Tesco leaves the US: what two strategy frameworks leave open

On 17 April 2013 Tesco reported its first fall in annual profit in almost 20 years, and in the same announcement confirmed it was leaving the US. Two familiar frameworks, entry modes and the integration–responsiveness grid, sound as if they explain it at once. This post treats each as a list of questions instead, and checks which ones the BBC report can answer. That report is the only source behind the library's case on Tesco's US exit.

What does the BBC report actually say about Tesco in the US?

It is clear about money and decisions, and thin on reasons. Tesco was exiting a chain of 199 Fresh & Easy shops that had never made a profit, at a cost of £1.2bn. On the same day it reported statutory pre-tax profit down 51 per cent to £1.96bn, and post-tax profit, including the cost of leaving the US, of £120m, down 95.7 per cent. The report also mentions an £804m write-down on UK property (BBC News, 2013). It does not say whether the pre-tax figure includes the US cost, or how much of the fall came from the US, so "same day" should not be read as "same cause".

Tesco was also leaving Japan and said it would approach growth in China more cautiously. Mr Clarke called the day's announcements the natural consequence of strategic changes begun over a year earlier; the objective he named was to be the best multichannel retailer for customers. He said the US sale was well advanced, with buyers interested in all or parts of the business (BBC News, 2013).

The explanation of why the US failed comes from outside the company, from Professor Ajay Bhalla. He said the root problem was a failure to understand that US retail differs from the UK's. In his view, the push for scale and low prices had worked for years but made it hard to change course. While Tesco concentrated on the US venture, the UK market moved quickly: customers put service and quality above low prices, and Waitrose and Sainsbury's became the preferred destinations of a growing middle class (BBC News, 2013). That is one academic's opinion on the day of the announcement, not the result of an inquiry.

What does the entry modes framework ask, and which questions does the report answer?

The framework asks four things about how a firm steps in: how much control it keeps, how many resources it commits, how much capital it puts at risk, and how fast it gets in. The library arranges five modes, from exporting to a wholly owned subsidiary, along those four lines, and treats the low-to-high levels as textbook tendencies, not measurements Foreign market entry modes. The post on choosing how to enter a foreign market goes through the table in detail.

The report answers very little. It calls Fresh & Easy Tesco's US chain and says buyers were interested in all or parts of it. That description is consistent with the wholly owned subsidiary row, but consistent is not confirmed. The report does not say whether Tesco built or bought, mentions no partner, gives no year of entry and no figure for capital invested. The only sum about the US is the cost of leaving, £1.2bn, and it is not broken down (BBC News, 2013).

What the framework does let you ask is how commitment relates to the exit: the table puts capital risk for a subsidiary at high, so leaving is likely to be expensive. Whether £1.2bn was large because of the way Tesco entered or for other reasons would need a breakdown the report does not supply.

Compare Walmart in Germany. There the source describes the entry (two second-tier chains bought), so the framework has something to hold on to; here the source is silent at exactly that point.

What does the grid ask, and how well does Professor Bhalla's remark fit it?

The grid asks, for this product, how strong the pressure is to standardise worldwide and how strong the need is to respond to each country. The two axes give four cells: global, multidomestic, international or export, and transnational Integration–responsiveness grid.

Bhalla's remark sounds like an answer on the horizontal axis: too little local responsiveness. Three things do not quite fit.

First, he says Tesco did not understand that the US market differs from the UK's. That is about knowledge, not about how much Tesco actually adapted, and the report does not say whether Fresh & Easy copied the British store format or changed it heavily (BBC News, 2013).

Second, the grid needs to know how much the industry pushes on the product. Yip's four groups of drivers (market, cost, government, competitive) ask exactly that, and the report says nothing about grocery retail on any of them.

Third, "differs" does not say where. The summary of Ghemawat's 2001 article in Harvard Business Review proposes splitting "distance" into four kinds: cultural, administrative or political, geographic and economic (Ghemawat, 2001). Bhalla picks none.

Which parts of the report fall outside both frameworks?

Two, and both come from people quoted in the report. The first is the decision to leave as a choice made by the group. Mr Clarke mentions Japan, China and the multichannel goal; as I read it, that is an ordering of priorities across the whole company, not a story about one market (BBC News, 2013). The two frameworks in the library ask about how to enter and how to adapt, not when to stop.

The second is the home market. Bhalla says Tesco was absorbed by the US while the UK changed (BBC News, 2013). That is a claim about the attention of senior management, not about entry mode or adaptation, and the report does not tie it to any figures.

The two remarks sit side by side: one is about why the venture failed, the other about the context of the decision to leave. The report does not link them. The table below pulls it together.

How should a Vietnamese owner use the two frameworks before going abroad?

Use them to write five answers down before signing, and leave blank any box for which you have no evidence. The example below is invented: Chain C, its name and its figures are mine. Chain C has 40 shops in Ho Chi Minh City and plans five in a city abroad through a wholly owned subsidiary.

The questions on exit cost and the home market are the two the Tesco report mentions only as outcomes. The method suits you if you are still before the decision; it does not suit you if you need to prove why a firm that has already left failed, because that needs internal papers. The five questions are my own inference, not checked against data on Vietnamese firms.

Going deeper: what did I read, and what could I not check?

Every detail about Tesco in this post comes from one BBC report dated 17 April 2013, which I read in full on 3 November 2026. I did not read Tesco's annual reports, and I have no source on the year or mode of entry, so the post does not claim that Fresh & Easy was built or bought.

For Ghemawat (2001) I read only the summary on the Harvard Business Review page, so I use only its list of four distances. The integration–responsiveness grid, which the library traces to Prahalad and Doz (1987) and Bartlett and Ghoshal (1989), I know through the library's framework summary; I did not open either book. The entry-mode table and Yip's four driver groups also come from the library, not from the original textbooks.

The grid was built for multinationals operating in many countries; a retail chain in one market may fit it poorly. This post does not prove why Tesco failed. It shows which questions the two frameworks raise, and that this short report answers fewer of them than one might expect.