Tesco - International Strategy

EXECUTIVE SUMMARY After years and years of pursuing Sainsbury as the United Kingdom’s largest retailer, Tesco PLC broke through in 1995 and has become not only the largest retailer in the UK, but also the world’s 4th largest retailer, trailing only Wal-Mart, Carrefour and Germany’s Metro AG. Originally, Tesco’s soul focus was the retail grocery market. As of February 2010, the grocery market continues to be Tesco’s largest source of revenue and it has accounted for more than 50% of Tesco’s £ 59.4 billion of sales. Further, Tesco does not limit its operation strictly to the United Kingdom. Currently, Tesco resides in 13 countries worldwide and operates 1,911 stores across Europe and Asia. The company has also expanded in the United States and has plans for an additional 320 stores in 2010 across the world. Australia’s economic and political stability and skilled labour force, provides a welcoming environment for foreign investors. With respect to the retail industry, consumer goods expenditure of 183 billion US $ in 2009 and an expected 212 billion US $ in 2010 presents significant opportunity to foreign retailers. However, risk exists as there is a limited presence of related and supporting industries for non-food products. As well, domestic rivalry remains strong in both grocery and non-food segments. The objective is to implement Tesco’s hypermarket store format in Australia while increasing the company’s global market share. Tesco’s main competitors include domestic retailers such as Woolworths and Wesfarmers Limited and as well, Costco from the United States. The entry strategy into Australia will be an International Joint Venture with Coles Supermarkets, owned by Wesfarmers. Many Coles supermarket stores will then be remodeled into Tesco branded hypermarkets. In addition, Tesco will further employ its differentiation strategy by offering different departments and services to consumers. Since there may be hesitation in accepting a foreign retailer