Tesco is a large British supermarket chain that began expanding globally. This document discusses Tesco's entry into the US market through its Fresh & Easy stores. It provides a brief history of Tesco and describes differences between the UK and US markets. Tesco spent years researching US customers before launching Fresh & Easy, which aims to be convenient with value prices and quality products. The document contrasts Tesco advertising between the UK and US, noting different cultural approaches.

1. Tesco
Martina Brtnická
Case study
2011

2. 2
Contents
Abstract.............................................................................................................................................. 3
History................................................................................................................................................ 4
Current situation................................................................................................................................ 5
Tesco – UK.......................................................................................................................................... 5
Fresh and Easy Neighborhood Market – USA.................................................................................... 6
Difference in advertisement .............................................................................................................. 7
Tesco advertisement in US................................................................................................................. 7
Tesco advertisement in UK ................................................................................................................ 8
Conclusion.......................................................................................................................................... 9
Literature.......................................................................................................................................... 10
Appendix I.: Private labels................................................................................................................ 11
Appendix II.: Growth strategy.......................................................................................................... 12
Appendix III.: Tesco formats ............................................................................................................ 13
Appendix IV.: Commercials .............................................................................................................. 14
Appendix IV.: The Tesco Way........................................................................................................... 15

3. 3
Abstract
I had been thinking a lot about a topic for this case study, before i finally chose Tesco.
There was no particular reason for duing so. It was actually coincidence as while looking for
materials for another subject I found out a power point presentation about Tesco and the
subject was: “How to transform global communication strategy into the local environment”,
which was the first sign. Secondly I talked to my friend as she told me about this fantastic
book full of case studies and one of them was about Tesco. So that was it and I decided to
write about Tesco, a British company, with a brave decision of joining the US market.
This report has the following structure: first I will introduce a history of this company
as having a closer look to it I found it very interesting. Then there will be a section about
Tesco recent situation. Followed by introducing the main differences between UK and US
market and finally introducing the Tesco entering strategy to US market in 2006. The length
of this essay is not enough to explain everything so it is considered to be a brief look at this
Tesco global movement.

4. 4
History
Tesco is a British supermarket chain. The first Tesco store was opened in 1929 in
London. The founder´s name was Jack Cohen. Its first private label product was a Tesco tea.
The name of “Tesco” is coming from the first two letters of his surname “CO” and the initials
of his tea supplier T. E. Stockwell which makes T. E. S. + CO = TESCO. Actually
surprisingly simple. (Quelch, 2006, s. 38-53)
Originally the shops were not found as self-service. This was an American style and
the first Tesco of this kind was opened in 1947. The size of the shops were quite small until
the time, 1980s, of the first non-family CEO Ian MacLaurin who closed most of Tesco´s
smaller stores and build larger, 30 000 square meter ones in the suburbs, for economical
reasons. (Quelch, 2006, s. 38-53)
Tesco was not an innovative and very successful company at first, as most of the ideas
they copied from their competitor Sainsbury´s. During 1992 they even started losing its share
of the market and some action had to be taken. The main responsibility was given to Leahy,
who organized focus groups with the customers and realized what Tesco was doing wrong.
They did not listen to their customers´ needs which rapidly changed and the first customer
driven innovation was established a year later – a value line, a low prices basic products. In
1995 Tesco introduced the Clubcard which was a very successful move, offering a penny
back per pound spend and it made some of the ex-customers to come back to Tesco. What
more, the new Clubcard loyalty cards collected important information about the customers
and it made the possibility to use direct mail to target selected customers. (Quelch, 2006, s.
38-53)
During the last 20 years the Tesco brand transformed from cheap, distressed and down
market to admired market leader.
It used to be that in the older days managers of all sorts of businesses went to America
to see how the industry is working there and found out, that its absolutely different, they got
the ideas and tried to implement them in their home country. Nowadays its more about Asian
countries as their economy is efficient and in this case innovation is going in the opposite
direction to that of the US. (Tidd, 2009, online)

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Current situation
Tesco, a global grocery, is the third-largest retailer in the world after Wal-Mart and
Carrefour. It operates in 14 countries: United Kingdom, China, the Czech republic, Hungary,
Republic of Ireland, Japan, Malaysia, Poland, Slovakia, South Korea, Thailand, Turkey and
United States. In 2010 the company had 5 280 stores and employed 472 000 people.
(Wikipedia.org, 2011, online)
It is known that Tesco has its private brands even in non-food (clothes, stationery,
etc.). Nowadays Tesco sees non-foods as a cornerstone for its future growth and set a goal to
be as strong in non-food as they are in food.
The global communication is coordinated from UK with local supervision. The Tesco
Way is an unified communication for all the countries where Tesco operates. The Tesco way
has five very important elements. (Kyrýt, 2011, online) Brief introduction: “Core Purpose” is
to earn lifetime loyalty of customers while creating a value for them. “Goals” of Tesco are,
for instance, be a global retailer, have the most loyal staff, be valuable for people more than
any other retailer etc. “Values” are that no one understands customers more than Tesco,
generally be innovative, lively and first in mind for the customer, look after our staff as best
we can so then they can pass it on our customers and much more. “Principles” are very sort
but expressive: To be better for the customers, simpler for the staff and cheaper for Tesco.
The last element is called “Steering wheel” which is the tool, that helps to communicate the
previous four factors in a balanced way emphasizing equally on each of them. (Quelch, 2006,
s. 38-53)
Tesco – UK
The key elements of the UK´s largest retailer success are its strong and growing
private labels. The general pricing psychology at Tesco is known as every day low pricing
(EDLP). In 1996 Tesco new website Tesco.com was started, primary for online shopping. By
the year 2002, they managed to cover 95% of the UK and had about 100 000 order per week.
To make it look even better than it is already, Tesco in UK has one of the best distribution
networks worldwide by investing millions of pounds every year in upgrading facilities.
(Yoruk, 2000, online)

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It was necessary to found a new concept of Tesco in order to enter the US market as
the UK conception would not succeed in America because of different mentality and believes
of the customers.
Customers in US are very branded orientated and private labels are mostly regarded as
inferior products and this fact was very worrying for a company with more than 50% of “own
labels”. The British customers do not mind private labels products. Actually Tesco´s private
brands were very strong in UK. And it is generally very difficult to change established
mindsets. US is an extremely tricky market because of the different cultures. (Tidd, 2009,
online)
Fresh and Easy Neighborhood Market – USA
This decision to enter the US market was not actually sudden. The company was
thinking about it very carefully and investing money in a research and finding such huge
difference between both markets, that in 1999 they decided not to enter the US market for fear
if its high risks.
However the idea never went to sleep and in 2007 Tesco decided to be brave enough
to market in an unknown territory under a brand new name. The first Fresh & Easy
Neighborhood Market was opened in Hemet, about 120 kilometers east from LA on the 1st
November 2007. Conceptually it was similar to UK Tesco Express store and the size was
about four times smaller than the traditional US supermarkets. Here is a nice definition of
Fresh & Esay by its CEO Tim Mason: “The brand is designed to be as fresh as Whole Food
with a value like Wal-Mart, the convenience of a Walgreens and a product range of Trader
Joe´s…that leaves us with a specific edge in the market.” (Tidd, 2009, online)
It is impossible to be successful abroad without knowing the local market. That is why
the company founded an executive team, who would live in the chosen part of US for a
certain period of time to find out about character, believes and shopping habits of the
Americans. They would visited US customers, went shopping with them, cooked or discussed
the food they bought. Asked about their opinion of healthy food and diet. In order to design a
food store fitted to American shoppers. Corporate Affairs Director Lucy Neville Rolfe
said:“Spending time with people in their houses, looking in their cupboards and fridges and
actually shopping with them is a great way to understand the market.” (Tidd, 2009, online)

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In today´s highly competitive world everything is copied in no time. So if a company
is not careful about their new upcoming product, the idea can be stolen and sold after different
name before they even manage to introduce it. That is why Tesco, while testing the US
customers and the layout of their food store was very mysterious about it. At the beginning
they introduced themselves as a researched company with even a fake website, so they could
test their concept of Fresh & Easy store modeled in a warehouse, not getting anyone
suspicious. Tesco did not want to alert their competitors before it was really unnecessary.
(Tidd, 2009, online)
Generally, when you go to the supermarket, you have to go through the checkouts so
the cashier can charge you for your shopping. But Tesco went even further and offered their
customers several options how to check out their shopping the most comfortable way. The
shoppers can check out themselves, if help is needed then Tesco will provide if or if the
customers find it easier to be checked out by the cashier it is also possible.
The difference between the British and American market is obvious in the matter of
online shopping. Being very famous way to get your goods, but the American version of
Tesco, Fresh & Easy, simply does not offer this kind of service.
Difference in advertisement
Americans have a very strong tendency to explain the specifics of the products using
informative advertising (just like the Fresh & Easy advertisement). In US there is common
use of humor, popular songs that are sometimes considered silly, but they sell as they simply
stick in the people´s heads. Britons like advertisement with simple, understated humor. Also
very popular is celebrity´s endorsements. It is used in UK as well, just not much as heroes,
more like in situations where they can laugh at themselves (like is described further down,
UK Tesco advertisement with Spice Girls). Tesco is aware of the fact, that Americans are
control freaks, they want to control their life, children, parents, job, other people, money, time
everything. That is why arguments like – shopping at Fresh & Easy save your time, money,
protects your health by not using artificial colors are used. (Trompenaars, 2004, s. 45-131)
Tesco advertisement in US
I am going to describe a video posted on the company website as I did not find any
other TV commercials. The video is about Fresh & Easy and that they are going to change the
way that people shop. The company learned that is necessary to keep things simple as then it

8. 8
works better and save money to the customers. Fresh & Easy promotes that they do not spend
money in unnecessary things like expensive displays, stores are build in a way to save more
energy, equipped with concrete stores which are cheaper and so on. What more, they
guarantee that there is no use of artificial flavors, colors or trans fats to protect your health. At
the end, there is promised made of making your shopping simpler, food fresher and getting
more value for your money.
Tesco advertisement in UK
As I was looking for an advertisement of UK Tesco, on youtube.com I have found one
from the year 2007 with Spice Girls. It is quite a funny video corresponding with British
humor where the members of the music group are discretely buying each other Christmas
presents at Tesco. We can see one of them hiding behind Christmas three, next one is suppose
to be trying a sweater on to hide herself, Jerry hiding behind the Guinness Book of Records
upside down etc. already making good advertisement as to the large variety of products under
one roof. In spite of the risk of embracement of being caught shopping in a place not
commonly frequented by celebrities even the Spice Girls could not resist such a convenient
variety of products and value for money.

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Conclusion
Tesco before entering US market was already operating with more than 50% outside
the UK. The final decision to expand into America took about 7 years and it was, by many
experts considered as very risky, but Tesco, once made their decision, looked very confident
with their move. In the Tesco story we can see that going global is not a matter-of-course. A
lot is to be considered as it involves a lot of time, money and energy and it may not always be
the right decision. Even Tesco went wrong few years back trying to expand in France, but
after few unprofitable years they left the market.
On the other hand it is quite an impressive story about the biggest UK retailer entering
the very tricky US market with courageous innovations that no one could predict how the
customers would react to. But so far so good. It looks like that Tesco made a good move and
it can be a very good example for many other companies.
For me, as a marketing student, this case study gave me a very interesting look into
“the kitchen” of one very strong and successful company. And I realized that to be a good
global marketer you need to understand the market and the shoppers in the country you
planning to enter. What more, you have to believe in what you are doing.

10. 10
Literature
Coriolis Research. Coriolisresearch.com [online]. 2004 [cit. 2011-10-30]. Tesco: a case
study in supermarket excellence. Dostupné z WWW:
<http://www.coriolisresearch.com/pdfs/coriolis_tesco_study_in_excellence.pdf>.
KYTÝR, Libor. Lewispr.cz [online]. 2011 [cit. 2011-10-30]. Transformace globální
komunikační strategie do lokálního prostředí. Dostupné z WWW:
<http://www.lewispr.cz/MediaLibrary/MediaLibrary/Documents/Tesco-Libor-Kytyr.ppt>.
TIDD, Joe; BESSANT, John. Managing-innovation.com [online]. 2009 [cit. 2011-10-30].
Challenges in Retail Innovation Aspects of Innovation in Tesco plc’s Market Entry into the
USA. Dostupné z WWW: <http://www.managing-innovation.com/case_studies/Tesco.pdf>.
TROMPENAARS, Fons. Marketing across cultures. Chichester, West Sussex, England:
Capstone, 2004. 353 s. ISBN 978-1-84112-471-1
QUELCH, John A. Global marketing management. 5th ed. Mason: OH : Thomson/South-
Western, 2006. 680 s. ISBN 0-324-32284-4.
Wikipedia.org [online]. 2011 [cit. 2011-10-30]. Tesco. Dostupné z WWW:
<http://en.wikipedia.org/wiki/Tesco>.
YORUK, Deniz Eylem; RADOSEVIC, Slavo. Profesores.ie.edu [online]. 2000 [cit. 2011-
10-31]. International expansion and buyer-driven commodity chain: The case of Tesco.
Dostupné z WWW:
<http://profesores.ie.edu/enrique_dans/TESCO/international%20expansion.pdf>.

11. 11
Appendix I.: Private labels
(Coriolis Research, 2004, online)

12. 12
Appendix II.: Growth strategy
(Coriolis Research, 2004, online)

13. 13
Appendix III.: Tesco formats
(Coriolis Research, 2004, online)

14. 14
Appendix IV.: Commercials
Fresh & Easy US
Tesco UK – Spice Girls

15. 15
Appendix IV.: The Tesco Way
(Kyrýt, 2011, online)