Concept Of Fdi In Tesco

Concept:

Foreign Direct Investment (FDI)

Flow of money for the purpose of investments from one country to another country is called as Foreign Direct Investments. It is an investment made by a company based in one country for long lasting interest or controlling stake into a company in a foreign country. The nature of FDI could be either be inward or outward. Inward FDI refers to direct investments flowing into the home country from foreign land, and outward FDI refers to home country making direct investments in foreign land. The difference between inward FDI and outward FDI is net FDI inflow. Net FDI inflow could be either positive or negative based on the investments flowing between countries.

Foreign direct investment could be of various

is one of the leading retailers worldwide. Founded in 1919, the company started expanding its business to other countries in Europe, Asia and the United States in 1995. It now has 4,811 stores in 14 countries worldwide. In 2007, Tesco expanded its business to the U.S. adopting a Greenfield strategy to establish the urban style supermarket “Fresh & Easy”. Opening these small convenience stores was a great opportunity for the company. By early 2010, Tesco had opened 145 Fresh and Easy stores in the western United States. Fresh and easy offered fresh, wholesome food at affordable prices and emphasized everyday low pricing rather than weekly specials. The consumer behavior or U.S. citizens had changed during the past years to becoming more health conscious and chose to travel less for buying groceries. However, this investment proved as a big and costly failure. One of the reasons was that Tesco’s timing was unfortunate, as it got hit by U.S. recession in 2008. Tesco decided to exits its U.S. chain of 199 Fresh and Easy shops, which never made a profit. Dumping Fresh & Easy after about six years cut profit by 1.2 billion pounds. The company filed bankruptcy in the same year so that it can sell itself at auction with an affiliate of billionaire Ron Burkle’s Yucaipa Cos. as the lead bidder. It is also believed that the root of Tesco’s U.S. problems was a failure to understand the U.S. retail landscape, which was different from the U.K.’s. The drive to become even bigger, while offering lower prices had worked for years, but it proved to be difficult for the company to change course when needed. This established the fact that not all foreign direct investments are successful and profitable. If a company doesn’t do enough research about culture, behavior or competitors it can easily fail, like