A Corporate Profile of TESCO Plc - Article Example

Topic:  Marketing Plan phase 2 of Tesco Plc Marketing Objectives, Targeting and Positioning, Growth Strategies, Competitive Advantage, Marketing Mix Programs Recommendation Marketing Planning Phase 2 of TESCO • The grocery retail giant of UK, TESCO is set with a new dimension in the global retail world marked with increased consumerism and buying power. TESCO is fighting neck to neck with other global giants. The company has been adopting the most innovative and newest form product mix and marketing mix to stand distinct in the global retail warfare. They have adopted multi-formal strategies in the market to look matured and diversified to service broader market and satisfy. The company has repose in its consumers. By studying their buying behavior and other intelligence the company has built up a vast and dedicated customer base that turned into a massive retail giant and the recognized leader. Yet the situation of the global market is plagued with rising prices and reducing buying power of consumers. Every one is fighting with this uprising menace including TESCO to survive. Objective In this critical time and fierce competitive situation the company has adopted The objective to create values for customers and reward for employees To enable customers to earn lifetime loyalty by people who shop with them and who work with them. Customers are core and if they are satisfied with what the company offers they are likely to return and shop round their outlets. The TESCO team is the fulcrum round which the service to the client is provided. If they are satisfied with the rewards provided they are likely to extend dedicated service to the customers who would go satisfied and return to enjoy more satisfaction. They are committed to treat people, as they like to be treated The strategic objective is to get firm support from the customer and employees both to maintain firm’s sale, market share and profitability. TESCO through it multi-format capability is set to grow share in food, to emphasize on growth in sale by increasing space from hypermarkets, and to drive a higher growth and market share in non-food sales. Competitive Advantage It is the key understanding of customers which differentiated from a succesful retailers to a loser. Tesco worked deeply to explore customer intelligence and services their want to be the Britains top superstores. The competitive advantage comes from this strategy only.The strategy of ‘Everyday low price(EDLP) did not remain uniqe to Tesco but they approached and nourished costomers was examplry. Very close and thorough analysis of customers’ buying bevaviour’ enable them to launch Tesco.com the online shopping business, startinf financial service arm and its entry into non-food business segment. This strategy alone enable then to take on Sainsbury in Britain and Wall mart in Erope to relegate them secondary position.From 1995 itself Tesco has been moitoring the market share records and convert Sinsbury customes into tesco’s loyal costomers. Research shows the customes slash their spending at Sainsbury by 16% and spend 28% more on Tesco. This buying pattern reversed the market share of 19.4% of Sainsbury and 18.1% of Tesco into 19.4% of Tesco and 18.1% of Sainsbury. The trend coninued and by today Tesco commands 313% market share and sinsbury enjoys only 16.5% .Tesco has used market intelligence far better and successfully to steal a march on its arch comptitors from begiging to end. Market Targeting & Positioning Tesco positioned itself in the market as a leader ready to serve a wide spectrum of customers who are attracted by low prices and high profile customers with premium products and prices. It opened different types of outlets specializing in sevicing the two segmets of markets. Young people with full of activites,stand –alone, middle aged persons with maturity amd money power, busy workers health conscious people, entertainmnt loving youngestes who look for thrills and excitments all were targeted by skillful marketing strategies, product positioning, and outlet positiong. Major Product, Services and Outlets Among the 2318 Tesco stores operating worldwide the major classification are Extra, Superstores, Metro, Express, Tesco.com Among the major offerings by these stores the main are Food Retail, Non-food Retail, Petrol Stations, Home living Range, Personal Finance, Pet insurance, Home Insurance, Travel Insurance, Saving Accounts, Personal Loans, Secure investment Bonds, Online Mortgage Finders Convenience Stores The key to continued growth in core sales is the street corner strategy that promoted TESCO Express convenience stores in every part of the city. These stores are comparatively smaller in size and handy in entering and eating meals by stand alone people. These stores proved successful in changing the eating habits of people. Fast foods and ready meals are quickly served out of microwaves, which are very quick, and saving time of people and providing convenience. The quick service commands some extra payment and customers are ready to pay for the convenience. This strategy became very successful and TESCO moved to acquire T& S a highly successful C-store and CTN chain (Confectionary. Tobacconists, newspapers), on stop and Day & Nite, on the way to becoming the UK's leading specialist operator of c-stores ‘Tesco Direct’ launched by Tesco is online brand and catalogue no-food offer. There are 11,000 products available online. The company promises to deliver products ordered with two hour and maximum next day. Customer will have option get delivery at the nearest store. The website is www.tesco.com /direct All Tesco stores sell food as well as some non-food items with Home plus formats and Extra. These offer customers convenience of shopping for great value non-food along with the household food items. The company is able to reduce prices by consolidation of stuffs. Almost 2000 value lines are offered in the counters. Marketing Strategies . Since 1995 the year for TESCO to acquire leadership in retail-chain business the company ha adopted many new strategies to be alive and distinct in the market. The market share of TESCO in retail business is 12.5%. Out of this they have 5% share in non-food market in Britain, and 6% in convenience market, and only 2-3% in banking market by 2004. By today the strategy of TESCO is not limited to overcome the competitor Sainsbury but to rapidly expand and grow in the international market. They aim to increase non-food sales, expand into retailing services other than the conventional grocery and exploit e-commerce business more vigorously. “Tesco has a long term strategy for growth, based on four key parts: 1.growth in the Core UK 2.business to expand by growing internationally 3.to be as strong in non-food as in food and 4.to follow customers into new retailing services.” Tesco Direct. The success in UK is attributable to their pricing policy *To keep prices of items low, * By exploiting the dedicated farmer-supplier to supply at the rock-bottom prices, and *customer strong loyalty. The strategy of adopting a different store concept and expanding into the non-core segments such as banking, insurance, legal services, retail petrol pumps, telecom and focus on non-food items like apparel, DVD, electronics, electrical appliances and many others items scaled up the image of TESCO as a composite consumer outlets and not simply a grocery retail supermarket chain. This outlet positioning is very strategic that will differentiate TESCO with other competitors that are short of adding this values to customers. Continued acquisition of space and other similar businesses is aimed to sustain the market share and move with the competition. The company invested into West-midlands base convenience store, its plan to open 59 new stores will sustain it dream to expand internally in the UK. The objective of the company is to maintain ROI at good level is continuing. With the massive enterprise value of TESCO it has enormous firepower to add to convenience stores in UK in particular. This is fair strategy provided the company retains its quality, visibility and earnings. TESCO has grown very big through acquisitions and the only way for its competitor to tackle its dominance is similar strategy to be adopted by its rival. Asda is already under Wall Malt and the acquisition of Safeway by Asda was chosen to be the right strategy towards taking TESCO head on. In fact Morrison acquired Safeway but TESCO was allowed to buy 10 out of 52 of its stores. TESCO adopted the strategy of expanding to non-food business and aim to double up this business to maintain 23% of the total. It is true the company accommodated this business in half of the new space acquired by the company in UK and provided full opportunity to grow. The appeal of non-food products is lucrative because of the bigger profit margins the products carry than the traditional items on the store. The products such as apparels, photolabs, pharmacies, electrical good can be procured at low cost and be sold through smaller prices out of town available at lower rents. This arrangement increases the profitability of the outlets and the firm. 20 to 23% of sales of TESCO come from these items only. The main competitors especially Sainsbury and Safeway battle for market share but the aggressive strategies of TESCO outwit them. Other smaller supermarkets cannot compete at any ground whether price of range. Wall Mart also adopted this strategy when it entered UK by acquiring Asda. . TESCO diversified in the retail petrol stations on the ground of many superstores. These petrol stations remained popular for lower prices of petrol, as the company did not pass on the hike in petrol prices immediately to consumers. The latest supermarket venture of TESCO is building and selling homes in UK. The strategy was meaningful in the period when real estate in UK was booming but now when the industry is suffering that may not look lucrative TESCO had a dream of entering into any product segment that appeared profitable. That led to it entry in the business of pharmacies, nutricenter offering alternative medicines, drugs for boosting sexual power, trimming tools and so on. Personal Finance Retail service: TESCO has the strategic acumen to identify the correct product in correct time and market with rebounding success. The personal finance Retailer portfolio met the same good luck. This was a joint venture with Royal bank of Scotland visa card, home insurance, Tesco Telecom, Tesco mobile, and Tesco Talk landline phone service. Tesco Personal Finance has proved a big success as one of Europe's fastest growing financial service providers, with over 4 million customer accounts by August 2003, and 50,000 new accounts o With 4 million customers on the anvil, the personal financial service proved be an instant success in Britain. The online shopping of TESCO also proved to be the major success that broke the previous record of the online selling companies with 1,20,000 customers online per week. Thus the company adopted all successful strategy of expanding, market penetration and consolidation to sustain its leadership position in the retail supermarket and hypermarket in UK. When TESCO found the domestic market getting saturated they moved to expand in the international arena. Wall Mart already dominated the world markets and French giant Carrefour was spreading its wing. TESCO took the courage to fight it in so many markets internationally and opened branches or franchisees. It stated its venture abroad in 1990 in East Europe and Asian countries –S. Korea, Thailand, Poland, Czech, Slovakia, Malaysia, Taiwan, Turkey and Japan and also in China. In India TESCO did not enter so far but it already opened the outsourcing center in Bangalore. The typical strategy TESCO adopted in these countries was to acquire the existing outlets in retail chain or buy significant share in one and turn the company a subsidiary of TESCO. By following aggressive pricing strategy to lower it down to outwit competition the company got stronghold in many countries. The company adopted setting up large hypermarkets there because it was easier getting permission from foreign countries. The domestic market had faced saturation. The success of TESCO has aroused competition in the global scale. TESCO has taken care of the growing consumerism and the growing money power with peoples and ethical buyers in the middle class. New outlets were developed in conjunction with Fairtrade UK to sell fruit juice of mangoes, orange, lemon, grapes, plums, apples, cookies, tea, coffee, chocolate. Flowers also got place in the outlets. Middle class people and aged professionals were targeted as ethical customer with money power as the prospective customers for petrol from the retail centers. In continuance of its international strategy for long-term growth through acquisition TESCO entered the most notorious market of Japan where C Two –Network provided the company with an excellent opportunity to enter market that was unconsolidated and full of potential. Thereafter the acquisition spree continued that made TESCO on the top in Japan. TESCO relied very much on the power of customer loyalty to the high street compared to the competitors’ practice of encouraging a culture of out-of –town superstore. The strategically different approach made TESCO the darling superstore in Japan. TESCO entered China also through acquisition of Ting Hsin International with ownership of 25 hypermarkets in China under the name Hymall and Le Gou. That provided the door to expansion in that great country with great potential after China became the member of WTO. In Hungry TESCO opened its first petrol station in 2004 and then expanded into many where it sold discounted petrol. In Poland TESCO became the hypermarket leader with 69 stores and a new distributing channel where transnational retailers controlled 50% of Poland’s supermarket. TESCO controlled 25 to 30% of Irish grocery market and behaved like monopolist there. The company acquired saleable products from Irish farmland at very low price and adopted undercutting price strategy. They sold goods below cost to undercut other retailers. They also sold some products at higher price than in the other European markets. In Ireland the practice was illegal and TESCO was fined for selling products below cost. Major Strategy of procurement and selling Sourcing locally the products the company sold the superstores made the cost of purchase lower and made marketing such products competitively at lower price. Sourcing locally International Markets: Tesco’s investment in new markets overseas, seeking out new opportunities for growth and ways of generating long term returns. Tesco is spread to 11 overseas market generating about over £11 billion sales and over £560 million profit. Over half of group space is outside the UK. The principle strategies adopted for overseas expansion and growth of business abroad are flexibility in fixing variable approach to different countries and focusing on local customers, local cultures, local supply chains, local regulations so that these are tailored to meet the local needs and lifestyles. There is need for focusing on selected few countries that are most suitable for their interests. They believe in using multi-formats to be versatile in the market to satisfy a bigger lot. They enhance their capability and skills in servicing through local people, process and system. They follow the strategy of building brands that cater to the importance of building lasting relationship with customers. Promotional strategy to retain customers In a survey it has been found that average Britons spend around 3% of their waking lives in Supermarkets. The strategists had a cache here and started grooming the floor with fun and fare, excitement and theatrics. The objective was to create something new to watch when someone visits the place again. They created new lightings, new ambiance, and presented the whole show to have newer look that could attract more people round and spend more time enjoying. Every store does something to attract customers. TESCO’s effort in this direction of retainment is not overt. Retailer Brief: Company Name www.scottishfoodanddrink.com The best promotional efforts of Tesco wasdistribution of credit points to customers who came back again and again to buy goods and add to their credit. This system attracted about 50 million customers on the floor. Advertising: Tesco adopted a slogan: Every Little Helps” as advertisement slogan. Advertisement is made through print media, television mainly. Tesco Value is superimposed on a red circle in each ad. In televisions well-known actors or personalities provide voicecovers. Distribution We have mentioned about the pricing strategy of TESCO. Now we would look into the distribution capacity of the company. TESCO with 1,878 stores in UK and 78 in Scotland has sales space more than any supermarket has in Britain. The enormous space enabled TESCO to distribute their ware all over and displayed for consumers pick up. The key skill in portfolio development, the ability to acquire sites, building new stores, and managing existing stores provided a distinct edge to TESCO. Multiple formats of stores enabled the company to maintain a presence in all types of stores big or small and offer strategic solutions for all shopping needs. TESCO had 78 stores known as Extra in hypermarket format. These are ‘Destination stores’ that drew customers from wide spectrum and across the area who dominated the local shopping. These are the channels that made non-food items the right place to grow and thrive. There are 441 core superstores that offer space to food range, limited non-food, and supplementary services and mostly located out of town. There are 167 Metropolitan street stores classified as ‘pocket supermarkets’ with focus on convenience food, snacks and takeaways for city centers workers and shoppers. There are 118 Express stores that are classified convenient stores with primary focus on petrol forecourts, and emphasis on fresh food and impulse lines. These are joint ventures with ESSO Fuels. Compact is the small version of the superstores situated mainly in market towns on the edge of town. They carry broad rage of food as well as non-food items. TESCO has developed brands of its own and positioned these in various rages of outlets for wide range of consumers. Tesco value range consists of over 950 lines with a yearly turnover value of £650 m. The bands compete with the cheapest products of the competitors in terms of quality. They claim to be the cheapest, compared to other supermarket in terms of price, and guarantee the value for money. Tesco brand comprises of about 8000 lines with quality image and that can compete with the leader in term of prices. This brand is positioned somewhere in between the finest offers and Tesco’s value. Tesco Finest with 950 lines and approximate value of £430m per annum. The range is developed to satisfy the latest lifestyles of people and to capture their spending on premium products. The packaging is developed to suit the mood of affluent class. ‘Tesco Healthy living’ brand is a brand extension from Health eating into non-food segment such as sports, equipment, clothing other health range of products. Tesco Kids brand encompasses 50 food products targeted at 5-11 years old children and placed in all stores. Organic brand is a big and prospective product range of 1100 lines in product categories of frozen foods, dairy, bakery, meat, ambient baby and beers, wines and spirits. These are fast growing product range likely to cross one £1000m within 5 years. Pricing strategy as we have seen before has been central to the marketing strategy and was directed to mainly project the image ‘We sell for less’. The company has invested about £1.2bn For pricing reduction purpose and projecting it as a main marketing tool. The promotional program of the company regularly supplements ‘Every Day Low Price (ELDP) There are regular promotional programs to create excitements in the stores and boost company’s image and position. The pricing strategy of the company is different to different products. For food products the company adopts the strategy of slashing the price down but for clothings it is bolstering with premium launch and high prices. This week Tesco has cut prices of 300 items by 50% but doing just the reverse in case of clothing. Tesco has recently scrapped its major pricing proptioal offer of 5 school shirts for £5 and increase it to £12 . They are also considering launching other brands with different image and tags. The 52 /3 weeks ended 24th February 2007 turnover of the Tesco was noted to £46,400 million, with profit of £2653 million before tax and £m1899 after tax that earned a earning per share of p22.36. This massive turnover and profitability is testimony to the fact that the strategies adopted by the company is very much correct and result-oriented. This is recommended that Tesco should continue following this low price strategy to attract customers and turn they to be loyal customers who can accept the premium prices also when required for premium goods.On the way to competition ahead premium products would guarantee higher profitability in quicker time. The premium customer –profile of Tesco would enable company to get readymade slot to introduce and get success. Right now the strategy of low prices of core products iis the fittest one since the global economy has turned sour with crippled buying power of consumers. Finding new outlets by greenfield launces in countries like India which is fast developing and the buying power is still intact can best be recommented. 1.Customer intelligence: the secret of Tosco’s success - Money Week www.moneyweek.com/file 2.Tesco splits pricing strategy for clothes and food - Sales ... www.brandrepublic.com/Discipline/SalesPromotion/News/828024/Tesco-splits-pricing-strategy-clothes-food/ - 39k 3. How Tesco became Britain's top supermarketCustomer intelligence: the secret of Tosco’s success - Money Week www.moneyweek.com/file/29196/how-tesco 4 Retailer Brief: Company Name www.scottishfoodanddrink.com/uploads/18863/Retailer%20Profile%20-%20Tesco.pdf 5. http://www.clothingattesco.com/ 6.TESCO plc A Corporate Profile www.people.ex.ac.uk/wl203/BEAM011/Materials/Lecture%204/TESCO%20Company%20Profile.pdf - Similar pages - Note this 7. Summary of main points of hearing with Tesco plc www.competition-commission.org.uk/.../ Read More