Marketing Issues of Tesco and Recommended Research Methods - Case Study Example

MARKETING ISSUES OF TESCO AND RECOMMENDED RESEARCH METHODS Executive Summary Operating in the international market requires effective data collection, analysis and appropriate strategy. The development of an international market for any business has to be supported by the strategic steps taken by the firm for ensuring sustainable operations in the business house. This enhances the requirements of suitable research methods that should be selected for the research. Tesco being one of the market leaders of the retail industry needs to observe and identify the target markets that can upheld their brand equity and also provide scope for business growth. The research methods selected for Tesco will be a mixed methodology. Use of qualitative and quantitative methods will help in assessing the past and present scenarios as well as the probable future estimations for Tesco. Table of Contents 1.0 Introduction 4 2.0 Tesco’s strategic Journey and Problems faced: 4 3.0 Challenges in the process of international market research: 6 3.1 Using secondary data for international markets 6 3.2 Differences between domestic and International marketing research and marketing information systems: 7 3.3 Critique the role of databases, data warehousing and data mining. 9 4.0 Advantages and Disadvantages of research methods: 10 5.0 Selected research methods: 11 6.0 Recommendations for Tesco: 12 7.0 Conclusions: 12 Reference List: 14 Bibliography: 18 1.0 Introduction As the competition in the business world is increasing, internationalisation is being considered as one of the foremost options by business houses. Researchers such as Drummond, Ensor and Ashford (2012) and Barney (2009) have opined that the concept of globalisation and technological growth have not only reduced the size of the markets for the firms but have also opened up new passage for serving a wider consumer base. In relation to this, firms are exceedingly getting involved in market research. Market researcher has been termed as the process of collecting, analysing and deducing information about the consumers and the market nature in context of launching a new product or service of even entering a new market place. According to Cameron (2009), use of appropriate research methods contributes majorly in the strategy formulation and in the outcome of the business activities. This factor will be analysed in the following sections of the report on the basis of Tesco for assessing their next strategic option available to the multi-national retailer. 2.0 Tesco’s strategic Journey and Problems faced: Tesco presently is the leader of the retail and supermarket chains in the European segment while in international retail industry Tesco holds the second position right behind Wal-Mart (Jansson, 2011). Although, the global recession of 2007-08 hampered the retail sector operations in the UK and other major European segments, Tesco was able to maintain their leading position by focusing on diversification in terms of consumer offerings. For instance, they have expanded their product base from FMCG and other retail products to banking and credit services (Tesco, 2014). Tesco bank has also opened up various financial markets for the company to venture into. Also, in the year 2013 Tesco acquired one of the famous restaurant groups called Giraffe which will expand their services into the food and beverage industry (Tesco, 2014). However, Tesco’s growth has also been marked by some scandals such as the horsemeat scandal 2013 in Irish and the UK markets which reduced the overall sales of Tesco across its operational markets all over the world (The Guardian, 2013). Apart from Malaysia and Hungary, all other countries where Tesco operated faced shortfall in their sales due to the Horsemeat scandal (The Guardian, 2013). Considering the overall business performance of Tesco in the domestic and foreign market, it has the highest power score percentage of 17.7% in comparison to its other counterparts such as Sainsbury’s 12.2%, Asda 13.5% and Morrisons with 9.9% (class lectures). The power score calculation is based on the consumer demand for the brand based on their brand association. Considering their present financial performance and brand reputation in the international retail segment, the growth potential for Tesco is 45% which needs to improve in context of their competitors’ growth potential (class lectures). For instance, Aldi is the highest with 62% followed by Asda 61% whereas Sainsbury’s holds the third position with 58% growth potential (class lectures). In terms of the challenges in the international market, the key threats apart from the competition are the changes in consumer behaviour, low entry barrier for new entrants in the retail market, technological superiority increasing e-commerce usage among global consumers and finally the instable exchange rates of different nations (Jansson, 2011). On the other hand, Ghoshal (2009) mentioned that operating in the international market cannot be totally controlled by a company as many influencing factors are independent in nature. Grant and Spender (2009) reflected that the volume of firms in the retail sector is increasing rapidly in comparison to that of the consumer volume which has intensified the competition. The essentiality developing a sustainable business process based on analytics, logical decision making and organisational objectives has increased in the past decade (Schoenecker and Cooper, 2010). In the case of Tesco, the diversification in their customer offerings has helped them in enlarging their consumer association and brand value (Andersen, 2009). However, in order to further enhance the scope of international operations, the strategic option for Tesco needs to be analysed on the basis of their current performance and the market demands. 3.0 Challenges in the process of international market research: 3.1 Using secondary data for international markets Use of secondary research in context of conducting international market research often reflects the scope of organisational business process and the historical development of the market in relation to the operational possibilities for the concerned firm. Bergh and Ketchen (2009) reflected that secondary data analysis is a cheap process for gathering information in order to make business decision and also enhances the range of information as it includes past references as well as forecasts future potential of markets. According to Denzin and Lincoln (2011), secondary data can be segmented into two parts namely, internal and external sources. Internal sources of secondary data for market research includes the organisational information such as profit and loss statements, inventory records, sales and expenses figures, balance sheets, etc. whereas external sources comprise of Government database, media reports, reports issued by regulatory authorities and third party research agencies, think tanks, commercial databases, etc (Hesse-Biber, 2010). The key issues faced in conducting secondary research however is to ensure the authenticity and validity of the data being collected. Johnson, Onwuegbuzie and Turner (2007) mentioned that use of secondary data may not necessarily reveal the results based on the contemporary scenario but a situation which has already changed and this can hamper the efficacy of the business decisions and strategic planning process. Adding to this, Morgan (2007) stated that the source of secondary data is questionable as the user is not aware of the process used for developing the concerned secondary database. Also in terms of measurement of the indexes considered in the planning process of the market research can be missed or misinterpreted as secondary data (Saunders, Lewis and Thornhill, 2009). On the other hand, lack of specific data and use of terms with broader meaning can also lead to delusion in the planning process. 3.2 Differences between domestic and International marketing research and marketing information systems: It can be gathered from the above made discussion that the variables in international market research is more in comparison to that of domestic market research. However, to analyse in an in-depth manner, Morrow (2005) highlighted that domestic market research mostly focuses on the geographic, cultural, social, economic and ethnic considerations of a particular nation and the concerned business regions. Although the variables are of similar nature in international market research but the variety or rather diversity in the research field is greater in comparison to that of domestic research. Market research not only helps the firms in indentifying and assessing the market conditions and consumer needs but also creates opportunities to design their marketing planning in accordance with the present and future needs of the business. Apart from this, market research reflects the competitive position of firm in comparison to its competitors and provides a direction for developing their marketing aim and objectives. Belk, Fischer and Kozinets (2013) stated that international market research mainly focuses on the consumer behaviour, purchase decisions, exchange rate influence on the concerned national economy and the consumer purchasing power. It can be considered that international market concentrates on understanding the ability of the firm to sustain in the unknown environment. Furthermore, Belk (2006) emphasised that in the contemporary scenario growth of technology has enhanced the data that can be collected from the basis of the international markets. New aspects such as influence of political, legal and environmental factors are also evaluated in domestic as well as international markets. The market reflection of domestic and international markets is also different which enhances the scope of secondary research (Cokley and Awad, 2013). Sekaran and Bougie (2010) noted that cultural diversity in international market is more which also increases the variance in the results developing complicacies in the business planning process of companies. Hair and Money (2011) stated that income and purchasing power highlights highest volatility in case of international market research because of difference in economic scenarios of the markets. On the other hand, in case of domestic markets, the purchasing power of the consumers can be easily identified by observing the consumer price index of the nation. The concept of customer relationship management plays a crucial role in market research process as it ensures direct communication with the consumers and also acts as an information database (Morgan, 2007). CRM does not reflect the differences between domestic and internal market research but its role is different in both the processes. CRM helps the firms to collect queries and feedbacks of the customers and helps the firm understand the necessities of the consumer base (Drummond, Ensor and Ashford, 2012). It also helps the firms in segmenting their consumer group on the basis of their age, income, purchase frequency and brand loyalty. In return these factors help the firm to assess the market forces of demand and supply and develop their operational functions accordingly. 3.3 Critique the role of databases, data warehousing and data mining. Database can be defined as a storehouse for all the information gathered for any particular process (Harrison and Reilly, 2011). Databases are created in order to develop a proper and organised process of managing the information base which also includes the process of data sorting, data utilisation and data sharing. Burns, Burns and Burns (2008) considered database development as an efficient way of resource utilisation in terms of expenses, space and time management. However, Toloie-Eshlaghy et al. (2011) reflected that modern day databases are influenced by errors such as duplicity and misinterpretation. Data mining and data warehousing are two of the most essential aspects of database management process (DBMS). According to Lyons et al. (2013), data mining is used for data sorting. For instance, e-commerce websites often indulge in data mining to ensure authenticity of the transactions being conducted online. On the other hand, data warehousing is related to the storing of data in a central or mother database system. For instance, the information provided to any e-commerce website regarding account opening or bank details during transactions are being stored by the website in a central database. Harrison and Reilly (2011) reflected that data warehousing is the first step in the process of DBMS and followed by data mining. Data warehousing is designed by technicians handling the database design while data mining can be done by the users using the information. Data mining often is used for manipulating the information in order to seek the expected answers for any particular task. Each of the concerned activities has a critical role in the present day functions of big business houses. As stated before, data base management is being utilised for reducing the time taken for information based research or planning process of a firm. Similarly, data warehousing allows the operators to access the information base from any corner of the world with the help of ICT technologies such as cloud computing, shared online drive or via a common platform for sharing (Burns, Burns and Burns, 2008). Moreover, data warehousing also helps in tracking the usage of data by various users and reflects the activities being conducted with the help of information base of a firm (Toloie-Eshlaghy et al. 2011). Data mining on the other hand is mainly related to the process of market research or any type of business research that requires analytical decision making process (Harrison and Reilly, 2011). Data mining helps the organisation in identifying the variables or parameters required for making any decision. For instance, in order to promote the food segment of Tesco, data mining can be used for assessing the consumer taste in accordance to their age or income groups. However, data mining process often includes manipulation for developing a specific result which can also lead to false results and hence destructive planning process for the business house (Burns, Burns and Burns, 2008). Overall it can be gathered that the primary role of DBMS, data warehousing and data mining is to design and develop the information management system of a firm for better information gathering, storing and sharing. 4.0 Advantages and Disadvantages of research methods: The two primary categories of research methods are quantitative and qualitative research methods. The use of research methods however can be mono method (using any one of quantitative or qualitative methods) or mixed method (using both the research methods). In the words of Lyons et al. (2013), qualitative research method is mainly used in order to develop a theoretical understanding of the subject topic in an in-depth manner whereas quantitative research is based on analytical measurement and examinations of the data collected in a research and develop a quantified outcome to the research process. Qualitative methods focus on gathering and analysing in an explanatory manner that provides a pool of knowledge and theoretical understanding for the researcher however differences in opinions can develop confusion regarding any set conclusions (Harrison and Reilly, 2011). Because of a wide explanatory process involved in qualitative studies the outcome is most often presented in a broad manner that lacks specific details or evidence related to the result of the study. As stated by Toloie-Eshlaghy et al. (2011), quantitative research methods follow a stringent process of analysis which helps in justifying the outcome of a research process. Quantitative research processes includes investigations that measures the contribution of different variables involved in the study. However, Lyons et al. (2013) argued that quantitative research methods fails to relate the outcome of a study with the natural surroundings and thus is not able to explain the research factor implications for different scenarios or individuals. 5.0 Selected research methods: Based on the above critical argument of the research methods and the requirements of the concerned market research, Tesco can opt for mixed research method for their strategy development. The selection of mixed research method will also help in utilising the positive aspects of both qualitative and quantitative research processes. Mono method of research has not been considered as Tesco will need to understand the market details in a descriptive manner with the support of evidences that will help the business house in developing their strategic planning process and design their future strategy. In this situation, analysis in an explanatory manner without a specific outcome will not be sufficient for the business house. 6.0 Recommendations for Tesco: Qualitative research will help Tesco in understanding the historical developments in their selected markets and also provide them an insight to the consumer behaviours and the ongoing trends the market place. On the other hand, quantitative research method can be utilised for determining the specific aspects if the strategic planning process such as budget development based on the analysis of the expenses and the time required for getting to the breakeven point in the target markets. Mixed research method will also help Tesco in gathering information of both secondary and primary nature creating a more analytical approach for the process of market research. However, it has to be considered that mixed method of research increases the amount of data collected for the research process and can complicate the outcome. Also use of mixed research often manipulates the data mining process as users of the data can manipulate the data. These negative factors have to be considered by Tesco while designing the international market research. 7.0 Conclusions: Tesco being a multinational giant in the retail industry have a strong position in the industry but are trying to strengthen their position in the international market place. Performing a market research process for international market requires extensive data mining and data warehousing that has to be supported by the appropriate research method. Analysis of the research process reflected that using mixed research process will help in creating a robust database for Tesco and provide both numeric and explanatory knowledge regarding the target markets. 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