The Analysis on the Success of Tesco - Literature review Example

Introduction: In this report a critical analysis on the success of UK's largest retailer ly TESCO Plc is presented to the reader. The analysis includes the process of identifying the critical success factors that contribute to the success of the company, the analysis of the company's marketing strategies that helped achieve its current position and analysis of its international investments. Furthermore, a critical analysis on the overall market situation that is affected by the growth of the company under debate is presented to the readers. This section presents the analysis on the policies of fair trade, market dominance, monopoly issues and competition law of the European Union. 1.0: Success Factors for TESCO Plc 1.1: Marketing Mix The success of an organization as argued by Philip Kotler and Kevin Lane Keller (2005) is mainly through the deployment of the 7Ps of marketing. In this section a critical analysis on the Price, product, Promotion and Place elements of the 7Ps is presented as these are identified as the critical elements in reaching the customer. Frances Brassington and Stephen Pettit (2003) argue that although the marketing mix can be explained using the 7Ps, the four critical elements that form the marketing mix are the four identified above. The authors further argue that the Marketing Mix plays a vital role in the overall marketing communication strategy of an organization, as it is the marketing mix that provides input to the marketing communication. 1.1.1: Product The company's wide range of products in every aspect of retailing presented in its supermarkets is the key element for the success of the organization as argued by Isla Gower (2004). The TESCO Finest and TESCO Value of the own brand range of products sold by the organization along with the leading brands in the retail industry is a classical example for the organization's success in the target market through extensive range of products as argued by Sandrine Mac and Scott A. Neslin (2004). The fact that TESCO Plc presents a wide range of choice in every category of its products is the major element fuelling its success in the UK and global retail market. 1.1.2: Price: The company pioneers in selling its products at competitive prices mainly lower than its supermarket competitors in the UK as well as in its global locations as argued by Isla Gower (2004) who says that 'the low price strategy of the organization without compromising the quality of its products is the key for its success in the UK retail market as the market leader'. Furthermore, the increasing awareness among the customers that quality need not be compromised with low price (Oliver Hupp and Ken Powaga, 2004) is the driving force for the organization in its continuous low price strategy. 1.1.3: Promotion: Promotion as argued by Philip Kotler and Kevin Lane Keller (2005) is 'the key for increasing the sales in the retail industry and retaining the customers in the target market'. The fact that TESCO Plc has established itself as a brand in the retail industry through pioneering in promotions like combination sales, event focused promotion of products and above all market focused promotion by its stores targeting the local markets is the major element for its growth in the UK retail market along with its pricing strategy. 1.1.4: Place: Place or the location for an organization in the retail sector is a critical element for its success as argued by Frances Brassington and Stephen Pettit (2003). This is naturally because of the need for local knowledge in the target market that serves for the promotion of its products and above all the choice of products presented in the shop floor (David Olson et al, 1982). The fact that the local knowledge is the key for increasing sales in the target demography as an organization can increase its sales only through the process of identifying the customer needs and understanding the behaviour of its target demography justifies that place or the location is a key element for the success of a retailer. The location of the TESCO Superstores at key locations in a given geography and the presence of the TESCO Metro and convenience stores in the city centres are the key elements for the organization's success in the UK retail market. 1.2: Retail Growth Cycle and TESCO Plc Isla Gower (2004) says 'the retail sector is a segment of business that embraces continuous changes with the change in the customer preferences and tastes'. This makes it clear that the growth in the retail sector widely known as the retail growth cycle can be sustained only through addressing the changes efficiently. TESCO's ability to effectively customize its products and communicate its promotions to the local target market is the key to addressing the continuous changes in the market. Furthermore, the increase in the online retailing and the increasing strength of electronic commerce has increased the need for an extensive range of products to be available on the shop floor in order to increase the revenue through the store sales apart from the dependency on the internet retailing as a potential source of revenue. 2.0: Marketing Concepts in Play In this section the marketing theories argued by many authors is analysed are analysed for their validity in the retail business application with examples from TESCO. 2.1: Consumer Behaviour The consumer behaviour is a widely accepted factor to achieve competitive advantage in the target market as argued by John R. Rossiter (2002). It is analysed under the following three segments. 2.1.1: Buying Experience: Buying Experience or Shopping Experience as it is termed by Frances Brassington and Stephen Pettit (2003) is a key element for a retailer to attract customers. This is naturally because of the fact that the psychological effect on the customers whilst they are at the store shop floor is the only source for creating an impression on the store in them. This is accomplished through the presentation of the products and effectiveness in communicating the promotions to the customers as argued by Frances Brassington and Stephen Pettit (2003). In the light of the aforementioned argument, an insight on the TESCO's chain of stores makes it clear that the company not only strives in product innovation and promotions but also provides an excellent shopping experience to its customers. 2.1.2: Marketing Communication and Branding: Communication, mainly effectiveness in communication of the company's products and services in the target market is an imperative element for the sustainable growth of the organization in the target market (Philip Kotler, 1999). The fact that the communication effectiveness is the essential element for success in the retail industry and the effectiveness in communication deployed by the company under debate through market focused POS and use of media justifies the use of marketing concepts used by the retailer in the real world scenario. The branding strategy of TESCO both in promoting its own label products (economy line and premium lines) as well as through its promotion and pricing strategies justify its success in the retail market. The arguments by authors including Philip Kotler and Kevin Lane Keller (2005) that the brand image of an organization is an essential element for its growth in the target market is clearly demonstrated by the organization under analysis. 2.2: Strategic Analysis Using Ansoff's model From the aforementioned arguments in sections 1 and 2 the Ansoff's model is presented to demonstrate the strategic positioning of the products by TESCO Plc. Market Penetration: The TESCO Value and other own brand products in almost all the product lines in the organization is the example for the market penetration strategy deployed by TESCO Plc. Diversification: The opening of new stores in international locations by the company with the core strategy deployed in the UK along with the local knowledge on the market demand demonstrates the diversification strategy deployed by the organization. Market Expansion: The TESCO Finest range of products that compete with premium brands in the retail sector proves that the company deploys the Market expansion strategy by selling own brand items in the premium segment of the retail market. The Ansoff Matrix on competitive strategy is presented below based on the aforementioned arguments. Ansoff's Matrix Existing Market New Market Existing Product Penetration TESCO Value range of products TESCO Finest along with premium brands in the market. Expansion TESCO Finest as a premium brand in the target market abroad. New Product Diversification New Stores abroad with new products in a new location. 3.0: TESCO and New Stores In this section an insight on the company's strategy in finalising the location for a store in the target market is presented to the reader. The elements analysed include local knowledge and supply chain integration. 3.1: Local Knowledge: Local Knowledge is a key element for the success of any retailer as argued by Philip Kotler and Kevin Lane Keller (2005). Since this enables the organization to focus on the range of products that would meet the demand of the target customers, TESCO has increased its sales through gaining local knowledge both within UK and overseas location like China where the company pioneers in the way of presenting its stores to meet the cultural requirements of the locality. Since China is a vast geography with a varied cultural background makes it clear that the local knowledge is an essential element for the success of a retailer in any location. It is evident from the case study that the company has increased its market share in the Asian retail market including countries like China and Thailand since the dawn of the twenty-first century. Robertta Copallo and Alessandra Faggian (2005) argue that the local knowledge is the key to growth in retail sector as it is the major ingredient in judging the demand in the target market. The aforementioned arguments justify that the local knowledge provides cultural awareness, value, consumer behaviour in the international markets and the macro environmental forces influencing the business. 3.2: Supply chain Integration: The company deploys state of art Supply chain system integrating the stores and the suppliers both local and nationwide in order to increase the product availability in its stores. The integration using SAP and the Microsoft .Net enabled (Company Profile, 2005) supply chain management system justifies that the company treats the supply chain issues critically whilst deciding the location of a store. In the light of the aforementioned argument, the international venture of the organization not only considers the elements of supply chain effectiveness but also the regulations and laws related to the logistics in order to effectively achieve supply chain integration. The company's presence in the European locations including UK accounts for the environmental awareness and pollution reduction through minimizing the use of trucks by optimizing the delivery and storage cycles in the organization is a classical example. Apart from the aforementioned elements, the political and social factors that form the macro environmental forces are also accounted for by the organization whilst opening stores abroad. The opening of stores in the Asian countries like China, Thailand and Japan where the social factors play a vital role in the acceptance of a western retailer justifies that the organization treats the political and social factors as strategic elements to gain competitive advantage in the target markets abroad. 4.0: Issues associated with the company's growth The growth of the organization has naturally increased its market share making the company kind of monopoly in the retail industry. The increase in the market share by the organization naturally increases its dominance in the target market making it clear that the dominant company in the industry can manipulate the norms of the industry thus affecting fair trade in the markets which can affect the customer interests as argued by Gerry Johnson and Kevan Scholes (2003). The increase in the market share of the organization also reduces the choices present to the customers that the retailers target making it clear that the customers are indirectly forced to purchase from the organization. The Article 82 of the Competition law of European Union further emphasises that the market leadership of an organization should not affect the growth of other competitors in the target market to encourage free-range competition in the European markets. This makes it clear that the growth of TESCO Plc in the UK retail market is a potential threat to infringe the competition law regulations of the European Union. Furthermore, the fact that the organization is rapidly increasing its number of stores through mergers and acquisitions as well as through the process of purchasing properties to install new stores makes it clear that the company is indeed a potential threat to the retailing business in the UK. Furthermore, the asset values of the company that has established itself as a leading property management company further increases the threat of the organization becoming a monopoly in not only the retail sector but also in other industries like property management. 5.0: Conclusion From the aforementioned arguments it is clear that although TESCO Plc has gained competitive advantage and market leadership in the retail industry both within UK and across the globe, the near monopoly status of the organization in the retail industry is a potential threat to the market effectiveness and economic growth of the retail industry in the European markets and other global locations. Furthermore, the company's success through the effective deployment of the marketing concepts justifies the validity of the theories in application. References France Brassington and Stephen Pettit (2003), Principles Of Marketing, UK: Prentice Hall Philip Kotler (1999), Marketing Management, USA: Prentice Hall Inc Philip Kotler and Kevin Lane Keller (2005), Marketing Management 12th Edition, Prentice Hall Inc Journals and Reports Company Profile (2005), TESCO Plc, Datamonitor Inc David Olson, Mary Jane Schlinger and Charles Young (1982), How Consumers React to New-Product Ads, Journal of Advertising Research, Jun/Jul82, Vol. 22 Issue 3, p24, 7p; (AN 6559237) Isla Gower (2004), UK Retailing - Market Review, UK; Key Note Ltd John R. Rossiter (2002), Consumer Research and Marketing Science. Advances in Consumer Research, EBSCO Publishing Oliver Hupp and Ken Powaga (2004), Using Consumer Attitudes to Value Brands: Evaluation of the Financial Value of Brands. Journal of Advertising Research, Sep/Oct2004, Vol. 44 Issue 3, p225-231, 7p, 1 chart, 4 diagrams; (AN 15592577) Sandrine Mac and Scott A. Neslin (2004), The Determinants of Pre- and Postpromotion Dips in Sales of Frequently Purchased Goods. Journal of Marketing Research (JMR), Aug2004, Vol. 41 Issue 3, p339-350, 12p, 5 charts, 1 diagram, 1 graph; (AN 14365047) Read More