Would Tesco Be Successful - Essay Example

Answer Yes, Tesco would be successful in continuing to build relationship primarily because Tesco realized the vast potential of internet early and has been the first business enterprise to introduce e-commerce activity in UK. The interactive communication between the client and the business house has been utilized to develop a professional relationship between the two, that not only provides opportunity to improve and improvise the quality as per customer’s requirement and demand while at the same time, customer gets the best deal because of the competitive nature of internet, as a medium of business promotion technique. Smith P.R. and Chaffey D. have argued that E-commerce is commonly thought to include e-tailing, online banking and shopping – it involves transactions where buyers buy and shoppers actually shop. Others suggest e-commerce is any transaction such as a support or an online catalogue search (Smith, Chaffey, 2002). Tesco’s history has shown that the dynamic vision of its bosses combined with the creative and innovative approach in strategy and market planning would pay off in spades. Initially, Tesco with its ‘Pile it high and sell it cheap’ motto, was able to strengthen its market position considerably. The aggressive market strategy, based on acquisition, further took the total number of stores to more than 600 in 1960s and thanks to Cohen, the largest supermarket of Europe came into being in 1961 in Leicester. 1970s and 1980s saw the rapid decline of Tesco primarily because of the low quality product. But under the dynamic leadership of Lord MacLaurin, Tesco underwent tremendous change. His business acumen was so sharp that he had realized early that introducing technology and building committed customer base would accelerate the growth of Tesco manifold. He introduced technology in the two main areas of sales and distribution and at the same time, made special efforts to attract the upper class by opening superstores with high end products. MacLaurin made many changes in the basic format of the store by not only introducing a whole lot of new products lines including non food items, clothes, home appliances, electronic goods etc. but stores in new formats like Tesco superstore, Tesco Metro, Tesco Express, Tesco Extra were also opened to meet all segment of the society. Tesco superstores were characterised by huge space and were designed to attract customers of all strata. It was followed by an intensive drive to make committed customers as members through clubcard so that they could offer their customer extra benefits. This particular drive also helped them to analyse and identify the changing trends of the customer requirements which were used to gain leverage against their rivals. During 1996-97 Tesco became the first store in Europe to offer online delivery and took home delivery orders through phone, fax and internet. Technology thus became an integral part of Tesco strategy that was vigorously followed by later CEOs1 of Tesco. By 2001 Tesco had become one of three leading online stores with more than 50% grocery online sale in UK and today it has around 7,50,000 registered users and processes 70,000 orders a week! It has a huge network in Europe and has made its presence in America by tying up with its leading supermarket chain Safeway. The amazing turnaround by Tesco in late 1990s, to become the largest chain of superstores not only in UK but in Europe, is not only extremely praiseworthy but a very rare feat by any retailer as yet. Building customer relationship is the priority area of Tesco management. The CEOs of Tesco were highly professional and had the foresight to envisage a highly potential online market which they created by developing a website which was not only aesthetically appealing but efforts were made to make it simple and user friendly so that even a novice could use it without any difficulty. Concerted efforts were made by Tesco to get feedback by the online and offline customers and public so that appropriate improvements and improvisation in the site could be made. Tesco went so far as to employ a housewife on its payroll just so that it could get first hand point of view of the changes from a person who represents its customers. Lynn Pullum, the housewife, became the guiding factor for the major changes on the Tesco website which were solely designed to attract more customers to use online shopping. Increasing revenue proves that building customer relationship is important factor of the success of Tesco. (revenue sheet attached) Answer 2 The "4 Ps" marketing mix framework is not sufficient enough for Tesco in preparing and managing marketing programs. The compulsions of the rapidly transforming societal paradigms and technological advancements are important factors that require more comprehensive and innovative approach to market strategy. Strategic marketing plans are crucial part of promoting products and services of an organization. The market plans are focused around 4Ps (product, prices, place and promotion) and a good market strategy always takes these points on a priority basis. It is equally important that while planning appropriate market strategy, proper use of SWOT (strengths, weakness, opportunities and threats) analysis is taken up. Awareness of strengths and weaknesses in the company’s resources facilitate and match the opportunities and threats so as to provide a competitive edge to their rivals. SWOT analysis is an important tool to up grade internal strengths of the company to meet the external opportunities and exploit them in a manner that would provide the companies with cutting edge advantage over their rivals. The technology and e-business played a vital part in rejuvenating the core business activities of Tesco and helped it to rebuild the trust amongst its customers. Since marketing primarily deals into products and services that benefit people in some way or the other, people become the most important factor in the market strategies. A good marketer always tries to exploit the personal preferences of the persons to influence his behavior as a consumer of goods and services that he wishes to sell. Marketers excel in influencing the self concept and personality traits and behavior by developing market strategies of the products, keeping in mind the prevailing lifestyles of the people. Hence, different market strategy is adopted for different group of people. Advertisements are the most prolific example of segmented marketing where the contents of advertisements are decided by the target group. Toys’ advertising will be focused on children that will tempt them to buy whereas a dress worn as fashion statement by top model or actress is most likely to be bought by youngsters and fashion conscious persons. Tesco has made concerted efforts in these directions. Tesco also used its online customer base to analyze the changing habits of the public and accordingly made changes in its business activities resulting in Tesco diversifying its core business activities to include new areas like insurance, counselling, personal finance, petrol pumps with attached Tesco convenient stores in the format of Tesco Express etc. Tesco’s market strategy was totally focused on the needs and requirements of the people and made continuous efforts to update its products line with that of the changing public demands. This was reflected on its continuously changing website which became increasingly people-centric. The huge success of Tesco website could be gauged from the fact that it has maintained its positions of being one of the four major ecommerce site and the top online grocery store in UK for the last ten years, in a row. Tesco’s interactive website is updated and well maintained and believes that technology must be backed by a long term vision and creative inputs. Radical and innovative approach towards adopting new ideas must be followed by aggressive marketing and quality service. Tesco strategy was a landmark in many ways. Tesco, after the fiasco of ‘pile high and sell cheap’ motto, literally made ‘quality at low price’ its motto because despite improving on its quality, it still maintained its status as being providing the best at the lowest prices which could be observed by the increasing number of online and offline customers which steadily rose and online customers alone accounted for whopping £300 million a year in 2001. It ensured that its promises are implemented in deed and service. Tesco was highly innovative in its marketing strategy. It was quick to analyze and encash the changing habits of the people by supplying them with latest products. It also made concerted efforts to promote and project its people-centric image by providing its customers with products and services which were customised as per their individual demands. It took its online and offline customers seriously and made customer satisfaction its priority which resulted in long term customer relationship which is fundamental to any retail business. It was also quick to realize that special events may require demands for specific products and therefore incorporated ideas for those events like Christmas, birthdays, barbeques etc. giving details of the products that would meet the needs of the customers. In same way, it made sure that the regular customers, under ‘my favourite’ have a list of all recently bought products, thus simplifying the process of remembering! Tesco also promoted computer literacy and internet proficiency among the less affluent class with the long term intentions of making them their customers. It was in fact a really commendable promotional activity that not only built its image as socially conscious enterprise but drew customers from unexpected quarters like old ladies and other persons who hitherto were afraid to use computers. The most interesting fact of the friendly image that it projected on its online delivery system was the provision of special note that often comprised of demands of the customers that went beyond the core activities of Tesco. Tesco often reaffirmed its people-centric approach by complying with those special requests at relatively low cost and earned its customers long term trust and commitment. Emerging markets are crucial in the era of globalization and can be defined as the new area with high income and where the demand for the product can be created with relative success. The non market factors are highly relevant when the business interests are global. ‘These are characterized by 4Is: issues, institutions, interests and information’2 (Baron, p2). Since they are the socio-political environment within which the firm has to operate, an effective market strategy needs to incorporate these factors. Last but not the least important is the fact that in an industry which has wide scope and opportunities, it is very important that the firm must strive to have a definite and advantageous position within the industry. In a fiercely competitive industry the firm gains that position by leveraging its strengths. According to Michael Porter, the firms’ strengths can be broadly categorized into cost advantage and differentiation. Three types of generic strategies emerge when these strengths are applied by the firm: cost leadership, focus and differentiation (Porter, 1980). Cost leadership strategy provides the firm with distinct cost advantage against its rivals. Focus strategy involves targeting specific market segment by fulfilling their requirement with better service. Differentiation strategy is focused on providing unique features to its products with value added services that gives it an edge over its competitors. Hence the various issues, which pertain to the interests of the people at large, are important factors that must be included in the framework of market strategies of products and services. Summary of last 5 years of Tesco’s Sales and Revenue Statement UK GAAP IFRS 2004 2005 20061 2007 2008 Financial statistics Group sales (including VAT) (£m) 33,557 37,070 36,957 43,137 46,611 51,773 Revenue (excluding VAT) (£m) UK 24,760 27,146 27,146 29,990 32,665 34,874 Rest of Europe 3,385 3,818 3,818 5,095 5,559 6,872 Asia 2,669 3,010 2,902 4,369 4,417 5,552 30,814 33,974 33,866 39,454 42,641 47,298 UK retail statistics Number of stores 1,878 1,780 1,780 1,898 1,988 2,1155 Total sales area – 000 sq ft2 23,291 24,207 24,207 25,919 27,785 29,5495 Revenue per employee3 162,459 166,534 166,534 170,923 177,084 179,840 Weekly sales per sq ft4 22.48 23.89 23.89 25.06 25.48 25.43 1. Results for the year ended 25 February 2006 include 52 weeks for the UK and ROI and 14 months for the majority of the remaining international businesses. 2. Store sizes exclude lobby and restaurant areas. 3. Based on average number of full-time equivalent employees in the UK, and revenue exclusive of VAT. 4. Based on weighted average sales area and sales excluding property development. 5. excluding stores in US and Dobbies Reference Case Study of Tesco. Baron, David E. Integrated Strategy: Market and Non Market components. California Management Review. Vol.37 N. 2, 1995. Porter, Michael, E.(June 1, 1980). Competitive Strategy: Techniques for analyzing industries and competitors. NY: Free Press 1998. Smith P.R., Chaffey D. (2002) E-Marketing Excellence. The Heart of e-Business (pp.35-78). Elsevier Butterworth Heinemann. Tesco Revenue Statement. Available from: [Accessed 18 December 2008]. Read More