Tesco is a company established in the United Kingdom with its headquarters located in Hertfordshire. It is identified as the third largest company in the grocery industry with several stores across various geographical locations. Tesco originally focused their operations on the European markets but decided to expand its operations beyond the European borders to the American markets (Lowe & Wrigley, 2009). This initiative saw them establish Fresh & Easy in the United States market. However, the chain of supermarket retrieved from the markets in the United States barely within the five years of operation (Butler, 2012). Tesco had to lay off hundreds of employees when it pulled away from the market in the U.S. Moreover, it had to hand over about 150 stores to the Yucaipa Companies. This paper aims to look at how marketing technique, adaptation to the cultural environment as well as customer service technique contributed to the failure to thrive of Fresh & Easy in the United States market.
Various observers, as well as critics, have analyzed Tesco’s failure to capture the U.S markets. Lowe and Wrigley for instance state that Tesco has a record in establishing as well as developing retail stores (2009). However, the experience did not work in their favor when it came to finding their stability in the U.S market. Observers indicate that the market analysis, entry strategy and risk assessment procedures used by Tesco greatly contributed to their failure. The digital technology available in the U.S markets serves as an attractive platform for business establishment.
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However, companies need for business to critically conduct several assessments before embarking on to the process of establishing a business. In the case of Fresh & Easy, Tesco used a strategy that was different from its normal expansion strategy of joint ventures and acquisitions (Butler, 2012). Tesco has always used an international joint venture which would involve them getting into partnership with a local company in which it finds a suitable for operational establishment. The kind of association allows both the Tesco and the local companies to realize profits and business success. An acquisition, on the other hand, allows Tesco to buy enough shares from the local company and gain control over it. In the case of the U.S market, Tesco used Greenfield investment which failed to consider the U.S culture at the introduction of the Fresh & Easy. The company rather focused on establishing stores that had similar operations as of those in the United Kingdom (Lowe & Wrigley, 2009). This significantly contributed to the poor reception by the American people.
Consequently, due to their proximity from relatively large grocery stores, Arizona, Nevada, and California were the main targets for Fresh & Easy. Poor risk assessment by Tesco prevented them from identifying that the target areas were barely able to provide a sound environment for business due to that fact that they were surviving and economic recession resulting from the collapse of the real estate business. This intensified their risk of collapsing (Lowe & Wrigley, 2009). The risk of Tesco’s collapse was further aggravated by the fact that the company failed to conduct a market assessment to identify consumer aspects within the American market. Experts have indicated that the more ambient the store is, coupled with merchandising mechanisms as well as the service provided are the basic features recommended for a retail store especially in the American market (Butler, 2012). In this regard, Tesco’s Fresh & Easy performed poorly compared to other retail stores in the market. The company offered minimal customer service to consumers who were used to unlimited customer service. Moreover, the lack of coupons acted discouraged many consumers who were price sensitive and as such contributed to their collapse.
In the light of the above issues, it is clear that Tesco would have made it in the U.S markets by conducting an intensive market assessment. This approach would have helped them to identify the consumer preferences, appropriate market entry as well as identifying the need for creating a brand awareness strategy. These would have given them a competitive edge within the U.S market.
References
Butler, S. (2012). Fresh, but not so easy: Tesco joins a long list of British failure in America. The Observer .
Lowe, M., & Wrigley, N. (2009). Innovation in retail internationalisation: Tesco in the USA. The International Review of Retail, Distribution and Consumer Research, 19 (4), 331-347.
