Situational Analysis for Tesco - Case Study Example

Company Overview and Target Market Overview

Jack Cohen formed Tesco Supermarket in 1919, it started its operations in West End market stalls in London and is one of the largest chain stores with stores in 14 countries. In 2012, its sales exceeded 72 billion Pounds, which represented a 7.4% growth from the previous years (Tesco, 2012). It sells over forty thousand products including food, clothing and other non-food lines. It have over 530,000 employees and serves a large customer base of around two million per month (Dudovskiy, 2014).

Tesco's target market is the middle-class population in Uganda. Since the retail industry in Uganda is still young and only dominated by a few international supermarkets from Kenya and South Africa, Tesco has a high potential of growing in this country. There is also support from the Government of Uganda evidenced by the tax breaks for foreign investors and repatration of profits. This will reduce the initial operational costs as the store settles in during the first years (Ministry of Finance, 2014).

Tesco operates a large variety of products and is bound to face several competitors. The top competitors for Tesco in the UK include ASDA Group Limited, ExxonMobil Corporation for the petroleum products, The Boots Group PLC for the shoe section, and Wal-mart for the general retail operations (Dataminator, 2004) to name but a few. Although its market share is declining, Tesco has had the largest market share (Currently at 27.9%) especially in the grocery market for more than 25 years, and it has managed to deliver a variety of groceries and other services satisfy customer demand, Including convenience stores, supermarket, superstores, and hypermarkets. In the Ugandan Market, its main competitors will be Uchumi Supermarket and Nakumatt Supermarket from Kenya, and the Shoprite from South Africa.

Market Entry Mode

One of the ways in which Tesco plans to enter the market is through exporting either directly, by establishing stores in various parts of the Ugandan Market or indirectly using intermediaries. The indirect mode will be used during the first months of operation in order to establish a rapport with the customers in the market and learn more about how to overcome the daily challenges in the market. The direct mode will be quite costly, so a few stores will be set up in select parts of the countries which have a high potential for growth and earning revenue.

Tesco also plans to enter the Ugandan market through franchises. It will offer franchises to select stores with a high level of customer appeal. This way, it will be able to increase its revenue stream through the franchise fee. Tesco will involve experts from both the UK and Ugandan market who will integrate the legal systems and international laws in these agreements. This way, Tesco will be able to protect itself from any legal liabilities in the future. The other modes that Tesco will use will include management contracts, whereby the company will involve management consultancy companies from Uganda, who will provide management services within the first few years of operations. This way, Tesco will be able to focus on its expanding project in the country (Prathamesh, 2013).

Target Market Objectives

The main objective of penetrating the Ugandan market is to increase awareness of Tesco stores worldwide including its brand, products, and its new locations within the country. Tesco will achieve this objective through advertisement in the social media, Televisions, radio and newspapers. In order to reach those people who do not have access to these, Tesco will carry out promotional activities and involve the countries celebrities in these activities. Another objective is to increase sales revenue and also innovate many ways of increasing its revenue stream in Uganda as well as in other countries within Africa. Tesco will achieve this objective by providing better quality products than its competitors. It will also increase customer experience through training of the employees who frequently interact with the customers (Allen, 2015).

Competitive strategy

As Tesco continues to expand its wings geographically, it has to have a sustainable competitive strategy . This will require it to establish strong barriers against its competitors. To do this, it will adapt the overt offensive strategy by knocking out one of its competitors to take over their companies. It will achieve this through either merging with one of them or acquire one of their major business lines. Tesco will also expand its market by finding new customers especially those in remote areas with limited access to urban centers; creating new uses to its product lines such as recycling products like car tyres to be used as flower gardens, and encouraging more usage through product promotional activities and offers.

Another strategy is to protect its market share. This can only be achieved through means of retaining its current customer base. The employees of Tesco Uganda will undergo training on how to treat customers and other relevant training that will appeal customers. They will also receive the acceptable level of compensation based on the rank. Tesco will strive to increase its market share (Prabhu, 2011). Tesco will increase its market share through progressive innovations in operations and products. Depending also on the profitability and cost, Tesco will also imitate some elements in its competitors because the rivals have been in the Ugandan market for some time and have learnt much more about the market and ways to manouver around the market than Tesco has (FrogDog, 2014). Through these strategies, Tesco will be able to become a market leader in Uganda and also optimize its resources.

By offering a variety of products, Tesco will also adapt a differentiation strategy. The products in Tesco stores will be associated with affordability and high quality. Management will also implement cost leadership strategies by offering low priced products, but at the same time engaging with low-cost suppliers in order to minimize the operational costs. For the stores to increase the customer base, they need to be located strategically. For those areas that are remote and have transportation problems, customers can be provided with parking within the premises.

Marketing Mix

Tesco will use its marketing tools - price, product, promotion and place (Doyle, 2002) – to achieve its objectives.

Product

Tesco chain stores offer its customers a wide range of products to select from, including food, clothing, petrol, household products, groceries and much more. Tesco supermarket store seek to provide quality products at affordable prices, therefore, all its products are fairly priced. It also has a wide network of stores that are easily accessible in various parts of the world, anyone travelling to Asia or Europe can easily access its stores. In the Uganda market, Tesco will apply he same principles but take into consideration the international laws and cultural differences.

Price

All products in the Tesco Uganda store are fairly priced with the main objective of helping the customer to save money, but at the same hime obtain high-quality products. N order to maintain the low prices of the products, the management will seek to purchase the products from suppliers with extremely low prices. these prices will also flactuate depending on the economic factors like inflation. Customer perceptions will also be considered in the pricing decisions

Place

Tesco stores will be located mostly in the urban centers, especially in the initial years of operation. As it continues to expand, it will set up stores in select remote areas, which have high-level security and high customer traffic. Management will also select and use the best distribution channels for its products. With the online platform in place, the customers in Uganda will also be able to access products from other countries, which will be delivered at a small fee to cater for the shipment fees.

Promotion

Tesco will use a variety of cost effective strategies in promoting its products and stores, including advertising through media, Direct marketing, sales promotion, publicity, and exhibitions. The main objectives of the promotional strategies will be to increase awareness of Tesco stores and Products in Uganda, and to persuade and remind the customers about the advantages of buying from the Tesco stores (Matamalas & Ramos, 2009). Promotion is important for those products that are not popular, especially because this could influence the image and perception of these products on the customers' minds. In determining the kind of promotional activities to engage in, the management will consider the type of product, the target market, stage in the life cycle of the product, and the available distribution process.

Management Functions

Organization

The management is tasked with the responsibility of arranging the available resources towards the achievement of objectives set that are in line with the other Tesco stores in the other continents but put into considerations the various cultures involved and the different legal and economic environments. This function of management will enable the company to determine the optimal internal structure that will push the operations towards the set goals and objectives.

Monitoring progress

The management will set standards against which the performance of the stores will be rated. They will also carry out evaluations of the performance of employees on a regular basis in order to increase customer satisfaction. The performance of the stores will be calculated based on the profitability, customer retention, and market share contribution.

Motivation

Employees of these stores will be properly compensated in order to meet their basic, educational, health, and family needs. The evaluation process will be done on a regular basis in a bid to improve their performance through positive feedback. Other motivational techniques that Tesco management will apply include paying close attention to individual employee matters, advancement opportunities based on their performance, transparency in communication, and socialization among the employees especially through picnics team activities.

Recommendation for Action

Tesco should use its market dominance in the global market in the advanced retailing methods in Uganda such as the m-commerce, where transactions are carried out through the mobile phone. In Uganda, the cell phone providers like MTN offer such services where one is able to pay for products and services through the mobile phone. In order to reduce its costs of distribution, it should make alliances with suppliers. It can also reduce the costs by integrating technological advancements in its operations. The customer care services should also be incorporated in order to enhance customer satisfaction.

Once Tesco has established its foundation in Uganda, it can use its large market share to shape the trends in the market and eliminate the threats of imitation from competitors. It can also use the aspect of convenience to grow while still avoiding commission for competition and legislation of monopoly businesses. There should also be continued research and development in understanding the culture in Uganda and innovate ways to meet the demands of customers. The management should also involve its employees in the whole proess of establishing the store in Uganda and continuously train them on relevant matters that may affect them.

In conclusion, Tesco has a competitive advantage in the Ugandan market. The management has innovated products and services to meet the customer needs through the online platform and also the convenience of these stores. It also provides distinctive and superior products compared to its competitors. The customer relationship management strategies that have been put in place are also pre-emptive and difficult for the competitos to match. The products that Tesco offers are affordable, due to the affordability campaign that ivolves offering free after sales service. The wide range of products that Tesco stores provide make it easy for the growth of the stores. They are profitable and the cost cutting initiatives put in place by management will enhance the profitabilty of the stores (Smith, 2012).

Reference List

Matamalas, R. L. & Ramos, M. S., 2009. Marketing Strategy Of The Supermarkets, s.l.: s.n.

Allen, K., 2015. What Are Some Target Market Objectives?, s.l.: s.n.

Dataminator, 2004. Tesco Plc: Company Profile, New York: s.n.

Doyle, P., 2002. Marketing Management and Strategy, Chapter 3. s.l.:s.n.

Dudovskiy, J., 2014. Tesco Swot Analysis, s.l.: s.n.

Ministry of Finance, 2014. The poverty status report 2014: Economic Development Policy and Research Department, Kampala: s.n.

Nwagbara, U., 2010. Managing Organizational Change: Leadership, Tesco and Leahy's Resignation. e-journal of Organizational Learning and Leadership, 8(2), pp. 30-52.

Smith, A., 2012. Analysis of the UK grocery market environment: Does Tesco have a competitive advantage?, s.l.: s.n.

Tesco, 2012. Annual Financial Statements, West End: s.n.