Question

In March 2006, Tesco announced that it would enter the United States convenience store market (Fresh and Easy). This represented a departure from its historic strategy of focusing on developing nations. The American market - Fresh & Easy - turned into a financial disaster ($1.8 bn loss) for Tesco.

Using Tesco as an example, how you think that Michael Porter’s Five Forces helped or hindered Tesco with its overall global strategy?

Answer 1

Tesco loses in the US market but its overall share in the world market was good. Michael porter's forces which would have helped winning their overall strategy in USA.

• Substitution: Tesco should have looked at the product as substitution of their products. If people in USA are totally dependent on Tea as beverage and Tesco has one of their product which is coffee. So they must look at their production of coffee and maintain the high quality of standard, so that they convinces people out there to shift to coffee of their brand as it is the perfect substitute of Tea.
• Entry/Exit In market: Tesco must look at the entry barriers in the market. If it is easy to enter in the market for a new firm with new product, it would create a problem for Tesco as every new firm would reduce the market share of Tesco. Tesco must try to entry into an market with such a product that it is not possible for everyone to produce the same product and there are many barriers to become their competitive firm.
• Rivals: They must look at the strengths and weakness of the competitive rivals in the market. They must focus on the weaknesses of other firms so that they can capture more market and attract new customers easily by providing those services which other firm do not provide and focus on their strength to become much capable that they convert their strengths as their own strength.
• Supplier power: It can be found by knowing that how many supplier are there in the market and how easy for your competitor to decline the prices in the market for a product. According to me if a firm is operating in a market from many years, it can easily through enough money when any new competitor of it enters into market to acquire them. So they must look how aggressively your competitive supplier plays in the market likewise they can operate on a little amount greater than break even point because they have generated huge revenue from the market from past few years but you are new, you cannot play such aggressively.
• Buying power: Here Tesco must know the buyer potential to pay for the product, to generate orders from them. You must look at the customer base and how customer base fluctuates when you slightly increase or decrease the price level.