Marketing Principles of Tesco Plc - Essay Example

Marketing Principles: Tesco plc Tesco plc is the grocery market leader in the UK and the second largest retailer, measured in profits, after Wal-Mart. It is the third-largest retailer in the world when measured in terms of revenue after Wal-Mart and Carrefour. The changing scenarios in the major market coupled with unstable economies and the threat of globalisation will provide a better understanding of how Tesco faces these challenges. The report herein will examine the micro and macro environmental effects, the segmentation strategies for its products, the targeting strategies and the effects of buyer behaviours on their marketing activities in different scenarios. A proposal on how they can position a product in a new market will also be examined towards the tail-end of this report. Micro and Macro Environmental Effects Micro: The micro environment mostly consists of the various factors that impact the company’s operations directly or indirectly especially from an internal perspective (Drucker 2008:10). Rivalry is one of these factors. Tesco has several rivals in the business such as Morrison and Sainsbury’s and needs to keep its position in the market. They have to make sure that their quality, pricing, products and convenience keep them above their competitors. This is because these are some of the strongest factors that may drive profits to zero if not looked into carefully (Drucker 2008:12). Threat of substitutes is another factor that needs to be considered. This is because the products may be sourced from other companies in the same business environment and this would reduce its attractiveness to its clientele. It is, however, benefiting from its bulk purchases since it gets its products at cheaper prices and with greater benefits trickling down to the clients at the end of the day (Lancaster and Reynolds 2005:9). Suppliers also determine how a company fairs. This is a horizontal factor that needs to be highly regarded. It affects the production costs and eventually the pricing. They have, however, maintained a tight grip on their suppliers which has made it difficult for the suppliers to look for alternatives. They take bulk orders which the suppliers’ desire and thus making it possible for Tesco to regulate the prices to suit their clientele (Kotler, Armstrong, Wong and Saunders 2008:20). The threat of a new entrant poses considerable danger to the company because it has the ability to influence profitability and control the market share. To counter this, they engage in expensive advertising which makes it difficult for the smaller or new companies to match. For instance, they spent 4-million-pounds on advertisement in 2007 which outdid many companies (Simms 2007:48). Macro: The macro environment, on the other hand, deals with factors that have a direct influence on the business (Drucker 2008:10). Political/legal factors affect the regulations that are passed and which may hinder Tesco’s growth. Laws imposed by the government or any legal hurdles that they may face due to anti-competitive practices will mean that they have to look for other ways of making profits. Economic factors affect many things amongst them the buyer power and the ability to grow (Kotler et al. 2008:21). For instance, the recession that took place in 2008 led to one of the worst sale performances due to the heavy discount offered though it increased its clients’ loyalty. Socio-cultural factors play a part in the advertisements and the need to understand the clientele base. Technology affects the dynamism of the business environment and it helps to provide new opportunities for growth and development. Tesco has taken advantage of this and engaged in online shopping as a way improving its sales. The environment affects the buyers, the supplies, the availability of resources and the natural system that all depend on for survival. To this effect, Tesco has begun a 500 million pound investment in green initiatives (Simms 2007:50). Segmentation This is quite a significant aspect of the marketing strategy that helps to divide the market into homogenous groups of their clientele. When they get into new markets they have to understand what segments are more prominent in the area and understand their socio-cultural attributes as well as what they would find appealing and compelling in a mutually useful way. This means that they must undertake a survey of the area before setting base (Simms 2007:53). For clients in areas where bacon is a staple, they must identify the way they can attract this clientele and where they are going to get supplies from as a means of keeping them as part of the Tesco family (Kotler et al. 2008:24). Apart from this geographic type of segmentation, a demographic segmentation may also be introduced as a way of properly understanding what age most of its clients fall in and understand what appeals to them in the long-run. This means that they may be forced to present a stylized generic product that may cut across all ages (Simms 2007:79). Targeting Strategy By choosing to market i.e. women wear, the report will showcase targeting approaches that will help to reach out to as many female clients as possible within the Tesco localities. The first strategy is to come up with a profile criterion that allows one to understand what kind of demographic representation women make in the areas of concern (Simms 2007:81). This will deal with issues of age and race. Though it is not meant to be racial in any way, determining race will help to decipher who likes what and how they like it. The next step is coming up with the socio-cultural factors that affect this demographic especially in terms of income and social status (Kotler et al. 2008:25). This will help in marketing as Tesco will understand how and where to effectively market these products. Women are more into fashion especially under the influence of celebrities around them. This means that Tesco must go a step further to understand what these women want to wear and why. If possible, getting the celebrities to try out these outfits may be appropriate. Given the difference in age and the generations, understanding where to fix which celebrity will be an added advantage (Lancaster and Reynolds 2005:19). For instance, they may get stylish personalities like Victoria Beckham to influence the middle aged women. Buyer Behaviour Buyer’s power is another factor. Pricing and quality always affect the way the buyers make their choices. It also influences the size or number of clientele flocking the retail chains. Better prices and improved customer care services have made it one the best selling companies in the UK (Kotler et al. 2008:27). In a place where clients want smoked salmons such as central London and yet the company has no such offers, they may move to another store that satisfies their demands. This will mean that they will also buy their goods from that store; hence affect Tesco’s sales in the long run. Another instance is where a competitor like ASDA sells the same product as Tesco at 30% off in price. Buyers, given the harsh economic conditions, will move to ASDA and shop in quantities to avoid missing the offer. If not taken care of, buyer behaviour is quite effective in making a company a market leader or lead to its exit from the market altogether owing to lack of profitability and increased competition (Simms 2007:93). Positioning For women wear, positioning them will require a few strategies. First and foremost, advertisements must be catchy and appealing to the intended clientele. Given the fact that most of the targeted women are working class or in the upper social status, the magazines will be the most appropriate as well as billboards in strategic places within the town centre (Lancaster and Reynolds 2005:10). It will also include having a specific cue that will enable it to attract the client’s intellect. The product needs to appeal to the psychology of the client in relation to their position. The different women who are seen as being of greater influence will be attracted by something that is marketed as being part of an evolution and which aims at revolutionizing the way they view themselves. Innovative strategies will be used to attract and lure their clientele’s attention. References Drucker, P.F. (2008) Management: tasks, responsibilities, practices, Transaction Publishers, New York. Kotler, P., Armstrong, G., Wong, V. & Saunders, J. (2008) Principles of marketing, Prentice Hall, London. Lancaster, G. & Reynolds, P. (2005) Management of marketing, Butterworth-Heinemann, Burlington. Simms, A. 2007. Tescopoly: how one shop came out on top and why it matters, Constable, London. Wilson, R.M.S & Gilligan, C. (2005) Strategic Marketing Management: Planning, Implementation and Control, Butterworth-Heinemann, Burlington. Read More