Strategic PR Plan for Tesco - Case Study Example

STRATEGIC PR PLAN FOR TESCO: HOW DOES TESCO COMPETE? Introduction TESCO aims to maintain its top positioning strategy, bringing the merits of competition, and the benefits it brings to the consumer. Its focus is on customers and the entire organization, from the employees to the top echelon, including its many stakeholders, work hard to meet the customers’ needs and demands. Tesco has grown to be the UK’s most popular supermarket and one of British business’ great success stories by fulfilling people’s expectations to have safe, nutritious, quality food at affordable price (Talking Tesco). This study will focus on the stakeholder issues of Tesco, and will attempt to answer on how to respond to these issues. An application of SOSTAC is applied here to Tesco. SOSTAC is a strategic marketing process introduced by Paul R. Smith (1990). This is being made a model in marketing throughout the business world. It has many features that involve SWOT, 5Ps, Marketing Mix, and other marketing tools. TESCO sees to it that it helps British shopping public. Tesco aims to make shopping simpler, more convenient and affordable for the customers. If these issues are directly addressed, customers reward the company with their loyalty. The company aims to communicate to the customers through its many subsidiaries, benefiting customers wherever they shop. Consumers have an easy way of switching between stores, that is, they choose to shop in a different store from one month to the next. They have a wide range of retailers to choose from including Wall Mart/Asda, Saisbury, Morrison, Waitrose, M&S, Somerfield, Aldi, Lidl and Netto, other smaller supermarkets, Costco and Makro, the Co-Ops, Symbol groups, and thousands of independent retailers. (Talking Tesco) TESCO then is in a very stiff competition. The management has to apply an effective PR strategy to cope with the challenges. Everyday too, the organization has to apply innovations to its various marketing infrastructures to be able to satisfy customers. Application of SOSTAC on TESCO SOSTAC stands for Situation analysis, Objectives, Strategy, Tactics, Actions and Control. (12 Manage website) Application of SOSTAC starts with the analysis of the present situation in TESCO. In this particular situation, the question that needs to be asked is “Where are we now?” This means analyzing the entire organization, on how it has gone through after years of operation. Situation After its founding in 1919 by Jack Cohen, then the first Tesco store opened in 1929 in Burnt Oak, Edgware, North London, the organisation has grown into a large business venturing not only on food but also on electrical goods, clothes and other services such as insurance, banking, etc. It has 30 distribution centres, of which six are dedicated to non-food and clothing. It is now the largest online grocery shopping service in the world. Fourth biggest online retailer in the UK, behind Amazon, Dell and Argos. Its revenues grew by 29.2% in 2007. Tesco.com, the online shopping alternative accounts for 66.2% of all UK online food and grocery shoppers. (Datamonitor.com) The 3,262 stores wordwide go through multiple formats including: Extra, Superstore, Metro, Express, and Fresh and Easy. Tesco is now the leading retailer in the UK with about 30% of the total UK grocery market, and the largest food retailers in the world employing about 318,300 people. Tesco 2007 profits exceeded £2.55 billion. (Datamonitor.com) Marketing Mix applied on Tesco The Marketing Mix model (also known as the 4 P’s) is used by marketers as a tool to assist in defining the marketing strategy. Marketing managers use this method to attempt to generate the optimal response in the target market by blending 4 (or 5, or 7) variables in an optimal way. It is important to understand that the Marketing Mix principles are controllable variables. The Marketing Mix can be adjusted on a frequent basis to meet the changing needs of the target group and the other dynamics of the marketing environment. (12 Manage website) PRODUCT The question here is, “Does Tesco create what its intended customers want? Here, we need to define the characteristics of Tesco products that meet the needs of the customers. We will delve on the functionality; quality; appearance; packaging; brand; service; support; and warranty. During 2006/07, Tesco launched the Fruit and Veg Pledge. This is to offer at least five fresh fruit and vegetable products at half price every week during the whole year. It extended a range of whole foods to include an even wider choice of pulses, beans, dried fruit and nuts, breads, oils, cereal bars, breakfast cereals and cooking oils. Tesco introduced nutritional signpost labels on 6,600 of its own-brand products.  This has made it easier for customers to understand and is practical to use. Organic products were made more affordable.   Tesco sells them alongside the standard ranges, on the same shelves, instead of in a separate section. It increased a range of Value non-food products to make setting up home cheaper. Tesco halved the price of energy-efficient light bulbs making them even more cost-effective than traditional light bulbs over their life-span. Offered was a range of Healthy Living non-food fitness equipment such as skipping ropes, pedometers, exercise bikes and rowing machines to make keeping fit more affordable [(http://www.tescocorporate.com/page.aspx?pointerid=22492B1EE56448CDB88FAD501D742BCB] PRICE How much are the intended Tesco customers willing to pay? Here we decide on a pricing strategy – do not let it just happen. A catalogue of 8,000 products was well received last year. Tesco Direct, Sir Leahry says, involves some capital in terms of systems and distribution, but it is not capital intensive. As regards competition on products, Tesco has 1,866 products cheaper than Asda which has 1,120 products cheaper than Tesco. Sainsbury’s has 451 products cheaper than Tesco which has 4,450 products cheaper than the former. Morrisons has only 417 products cheaper, while Tesco has 3,054 products cheaper than Morrisons. (Sir Terry Leahry interview) PLACE Is Tesco available at the right place, at the right time, in the right quantities? Some of the recent major changes in business have come about by changing place. Think of the internet and mobile telephones. Tesco is into online shopping so the place is not a problem. Tesco has many branches all throughout the United Kingdom, Europe, China, Japan, and in many parts of the world. It is now expanding to other parts of Asia and Hong Kong. It is an international retailer serving over 13 countries. Its base is in the UK. Tesco is making headway in the difficult times and for the development of international business. It has done major acquisitions in Czech Republic and in Poland where they bought the Leader Price stores and in Malaysia where they bought the Makro stores. Wal-Mart and Carrefour pulled out of Korea; Tesco is very successful in Korea, which is a competitive market. Tesco Home Plus in Korea is very encouraging. It also has a potential to develop in the US, a very substantial business. (Tesco website) PROMOTION How are the chosen target groups informed or educated about the organization and its products? This includes all the weapons in the marketing armory – advertising, selling, sales promotions, direct marketing, public relations, etc. While the other three P’s have lost much of their meanings in today’s markets, Promotion has become the most important P to focus on. They say that Tesco listen – this is an advertising campaign and a strategy of the organization. Their success is based on listening to customers. They listen and respond to customers and their changing lifestyles by spending lots of time and effort asking them, i.e. they listen and respond, providing customers the opportunity to tell them what they want. The strategy of listening and responding has been successful, but Tesco is aware that if they stop listening and don’t respond to their customers’ needs, they will choose to shop elsewhere. This method of listening to customers made Tesco develop the Every Little Helps Promises. These promises to their customers reflect the simple things people care about when they go shopping: Prices are good; I can get what I want; The aisles are clear; I don’t queue; and The staff are great. Tesco knows that these simple promises have to be fulfilled, and that if they don’t get these things right customers will go and shop with one of their competitors. It is important for them to do the little things that really matter for customers and staff, in every store, everyday. Those promises are fundamental to their success. Listening to customers has enabled Tesco to respond to many changing customer attitudes such as increasing concern for health, local sourcing of food and a renewed sense of community. Research has helped them identify new general trends such as an ageing population, more single person households and more working mothers. Tesco believes that these emerging trends are likely to continue and produce more changes in what customers expect from the company. How does the company listen? Tesco has a program known as Customer Question Time sessions each year, a forum where they listen to customers’ views on everything, from products, price, quality and service to Tesco’s role in the community and the Tesco brand. Customer Comment Cards are available in all their stores. They also have customer service helpline, and the club card, which celebrated its tenth anniversary, and with over 13 million active card holders, it is a world-leading loyalty programme. This program allowed Tesco to better understand what customers want. A range of qualitative research techniques is also employed, which include focus groups, accompanied shots, home visits and others, to explore issues as they arise. Tesco uses quantitative techniques, such as on-street, telephone or on-line questionnaires, to talk to a wider number of customers, or to quantify views and opinions garnered in qualitative studies. It has on-going research trackers asking the same key questions regularly, to allow them to track performance over time. Tesco uses multiple sources of information which allows them to look at many aspects of consumer lifestyles, to understand a problem, or to discover opportunities to do more for customers. (Talking Tesco) Objectives of Tesco Tesco aims to develop store structures to better meet the needs of both customers and staff. It wants to provide Tesco leaders with coaching to support their teams better, and to get more people in to work more of the time. Tesco also desires to reduce management vacancies down to a minimum. (Tesco website) Tesco states its other objectives for the community. The community plan is a continuous process that will drive change across the business in the years to come. Building upon Tesco’s current corporate responsibility, it provides a platform for constant innovation to deliver two broad objectives: Be a good neighbour Tesco respects the local communities in which they operate and wants to make a positive contribution to them as good corporate citizen and a friendly neighbour. Be environmentally responsible Tesco also aims to take care of the environment by examining processes and reviewing the energy consumption, and promoting environmentally responsible practices. Projects for 2006 include reducing carrier bag usage, energy saving and improvements to recycling facilities for customers. (Talking Tesco: how we compete) Strategy This answers the question, “how are we getting there?” TESCO implemented a customer-focused strategy that consistently delivers to customers across the UK better value for their money, together with wider choice and more convenience. It’s on the right focus of customer satisfaction with innovation everyone’s job. As part of this continuous effort, Tesco decided to evaluate options to further improve customers’ shopping experience. Through Digital Retail Network, Tesco has been able to match a revenue-generating initiative with a solution that entertains and engages the customers and one which also assists and guides the customers’ point-of-sale decisions. This is adding value to the customers’ shopping experience. (Hughes Network System, 2004) Tesco has implemented the in-store TV network in its stores. This is known as the TESCO TV which displays news and entertainment, as well as promotional information on both Tesco’s own products and suppliers’ branded products. The suppliers pay to promote their products on TESCO TV as with any advertising medium. In this way, Tesco’s customers are benefited from timely promotional information in addition to enjoying non-promotional content such as cooking instructions, and some shows like cartoons and other “casual” content including news. With this solution, Tesco can provide more information to customers directly at the point of sales and can add real value to their shopping experience, and for suppliers, this also creates a genuine opportunity to better communicate with their customers. The application of Hughes Networks Systems Europe (HNSE) is one wise move for TESCO because of its superior track record, end-to-end solution, and their very professional way of meeting customers’ needs. Turning to broadband satellite solution is one great strategic move for Tesco’s PR planning. The company contracted Hughes Network Systems Europe (HNSE) for a turnkey solution. In addition to providing the transport infrastructure through its DIRECWAY two-way satellite broadband platform, HNSE has overall responsibility for the installation, operation, and maintenance of the entire implementation. Also, Instrumental Media Group is responsible for the content that is shown on the screens. SCALA, an HNSE partner, provides the software platform for the content production, enabling the highest flexibility with powerful authoring, editing, and scripting tools. (Hughes Network System, 2004) Target programming is delivered to different areas of the stores. In each store where TESCO TV is available, HNSE is installing approximately 50 flat screens of different sizes. Up to eight different channels are available on TESCO TV, each channel specifically intended for a particular zone of the store. The latest music videos are shown in the Home in the Home Entertainment department and Health & Beauty has its own channel. In the Café, customers can relax watching the latest news, sports clips, and other entertainment programs. (Hughes Network System, 2004) This implementation of TESCO TV is an example of a promotional technique. This can influence sales through the delivery of advertising content on screens positioned at the point of sale. TESCO TV has also vastly improved the ability to cross sell and promote other products within its portfolio. This can also improve time to market. Reacting to new trends or competitive offerings is now much faster and more comprehensive than ever. A promotion can be amended, re-distributed, and displayed in all stores within a few hours, and Tesco can respond to changes in the market in almost real time. The customers can benefit by receiving information while they are being entertained. In this set up an e-Learning or back office solution could be added. Other benefits are easy training for the staff, communication of messages of the day, briefing of management team, and management of inventory. Hughes Network System Europe (HNSE) has facilities in Italy, the United Kingdom, Germany, and the Czech Republic. Utilizing its satellite hub earth stations and network operations centres in Griesheim, Germany and Milton Keynes, U.K., HNSE provides DIRECWAY broadband satellite services throughout the continent, both directly and through a growing family of value added service providers. (Hughes Network System, 2004) Hughes Network Systems is the world’s leading provider of broadband satellite network solutions for businesses and consumers. Tactics Tactics involve some more details on communications. Aside from the assets mentioned in the Strategy above, here are some of the details employed by Tesco on the aspect of effective communication with the customers. Tesco listens to people – It is the largest private sector employer in the UK with over 260,000 staff. The people make Tesco a success and their feedback is very valuable. Tesco listens to suppliers – it takes a partnership approach and believes that open and constructive relationships with suppliers are key to a strong and sustainable supply chain. Tesco listens to communities – Tesco aims to improve the way they consult local communities before building new stores so that they can be sure that they have understood local issues and concerns. SWOT on Tesco Any organization must try to create a fit with its external environment. The SWOT diagram is a very good tool for analyzing the (internal) strengths and weaknesses of a corporation and the (external) opportunities and threats. However, this analysis is just the first step. To really create the fit with the external environment is often the most difficult work. (12 Manage Management Communities) A SWOT analysis should be carried out with a detailed and proper research work. With an honest-to-goodness research work, you won’t be groping in the dark, and you can have a comprehensive concept of both the internal and external factors. This way you can have an innovative and creative strategy that is directional, cost effective and of course executable. Strengths Tesco’s strength relies on its specialist marketing expertise, explosive access to natural resources, new innovative product or service, quality processes and procedures and strong brand or reputation. Learning and progression is core to Tesco’s operation. Training forms an important part of staff development, and they do give opportunities for all staff to develop their talents to the full. Ongoing training programmes seek to ensure Tesco’s people understand their organisation’s customer service objectives and strive to achieve them. Tesco support its people to achieve their potential through access to training programmes and all staff have personal development programmes to ensure they have the right skills to do their job. Tesco has a wide range of policies that makes it a strong organisation. It has solid, humanitarian policies on animal testing, the environment, charity, equal opportunities and diversity, community sponsorship and community vouchers, education, social policies, climate change, human rights policy, health and safety, code of practice, genetic modification, biodiversity – Nature’s choice, waste management and recycling, business ethics, organics, animal welfare, and supply chain standards. Al these make Tesco a strong business organisation. Weaknesses Size matters, they say. But in many organisations that have now gone global, size is not that too difficult anymore to contend with because of technology such as the internet, and the broadband communication. As stated above, Tesco works in cooperatioln with Hughes Network System Europe (HNSE) which provides DIRECWAY broadband satellite services through the continent, both directly and through a growing family of value added service providers. Opportunities Tesco infiltrates the developing market in China, and is also in internet marketing, as stated earlier. The AGM is an excellent opportunity to communicate directly with all shareholders. The whole Board attends the meeting and is available to answer questions from the shareholders present. To encourage shareholder participation, Tesco offers electronic proxy voting and voting through the CREST electronic proxy appointment service. www.tesco.com/corporate. Topland has sold its portfolio of 33 Tesco stores to Pearl Group. Topland provided £650 million in 2004 for the 50-50 joint venture, which is now worth £950 million. Tesco will keep its 50% of the portfolio. (Source: Financial Times, available at Mintel website) Threats Research shows that 94 per cent of consumers in Britain have a choice of three or more different supermarket retailers within a 15 minute drive. (Talking Tesco) Tesco handled this threat of shortage of products. Tesco’s share data sometime showed that there was a sharp increase in the sales of flowers and wine for one week at the start of the summer. An analysis of their Clubcard data showed that the majority of customers buying these items were families with school age children. Parents were buying these products for their children to take to school and give to their teacher at the end of term. With this conclusion, Tesco people were able to ensure that there was a plentiful supply of flowers and wine in their stores at the end of the school term. Using external research, they found an opportunity to improve the range. The research told them of a rapidly growing need for Polish & Eastern European products and their growing number of excellent Polish staff helped confirm their beliefs. As a result of this, they appointed one of their Polish executives who began by listening to customers and held their first ever Polish ‘Customer Question Time’ (in the Polish language) to find out which kinds of products their customers would like to buy. After talking to Polish customers, they finalized their product selection then sourced the products from a new supplier. CONCLUSION: PR Planning for Tesco involves presenting its many accomplishments, from small beginnings, Tesco has become Britain’s most popular retailer by recognizing and responding to social change. It is important for Tesco to understand change and rise to its challenges. The battle to win customers in the 21st century will increasingly be fought not just on value, choice and convenience but on being good neighbours, being active in communities, seizing the environmental challenges, and behaving responsibly fairly and honestly in all of Tesco’s actionsStakeholder issues, from pricing to public relations to Porter’s five forces are addressed in Tesco’s program for Public relation by Tesco is effective. They deem it important that a new store opening is welcome by local people. The people on the other hand give suggestions, or they respond to Tesco’s questions. The company talks to local people when they plan their stores. They work closely with local communities so that they understand local issues and concerns. They distribute leaflets locally, detailing their plans and inviting feedback. They also hold public exhibitions so that people can come and talk to them about their plans for a new store. They also talk to local traders about how their stores can attract new customers to the area and improve business for all. This year, 2007, they’ve held public exhibitions and consulted local communities proactively in other ways on every new Tesco superstore. References: Datamonitor website. Available from: www.datamonitor.com.,http://catalogue.londonmet.ac.uk/search?/.b1501950/.b1501950/1,1,1,B/l856~b1501950&FF=&1,0,,1,0. 24.09.07) Hughes Network System (2004). Tesco taps into the power of satellite. Available from: http://www.hnseu.com/files/downloads/TESCO%20TV_0804.pdf. [cited 14 Dec 2007] Sir Terry Leahry interview, available from: http://w3.cantos.com/07/int-tesc-704-azwuz/interviews.php?task=view&i=1&cnt=bb&med=asx&int=changed&type=video Talking Tesco: how we compete. http://www.tesco.com/talkingtesco/p/inc/TalkingTesco.pdf. [cited 14 Dec 2007] Tesco website. Available from: http://www.tesco.com.[cited 14 Dec 2007] 12 Manage Management Communities website. Definition of SOSTAC Model. Available from: http://www.12manage.com/description_smith_sostac.html.[cited 14 Dec 2007] 12 Manage Management Communities website. What is a SWOT analysis? Available from: http://www.12manage.com/methods_swot_analysis.html. [cited 14 Dec 2007] Read More