TESCO’S AMERICAN LESSON

Last week we learned that the UK supermarket giant, Tesco, was pulling out of its ‘Fresh and Easy’ supermarket venture in the West Coast of the United States.  It opened some 200 stores in California, Arizona and Nevada over the past five years, but it failed to gain market share and compete with the big American supermarket stores.

Why did this happen?  Surely Tesco must have done its homework and carried out the research.  Perhaps they didn’t take heed of the market research, perhaps the research didn’t tell Tesco what they needed to know. Perhaps they didn’t study the competition properly.

Well.  It was an expensive business venture, because Tesco are reported to have made losses of $2 Billion.

For me, the overwhelming business mistake was that Tesco did not take account of cultural adaptation.  The grocery shopping habits of the West Coast US consumer are a large weekly shop, arriving typically in a large vehicle and going home to a large fridge and freezer.  A regular ‘drop in’ for fresh groceries, in the way that a ‘Tesco Express’ may work successfully in the UK is not the model that works in the West Coast of America.  Do not be fooled that a country that apparently has a common language has a common culture, because it does not.

The moral of the story for your international business development is that you must put cultural awareness and adaptation high within your strategic international planning.  If you do not, you will suffer the business consequences, just as Tesco have discovered.