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The Challenges Faced by Tesco in Japan

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Tesco is a renowned brand in the groceries and general merchandise retailers hailing from United Kingdom. Tesco has many outlets around the world, mainly to name a few such as United Kingdom, India, Thailand, Malaysia, Czech Republic, Hungary, Ireland, Poland and Slovakia. Headquartered in Welwyn Garden City, Hertfordshire, England, United Kingdom, it is one of the third-largest retailers in the world. In the year 2003, the expansion of Tesco in Japan was made debut but however, Tesco failed to make any significant headway in enticing the Japanese shoppers and after nine years, Tesco left the Japanese market in 2011. The supermarket giant said Japan was a difficult country to trade in due to high costs, and that customer demands were difficult to meet.

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The thick culture of Japanese in thinking themselves as a homogeneous and ethnocentric society with a strong sense of group and national identity was indeed quite different to the UK and hard to break. This is because, most Japanese had family-owned and long-established grocery stores, which is a form of community hub where it was valued for the personal touch that is offered. Therefore, one of its biggest challenges for Tesco in Japan was despite having Japanese customers in love to buy western products, the Japanese customers also in returned prefer high quality products and excellent customer service during their individual shopping experience. This was highly unable to be provided by Tesco, as the stores in the main city centre of Tokyo tend to be large in size making it almost impossible to offer high levels of customer service to each and every shopper. Thus, Tesco had to develop an own-label range and even a fresh kitchen to supply fish and other local products to its stores which trades under the names Tsurakame, Tesco and Tesco Express in order to be more appealing to the locals as the retail market is fragmented and there are many strong regional family-owned players. However, that too ended up in a loss as the endless growing of convenience stores started to dominate widely particularly in the city centres, and a culture of ‘immediacy’ supports large numbers of vending machines was very difficult to shift consumers preferences.

Another challenge faced by Tesco was baring the importance of fresh food to Japanese customers. This is because, Japanese food culture resisted the pervasiveness of junk snacks and fast food, and remained largely healthy and vibrant in order to contribute contributes to the physical wellbeing, the symbolic cohesion and daily pleasure of the country. Thus, Tesco intended to succeed in Japan by providing high scale of fresh food variety by offering about 2, 500 items, including fresh and processed food, at supermarket prices where it also included by having many dishes to be cooked on site to ensure maximum quality mainly in residential areas in metropolitan Tokyo where population density is high. However, this was a failure as well as it was not sufficient enough to attract a loyal audience, and failed to meet Japanese shoppers’ need for a broad range of fresh products they could buy daily in small quantities.

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The challenges in terms of cross cultural management was indeed high for Tesco as food retailing in Japan is increasingly shifting away from large hypermarkets in the suburbs to smaller stores in the cities like 7-Eleven and FamilyMart. This is widely due to more stagnant wages and the increasing number of pensioners in Japan which has caused food discount stores to be growing. The problem is that there were increasing competition to be faced from much larger groups, like Aeon. Thus, despite efforts to do so, Tesco was unable to buy scale due to a lack of either sites for store development or attractive acquisition targets in which caused Tesco to sell 50% of its subsidiary to the country’s second-largest retail group, Aeon.

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