Tesco Entering the Us Market

Over recent years, Tesco has become the world’s third largest retailer and holds a dominant position in the UK’s grocery market, with a turnover of £42.6Billion in 2007 (FAME). Tesco has increasingly looked overseas for growth, with 1,376 stores outside the UK; international sales of £11billion in 2007, generating £564million in trading profit. International expansion began in Hungary in 1994 but most of the company’s overseas development has occurred post 2000 and currently operates in 14 countries (Dawson et al 2006, p182). Tesco’s previous international ventures have been in developing economies such as the Eastern Bloc, Thailand and China (Japan being the exception). In all cases there is an extensive evaluation of markets, and the Tesco format is adjusted to a formula for the local market. For example, Tesco’s market research told them in Thailand, people prefer to “interact with vendors and rummage through piles of produce to choose what they want” (Tesco, 2007), rather than the western approach of packaged produce. Tesco being responsive to local demand has been costly in market research, however it has lead Tesco to be successful internationally.
The US is seen by some retail analysts as “a graveyard for the British retailer” (Palmer, Miller, Olsen 2007). This is somewhat accurate as successful UK retailers such as Debenhams, Dixons and J. Sainsbury all have attempted to enter the US market and failed.
Determined not to have the same fate as previous British retailers, Tesco have researched the American market for 5 years, largely in secrecy, prior to publicly announcing their plans. Tesco has chosen to open its first American stores on the affluent West Coast in “Los Angeles, Las Vegas, Phoenix and San Diego in November 2007” (Telegraph, 2008). Daniels, Radebaugh and Sullivan suggest “companies expand into high growth markets because they expect demand for their products will increase as the economy grows”. The west coast has a combined