International Expansion: Why Tesco Missed the Mark in the U.S. Market

tesco international expansion case study

Tesco is one of the largest retailers in the world. In 2021, the Tesco Group generated $66 billion USD in revenue. It currently operates 4,673 stores across the globe. Almost 4,000 of those stores are located in the United Kingdom, which is Tesco’s primary market. Based in Hertfordshire in southern England, Tesco “is the leading supermarket brand in the United Kingdom, consistently ranking highest in terms of grocery market share.” Tesco also operates successful stores across many European and Asian markets . In 2007, Tesco expanded in the United States under the brand, Fresh & Easy. At its peak, the company operated 208 stores in the market; however, due to its small store formats, skewed customer research, poor store locations, and food packaging concerns, the company was forced to exit the market in 2013 when it sold its remaining stores. In total, Tesco suffered losses of $1.6 billion USD as a result of its failed entry into the U.S. market.

Small Grocery Store Format

Tesco’s Fresh & Easy stores confused many American shoppers because the stores were much smaller than the traditional American grocery store. The typical Fresh & Easy store was around 3,000 square feet, which is less than one-third the size of an average American grocery, which is usually around 10,000 square feet. The stores were designed to make shopping easier and more convenient for the consumer. In short, they were built for daily shoppers. This daily shopper model, which is common in Europe, did not resonate with the typical American grocery shopper, who typically shops on a weekly basis. Tesco’s smaller stores had less variety which also frustrated the American consumer, who prefers to buy everything at a single store .

Skewed U.S. Market Research

The stores emphasized pre-prepared and ready-made meals, which did not resonate with the average consumer. Because Americans typically shop on a weekly basis, they are often buying items in bulk, which means ready-made items are less appealing . Tesco completed “ detailed market research including visiting shoppers at home to see what they bought and asking people to keep a food diary to observe what they consumed.” In their research, Tesco primarily talked to consumers in California. The company did not build a robust representative sample of the wider American grocery shopper. This oversight likely contributed to Tesco’s misguided decision to purchase small store formats with less variety and ready-made meals.  

Poor Store Locations

In its initial property deals, Tesco acquired store locations that “were essentially on the wrong side of the road .” Many Tesco store locations were located on the in-bound side of the road, which made it extremely difficult for people to stop on the way home from work as they left their jobs in the city. People would see the stores on the way into work when they were not looking to shop. Analysts say Tesco should have prioritized stores on the out-bound side of the road, so customers could quickly grab something for dinner on the way home from work. These poorly located stores severely hurt foot traffic in stores, which contributed to decreased sales in the U.S. market.

Food Packaging Concerns

In some ways, Tesco’s Fresh & Easy grocery stores were ahead of their time. Fresh & Easy stores fully embraced self-checkout . At the time, “self-pay checkouts for groceries were confusing for Americans so used to service .” The self-checkouts required products in the store to have a barcode clearly displayed. This meant that Tesco products were often individually wrapped in plastic for easy checkout. This frustrated American consumers, who are accustomed to touch and feel items like produce and fruit . The plastic wrapping undercut Tesco’s environmental and sustainability stance in the U.S. market. Despite its Fresh & Easy name, “it was hard to get quality fresh food there – especially fruit and vegetables.”

Tesco struggled to properly incorporate and contextualize the lessons learned during their customer research, which ultimately hurt the company’s expansion in the U.S. market. At CASTUS, we work with our clients to execute on their strategic growth plans to drive sustainable, long-term sales. If your company wants to expand into the U.S. market, we would love to talk with you .

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Tesco Corporation’s Internationalization Strategy Case Study

Introduction, analysis of the existing strategy, costs and benefits of the strategy, environmental challenges, resources/capabilities, new strategic directions.

Tesco is one of the leading UK retailers that started its international expansion in the 1990s. The company’s focus on internationalization was a successful strategy that led to remarkable growth in many regions and considerable profits that reached $3.8 billion in 2011 (Wrigley, Lowe, & Cudworth, 2013). However, success in some regions was accompanied by major failures in other areas, which led to significant losses, both financial and reputational. This paper includes a brief analysis of the company’s strategy, as well as challenges the company faces and new strategic directions to adapt to address these challenges.

The focus on international expansion was determined by the growing regulatory and competitive pressures Tesco had to handle in the domestic market. The first areas of expansion were countries of Central Europe that were undergoing major transformations in the 1990s after the collapse of the Soviet Union. Regulations in those countries were minimal, and competitors were also quite a few, which enabled the company to earn a significant share of the market (up to 27%) in 2011 (Wrigley et al., 2013). At that, Tesco experienced the most unprecedented growth in Asia, specifically in South Korea. The company is now the second-largest retailer in the country, with revenues of over £5 billion (Butler & Neville, 2013). The company is successfully penetrating the markets of India and China.

Nevertheless, the expansion into the US market that started in 2007 proved to be a failure as the company announced that all the stores would be closed and sold in the near future (Ruddick, 2013). It is noteworthy that Philip Clarke, the company’s CEO, understood the complexity of operating in the USA as the market was saturated, and the competition was rather fierce. However, the decision was to enter the American market with a focus on fresh food (which was quite expensive).

The internationalization of Tesco has a number of peculiarities. First, the company made some partnerships. One of the most successful partnerships was implemented in South Korea (Wrigley et al., 2013). Tesco and Samsung collaboration was successful as Tesco managed to address various issues associated with operating in new markets. First, the retailer managed to learn the peculiarities of the country’s legislation and regulatory policies.

Customers’ needs and characteristic features were also acknowledged. Tesco also managed to establish a retail chain that seemed fully domestic. Another peculiarity of Tesco’s expansion was the focus on its private labels rather than manufacturers’ products. The company also tried to be customer-oriented. However, in many regions, Tesco failed to achieve this goal, which led to failures and losses (Yoder, Visich, & Rustambekov, 2016). The company did not meet the needs of customers in the USA, Japan, and other regions.

It is necessary to note that internationalization is often an effective strategy used when the competition in the domestic market becomes too fierce, or other environmental challenges come into play (Wrigley et al., 2013). The expansion to other markets allows companies to improve profits through the increase in sales. The company can allocate funds wisely and invest in profitable projects. Operating in new markets helps companies become more flexible and innovative.

On the one hand, businesses learn about different regulatory policies and laws. On the other hand, they learn how to adjust to such environments. This flexibility is essential in the contemporary globalized world as regulations and norms existing in some countries tend to be adopted in other regions as well. There are chances that the norms and regulations existing in a foreign market will be used (with some differences) in the domestic market as well.

Nonetheless, the costs associated with the use of this strategy are also substantial. First, any expansion requires significant financial investments (related to acquisitions, alliances, construction of facilities, and so on). For instance, Tesco invested £1.25 billion to enter the American market (Wrigley et al., 2013). Clarke stated that this kind of investment was affordable for the company, and it could become transformational for Tesco in case of success. The CEO also stated that the major reputational loss in case of failure was associated with his name, not the company. Nevertheless, the reputational loss is apparent, and its negative effect can become visible soon. Unsuccessful expansion can come at a high cost, and Tesco’s failures in some regions can be seen as illustrations of these costs.

Tesco’s failures are associated with a number of wrong decisions as well as environmental challenges. First, the company entered the American market a year before the global financial crisis of 2008 (Butler & Neville, 2013). The environmental factor was accompanied by the inability to adjust and the inability to address customer needs (Yoder et al., 2016). For example, Fresh & Easy stores offered high-quality products, but they became unaffordable for price-sensitive Americans.

Furthermore, the focus on private labels was also ineffective in the US market. Martinez-Ruiz, Gonzalez-Gonzalez, Jimenez-Zarco, and Izquierdo-Yusta (2016) stress that American customers often become loyal to particular brands. People’s needs and preferences were not addressed, which resulted in failures. Customers’ peculiarities were not taken into account in other regions as well. For instance, in Poland, people prefer convenience stores to large hypermarkets while Tesco focuses on this type of retail units in that region (Ruddick, 2013). Apart from the inability to identify people’s needs, Tesco also faced issues related to the introduction of new regulations.

For instance, the changes in the Indian legislature has a negative effect on the development of the company and its further expansion in the region (Butler & Neville, 2013). Finally, many countries are trying to address serious financial issues and introduce new taxes, which also has an adverse impact on the company’s growth.

When discussing the resources and capabilities of the international retailer, it is necessary to note that Tesco has substantial funds to invest in numerous projects. The company’s billion profits show that significant funds can be allocated to innovate and expand. Apart from the obvious financial resources, the company also has other resources and capabilities. For instance, Tesco has a positive experience associated with the collaboration with companies operating in new (for Tesco) regions (Wrigley et al., 2013).

This experience can be helpful when expanding to new markets (in India and China). Tesco’s experience in collaborating with other companies can generate value as the company will be able to employ it in other regions (collaborating with other companies). The use of this strategy can help the company reduce costs, understand new markets better, and develop a proper image in the new market.

The company also tries to innovate and come up with new products and services. The development of private labels is one of the areas where Tesco has succeeded in many regions. For example, its tablets have acquired significant popularity (Warman, 2013). Hence, the development of private labels can help the company meet the existing and potential customers’ needs in a more efficient way.

The company is also expanding its e-commerce operations. Tesco’s management claims that being online is one of the major competitive advantages in the retailing industry (Warman, 2013). The company has quite effective information systems that can be used to implement marketing research, share knowledge within the company, and so on. The data obtained can help the company create value-added products and services that can attract more customers and meet the needs of the existing customers.

It may seem that the most appropriate strategy for Tesco is the focus on the domestic market and the most successful foreign markets (such as South Korea). However, the UK market is saturated, and the competition is very serious. The company needs to expand, but the expansion strategy should be based on the lessons learned from previous years. First, Tesco should launch large-scale market research with a focus on customers’ characteristic features (profile).

It is essential to understand what people need and want. One of the successful methods to learn more about new customers is the development of partnerships and alliances. Tesco can collaborate with local businesses to develop a successful marketing strategy.

Yoder et al. (2016) note that ineffective supply chain management contributed to Tesco’s failures. The company should implement research concerning the most efficient locations of stores and other facilities. This task is closely connected with another area of concern. The company should analyze the existing competition in new markets. Tesco should properly evaluate the existing competition and (based on this analysis) decide whether new Tesco stores can be set or other locations should be chosen. It is also important to identify Tesco’s competitive advantage to be able to win the competition or, at least, remain a successful player in the market.

Finally, Tesco should focus on innovation as this strategy has proved to be effective in South Korea and many other countries. The use of technology is instrumental in achieving this goal. For example, South Korean customers enjoy so-called virtual stores (Wrigley et al., 2013). These advances can be equally successful in western countries as well. The use of mobile technologies is also on the rise. E-commerce is another area to develop.

In conclusion, it is possible to state that Tesco has chosen an effective strategy that implies internationalization. This strategy is associated with numerous opportunities, including larger profits, growth, flexibility, organizational learning, etc. However, it is vital to avoid the mistakes the company has made. For instance, Tesco should reconsider its supply chain management, especially when it comes to the choice of location. The company should implement extensive research concerning customers’ needs and preferences.

It is also critical to evaluate properly the existing competition in different markets as well as environmental issues as macro and micro-economic factors affecting the development of countries and regions. Tesco should maintain its focus on innovation, but the use of advanced technologies and marketing strategies should be based on extensive market research. Although the company is still facing numerous internal and external issues, Tesco can still retain its leading position and improve its operations in different markets.

Butler, S., & Neville, S. (2013). Tesco’s empire: Expansion checked in UK and beyond . The Guardian . Web.

Martinez-Ruiz, M. P., Gonzalez-Gonzalez, I., Jimenez-Zarco, A. I., & Izquierdo-Yusta, A. (2016). Private labels at the service of retailers’ image and competitive positioning: The case of Tesco. In M. Gomez-Suarez & M. Martinez Ruiz (Eds.), Handbook of research on strategic retailing of private label products in a recovering economy (pp. 104-126). Hershey, PA: IGI Global.

Ruddick, G. (2013). Is Tesco’s dream of building an international empire unravelling? The Telegraph . Web.

Warman, M. (2013). Tesco Hudl tablet takes on Kindle and iPad . The Telegraph . Web.

Wrigley, N., Lowe, M., & Cudworth, K. (2013). The internationalization of Tesco: New frontiers and new problems. In G. Johnson, R. Whittington, D. Angwin, K. Scholes, & P. Regner (Eds.), Exploring strategy: Text and cases (pp. 657-661). Harlow, UK: Pearson.

Yoder, S., Visich, J., & Rustambekov, E. (2016). Lessons learned from international expansion failures and successes. Business Horizons , 59 (2), 233-243.

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IvyPanda. (2021, July 21). Tesco Corporation's Internationalization Strategy. https://ivypanda.com/essays/tesco-corporations-internationalization-strategy/

"Tesco Corporation's Internationalization Strategy." IvyPanda , 21 July 2021, ivypanda.com/essays/tesco-corporations-internationalization-strategy/.

IvyPanda . (2021) 'Tesco Corporation's Internationalization Strategy'. 21 July.

IvyPanda . 2021. "Tesco Corporation's Internationalization Strategy." July 21, 2021. https://ivypanda.com/essays/tesco-corporations-internationalization-strategy/.

1. IvyPanda . "Tesco Corporation's Internationalization Strategy." July 21, 2021. https://ivypanda.com/essays/tesco-corporations-internationalization-strategy/.

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IvyPanda . "Tesco Corporation's Internationalization Strategy." July 21, 2021. https://ivypanda.com/essays/tesco-corporations-internationalization-strategy/.

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Please note you do not have access to teaching notes, the secrets of tesco's expansion success: how the uk's largest supermarket is creeping up on carrefour and wal‐mart.

Strategic Direction

ISSN : 0258-0543

Article publication date: 1 December 2005

Reviews the latest management developments across the globe and pinpoints practical implications from cutting‐edge research and case studies.

Design/methodology/approach

This briefing is prepared by an independent writer who adds their own impartial comments and places the articles in context.

The UK's supermarket customers have long known the secret of Tesco's success. Living up to their advertising strapline of “Every little helps”, consumers have flocked to their stores for not only well‐stocked, cheap provisions, but an increasing number of goods and services – from TVs to insurance, deckchairs to mobile phones.

Practical implications

Provides strategic insights and practical thinking that have influenced some of the world's leading organizations.

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The briefing saves busy executives and researchers hours of reading time by selecting only the very best, most pertinent information and presenting it in a condensed and easy‐to‐digest format.

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(2005), "The secrets of Tesco's expansion success: How the UK's largest supermarket is creeping up on Carrefour and Wal‐Mart", Strategic Direction , Vol. 21 No. 11, pp. 5-7. https://doi.org/10.1108/02580540510630650

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Tesco’s Stumble into the US Market

  • Entering the US, Tesco deserves credit for creating a neighborhood market approach—emphasizing fresh produce and meats, and good quality but value-priced prepared meals.
  • By not partnering or hiring local executives, Tesco missed the opportunity to learn more about the habits and needs of target customers.
  • Tesco rightly aimed to scale the concept as soon as possible so that fixed overhead investments in its own distribution centers could be spread across a larger number of stores.
  • Perhaps Tesco's original rollout plan was too ambitious, with executives assuming that the company would get everything right on the first try.
  • Tesco has listened to its customers, learned from its mistakes, and made appropriate midcourse corrections.

Tesco PLC is the third-largest retailer in the world, just behind Wal-Mart and Carrefour. But that didn't make the UK-based chain immune from many costly mistakes as it entered the US market in 2006.

For example, it opened some of its Fresh & Easy stores on the wrong side of the road, eliminated discount coupons, and decorated in a spare style more suited to a hospital than a food retailer. Five years later, Fresh & Easy has not made a dime, and analysts are wondering whether the company should pack up and go home, as so many other British retailers have done before it.

Tesco's story makes ideal Harvard Business School case material for teaching everything from multinational strategy to on-the-ground logistics. Marketing professor John A. Quelch recently introduced Tesco PLC: Fresh & Easy in the United States , developed from public sources.

Sean Silverthorne: Each country poses its own obstacles for multinationals entering new geographies. Your recent case on Tesco highlights challenges faced by companies coming to do business in the United States. Tell us about the initial strategy to conquer the United States with Fresh & Easy stores.

John Quelch: The United States is an unusually competitive and cluttered market. It is tough to succeed without a clear and sustainable point of differentiation. While successful grocery retailers are expanding internationally, the odds are long. Both Sainsbury's and Marks & Spencer of the United Kingdom have withdrawn from the United States. Wal-Mart tripped up badly in Germany.

Tesco's international forays have hitherto been successful—with the possible exception of Japan. Tesco intelligently elected to concentrate on fast-growing, emerging economies in Eastern and Central Europe and in southeast Asia. Its modus operandi has been to joint venture with a local retailer, acquiring good store locations and local management talent in the process.

Tesco deserves credit for not taking a "me-too" approach in its US strategy. Tesco entered the California, Arizona, and Nevada markets with a new retail concept: a neighborhood market emphasizing fresh produce and meats, and good quality but value-priced prepared meals. Averaging 4,000 items in assortment, its Fresh & Easy stores aimed to be distinctive on those two attributes: fresh and easy, conveniently located stores with a conveniently preselected assortment.

Q: The company did a serious amount of homework before entering the United States, including sending 50 British executives to live with California families. But it seems the advance team didn't learn all that it should, such as the notion that designing stark stores with concrete floors wouldn't necessarily appeal to American tastes. What can other companies that are thinking of moving into the United States learn about Tesco's early fact gathering and strategy development?

A: I suspect that Tesco had a view on what would work before sending its executives to live with those California families. The result was perhaps a bias toward gaining evidence in support of a predetermined strategy.

California is a car culture. Most households undertake a weekly shopping expedition, supplemented with stock-up purchases at convenience stores. A small neighborhood market's success depends on enough consumers changing behavior to buy a higher proportion of their groceries on a more frequent basis. This could work in inner-city locations where younger shoppers might buy their evening meal on the way home each day, but it is less likely to work in the suburbs.

In addition, the Fresh & Easy assortment carried around 50 percent private- label products, rather than more familiar national brands. And finally, fresh produce was prepacked rather than loose on the shelves. While this can actually improve freshness, consumers perceive the opposite.

Q: Tesco decided initially to fill its US management ranks mostly with British expats instead of hiring locally. How did that strategy work for them? What can we all learn?

A: Tesco established Fresh & Easy as a greenfield investment rather than acquiring or joint venturing with a US retailer as its starting point. Therefore, Tesco did not have immediate access to local retail savvy, not just in store design and assortment but also in the critical area of store locations.

Many Fresh & Easy stores are refits of preexisting retail stores that were up for sale; at least some of these stores were on the wrong side of the road, more easily accessible to inbound rather than outbound commuters who would more likely be thinking about what to buy for dinner. Foreign managers, transplanted from the UK, might not readily have these kinds of insights. And as a greenfield newcomer, Tesco would not necessarily attract California retailing's best and brightest talent as it would assuredly do in the UK.

Q: As sales remained under plan, Tesco execs halted development of new stores temporarily and made adjustments to those stores already open, such as shifting product mix, allowing some coupon discounting, and expanding hours. Do you have advice for companies about revisiting original assumptions? Do companies new to the American market have to do this reassessment more frequently or look for different things?

A: Tesco has not been afraid to listen to its customers, learn from its mistakes, and make appropriate midcourse corrections.

The assortment was expanded by 600 items; stores that were originally stark and unwelcoming—to project a value price feel—were painted in pastel colors; and more signage was added. Weekly price specials were increased to build store traffic.

Perhaps Tesco's original rollout plan was too ambitious. It assumed that Tesco would get everything right on the first try. On the other hand, Tesco rightly aimed to scale the concept as soon as possible so that fixed overhead investments in its own distribution centers could be spread across a larger number of stores.

Q: What issues do students have to answer as they make their way through the Tesco case?

A: There are two questions that students must wrestle with.

First, are Tesco's problems in the United States a result of poor strategy or poor execution? The latter problem is obviously more correctable. On the other hand, Tesco has lost time; competitors have responded to its initiatives by incorporating some of Tesco's approaches in their own merchandising and assortment selections.

The second question is how long the Tesco board will permit management to hemorrhage losses in the United States. Originally, Tesco announced a five-year plan to profitability that would come due in 2011.

Q: The case ends with Tesco in the fourth year of its five-year plan, with largely disappointing results. We heard the news recently that Philip Clarke has authorized a new expansion program through at least 2013, when it finally expects Fresh & Easy to become profitable. Correct decision?

A: Sir Terry Leahy, Tesco's highly successful CEO for more than a decade, recently announced that he would step down in favor of Philip Clarke, a long-standing Tesco insider. Speculation that this might result in the the company abandoning the Fresh & Easy experiment no doubt prompted the recent announcement that Fresh & Easy would be given a two-year reprieve until 2013.

Tesco has the resources to continue, and the US market's size remains a juicy target if Tesco can get it right.

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Tesco in Korea - a classic case study in international expansion

tesco international expansion case study

6th September 2009

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A great article in The Sunday Times today examines the strategy behind the success of Tesco’s expansion in South Korea…

International expansion is a key topic in the new A2 specs and the case study of Tesco’s approach to building market share in Korea is a great example to use.

The Sunday Times article is here

Some of the key points I noted down are:

- Tesco’s investment in Korea was set up as a joint venture partnership with Samsung - the leading Korean conglomerate

- Tesco will soon achieve market leadership, with more than a third of the market

- Tesco’s share of the Korean business’ profits is forecast to rise to almost £0.5bn by 2014

- Of the 23,000 staff, just 4 are from the UK!

- The success of the business is all about Tesco operating it as a local business, taking full account of the Korean way of life

- The Korean stores also double-up as community centres, even including schools!

- 25% (13million) Koreans are signed up to the Tesco customer loyalty scheme

Students can learn more about Tesco’s international strategy here

Jim co-founded tutor2u alongside his twin brother Geoff! Jim is a well-known Business writer and presenter as well as being one of the UK's leading educational technology entrepreneurs.

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The Strategy Story

TESCO – British Retailer that redefined Grocery Shopping

The first time I visited a ‘Tesco Extra’ store was at midnight, making an emergency run for next morning’s breakfast. The store seemed to occupy the area of an entire football field in Ashby-De-La-Zouch, UK. Even at an ungodly hour, Tesco was well-lit with visiting customers.

Inside, there were never-ending aisles lined up with groceries, food items, clothing, electronics, and whatnot. It was easy to lose way and lose track of time in the colossal supermarket.

I thought to myself that this would be the only store of its kind in the county, but I was wrong.

Tesco has 4008 stores across the UK and Republic of Ireland , with 7005+ stores and franchises across the world. In Europe, Tesco has established itself in Hungary, Slovakia, Czech Republic, Poland and Turkey. In Asia it has stores in Thailand, South Korea, Malaysia, Japan and China.

TESCO is much more than a chain of supermarkets selling a million products. It’s a giant conglomerate, spanning across so many verticals. It’s the equivalent of one of the FAANG companies but in the Grocery & Retail sector. It becomes imperative for business enthusiasts like you and me to understand the business model of this retail giant called Tesco.

It’s considered a part of the ‘Big Four’ supermarkets alongside ASDA, Sainsbury’s, and Morrison’s in Europe.

Infographic: The UK's favourite supermarkets | Statista

The Birth of Supermarkets in Britain

Founded in 1919 by a war veteran – Jack Cohen , Tesco began as a grocery stall in the East End of London, making a profit of £1 on sales of £4 on day one. Tesco’s first store was launched in 1929, selling dry goods & its own brand of Tesco Tea. A hundred more Tesco stores were opened in the next 10 years.

With 100+ mom-and-pop stores in Britain, Jack wanted to expand his product range. He traveled to the US in 1946 and noticed the self-service system, where customers would select different products on the shop floor and finally checkout at a counter. Jack brought this concept back to Britain, giving birth to Tesco Supermarkets and changing the face of British Shopping. His motto was to “stack ‘em high, and sell ‘em low (cheap).”

Tesco has a wide range of supermarkets depending upon their size, range of products, and location. This also helps regulate their Supply Chain to reduce wastage.

tesco international expansion case study

Tesco Business Model is based on various verticals

Tesco has deep-rooted its businesses in the European market so well, it’s difficult to miss out on the Tesco hoarding anywhere. Its Businesses and subsidiaries are:

tesco international expansion case study

A glimpse into the Complex Supply Chain

A supply chain is one of the critical aspects of the business model of a giant retailer like Tesco. Tesco has its priorities set when it comes to procuring products from different parts of the world:

  • Use expertise to offer a better range of products at reasonable prices
  • Use economies of scale to buy more for less
  • Leverage and maintain relations with global branded suppliers
  • Grow the brand

It procures goods from over 44 countries, majorly China. A stock of up to 90,000 different products (30% are food & beverages) is transferred via the global sourcing office located in Hong Kong. Keeping wholesalers out of the loop, Tesco procures directly from suppliers. The conglomerate has developed and maintained long-lasting relations with suppliers’ world over—the main ones being General Mills, Kellogg, Mars, and Princes.

Tesco has set up a separate division to regulate its supply chain, “the machine behind the machine” – Tesco International Sourcing (TIS). It can be compared to the East India Company of the 18 th -19 th Century, catering to only one customer – Tesco.

TIS is connected to over 1000+ suppliers across 1200+ factories . It’s responsible for over 50,000 Tesco product lines in terms of quality control, sourcing, production, designing, timely delivery, and sorting trading/customs documentation.

All activities are coordinated centrally at TIS, with just 533 staff members. These staff members undergo rigorous training to detect & analyze Supplier-violations and conduct Auditing.

tesco international expansion case study

Tesco coordinates with TIS on a daily basis to procure products in the following ways:

  • The local team uses customer insights to create a Product Brief (new or modified) specified for each region.
  • TIS analyzes the product brief and develops a Product Sourcing Plan depending upon – stores that need this product and figuring out minimum transport time and cost, as per the region.
  • The Plan is executed, and specific demands are handed out to Suppliers all over the world. Expert TIS Buyers make sure the best deal is made.
  • Inbound logistics are consolidated at specific Tesco Depot to receive the product efficiently from Suppliers.
  • Local teams then make sure the product is distributed to different Tesco stores from the Depots.

Tesco adding eCommerce to the mainstream business model

Being in the Top 50 retailers globally as of 2021 , Tesco’s annual revenue worldwide in 2020 was £58.09B , a 9.1% decline from 2019 (due to the Pandemic & disposing of its Asia operations , to focus on the core business in Europe).

It shifted from Brick & Mortar to Brick & Click stores. The Click+Collect functionality on its website accounts for 43% of E-grocery sales in the UK. The Click+Collect concept enables customers to place their orders online and collect their orders a few hours later at the nearest Tesco Depot. Tesco created these specialized Depots for online orders only.

Despite shutting down most its mall operations, Tesco survived 2020 through its online retail store Tesco.com , with double the orders. Its E-commerce net sales had shot up by 31% from 2019-2021.

tesco international expansion case study

A Global Operations & Technology Center in Bengaluru was also set up in 2004. This center serves as the backbone of distribution operations for Tesco worldwide. Its business functions are- Finance, Property, Distribution Operations, Customers & Product. The employees at this Center are Engineers, Analysts, Designers, and Architects.

Tesco’s Marketing Strategy

Tesco has always believed in acquiring loyal customers and regaining stakeholders’ trust. It aims to reach customers from all financial backgrounds. So it launched 2 of its own sub-brands – Tesco finest for the affluent customers and Tesco Everyday Value for the rest of the crowd.

Tesco also launched the Club Card in 1995 as a Membership card, to maintain customer loyalty and keep them coming back. The Card operates on a point-based system with discounts on products, & other subsidiaries like double data on Tesco Mobile. With 5 Million subscribers in the first year , Tesco finally overtook its competitor – Sainsbury’s to become No.1 in the UK.

The Club-card strategy was used to obtain customer data and observe buying habits. This data was analyzed, allowing Tesco to put the right products on shelves while eliminating unpopular ones. Tesco realized that the Club Card isn’t just a quick fix & temporary promotional tool; it’s a promotion in itself. This made the Tesco Club Card unique and long-lasting.

Tesco also realized that spending Billions on traditional marketing efforts and maintaining a ‘one-size-fits-all’ brand image wouldn’t work. It decided to hyper-target specific customers and to earn their trust. For starters, thousands of head-office staff and senior executives were sent to work in stores – to demonstrate how Tesco values its customer. Customization became key for its new marketing strategy; sending out discounts on birthdays via Emails and campaigning from door-to-door.

Tesco also made a partial shift to Digital Marketing which costs much lesser and has a wider outreach. It created well-tailored profiles on all social media platforms. On Twitter, it has more than 15 accounts, separate for each of its business units. The online customer care account on Twitter is active 24-7.

All supermarkets commonly advertised themselves to have quality products at a reasonable cost; Tesco wanted to differentiate itself as a unique brand. It introduced step-by-step Recipes prepared from ingredients available at any Tesco store, with Chef Jamie Oliver as its Health Ambassador . Tesco Food and its variety of recipes were a massive hit. Later on, the monthly Tesco Magazine as a food & lifestyle magazine was also launched, with 4.65Million readers worldwide.

The beginning of the pandemic in March 2020 left people apprehensive about visiting a physical store to buy groceries. To deal with customers’ concerns, Tesco came up with an instructional advertisement in April ‘20. With crisp instructions similar to that of an in-flight safety video, this ad showed customers how to physically shop and behave at Tesco stores. It was considered to be the most effective advertising and communications campaign of 2020 as per YouGov BrandIndex .

Competition

Tesco’s earliest competitor has been Sainsbury’s since the 70s. The Tesco Club Card strategy in 1995 helped it overtake Sainsbury’s to become the No.1 Retailer in the UK, but not for long. The ‘Big Four’ supermarkets in Europe have been in close competition throughout the years. Tesco has acquired a 28% majority stake in the UK market.

The horse meat and accounting scandals were a real setback for Tesco, letting competitors take over the European market. The newest German entrants – Aldi and Lidl had caught customers’ attention and market share in a short span of time.

With a combined market share of 12%, these German retailers posed a threat to Tesco. So much so that Tesco began the ‘ Aldi Price Match ’ campaign to curb the growth of the German discounter and win back customers. Tesco started price-matching thousands of its products with that of Aldi, offering better quality and branded products at Aldi’s prices.

Tesco has a majority market share in Britain, with Sainsbury’s and ASDA in tow:

tesco international expansion case study

Tesco Adding Sustainability to its business model – The Little Helps Plan

It’s a well-known fact that giant conglomerate retailers are one of the major causes of rapid climate change and increasing carbon footprints. Tesco realized its impact on the planet and launched the Little Helps Plan as a core part of business in 2017. This plan serves as a framework to attain long-term sustainability. Its four Pillars – People, Products, Planet, and Places are aligned with the UN’s Sustainable Development Goals.

tesco international expansion case study

Until now, the Plan has enabled Tesco to:

  • Permanently remove 1 Billion pieces of plastic from its packaging
  • Redistribute 82% of unsold food, safe for human consumption
  • Remove 52Billion unnecessary calories from foods sold

Apart from this, it also aims to increase sales of Plant-Based Meat alternatives by 300% by 2025. At present, it has 350 plant-based meat alternatives on the shelf.

Apart from partnering with various other organizations, Tesco entered a 4-year partnership with World Wide Fund for Nature (WWF) to address one of the biggest causes of wildlife loss – the global food system. It aims to eliminate deforestation from products, promote recyclable/compostable packaging and minimize food waste.

Tesco is one of the few successful retailers in the world, with a compelling history. Tesco has overcome numerous issues across its supply chain, faced global criticism, and still stands undeterred in the European market with its rock-solid business model. It has always adapted to its unpredictable consumers and continues to do so while caring for the planet.

The business is healthy. We said we would rebuild the relationship with the brand and consumers; you will see that in every measure of customer satisfaction we do that. The business is healthy, vibrant and there is a lot of optimism of what we can do going forward. CEO Dave Lewis, who took over Tesco in 2014 (during the struggle years) & stepped down in September 2020

-AMAZONPOLLY-ONLYWORDS-START-

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tesco international expansion case study

An Engineering grad, currently working in the fields of Big Data & Business Intelligence. Apart from being immersed in Tech, I love writing and exploring the business world with a focus on Strategy Consulting. An ardent reader of Sci-Fi, Mystery, and thriller novels. On my days off, I would spend time swimming, sketching, or planning my next trip to an unexplored location!

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Retail multinational learning: a case study of Tesco

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Research output : Contribution to journal › Special issue › peer-review

Purpose - This article examines the internationalisation of Tesco and extracts the salient lessons learned from this process. Design/methodology/ approach - This research draws on a dataset of 62 in-depth interviews with key executives, sell- and buy-side analysts and corporate advisers at the leading investment banks in the City of London to detail the experiences of Tesco's European expansion. Findings - The case study of Tesco illuminates a number of different dimensions of the company's international experience. It offers some new insights into learning in international distribution environments such as the idea that learning is facilitated by uncertainty or "shocks" in the international retail marketplace; the size of the domestic market may inhibit change and so disable international learning; and learning is not necessarily facilitated by step-by-step incremental approaches to expansion. Research limitations/implications - The paper explores learning from a rather broad perspective, although it is hoped that these parameters can be used to raise a new set of more detailed priorities for future research on international retail learning. It is also recognised that the data gathered for this case study focus on Tesco's European operations. Practical implications - This paper raises a number of interesting issues such as whether the extremities of the business may be a more appropriate place for management to experiment and test new retail innovations, and the extent to which retailers take self-reflection seriously. Originality/value - The paper applies a new theoretical learning perspective to capture the variety of experiences during the internationalisation process, thus addressing a major gap in our understanding of the whole internationalisation process. © Emerald Group Publishing Limited.

  • international business
  • multinational companies

Access to Document

  • 10.1108/09590550510577110

Other files and links

  • Link to publication in Scopus
  • http://www.emeraldinsight.com/journals.htm?articleid=1464111&show=abstract

Fingerprint

  • Retail Business & Economics 100%
  • Multinationals Business & Economics 75%
  • learning Earth & Environmental Sciences 72%
  • globalization Earth & Environmental Sciences 43%
  • Internationalization Process Business & Economics 28%
  • international distribution Earth & Environmental Sciences 23%
  • emerald Earth & Environmental Sciences 17%
  • Internationalization Business & Economics 15%

T1 - Retail multinational learning

T2 - a case study of Tesco

AU - Palmer, Mark J.

N2 - Purpose - This article examines the internationalisation of Tesco and extracts the salient lessons learned from this process. Design/methodology/ approach - This research draws on a dataset of 62 in-depth interviews with key executives, sell- and buy-side analysts and corporate advisers at the leading investment banks in the City of London to detail the experiences of Tesco's European expansion. Findings - The case study of Tesco illuminates a number of different dimensions of the company's international experience. It offers some new insights into learning in international distribution environments such as the idea that learning is facilitated by uncertainty or "shocks" in the international retail marketplace; the size of the domestic market may inhibit change and so disable international learning; and learning is not necessarily facilitated by step-by-step incremental approaches to expansion. Research limitations/implications - The paper explores learning from a rather broad perspective, although it is hoped that these parameters can be used to raise a new set of more detailed priorities for future research on international retail learning. It is also recognised that the data gathered for this case study focus on Tesco's European operations. Practical implications - This paper raises a number of interesting issues such as whether the extremities of the business may be a more appropriate place for management to experiment and test new retail innovations, and the extent to which retailers take self-reflection seriously. Originality/value - The paper applies a new theoretical learning perspective to capture the variety of experiences during the internationalisation process, thus addressing a major gap in our understanding of the whole internationalisation process. © Emerald Group Publishing Limited.

AB - Purpose - This article examines the internationalisation of Tesco and extracts the salient lessons learned from this process. Design/methodology/ approach - This research draws on a dataset of 62 in-depth interviews with key executives, sell- and buy-side analysts and corporate advisers at the leading investment banks in the City of London to detail the experiences of Tesco's European expansion. Findings - The case study of Tesco illuminates a number of different dimensions of the company's international experience. It offers some new insights into learning in international distribution environments such as the idea that learning is facilitated by uncertainty or "shocks" in the international retail marketplace; the size of the domestic market may inhibit change and so disable international learning; and learning is not necessarily facilitated by step-by-step incremental approaches to expansion. Research limitations/implications - The paper explores learning from a rather broad perspective, although it is hoped that these parameters can be used to raise a new set of more detailed priorities for future research on international retail learning. It is also recognised that the data gathered for this case study focus on Tesco's European operations. Practical implications - This paper raises a number of interesting issues such as whether the extremities of the business may be a more appropriate place for management to experiment and test new retail innovations, and the extent to which retailers take self-reflection seriously. Originality/value - The paper applies a new theoretical learning perspective to capture the variety of experiences during the internationalisation process, thus addressing a major gap in our understanding of the whole internationalisation process. © Emerald Group Publishing Limited.

KW - international business

KW - learning

KW - multinational companies

KW - retailers

UR - http://www.scopus.com/inward/record.url?scp=18844441797&partnerID=8YFLogxK

UR - http://www.emeraldinsight.com/journals.htm?articleid=1464111&show=abstract

U2 - 10.1108/09590550510577110

DO - 10.1108/09590550510577110

M3 - Special issue

SN - 0959-0552

JO - International Journal of Retail and Distribution Management

JF - International Journal of Retail and Distribution Management

Retail Multinational Learning: A Case Study of Tesco

Influential Citations

Quality indicators

International Journal of Retail & Distribution Management

Key Takeaway : Tesco's European expansion reveals that international retail learning is facilitated by uncertainty and shocks, and not necessarily by incremental expansion approaches.

Purpose - This article examines the internationalisation of Tesco and extracts the salient lessons learned from this process. Design/methodology/ approach - This research draws on a dataset of 62 in-depth interviews with key executives, sell- and buy-side analysts and corporate advisers at the leading investment banks in the City of London to detail the experiences of Tesco's European expansion. Findings - The case study of Tesco illuminates a number of different dimensions of the company's international experience. It offers some new insights into learning in international distribution environments such as the idea that learning is facilitated by uncertainty or "shocks" in the international retail marketplace; the size of the domestic market may inhibit change and so disable international learning; and learning is not necessarily facilitated by step-by-step incremental approaches to expansion. Research limitations/implications - The paper explores learning from a rather broad perspective, although it is hoped that these parameters can be used to raise a new set of more detailed priorities for future research on international retail learning. It is also recognised that the data gathered for this case study focus on Tesco's European operations. Practical implications - This paper raises a number of interesting issues such as whether the extremities of the business may be a more appropriate place for management to experiment and test new retail innovations, and the extent to which retailers take self-reflection seriously. Originality/value - The paper applies a new theoretical learning perspective to capture the variety of experiences during the internationalisation process, thus addressing a major gap in our understanding of the whole internationalisation process. © Emerald Group Publishing Limited.

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Strategic Expansion of Tesco in India: A Case Study

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    Global. Tesco is one of the largest retailers in the world. In 2021, the Tesco Group generated $66 billion USD in revenue. It currently operates 4,673 stores across the globe. Almost 4,000 of those stores are located in the United Kingdom, which is Tesco's primary market. Based in Hertfordshire in southern England, Tesco "is the leading ...

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    Tesco's management was worried and highly concerned about the growth of store expansion in India. After Tesco's exit from Thailand and Malaysia, the tension in India operations was much more prominent. Top management of India operations was asked to develop a Roadmap-2025 for India expansion. In this context, Mr Aniket Bansal—the Head of ...

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    The company. manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as. providing an extensive range of online products and additional customer ...

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    This case Tesco, UK's Largest Supermarket Group, International Expansion Strategies focus on Tesco, UK's largest and world's third largest retailer, to expand into foreign markets for sustaining its future growth in the global retail industry. The company initiated its international expansion strategy by venturing into Central Europe, Asia and the US.

  6. (DOC) Case study of Tesco plc: Future international expansion strategy

    After the first year the situation will be re-analysed and an expansion of 7 more stores across the country is proposed.Based on the outcome, the plan is to open 42 stores in by the end of a five year period. 6. Conclusion This report clearly analyses the international market of Brazil for Tesco's expansion.

  7. Retail multinational learning: a case study of Tesco

    Findings - The case study of Tesco illuminates a number of different dimensions of the company's international experience. It offers some new insights into learning in international distribution environments such as the idea that learning is facilitated by uncertainty or "shocks" in the international retail marketplace; the size of the domestic market may inhibit change and so disable ...

  8. The secrets of Tesco's expansion success: How the UK's largest

    - Reviews the latest management developments across the globe and pinpoints practical implications from cutting‐edge research and case studies., - This briefing is prepared by an independent writer who adds their own impartial comments and places the articles in context., - The UK's supermarket customers have long known the secret of ...

  9. PDF Analyzing and Evaluating Critically Tesco's Current Operations Management

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    In the mid-1990s, saturation in its domestic market forced Tesco, the UK's largest and the world's third largest retailer, to expand into foreign markets for sustaining its future growth in the global retail industry. The company initiated its international expansion strategy by venturing into Central Europe, Asia and the US.

  15. Tesco in Korea

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  17. Retail multinational learning: a case study of Tesco

    Findings - The case study of Tesco illuminates a number of different dimensions of the company's international experience. It offers some new insights into learning in international distribution environments such as the idea that learning is facilitated by uncertainty or "shocks" in the international retail marketplace; the size of the domestic ...

  18. Retail Multinational Learning: A Case Study of Tesco

    Design/methodology/ approach - This research draws on a dataset of 62 in-depth interviews with key executives, sell- and buy-side analysts and corporate advisers at the leading investment banks in the City of London to detail the experiences of Tesco's European expansion. Findings - The case study of Tesco illuminates a number of different ...

  19. Tesco in China Market Expansion Failure Analysis Study

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  20. Case Study Of Tesco's International Expansion Strategy

    Case Study Of Tesco's International Expansion Strategy. JCB chose to enter India via a joint venture, as opposed to some other entry mode because of high trade tariffs made export to India difficult. The Indian government enforced regulations by requiring foreign investors to have joint ventures with local companies even though JCB want to do ...

  21. Tesco Expansion Case Study

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  22. Strategic Expansion of Tesco in India: A Case Study

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