Tesco Plc Strategy Analysis - Coursework Example

It also operates financial institutions as a joint venture with the royal Bank of Scotland (Data Monitor, 2004). Mullins (2010) says that a marketing strategy primarily focuses on effectively allocating and coordinating marketing resources and activities in order to accomplish firm’s objectives within a specific product market (Mullins & Walker, 2010). The critical issue that concerns the scope of a marketing strategy is specifying the target market(s) for a particular product or product line (Mullins & Walker, 2010).

This is followed by the motivation to seek competitive advantage and synergy through a well-integrated program of marketing mix that is custom made to the needs and wants of potential customers in the market segment (Mullins & Walker, 2010). Michael Porter identifies three generic strategies and these include: the cost leadership strategy, the differentiation strategy and the focus strategy (Mullins & Walker, 2010). These strategies are based on strategic scope and strategic strength of a firm.

The strategic scope is used to mean market penetration while strategic strength is used to mean the firm’s sustainable competitive advantage (Mullins & Walker, 2010). Tesco uses the cost leadership strategy in its operation. With this strategy a company aims at becoming the lowest-cost producer in the industry (Stephane, Girod, & Rugman, 2005). It is a strategy that is often associated with large-scale businesses that offer generally standard products that comprise of little differentiation and are perfectly acceptable to majority of the market customers.

This strategy is aimed at gaining market share by cutting costs so that a firm can offer lower prices and in the process gain market share (Stephane, Girod, & Rugman, 2005). High volume is leveraged to create low costs by getting the best prices from suppliers and more efficiently utilizing fixed costs. In order for any company to use this strategy it must be cost conscious in every aspect of the business (Kim, Nam, & Stimpert, 2004). This strategy therefore is characterized by tight budgeting, elimination of waste and thin personnel staffing.

Scholars agree that this strategy is often adopted when there are many providers, growth is flat and providers are trying to steal the market share from each other by lowering prices (Kim, Nam, & Stimpert, 2004). Last year in September Tesco began a new strategy where it began to put its focus on permanent low pricing as opposed to its previous specific price promotions. This was as a result of its losing a great percentage of its market share to its competitors such as Sainsbury, Asda and Wal-Mart (Poulter, 2011).

Market segmentation refers to the process of dividing the total market for a product or service into groups with similar needs such that each group is likely to respond favorably to a specific marketing strategy (McDonald & Dunbar, 2004). There are many variables to which a market can be segmented and these include the following: behavioral, demographic, psychographic and geographic segmentation. Behavioral segmentation is a strategy based on customers’ needs and subsequent reaction to those needs or towards the purchase of intended product or services (McDonald & Dunbar, 2004).

Demographic segmentation considers aspects such as age, gender, education, income, occupation, size of the family etc. psychographic segmentation is all about diving people according to their lifestyles and values and how