Low barriers to entry

Last week The Economist had an article about Tesco’s expansion into the U.S. grocery business. Tesco will not start small, but immediately begin with a $500M/year assault. Tesco can not afford to start small, since competitors could copy any successful tactics.

To me, this is yet another example of why I wouldn’t want to be in the grocery business: the need to take large risks in order to achieve high returns, rather than taking smaller incremental steps. On the other hand, Warren Buffet just bought 3% of Tesco.

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