Factors that compelled Tesco to exit the Japanese Market The WritePass Journal

Factors that compelled Tesco to exit the Japanese Marketï » ¿ Executive summary Factors that compelled Tesco to exit the Japanese Marketï » ¿ ). Tesco failed to establish enough scalable business after its 8 years operation in Japan. According to CEO, Philip Clarke, Japanese shopping habits were very different from those envisioned in business strategies and business processes of Tesco. According to Clarke, the British consumers enjoy carrying out a â€Å"big shop† once in a week since there is enough room to keep their shopping. In contrast, for many Japanese, space is premium and carrying out a big shop is not an option. Tesco, like other foreign retail companies, failed to adapt fully to the local shopping habits of the Japanese consumers. Consumers switching from branded luxury products in Tesco stores to more affordable private labels. Despite the demand for staple food and household items remaining flat, some consumers switched from purchasing branded luxury products to private labels that are more affordable. However, the penetration of such private labels products has not been popular compared to branded products because the Japanese consumers are still conscious of the product brand of the item they purchase. A series of food safety scares hit the market. The outbreak of Bovine Spongiform Encephalopathy (BSE) in Japanese cows, use of non-approved additives in packaged foods and product origin being mislabeled eroded consumer confidence and caused a series of food safety scares in the grocery retail market. The British business format of Tesco failed to compete with department and supermarket stores in Japan. The people of Japan put much emphasis on the quality and freshness of food items. They, therefore, prefer to shop many times in a week instead of carrying out a single bulk shopping in a weekly basis. Departmental store food halls began offering high price but high quality foods while low priced standard food products were offered by supermarkets. Although discount stores started increasingly introducing fresh food product to encourage more customer visits, they were considered to be at the lower end of the market along with convenience stores. The small retail channels have increased their market share in recent years because their business format meets the Japanese consumers’ preference for shopping several times each week. They have also widened their range of services such as the provision of added-value services, bill-paying facilities, cash machines and delivery services. The small retail channels business format is in contrast with Tesco business format. As a result, Tesco faced a challenge of penetrating the highly competitive business segment. The Japanese people are highly demanding and fussy consumers who need to be provided with a wide selection of goods and foodstuffs. The Japanese consumers also value freshness of their produce, and they are likely to question of the stock in a hypermarket such as Tesco. Japanese consumers make frequent visits to many different stores per week instead of carrying out a one stop-shop within a single supermarket store. Conclusion In summary, the expansion strategy taken by Tesco into the Japanese market was a well-timed one. However, the Japanese market posed many difficulties which prevented Tesco penetrating the market and achieving profits. Despite that Tesco invested many resources and formulated strategies to gain the Japanese retail market, its failure to establish a business format to suit the Japanese consumers’ lifestyle envisaged its eventual exit. Other foreign retail companies such as Carrefour SA of France had failed to attain profit. Economic factors also led Tesco’s exit as consumers changed preference. The consumer patterns of the Japanese can be difficult to accommodate and formulate a business format to suit their demands and lifestyle. References Humby C, et al. (2008) Scoring Points: How Tesco Continues to Win Customer Loyalty. London: Kogan Page Publishers. Tesco’s internal data, 2009 (www.tesco.com) Williamson C, et al. (2013) Strategic Management and Business Analysis. London: Routledge.