Chosen organisation: Tesco

Overview of Tesco

Company: TESCO

Company Type: Public Limited Company

Industry: Retailing

Founded: 1919 (East London)

Founder: Jack Cohen

Headquarters: United Kingdom, England

No of locations : 6351 stores

Key People: Sir Richard Broadbent (chairman), Phillip Clarke (ceo)

Revenue: £64.539 billion (2012)

Net Income: £2.806 billion (2012)

Total Assets: £50.781 billion (2012)

Total Equity: £17.775 billion (2012)

Employees: 519,671 (2012)

Subsidiaries: Tesco Stores Ltd, Tesco Bank, Tesco Mobile

Website : www.tesco.com

Strategic marketing management is the process of formulation,

estimation and implementation of marketing strategy by an

organization. Indeed a marketing strategy aimed at differentiating

the business in a positive way with respect to its competition

through satisfying customer needs.

According to Tony proctor (Strategic Marketing, 2000) a strategy is

a plan that integrates an organization’s major goals, policies,

decisions and sequences of action into a cohesive whole. It can

apply at all levels in an organization and pertain to any of the

functional areas of management. Thus there may be production,

financial, marketing, personnel and corporate strategies.

Marketing strategies serve as the fundamental underpinning of

marketing plans designed to fill market needs and reach marketing

objectives.[3] Plans and objectives are generally tested for

measurable results. Commonly, marketing strategies are developed as

multi-year plans, with a tactical plan detailing specific actions to

be accomplished in the current year. Time horizons covered by the

marketing plan vary by company, by industry, and by nation, however,

time horizons are becoming shorter as the speed of change in the

environment increases.[4] Marketing strategies are dynamic and

interactive. They are partially planned and partially unplanned. See

strategy dynamics. Marketing strategy needs to take a long term

view, and tools such as customer lifetime value models can be very

powerful in helping to simulate the effects of strategy on

acquisition, revenue per customer and churn rate.

Marketing strategy involves careful and precise scanning of the

internal and external environments.[5] Internal environmental

factors include the marketing mix and marketing mix modeling, plus

performance analysis and strategic constraints.[6] External

environmental factors include customer analysis, competitor

analysis, target market analysis, as well as evaluation of any

elements of the technological, economic, cultural or political/legal

environment likely to impact success.[4] A key component of

marketing strategy is often to keep marketing in line with a

company's overarching mission statement.[7]

Task 1

Discuss the role of strategic marketing in an organisation of your choice.

Tesco's strategy is clear, areas such as UK grocery business, non food, global expansion, financial services, dotcom business and telecommunication business and hence Tesco can use its core areas tokeep the business alive in the risky areas.

Tesco will use Differentiation Strategy to launch itself in the Swedish market by charging premium price from the elite customer whocan afford to buy totally sustainable materials manufactured in Sweden itself against Florence and Fred or Cherokee names. However before deciding all this Tesco's needs to carry out market research to test the new product concept launch in the Swedish market, pricing strategy, attitudes towards the brand image as a retail outlet, buyers purchasing habits and so on.

Having defined the product specifications, differentiation strategy is applied which involves a detailed decision on Price, Product and Distribution.

Premium price can be charged on the basis of the quality and style being offered. Tesco cannot demand a premium price as compare to theprice in the boutique as the product will be distributed throughout the Tesco chain.

Sweden is a huge country and the population is over a wide geographical areas. So, Tesco needs to decide distribution ways suchas internet selling, joint venture or own stores chain. To sell its product, it has to cover maximum area. As Swedish people are technology savvy, internet selling can be a option,

Communication is very important, if product is not made known to thelocal and every people then the product launch would be a failure. Heavy marketing campaign will be carried to communicate to the common people in the vast geographical areas such as TV and radio

repeated interval all day, Local newspaper, Media PR the alliance partner to issue press releases and talking to local people about Tesco and benefit such as availibity of jobs. Political PR, Billborad campaigns, Direct mailing, flyers, and internet ads and soon.

Task 2

Explain the processes involved in strategic marketing.

Tesco's marketing strategy is based on customer surveys to find out their product needs and wants. Through their marketing research, they have realized that customers want a one-stop shop where they can get all their commodities under one roof. As such, they are ableto stock items from clothes and food stuff to car accessories such as tyres and batteries.

Strategy frameworks and structuring tools are key to assessing the business situation. Risk and value trade-offs are made explicit, leading to concrete proposals to add value and reduce risk. Explicitplans for action, including effective planning need to be developed by Tesco as the strategic alternative.

From the generic strategies discussed above, Tesco is likely to employ two strategic options that are also likely to be primary market objectives of focus on market development though partnershipsand diversification through new product development.

Principal of strategic planning process

Develop a vision statement:-

A vision statement provide the clear view of the future of any organization, a vision statement describe what the organization

intends to be with in 10 years. It is a picture of what the organization will look like as a result of success. It tells the leaders what they are working for give them report of progress and accomplishment as they work according to that vision.

Develop a mission statement:-

A mission statement is fewer than 20 words and provides a full statement of what the organization is all about. The mission statements describe who makes up the association and who it represents.

Set Goals: -

Every work depends on the Goal, which flow the mission statement. Itdefines what the organization need and what they want during the next five. Goal should be no more than five years. Each goal is veryimportant for organization and should be complete on the right time and in right order. All the members of organization work according to reach at the goal on the right way.

Set Objective: -

Objectives are basically some short term target that make easy to get the goal of the organization and help to run the whole project. A smart objective allows you to understand exactly where your fits in the organization and what your responsibilities are. You understand better understanding of the value and contributions that you can bring to the organization.

SMART should be clear and should be included these work qualities.

Specific

Measurable

Achievable

Realistic

Timely

Task 3

Evaluate the links between strategic marketing and Corporate Strategy.

A company is diversified when it is in two or more lines of

business. Strategy-making in a diversified company is a bigger

picture exercise than crafting a strategy for a single line-of-

business. A diversified company needs a multi-industry, multi-

business strategy. A strategic action plan must be developed for

several different businesses competing in diverse industry

environments.

ABF, PESTLE Analyses, contributes to the Primark co-operative

strategy. Setting corporate strategy objectives means setting those

measures of actions and methods which will help the company to

achieve its overall mission in a certain timeframe. Corporate

strategies are the most basic planning tools underlying all planning

and strategic activities (Hamel & Prahalad, 1994). Through sharing

its value ABF and Primark establishes strong relationships with its

stakeholders that have led them to have an encouraging feedback on

the latest annual report about the audit conducted on ethical trade

(Hamel & Prahalad, 1994)

Tesco is one of Britain's leading food retailers, with 519 stores throughout England, Scotland and Wales. There are also 105 stores inFrance operated by Catteau, and 44 in Hungary operated by Global. Tesco is committed to:

offering customers the best value for money and the most competitiveprices

meeting the needs of customers by constantly seeking, and acting on,their opinions regarding innovation, product quality, choice, store facilities and service

providing shareholders with progressive returns on their investmentimproving profitability through investment in efficient stores and distribution depots, in productivity improvements and in new technology

developing the talents of its people through sound management and training practices, while rewarding them fairly with equal opportunities for all

working closely with suppliers to build long term business relationships based on strict quality and price criteria

participating in the formulation of national food industry policies on key issues such as health, nutrition, hygiene, safety and animal welfare

supporting the well-being of the community and the protection of theenvironment

In order to facilitate such corporate strategy with strategic

marketing plans, Tesco has devised such marketing schemes that are:

1. Low in budget and effectiveAs it doesn’t want to spend high amount of money for advertising itsproducts, minimal money will be spend in this department.

2. MerchandisingProperly combined food, presentation, approach and visual displayingnew season food to catch passersby-by attention

3. Bulk purchasingBuying product in large quantity will be cost effective as the cost of producing one garment will be low. Also, the supplier will be happy to work with Tesco in future and maintain a strong relationship bond of work with them.

4. Need of the customerTesco uses CRM (Customer Relationship Management), a software that enables them to detect high demand products in order to produce large quantities of them to satisfy the high demand while generatingHugh income for the company.

Task 4

Assess the value of models used in strategic marketing planning.

With respect to the international expansion plan, assumption is madethat Tesco will start its operations in Switzerland, Europe. Currentposition of Tesco is very strong as it can be judged from its large profits and constant investments in setting up new stores at both levels, i.e., locally and globally. Thus, the organization has high potential to penetrate in Swiss Market. Tesco will target customers belonging to all age groups and will try best to meet their needs and expectations. Moreover, Tesco will ensure to create strong supply chain network in Switzerland so that the company can operate successfully. Tesco will try its best to be an active member of running Corporate Social responsible campaigns as the society and community serving is important to attract Swiss people. Other main factor that can influence the decision of penetrating is Swiss market is that the market is highly developed, few competitors exists there and is a multilingual country. Moreover, the country’s investment policy is good and attracts tourist which will help to retain its local customers visiting Switzerland. Thus, the country has high potential to attract foreign investments in its country because of its economical, political and financial stability. Furthermore, the Swiss people are quality-conscious and the country has dynamic economy with low taxes. If Tesco succeeded in its operations in Swiss Market, further expansion plans of setting up new stores in Switzerland would help the company to penetrate in themarket. Nonetheless, the process of further expansion could take four to five years.

According to (Phillip Kotler, 2007), Model building started with a

card-sort process that is facilitated with competency cards and

sorting pads for participants.

There are various models that companies can use. Every organisation

will use the model that best suit their service in regards to

Primark I will discuss Porter 5 forces theory.

PORTER’S FIVE FORCES

3.1 Threat of New Entrants

The UK grocery market is primary dominated by few competitors, including four major brands of Tesco, Asda, Sainsbury’s and Safeway that possess a market share of 70% and small chains of Somerfield, Waitrose and Budgens with a further 10%. Over the last 30 years, according to Ritz (2005), the grocery market has been transformed into the supermarket-dominated business. Majority of large chains have built their power due to operating efficiency, one-stop shopping and major marketing-mix expenditure. This powerful force had a great impact on the small traditional shops, such as butchers,bakers and etc. Hence, nowadays it possesses a strong barrier for new companies who desire to enter the grocery market. For instance, it becomes rather difficult for new entrants to raise sufficient capital because of large fixed costs and highly developed supply chains. This is also evident in huge investments done by large chains, such as Tesco, in advanced technology for checkouts and stock control systems that impact new entrants and the existing ones. Other barriers include economies of scale and differentiation (in the provision of products or services with a higher perceived value than the competition) achieved by Tesco and Asda seen in theiraggressive operational tactics in product development, promotional activity and better distribution.

3.2 Bargaining Power of Suppliers

This force represents the power of suppliers that can be influenced by major grocery chains and that fear of losing their business to the large supermarkets. Therefore, this consolidates further leading

positions of stores like Tesco and Asda in negotiating better promotional prices from suppliers that small individual chains are unable to match Ritz (2005). In return, UK based suppliers are also threatened by the growing ability of large retailers to source theirproducts from abroad at cheaper deals. The relationship with sellerscan have similar effects in constraining the strategic freedom of the company and in influencing its margins. The forces of competitive rivalry have reduced the profit margins for supermarket chains and suppliers.

3.3 Bargaining Power of Customers

Porter theorized that the more products that become standardized or undifferentiated, the lower the switching cost, and hence, more power is yielded to buyers Porter M. (1980). Tesco’s famous loyalty card – Clubcard remains the most successful customer retention strategy that significantly increases the profitability of Tesco’s business. In meeting customer needs, customizing service, ensure lowprices, better choices, constant flow of in-store promotions enablesbrands like Tesco to control and retain their customer base. In recent years a crucial change in food retailing has occurred due to a large demand of consumers doing the majority of their shopping in supermarkets that shows a greater need for supermarkets to sell non-food items. It has also provided supermarkets with a new strategic expansion into new markets of banking, pharmacies, etc. Consumers also have become more aware of the issues surrounding fairer trade and the influence of western consumers on the expectations and aspirations of Third World producers. Ecologically benign and ethically sound production of consumer produce such as tea, coffee and cocoa is viable, and such products are now widely available at the majority of large chains.

3.4 Threat of Substitutes

General substitution is able to reduce demand for a particular product, as there is a threat of consumers switching to the alternatives Porter M. (1980). In the grocery industry this can be seen in the form of product-for-product or the substitute of need and is further weakened by new trends, such as the way small chains

of convenience stores are emerging in the industry. In this case Tesco, Asda and Sainsbury’s are trying to acquire existing small-scale operations and opening Metro and Express stores in local townsand city centres Ritz (2005).

3.5 Bargaining Power of Competitors

The grocery environment has seen a very significant growth in the size and market dominance of the larger players, with greater store size, increased retailer concentration, and the utilisation of a range of formats, which are now prominent characteristics of the sector. As it was mentioned above, the purchasing power of the food-retailing industry is concentrated in the hands of a relatively small number of retail buyers. Operating in a mature, flat market where growth is difficult (a driver of the diversification into non-food areas), and consumers are increasingly demanding and sophisticated, large chains as Tesco are accruing large amounts of consumer information that can be used to communicate with the consumer Ritz (2005). This highly competitive market has fostered anaccelerated level of development, resulting in a situation in which UK grocery retailers have had to be innovative to maintain and buildmarket share. Such innovation can be seen in the development of a range of trading formats, in response to changes in consumer behaviour. The dominant market leaders have responded by refocusing on price and value, whilst reinforcing the added value elements of their service.

Task 5

Discuss the links between strategic positioningand marketing tactics. Strategic Targeting Positioning

The proposed Strategic Targeting Positioning strategies are given below:

Segmentation Strategy

Segmentation strategy helps to segment its target customer market onthe basis of which the company’s success or failure depends (Hague, 2002). Originally, Tesco’s operation will be started through small store which will expand in future to other areas. The segmented market will be offered both non-food and food items. The main objective is to sell products at fair price delivering high level ofcustomer satisfaction. Swiss people are quality conscious so Tesco should ensure that it delivers high quality products to its people (Joost, 2005).

Targeting Strategy

The main aim behind targeting strategy is to determine business’s feasibility (Peter and Donnelly, 2002). Tesco’s target market in Switzerland includes people of all age groups i.e., infants, children, teens, adults old age people. Tesco will offer wide rangeof products to the targeted market adopting well planned and unique strategies. Furthermore, the buying behaviour of the consumers will be monitored closely monitored.

Positioning strategy

Market positioning plays important role in developing a market strategy. The positioning strategy mainly focuses on the specification of the product features and brands which are close to its rival’s product in the market (Ritz, 2005). Fresh and unpreserved goods i.e., food products should be focused as people’s spends more in buying food products in Switzerland (Graiser and

Scott, 2004). Besides this, fair price products will help to attractcustomers as people are price sensitive and quality focused in Switzerland. If this is done in persuasive way, successful implementation of marketing strategy could be ensured.

According to (Wisegeek, 2012) Market positioning is the manipulation

of a brand or family of brands to create a positive perception in

the eyes of the public. If a product is well positioned, it will

have strong sales, and it may become the go-to brand for people who

need that particular product. Poor positioning, on the other hand,

can lead to bad sales and a dubious reputation. A number of things

are involved in market positioning, with entire firms specializing

in this activity and working with clients to position their products

effectively. When a product is released, the company needs to think

beyond what the product is for when it comes to positioning. It also

should think about the kind of people that would wants to buy the

product.

The act of designing the company’s offering an image so that they

occupy a meaningful and distinct competitive position in the target

customer’s minds (Phillip Kotler 1997).

Tesco Target:

Tesco targets the high street and thterefore claimes that it is the cheapest when taking into account the points that given to the customers.

However, it still targets other segments like these people who are more interested in the quality.

Finally, by emphasising the value of the money, Tesco targets who want something reasonable in terms of quality and price.

Demographics Target

Comparing demographics across stores indicate some commonalities across the locations. Overall the stores are not located in the mostaffluent neighborhoods (with exceptions), but the neighborhoods havea relatively higher density (both in terms of population and households). A large proportion of the stores have culturally diverse backgrounds with higher concentration of non-white Households. Compared to the rest of the county, these neighborhoods have a greater proportion of teenagers and young adults (a large percentage of population between 15- 25 years of age, who are typically greater consumers of prepared foods given their on-the-go lifestyles). We ran an econometric (logit) analysis on which of these demographic factors would increase the probability of Tesco selecting a particular Zip Code to launch a store and we got some interesting insights. The table below gives the list of some factorsthat were very significant indicators of store locations (Factors are listed in decreasing order of importance).

Maybe it is from recognizing the challenge of developing assortmentsto cater to multiple store groups that Tesco decided to bring in itsSupply Chain partners from the UK. There are risks in bringing in a supplier not experienced in the local business landscape, but the advantage is that you are working with a supplier who knows your business-style and there will be lower integration costs. More importantly, Tesco will have leverage with its suppliers to meet theneeds of a very diverse target consumer base.

In order for any business to survive they first need to understand their competitors and the market they are competing in. A number of tools can be used to access the market and understanding the competition better the company has to use the tool that best fit them.

Tools

• SWOT,

• PESTLE,

• STEEP,

• 7PS,

• PORTER 5 FORCES

• PEST

The above mentioned tools are vital and will help Tesco maintain a

very strong position in the near and for future. A successful Tesco

must use effective marketing strategies to deliver what the

customers want; the strategic positioning enablesTesco to analyze

all the factors of the market and continue to be the market leader

for cheap products.

Task 6

Analyse the merits of relationship marketing in a given strategic marketing strategy

According to Zeithaml and Bitner (2000) Relationship marketing is a

philosophy of doing business, it's a strategic device that focuses

on keeping and improving current customers whole acquiring new

customers. According to Coviello's (1997) states, Relationship

Management is an ‘integrative activity involving functions across

the organization, with emphasis on facilitating, building and

maintaining relationships over the time.

So therefore Relationship Marketing will help Tesco to achieve this aim and objective due to the fact that existing customers who receive information from Tesco about their deals on products similarto the customers purchase history that is stored on their Clubcards,are likely to purchase them and this increases ‘loyalty’ given that

this shows customers that Tesco is good at knowing at what the customer wants.

Understand customers; Be first to meet their needs

Tesco tries to Understand customers and be the first to meet their needs by always sending emails to latest new products in store and on their website. Plus deals and discounts on products that suits the customers’ needs e.g. if customers interests are purchasing Horror DVDs, Tesco would email/send this customer latest Horror DVDsthat is on their website and in store.

Another example of how Tesco tries to be the first to meet customer needs by using Relationship Marketing is on Tesco’s website during holiday seasons such as Easter. When it was the Easter period this year, Tesco had a page full of products and presents that customer can purchase online if they are not sure what to buy in the Easter period. On the Easter link on the website, it has a variety of Easter products that Tesco can choose from and deals such as deals on Easter Eggs, flowers, wine, etc. Plus it also gives customers an option to ‘Pre-Order’ their delivery after they come back from theirEaster holiday, this shows great customer service because customers can book in advance the products their want to purchase online whichwould be delivered to them when they come back from their holiday instead of visiting the Tesco store when they get home.

This Relationship Marketing method will help Tesco to achieve their aim and objective due to the fact that Tesco is always making sure their customers are aware of old products that are on discounts and new products that may interest customers.

Task 7

Describe how you would use appropriate marketing techniques to ascertain growth opportunities in a market.

Due to the fear competitors may use the information to their advantage, Tesco do not release their marketing techniques and strategies. However it is still fairly obvious to see that there arecertainly a few ways in which Tesco deliberately target their customers.

It can be argued that Tesco try and do the following with their marketing:

• Engage directly with the customer by emailing them and sending them post

• Keeping a constant link with the customer and building up loyalty with their Clubcard scheme

• Making their store appeal to a wide demographic - something for everyone

• Showing they are the best for both value and quality and why they beat the rest

It is widely agreed that Tesco's 'crown jewels' in their marketing campaigns is the Tesco Clubcard. This card rewards loyalty in the form of Clubcard points that can then be used as currency in a future Tesco purchase. Therefore the customer feels they might as well stay with Tesco for all their grocery shopping as they will be rewarded by collecting points which will eventually save them money.Other stores do have similar schemes but the Tesco Clubcard is well and truly the standout one.

Another marketing technique they use is to target all types of customer. From the mother and fathers who will do their weekly shop,to the more technical savvy who like a bargain such as a cheap HD TV. It gets them all in the stores and then they may well end up buying a lot more than the item they first came in for.

To summarize, Tesco's marketing technique is mainly built on building customer loyalty, as a returning customer base means repeatbusiness and leads to a very profitable model.

Task 8

Describe the basic steps in planning how to use marketing strategy options in a market.

The first strategy of cost leadership is one in which Tesco can strive to have the lowest costs in the industry and offer its products and services to a broad market at the lowest prices. This strategy will be based on the Tesco’s ability to control their operating costs so well that they are able to price their products competitively and be able to generate high profit margins, thus having a significant competitive advantage. If Tesco uses another strategy of differentiation, than it has to try to offer services and products with unique features that customers value. Tesco will be able to create brand loyalty for their offerings, and thus, priceinelasticity on the part of buyers. Breadth of product offerings, technology, special features, or customer service are popular approaches to differentiation.

The last strategy of focus can be either a cost leadership or differentiation strategy aimed toward a narrow, focused market. In pursuing a cost leadership strategy Tesco focuses on the creation ofinternal efficiencies that will help them withstand external pressures. Therefore, it appears reasonable to think that Tesco willhave frequent interactions with the governmental/regulatory and supplier sectors of the environment. In accordance to this framework, while both overall cost leadership and differentiation strategies are aimed at the broad market, Tesco may also choose to confine their product to specific market areas or may choose to offer a smaller line of products to the broad market, thus pursuing a strategy of focus or niche (Porter, 1980). In other words, Tesco pursues a strategy of cost leadership or differentiation either in aspecific market or with specific products.

The danger some organisation face is that they try to do all three and become what is known as stuck in the middle. In case of Tesco itis not appropriate, as they do have a clear business strategy with aclearly defined market segment

Task 9

Highlight how you would create appropriate strategic marketing objectives for a market.

7.0 MARKET OBJECTIVES AND STRATEGIES IMPLEMENTATION

Strategy frameworks and structuring tools are key to assessing the business situation. Risk and value trade-offs are made explicit, leading to concrete proposals to add value and reduce risk. Explicitplans for action, including effective planning need to be developed by Tesco as the strategic alternative.

From the generic strategies discussed above, Tesco is likely to employ two strategic options that are also likely to be primary market objectives of focus on market development though partnershipsand diversification through new product development.

Market Development Strategy: Joint Developments and Strategic Alliances

By entering new markets like China and Japan it can serve as a key growth driver of the company’s revenues and expansion strategy. Tesco’s interests in Japan are likely to continue growing in due course, as Asian markets are showing an increase in consumer spending and increased trend towards retailing. These new markets are also demographically high opportunity markets.

In the case of Tesco, one of the suggested strategic options is in international alliances with the local retailers in Asian markets. It will be considered as a method of development and may be formed to exploit current resources and competence. By entering into joint ventures or partnerships, in order to gain a larger economy of scaleand larger market presence, Tesco will draw on the extensive local knowledge and operating expertise of the partner whilst adding its own supply chain, product development and stores operations skills to deliver a better shopping experience to customers. However, giventhe huge scale, potential and complexities of these markets, Tesco

may feel that being the first mover is not necessarily an advantage.The success of the partnership will be related to three main successcriteria: sustainability, acceptability and feasibility. Sustainability will be concerned with whether a strategy addresses the circumstances in which the company is operating. It is about therationale of this expansion-market development strategy. The acceptability relates to the expected return from the strategy, the level of risk and the likely reaction of stakeholders. Feasibility will be regarded to whether Tesco has the resources and competence to deliver the strategy.

Product Development: Diversification

Johnson and Scholes (2003) believe that changes in the business environment may create demand for new products and services at the expense of established provision. Ansoff’s matrix also suggests thatif new products are developed for existing markets, then a product development strategy has to be considered by the management level ofa company. In expanding and diversifying Tesco’s product mix, it is also crucial to implement internal development when new products aredeveloped. The nature and the extent of diversification should also be considered in relation to the rationale of the corporate strategyand the diversity of the portfolio. By following the changing needs of the customers Tesco can introduce new product lines. This may require more attention to R&D, leading to additional spending.

The retailing industry is experiencing overcapacity and innovative services and products being the major competitive advantage. Therefore, innovation has to be a major driver for Tesco’s product development. For example, Tesco can develop a portfolio of differentstore formats in the UK, each designed to provide a different shopping experience. While the majority of Eastern European and Far Eastern outlets are hypermarkets, Tesco can also develop different store types in these markets as well. This value added by the uniqueness will eventually lead Tesco to command a premium price. The management of technological innovation is increasingly involved in strategic decision-making. Tesco have to exploit their internal strengths and minimise their internal weaknesses in order to achieve

sustained competitive advantage (Although a competitive advantage isthe goal innovators want to achieve, the ability to create platform(s) depends on how they could manage the innovation. Nevertheless, it does not mean that the innovator has to possess allrequisite capabilities, the important thing is the ability to organise and use the capabilities of others in order to create a business platform).

The marketing objective of Tesco is to expand its business operations in Switzerland. Furthermore, its main purpose is to become a recognized brand in Swiss Market where it could serve its targeted market.

To be recognized globally in retail market.

To produce larger profits operating globally, specifically from Switzerland as the Swiss market has high potential for successful operations of Tesco.

The target consumers of all age groups of Switzerland.

To speed up its store operations in Switzerland

To increase sales and create brand awareness in Switzerland

To increase the process of sales by upgrading and using modern technology.

Task 10

Report on the impact of changes in the external environment on a marketing strategy.

Opportunities:::

Non-food retail:::

The growth in Tesco’s hypermarket format in the UK means that there are

expectations of seeing its 13% share of retail sales climb sharply over the next few

years. It can use its footfall and low cost structure together with improved

merchandising skills to add another leg to growth. Equally, its growth overseas will

further increase earnings and scale, taking Tesco onto the virtuous circle of growth. It

is estimated that Tesco’s non-food sales will double over the next four years.

Worldwide it has sales of £7 billion in non-food, some 23% of the total. Its aim to be

’as strong in non-food as we are in food’, no longer sounds like theconsultancy-speak

that it once did, and they are getting there using the basic tenets of value, choice and

convenience that have been so successful in food. Around half of newspace opened

in the UK last year was for non-food and the result has been to increase its market

share from 5% to 6% and its overall share of UK retail sales has increased by 100

basis points to 12.8%.

The company’s telecoms venture is the latest stage in its strategy to develop popular

retail services. It has repeated its approach in banking, by capitalizing on its brand.

Health and beauty

Tesco’s UK health and beauty ranges continue to grow, and it is currently the fastest

growing skincare retailer in the market. The company has a volume market-leading

position in both toiletries and healthcare and is number one retailer in the baby goods

markets. Across all health and beauty ranges Tesco continues to invest in price to

deliver the value customers have come to expect and this year invested £27 million on

health and beauty pricing alone. The company now has 19 stores with opticians and

nearly 200 stores with pharmacies.

Further international growth

Tesco now operates in six countries in Europe in addition to the UK;the Republic of

Ireland, Hungary, Czech Republic, Slovakia, Turkey and Poland. It also operates in

Asia: in South Korea, Thailand, Malaysia, Japan and Taiwan. Seven years ago, its

International sales were £770 million. Now, they are nearly 10 timeslarger, at almost

£7 billion, with profits of £306 million. In the current year, Tescowill add 2.5 million

square feet to sales area and could well enter another major market.Growing

internationally has forced Tesco to become serious about hypermarkets and this has

had seriously positive implications for growth in the UK.

Tesco has formed a strategic relationship with US supermarket, Safeway Inc, to take

the tesco.com home shopping model to the US. Telecoms is the latest stage in its

strategy to develop popular retail services. It has repeated its approach in banking, by

capitalizing on its brand.

Threat::

UK structural change could spark a price war

The price followers in the UK market are about to become aggressive investors in

price, Safeway because of new ownership and Sainsbury because of new

management. Morrison is reducing Safeway’s prices by up to 6% and Sainsbury is

bound to see lower prices as one of the basic changes necessary to drive its recovery.

With both Asda and Tesco committed to price leadership, this could result in a step

down in industry profitability

Overseas returns could fall

The buy case for Tesco is predicated around investment overseas driving higher

group returns as each country moves past critical mass. This might not happen, either

because of economic conditions, competitor action, or failure in Tesco’s business

model. It also could come as a consequence of an aggressive move into a larger

market, such as China or Japan.

Wal-Mart/Asda challenge

Since the US shopping giant Wal-mart purchased Asda, Tesco’s rank asthe top UK

supermarket has been threatened. Asda can now compete extremely wellon price

and range of goods. For the moment, Asda is the third largest supermarket in the UK,

just behind Sainsbury’s and then Tesco. However, Asda closed the gapon

Sainsbury’s in 2003, leaving the company to directly challenge Tesco’s dominance.

Tesco is well aware of this, and has so far been quick to keep up with price cuts or

special offers at Asda. Wal-mart may also decide to wield its buyingpower more

heavily in the UK, and this could spell the end of Tesco’s brand dominance in the

future.

International expansion

International growth is expensive. Entering new markets with a new brand requires

heavy investment and marketing, as well as land prices (which are currently low) and

extra distribution and operation expense. Tesco’s debt may increase before it begins

to decline.

Korea is contributing a good proportion of Tesco’s international profit growth. If profits

continue to grow in this way, Korea will probably represent one-third of Tesco’s

international profits in 2003/4. Korean consumer spending is currently quite low, and

coupled with the country’s current unrest, and Tesco’s large investment, this

represents a high risk area for Tesco to bank on.

Task 11

How would you conduct an internal analysis to identify current strengths and weaknesses in a marketing strategy?

Strengths

Increasing market share

Tesco holds a 13% share of the UK retail market. Its multi-format capability means

that it will continue to grow share in food, while increasing space contribution from

hypermarkets will allow it to drive a higher share in non-food.

Tesco’s general growth and ROI show no sign of abating. In the UK, Tesco’s late 2002

investment into West-midlands based convenience store group T&S was billed as the

most aggressive move into the neighborhood market by a big-name retailer so far.

The deal has turned Tesco into the country’s second biggest convenience store chain

after the Co-operative Group, and the company also plans to open up 59 new stores

in the UK this year. Tesco has grown its non-food division to the extent that its

revenues now total 23% of total group earnings.

Tesco’s international business segment is growing steadily, and is predicted to

contribute nearly a quarter of group profits over the next five years. If geographical

spread continues to grow, this will ensure Tesco’s continued regional strength.

Insurance

In fiscal 2003 Tesco Personal Finance reached the milestone of one million motor

insurance policies, making it the fastest growing motor insurance provider ever. The

group’s instant travel insurance allows Clubcard holders to buy their holiday insurance

conveniently at the checkout. Pet insurance now has over 330,000 cats and dogs

covered, while the life insurance policy followed on from the success of last year,

when it was voted The Most Competitive Life Insurance Provider in the MoneyFacts

Awards 2003

Tesco online

Tesco.com is the world’s biggest online supermarket and this year the group had

sales of over £577 million, an increase of 29% on last year. Tesco online now operates

in over 270 stores around the country, covering 96% of the UK. With over a million

households nationwide having used the company’s online services, thecompany has

a strong platform to further develop this revenue stream.

Brand value

Profits for Tesco’s operations in Europe, Asia and Ireland increasedby 78% during the

last fiscal year. The company has a strong brand image, and is associated with good

quality, trustworthy goods that represent excellent value. Tesco’s innovative ways of

improving the customer shopping experience, as well as its efforts to branch out into

finance and insurance have also capitalized on this.

Weaknesses

Reliance upon the UK market

Although international business is still growing, and is expected tocontribute greater

amounts to Tesco’s profits over the next few years, the company is still highly

dependent on the UK market (73.8% of 2003 revenues). While this isn’t a major

weakness in the short term, any changes in the UK supermarket industry over the

next year for example, like the Morrison’s group successfully purchasing the Safeway

chain could alter the balance of UK supermarket power, and affect share.

Debt reduction

Tesco is not expected to reduce its debt until at least 2006. Tesco has a large capital

expenditure program mainly due to its huge investment in space for new stores.

Since its expansion is so aggressive, Tesco has little free cash forany other

operations.

Signs point to serial acquisitions

With an enterprise value of £23 billion, Tesco clearly has enormous firepower. Also, its

product range is vast and almost any acquisition can be justified, particularly in the

UK. While ’fill the gap’ strategy would be useful to the company, ashas been the case

with the UK convenience market, there is the danger of Tesco becoming a serial

acquirer, as this tends to reduce earnings visibility and quality.

Task 12

Describe how you would propose strategic marketing responses to key emerging themes in a marketing strategy.

Market orientation in cooperates satisfying the market through an understanding and response to the local needs of the final and intermediate customers, competitors and the macro-environment leading to superior performance.

Tesco as been able to market mix through its emphasis on customer needs through its values philosophy “no one tries harder for

customers; treat people how we like to be treated.” Which are disseminated through an internal marketing strategy by distributing the company’s papers to its employees (Mockler, 2002). Another way Tesco has succeeded in market mixing is the use of its ‘clubcard’ loyalty card scheme and websites like tesco.com. Through these, the company has been able to acquire a significant customer base, which an analysis can be performed on. ‘Clubcard’ significantly influence consumer behaviour in the UK and it’s closely integrated with the business processes and aligns with the brand and brand strategy.

Tesco utilizes the use of online services to enhance its customer experience. These include establishing a site that easy to use, faster, relevant, valuable, serviceable and enhance product development (Rowley, 2008). In addition, Tesco has developed other online products to meet new customer needs like offering of music download and developing grocery delivery services that includes wineand white goods.

Tesco also use its product range to create stronger customer experience as a customer is able to purchase a range of products in a single store. In addition, online services have been made easier hence; a customer takes the shortest time with least effort to complete and order creating better customer experience.

Tesco uses technology to gather marketing information and planning. First, is the scanning of ‘clubcard’ to derive information required for customer database. Secondly, is the ability of customers to collect points through the scheme through transactions with various partners and the online services (Grant, 2005). Thirdly, is the dataanalysis process which Tesco has paid a lot of attention in its design hence ensuring an adequate database, data currency, data equality and tight control of data analysis costs.

Tesco another marketing mix is the their astute response to perceived opportunities and threats like entering UK market with express format in 1995 and by refining same format Tesco opened new generation of express units which included pre-fabricated facilities.

Tesco operate as the world’s leading internet grocer and runs financial services through a joint venture with the Royal Bank of Scotland. Tesco utilises the technique of entering markets where

competition is weak or fragmented hence there is no presence of established global retail giants (Hirsh, 2008). Tesco is very adaptable to its marketing strategies like the idea of not introducing the use of ‘clubcard’ scheme in US newly opened stores since research found out that most consumer were cynical about the concept.

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With respect to the implementation of the proposed plan, huge investments would be required to starts its operations in Switzerland. Infrastructure cost, cost of skilled labor, maintenancecost, supplier of goods, cost of inventory and other marketing related expenses such as advertisement etc all requires in-depth analysis (Rowley, 2003). Moreover, other expenditures such as employee salary, cost of middlemen services such as ware house, transporters, sales service workers and costs of promotional activities besides advertisement. Strict control and continuous monitoring of the plan will be required. Besides this, Tesco shouldform a contingency plan so that quick decision and implementation ofchanged program could avoid losses (Okumus, 2003). The proposed planshould be carefully considered and could be implemented in the next two years or before. Nonetheless, its implementation can be affectedby any of the external environment factors, i.e., political influence, change in policies etc.

References:

Tony Proctor, 2000. Strategic Marketing: An Introduction. 1 Edition.Routledge