Tesco pulls out of Japan

Even the might of Tesco cannot overcome the cultural differences between the UK market and the Japanese market for groceries. They moved into the Japanese market in 2003, as part of their objective of global growth, but have now decided that they cannot grow big enough there to generate the economies of scale that they need to make the business profitable - and with the change of focus in their objectives away from growth and towards greater profitability, this no longer fits with their strategy.

The reasons for the difficulty of gaining the growth that they need seem to be due to big differences in the way that people do their grocery shopping in Japan. Gavin Rothwell, research manager at groceries analyst IGD, is quoted as saying “The retail market is fragmented and there are many strong regional players, often family-owned. Convenience stores dominate, particularly in the city centres, and a culture of ‘immediacy’ supports large numbers of vending machines/kiosks.”. Tescos are not the only major western retailer to have failed to break these habits, as Carrefour and Boots have also tried to break into the market but pulled out, and Wal-Mart are reportedly struggling. So this story emphasises the risks that businesses take when they try to use the market development sector of Ansoff’s matrix to sell a well-established product into a new and unfamiliar market - and suggests that some markets are more impervious to globalisation than others,