Competitor Analysis and Marketing Models at Tesco - Case Study Example

COMPETITOR ANALYSIS INTRODUCTION In the present day, organizations are vying over one another in order to gain control over a significantshare of the market. This is done through numerous ways of marketing the products or services offered by them such as promotional campaigns, advertisements, market surveys etc. but, the introduction of the product into the market or resorting to popularization of the product will alone not help the cause of the business entity. In order to be able to gain a significant market share, the organization must initially work towards understanding the existing market scenario & must have an idea of the extent of competition prevailing in the market (Robert J. Dolan, 1991). This will help the company n making the necessary modifications either to its product or its marketing strategy or both as & how the situation demands. Such an effective definition of the marketing strategy & the assessment of the degree of competition with the market may also be applied to the tourism industry as well. The present essay is an attempt on the same line to determine in brief about the various strategies & competitive policies that need to be worked out by any tourism sector to be able to offer healthy & stiff competition using many popular marketing models. STRATGIC MARKETING Strategies are the long term goals that are set up by any business entity for the purpose of achieving the desired objectives in addition to the fulfillment of the needs & tastes of the customers. The concept of marketing is no exception to this fact and as such, any marketing activity should be effectively planned & implemented according to a well-defined strategy. A strategy is different from a tactic wherein the latter is mainly concerned with addressing the short term goals of the organization with regards to the a particular product or a specific market situation. As opposed to this, a strategy is usually devised for a long period that sometimes runs into months or even years for satisfying a major objective such as an expansion of the organization into new sectors, popularizing a new product that is proposed to be introduced into the market etc. In general, there are two major parts under strategic marketing: Assessing the competition in the market. Implementing the strategic action plan as part of the usual operations. The present markets are extremely competitive in nature. Therefore, there needs to be a consistent strategy in order to provide for a way to outclass other products that provide competition through effective marketing strategies. But, in addition to having a well-defined strategy that aims to take care of long term goals & ambitions, one also needs to have an action plan in place for everyday activities. In addition, one also needs to make sure that there are adequate resources for the purpose of being able to fulfill the desired objectives. The decision of the overall strategy & its planning are hugely influenced by the market condition & the organization's objectives. These considerations can be briefly classified as shown below (Coskun Samli, 1998): If the market is favourable & the organization occupies the best position, then the best option is to mobilize the best resources towards achieving organizational goals. If the market situation is favourable but the organization's place is a bit weaker in comparison to other industry players, then the goal of the strategists should be aimed at making the best offer towards improving & consolidating the place of the company in the market. In case the market is not favourable, but the organization is better placed in comparison to its competitors, then strategic marketing policies will ultimately work towards generating short-term profits. If both the market and the organization's situation are not satisfactory, then strategic marketing should be undertaken if & only if it is felt that the proposed initiative would be beneficial at least towards a part of the business entity. Therefore, one needs to compare the existing market situation & the organizations condition with the above possible situations & work towards devising strategies for marketing accordingly. Therefore, the subsequent step is to devise a strategy after having performed the categorization on the basis of the above guidelines. These strategies are discussed below (Norton Paley, 2000): Cost Leadership Strategy: this strategy emphasizes on the fact that one can produce & market goods at prices less than that of their competitors. The catch is that the profit earned by this initiative should be more than the prevailing average. The various conditions that need to be favourable for this approach are a sufficient amount of capital, efficient & skilled manpower & management as also distribution in the minimum cost. Differentiation strategy: this strategy is usually adopted wherein the product that is intended to be marketed is unique in its own sense by virtue of its brand image, its properties & features etc. such products must ultimately work towards generating higher profit margins. The success to this strategy is augmented by the availability of efficient product support & strong R&D (Research & Development). Focus strategy: This is the most modern marketing strategy. Under this strategy, an effective focus is maintained on a particular range of products or a particular segment of the market or a particular aspect of the cost management initiative. Therefore, this approach helps in the definition of strategies with focus on a particular aspect of the marketing process. Therefore, this form of strategic marketing addresses a particular section of the market under study. COMPETITOR ANALYSIS The theory of competitor analysis is immensely related to the science of strategic marketing. Competitor analysis is used for the assessment of the competition & dangers from existing & future (potential) customers (Grant, 2003). Therefore, one needs to consider the use of this technique for the purpose of gaining a formidable position in the market. Thus, competitor analysis is under for the analysis of the degree of competition between the various products or brands that are under mutual competition in an existing market segment. This typically involves the analysis of around 5 to 10 of the most popular products. The analysis of these products helps in outlining the various advantages as well as the disadvantages that characterize the product. This helps towards determining the overall market situation thereby providing for the development of effective strategies & improvements cum modifications. The first phase of analysis under competitor analysis is to conduct a planning phase. This is typically used to gather the most competitive products that govern the market forces presently. Then a 'Context of Use' analysis is used to determine the users of the product & the potential use of the product. Care should be taken that the focus here is to be centred on the needs & requirements of the user rather than the sophistication of technology. The purpose of this stage ends when information on the most popular products that are thought to be competitors is obtained from the market for study & analysis (Liam Fahey, 1991). The facts that are gathered for the various products as part of the planning process are used for ascertaining the strengths & weaknesses of every competing product (something that is common under the SWOT analysis). This helps in the formulation of an action plan that can be used to thwart any existing or potential threats in addition to working towards improving the popularity of the product in the market. Usually, such analysis is performed at meetings between the management & the stakeholders of the company. Finally, the decisions taken as part of the competitor analysis are circulated among all the people involved so as to enable each one of them to have a clear idea of what needs to be done in order to achieve the desired objectives thereby allowing them to contribute to the cause through their individual efforts. COMPETITOR ANALYSIS OF TESCO PLC The theory of competitor analysis will now be applied to ascertain the various competitors of Tesco PLC & specify the various strengths & weaknesses that characterize the company's current position. Tesco PLC is an international retail chain that is based in the United Kingdom. In terms of size & market share, it holds the fourth position in the world only behind Wal-Mart, Carrefour & Home Depot. The company offers retail products in clothing, food, finance, telecom services & electronics. According to latest surveys, the company has an overall market share of around 30% (Answers, 2006). Tesco has two major competitors in the UK, namely Sainsbury, ASDA & 'Marks & Spencer'. At present, Tesco occupies the first position in the UK retail market & this has been attributed to the steps taken by Tesco for achieving this position & consolidating it in addition to the faults made by the other two major retail chains in the UK that have been mentioned above. The following paragraphs will discuss about the strengths & weaknesses of Marks & Spencer as well as Sainsbury. Sainsbury's was once the retail market leader in the UK, but is now in the third place behind Tesco & ASDA. The company went into a slump prior to 2004, but has since then recovered owing to the reforms undertaken by its CEO, Justin King. The first & the foremost problem with Sainsbury has been that here has been no active involvement of the Sainsbury family since 1998, even though they are known to have a share of more than a third (35%). Another significant shortcoming of the chain has been that no one can sell his/her shares (in Sainsbury) unless he has the written consent of the family. This has brought the company's fortunes to a virtual standstill. In 2000, Sir Peter Davis too over the reins of the company in an attempt to regain its lost position & glory, but since than the company has go been towards an economic downturn. The reason has been attributed to the fact that the company's management under the leadership of Davis opted to concentrate on the profits instead of targets or providing quality service, which proved to be detrimental. The company also shifted focus towards infrastructure development using IT & improving distribution at a cost of nearly 3 billion, but has failed to concentrate on providing the availability. It was only in 2004 under the guidance of King that the company shifted focus towards learning the needs of the customers from the customers themselves & for this a customer survey initiative was launched. On the basis of the inputs received, new staff was recruited in an attempt to improve the Quality of Service the efficiency of the supply chain. In addition to these decisions, the reduction of the dividend in order to generate more revenues has finally enabled the company to take the path towards recovery. In terms of turnover, Marks & Spencer is the largest cloth retailer in the UK but the company sells such more than this. Until 1997, the company was regarded as the most powerful retailer in the UK with the net profits surging to 1 billion in that year alone. But since then, the company has had to face numerous problems due to the mistakes committed by it. The company has not yet recovered from the economic plunge post 1997. Today, it has been reduced to a quarter of the size of the largest retailer, Tesco. Until 1997, the company was a very popular chain with the customers who regarded it as the best in terms of the quality of service provide to the customer. In fact, the company's profits reached an all-time high during the financial year of 1997-98. But, owing to this rise in profit which had touched a billion pounds, the company under Sir Richard Greenbury committed the same mistake as Sainsbury-namely concentration towards the maximization of the profits. This led to a sense of dissatisfaction among the customers. Moreover, the company sidelined the availability of raw materials from foreign countries at cheaper prices & instead stuck to procuring the goods from British suppliers in spite of their comparatively higher prices. Even o this front, the company was no able to secure the trust of the suppliers. All these factors eventually led to a two-third decline in the share price of M&S at the turn of the century. Many attempts by the company such as the introduction of new clothing collections etc. has met with scant success. In the recent past, the company has had to sell its financial services wing & has recently survived a takeover attempt by the Arcadia Group, Bhs boss & Philip Green. Therefore, the company is yet to find any hope for revival. ASDA is a name contraction for 'Associated Diaries'. it is a retail chain in the UK that became a subsidiary of Wal-mart, way back in 1999. The takeover was soon followed by the opening of a series of Hypermarkets. In 2005, the company had to witness a slight slip in the market share owing to a resurgent Sainsbury's. As of today, ASDA is in the process of expansion owing to the financial backing fro Wal-Mart, but it's market share is still occupies the second position in the UK retail market behind Tesco. ASDA has been known to concentrate on the pricing in particular. Presently, the company faces stiff competition from Sainsbury's which is driving ahead on the basis of current performance. In fact, ASDA & Sainsbury occupy an individual share of around 16% compared to the 30% enjoyed by Tesco (Clive Humby & Terry Hunt, 2004). Contrary to these steps, the success of Tesco PLC can be attributed to the degree of emphasis that has been laid by the company on Tesco PLC. In fact, the company went to the extent of offering rebate vouchers to the tune of nearly a billion pounds in order to attract new & young customers. The launch of the 'Clubcard' program in 1995 has since then seen a total membership of nearly 10 million customers, which speaks volumes abut the success achieved by this initiative. It must be understood that others continued to follow suit by offering similar cuts & offers, but none have been able to catch pace with Tesco. Eugene Tan (2006) had the following to say about this: "Well, the programme was designed and run with the customers in mind, to appeal to its customers' hearts as well as their heads. It was primarily the notion of placing the customers first and seeking to understand what makes them tick - and then rewarding them for their purchases and loyalty - that propelled Tesco to its success." Eugene argues that the company never bothered about getting the customer to spend more (as was the case with others through their respective initiatives). Instead, Tesco's management adopted a customer-centric mindset & evolved all strategies in this way. In fact, this has enabled the company to offer better quality of service (in turn an enhanced customer satisfaction), which has propelled most of the customers to want to visit the store more often (this was the case with Marks & Spencer until the mid-1990s, when a change took place in this mindset for the worse). Through the 'inclusive offer' initiative, the company has been providing to all classes of customers under the same roof regardless of their economic status in a non-discriminative manner. According to surveys, this has created a sense of respect for Tesco among of the customers. The increase in the sale of wholly owned brands (of the highest quality) has strengthened the position of the company owing to the generation of higher profits at no compromise of quality or service (Andrew Seth & Geoffrey Randall, 1999). Therefore, on an overall basis, it can be concluded that the major reason for Tesco's strong position is the company's emphasis on quality of service, customer satisfaction & promotion of self-owned brands. The other have only tried to copy these initiatives, but have been unable to implement them qualitatively at least in the recent past. It must now be seen as to how well would Tesco be able to maintain this stand. REFERENCES 1. Robert J. Dolan (1991), Strategic Marketing Management. Boston: Harvard. 2. Norton Paley (2000), How to develop a strategic marketing plan: A step-by-step guide. New York: CRC. 3. A Coskun Samli (1998), Strategic marketing for success in retailing. Westport: Quorum. 4. Grant (2003), Contemporary Strategic analysis. London: Blackwell. 5. Liam Fahey (1991), Competitors: outwitting, outmaneuvering, and outperforming. New York: John Wiley. 6. Answers (2006), information on the UK retailing market. Found at: www.answers.com 7. Clive Humby & Terry Hunt (2004), Scoring Points: How Tesco is winning Customer Loyalty. New York: Kogan Page. 8. Andrew Seth & Geoffrey Randall (1999), the Grocers: Te Rise & Rise of the Supermarket Chains. New York: Kogan Page. Read More