Question

Managers at the British company Tesco sold the Fresh & Easy U.S. grocery store chain after comparing returns from that division to those from Tesco’s other divisions around the world and determining that the U.S. retail food market could not deliver acceptable returns for the company.

Answer 1

The decision reflects the control over the required return on investment and is Corporate level strategy. Pursuing corporate level strategy requires that the group directors must add value in all the business units whose operations are largely independent of other business's core operations. Because Tesco appraises all of the businesses which also includes Fresh & Easy U.S. grocery store, the results showed that this business unit was not generating the value desired from its operations. Tesco preferred to invest the money coming by the sale of Fresh & Easy somewhere which would generate better returns.