Tesco is the largest British retailer and is also the world's third largest grocery retailer with outlets across Europe, USA, and Asia. Jack Cohcn, one man in 1919 started the grocery business in the East End of London. In 1929, the first Tesco store opened in North London. (Annual report 2009)
T.E stock well and Cohen combined originally sold tea names the brand- TESCO tea. At present Tesco is operating over 2200 stores ranging from the large hypermarket style stores to small in all over the United Kingdom. Tesco has diversified its original product grocery and general merchandise to include banking, insurance, service electrical goods as well as telephone equipment and airtime. As the company has grown, so has its workforce. From one man and a stall, Tesco now has approximately 280,000 employees in UK and over 46000 worldwide (Annual report 2009).
Tesco and the macro environment:
Globalization affect and the marketing decisions of Tesco: Competition is a global economy is both a major challenge and an opportunity for business firms like Tesco and other competitors the nature of these challenges depends on a variety of factors, including the size of the organization. Consequently firms like Tesco is greatly affected in its planning and decision making.
Organizations like Tesco can compete in international market in general the firm take a global perspective. It transfers capital, technology, human resources, information and inventory from one market to another.
As all the macro environmental factors are encompassing the business organization by which mainly Tesco is affected in making its marketing decisions, one obvious solution would be to examine the various factors of macro environment. Factors affecting the marketing decision of Tesco namely economic, political and legal, technological and socio-cultural factors. Layton analysis in 2007 clearly says “social responsibility and economic development”.
In analyzing the macro environment the economic aspect strongly response in marketing decision making of Tesco with the satisfaction of human needs and demand through the transformation of resources into goods. For the last 12 months firms like Tesco and the other competitors had to face the competition in fulfill the consumer's unlimited demand. During an economic recession in 2008 not only Tesco but also the other stakeholders as well as the competitors fall in some troubles. The world wide companies implied a loss of orders, a likely reduction in the workforce, a decline in out put, on the contrary there was falling demand of the companies' product, rising unemployment with in the countries and the economic circulation was slow. Notwithstanding the financial crisis Tesco has net profit (before tax) of around 3 billion pounds. To serve the customer is their strategy. (Annual Report 2009). Tesco always believe in keeping the existing customers happy.
In the globalization age Tesco like other multinational companies seeking to establish market share and to gain low cost production sites like as coca-cola, Pepse co. Mc Donalds etc. In 2008 during the financial crisis it was seen the people living in developing countries, the rich become richer, and the poor live under expensive product but the poor class people had to spend in synchronizing their income level. As a result the conventional retailers offering medium price goods are the most vulnerable to these changes. Macro environment changes will affect to the companies like Tesco in their future marketing strategy. At present Tesco wants to expand its market share crossing to its home boundary and wants to obtain the share in mind by the consequences of capturing the global market. Tesco requires committed and flexible employees for the expansion of business as well as to deliver the highest standard of service to meet its objectives. Consequently these techniques will lead Tesco booming its sales and earn higher level of revenues winning of all the crisis subsidies.
For the last 12 months Tesco had been strongly affected in making its marketing decisions due to the political and legal environmental changes. Tesco has a good working knowledge of the major laws protecting competition. Consumers and society legislation affecting business has steadily increased over the years. The European commission has been active in establishing a new framework of laws covering competitive behavior product standards, product liability and commercial transactions for the 15 members' nations of the European Union. Government affects on business activities of the companies. Many times government promotes for business and many times it makes constraint against business. From the history it can be included, many companies operating in twine tower had been strongly affected due to a plane attack as a result companies lost a huge amount of revenue.
Another important factors affect on the marketing decision of Tesco is the technological dimension. From 1919 till now Tesco operating its business successfully. Due to the technological change Tesco has been able to diversify its business into various sectors such as banking insurance, electrical goods and telephone equipment. Now Tesco is operating one stop shopping this obviously for the bless of technological improvement (Annual report 2009). For the advancement of technology Tesco can serve new quality product to its customers, found new ways of distributing of products, and have been able to build a strong customers relationship. Compositing with the other competitors Tesco has made a well trained staff in its widening markets so that can recognize the demands of the consumers (Annual report 2009).
In globalization millions of people can use internet. So Tesco is not confined in home it also started online business as do the competitors. For example Sainsbury's started to sell wine on the internet in 1995. Electronic fund transfer at point of sale is playing an important role in the area of retailing. Most shops of Tesco now accept credit cards on switch cards where founds immediately transferred from bank account to the supermarkets.
In the new economy of globalization the digital revolution has placed a new set of capabilities in the hands of consumers and business. It can be differentiated, customized and personalized.
Due to digital revolution Tesco pointed some important issues helping in making the marketing decisions namely the issues (1) Customers buying power has in creased (2) Customers can get available goods and services (3) Customers have huge information about the products. (4) They can easily place an order and receive the product.
Given this premise, the marketing decision of Tesco has been maintaining a constant consumer base and Tesco has been able to distribute the products and services within very short time in not only United Kingdom but also internationally, one of the shortest definition of marketing is “meeting needs profitable”. Marketer like proctor and Gamble noticed that people want tasty but less fatty foods.
The information age and distribution capability will lead the company to substantially new forms of marketing and business. The industrial age was characterized by mass production and mass communication, stores overstuffed inventory, and ramptant discounting. The information age promises to lead to more accurate level of productions more targeted communication, and more relevant pricing. As it had been stated by Lou Gerstner, chairman of IBM, “A technology comes along that is so profound, so universal and that will change everything.
In making the marketing decision Tesco analysis the socio-cultural dimensions of economic forces which have a strong response for the last 12 months. The reason behind it marketing decision making basically depend on the customs, values and norms and beliefs of the society. (Annual report 2009)
Socio cultural processes are important for the marketing decision making for example, consumers are willing to pay premium prices for designer clothes, where's the same clothes have virtually no market in other countries. Different people have different preferences for color, style taste and also changes in season to season. If it is considered for the employees of Tesco same thing will happen. Tesco has numerous employees all over the world. People working in the UK work so fast and they are sincere to work on the conlrary employees working in other countries are unlike to UK. For this Tesco provide for highly structured monitoring and evaluation of training and development this includes the schedule tasks time tables, measures. As a result employees working in Tesco in any country can easily understand and adopt the environment change of this locality and putting a contribution in customers' satisfaction. This moment enabled Tesco to identify the cultural barriers and the consumers' preferences.
Tesco always believe that consumers are the important factors for the success in business. Without the consumers no business can exist. So to increase customers loyality Tesco always find the path to satisfy customs demand.
Firms like Tesco and other multinational companies always motive its employees to serve the customers well. Today more companies are recognizing the importance of satisfying and retaining customers and measures the customers life time value. In the long run the company will always serve the different and changing needs of the customers.
McDonald's Co. UK
McDonald's is not of the best known brands world wide. Operating in each area of the world and evaluate on sales and profit performance. Mc Donald's is creating value and satisfying the customers demand by offering new products, Premium salads and sandwiches, classic menu favorites and affordable offering around the world since its founding in 1955. McDonald's now operating 31000 restaurants in 115 countries around the world offering a range of tastes, sizes and prices that deliver great value to customers. (According to annual report 2009)
Macro environment and marketing decision:
Companies like McDonald's and their suppliers, customers, and competitors all operate in a macro environment of forces and trends that shape opportunities and pose threats. The good communication and transportation systems have increased competition among the companies. This turn leads to change in marketing techniques.
Major macro environments factors are demographic environment, economic environment, technological environment, Political and legal environment and socio cultural environment, are influenced in marketing decisions of firms like McDonald's.
In analyzing the business macro environment the first factors comes the demographic environment. People make the markets, marketers keenly interested in the size and growth rate of population in cities, regions, and nations, age distribution and ethnic mix; educational levels household patterns and movements. During the year 2008 McDonalds co. as well as other companies affected in marketing decisions because a growing population does not mean growing market unless these markets have sufficient purchasing power.
For the last 12 months economic environment has played an important role in market decision making of firms like McDonald's. The available purchasing power in an economy depends on current, income, prices saving and credit availability.
Marketers have paid close attention to major trends in income and consumers spending patterns. During the year 2008 due to the economic recession companies like McDonald's had been affected in rising their customers and making a high revenues. Response to the affect of economical crisis McDonald's co. had taken some steps namely-
1) Improve the food performance
2) Expansion of better management
3) Minimize the overhead cost.
4) Optimize the margin
5) Setting new target customers and revenues.
6) Uphold high ethical standard.
Technological environment: One of the most dramatic forces shaping people lives in technology by which resources are converted into products. In 21st century most of the companies in the world are facing a great competition among themselves. Consequently McDonald's have improved information technology, more efficiently operating in the order to compete with the competitors in the same arena. Such as McDonald's follows a predetermined path as the meat is cooked, the burger assembled and the finished product wrapped and bagged for a customer (Annual report 2009).
The rapid invention of the internet into all areas of business is also a reflection of the technological dimension. The integrated business software systems also have a role in this sectors.
Every new technology is a force for creative destruction: Transistors hart the vacuum to be industry, xerography hurt the carbon paper business, autos hurt the rail roads and television hurt the newspapers. Instead of moving into the new technology, many industries like McDonald's fought or ignored them and the rivals were declined.
The economy's growth rate is affected by how many major technologic are discovered. Unfortunately, technological discoveries do not arise evenly through time the railroad industries create a lot of investment and then investment petered out until auto industry emerged. Loter radio created a lot of investment which then petered out until television appeared.
New technology also creates major long run consequences that are not always foreseeable. The contraceptive pill, for example led to smaller families, more working wives and larger discretionary incomes-resulting in higher expenditures on vacation, travel durable goods and luxury stems. In this case the marketer like McDonald's should monitor the following trend in technology.
“The pace of change the opportunities for innovation varying R&D Budget and increase regulation”.
Political legal environment: Marketing decision are adoringly affected by developments in the political and legal environment. This environment is composed of lows, government agencies, pressure group that influence and limit various organizations and individuals. Sometimes these laws also Crete new opportunities for business. For example mandatory recycling laws house given the recycling industry a major boost and spurred the creation of dozens of new companies making new products and services from recycled materials.
Marketers must have a good working knowledge of the major knowledge of the major lows protecting, consumers and society. Company like Mc. Donald's generally establish legal review procedures and promulgate ethical standard to guide their marketing managers and as more business takes place in cyber space, marketers must establish new parameters for doing electronic business ethically.
Social-culture environment: Society shapes our beliefs, values and norms. People absorb, almost unconsciously, a worldview that defines their relation whips to them selves, to others, to organizations, to society, to nature and to the universe. The shape of the market the ethics of political influence and attitudes in the work force are only a few of the many ways in which culture can effect are organization. McDonald's is clearly affected by socio cultural factors. For example in response to concerns about nutrition and health. MC Donald's has added salads to its memo and experimented with other low fat foods. And the firm was the fast food chain to provide customers with information about the ingredients used in its products.
Managers of various enterprises have been criticized for not being responsive to the social attitudes, beliefs and values of particular individuals groups or societies. But attitudes and values differ among workers and employers, rich and poor people college student and alumni. This variety makes it difficult for managers to design an environment conducive to performance and satisfaction. It is even more difficult to respond to these forces when they are outside the enterprise.
The marketing mix for competitive advantage:
The 4Ps of effective marketing: This marketing strategy was developed by McCarthy classified these tools into four broad groups that he called the four Ps of marketing: product, price, place and promotion. The particular marketing variables under each P are shown in the following figure. Marketing mix decisions must be made for influencing the trade channels as well as the final consumer.
Arranging an appropriate combination of the 4ps- product, price, promotion and place company like McDonald's designe plan to meet needs of customers. It is understandable the 4Ps method is one of the pillar of their marketing strategy. McDonald's use this tool to adjust to the fluctuating needs and demands of consumers especially in an attempt to elaborate specially in an attempt to elaborate operation globally. Effective marketing mix is integral for the success of companies such as McDonald's in main tanning competitive advantage.
Product: A product is anything that can be offered to a market to satisfy a want or need. Products that are marketed include physical goods, services, experience events, persons places, properties, organizations, information and ideas. Product is the first and most important element of the marketing more. Products strategy calls for making coordinated decisions on product mixes, product lines, brands and packaging and labeling.
The primary stage of marketing towards maintaining competitive advantage would be product development. In use of McDonald, product development is synonymous to expansion of product range. McDonald offers menu items to customer is that they have a choice. They have a huge number of ways to spending their money and places to spend it. Therefore McDonald places considerable emphasis on developing a menu which customers want. Marketing research establishes exactly what this is. However customers' requirements change over time what is fashionable are attractive today may be discarded customer's preferences. In this way McDonald obtain competitive advantage. In order to new product and phases out old one and will continue to do so. The development of broader products that ranges increases the possibility that individual customers will be motivated to purchase. Encouraging higher levels of consumption is not only beneficial on the part of Mc Donald but also is boosting the national economy.
Provide quality of products bought satisfied the needs and preferences of the consumer the McDonald will lead to consumer loyalty and repeated consumption. Product development is also a continuous activity on the part of the expansion strategy employed by McDonald care is taken not to adversely affect the sales of one choice by introducing a new choice. Which will cannibalise sales from the existing one Mc Donald's knows that items on its menu will vary in popularity. Their ability to generate profit will vary at different pains in their life cycle. The investment portfolio US will be different depending on the state a product has reached. At anytime a company will have a portfolio of products each in a different stage of its life cycle. Some of McDonald's options are growing in popularity while auguably the Big Mac is at the maturity stage.
Price: Price is the one of the element of the marketing mix. That produce revenues; the other elements produce coats. Prices are the easiest marketing mix element to adjust. Product features channels and even promotion take more time. Price also communicates to the market positioning to its product or brand. Today companies are wrestling with a number of difficult pricing tasks. Price is just a number on a tag or an item. It goes by many names. Traditionally, price has operated as the major determinant of buyer choice. Although non price factors have become more important in recent decades, price still remains one of the most important elements determining market a here and profitability. Consumers price information and price discounters. Consumers put pressure on retailers to lower the prices. Retailers put pressure on manufactures to lower their prices. The result is market place characterized by heavy discounting and sales promotion. Pricing is often based on quality and cleanliness as well as the taste and satisfaction that it offers consumers.
McDonald's use the customer's perception of value is an important determinant of the price changed.
Customers draw their own mental picture of what a product is valued and worth, a product has psychological connotations for the customer.
Mc Donald's aware too much when using low price as a marketing tool is that the customer may feel that quality is being compromised. It is impartment when Mc Donald's deciding a price to aware of the brand and its integrity.
A further affect of price reduction is that competitors match prices resulting in no extra demand. The result of this profit margin his been reduced without in creasing roles.
Promotions: The most valuable tools of marketing program is the promotional tools is playing an important role in making the marketing strategy in the time of globalization and enabling McDonald's to obtain the competitive advantage. In 2008 McDonald's main marketing strategy was to serve the customer new items of foods and comfortable eating place and affordable product price.
The major media types McDonald's using to attract and retention the customers are likely TV, radio, cinema, online poster sites and in the press (news-papers, magazines). Besides ruse the promotional methods includes sales promotions, point of sale display merchandising, direct mail telemarketing, exhibitions, seminars, etc. (Annual report 2008)
In analyzing the marketing strategic of the McDonald's advertisement distinguishes form other marketing communications which is a paid form and presentation of goods and services the company offers. In maintain the competitive advantage ads are cost effective way to build brand preferences for McDonald's or to educate the people since its target audiences are to reach a single professional women with income above a certain level. To advertise to mothers with children, it may be more effective to take advertising space in cinemas during Disney films (Annual Report 2008)
In maintaining the completive advantage McDonalds are using different methods in development its marketing strategies. For an instance TV advertising makes people aware of a food item and press provides more detail. Global companies like McDonalds use a large number of ad agencies located in different countries and serving different divisions have suffered form uncoordinated advertising and image diffusion. The result is integrated and more effective marketing communications and a much tower total communication cost.
The aims of marketing communication of McDonalds is to create liking, preference, conviction and purchase of product or service. The Burger king corporation used comparative advertising for its attack on McDonalds (Burger king's Burgers are flame broiled; McDonalds are fried). Comparative advertising works best when it elicits cognitive and effective motivations simultaneously.
Advertising campaigns very in creativity. William Bernbach observed “ The facts are not though........Donot forget that shakes pare used some pretty hackneyed plots, Yet his came through with great execution”.
In last year 2008 Due to the financial crisis, it was seen consumers in many developing countries where McDonalds operating its business were relevant to buy some products the companies offer. Even many consumers where dissatisfied with their current product, a habit was been established and learning about new product in difficult McDonalds offered convenience, high quality, low price warranties etc.
The final element of marketing program is the place is also important in requiring competitive advantage basically where the stores are situated. Mc Donald's is one of the company which is situated in the most Urban area in UK and allover the world it continuing its operations. Place is the marketing program that encompasses the management of a range of processes involved in bringing products to the end consumers. At the very beginning since 1955 in the introduction stage of McDonald's, it operated only in some selective places in UK urban area. As soon as it passed this initial stage it started to build intensive distribution. Such as it entered new market segments, it increased its distribution coverage and enters new distribution channels. Likely done by star bucks coffee company. In the globalization starbucks coffee company opened to capacity crowds in the fall of 1998 and the company opened another restaurant by the end of the year. Starbucks continues to expand globally entering china, Kuwait, Korea and Lebanon in 1999.
The factors that included with place likely channels coverage, assortment location, Inventory, transport place is the key marketing min tools includes the various activities the company undertakes to make the product accessible and available to target customers. The company must identify, recruit and link various marketing facilitators to supply its products, and services efficiently to the target market. It must understand the various types of retiles wholesalers and physical distribution firms and it make its decision.
The key to success of McDonald's in the retail industry is the good customer relationship strategy and the responsibilities of different individuals. From its foundation till now McDonald's always maintain the customer loyalty and a brand bonding was judged by measures of awareness, recognition, recall or intent to buy McDonald's products. Consequently against short term target and ensured that this is done within the confines of a tightly controlled, fine marketing budget.