Tesco Marketing Planning Analysis - Essay Example

?TESCO: Marketing is an oft conceived word used in our daily life. It is a normal word which may often be found as a part of our day to day conversations, and has more to do with the approach then the execution of a business idea. It was first explained by the American Market Association as an “activity”. Later the definition was elaborated and modified to involve the various institutions and processes employed for making, communicating and delivering products which are of value to the stakeholders-customers, clients, partners and the society at large. The term was derived from the original meaning which taken literally meant simply going to the market to shop or to sell goods and services there. Marketing has grown by leaps and bounds today. It is a creative industry that has expanded down to various genres such as advertising, distribution and selling. Customer base is figured out, their needs and aspirations realized and the relevant product developed accordingly. In today’s international arena, Marketing is an important tool since it contributes greatly to the success of the business and its products. Productivity and sales are largely dependent on companies’ marketing strategies. On the other hand, engineering is also an important aspect as it allows innovation in an organization which aims to bring positive change to boost customer or producer value. Most often, innovation is conducted as a private activity within an organization in a series of narrowly managed steps. Keeping in mind the importance of marketing and innovation, companies must understand their product to be able to market them. According to Bill Campbell in an interview, only engineers know the information that they should get and deliver about the product they have produced and only effectively communicating that information to the customers would yield desired results. Now, this effective communication is done by our super-creative marketers. Therefore, it is important that marketers and engineers work hand in hand to effectively deliver what customers want. Marketers know their customers and their goal is to create customer value whereas engineers know their product and their goal is to create producer value. Therefore, when marketers and engineers work together, they yield innovative products that are customer-oriented. In an investigation, it was found that those firms are more successful at innovative product development in which the employees are well equipped with the required skills to strategize marketing as a whole. Recently, a product-development process called Quality Function Deployment (QFD) has been adopted by U.S. and Japanese firms who promotes communication within the core team (marketing, engineering and manufacturing) and changes communication patterns from “top-to-bottom” management to focus more on horizontal routes where core team members communicate directly with each other and come up with better results. One of the greatest examples of integrating innovation with marketing is of Apple Inc., a multinational corporation which is ranked as the world’s most innovative company and who markets its designs and products as the customer’s need. Tesco is one of UK’s most successful super markets today. Its total market share stands at 38% and it continues to ride high. It is speculated to become the biggest super market chain of UK very soon. It is currently at number 8 amongst the top 10 grocery retailers of the world. Tesco is known for its huge variety of goods ranging across the board from groceries to fresh food to clothes to compact discs. It’s success has been a result of numerous factors. It is claimed that it’s leading edge in areas like price, customer service, distribution, ecommerce, loyalty cards and own label products have been key to it’s phenomenal success. Their deputy Chairman, Mr David Reid, asserts that Tesco focuses on customer needs and delves a lot of time in understanding the customer needs and wants before translating them into plans aimed at adding value for the customers. This is exemplified from the striking drop in price rates at Tesco from 2004 to now. The price dropped by more than 11% since then. The paper will be developed as a SOSTAC marketing template for Tesco. It will develop a SOSTAC plan for the expansion of Tesco into the Switzerland market. Tesco has already ventured into the international market but has not yet tried its hands in the Swiss market. While it was successful in most of its international markets, its outing with France was not at all successful. Situational Analysis of TESCO Strengths: Tesco realizes the importance of data and hence undergoes a rigorous research and development and market segmentation to obtain the desired data and then using the data to analyze market trends, consumer behavior etc. Tesco collects different kind of data to analyze its market. The data is collected via primary analysis. Tesco takes regular feedback from its customers, keeps a track of trends in the market, the demands of products, the affects of price on demand, seasonal fluctuations in demands and prices, and the overall consumer behavior. The primary aim of the market research that Tesco undertakes is to analyze why people behave the way they do and aims to attract consumer. To do market segmentation properly, Tesco collects demographic and psychographic data. Both these types of data are very crucial for the success of an organization. Demographic data is the kind of data which can be put into categories and labeled statistically. Demographic data includes age, race, income, religion, gender etc. It comprises of basic facts. For instance, Tesco finds out what age bracket visits their super market very regularly, which age bracket does not, what kind of products do they prefer, what is it that they don’t like, when do sales rise and when do sales dip. It then shapes up its promotional offers accordingly. On the other hand psychographic data cant be quantified it is used to understand consumer behavior, how target market feels, what they want and how they go about getting what they want in their daily lives. It helps them in their purchasing decisions. Tesco utilizes all this data, then analyzes it and comes up with reports to assist it in forecasting demand and making promotional offers. While Tesco has its strengths, it has weaknesses too. SWOT analysis is a useful tool to analyze a company’s strengths. SWOT analysis is a useful measure of a company’s key strengths and weaknesses against that of the competition. It also points out and zeros down key external opportunities and threats as encountered by the company. In the analysis that will follow the key strengths of TESO will be evaluated against is threats and opportunities. TESCO has a very strong cash flow due to its UK business. The financial strength of TESCO has helped give it enough international repute and helped it move from strength to strength. It has also been exceptional in its customers service and value especially within the UK. Another key strength of TESCO is its distribution system. It imports a lot of its products from Spain and follows a JIT system. This ensures that TESCO is never neither out of stock or in stock. Now on going global, TESCO has opened up distribution channels for Central Europe and Central Asia. All these channels have proven to be immensely successful. In these international countries more than 85-90% of food items are purchased locally while the remaining durable items are purchased globally. Because TESCO is becoming a major international force, it’s bargaining power with the suppliers is also increasing slowly and gradually. Tesco is also big on the e-front. It is considered to be the largest grocery e-tailer in the world rigt now. It’s turn over from internet accounts for above 5-12% of turnover in some stores. Tesco took its e-marketing and e-tailer strategy to other countries such as South Korea and Ireland and implemented there as well. The strategy turned out to be a phenomenon success, so much so that Safeway, their biggest Amerian counterpart also decided to provide online services. Tesco has also made effective use of loyalty cards. It has been using them for quiet sometime and this has proven to be succsseful as well for them. the cards help them evaluate and understand their consumer behavior better. The system will soon be taken to other international countries such as South Korea. Tesco is locally focused abroad. It ensures to employ more local managers who are better and more well versed with local culture, tastes and food habits.Tesco has a huge band of stores. These include local stores, super markets and hyper markets internationally. In UK, food items dominate the hypermarkets while internationally other goods such as wooden sledges and Slovakia to Ski equipment have taken over as well. Weaknesses: Tesco comes across resistance from people in the UK in its endeavors to set up operations abroad. In this process a very small number of expatriates are required yet, it is very difficult to convince employees in Tesco to move over. Most of the time, the people drawn are the best managers in the UK. Thus Tesco is confronted with the danger of drawing the creme da creme of its management team from the UK. This can be a disadvantage to its market position in the UK market. As mentioned before, Tesco tried to expand itself and extend its footing to France in 1996 but failed there in the process. The failure has put a huge dent in the future prospects of Tesco for expansion in Western Europe. Opportunities: The marketing plan is for TESCO’s prospects in Switzerland. It should be noted that in Switzerland, their own brands are immensely popular. Tesco on the other hand has developed enough own brands each of which have been immensely successful. Their self brands can be readily accepted in the swiss market and make almost 30 percent of the Swiss sales. The Swiss are very well adapted to technology and e-retailing. Currently Swiss market is the most successful example of a country that has embraced Internet shopping in its truest forms. Moreover, the Swiss market is relatively wealthy. It is considered to be one of the wealthiest markets in the world. If Tesco becomes successful in establishing itself in Switzerland, it could succeed in opening more doors for itself for future expansion. It is also a very price sensitive market. Now Tesco, pioneers in low costs and has a huge bargaining power with the suppliers. Thus, given the conditions and the competitive edge on which TESCO operates, the SWISS market presents a huge opportunity for TESCO. Threats: Whilst there are a lot of opportunities for TESCO in Switzerland, they also face enough threats. Switzerland is a culturally diverse country. It is a small country in which there are four different languages being practiced notwithstanding 4 different people groups. These language differences and variations in culture will have a heavy impact on TESCO where marketing is concerned both in advertising and packaging. Because there is a diverse set of people in Switzerland, naturally there are variations in tastes and preferences. Thus, this makes the Swiss market a difficult target market for Tesco. Tesco will have to carefully assess competitor strategy and come up with its own strategy. It must not forget that their recent trip to France did not prove to be successful. Objectives: Where do we want to go. Tesco’s market share as of December 2009 was 30.5%. In the last couple of year its market share has risen above 25%. The company lay it’s foundations on the basis of this idea : “Pile it high and sell it cheap”. Tesco started off from small service stores initially and then went on to expand its operations nationally and globally. In 1956, Tesco opened its first self service supermarket. Because of its phenomenal success in the UK, Tesco continued to expand internationally. It followed a very swift international strategy and is currently the world’s fastest international retailer. More than 70% of its international stores are less than 3 years. The paper will produce a SOS for a marketing plan for TESCO for entering in the Switzerland market. At the moment TESCO operates in ten countries outside the UK. These include Ireland, Hungary, Poland, Thailand, Czech Republic, South Korea, Taiwan, Japan and Hongkong. Amongst the aforementioned countries, it is already leading as the Market leader in six countries. The development in each of these countries has been different and has been according to the local environment in those countries. TESCO has led from the front internationally. It has done everything on its own without neglecting the home market. In the UK Tesco continues to be the most dominant supermarket. On the international arena, it stands steady with 15% of operating profits. Most of its stores are in East Asia and Central Europe . The strategy applied in Central Europe is vividly different from the strategy applied in UK supermarkets. In Central Europe the stores have turned into hyper market. Tesco was new to the concept of hypermarkets, yet its stint proved to be successful. Today they are the leading market retailers in hyper markets. Tesco also tried entering France but unfortunately they couldn’t survive the effort and the effort failed. The failure made Tesco reassess their strategy and they now want to go for super market acquisition. The take over strategy has proven to be immensely successful for Tesco. Strategies: Analysis of Strategies that could be adopted by TESCO Market Entry: Market entry strategy is a very critical and crucial one for a company’s success when it’s going international. It is a very important decision and thus incumbent on Tesco to select the right way to enter a foreign market after doing a carefully construed analysis of the market potential, the company’s potential against it, marketing involvement and commitment management that the company is ready to take on. Of the most recently used strategies to enter markets, the most successful one has been joint venture. Joint venture has become a very successful form of strategy used in the last 20 years. According to Pettit(2000), joint venture is typically a setup in which two organizations pitch in to co-own a company. Both companies share ownership, control and profits as well a the risks. However Tesco had followed the same strategy in France a couple of years ago and had failed. It should not be taking any more risks this time and should opt for the supermarket acquisition strategy. This popular strategy has proven to be extremely effective in the case of Tesco. For instance, when Tesco entered the market in Ireland, it took over their super market, Quinns. Thus Tesco has an edge and has seen past success in pursing this strategy against a joint venture strategy. In a takeover, you buy the super market chain; change the physical set up of the store; but don’t change the local management and employees of the store while tweaking a bit with the distribution channels. Retailing Strategies: Tesco needs to put into perspective the retail-marketing environment in Switzerland when deciding it retail strategy there. Migros and Coop Schweiz dominate the 30% of over all retail sales in Switzerland current. There are also a lot small and medium sized stores in the UK. There the grocery markets have proven to be more successful than large hyper markets. Moreover, Swiss shopping habits are more towards convenience than extra vagance. There are innumerable number of food stores for every one thousand set of people. There are natural and landscape factors that limit retailing there. For instance, Switzerland is home to mountains, lakes and forests and posses numerous small villages. Thus given this background of the Swiss market, it is expected that Tesco should try its hands first at setting up small convenience stores. For instance, the Tesco Express stores had proven to be pretty successful in the UK. Once the stores have been set up, Swiss needs to look at the strategies adopted by most of its competitors for instance Migros, Marks and Spencer etc and figure out its own strategy. Recruitment for Stores strategy: Tesco can have several strategies in its kitty, if its look to recruit staff for its stores. The number of people needed from home country to be assigned to foreign country varies and depends on the size of the operation and the amount of work needed. Personnel mostly come from three sources. These are expatriates, third country nations and local nationals. Tesco has opted for local managers in most of its international expansion ventures. It has used few expatriates for it stores. Tesco feels that local managers are more aware of the culture and are in a better position to do the business then expatriates. They have a better understanding of the customers, their buying habits, their purchasing behavior and can use this knowledge to the stores advantage. Moreover, they are well versed with the kind of legal constraints Tesco might face. Swiss are high on ethics and morale behavior. Moreover, offlately work habits have shifted from part time employment to full time employment. On the wages front, opting for local managers will benefit Tesco as they will be able to pay less to local employees compared to expatriates who will also have to be compensated for living expenses and tax payments. Product adaptation and development strategy: Before disembarking into Switzerland, Tesco will have to re-evaluate their international product offering. According to Kotler (1992), there are three main areas that marketers need to consider for their future customer bases. These include product benefits, product attributes and marketing support services. Product benefits is about coming up with the right things that will meet the customer’s needs and the things needed to maintain one’s image. Product attribute refers to the properties, the layout, the Product benefits is about coming up with the right things that will meet the customer’s needs and the things needed to maintain one’s image. Product attribute refers to the properties, the layout, the look and the styling of the product. Lastly, marketing support services refer to customer services and advertisement related stuff. Tesco will have to differentiate itself from its competitors. It could be either on the packaging and styling of its product or the range of brands that it is offering at Tesco. For good marketing services, it could opt for e-tailing service, good delivery, sales after –service and good customer services. All these can prove instrumental in Tesco’s success in Switzerland. 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