Tesco Case Analysis

Tests had an In store policy that a new checkout line would be opened If there was m re than 1 person waiting In line and they were pioneers In self service checkout terminal. Tests was also innovative with its store formats. Tests stores ranges in size and service fro m; Express, Metro, Superstore, Extra, and Homeless. Tests used consumer purchase data to tailor assortments to local customer needs. Tests also increased the amount of non food items they stocked to include a clothing line.The Club card, which offered cash back rewards and redeemable vouchers, was successful In creating loyalty among Its consumer. Tests proved successful In International operations by expanding Into emerging entries with minimal competition such as those in Eastern Europe and Asia. It AC aired smaller, established retailers and kept local management in place. They were flexible in their strategy and acted locally using multiple formats.Tests also leveraged its brand loyalty to expand in other service a reas such as; flan telecommunications, and grocery delivery. This by partnering or eventually acquiring recognized and trusted brands/organizations. 2. Which success factors are or are not transferable to the US? Transitioning to the United States presented a challenge for Tests considering that t Eire major factor of international success have been the lack of strong competition in the new areas to expand.Clearly not this case, because there were around 35,000 supermarkets In t and in addition, almost every retailer from drugstores to home improvement centers sold some grocery items. There existed intense price competition as the U. S. Was over stored, according to some industry analysts, and the average U. S. Supermarket realized an operating proof t of 2% to 3% of sales, presenting a much different landscape from what Tests was transitioning g from in the U. K.Nevertheless, Tests identified an increasing consumer interest in wellness, in health conscious food choices and a contin uing trend towards on the go consumption, especially evident in California as a result of greater automobile commuting times compared to the national average. Tests hoped to avoid the headed head competition for the weekly family shopping trim with the established grocery chains, a niche it dominated in the U. K. , and rather focus s on targeting an undeserved niche in the marketplace. 3. Was Tests smart to enter the US market? In California, Arizona and Nevada?Although early analysis led decision makers to believe the US, especially the Southwest was a good market to enter actual performance leads one to think otherwise. Tests c inducted a great deal of due diligence prior to entering the US market. They analyzed trends I indicated by market research, sent senior managers to live with Californian families, and conducted d a mock store tour with 200 focus groups. By targeting an undeserved niche in the marketplace ace, Tests hoped to avoid headed head competition for the weekly fami ly shopping trip with established grocery chains.Several other factors demonstrated potential to include: o Grocery retailing in the US embraced multiple formats (in keeping with Tests strategy No national grocery retailer in the US None of the principal supermarket chains (Kroger, Safely, Supernal) commanded more than 15% of US grocery sales Market size: $600 billion Possible gap between convenience stores and supermarkets that might be filled by neighborhood markets o Increasing customer interest in wellness, in health conscious food choices, and a Tests specifically looked to the following benefits of California, Arizona and Nevada:S Grocery retailing not dominated by any one chain S Lower penetration by Wall Mart than in other US regions S CA: rapidly growing, ethnically diverse population of over 35 million, median house hold income well above national average S AZ, NV. Similarly diverse and growing rapidly Despite all of the potential benefits, Tests faced several challenges t o include: Competition (35,000 supermarkets) Almost every retailer from drugstores to home improvement centers also sold grocer y items (overstated) Intense price competition Economic downturn Low average operating profits of 23% of salesPrior attempts by British supermarket chains to expand into the US had proven nuns successful 4. What is the Fresh & Easy value proposition? Is it likely to be appealing in California, Arizona and Nevada? â€Å"C†¦ ] customers wanted great service, choice, and value† (p. 4) â€Å"offer fresh, wholesome food at affordable prices† (p. 7) â€Å"strong commitment to being a good neighbor and a great place to work† (p. ) emphasis on everyday low pricing rather than weekly specials hoped to leverage lower operating costs to deliver â€Å"honest low prices† on â€Å"fresh wholesome food† that â€Å"should be available to everyone† in a â€Å"neighborhood market† ( Employees from local community, careful ly selected to fit Deco's culture (p. 7) Nonfood items would account for only 5% of sales (p. 7) â€Å"ready to sell† approach, whereby many products sent from distribution center to store packaged, extending product freshness, protecting produce from damage, cutting down on spoilage, requiring less refrigeration, and reducing labor needed to stock shelves (p. ) Leveraging relationships with collaborators for distribution (p. 8); this centralized MO del was similar to Walter's Smaller stores = easier permitting process Taking over existing, vacant drugstores = cheaper than building from scratch New stores built from prepare materials = quicker construction, lower overhead, streamlined supply chain Energy efficient stores (30% less energy than comparable, traditional stores; some stores LED certified) Fresh & Easy emphasized everyday low pricing rather than weekly specials and hope d to on â€Å"fresh wholesome food† that â€Å"should be available to everyone† in a â€Å"neighborhood market. Fresh & Easy leveraged relationships with collaborators for distribution to create value e by minimizing costs and emphasize fresh. Their â€Å"ready to sell† approach, whereby prepare caged products went directly from distributors to local stores, promotes that it extended pro duct freshness. The prepackaging protected produce from damage, cut down on spoilage, required less refrigeration, and reduced labor needed to stock shelves. Fresh & Ease's appeal in new markets relied on various factors.California offered the rapidly growing, ethnically diverse population of over 35 million with a median house hold income well above the national average. The percentage of Caucasians had fallen to below 45 and 40% of people spoke a language other than English at home. Hispanic Americans accounted for 37% of the population, Seminarians for 12% and African Americans 6%. The populations of Arizona and Nevada were similarly diverse and growing rapidly. Ethnic ally diverse pop populations are likely to appreciate Fresh & Ease's value propositions.The emphasis on â€Å"honest 10 w prices† and a â€Å"neighborhood market†appeal to various ethnicities. However, Fresh & Easy built many stores in suburban neighborhoods. The population n in these neighborhoods tend to shop less times per week but spend more at each visit. These habits clash with the Fresh & Easy concept of daily visits to grab a quick and inexpensive vive bite. It may have been a better idea to have targeted urban cities like New York or Chicago w here the population's buying habits are more compatible with Fresh & Ease's intended target. 5.