Tescos Marketing Story - Essay Example

? Marketing Story Analysis inserts his/her s Department’s Word Count: 996 words Date Table of Contents 1.Introduction 3 2.Analysis 3 a.Retail Management 3 b.E-commerce and multi-channel strategy 4 c.International marketing dynamics and challenges 5 d.Brand Image and goodwill 5 3.Conclusion 6 References Appendix- Article 1. Introduction The article centers on Tesco’s falling profits in the U.K owing to a myriad of factors that shall be analyzed. Therefore, the center of analysis for this paper shall be Tesco, its target markets and consumer behavior. This involves, but is not limited to, the change in consumers’ shopping habits and fast changing demographics and psychographics in the U.K. At a deeper level, however, one can find the existence of international marketing strategy, brand image and strategic retail management. 2. Analysis a. Retail Management One of the major and all-encompassing marketing concepts highlighted by this article is that of retail management and consumer behavior. The U.K, like its developed counterparts, is facing a change in its demographics with a skewed population pyramid (KPMG, 2013). The so-called “ageing population” translates to changing customer habits based on age. In the middle of such a transition, retailers such as Tesco are finding it difficult to adapt to such changes in customer behavior. This transition has given way to increased significance of one-stop convenience shopping as elder individuals find themselves difficult to visit several stores for buying food and non-food products (SAS, 2013). This is one of the most important aspects of retail strategy which requires companies to build store formats based on the needs of the target market (Gilbert, 2003). For instance, IKEA has adapted to customers’ needs for buying furniture for their first apartment (Castella, 2012). Furthermore, it caters to customers’ need to engage in one-stop shopping for their home by offering a maze-like retail format whereby customers walk through virtually everything before getting down to the product they intended to buy (Tozer, 2011) . The article demonstrates just how the “space race” is no longer important as it used to be. In fact, multi-channel strategies, as the author puts it, are the basis for such advantage in the contemporary world. This points to the area of retail format development which involves the development of a new format of stores for the existing customers with a different retail mix (Levy & Weitz, 2012). In the context of Tesco, this means making the shopping experience more convenient for customers. Tesco has strictly adopted the multi-channel strategy by having Tesco Express, Metro, Superstores and Extra in its pipeline of stores (Doyle, 2008) (West et al., 2006). These outlets fulfill different market needs ranging from being located near to customers’ place of residence or work to offering ready-to-eat meals in City Centers. Another way of viewing the same is to understand the shift from the traditional bricks and mortar store format towards digital/online presence (Bernstein et al., 2008). b. E-commerce and multi-channel strategy The scope for e-commerce has been highlighted in the article by claiming that, owing to busy work schedules, individuals are now flocking towards online shopping which has already increased by over 8% in Britain with respect to Tesco. Even successful traditional companies such as Wal-Mart are now offering e-shopping in addition to their traditional services (Rosenbloom, 2013). However, given the fact that virtually all major retailers have adopted this perspective, one may challenge whether or not the multi-channel strategy can guarantee a “sustainable” competitive advantage in today’s world. Further contradiction arises from some authors who have claimed multi-channel strategies to be obsolete. According to them, the “channel” perspective is being replaced by the “touch-points” perspective that is seen as a way of engaging in agile commerce (Walker, 2011). What matters now is managing customer relationships and the customer life cycle (Dawar, 2004). However, it is difficult to draw the line between multi-channel strategy and one focused on touch-points especially since both seem to be oriented towards the same end- the customer. Therefore, it is mere exaggeration to claim that the two differ. Finally, the article raises the question of whether retail format can lead to a sustainable competitive advantage. While the article highlights the benefits that large stores bring by making customers linger to the store rather than flee, it also highlights how Tesco’s restaurant-type bakery has not managed to bring the company appealing profits. c. International marketing dynamics and challenges Next, the article highlights the challenges of international marketing that pertain to varying cultural landscapes across countries. For instance, the U.K and American may “sound” similar by virtue of their being Western nations; however, significant cultural differences exist between the two (Stewart-Allen & Denslow, 2002). This is exemplified with the failure of the company to market grocery wrapped in cellophane and automated tills to the Americans. This is similar to the problem of cultural adaptation faced by IKEA which hampered its entry in the U.S market (Zentes et al., 2012) (Grol & Schoch, 1998). Therefore, the question of cultural adaptation vs. standardization arises when marketing across borders . Should the marketing mix remain the same or should it be tailored to the culture in the other country? Although companies such as Tesco (that are pressed for profits) may find it less cost effective to tailor their marketing mix according to culture, cultural adaptation may be necessary to prevent product failure. d. Brand Image and goodwill Finally, the concept of brand image and corporate goodwill has been highlighted. The article suggests how Tesco had suffered from negative media publicity from its “beef” products actually turning out to be “horsemeat” (The Economist, 2013). However, Tesco did not merely face a decline in its brand image in response to the horsemeat inflicted products but owing to misleading advertising in response to it (Williams, 2013) (Poulter, 2013). This points to the area of misleading claims made by advertisers and the role of the regulatory environment in marketing in most countries. 3. Conclusion To conclude, the article effectively demonstrates the problem of adapting to changing demographics as well as consumer behavior in contemporary world. Furthermore, concepts pertaining to retail management such as multi-channel strategies and retail format development have been highlighted. The competitive advantage clearly doesn’t lie in the space race today but adapting to e-commerce and changing retail formats. References Bernstein, F., Song, J.-S. & Zheng, X., 2008. ‘‘Bricks-and-mortar’’ vs. ‘‘clicks-and-mortar’’: An equilibrium analysis. European Journal of Operational Research, 187, p. 671–690. Castella, T.d., 2012. Ikea at 25: How has flatpack giant changed the UK? [Web] Available at: HYPERLINK "http://www.bbc.co.uk/news/magazine-20123362" http://www.bbc.co.uk/news/magazine-20123362 [Accessed 17 November 2013]. Dawar, N., 2004. What Are Brands Good For? MIT Sloan Management Review, 46(1), pp.31-37. Doyle, P., 2008. Value-based Marketing: Marketing Strategies for Corporate Growth and Shareholder Value. 2nd ed. Chichester: John Wiley & Sons Inc. Gilbert, 2003. Retail Marketing Management. London: Pearson Education. Grol, P. & Schoch, C., 1998. IKEA: Culture as Competitive Advantage. England: The European Case Clearing House Paris Chamber of Commerce and Industry. KPMG, 2013. How will demographic trends in the UK affect the retail sector?. [Web] Available at: HYPERLINK "http://www.kpmg.com/uk/en/issuesandinsights/articlespublications/newsreleases/pages/how-will-demographic-trends-in-the-uk-affect-the-retail-sector.aspx" http://www.kpmg.com/uk/en/issuesandinsights/articlespublications/newsreleases/pages/how-will-demographic-trends-in-the-uk-affect-the-retail-sector.aspx [Accessed 16 November 2013]. Levy, M. & Weitz, B.A., 2012. Retail Management. 8th ed. New York: Mc Graw-Hill. Poulter, S., 2013. Tesco rapped over misleading horsemeat ad: Supermarket accused of trying to fool customers by spreading blame for scandal. [Web] Available at: HYPERLINK "http://www.dailymail.co.uk/news/article-2410618/Tescos-misleading-horsemeat-ad-Supermarket-accused-trying-pass-blame.html" http://www.dailymail.co.uk/news/article-2410618/Tescos-misleading-horsemeat-ad-Supermarket-accused-trying-pass-blame.html [Accessed 16 November 2013]. Rosenbloom, B., 2013. Marketing Channels. 8th ed. Mason: South-Western Cengage. SAS, 2013. HOW THE UK WILL SHOP: 2013. SAS. Stewart-Allen, A. & Denslow, L., 2002. Working with Americans. New York: Pearson Education. The Economist, 2013. The end of the space race. [Web] Available at: HYPERLINK "http://www.economist.com/news/britain/21576441-britains-biggest-retailer-tries-adapt-fast-changing-shopping-habits-end-space" http://www.economist.com/news/britain/21576441-britains-biggest-retailer-tries-adapt-fast-changing-shopping-habits-end-space [Accessed 15 November 2013]. Tozer, J., 2011. Why shoppers find it so hard to escape from Ikea: Flatpack furniture stores are 'designed just like a maze'. [Web] Available at: HYPERLINK "http://www.dailymail.co.uk/femail/article-1349831/Ikea-design-stores-mazes-stop-shoppers-leaving-end-buying-more.html" http://www.dailymail.co.uk/femail/article-1349831/Ikea-design-stores-mazes-stop-shoppers-leaving-end-buying-more.html [Accessed 17 November 2013]. Walker, B., 2011. Why Multichannel Retail Is Obsolete. [Web] Available at: HYPERLINK "http://www.forbes.com/2011/03/11/multi-channel-touchpoint-leadership-sales-leadership-obsolete.html" http://www.forbes.com/2011/03/11/multi-channel-touchpoint-leadership-sales-leadership-obsolete.html [Accessed 15 November 2013]. West, D.C., Ford, J.B. & Ibrahim, E., 2006. Strategic marketing: creating competitive advantage. Oxford: Oxford University Press. Williams, C., 2013. Tesco rapped over 'misleading' horsemeat ads. [Web] Available at: HYPERLINK "http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/10286180/Tesco-rapped-over-misleading-horsemeat-ads.html" http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/10286180/Tesco-rapped-over-misleading-horsemeat-ads.html [Accessed 16 November 2013]. Zentes, J., Morschett, D. & Schramm-Klein, H., 2012. Strategic Retail Management: Text and International Cases. Heidelberg: Springer-Verlag. Appendix – Article The end of the space race Britain’s biggest retailer tries to adapt to fast-changing shopping habits Apr 20th 2013 | From the print edition Do you really need one? THE Tesco “superstore” in Kensington is a minor marvel. A rainforest-like mist wafts across the vegetables. A pizza bar beckons shoppers to choose their own toppings. A computer the size of a small pony suggests recipes and proffers lists of the ingredients needed to whip them up. Such delights were not uppermost in investors’ minds when Tesco, Britain’s biggest retailer (and largest private-sector employer) reported dismal results on April 17th. But they hint at better things to come. Profits before tax tumbled 51.5% in the year to February, their biggest-ever drop. Much of the decline came from admitting past mistakes, especially Tesco’s bungled foray into the United States. The grocer took a ?1 billion ($1.5 billion) write-down of its investment in Fresh & Easy, which failed to convert American consumers into fans of cellophane-wrapped fruit and automated tills. All that remains is to sell the chain. Other international operations suffered, too. South Korea’s partial ban on Sunday trading dented profits there. Austerity and unemployment hurt in central Europe. The biggest surprise, though, was an ?804m write-down in the value of Tesco’s British property holdings. The retailer had bought these as sites for big new stores years ago, when British grocers were still vying to outstrip each other in a “race for space”. Now Tesco’s boss, Philip Clarke, admits the stores will never be built. “We’ll be focusing much more on building our multichannel credentials,” he said. What he means is that, to keep up with changes in the way Britons shop, Tesco has to make it easy to buy whenever and wherever it suits them. This shifts the grocers’ race onto new turf. Inflation and a sluggish economy are squeezing household budgets. Pressed for time, people are shopping more often and closer to home. Increasingly they are ordering online. Last year just under 4% of grocery shopping took place online. But Britain is ahead of the rest of the world and online sales are rising fast. Tesco’s jumped 12.8% in the past year. Out-of-town mega-markets may be unfashionable but the race to open “convenience” stores catering to busy urbanites is very much on. In Britain, Tesco will open about the same amount of net new shopping space this year as it did in 2012—some 1.4m square feet. But the mix will shift towards convenience stores. Morrisons, which had hung back from the small-space race, recently jumped in. It is taking over defunct shops from such high-street casualties as HMV, Jessops and Blockbuster to convert into groceries. Online, grocers are battling against each other and against Ocado, a 12-year-old e-commerce outfit whose delivery vans are ubiquitous in posh south-eastern neighbourhoods (though it has yet to make much money). While venturing abroad Tesco underinvested in Britain and lost market share. Mr Clarke, who has been in charge since 2011, is trying to claw that back. His ?1 billion scheme to “build a better Tesco” seems to have recovered from the discovery earlier this year of horsemeat in meals labelled “beef”. He has retrained staff and added to their numbers (“there’s a twinkle back in their eye”, he claims in a corporate video). Large stores are to become “destinations”, tempting shoppers to linger rather than flee. The one in Kensington has a Euphorium bakery, part of Tesco’s growing collection of restaurant-type investments. If only the profits were as appealing. Read More