Developing a marketing strategy at Tesco
Marketing is to establish, maintain and enhance relationship with customers and other partners, at a profit, so that the objectives of the parties involved are met. This is achieved by mutual exchange and fulfilment of promises. Brassington F and Pettitt S( FT Prentice hall,2006)
Developing a marketing strategy is a very fragile process and all organizations make extra effort for it to gain customers.
Customer's knowledge is very essential to gain them. Marketing strategy has a vital role to play in an organization. Customer relationship is very important for a business. Customer needs should adhere to organisational objectives and this is important. In a nutshell we are statisfying needs of customers with profit. According to the Chartered Institute of Marketing, they offer recognised qualifications and trainings and also provide advice on marketing, their base line is :
SATISFYING NEEDS AND WANTS OF CUSTOMERS AT PROFIT
Marketing strategy should be adhered to customer needs and wants.
Customer is an essential factor of an organisation, his likes and dislikes, thoughts and wants change with time. Its very natural, that human beings change their attitude, desires after a certain time period. The strategy should respond to those changes effectively.
To capture market, companies should adopt affective techniques. Customer should know what we are doing.
Monitoring and control after strategy implementation is very important.
COMPANY PROFILE OF TESCO
Tesco PLC holds the leading position among food retailers in Great Britain, with a market share that exceeds 15 percent. In England, Scotland, and Wales, the company runs 588 supermarkets, 257 of which are superstores--stores that sell food items in addition to a variety of other products, including gasoline, clothing, housewares, and alcoholic beverages. Tesco also operates 32 stores in Northern Ireland and 77 in the Republic of Ireland under various brands, 43 in Hungary under the Global and Tesco names, 31 in Poland under the Savia name, and 13 in the Czech Republic and Slovakia under the Tesco brand. In Northern Ireland, the company also runs 52 Wine Barrel off-license outlets. Tesco is the largest independent gasoline retailer in Britain; its 288 gas stations sell 12.5 percent of the gasoline sold in the United Kingdom. Recent company innovations include the Clubcard loyalty card as well as offerings from Tesco Personal Finance, which include a grocery budgeting account called Clubcard Plus, a Tesco Visa Card, and a Tesco savings account.
BASIC PLANNING RULES FOR A STRATEGY
VISION AND MISSION
All companies have their vision and mission statements which describe the organization.Some organizations have two statements. Reputed companies have one vision statement.
It is a small description of an organization's future.
What is the business?
How value of customer can be increased?
Tesco Vision is
EVERY LITTLE HELPS A LOT
A strategy should be customer oriented, customer knowledge is essential. To know your customer, customer diversification in categories is important. They can be divided into segments according to their liking and disliking trends. A market research can be conducted to know the trends. After trend analysis, competitive advantage can be attained.
According to the Chartered Institute of Marketing
"Marketing is the management process that identifies, anticipates and satisfies customer requirements profitably".
For quality oriented customers we should make a strategy that draws their attention to our quality products and prices. Strategy should match our strengths.
After strategy formulation, customer awareness is important. We need to develop channels to makle the customers aware of our offers.
To develop a systematic approach is hard and fragile task then all the other marketing tasks. Its id nutshell which includes all the companies objectives and plans.(Malcolm Macdonald,2008)
Sequencing and scheduling of Activities
Organisational managers are responsible for executing all the marketing activities and scheduling them. The main steps to make the execution on time are:
1 Identify activities to be performed
2 Determine the time required for activity completion
3 Determine the activity sequence.
4 Timing of all activities.
5 Assign responsibility(O.C Ferrel,Michael D,2007)
Integration of activities
Integration are of two types
In simple, organizations subcontract the easy activities to other countries and keep complicated duties to themselves. Small companies support this strategy.
In complex, the companies make decisions at the headquarters.(Bradley F,2005)
Companies go with diversification if they have strong assets. Such Organizations introduce themselves in markets where the resources are according to their abilities. They have more opportunities if the resources are general. (Bradley F,2005)
Time scaling is of two types
1 Production time scale
2`Commercial time Scale
Both of them have different requirements according to the production and Marketing departments of the organization.(Suerie C,2005)
Implementation and control:-"
A plan is nothing unless it degenerates into work."(peter drucker) Control is the way that we catch faults in strategy.
Types of control:-
Annual plan control
STRATEGIC MARKETING PLANNING PROCESS
This Process consists of a pattern of sensible steps that are taken to arrive at a Marketing plan.
The next step would be to analyze the Market.
Inorder to analyze the market there are some dimensions which need to be covered.
Size of Markets
Profitability of Market
Structure of Cost
Development and Trends
(Mcloughlin D, A.Aker D, 2010)
SETTING MARKETING OBJECTIVES
There are two factors
Customer oriented objectives
Market oriented objectives
Both objectives should be designed to earn profit and gain customer.
Goal setting should keep the organizations internal and external environments in centre.
Only then a realistic business strategy can be developed.
The goals should be smart, measurable, realistic, achievable, specific and time bound.
"A strategy is a plan that integrates an organizations major goals,`policies,decisions and sequences of action into cohesive whole."(Proctor T,2000)
A marketing strategy should be coherent to the marketing plan. It should always be the same practically.
In order to put in place a marketing strategy, the first step is to understand the market. Divide the market in to different categories. E.g. the business sector is huge market. This market can be categorized business nature. Banking industry is separate market. Steel industry is a separate market and similarly Textile is a separate market.
The next step is to analyse, number of businesses working in each sector. Size of each business, their level of working.
After doing this analysis, customer trends need to be analyzed , what do they want. Then after analysing we should be understand where we have the competitive advantage. And how can we bring it to use.
Positioning means to make an image in the mind of the customer. His perception about us. What he thinks about us. What do we want him to think. How can we do that is part of the marketing strategy. Some businesses want to offer quality and some offer cheaper rates. This is where we want the customer class comes in. Does he fall in the higher class, middle class or lower class.
Afetr segmentation, market selection and positioning the product, the next step is to make a marketing mix. Business should then evaluate its different marketing mix strategies which include the 4 ps.
According to Adcock et al
"The right product, in the right place, at the right time, and at the right price"
Organizations should work on the product. How the customer values the product. It also depends a little on the company where it wants to draw attention.
Existing products should have a different line of action on how the product should be modified.
The price aspect is critical. If customers want quality at any price. Then in the above P(Product), the company might focus on quality. If the price set is low then the customer might see it as low quality, others might favour it to meet the finances.
Accessibility is the answer to gain customers. Products available to customer in his local area, then this is an advantage. Because if products are of basic or daily needs, customers have many options and will prefer the nearest one. Internet shopping is another plus point.
Customer awareness to product is also important. Either through internet, media or print media. Until and unless the customer does not have the knowledge, we won't make any sales.
Tesco,s way promotion are advertising, public relations, direct mail, sales promotion and personal selling
These were the 4ps. For more detailed and comprehensive study, 3 more ps were included:
An organisation needs to make sure that its resources such as the employees are fully trained. They should have enough product knowledge to satisfy customers.
The processes of the company should be efficient enough to handle customers and satisfy them according to their needs.
This factor refers to the company's appearance. How the employees look, the premises. These elements put an immense impression about the business in their mind.
These tools are just like the ingredients of a strategic marketing plan. If any one of it is not focused and given a detailed consideration then chances are of failure.
TOOLS AND TECHNIQUES
If an organisation works honestly with it self, this will lead to success. A business should look in its internal and external environments. For every business it is important that it analyses its strengths, weaknesses, opportunity and threats (SWOT analysis). Then it realises where it stands. After it knows what its actual picture is, then accordingly strategies should take shape.
A company's strength could be
Good customer service
Good offers, packages
According to a report some of Tesco,s strengths are
Diverse ranges of products
â€¢Â Â Â Open 24 hours service
â€¢Â Â Â Strong flow of cash
â€¢Â Â Â Increasing turnover and profits
â€¢Â Â Â Strong Balance Sheet
â€¢Â Â Â Growing Supermarket Chain
â€¢Â Â Â Brand Awareness
â€¢Â Â Â Online Shopping
Weaknesses could be like
Lack of resources
Accounting system is not good
There is a mind positioning of low quality -(Tesco value brands)
â€¢Â Â Â Lack of local knowledge of customers and culture
Â Â Â
Â Â Â
â€¢Â Â Â Competition which is strong
â€¢Â Â Â Unpredictability in Price of raw materials
â€¢Â Â Â Recession
â€¢Â Â Â Shift of market to globalisation
â€¢Â Â Â Takeover bids
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Internet as a source of new markets
New technologies can help product improvement.
New competitor in market
In order to identify the Macrofactors, we use
Step: stands for Social, Technological, Economic, Political factors
Steeple: Social, Technological, Economic, Ecological, Political factors, Legal and Ethical Fators.
Pestle: Political, Economic, Social, Technological, Legal and Ecological factors.
Now these three tools vary from organization to organization.(Blythe J, 2006)
External environment includes the forces outside the organisation. Its called the PEST analysis. PEST are the factors that make the business wade in the external environment. But businesses have to survive.
Political changes also affect the business. If a new regulation is imposed like taxes, this could effect the companies cost.
After the European Integration and agreement of free trade, the market has opened up for British Companies to invest in Eastern Europe. Tesco already has 60 Hypermarket store in Hungary.Â Â
Economic factors like change interest rates, exchange rates also affect the business.
Social factors include change of lifestyle, fashion, attitudes of people which change demand for certain product.
Changes in consumer demands, trends and lifestyle show both opportunities and threats for the company. Opportunities in terms of new market and consumers, however, there are added threats of developed Swedish retailers.
Technology has immensely changed the way businesses work now.
Changes in retailing sales through the Internet is now very common. Paperless operation, access through secure servers; provide flexibility in the business running. Sweden is going through technological development with companies like Ericsson, Tesco would enjoy the logistic and distribution channels already in place
National legislation for health and safety both in terms of consumer rights and also in terms of production of own natural renewable resources for making clothes
Businesses do not have control over these factors what they can do is react
to these changes by accordingly adjusting the SWOT environment.
This tool is used by businesses to evaluate their different business units (SBU).It was developed by the Boston Consulting group. It places the different SBUs of the business in each quadrant according to their market share and reputation
These products are market leaders have good market share and growth
These products have high market share in low growth markets.
These have low market share in high growth markets. These products need considerable thought if they should be supported or not. They are not generating much income.
These products have low share in low growth markets. Very poor performance and should be withdrawn.(L. Kurtz D,2008)
PRODUCT LIFE CYCLE
It is a model which represents the life of a product. It has four basic stages
The product is developed and introduced in the market.
This phase of the cycle is where the product gains market share and generates income.
In this stage the product has achieved the maximum share and is at its maturity point.
After achieving the maximum share the product undergoes a decline phase where it has no more demand for it self.(Saaksvuori A,Immonen A,2008)
Product Life Cycle Model
PORTERS FIVE FORCES MODEL
Threat of new Entrants
Bargaining power of Supplier Bargaining power of Buyer
Porter argued the strategy is not just as series of models at the corporate level of strategy. He noted that strategy includes analyzing potential entrants, suppliers,buyers,substitutes, and competitors.
BARGAINING POWER OF BUYER
It is the ability of the buyer to bargain. This power increases as the buyer has more options to buy from.
These are the new companies entering into the industry and are a threat to the existing ones.
BARGAINING POWER OF SUPPLIER
It is the ability of the suppliers to decide the price for their product and the terms.
Alternate products offered by companies for a particular product are also threat to existing entities.(Michael J. Stahl, DavidW. Grigsby,1997)
MARKETING STRATEGY OPTIONS
According to Michael Porter, orgaizations can continue with three strategies,
1 Differentiation Strategy
2 Cost Leadership
3 Focus Strategy
This strategy is used by an organization to make itself different from other businesses. This strategy helps the organization to charge more from customers as compared to competitors. One thing is for sure that if customers get extra value they can pay more.
Rolex watches charge more for there product. They earn their reputation by the quality of metal, stainless steel. They undergo special test for quality assurance.
This strategy is used by companies to boost sales. They reduce their cost slightly below the cost of rivals and sell the products more.
Timex has been a cost market leader for long. They make simple watches at low price for mass market.
Organizations using this strategy focus at particular market or group of buyers. Organizations might make thier focus using differentiation or cost leadership strategy in that specific market.(Ricky W. G,2007)
These are skills used by organizations to provide customers with extra benefits.
Competences could be
(Hamel.G, Prahalad CK,1996)
Customer expectation has increased due to companies continuing improvement towards their product to satisfy them. Since every company competing with Tesco is giving almost comparable products so the only way to get an edge is to give something extra to surprise them. Employee training is also very important to cope with customer expectation like giving a free delivery at home.
Technology is changing at a very fast rate so companies need to be good supporters or followers.
Tesco can and is improving towards reducing the ques inside the stores by improving the websites so grocery orders can be taken online.
Competition has increased tremendously in many industries and so many companies who were weak have fallen out, due to added factor weak economic conditions.
Tesco club card scheme has really helped it to get through the economic condition.
In this era every business considers and makes decisions according to the international market. Now the world has developed it self to be a global village. Spread of information, media, internet many different of doing business online has raised the competition even more.
(Doyle.P, Stern. P, 2006)
Tesco is becoming a growing chain and is one. This chain has helped it to secure strong profits.It has and should continue to operate in other countries to gain customer bank and explore new markets.
Tesco's functional areas are
The administration department should keep the internal operations maintained.
Finance department should take care of cash flows and also take measures to control cost with out effecting profit.
Marketing department should focus on sales increase and product training for employees.
Research and development
Research and development should maintain the standards of product quality.
Tesco has introduced self checkout machines through which people can pay themselves instead of waiting in ques.
If the objective is to increase sales.
To increase the sale, Tesco should work on its sales and marketing Department. Employee training is important. Product knowledge for employees so that customer satisfaction is guaranteed. It will help the human resource to market the product and give the customer what they need. As a result, we will experience an increase in sales. Customer awareness is very essential.
E-marketing is also an important tool in this era to make it easy for people to buy products online.
It is more easy for people to do transactions online and get delivery on time.
In a nutshel, i would say that marketing should have proper department in every business and it should work on an genuine plan. The rules and principles of marketing should be adhered to make the marketing plan successful. A company should also keep up with its functional areas so that the plan work smoothly.
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