Marketing Strategies Of Tesco Plc Marketing Essay

Tesco is the largest food retailer in UK, and operating its stores in various nations with best performance. With its head quarters in Hertfordshire it had 72.0 billion group sales, with a £3.8 billion group profit before sales, 1.6 percent direct raise in the revenues before tax, 2.1 percent raise in the underlying earnings per share and a dividend of 14.76 percent in the year 2012 shown in the annual report of TESCO PLC. Rating itself among the largest group of the retailers in UK, it is employing more than 520,000 residential. It possesses more than 6,700 stores in the 12 markets which serve million of customers on daily basis. The vision of the organization is to deliver the best optimum shopping trip to its customers on daily basis. The philosophy of “Every Little Helps” the organization has developed a motivated and advanced environment to support the customer in their shopping, trading and commerce. TESCO PLC offer a huge variety of the food retails to its customers with their name. The two of the largest brands being held by TESCO PLC, Finest and Every Day value have sales of £1 billion on yearly basis, more than the yearly sales of Coca Cola each year. The plan of the organization’s CEO in building of a better TESCO PLC is based on the following six basic key elements:

Service and Staff

The organization believes its staff; the appointed staff has to spend a period in the stores, than in the food department of the organization.

Stores and formats

The organization believes that faster programs in the store promote refreshing programs and an enthusing feel to the customer.

Price and value

The stores believe on more personalized offer to the customer. To make a feel of ownership, and competitive prices to the customer.

Range and Quality

TESCO PLC strongly believes its innovative quality of the products and services

Brand and marketing

TESCO PLC work a lot on the building of a good loyal relation with the customer

Clicks and bricks

The online support of TESCO PLC is valuable for its customers.

The operation of the organization is worldwide, and the recent venture has been signed in Japan which shall be a joint venture project. The surveys showed that after Wall Mart and France’s Carrefour, Tesco plc is the third largest retail outlet in retail business. The foundation of the merchandize was laid by Jack Cohen in 1929. The stocks of the organization are traded in NYSE (New York Stock Exchange) Tesco plc trademark. TESCO PLC deals in a variety of products and services in the globe. The wide range includes grocery product, merchandize, apparels, books and stationary, electronic, rental and several financing activities daily. In 2010, TESCO PLC was number 85 in the list of the Global 500 cooperation’s.

SWOT Analysis

This is an important step for the formation of a marketing strategy of an organization. The SWOT analysis provides the major strengths, organizational weakness, the opportunities available for the organization and the threat for the organization in the market. The SWOT analysis of TESCO PLC is:

Strengths

TESCO PLC offers its customers better value of products in form of lower prices and promotion.

The wide range of stock availability

The better location for the stores

Highly built goodwill of business

Widely available investment resources and the reserve provisions

The diversified environment of the business

The supply of the TESCO owned brands

Community promotional programs

The customer loyalty

Effective management skills

Better production quality

Weaknesses

The pool of cheap debt facilities

Lack of training facilities in diversified environment

The organizations marketing is limited to the word of mouth

Lesser representation of the brand image as competitors of the organization

Several policies regarding the diversified environment of the organization.

At times the limited stock makes it a weakness of the organization

The staff finds it difficult to recall the brand at times

More sequential acquisitions and joint ventures can reduce the profitability of the organization.

Opportunities

The organization’s owned transportation.

The delivery facility of the organization.

The production of a variety of products on its own brand name.

The impact of the financial crises has not affected the outlets much.

The improving quality of technology.

Cheaper goods and services available.

The opening of virtual stores.

The online dealing with the customers.

Threats

The economic crises of the business

The competitor’s strategies to capture market.

Difficulties in overcoming the financial crises

The threat of the new entrants in the market may affect the business share.

Change in the government policies of the diversified business environment.

The price war of the brands plays a vital role to become the business threat.

The various investigations on the SWOT analysis of TESCO have shown that the organization is maintaining its strong position in the retail business. It is facing the competitors with its policies. However, the globalization opportunities of TESCO PLC may be improved to meet the competing demand of its business.

PESTLE Analysis

TESCO PLC is operating in 14 countries of the world. It is essential for the organization to maintain its business policies and targets up to mark to meet its emerging market demands. Following is the PESTLE (political, economical, social, technological, legal, environmental analysis) of TESCO PLC.

Political Factors

The policies set by the government affects the organizational strategies and the decisions to sustain in the marker. For a globalized retail business like TESCO PLC, it becomes crucial to follow the rules and regulations being laid by the business. The investors have discussed on the following factors:

Fiscal policy and the Taxation establishment:

Today the Excise & Import duty rates have been condensed considerably. a lot of food articles have been absolutely excused of the excise duties. The rate of Custom duty has also been significantly concentrated on heavy machinery and factory equipments, moreover on the unprocessed material as well as the transitional items. Even more for the selling of abroad. Company taxes now are abridged and now the shift is on the market relating paybacks of the business. Moreover there is an option by the government to transfer the burden of tax and duties on the customer, by adding up it in the sale value. So, TESCO PLC focuses on the countries where there is lesser import taxes or the custom charges likewise the upcoming venture of TESCO PLC is in Japan.

Tax Reductions

Though the taxes and the duties rate had been raised 16 to 14 percent in the year 2008 till 2009. The individual tax slabs are revised and most probably increased per year. Yet the government allows the producer to transfer the burden of his taxes and heavy payment. Although the government styles believe, lower tax rate on the retail customers and the retail businesses even though TESCO PLC pays attention how the business shall flourish in a particular country. So that sale value may reduce the customers of the organization. So the organization makes up some provisional policies to reduce its tax burdens from its net profits.

A suggestion to the government for the reduction of fundamental sales tax from 3% to 2% is a superior break for the manufacturing and trading business, hence the implication of the suggestion shall raise the profitability of the organization and a better sale value for the customers.

Political Policy Interchanges:

TESCO PLC has to consider the issues in the policy making of the countries. The FDI global retail has been affected due to the globalized diversifying policies. Each country holds its politics and bureaucratic role in administration. Several rules and regulations are settle and the retail business has to follow the regulation been set by the local environment. In such situation at times it is difficult to administer the vision of the organization.

Economical Factors

In the globalizing of an organization, the major factor considered is the economical situation. The facts at where the economy stands, the inflation or the deflation of the economy, the trade cycle prevailing in the economy plays the vital role. The economical factors being faced by TESCO PLC are:

Increasing proceeds and per person income (PPI) of any organization plays the vital role, covering the marketing and promotional strategies of the organization. Within the similar criteria, the business advancement as well as the additional cultured trade and commerce procedures through which the production process continues in the native country. Considering the fact TESCO PLC has take into consideration the type of products and services it undertakes.

Today industrialized is not the only major portion of the GDP. The share of agro portion of the country has their impact on the GDP of any country. Although it has not been the same as of 70 percent proportional of the country, yet it covers up almost 30 – 40 percent of the country’s GDP portion. Thus TESCO PLC has to focus, what total products it can offer to its customers in a particular residency, according to their tastes, habits.

A case quoted by some investigations showed that TESCO PLC had to adopt for the different frangness of a single branded car polisher, in UK and USA because the taste and habit of the consumer are different (Kasi. 2011).

Social Factors

TESCO PLC has to face the social factors .e.g. the communication style, the living standards of the masses, the tastes, culture and civilization of the nation.

TESCO can only be successful in Indian market of retail business because the consumer behaviour of India has been changed. The change majorly comprise of the income changes, the living standards, the demographical statistics, as well as the consumer perception of the market. The murmur nowadays is shop at malls and hypermarkets which offer wider ranger under single roof.

The population ready to work is important in any organization, similarly, TESCO PLC could hire individuals of 24 years or more in India, and where as the working age group of UK varies according to the school lefties, the graduates and the post graduate.

A research body specializing on retail industry-says “As the current economic boom in India spreads to Tier II and Tier III cities and towns, reaching out to prospective consumers in these cities is high on the agenda of most retail companies. Retailers consider market presence in these cities and towns key to their growth and profitability.”

Technological Factors

The availability of the favorable technology for the organization is important. TESCO plc is now considering its venture in Japan, the probable plan is to design a virtual store which is an innovative technology in the globe. Moreover the acceptance of new innovative products is also important.

In India TESCO could have adopted the innovative methods to attain its maximum profits. However, the same technology procedure could not be adopted in Ireland and Denmark as the masses were not eager to involve in the new methods

More superior investments in the food factory and the processing industry have been rated higher over all the globe of TESCO.

The huge markets like UK and USA support the innovative idea and technology facts more appropriately and more willingly.

Legal Factors

The law of the land is important in deciding the major factors like, the government rule, the local laws are important.

On the launch of TESCO in India, the organization faced several laws relating the food processing industry and the electronic processing. In Denmark the organization faced rules and regulation in the food standard and quality. Various laws had to be complied in the product labelling, packaging and advertisement in USA and Ireland.

TESCO has to follow the local Employment law. Indian government prohibits child labour, the Denmark employees avoid joining a trade union, the competitative organization’s policies .e.g. Wall Mart prohibits trade union and the employee strike on the job, even though due to the arising of such issues in Ireland, and the employees were on strike a survey has shown the causes and effects. Thus the laws relating to the employment and its further classification must be followed by the organization.

(Source: A.T. Kearney GRDI 2006)

Environmental Factors

Since TESCO PLC is a globalized retail business, it faces various environmental issues in the implementation of its policies, organizational codes in a particular country. Hence, the organization at times franchises its outlets, but this is not viable in all the cases.

The rules for Safety and health vary in every country, and thus the organization has to comply with them to make their business grow in the country.

In the agriculture business the insect repellent and mercantile nourishment are important, the usage of an allowed chemical that wouldn’t affect the surroundings is important.

The Statutory policies regarding the sewerage and the pollution control are worthwhile. The globalizing organization must take in consideration the Environmental Safety laws and regulation.

Industry similar to petroleum, chemicals, refineries, cement plants, medicine and drugs, fertilizing, dyeing, paper manufacturing, etc require such clearance and support from the standards.

Besides the eatable industry, the other issues relating to the surroundings are important for the organization.

Differentiation Advantage of TESCO PLC/ Competitive Advantage of TESCO PLC

Vision Statement of TESCO: “TESCO’s global strategy is to think locally and act globally, winning the loyal customers, through the efforts from its highly competitive staff, and result as the customer winning cooperation”, this vision was released by the company in May, 2011, when TESCO PLC had launched one fourth part of its business.

Strategy of TESCO PLC- “Philip Clarke settled the 7 portioned strategy of the business in 2011 based on the vision statement of the company. These are, 1- to raise their UK core, 2- to become the international retailing store, 3- to become strong enough in all the products range as the company is in the grocery, 4- to maximize its retailing services in the globe, 5- to develop the corporate social responsibility in the best interest of the organization, 6- to become the high brand producer, 7- to build the teams so effectively, to generate more values in business.”

Company Objectives

Marketing Objectives

To advance personnel efficiency.

To accomplish principal point in the retail and manufacturing business.

To make parallel the business functions through continuous staff updating.

To increase the marketplace portion up to 40 % in the year 2013.

To make the most of client satisfied through business policies.

To boost sales up to 60 to 70% in the year 2013.

To found up outlets of the business in the projected areas.

To raise the consumer support in year 2013.

Increasing the profits, additionally the, profitability up to 40 % in 1the year 2013.

Boost up the customer knowledge about the fairly trading products and services.

Hence, the goals set by the organization for the year seem enough efficient to meet the competitors requirements.

Segmentation Targeting & Positioning (STP)

Coperation use the basic 3 strategies Segmentation, targeting and positioning are the three marketing strategies that should be used by the corporation to promote its fair trade products aggressively, in order to raise its sales. These are as follow:

Segmentation strategy: Segmentation strategy plays a profound role in the success or failure of the company. Mass, local and niche all market segments should be addressed in the marketing plan to boost the sale of fairtrade products by increasing customer satisfaction in an effective manner. To maximize the customer value, consumer behavior will be studied before the segmentation in which their taste & preferences, attitude and buying behavior will be assessed.

High Medium Low

Mass market

Niche market

Local market

Pink: Red part of the matrix denotes the area, which is of high segment attractiveness and most suitable for the company in long run.

Red: Red part of the matrix reflects the medium, which have less segment attractiveness in comparison to the mass market. This part has less suitability for the plan in comparison to the mass market (Peck, Christopher, Payne & Clark 1999).

Green: This part of the segment matrix, reflects the least attractiveness in terms of segment and has less suitability for the marketing plan developed for the retail chain.

Targeting strategy: Targeting strategy in marketing plan also determines the business viability. Target market for the marketing plan should involve all those people, who have preferences for fairtrade products like children, youngsters and middle age people. Company should assess the customer needs, in order to target them in a well planned manner. For this, the firm should analyze their preferences & taste for fairtrade products (Hall 2008). Consumer behavior should be well analyzed before the commencement of the targeting strategy.

Positioning strategy: Market positioning of the selected products play a critical role in the marketing plan. Fairtrade product should be positioned in the city center marketplace at the stores of Tesco. Fairtrade product is for the youngsters and middle aged people of U.K and other intended countries. To meet the rising demand of the target customers for the fairtrade products, the product will be positioned in a persuasive manner. By intimating the innovative design and value added quality of Farirtrade, this product will be positioned in customers’ intellect. This brand competes with the fairtrade products offered by Wal-Mart. For this, company should go for some innovative modes, in order to lure the attention of the customers towards the fair trade products (Lancaster & Reynolds 2005).

Marketing objectives and goals (SMART)

Strategy framework and structurization tools are keys to an assessment business-situation. Risk and cost compromises neatly, leading to specific proposals to raise value and to lower risk.

Explicit plans of action, including effective indispensability of planning should be developed Tesco as strategic alternatives.

From the general strategy it was spoken above, Tesco is possibly to apply two strategic versions which are prime objectives of the market and also can concentrate on development of the market, though partner attitudes and diversification by development of new products use. (Peck, 1999)

Market Development Strategy: Joint Developments and Strategic Alliances

With entering into new markets such as China and Japan, it can serve key factor in growth of incomes of the company and strategy of expansion.

Interests of Tesco in Japan, possibly, will continue to grow in due time as the Asian markets show growth in consumer spending and an increase of the tendency towards retail commerce. These new markets also serve as high opportunity demographically markets.

In case of Tesco, one of offered strategic versions in the international alliances is with local retail dealers in the Asian markets. It will be considered as a method of progress and maybe generated on use of existing resources and the competence.

Entering into joint ventures or partnership, with objective of reception of a greater scale effect greater presence in the market, Tesco will lean on an extensive local knowledge and experience of the partners while adding own circuits of deliveries, progress of a product and keeps operations skills to deliver better shopping experience of clients.

However, considering huge scales, potential and complexities in these markets, Tesco can feel that being the first mover, advantage is not mandatory. Success of partnership will be connected with three basic criteria of success: stability, acceptability and feasibility. Whether stability will be engaged Strategic circumstances in which the company works are considered. It is a question about a background of this strategy development for expansion of the market. Acceptability is the risk level and probability of reaction of the interested sides concerns to expected profitableness from strategy. Whether technical and economic will consider Tesco has resources and the competence to deliver strategy. (Peck, 1999)

Competitive Advantage?

Tesco appears to be a very strong company which has a very strong position as the largest UK food retailer.

Tesco has gained this position by being the low cost buyer and seller of goods, offering customers cheaper prices. These are economics which are not likely to change. 

The main threat is from the other large supermarkets, but the size of Tesco’s selling space gives it a big advantage over competition and it is likely that Tesco will remain the market leader far into the future. 

The UK market cannot continue to grow at its current rate and the growth of online retailing could make switching to other supermarkets easier for customers. However, it is likely that online growth will be limited with the majority of customers preferring to shop in stores. 

Tesco has been able to use economies of scope to expand into non food retailing which is an area which Tesco can continue to develop in the UK market. Tesco has also moved into foreign markets, and although these are not as profitable as UK markets at this time they are showing signs of strong growth and the growth potential is much larger than in the UK. 

Objectives: To attain a considerable share of the market, it is indispensable for Tesco plc to have some effectual objectives that are focused mainly on SMART pattern (specific, measurable, attainable, reliable target). Corporate and marketing objectives for the firm should be both customer and business oriented that is promising from the business point of view. These are as follow:

These are some detailed objectives that are intended to cover as a principal part of this marketing plan. After the attainment of these objectives, it would be easy for the company to capitalize the plentiful opportunities that are existed in retail industry (Kotler, Armstrong, Wong & Saunders 2008).

Marketing Mix of Tesco

Product

Tesco as a full line discount store, it offers broad variety of merchandise, limited service and low price. Customers can found both private (Tesco Choice) and national brand. Most of these brands are value oriented rather than fashion oriented. To attract more customer and gain customer loyalty, Tesco offer lot of value added services such as free parking, customer service, full air condition, baby room, toilet etc.

Tesco Extra Cheras carry 18000-20000 SKU in its store and over 70% is food product whereas only around 30% is non-food products. The products selling in Tesco range from food to electrical product, furniture, and household goods. On weekend, a lot of sampling activities allow customers test the product before they purchase it. If the customer found the product was damaged after they purchased it, they can return this product to Tesco and exchange for new one, of course this is only for non-perishable goods.

Although Tesco not emphasis on the product quality or product design/packaging, but it still maintain the products quality on acceptable level. To maximize the value of product to customers, Tesco sell its own brand product ¼ˆTesco Choice¼‰on broad variety at lower price compare to national brand. This strategy successfully grab the customers that emphasis more on the value instead of brand.

Pricing

Price is the sum of all the value that consumer give up in order to gain the benefits of having or using a product or services. Historically, price has been the major factor affecting buyer choice. In recent decades, nonprice factors have gained increasing important but price still remain the one of the most important element determining a firm’s market share and profitability (Philip, K 2008)..

Most of the products available in Tesco are available in other retailer store too. To compete with other firms, cost-plus pricing is the most appropriate pricing strategy for Tesco. Cost-plus pricing is the pricing strategy that adding a standard markup to the cost of product. For example, manufacturer sells a soup powder at RM20 to Tesco, Tesco may mark it up to RM30, its means a markup of 50% on cost.

Another type of pricing strategy Tesco using now is cost-based pricing. Cost-based pricing involved setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for its effort and risk (Philip, K 2008).. Cost-based pricing only applicable for Tesco own label products instead of national brand product(refer to appendix). This is because Tesco set its own brand products price based on its production cost. Therefore, Tesco brand products are cheaper than national brand product around 30-40%.

Last pricing strategy Tesco adopted is Good-value pricing. Good-value pricing offer just the right combination of quality of good service at a fair price (Philip, K 2008).. An important type of good-value pricing at the retail level is everyday low pricing (EDLP). EDLP involve charging a constant, everyday low price with few or no temporary price discount. In Tesco case, they charge different products at promotional price in everyday basis. For example, Tesco sell fish cheap on Monday, but charge lower price at vegetable on Tuesday.

Place

Tesco Extra Cheras located at Cheras, Kuala Lumpur. Kuala Lumpur is the capital of Malaysia and it’s a densely populated city. As a capital of Malaysia, the income levels of citizen in Kuala Lumpur usually are higher than other cities, hence the consumption also higher. Besides that, Tesco Extra Cheras is surrounded by many housing areas which are Taman Bukit Mewah, Taman Billion, Taman Midah, Taman Desa Aman etc. Therefore the sources of customer are sufficient for Tesco.

Tesco Extra Cheras is a full air conditioned discounted store, hence customers feel comfortable when shop in the store. To increase the shopping experience of customers, there are restaurants and cafés available in the store such as Pak Hailam Kopitiam, The Chicken Rice Shop, KFC etc to allow customer take a rest and fulfill hunger. Indoor and outdoor parking lots with cover are available for customer who driving to Tesco and it’s free of charge.

Distribution Channel

After our analysis, we conclude that Tesco is only available in store channel in Malaysia, but Tesco still has an official website which contain cooperate information and recent activities and promotions even though customer can’t place order online.

Store Channel

Tesco is only available in physical store form and its offer lots of benefits that catalog channel and internet channel don’t have.

Customer can browse in Tesco store to see what is available and purchase the product before they determine what to buy.

Customer can feel and touch the product when they shopping in Tesco. For example, customers can try sample of orange juice and see what it look like before they make the purchase decision.

Customers can choose to pay by using cash or credit card in Tesco and get the products immediately after they make payment.

Tesco provide entertainment and social experience to customer. For example, customer spending time in Tesco with family and friend can enhance their relationship greatly.

The perceived risk of customer will be reduced because they can check and test the product before they purchase it. Even though the product the malfunction or defective after the purchases, the customer can easily access to Tesco to return or exchange the defective item to new one based on 7days return policy and warranty.

Electronic Channel

Tesco has an official website that updated periodically but it doesn’t provide online order service to customer. The official website only has the information about recent promotion, vacancy, corporate information, and customer service (to accept customer feedback).

Promotion

Consumers today are bombarded by commercial messages from a broad range of sources. In consumer’s mind, messages from different media and promotional approaches all become part of message about the company. Conflicting messages from these different sources can result in confused company images, brand position and customer relationship (Philip, K 2008)..

To communicate with customer, Tesco using few element of promotional mix which is sales promotion, advertising, and public relation to maintain its brand image consistently in consumer mind.

Sales Promotion

Tesco using lots of consumer promotion tools such as sample, coupon, premium, price pack and contest to accomplish sales promotion objectives.

Samples are offers of a trial amount of a product. Customer can try the sample such as orange juice, nugget, French fries before they purchase it.

Coupons are certificates that give a buyer a saving when they purchase specified product. Tesco often issue coupons to its clubcard member, with these coupons, customer can buy the goods at lower price.

Premiums are goods offered either free or low cost as an incentive to buy a product. In Tesco, the customer will get a free DVD player and free clubcard point when they purchase the 32″ LCD flat Tv.

Price pack offer customer saving off the regular price of a product. In Tesco, a bottle of “Tropicana Twister” orange juice cost RM6.50, but it only cost RM12 when customer purchase twin pack of “Tropicana Twister” orange juice. It means customer can save RM0.50 when they purchase twin pack.

Contests give consumer the chance to win something, such as cash, trip or good by luck or though extra effort. Preciously Tesco has held a contest name Syok Bola Clubcard contest, as the customer purchase certain product in contest period, they are qualify to take part in the contest to win the prize.

Advertising

Advertising can reach masses of geographically dispersed buyer at a low cost per exposure, and it enables the seller to repeat a message many times. Tesco advertise it promotion product at television, newspaper, brochure, and sms to create customer awareness.

Other than these advertising methods need cost, a type of advertising method didn’t incur any cost call Word of Mouth also used by Tesco. Customer who already knew the promotion at Tesco usually will tell their friend or family about the great deal offered by Tesco. Although word of mouth is the most effective yet cheapest communication method but unfortunately it’s hard to control.

Public Relation

Public relation is a tool to build good relation with the company’s various publics by obtaining favo