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The retail sector is very huge sector in the UK Market. Retail covers the whole lot from the small village shop where the shop proprietor recognizes every shopper by name, to the London Oxford Streets giant department stores. The Retail industry range includes the shop where you walk into to purchase, to the shops where you can explore with a keyboard and mouse.
As per Department of Trade and Industry's commissioned report in 2003, £221bn topped in the UK after retail sales, and also provides jobs to around three million people and contributed 12% in the whole UK economy. We society is consumer-driven society, where shopping represents a lot more a hobby than an actual requirement to purchase products.
Tesco, among the globe's leading multinational retailers and a top retail store chain in the UK. In 1919 Tesco was founded by Jack Cohen, at that time Cohen started to sell extra grocery items from a stall in the East End of London. Against his first day's £4 sale he gained £1 profit.
The Tesco brand first time appeared in 1924. The brand `TESCO`, came about after Jack Cohen purchased shipment of tea from the supplier T.E. Stockwell. He made new labels by using the first three letters of the supplier's name (TES) and (CO) from his sir name forming the name "TESCO".
The first brand which was sold by the Tesco was "Tesco Tea" in 1924. The first Tesco store was started in 1929 at Burnt Oak, Edgware London. In 1932 Tesco became a private limited company. Tesco was registered in the London Stock Exchange as Tesco Stores Limited in 1947 and the price of the share of Tesco Store Limited was 25p. In 1956 in Maldon, a cinema was converted into the first Tesco self services superstore. In year 2000 Tesco open it web site www.tesco.com
Tesco initially specializing in food, but now has been diversified into different areas like consumer electronics, clothes, general household stuff, Selling of DVDs, Tesco Finance, Tesco Insurance etc.. Tesco gained £3.128 billion profit in last 12 month up to 28th Feb 2009 (as per The Guardian, 21 April 2009).
Tesco runs 4 different types of stores. These stores include Tesco Extra, Tesco Superstore, Tesco Metro and Tesco Express. Tesco has biggest retail store operation in UK, other than UK; Tesco exists in Ireland, Central Europe, and Asia. Tesco has about 3729 stores and about 440,000 people works for Tesco (as per Tesco annual report 2008).
Marketing, by its very nature, is an outward-looking discipline. As the source to interaction between the organization and the outside world, it has to balance internal capabilities and resources with the opportunities offered externally. Although the definition and understanding of customer`s needs and want are at the heart of the marketing philosophy, there are many factors influencing how those customer need evolve, and affecting or constraining the organization `s ability to meet those need in the competitive environment. Thus in order to reach an adequate understanding of the customer`s future need and to develop marketing mixes they will satisfy the customer, the marketer has to be able to analyze the external environment and clarify which influences and their implications are most important.
What is Macro Environment?
The macro environment consists of all external factors which are uncontrollable and which effect the business`s development and also influence its planning and decision making. They need to recognize the inclinations and mega trends characterizing the present macro environment. This is critical to recognize and act in response to unmet requirements and trends in the souk.
Although the environment consists of a whole wide variety of factors and influences, it is possible to group them under broad heading, these elements can be divided into four main grouping, known by the acronym STEP; Socio culture, Technological, Economical and Political and legal environment
Socio Culture Environment
The socio culture environment is of particular concern to marketers as it has a direct effect on their understanding of customers and what drive them. Not only does it address the demographic structure of markets, but it also look at the way in which attitude and opinion are being formed and how they are evolving. A general increase in health consciousness, for instance, has stimulated the launch of wide variety of products which low levels of fat and sugar; fewer artificial ingredients and no additives.
Technological innovation and technological improvement have had a profound effect in all areas of marketing. Computer technology, for instance, have revolutionized product design, equality control, materials and inventory management, the production of advertising and other promotional materials, and the management and analysis of customer information. The rise in direct marketing as a communication technique, owes a lot to the availability of cheap and powerful computerized database management. Technology also effects the development of new processes and materials, as well as the invention of completely new products or application such as the multimedia home computer, including a CD-ROM drive, or the development of the low calorie sweeteners that have revolutionized the dieting market.
The economic and competitive environment covers both macro and micro-economic conditions which effect the structure of competition in a market, the cost and availability of money for marketing investment in a stock and new products, for example, and the economic conditions affecting a customer`s propensity to buy. The global recession of late 1990s and in the current situation for instance, caused a significant increase in the unemployment at all social levels, and thus affected consumer`s willingness and ability to buy may kinds of product.
The political and legal environment covers the external forces controlled by the government both national and European (if we talking about UK political/legal environment), local authorities, or other trade or activity oriented regulatory bodies. Some of the rules and regulation developed and implemented by the bodies under this heading have the force law, while others are voluntary, such as adverting code of practice.
Macro Environmental effects on TESCO Marketing Decision Making
As macro environmental factors always effect the development and planning of every business, same as Tesco also has or will have some influences of macro environmental factors towards its marketing decision making.
Socio Culture Environmental Factors
Demographics is the study of the measurable aspects of population structure and profiles, including factors such as age, size, race, occupation and location. As the birth rate fluctuates, and as life expectancy increase, the breakdown of the population changes, creating challenges and opportunities for marketers. Tesco use the demographic changes as opportunity and set its marketing strategy by the running the different kinds of store depending on the population size, location etc. Tesco use ethnic groups as a tool for good opportunities. Tesco divided its stores across the UK into five formats, these stores differentiating with the size of store and product being sold in these stores,
TESCO EXTRA is largest store, generally located out the town a wide area. All Tesco products range available here. Free Car Parking also provided here. In 1997 first Tesco Extra was opened.
TESCO SUPERSTORES are considered as supermarkets with standard large size. These stores have the stock of grocery and a lot of small non food small items. These store called the superstore for connivance but this word does not use in the shops. Generally these stores open 24 hours. In UK floor space it is standard Tesco format. Generally these stores located in neighborhoods of cities or the locations of these stores are based on the boundaries of large, medium-sized settlements. The usual size of Tesco superstores is about 2,900 m² (31,000 sq ft).
TESCO METRO STORES are medium size store. They are larger than Tesco Express and smaller than Standard Tesco superstore. The locations of these stores are inside the city centers or they locate on the high street of less populated town like Uxbridge etc. Usually size is 1,100 m² (12,000 sq ft). The first Tesco Metro was started working in Covent Garden, London in 1992.
TESCO EXPRESS stores are vicinity ease shops. Tesco express sale the food item generally with the focus on a high margin products range. These store located in the busy city centers, small shopping boundaries in residential areas and on the petrol stations. Usually the size of Tesco Express is about 190 m² (2,100 sq ft).
Covers the Customer from all Walk of Life
Tesco covers the customers from all walk of life as discussed above in the demographic changes Tesco runs different kind of store, other than this there is also a facility of online shopping, Tesco direct. These all available option caters the society as whole from families to a person in a rush for snack purchase.
Covering Status Preference Through Pricing
Store like Tesco seems to be considered as less premier in the status preference if we compare it with other competitors like Marks and Spencer`s(Chaney, 2004). Tesco started to cover this preference status by gaining customer base through keeping an eye on mass market pricing.
Free Eye Tests
Tesco has started giving facility for free eye tests to those people who has not cover NHS.
This is a very good example of corporate social responsibility set by Tesco and it gives Tesco a spectacular reputation in the community (Anker, 2010). Tesco also promoting fair-trade products although this is not an differentiating attribute as other competitors has also launched this kind of practice but even that it is giving superiority to Tesco.
Contributing towards reducing unemployment
Due to the current economic down turn situation around the globe, unemployment rate is very high. As fast growing largest retailer in UK and creating more jobs, Tesco playing a vital role to reduce the unemployment.
In an increasing dynamic world, where the creation, launch and maintenance of new product are more expensive and difficult than ever, no organization can afford to ignore technological environment and its trends. Even if your organization does not have the inclination or resources to adopt or adapt new technology, understanding it is important because competitors will exploit it sooner or later, with implications for your product and its marketing. Technological factors also effect to Tesco as well. These factors are helpful for Tesco business as,
Successful Online Retailer
Tesco declared the most booming online shopping retailer. Tesco had achieved the bar of £1 billion online sale in 2006. And online sale has been increasing with the 12% average per year after that up to 2009 (Tesco PLC, 2009; Andy, 2006). Tesco aggressively capturing the market for non food items range through taking advantages of his portal. Dedicated outlets are also in operation for collections for those orders, customer made online (Tesco PLC, 2009).
Use of Modern Technology
Tesco have also gained benefits from modern technology. At Tesco stores to identify gaps on shelves, portable scanners are being used. These portable scanners also used to identify in stock flows. To increase the efficiency heat senescing technology is being used to assess queue at checkout points. Tesco delivered nearly £400 million in savings after adopting this kind of technology (Leigh, 2008).
Self Service Check out, Club Cards etc
Some people with a few items avoid from the long queues and want to check out quicker, Tesco`s quick and efficient self service check outs are an attractive factors for many customers. People can checkout very easy and in a simple way by them self. More over club cards are also shows Tesco`s policy on adopting the latest technology to attract the customers after giving away points on each shopping and then convert these point into shopping vouchers.
The effects of economic and competitive environment are felt by organization and consumer alike, and it has a profound effect on their behavior. Macroeconomics environment provides the overall backdrop against which marketing activities take place.
Less effect of Economic Downturn
The recent adverse economic recession does not seems effect Tesco much and didn`t effected the overall profit of Tesco as they valued themselves after stocking the products range that attract to every end of the market, e.g. from the high quality range to a lower value range products. Tesco observed 1% rise in its profit before tax for the first half of the financial year. The 'survivability index' places it ahead of most retail chains (BDO network, 2008; Ruddick, 2008).
Reduction in the VAT
Government announced the reduction in the value added tax last year. VAT was being reduced from 17.5 % to 15 %. It means people had more disposal money for spending and it generated more revenue for Tesco. But VAT has increased to 17.5 % in 2010.
Operation in less recession effected areas of World
Tesco has operation in the countries like China and India which are less effected from the economic recession if we compare them we the western part of the world. This is important aspect for the Tesco and shows excellent prudence as revenue.
Economic downturn creates unemployment
Recent Economic downturn has badly affected both the organizations and individuals as well. This recession has created unemployment and numbers of people do not earn increase and this unemployment mean less money for spending and this is also affect the demand of goods.
Quite apart from their effect on the economics and competitive environment, government have a great influence on the character of the general business environment through their policies and the resultant legislation. Organisations have to exist in and operate according to the laws of societies within which they do business, thus in addition to the more general laws of contract and commerce, product have to conform to safety laws; manufacturing processes are subject to pollution control; copyright and patent protect innovation; and retailer opening hours are restricted in Germany, for example, by the Ladenschlussgesetz,and in the UK by Sunday trading laws.
Having operation in globalize environment Tesco's performance is very sway by the political and legislative environment of these regions, including the European Union (EU).
New Government Policies
As 2010 is general election year for UK. The current political scenario seems to have some reservations for Tesco. Conservatives have plans to introduce a competition test to observe requirement and appropriateness for development into new area, if they come to power. This has already been severely lobbied not in favor of by Tesco given its difficult implication for increase and expansion.
Entering into new markets
The complete debacle of the eastern community, EU growth, and removal of protectionist trade barriers in market of countries like India and China have been key changes in the world economy. Tesco is taking advantage of these opportunities by diversifying in these markets already.
Reduction of Corporate Tax
Reduction in corporate tax is favorable for the Tesco and other UK corporations. But despite the cuts it has been a question mark for Tesco to avoid from Tax by launching off shore schemes. This is significant in terms of the cascade effect it may have on development planning, and for related regulations that may come into force given the future political shifts beside the concerns over fiscal shortfall in the UK (Leigh, 2008).
How the Marketing Mix used by Tesco Strategic Management to get Competitive Advantages in its Chosen Sector
Understanding the nature of customers and their needs and wants is only the first step, however. The organization needs to act on that information, in order to develop and implement marketing activities that actually deliver something of value to customer. The means which such ideas are turned into reality is the marketing mix.
The concept of the marketing mix as the combination of the major tools of marketing was developed by Borden in the 1950s (Bordon, 1964), and the mnemonic `4Ps`(product, price, promotion, place) describing those tools was coined by McCarthy(1960). The marketing mix creates an offering for customer. The use of word mix and combination are important here, because successful marketing relies as much on interaction and synergy between marketing mix elements it does on good decisions within those elements themselves.
In the perspective of Tesco, their access to the Chinese market should considerably acclimatize to the culture of the consumers in the market of China. On the other hand, the company should always take into account the fundamental standards to which their company adhere to. Provisional changes of services in term of the four Ps should not entirely turn aside to the standards inbuilt to the company.
The management of Tesco should set off product development strategies once they have taken control of their shop in China by marketing their existing products, exporting products in different provinces of the country and in so doing pressing forward on the possible opportunities of boosting the company's market penetration and market share. Tesco should consider restoring or revising models of their products to provide the Chinese customers what they want and what they need. In this way, Tesco could develop the store's own brand products which could be marketed strategically within the territory of China.
Looking at the situation of Tesco, one way that it could acquire cost advantages is by enhancing process efficiencies, expanding exclusive contact to a large supplier of lower cost materials, or steering clear of several costs in general. If rival organizations in the country are incapable to lower their costs by a comparable quantity, Tesco will be capable of sustaining a competitive advantage anchored cost leadership.
To develop its success in its retail operations, the Tesco should make multi-million pound investments in store expansion in low-income districts and localities. By getting involved with similar-minded public and private sector groups like local community based associations, colleges, and chambers of commerce, the Tesco will be able to open sites in economically disadvantaged districts in China. Targeting these areas will enable the company to gain the trust of local luminaries and gain favour from the local government by providing employment to the locals.
The Tesco's approach should constitute a long-standing strategic plan that centres on generating value to expand the loyalty of their customers which take account of preserving a well-built central Chinese business, to be as strapping in non-food as food products and services, to develop globally and to set the ball rolling on retailing services like on-line shopping.
The bottom-line is that the object of the marketing mix is to satisfy the customer. What Tesco must do is to basically know the needs of the customer in their target country. However, the company should not centre on merely knowing the needs of the consumers. It also has to extend a good relationship with them by ensuring a competent provision of its product and services. Along with these is the provision of a suitable customer care service to reinforce their satisfaction