Question

Summarize the case- "Tesco: From Troubles to Turnaround". Explain what other companies should learn from Tesco's mistakes?

Answer 1

What lessons can be drawn from this failure? Let us discuss on eby one here under:

1.Pre-Established Outcome:  It has been pointed out that Tesco did extensive consumer research, even living in the homes of Americans to understand their eating and shopping patterns. This is true, but the early-stage research that led to core decisions, such as the size of the store, was constrained by Tesco’s situation. Tesco is a very large company. It needs to do things on a large scale or they are probably not worth doing at all.

These 10,000-square-foot locations had the advantage of being widely available, and developing them did not pose the legal and zoning problems of more conventional locations. But it is easy to identify a hole in the market. The question is whether there is a market in the hole. There was never any evidence that the mass of Americans were actually looking for this small footprint option.

Here, Tesco so leaned on its researchers that it never really got the truth. It just got the truth it wanted

2. Excess Overhead:

Before Tesco opened one store in America, it built a massive distribution center, brought in a large staff of expatriates to manage the operation and enticed key British vendors to build US facilities.

This created tremendous overhead, which created tremendous pressure to open stores quickly, which, in turn, created tremendous pressure to accept sub-par locations.Tesco put itself in a “heads you win, tails we lose” situation.his failure of Tesco to maintain flexibility doomed what was really a small start-up retailer.

3.Local Market Knowledge:

If, you are opening a chain in an advanced western society such as the United States of America, you want to tap into all the local market knowledge and experience.

You want buyers who know the vendor community, real estate people who have relationships with developers and know the neighborhoods like the back of their hands. You want vendors who are tapped into what is selling around the country.

We can understand that a company might like to send one of its own over as Chief Financial Officer to watch the money, but other than that, there was really no cause to have any British executives in the US.

Equally, pushing UK suppliers to open in the US was counterproductive. At an early stage in the Fresh & Easy adventure, we ran a letter pointing out that the first Fresh & Easy stores devoted 25% of its fresh-cut salad assortment to watercress-based salads.

4 Gain Customer Loyalty:  Fresh & Easy opened without accepting American Express or manufacturer’s coupons, or allowing for standard check-out. Doubtless there are real reasons why Tesco felt these would not ultimately fit with its concept. Once again, though, the smart thing would have been to meet the competition on all these aspects and then reassess once Fresh & Easy had won over customer loyalty.Tesco acted as if it were Tesco in the UK — already very successful — rather than acting as if it was a nobody in the US scrambling to gain a foothold in the market.

5 Don’t Fall In Love With Your Technology: In the early days, Fresh & Easy was plagued by out-of-stocks. It was believed that this was due to a sophisticated ordering system that was functioning poorly due to a lack of historical data. But Fresh & Easy only had a few dozen stores at the time. One vendor suggested that Fresh & Easy equip each store with a clipboard and have the store manager call in all the out-of-stocks every day so they could be delivered the next.

There are many reasons Fresh & Easy’s sales never took off, but the fact that the chain alienated so many customers with out-of-stocks in its early days may play a greater role than is realized.