Marketing Strategies of Tesco Plc and WM Morrison Supermarket Plc - Essay Example

Marketing Strategies of Tesco Plc and WM Morrison Supermarket Plc Table of Contents Table of Contents 2 Introduction 3 Business marketing management orientation 3 Product and production concept of WM Morrisons 3 Sales and marketing concept of WM Morrisons 4 Product and production concept of Tesco 4 Sales and marketing concept of Tesco 4 External audit 4 Macro-environmental analysis 5 Micro-environmental analysis 6 Compare and contrast the marketing mixes 7 Product 7 Price 8 Place 8 Promotion 9 Recommendation 9 Conclusion 10 References 11 Introduction The UK retail industry contributes near about 16% of its total economy. The major retailers in the UK have shown optimism towards the sales prospect of 2015. 76% of the retailers have reported that they are expecting huge sales growth as well as high level of investment and employment by the end of 2015. The major players of the UK retail industry include Tesco, ASDA, Sainsbury’s, WM Morrisons, Aldi and Lidl (Office for National Statistics, 2015). Among the leading retail chains, Tesco has recorded the strongest performance during the last 18 months with 1.1% sales growth despite the neck to neck competition. The organisation was established in 1919 by Jack Cohen. It is currently running over 2600 stores across the UK (Tesco Plc., 2014). On the other hand, WM Morrisons has demonstrated around 3.3% slum in sales. Over a period of time, the organisation has demonstrated rapid deterioration due to their inadequate adoption to the changing market environment. The organisation had started its business by 1899 as a small grocery store. Currently, it possess near about 500 stores within the UK (Morrisons, 2014). The further discussion will evaluate the effects of marketing management orientation and external environmental factors on the current positions of both the organisation. It will also compare and contrast the elements of marketing mix for Tesco and WM Morrisons. Therefore, it will propose various recommendations to improve and sustain the competitive advantages for both the retail chains. Business marketing management orientation The marketing management orientation of any business defines its marketing, sales, production and societal marketing strategies. The analysis of the effects of marketing management orientation will evaluate the market position of both the organisations (Morgan, 2012). Product and production concept of WM Morrisons The strategies of WM Morrisons are focused towards their product and production quality. The vertical integration strategy of the organisation allows them to manage all the aspect of their internal business functions such as meat processing, maintaining the freshness of their food and fruit items. They also control and maintain a certain temperature during the product delivery to their warehouse as well as sales locations. The organisation possesses their own fresh food factory known as Farmer Boy which is specialized in production of fresh batches of pizzas, bacons and pies. This has allowed the management to maintain their market reputation by providing freshly prepared products (Reuters, 2015). Sales and marketing concept of WM Morrisons The sales and marketing strategies of the organisation are concentrated towards the traditional procedure of promotion and advertising. The organisation’s promotional procedure strictly highlights their strategy to provide fresh and specialized food to every segment of consumers. The selling concept of the organisation is also concentrated on keeping the prices low to ensure the affordability of their consumers. The social marketing strategy of the organisation is less focused towards the changing demands of consumers as well as the market adoption of the competitors. This has caused slow immigration of the organisation to the digital marketing procedure. Hence, it has declined the market share as well as sales growth of WM Morrisons (Morrisons, 2014). Product and production concept of Tesco The product and production strategy of Tesco has assisted the management to offer highest quality and widest possible choices to their consumers. The organisation prefers to work closely with their suppliers to maintain their frequency of product supply procedure. The sales and marketing strategy has encouraged the organisation to invest in the different store development procedure. This facility has assisted the organisation to improve the in-store consumer experience. Therefore, it has allowed them to enhance their consumer loyalty. Sales and marketing concept of Tesco The multi-channel sales strategy has allowed the management to utilize all the possible channels to sale their product ranges to their consumers. This facility has increased the flexibility of product purchase procedure for their consumers. Therefore, it has enhanced the overall sales growth of the organisation. External audit The external audit will assist the management of both the organisations to examine the effects of different macro and micro environmental factors of the industry on their overall business processes (Wilson and Gilligan, 2012). Macro-environmental analysis The local as well as global business performance of Tesco is highly motivated by the political and legislative structure of the UK and European Union. The employment legislation of the UK government encourages the retailers to offer different range of job opportunities to the population. During the era of online retailing and high staff turnover, Tesco still believes in appointing a huge number of elderly workers, students and disabled persons in their physical retail stores. This procedure provides the organisation a high level loyalty and performance from workforce (Guardian News, 2015). On the contrary, the excessive job cuts within WM Morrisons are affecting their market reputation. The organisation has already announced over 2600 job cuts within the next few months. Due to their decreased profit margin, the organisation is unable to follow the governmental regulation regarding the minimum wage structure. A major part of their workforce is facing job dissatisfaction due to very low pay structure (Elder, 2015). The high level of unemployment is affecting the overall economy of the UK. Decrease in consumer demand and buying capacity is adversely affecting the pricing policies and profit ratio of the retail organisations. In this situation, Tesco has shifted their focus to promote and advertise their value-based product brands rather than their luxurious product range to manage their competitive position in this fluctuating economy (Mckevitt, 2015). The financial condition and market reputation of WM Morrison has witnessed a huge setback due to the fluctuating economy. The excessive rate of unemployment and high level of taxes have provoked the organisation to cut prices of 21000 products. It has also insisted them to launch re-branded value product. This situation has adversely affected the consumer confidence towards the retail chain. Therefore, it has decreased the consumer loyalty (Morrisons,2014). The social and cultural changes in the UK have influenced the population towards one-stop as well as bulk shopping. Consumers are inclined towards availing wide range of products under one brand name, to eliminate their travelling and product searching costs. These changes in society and lifestyle have encouraged Tesco to increase non-food product offering within their online as well as physical retail stores. Tesco is also adjusting with the increased demand of healthy and nutritional foods by offering different ranges of organic food products (Mckevitt, 2015). WM Morrisons have also designed its product line as per the changing demands of the society. They have switched premium products with organic and value food material to attract regular consumers. On the contrary, their inadequate presence on social media has restricted the management to distribute the product knowledge among wide range of consumers (Morrisons, 2014). The technological advancement has assisted the consumers to simplify their product search as well as shopping procedure. The increased adaptation of advanced technologies has allowed Tesco to increase their consumer database. Properly designed self-service checkout points and online retail facilities has enabled the organisation to gain huge consumer loyalty (Jones, et al., 2013). During the era of Ecommerce facility, WM Morrisons is still facing difficulty to launch a properly functioning online retailing facility to their consumers. Their limited online presence and advertisement campaign has affected their overall sales growth (Jones, et al., 2013). Micro-environmental analysis The threat of new competitors in the grocery retail market of the UK is very low but the competitions by the existing rivalry are quite high. The market is already well-equipped with various leading organisations that serve over 80% of the local demand. The newly launched organisations need to introduce exceptionally low-price structure to capture the market, while the business establishment cost will be very high for them (Reuters, 2015). On the other hand, Tesco and WM Morrison are facing huge competitions from the existing rivals, such as Asda and Sainsbury, over the pricing policy, promotions and product offering. In this competitive situation, the market share of Tesco has demonstrated 15% hike due to their excessive price cuts and discounts over several items (Mckevitt, 2015). The absence of proper online promotional procedure and advertisement tactics has reduced the market share of WM Morrisons to 11%. The employee dissatisfaction is also affecting the performance of the organisation (Morrisons, 2014). The bargaining power of the consumers is very high due to low differentiation in the product pricing as well as product features. The cost for switching brands is very low for the consumers. The increased popularity of social media and online retail is enabling the consumers to compare the price and availability of different brands of products. Therefore, high promotional activities, lucrative discount schemes and rapid delivery system to every part of the UK have assisted Tesco to attract a huge population towards their online and physical market (Guardian News, 2015). Alternatively, the online retailing facility of Morrisons is very poorly structured and the product delivery system is still restricted to limited locations of the UK. This situation is affecting the consumer buying behaviour towards the organisation. A huge number of consumers of WM Morrisons are switching to the other easily available grocery retail brands (Morrisons, 2014). The availability of huge number of suppliers in the UK market has lowered down their bargaining power. This situation allows both the organisation to negotiate the price of their raw materials with the suppliers. It also allows Tesco and WM Morrisons to offer different discount schemes to their consumers (Reuters, 2015). Compare and contrast the marketing mixes The concept of marketing mix can be described as the set of different marketing variables, such as products, price, promotion and placement, which can be controlled by any organisation to generate desired response from targeted market (Mintz and Currim, 2013). Product The management of Tesco has continuously expanded their product ranges and services over the last few years. The retail super-market of Tesco deals with wide variety of processed food items, groceries, household products and healthcare products. Apart from food and grocery items, their vast range of products includes financial services, clothes and consumer electronic. Tesco prefer to produce proper balance between price and quality of their offered products and services to the potential consumers (Mckevitt, 2015). Similar to Tesco, the management of WM Morrison is mainly focused on offering different household products, grocery items and frozen food items. The organisation has also introduced retail outlets for kid clothing materials known as Nutmeg. Besides their general grocery and health care product, the organisation also offers dry cleaning and bakery facilities. Rather than diversifying their product and service ranges towards the financial and electronic items the organisation prefer to concentrate on the quality, appearance and design of their products and packaging (Elder, 2015). Price The business strategy of Tesco to serve different segments of consumers has assisted the management to set competitive and affordable pricing policies. The management of Tesco is targeted to reduce their purchasing and operational cost through the assistance of economies of scale. The organisation is focused on attracting more consumers by reducing the price of value products. This process allows the organisation to create a strong consumer database as well as generate consumer loyalty (Mckevitt, 2015). On the contrary, the pricing policies of WM Morrisons failed to attract desired consumer traffic due to the price war by different leading retail chains in the UK market. The like-for-like sale of the organisation has witnessed 7.5% fall in comparison to the last year. The organisation has demonstrated the tendency to pre-fix their level of price, discount, rebate and price margins. Therefore, lucrative seasonal discount schemes of Tesco, Aldi and Lidl have adversely affected the product pricing procedure and profit ratio of the organisation (Yeomans, 2014). Place The product placement procedure of organisations depends on various locations that are used by consumers to purchase product and services. Various organisations prefer to efficiently distribute their products and services through all the possible channels to attract huge consumer database. Tesco mainly utilizes two major product placement channels such as physical stores and online stores. The official website of the organisation is known as Tesco Direct. The organisation efficiently utilizes all the online facilities to increase consumer traffic towards their different product line. It has also focuses on the door step delivery to their consumer from different parts of the UK. The organisation has segmented their physical stores into Tesco superstore, Tesco compact and Tesco Metro as per the differences in regions and demands of their consumers (Mckevitt, 2015). WM Morrison also distributes their products and services through online as well as physical retail outlets. The organisation is very slow in terms of their online selling procedure. The physical stores of the organisation are subdivided into different categories as per the convenience of their consumers (Elder, 2015). The online store of the organisation is handled by a third party organisation known as Ocado Group Plc. Therefore, the online product distribution procedure of the organisation lacks innovation and diversification. The organisation has also initiated door step product delivery facility. Various parts of the UK are still restricted from availing this door step distribution facility of the organisation (Elder, 2015). Promotion Both the organisations are efficiently utilizing different traditional promotional media such as television, newspaper, family magazines, billboards and radio, to advertise their product offerings, discount schemes and promotional campaigns. The management of Tesco and WM Morrisons has designed lucrative loyalty card facilities for their potential consumers (Reuters, 2015). The promotional and advertising procedure of Tesco has also adopted the digital marketing procedure to broaden their horizon to a huge number of consumers. The organisation is effectively utilizing different social media sites to communicate with their consumers. Apart from traditional advertising procedure, the organisation is also utilizing different social media sites to advertise different promotional campaigns and discount features to their consumers (Mckevitt, 2015). On the contrary, the promotional procedure of WM Morrison is facing a huge setback due to their limited presence in different social media sites and their lack of promotional activities through different online facilities (Elder, 2015). Recommendation The analysis of marketing management orientation and current external environmental effects on the business structure of WM Morrisons has indicated different strategic inefficiencies within the organisation. The lack of diversification in the product line and poorly structured distribution procedure are the major reasons behind their setback within the competitive retail market of the UK. The slow adoption to the online selling and promotional features has also restricted their market share within the UK retail market. The organisation needs to indulge in developing a fully-equipped and well-functioning Ecommerce site. The management need to properly maintain all the details of their available product line in their Ecommerce site to reduce ambiguity of their consumers. The management must shift their focus towards increasing their product line towards clothing section for adults and electronic section to increase their market share. The management needs to undertake product development strategy to introduce these new product lines to their existing market segment to eliminate the threat of market saturation. This process will also require the advertisement and promotional activities through different digital marketing media to accrue the attention of different segments of consumers. The management of WM Morrisons must broaden their horizon to provide door-step product distribution procedure. They need to establish new distribution locations to reach consumer of rural as well as distant locations. Proper execution of these recommended marketing and product development strategies will allow the organization to improve their competitive position within the UK retail market. The marketing and product strategies of Tesco have assisted the organisation to secure a competitive position within the UK retail market. Due to the rapid changes in the economic conditions and market demands, the organisation also need to consider some new business strategies to sustain their position in the future market conditions. The management of Tesco should develop eco-friendly product packaging facility to fulfil the changing demand of consumers. The organisation also needs to concentrate on recycling their packaging material to reduce different organisational costs. The innovative and less expensive packaging material will certainly allow the organisation to sustain their competitive position in the retail market. The marketers also need to adopt the market development strategy to shift their focus towards new market segment. The marketers need to penetrate untouched market segments and rural markets with their existing product ranges. This procedure will allow them to increase their overall market share. Conclusion The discussion about marketing strategies and external market environment of Tesco and WM Morrison has illustrated the current market reputation and sales growth of both the organisation. The highly competitive retail market of the UK has demonstrated different effects on the overall performances of both the organisations. The study has evaluated the highly growing market share of Tesco, while the profit ratio of WM Morrisons is diminishing day by day. The product line and pricing policy of both the organisation has demonstrated almost similar nature. On the contrary, the sales and marketing strategies of the organisations have denoted different characteristics. The marketing and promotional procedure of WM Morrisons focuses on traditional mediums of advertising while the management of Tesco has introduced different digital marketing channels to improve their consumer database. Therefore, various suitable suggestions have been offered to WM Morrisons to improve their market competitiveness. These suggestions include new product development and improved online marketing strategy. Eco-friendly product packaging and mew market penetration strategies have been recommended to Tesco to sustain their competitive position in the UK market. References Elder, B. (2015). Morrisons fall on earning equiality issues. Retrieved from http://www.ft.com/intl/cms/s/0/381e248a-cb09-11e3-ba95-00144feabdc0.html#axzz3W8APzhw8. Guardian News. (2015). Tesco escalates the supermarket price wars by cutting prices. Retrieved from http://www.theguardian.com/business/2015/jan/08/tesco-further-price-cuts-supermarket-wars-dave-lewis. Jones, P., Clarke-Hill, C., Comfort, D. & Hillier, D. (2013). Sustainability: UK retailers and social media. World Review of Entrepreneurship, Management and Sustainable Development, 9(4), 460-474. Mckevitt, F. (2015). Tesco posts strongest performance in 18 months. Retrieved from http://uk.kantar.com/consumer/shoppers/2015/march-kantar-worldpanel-uk-grocery-share/. Mintz, O. & Currim, I. S. (2013). What drives managerial use of marketing and financial metrics and does metric use affect performance of marketing-mix activities? Journal of Marketing, 77(2), 17-40. Morgan, N. A. (2012). Marketing and business performance. Journal of the Academy of Marketing Science, 40(1), 102-119. Morrisons. (2014). WM Morrisons: Annual Report And Financial Statements. [pdf] Morrisons. Retrieved from http://www.morrisons-corporate.com/Documents/Corporate2014/Morrisons_AnnualReport13-14_Complete.pdf. Office for National Statistics. (2015). Retail Sales, February 2015. 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