The force driving the revolution is changing consumer characteristics. Speed, convenience, and fresh food – these are the benefits that consumers have been able to derive through shopping at retail supermarkets. Tesco is the biggest retailer in terms of market share and has ventured into several foreign markets. Tesco has two distinguishing features – it is the UK’s largest retailer in terms of market share and the world’s biggest e-grocer (Yoruk Radosevic, 2000). The market environment analysis of Tesco’s presence in China would demonstrate the strategic changes that Tesco may need to incorporate to attain maximum results.Since China has opened up for foreign direct investment in the manufacturing and financial sectors, it has experienced tremendous growth in every sector. Social and economic reforms have led to a rapid increase in consumer incomes and demand for products and services (Chan, 2005). In the first six months of 2004, the consumer retail sales of the nations were 2.5 trillion yuan. Two-thirds of the total retails sales have come from the urban consumers which comprise one-third of the total population. As the wholesale and retail services have been controlled by the state, it has been a barrier to the development of a nationwide market. China’s central government decided to open its retail market to foreign investors in 1992 to accelerate the country’s tertiary industry growth and to create more job opportunities (Wong Yu, 2002). This broadened the channels for foreign retail investors to tap into China’s 1.236 billion population. Change in the consumer pattern since reform is also responsible for the growth in the private sector (Chow Tsang, 1994).Although supermarkets were introduced in China in 1981, there are apprehensions about its growth (Mai Zhao, 2004). Chinese consumers still prefer to shop intraditional markets rather than supermarkets for their food and food accounts for more than half of the total household expenditure.