Tesco PLC Product Launch Strategy in Kenya - Essay Example

Executive summary This report gives the on the consideration of Tesco PLC a biggest retail chain store in UK in expanding into the overseas markets in Kenya. Various topics are discussed including the background of the company and its current situation and the overseas markets it is considering to expand to. The audit of the company is provided including the company environmental analysis and the SWOT analysis is provided. The report goes further into describing the appropriate market plan that the company is to adopt in the launching of the new product in the newly identified country Kenya. The report concludes by highlighting the possible problems likely to be encountered in the expansions and goes further in giving the recommendations on the overcoming these challenges. AUDIT Company background Tesco PLC is one of the leading companies among the food retailers in United Kingdom with a market share of 15% , the company not only sell food items but also other products including clothing, housewares , alcoholic beverages and gasoline. This company has its major markets in United Kingdom, Wales and Scotland where it has over 550 supermarkets where about 250 are superstores, it also operate in other countries under the various brands and a major independent gasoline provider in United Kingdom and because of its expansions of its operations and market it has emerged to be among the top multinational companies in United Kingdom. Tesco Stores limited was found in 1932 and has grew rapidly and for a number of decades it has grew rapidly, this was attributed by the acquisition of various grocery chains and the development of superstores which offered a variety of food and other non-food goods which were relatively less expensive. During 1970s the company has a slow because of the intense competition from other companies like J.Sainsbury PLC. There were price wars between the two Companies and this led to many small retailers driven out of the market, the strategies applied were mainly to win customer trust and loyalty. In 1983 it change its name to Tesco PLC and thereafter collaborated with Marks % Spencer and developed major shopping centres across other cities outside United Kingdom as well as launching of new products. In 1990s the company concentrated on the acquisition of new markets and development of new products and services, it expanded into the various countries by taking over and merging with other companies. The company aims at building a multinational empire in Europe by developing new and innovative products and services and to further seek opportunities to expand into overseas countries and markets. The more recent developments and innovations by the company include the introduction of Clubcard loyalty card, Tesco Visa card, Tesco saving accounts, Tesco personal Finance and the launching of its brands and products in the newly acquired and developed markets all these are aiming at consolidating the company hence ensuring that it has enough strength to venture in launching of new products and markets. Environmental analysis There are several factors which have led to Tecso PLC to consider in venturing and launching its operations in overseas markets notably are the business environmental factors which. This analysis is the evaluation of the Company external analysis comprising threats and opportunities and five business environmental dimensions are involved, these areas of dimensions include economic, legal-political, social cultural, technological and the future certainty. Economic These are the economic trends that have influence Tecso PLC to consider venturing in the in expansion to overseas markets, these factors that are comprises the target market includes: better terms of interest rates in the target market; higher economic growth rate, per capita income and disposable income; availability of a wider sources of power energy; lower and moderate rates of inflation and where there is moderate levels of employment in order to easily acquire the relevant workforce. Legal-political These are the favorable regulations and policies present in a target market, the governments are the determinants in this case. These include favorable tax policies, government incentives, government stability and favorable regulations on tariff rates. Technological factors These are factors that are associated with the technological situation of Tecso PLC. The consideration of overseas expansion comes about because the company has acquired and adopted a suitable and appropriate technology to suit the target market and also feasibility of the existing technologies are also significant factors. Social cultural factors These factors representing an overseas opportunities includes: emerging fashions and lifestyle trends that are likely to boost the sales of Tecso PLC, cultural factors that have positive implications to the company and the emerging trends associated with demographic structure that affects positively growth rates, income and profitability of the company. Certainty factors These are the foreseeable future trends in the target overseas markets; these include future events and the aims and objectives of considering the target market. Target market analysis Tesco PLC should identify an overseas market that will enable it to achieve maximum returns from the opportunities identified on the external analysis. From the various available markets the suitable overseas market for this company is the Kenya, this country has been chosen considering factors such as the accessibility which is important in providing an efficient distribution of its launched products, the market size in Kenya is relatively larger and well diversified, the company is expecting increase in profitability due to these expansions to global markets. Also the target market should be analyzed to determine the level of risk, this is done by applying the four risk matrix where all the risk types are highlighted and the level of risk is identified for each. In the research on Kenya the political risk is moderate; financial risk is low because there are well established financial institutions; commercial risk is found to be moderate and finally is the industrial risk which is common in most competitive environment and it is found to be somehow risky due to the level of competitions. Consumer evaluation on the target market is also important to the company; it will enable the company to know what the customer needs and the quantity demanded. Different consumer behaviors are placed into segments in this case Kenya demography is composed of children youths, matured adults and the aged, across all the segment research is done to identify the similar consumer behaviors and its demand finally the cluster analysis is conducted. This analysis provides a universal cross national segment of the country where a uniform marketing mix strategy can be applied. Competitor’s analysis Tesco PLC being a global company is expected to face competition in the new market from other multinational companies like Asda, Sainsbury's and Safeway. Because the new venture is attractive hence there will be a high entry of these firms into the market. The new markets are expected to grow in the size because of the increased competition, market dominance by companies with competitive advantage, increase in the number of retailers and adoption of sophisticated marketing strategies. With the power of buyers being high larger players in the market like Tesco PLC will have the advantage of getting information from the customers hence enhancing them to launch new products that are tailored to meet the customer’s needs; this will ensure that they have competitive advantage over its competitors. The increase in competition will lead to innovation and marketing designs in response to the changes in consumer behaviors. Most of the key competitors will respond by focusing on value quality and price strategies as well as improved customer service. Evaluation of options For Tesco PLC to compete with its key competitors in the new market the following strategies should be adopted. Tesco PLC should promote itself as a brand and also its reputation, Tesco as a brand is the key strategic advantage over its competitors. This will be achieved by its brand-specific approach through unique brand packaging and a suitable means of promotion. The company will also have a reputable brand image with the association with good quality and trustworthy goods. The second strategy is that Tesco PLC should adopt an effective supply chain management, chain management is very important for overseas markets by enhancing the distribution and delivery of goods. This will be enhanced by effective communications and partnerships with reputable suppliers. It is also important for Tesco Company to integrate information technology into their organizational structures to address the complexity as it expands into new markets and launching of new products. This will ensure that the Company is able handle the complexity of management, increased volume of sales, enhance focus on innovation, control of costs and being market oriented. SWOT analysis Tesco PLC Strengths Increased market share: Tesco Company has a large retail market share in U.K holding about 13%. It has continued to venture in other overseas countries thus increasing further their control sales and distribution of both food and non-food goods. Brand value: Tesco Company has a strong image of its brand because it is associated with trustworthy and quality goods; this has been further enhanced by the innovation and the improvement of customer care and provision of other services such as insurance and finance. Online Supermarket: Tesco.com has become one of the biggest online supermarkets, it has its operation in more than 270 stores in UK and most of the households are using these online services and plans to expand into world markets. Strong domestic market: Tesco has been able to develop and sustain its strategies and compete with its key competitors. In UK it is 75% bigger than Sainsbury’s and has been able to compete successfully with Wal-Mart’s in UK markets. Weaknesses Dependence on UK market: The Company profits are mainly from UK markets because the international and overseas markets are still growing. This is risky because any negative effect that can affect its UK operations then the Company might collapse. Mass acquisition: The Company has had a lot of acquisition in UK hence making it have a range of many products, this has led to low quality products and reduced earnings attributed by serial acquisitions. Debt management: Tesco Company has no plans of reducing debt because of its rate of expansion and the huge investments they are engaged in hence it has no free cash. Opportunities Overseas growth: Tesco Company has its operation in many countries in Europe; there is an increased expansion through acquisitions and market development. Venturing in non-food retail: There has been increase in the sales of food products yielding higher profits and also growth in overseas. This will see the company invest in other non-food products and has ventured in telecoms, banking and insurance. Threats Intense rivalry: the structural change in most of its competitors has resulted into tough price wars. Their price leadership cannot address the issue hence reducing the profitability of the company both domestically and in the overseas markets Acquisition of Asda by Wal-Mart: This acquisition has threatened the position of this Company because of the range of goods. Tesco has responded by price cuts and special offers. Overseas expansion: Tesco PLC in undertaking these expansions invests a lot thus proving to be expensive. It requires investment on marketing distribution and operations. In some cases some of these international ventures are at risk of failing completely. MARKETING PLAN Situational analysis These are basically matters and issues that arise from the SWOT analysis regarding the company consideration of investing and launching of new product in overseas markets which has been identified as Kenya after conducting research and found to be suitable. These issues provides the real situation of Tesco PLC, its position in the market and its market share it holds in both food and non-food retail goods. The following are the issues that emerge from Tesco PLC SWOT analysis. Strengths The company has got a strong brand image; this is the major key strength that the Company has over its key competitors thus having a greater competitive advantage. Tesco PLC has expanded its business activities all over the international markets and all over the world; this has led to the diversification of its business activities across many countries in its overseas and newly acquired markets thus strengthening the Company. Tesco Company has a competent chain of supply and distribution channels, this has facilitated the good coordination and delivery of products into the overseas and international markets thus enhancing the competitiveness of the Company. Tesco PLC is a market leader in UK it holds the biggest share in its industry compared with its competitors and this is a positive aspect to the success of the Company. The Company has advance further in improving it customer service by developing online store supermarkets through its website Tesco.com. This has greatly increased the sales of the company because most of the customers prefer online shopping than retail shopping attributed by the advent of the new technology. The company has been having in the recent time increased volume of sales boosting the profitability of the Company and therefore the need for the Company to consolidate its position as a market leader through acquisition of local chain stores. They have also been able to expand its business to overseas and international markets through market development as well as acquisitions. Weaknesses Tesco PLC has weak marketing strategies and approaches in its major leading markets; this has led the company to face stiff competition from new entrants into the industry and in some cases the company has to adopt hostile takeovers as their only strategy to counter the competition. The Company is not performing well in the international markets hence most of the profits of the Company are generated from within UK. The company is at a threat of losing its major market share and profitability in an event of poor economic conditions in UK markets. Tesco PLC has got a large capital expenditure programs mainly due to the huge investments that the Company is considering in the acquisitions, expansions into the overseas markets and development and launching of new products this has seen the Company having increased debts as there is no adequate cash to facilitate other operations. There is an increase in the tendency for the Company towards low earnings and reduced quality of goods and services to the customers; this has been attributed by the numerous acquisitions where the acquired chain stores and markets have the tendency of not upholding the quality control of the new Company due to lack of competent and experienced workforce. Opportunities The Company is experiencing a demand for the development of privately labeled products and services; the Company has the opportunity to enhance the customer loyalty and trust by complying with these specifications. There are many unexploited markets in the overseas countries and the international markets therefore Tesco PLC has the opportunity to venture and invest on these business opportunities. It is also evident that there is a gap in product requirement in the specific overseas markets and therefore the Company needs to intensify research and development of the various products and launch them on these potential overseas markets. There is also an opportunity for the Company to diversify its business operations on other non-food products. This is as a result of the increased profitability of food retail goods hence the Company can invest further on products such as clothing, financial investments and insurance in the newly developed markets. The Company has the opportunity to enhance efficiency and effective business operations in the new markets by adopting the available new technologies that are flexible and make operations well coordinated. This will ensure that the company sustains profitability and market domination both in the domestic and the overseas markets. Threats The major threat that Tesco Company is likely to face both in the domestic and the overseas markets is the immergence of the low price supermarkets discounting stores , this will affect the company major products whose prices are considerably higher than that found in these emerging stores thus reducing the profitability of the company. The markets in which Tesco Company has invested in has a higher number of new entrants, this is attributed by the attractiveness of this markets thus posing challenges associated with the competition it brings into market and business operations. There may be a risk of losing of overseas investments due to inappropriate feasibility study of the new market. These investments are expensive because of the extra costs and expenses that are associated with such operations hence misappropriation and inaccurate information about the market may lead to fall of investments. It is also emerging that other multinational Companies are in the campaign of expanding their markets hence Tesco PLC is facing the challenge in both the domestic and overseas markets from these new acquisitions by other multinational companies who are their major rivals. Global marketing objectives of Tesco PLC These are the aims that Tesco PLC is set to achieve by venturing investments in the new overseas markets in Kenya. These objectives also include the development of new products and launching them in these new market segments. These objectives are important because it ensures that the Company remains focus and always market oriented, these marketing objectives include. Tesco PLC aims at becoming the leading retail Company in both the acquired overseas markets in Kenya and also at its domestic market in UK. Despite the stiff competition it is projected to faces in Kenya there should be appropriate marketing strategies and techniques to counter these competitions and further consolidating its position in the market. The company aims at increasing the volume of sales turnover in the new markets by a significant percentage increase for every financial year; this will be enhanced by carrying out intensive campaigns on the products, aggressive development of new markets and ensuring that they meet the demand of its markets. The company seeks to increase its market share in both domestic and overseas markets; this will be achieved by consolidating the company position, maintaining and sustaining the already acquired markets and constantly exploring emerging opportunities in the various market segments. The Company aims at consolidating the customer base for each financial period in the new markets. This will be achieved by applying customer relation management techniques that will ensure that the customer satisfaction, loyalty and trust are always the first priority of the Company in the provision of goods and services. The company aims to achieve and sustain an increasing percentage of both revenue and profitability of the Company for each of the subsequent years; this will be accomplished by increasing the volume of sales and ensuring that they venture in profitable overseas markets. The last marketing objective is to increase consumer awareness on its existing and the newly launched products in the new markets; the Company will achieve this by applying appropriate product promotion and advertisement communication mechanism that will ensure that they reach out the potential customers and have a greater appeal on them. Global marketing strategies These are the methods ways and means in which Tesco PLC will adopt in order to ensure that the above marketing objectives in the Kenyan new market are achieved. These marketing strategies include segmentation strategies; targeting strategies and positioning strategies, there descriptions are as follows. Segmentation strategies This strategy that aim at addressing all the market segmentations that are found in a given country market. Tesco PLC should address all the customer requirements in all the market segments such as the mass, niche and local and this will ensure that optimum sales in all the segments is achieved and that customer satisfaction and loyalty is achieved. The Kenyan consumer behaviors will be studied across all the segments and taste, preference and attitudes are assessed. The market segment is grouped into high, low and medium where each of the categories has similar characteristics. The high also known as mass market segment is very attractive and the Company will consider it perfect for a long run investment, next is the medium or the niche market segment where it is less attractive and the company will lay less emphasis in product launch as the returns are considered to be low, finally is the local market which is the least attractive hence there is no major business activity to be carried out in this market segment. Targeting strategy This strategy is useful for Tesco PLC in determining the viability of Kenya as a new market. This will involve assessment of on the preference of the new product across the population demography including children, middle age, youths and the aged. The customer needs are assessed in order for the company to plan for the target segment in the country; this comes as a complementary of the consumer behavior assessment. Positioning strategy Market positioning in launching a new product is important for a company market plan, Tesco PLC will have to launch the product in a specific location in the Kenyan market where it can be easily accessible to the target market segment. The product should be further positions in a way that it persuade consumers by designing it in an innovative way and adding quality, this will ensure that it competes with other brands in the same market. Global market entry strategy This strategy is important for a company in entering into a market successfully it further ensures that the company chooses an appropriate method of launching a new product in a new market. Tesco PLC will have to consider the level of competition of the product to be launched, both human resource and management capability of the company, tariff barriers; good timing to ensure it enters when the market and competition is favorable and the nature of the product to be launched. For the Kenyan market the appropriate market entry strategy for Tesco PLC should ensure that it has a higher level of involvement because of its vastness, therefore the appropriate strategy can be strategic alliance, company acquisition, joint venture or wholly owning a subsidiary. Marketing mix This is an important aspect of a company marketing plan comprising of techniques and ways of delivering the outline strategies in launching a new product in a new market. The marketing mix that Tesco PLC in launching of the new product in Kenya should comprise of the following segments. Product Tesco PLC should ensure that the new product is a value added. This will ensure that the product has a competitive advantage over other products existing in the same market thus enhancing the dominance of the product in the market. The product should be innovated and designed in such a way that it meets the needs and the specification of the customer thus ensuring that the customer satisfaction, loyalty and trust are enhanced. Place The newly launched product by Tesco PLC should be placed in a suitable geographical location for to the target market segment. This will enhance accessibility to the potential customers thus enhancing the efficiency to the customers hence consolidating the customer’s satisfaction. Tesco PLC will have to establish an efficient chain of supply in the newly developed markets to ensure that the distribution process is perfectly good ensuring that consumer’s demands are met. This will also enhance regular supply and the availability of the new products in the markets. Promotion This is an important segment in the implementation of the marketing strategies which involves creating awareness of the newly launch product in the new market. Tesco PLC will have to carry out aggressive promotional campaigns that will enhance the awareness of the product hence boosting the volume of sales of the product. There are several ways of carrying out these promotions but the major one is the advertisements. The promotional campaigns adopted should be appealing to the customers therefore advertisement communications is an important feature in this marketing activity. The most suitable and accessible methods include broadcast channels, online, print and sales promotion campaigns. Price This is an important aspect in the marketing of a new product in a new market. Tesco PLC will have to identify a suitable pricing strategy on this new product to ensure that the product has a competitive advantage over other goods such as substitutes. The company will aim at lowering its rates in comparison with factors associated with the consumers such as the disposable income and per-capita income. The company should persuade the customers by launching the product at its value added price. Emerging issues and challenges Despite the success and the benefits that Tesco PLC will gain in its expansion into the overseas markets and launching of new products there are a number of challenges that are likely to be face in the implementation this market plan. These challenges include: There is likely to be stiff competition in the new markets because of its attractiveness; entry of multinational companies offering the same goods and services. The companies are likely to face challenges associated with the legal requirements of setting up a business in another country; Tesco PLC in its expansion into Kenyan markets will face the challenge of fluctuating interest rates imposed by the government also the import and export regulations. Technical changes in the immediate business environment have posed a bigger challenge in the expansion to of Tesco PLC, there is development of new technologies each day hence this company might lack the necessary technology to explore the new market. Tesco PLC is likely to face challenges related to the change in customer changes in habits and trends, also the culture of the Kenya will affect the business operations of the company. Tesco PLC to overcome these challenges, the following strategies are recommended: they should ensure that their first priority is to keep the customers satisfied as well as maintaining their trust and loyalty; they should continuously conduct research and development on new products and markets; they should ensure that all the cost and expenses of the company are regulated and finally they should respond instantly to the strategies adopted by its competitors. Work Cited Paul R. Smith, Z. Z, Principles of Global Marketing Strategies:Domestic and International Market Expansions, London: Kogan Page Publishers, 2011. . Read More