Lessons Learned from Tesco's Failed Go-to-Market Strategy: Optimising Your Expansion

Tesco, one of the largest UK supermarket chains, entered the US market in 2007 as 'Fresh & Easy'. However, after six years of operation, the company exited the US at the cost of $2 billion. This failure serves as a cautionary tale for entrepreneurs looking to expand into new markets.

What went wrong with Tesco's go-to-market strategy in the US? One of the key mistakes was structuring its stores around the British consumer, who likes to shop daily and consume ready meals frequently. In contrast, Americans prefer to buy in bulk and consume fewer ready meals. Additionally, Tesco focused on the US West Coast, which is more car-dependent, rather than the East Coast, which has more walk-in customers. Timing was also an issue, as Tesco launched during a recession.

To avoid similar failures, entrepreneurs must take into account cultural differences, customers' needs and habits, and the timing of entry when structuring their go-to-market strategy. Understanding these cultural parameters can help businesses tailor their products and services to the new market's preferences and expectations. Moreover, entrepreneurs must pay attention to the timing of entry. Entering a market during a recession, as Tesco did, can be particularly challenging. Timing must also consider the competition and the market's saturation level, as these factors can greatly impact the success of a new entrant.

Tesco's failed go-to-market strategy in the US is a valuable case study for entrepreneurs looking to expand into new markets. Learning from the mistakes made by Tesco can help businesses avoid costly failures and improve their chances of success. By taking cultural parameters into account and timing their entry carefully, entrepreneurs can optimise their go-to-market strategy and increase their chances of success.  

In addition to cultural parameters, customer needs and habits, and timing of entry, there are other factors to consider for a successful go-to-market strategy. Here are a few examples:

1.     Market Research:
Conducting thorough market research is crucial for gaining valuable insights into the new market. This research should provide information about the market size, customer segments, competitors, pricing strategies, and other important market factors. This information can help businesses tailor their product offerings and marketing approaches to meet the needs of the target market.

2.     Distribution and Supply Chain Strategy:
A successful go-to-market strategy should include a well-planned distribution and supply chain strategy. This includes considering factors such as logistics, transportation, and communication infrastructure in the new market. A robust distribution strategy will ensure that products reach the target audience on time and in good condition.

3.     Marketing and Advertising Campaigns:
Developing effective marketing and advertising campaigns is crucial for creating awareness and generating demand for the product or service. These campaigns should be tailored to the new market's preferences and communication styles. Investing in targeted marketing campaigns will increase the chances of success in the new market.

4.     Regulatory environment:
Different countries may have different regulations and legal requirements for businesses operating in their markets. It is important to be aware of these regulations and ensure compliance to avoid penalties or legal issues.

5.     Infrastructure:
Infrastructure in different countries may vary significantly in terms of transportation, logistics, and communication. Businesses should consider how these factors may impact their operations and adjust their strategy accordingly.

6.     Language and communication:
Language barriers can be a significant challenge when entering a new market. It is important to consider the local language and communication preferences when developing marketing campaigns and customer service strategies.

7.     Local partnerships:
Building partnerships with local businesses or individuals can be a valuable way to gain insights into the local market and establish a presence in the community. However, it is important to carefully vet potential partners and ensure alignment with business objectives.  

One example of a successful expansion into a new market is Starbucks' entry into China. Starbucks entered the Chinese market in 1999, at a time when coffee consumption was not widespread in the country. Despite this, the company was able to successfully establish a presence in China and is now the country's leading coffee chain.

One of the key factors that contributed to Starbucks' success in China was its willingness to adapt its products and store design to fit the local market's preferences. For example, Starbucks added more tea-based drinks to the menu to cater to Chinese customers' taste preferences. The company also tailored its store designs to reflect local culture and incorporated elements of traditional Chinese architecture into its stores.

Another factor that contributed to Starbucks' success in China was its focus on customer experience. The company invested in extensive staff training to ensure a high level of customer service, which helped to differentiate Starbucks from local competitors. Additionally, the company's marketing campaigns were tailored to local customers and focused on building an emotional connection with the brand. Starbucks also paid close attention to its distribution and supply chain strategy in China. The company established partnerships with local suppliers to ensure a reliable supply of high-quality coffee beans and other ingredients. Additionally, Starbucks opened a coffee farm in China's Yunnan province to support local coffee production and build a sustainable supply chain.

Overall, Starbucks' successful entry into China is a prime example of how a company can adapt its go-to-market strategy to fit the local market's needs and preferences. By investing in localising its products, store design, and marketing approach, Starbucks was able to establish a strong brand presence in China and become the country's leading coffee chain.

If you're interested in learning more about go-to-market strategies, check out the Go-To-Market Programme offered by Creo Incubator, designed to help entrepreneurs optimise their market entry strategy.
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