In times of fast progress, in terms of economic development and globalisation, many multinational companies are extending their business overseas. One of those many firms is Tesco. This report will elaborate more about how Tesco failed in America when it encountered cultural and economic differences.
Tesco is a British owned multinational grocery and general merchandise retailer that was found in 1919 by Jack Cohen in London. (Tesco PLC, 2013). Over the years Tesco has grown rapidly and now it operates in 14 countries around the world. (Tesco PLC, 2013). Tesco is now the third largest retailer in the world. (Tesco PLC, 2013). In 2007 Tesco entered the US market under the name of Fresh & Easy, opening …show more content…
Since Americans are patriotic towards their local sports teams. Cultural diversity offers a potential source of sustainable competitive advantage. Tesco should have created a multi-cultural research and development team which had British and Americans in the team. This would have helped the research team comprehend the information and understand the American way of life style easier. Equipped with local cultural sensitivity, knowledge, firms would have been able to develop more effective local advertising and marketing strategies. Tesco failed in America due to its own actions. If they had understood the culture of the local market thoroughly then Fresh & Easy might not have failed.
The economic condition of an economy can encourage and discourage investment and other economic activities. Tesco entered the US market in 2007, it had just started to establish itself when it was hit by the 2007-2008 financial crisis. Most of the Fresh & Easy supermarkets were opened near new housing developments. During the 2008 recession everything turned into a nightmare when the real estate market collapsed as well. Mortgage crisis ravaged many of the areas where Fresh & Easy shops were located. Therefore if there are no customers there are no sales. It was foreseen that Tesco would pull itself back together but even after 5 years it wasn’t able to make profit. This resulted in some unhappy shareholders. To make the situation even worse, Tesco had to