Tesco's Marketing Strategy. An Analysis

Essay , 2022 , 11 Seiten

BWL - Offline-Marketing und Online-Marketing

This paper is an analysis of Tesco's strategic marketing.

Tesco is a customer centric organisation and believes in customer service. As they quote "Serving our customers, communities, and planet a little better every day" Keeping customers at the heart of what we do.
This reflects a holistic view of the organization which not only focusses on its customers but also on its suppliers, communities, and the countries in which they operate. Their core value reflects its commitment towards the overall society by contributing towards creating a better planet every day in form of their longstanding commitment and the campaign towards reducing carbon footprint.

Table of Contents

1. Tesco-Introduction & Organisational Profile

2. Tesco Core values & Strategic pillars

3. Tesco -Envoirmental Analysis-Pestle Factors

4. Tesco- Company Analysis- SWOT

5. Tesco-Ansoff matrix

6. Tesco-7 Ps of Marketing Mix

7. Conclusion

1,0 Tesco Introduction & Organisational Profile

Tesco plc is a leading multinational retailer based in Uk with strong domestic and global footprint. They are the market leaders in UK with the highest market share of 28% followed by Sainsbury and ASDA.As reported for 2021 they have 6800 stores worldwide with a formidable team of 4500 Employees and over 80 mms of customers.

Tesco was founded in 1919 byJack Cohenas a group of market stalls in London. They started as humble surplus stall store in London and later diversified into one of the largest supermarket chain retailing clothes, books, electronics, furniture, toys, petrol stations, banking, financial services, and Telecom.

Tesco is now led by Ken Murphy as a CEO and has made over £54.8bn of sales in 2020-2021 with £2,033mn of profit before tax. They have operations in UK and eleven more countries with diversified interests in Banking, insurance, Customer data Science and Telecom.

2.0 Tesco Core values & Strategic pillars

Tesco is a customer centric organisation and believes in customer service. As they quote "Serving our customers, communities, and planet a little better every day" Keeping customers at the heart of what we do.

This reflects a holistic view of the organization which not only focusses on its customers but also on its suppliers, communities, and the countries in which they operate. Their core value reflects its commitment towards the overall society by contributing towards creating a better planet every day in form of their longstanding commitment and the campaign towards reducing carbon footprint.

Tesco strategically associates itself with its responsibilities for the communities and society in form of many programs including their efforts in promoting sustainability through a program called “Little helps plan”. It demonstrates their commitment towards the four pillars namely People, Product, Planet and Places to work on issues such as human rights, diversity and inclusion for its people and food wastage. They work towards curbing food poverty as a community issue, providing healthy and sustainable diets for its customers and larger causes such as climate change.

Their strategic pillars focus upon three areas of operations.

-To stay competitive
-To accelerate growth
-To generate strong cash flow

Tesco has always reflected on aggressive yet customer centric strategies to stay ahead as one of the world leaders in the modern-day retail.

3.0 Tesco – Envoirmental Analysis-Pestle Factors

3.1 Political Factors:

Political factors such as stability, change in tax rates, Export /Import policies, safety regulations both for food and non-food items and overall political envoirment has direct bearing on the organisational performance and processes.

In recent times major events such as Brexit created a climate of uncertainty as supply chain with Europe was severely impacted. Adamyk, K., 2019. PESTLE Analysis on Tesco PLC.

3.2 Economic Factors

By virtue of the size and presence of Tesco in UK and other countries makes it vulnerable to the changes in the market conditions with respect to the change in taxation, legislation etc. This may directly or indirectly impact cost, demand, profit, and price elasticity.

3.3 Social Factors

Social factors are referred as change in customer’s buying patterns, demo graphics and their preferences. Tesco has been constantly manging such changes in different scenarios such as COVID times and more recently impact of inflation on the price sensitive customers who have been impacted by the sudden wave of inflation rising out of War situation in Ukraine.

During COVID times Tesco was not only sensitive to its customer needs by promoting in store hygiene but also stepped up their online presence with a variety of goods to cater to the customer needs such as masks, sanitising products, immunity builders etc which registered a rapid increase in demand. In the current times they are constantly focussing on providing the customers with low cost and high values products through different offers and promotions.

3.4 Technological Factors

Tesco has repeatedly evolved itself to leverage technology by way of venturing into modern day practices focussed towards increasing customer convenience through online sales and delivery models. They have also implemented practices like self-checkout at their stores to optimise the cost of operations.

3.5 Environmental Factors

Tesco has repeatedly shown its commitment towards not only its customers and communities but also towards larger goals like reducing the Carbon footprint by almost 50%. In their endeavour to work towards the goal they have been actively working on creating sustainable products and implementing environment friendly practices.

3.6 Legislative Factors

Various legislative changes across the world have definite impact on overall supply chain and operating profits in the relevant region. This not only impacts the cost of the goods but also the quality and product features. (Analysis et al., 2014). Tesco has created teams internally to handle legislative support for both its domestic and international operations.

4.0 Tesco Company Analysis- SWOT

Tesco’s being one of the largest Retail organisations has multifaceted profile and various dimensions which covers its strengths and weaknesses across different geographies.

In this framework I will discuss and analyse Tesco’s profile, its competitive positioning while discussing the internal and external factors along with its current and future potential.

4.1 Strengths:

As a market leader Tesco is an established brand in UK and in other countries. They have diversified product offerings and a wealth of experience of over hundred years in managing retail business and operations.

One of the other strengths for Tesco have been their dynamic and progressive attitude and their constant focus on modernising their stores, work processes and product offerings. They have been successfully harnessing the power of technology to modernise their processes, supply chain and the fulfilment channels.

Tesco club card is yet another powerful loyalty program which rewards customers on each purchase in form of membership points. It was launched in in 1995 and have over 20 million users in UK. This card not only gives the loyalty points but also gives preferential services, offers, and prices for its customers. Tesco card was launched with a progressive view of digitising customer details to analyse customer behaviours and buying patterns. In return they rewarded their loyal and returning customers with loyalty points and several other benefits. Now, twenty-seven years down the line they have an intensive data which is being used to create customer centric product and promotions. (Humby, Hunt and Phillips, n.d.)

4.2 Weakness :

Retail as an industry poses severe challenges with respect to its competitive marketscape and low operating profits. In case of Tesco also these have been their challenges due to pestle factors such as market conditions, competition, cost of living, excise and taxation and other government regulations. (Davey, 2022)

Tesco currently occupies the leadership position in UK with a market share of about 28% closely followed by Sainsburys and Morison at 15.7%,14.7%,10.1% respectively. In addition to the Big four companies who are the top competitors to Tesco there also has been the emergence of discount stores like Aldi and LIDL which have created competition especially for the price sensitive customer segment. (Hill,2002)

Finally online retail giant like Amazon have added another channel of online shopping especially after COVID in 2019-20. (Vyshnavi, 2022).

4.3 Opportunity:

Tesco as an established market leader has been harnessing the opportunities such as market expansion, product diversification, brand positioning, modernisation of retailing and customer loyalty in both its domestic markets and overseas expansions. They believe in expansion through acquisitions, mergers, and joint ventures to develop their market to rapidly expand their footprint and product lines.

4.4 Opportunities

for expansions continue to be one of the key strategic policies which drives the Tesco’s vision to provide their customers with better offering every day.

New product segments such as sustainable ranges and heathier options at affordable processes continue to be upcoming opportunities in the retail industry.

4.5 Threats:

There are several threats which must be manged in time to ensure the organisation’s uninterrupted progress.

It has been the constant endeavour with Tesco to provide high quality and affordable product range to its customers, thereby exposing themselves to the threat of doing business with high operating costs and low profit margins. Threat from competition has been ranging from both organised and traditional retails including online and offline modals across various countries of operations. (Davey, 2022)

Going forward in this section I would like to emphasize upon the Ansoff matrix and the matching principle to detail out the company’s focus on creating customer centric product, process, and policies for expanding its operations both laterally and vertically.

5.0 Tesco Ansoff matrix

Tesco Ansoff matrixis a strategic tool used by companies to devise their growth strategies. Tesco has been an excellent example of organisation which has legacy of employing the matrix in all its four categories. I believe that the growth appetite for Tesco has led to its market leadership all along its existence. (Johannesson, 2011) Their aggressive growth mindset has made them focus on new territories, product lines and customer segments. (Ansoff Matrix of Tesco UK - Ansoff Matrix, 2020).

5.1 Market Penetration

Tesco continue to strengthen its position in the market by introducing affordable product range and creating customer centric offers and promotions. This requires capital investment to increase production and marketing capabilities along with robust distribution modals.

5.2 Product development

Tesco leverages the customer data and their buying patterns to understand the changing market needs and to create product range which is more suitable for its customers like organic produce, sustainable clothing's fuel, banking solutions and allied services.

5.3 Market Development

With longstanding and diverse experience in managing largescale retail operation in UK, Tesco has also diversified in other geographies through strategic takeovers and joint ventures. It continues to evaluate several markets in Asia after its successful expansion in Europe.

Tesco has secured sustained growth through progressively deepening its connections with the economy in the operating country and communities.

Discussion

Tesco’s strategies have helped them to embed their style of working by demonstrating the appetite for localization and transformation in accordance with the new market conditions and competition landscape.

Despite strong foothold in retail and extensive market research Tesco failed to make its mark in mature and aggressive foreign markets like US and Japan. In case of US not only did they launched during the time of economic downturn in 2007, but they were also not able to operate while keeping their cost low as they were not able to keep the promise and quality of Tesco. It was also observed that the consumer needs and behaviors varied in US market as compared to UK). It can also be argued that diversification and expansion also entail complexity of operations and organizations must focus on aligning the new product lines and geographies into existing framework leading to changes in the existing value chains by using their resources, expertise, and experience (Palmer, 2004).

5.4 Diversification

Diversification into different product categories and brands ensures acquisition of new customers/ markets and risk mitigation for the company for the loss in one product segment, business, or channel. It also allows the opportunity for cross selling and upselling for the existing customer base.

On the other hand, it is relevant to note the risk involved in radically shifting the scope and synergies of the organization with introduction of new product, services, or markets.

For any strategy to be effective, it needs to be well tuned both to the needs and requirements of customers (the market conditions in which it is implemented), and to the resources and capabilities of the organization looking to implement it. Hooley et al., (2020)

I will now discuss the relevance of the matching principal and its application in case of Tesco along with the discussion on Strategic fit.

6.0 Strategic fit

Strategic fit applies the concept of the Matching principals, and it describes the alignment of customer requirements or Market Conditions with Tesco’s products and offerings. Customer needs may change with respect to changing demographics, scenarios such as post covid customer behavior, impact of inflation on Tesco & its customers and availability of cash flow. Organizational Resources include Widespread reach, strong supply chain, fulfillment channels, diverse product range.

In this case the Implementation of strategic fit reflects in Tesco’s marketing strategy focused on redefining value by creating affordable price range, offering healthier choices through range of specialized sections, fulfillment of digital profile through club cards, investing in online and fast delivery channels. (Tesco Annual Report 2021, 2022), (Al-shaghdari, F.M., 2017)

7.0: Tesco 7P’s of Tesco’s Marketing Mix

Customers buying decision is driven by numerous factors such as social influences (Peter & Donnell, 2007), situational influences (Belk,1975) and physiological influences (Peter & Olson, 2005). It is assumed that the Customers typically buy the product after careful examination of the product attributes such as price quality, design, and features to derive the value for money. Hence the marketing mix is designed to exploit or influence customer buying decision through a carefully designed strategy to include the Product, price, promotion, and place. In the recent times three more attributes have been added to the marketing mix to accommodate services. It now also includes people, processes, and physical evidence Booms and Bitner (1982).

Tesco being the large Colome grate with varied business interests and a large product line often also sells products packaged along with services such as credits and EMI’s and warranties. Hence it becomes relevant to discuss the entire proposition through 7 p’s of the marketing mix.

Marketing mix of Tesco is set to cover the diverse set of both online and offline activities that contribute to the Brand and competitive positioning of Tesco.

7.1 Product

Past and current studies indicate that the Product is one of the core aspects of the marketing mix and impacts the consumers buying decision Ferrell (2005). Product can be called as a combination of quality, design, features, and careful packaging (Borden, 1984)

It is retailers endeavor to offer the core product packaged with symbolic and experiential attributes to create the product differentiation. Hence it is the ability of the overall packaging, branding, reliability, features, and availability of the product to pull the customers. (Kotler & Armstrong, 2006)

Organizations focus on Diverse Range and variety of the Products suited for different customer segments and markets. This includes the introduction of new products with modifications in view of localization in overseas markets. One of the effective tools for Product mix includes the opportunities for Strategic partnerships to develop new categories, solutions, and product lines.

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• Autor: Komal Tyagi (Autor:in)
• Erscheinungsjahr: 2022
• Seiten: 11
• Katalognummer: V1334582
• ISBN (PDF): 9783346834478
• Sprache: Englisch
• Schlagworte: tesco, marketing, strategy, analysis