question. So a prior
analysis of the market is needed.
4. Deciding the market entry and mode should be the next step. The company may select
the routes such as the launching of a brand new product or new services related to
other country religion or joint venture with another willing partner company that is
already present in that industry.
5. In this international strategy phase, the final step is to create a service offering that will
include specifics such as pricing, goods and distribution
Importance of international strategy:
An international strategy will help to diversify and broaden a business when a company recruits
international employees or looks for new markets, new product of goods and services in
abroad. Economic globalization is the mechanism in which companies widen their markets
quickly to include foreign consumers. For operating a business outside country is vey crucial
task the company operating a business, cannot using the same strategy to expand the business
in another country, So the framing of an international strategy plays a very important role for a
business pursuing international foothold. Businesses either become aggressive exporters and

start exporting products or open their business units in the market they want to win, depending
on the business strategy chosen. A business using an international strategy has three
fundamental advantages. These advantages are: (1) greater consumer access, (2) economies of
scale and additional learning opportunities, (3) advantages such as labour and resources for
strategic and lower cost locations.
Case of TESCO international strategy in USA
In the UK Tesco operates more than 2300 supermarkets, hypermarkets, convenience stores,
where it has retail market in food, It operational business includes small municipal stores and
other financial services. It holds a 35 percent stake in US supermarket chain Safeway's Grocery
Works, the world leader in online grocery sales. It is the largest online grocery store and now
has a TV channel and a "retail-based education organization" to grow its market.
In November 2007, Tesco, a UK-based retailer company, entered the US market, opening a
small-format shop called Fresh & Simple. The case outlines the entry strategy of Fresh & Simple,
touching on market research, shop format, layout, venue, etc. In US so many issue are raised
related to the shop, The case discussed about the Tesco decision on April 2007 to opening 61
New fresh &Easy stores had been opened, At the end of case with a short debate, with
inflation and recession raising their heads, about the unfavorable macro situation in the US.
UK based retail company Tesco had opened 60 floor in Fresh & Easy shops in the US at
Manhattan beach, According to the survey, the store opening is a major success to registering
about 2600 footfalls. Another one best sales product is Grill pack (It is high quality beef patties,
chicken role) It was great to open, the neighborhood turned up in force to show its support.
Tesco is entered in the US market in November 2007 opening a small shop Fresh & Easy. In
November 2007, Tesco's had started pre-launch operations, such as performing market
research, negotiating leases, buying land for a distribution centre in Moreno Valley, California,
and building its US headquarters in El Segundo, California, have been published in US-based
newspapers since the beginning of 2005, and it also confirmed in September 2005 that the
Tesco had opening a team of 60 executives.
Years Stores number
2007 150
2011 175
Tesco's plans for global growth in the past have been:
. In developed countries, to reach markets aggressively
. Focusing on less-competitive markets

. Entering by acquisitions. To reach the U.S. market, Tesco used entirely different tactics.
Tesco faced intense competition, such as national rivals, local and regional grocers, and
discounters, by entering the U.S. market. So in April 2009, nearly $200 million in losses
announced by Fresh and Easy departmental store which is one of the chain of Tesco Plc and in
June 2009 June Fresh & Easy stores have been criticized for hiring only part-time staff and
denying a union recognition request. In April 2011, losses have risen to approximately $220
million, In January 2012 the stores are temporarily closed because of losses.
Why Tesco failed in USA
The company spent lot of money in the ground research, One of the biggest failures they have
made is their choice of place. Furthermore, their plan is to open shops smaller than a typical
supermarket and place them within walking distance of every residential or business location. It
was majorly identify that Tesco strategic marketing problem are lack of knowledge, lack of
customer relation, cultural issue arises, wrong knowledge of low quality products, foreign
brands, economic recession, highly strong client and resource rivalry, Unpredictability of raw
material prices in USA , existing or new market dealer create a huge competition these are the
problem faced by Tesco. So that company wants to change American customers habits,
changing habits is typical task in that time, these are the following changes consumers wants,
the US customers want to purchasing in bulk to save money, or to involvement in online
coupons and offer directly on website.
Identification of strategic issue
Tesco is focusing on the development of an alternative strategy, it must trying to build continue
to create consumer trust, but this may take a longer period of time, or help to changing’s the
habits when trust is formed among the consumers then the company makes a good progress
and compete with other market rivals. In order to capture more buyers, marketing is
considered an integral component, and this was not pursued by Tesco in the US market. The
organization wants to a good knowledge about the value of Tesco products. While on other
hands, the "Food Love Stories" campaign must be carried out by Tesco and this can be seen as
an effective tactic to draw the market's attention, theses campaign helps the company time to
time to concentrate on the best quality of food so it would be easier to reorganize the brand
structure in short period of time. In addition, the price of the product from Tesco must also be
economical because pricing is a significant benchmark in different supermarkets as well as
competing with its rivals (James, 2015). The company's loyalty seminars is one of the largest
assets in the US market to draw consumers and thereby expand accordingly.
Issue involved in the strategy

The main strategic planning problems that can occur in Tesco are:
The planning of Tesco is not effective, several issue are arise, focusing of the organization
should be on developing efficient processes, improving employee skills, maximizing capital and
representing a positive picture of the market. Lack of successful response- In order to ensure
desired results, the organisation should be committed to fulfilling its commitment to its
stakeholders. In order to ensure better results in the performance of the respective positions
and obligations, business planning should be straightforward and easy to understand. Lack of
control- The organizations should be concentrate on reviewing their operation and
performance checking by ensuring that their functions are monitored effectively.
There is lot of issue arise in Tesco lack of participation, lack of leadership, in the event of a
resource deficiency and an emphasis on business-related issues, negative results can be
produced, which can again have an adverse effect on Tesco. (2008: L. Draft).
Relevant theoretical concept, model, strategy used by Tesco:
The strategic planning of Tesco, focuses on improved operating efficiency of business, to review
analysis the security and success. In order to ensure a competitive advantage at a lower price,
they concentrate on delivering the product in cheapest price and aware about consumer
network. To expand their business continuously to involved in discovery and innovation
programmers, they concentrate on expanding their research initiatives. They are committed to
ensuring that their goods and services are of good quality. Tesco is always try to focused on
improving their interactions in the eyes of with their producers, partners and consumers.
Key strategic planning approaches are listed below:
The Matrix of Boston
Matrix for SPACE
Strategy for PIMS
Matrices from Directional Strategy
Matrix for SPACE strategy
Tesco has applied the strategic position and action evolution (SPACE) matrix is a strategic
planning tool that describes strategic thinking based on a company strategy's competitive
position. The matrix of SPACE is split into four main components, including aggressive,
conservative, defensive and competitive. The SPACE strategy is having two approach on the
basis of internal factor lies on financial strength and competitive advantage. External factor
protect environment and business strength. Tesco uses aggressive strategy to create a good

position in the market and rapid growth by increasing strength to develop market strategy such
as Tesco official sites , portfolio product development etc.
Metro for directional strategy
The main function of directional matrix strategy is to attract the market and build the business
strength by analyzing the market condition with the help of these strategy its help in to
investing decision.
Figure 1: Directional Strategy of Matrix
If the market attractiveness is higher compared to their business strengths to retain their
market position and profitability, they may make strategic decisions to establish strong
competitive advantages such as product portfolio growth, creativity and innovation in store
design to promote customer comfort or experience, strong distribution system, etc.

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Value chain analysis for Tesco:
This analysis describe about the internal activity system such as market segments, information
about the product quality, quantity, technology or other services which are helpful for the
human resource management, sale service report. It also requires storage, outbound logistics
and operations activities that represent the condition of their desired outputs. In addition, it
includes support activities such as decision making on technology, human resources and
infrastructure growth.

Hence, Ansoff matrix is very useful to explain the market strategy and competitive advantages
of Tesco is as follow;
Market penetration: Due to this strategy Tesco has a opportunity to overcome the strategic
issue of Tesco will able to keep its customers or control the extra cost of market, by this
strategy Tesco plc get high revenue in USA and focusing on its online market channel.
Product development : To overcome the strategic issue Tesco has enter in new departmental
stores of Fresh and Easy in the USA , with the help of using product development strategy Tesco
has focus on good quality of goods and services and maintain a goods relation with distributor
supplier, logistic partner to get growth in future.
Market development: Tesco should concentrate, according to this point, on its overall. To
achieve desired sales and revenue, marketing operations. For Tesco, it can be dangerous since
there is a niche segment in market growth where Tesco is concerned with basic goods.
Diversification: It describes the introduction into a new place of a new product, hence, The
strategy is considered risky since the saturated market is not always capable of managing the
pressure for the diversified market. In relation to Tesco, before moving into the diversification
process, it is important to look for a niche market segment. There is lot of issue arise in Tesco
lack of participation, lack of leadership, in the event of a resource deficiency and an emphasis
on business-related issues, negative results can be produced, which can again have an adverse
effect on Tesco. It is necessary for Tesco is focusing on the development of an alternative
strategy, it must trying to build continue to create consumer trust, relations, but this may take a
longer period of time, or help to changing’s the habits when trust is formed among the
consumers then the company makes a good progress and compete with other market rivals. So
that Tesco is easily survived in the market if he continue focused on the strategy.

Conclusion
It's not always easy to develop a company in a foreign market. If a company does not do
adequate research on society, client actions or rivals, it may easily fail to grow its business. The
business needs to find the best suited entry strategy. By getting failures in Greenfield
approach, Tesco should have used the acquisition strategy. By doing so, it would not have failed
at this stage. The operation of Tesco in United States wasn’t successful, According to the PEST
and SWOT analysis showed that The North American market was a remunerative market, Tesco
did not choose the correct path to become competitive in entering the US food retail market.