Tesco provides its products, services , groceries, and financial services mostly to the customers of various like U.K, Argentina, U.S, Brazil, China, Thailand, Poland, Hungary, Greece etc. Tesco enhanced customer relationship and satisfied their needs by conducting massive market survey and gathering information of current and potential customers. In meeting customer needs, Tesco understand the nature and demands of the market, customizing service, better choices, lower prices, and products tailored to the local market, greater selection, and more non-food product that impact customer satisfaction , purchase behaviour and boost sales. While this could be an opportunity for Tesco to increase its customer base (barging hunters ,and Premium shoppers), it can also be taken as a threat as the marketplace changed “the consumer changes in buying behaviours¿½ requires further market researches and analysis. Tesco’s success in Hungary and failure in France indicated the business could work better in fresh market with few large domestic retailers. Moreover, Non-food sales can be seen opportunities for growth outside of the retailing sector.
Tesco has many competitors in the retail industry including the U.S’s Wal-Mart Stores Inc., Frances Carrefour SA, and the Netherlands Royal Ahold NV. The competition in the retail industry is not only about location, but also about price reductions to attract customers into their stores and better service that delight customers. As a result, Tesco has adapted powerful strategy that targeted price-conscious buyers ¿½pile it high, sell it cheap¿½ to offer bigger discount and focused on customer service. However, Tesco strategy partly down due to the aggressive sales strategy of their competitors such as Germany¿½s Lidl & Schwarz Stiftung & Co. and the U.K.¿½s ASDA Group Ltd. This indicates the presence of huge competition .Further
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Tesco is extending into online retailing can be seen as opportunity to boost sales and cut costs. This includes customers being able to buy their shopping online rather than in-store. This increase in customer convenience can significantly boost sales if implemented effectively. Tesco’s interests in Japan and U.S are likely to be an opportunity to increase its customer base, and it could be also seen as threat as losing control over UK market since they holding up to 25 % share of retail industry.
Tesco has formed a strategic relationship with The American company Safeway Inc to take online service ” tesco.com ” home shopping model to the US. In addition, Tesco has developed a relation with 1,300 local businesses in Poland, this means Tesco¿½s suppliers have little power in regards to pricing and the products they offer and allows Tesco to adapt their supply chain and change supplier with relative ease. Moreover, around 60% of non-food products are locally manufactured in Slovakia creates stability in the long-term in the uncertain economic environment.
Tesco continues to employ a business model that revolves around satisfying its customers and simplifying their shopping experience. In the United Kingdom, Tesco has relied on a multiple format approach to succeed in the grocery market; the branding of different types of stores differentiated based on size and product diversification.
The company has been very successful in following customers into expanding markets within the UK, such as financial services, non-food related goods, telecommunications and garden centers and has effectively implemented this same approach in new markets abroad. Moreover, Tesco deliver product tail orated to the local market and use best practices and recruiting talent in order to build its brand image.
Tesco has focused on developing large hypermarket stores when entering into these markets. By doing so, they have placed more emphasis on non-food products that have higher profit margins.
5. Context Analyzed using PESTLE
TESCO is one of the largest global retailer that shows a level of buying power to guarantee mainstream economies of scale.
Q2. How effectively does the organisation¿½s marketing reflect an understanding of the targeted segment(s) needs and wants and customer/buyer behaviour?
> Identify total market
* Existing customers: Barging hunter, premium shoppers, and middle-market. 25% market share in UK, as of 1997, $4.4 billion sales non-UK, and with 692 stores located UK and 140 stores overseas.
* Future Customers: All classes of customer (upper, medium and low income customers), online shopper, and non-food markets shoppers.
> Determine segmenting
There are a number of ways Tesco segment its potential market based on the information contained within the case study.
* Geographic Segmentation:
* Tesco is an UK-based expanded globally on many continents like Asia, Europe, and USA. It has stores around the world.
* Setting up small ¿½Tesco Direct¿½ shops in busy urban areas like city centres and placing convenience stores by the pumps.
* Large supermarkets that are set up in more rural (slightly out of city) areas.
* Demographic Segmentation:
In the Demographic segment Tesco have focused primarily on income segmentation and lifecycle.
* For families, Tesco provide Baby-friendly shopping carts.
* Tesco¿½s aims to market to all classes of customer, to satisfy upper-end shoppers, it introduced organic food products. (Non-price sensitive customers)
* Tesco launched brands identifying these different segments for example, house-brand goods differentiated by price or quality, first under the Value brand targeting low and middle income, and later under the finest gourmet label targeting high income.
* Tesco managers select stock based on country-specific holidays and customs.
* Tesco stock Halal meats for Muslims , Masala curry paste for Indians customer , and Rubicon exotic juice Afro-Caribbean shoppers
> Profile each segments
Based on Geographic:
Tesco was successful in Hungary, a country where it¿½s population open to fresh shopping experience. This would indicate that the business would succeed in other places as well.
Based on Demographic:
Tesco stores are divided into many formats and serve different consumers preferences and demand.
> Assess segment attractiveness
Tesco cater and satisfy more than one segment of the consumer market meaning that both elastic and inelastic customers are satisfied and are paying different prices that in turn is increasing Tesco¿½s profit margins.
> Profile each segments
* Tesco Brand – Standard products at “mid range, own label store prices”.
* Tesco Finest – Aimed at middle to high income customers.
* Price sensitive customers (elastic demand) ,and non-price sensitive (inelastic demands)
> Determine positioning
* Cost Leadership (lower cost) ,and differentiation (higher cost)
Marketing technique and tools
* Tesco apply the ¿½Cost Leadership¿½ strategy, low cost, in order to gain an advantage over rivals and offer cheaper prices to customers.
* Tesco also apply the differentiation strategy, higher cost, with its products and create innovative ways of keeping up with competition and staying on top. This shows how cautious Tesco was to keep their standard high and maintain their premium quality image
* They always selected highly visible locations and opened stores as clusters.
* Tesco’s stores have a similar design in the home country and overseas. They are located mostly on the fringes of cities to lower costs.
* To achieve global economies of scale, the company management has focused on standardizing management methodology.
* Tesco staffs are trained to respect and respond to the needs of our customers and to promote “Every Little Helps” at all times.
* Tesco enhance its image as a local retailer was to employ local management and staff. In all of its foreign stores Tesco employed 95% local employees
* Tesco adapted ¿½think global, act local¿½ strategy in its international operations and delivered customized products tailored to the local market and economics of scale.
* Tesco enabled stores to share resources ¿½cluster of shared cost¿½, even if they don¿½t operate in the same country.
* Tesco combined operational efficiencies with product and service customization for each foreign country.
Q3. Given the insight into organization¿½s marketing strategies and the target segment(s), what are they doing right and what are they doing that could be improved?
> Doing right
* Tesco try to make customer shopping trip as easy as possible by offering the convenience of either large or small stores and bringing simplicity and value to complicated markets
* Tesco apply the ¿½Cost Leadership¿½ strategy and differentiated by service, price and quality, first under the Value brand, under the finest gourmet label, and friendly service .
* Tesco used of its house-brand products, including the up-market “Finest” and low-price “Value”.
* Tesco moved towards the financial sector, telecommunication, and petrol, has diversified the Tesco brand and provides opportunities for growth outside of the retailing sector.
* Tesco pay more attention in-depth and broader research into customer behavior than any other retailer.
* Recruitment and selection strategy at Tesco target local employee. With 37 percent of the company¿½s physical floor space is located outside the United Kingdom, 5% of its employees have been relocated from the United Kingdom
* Tesco looks toward market leadership as its goal, but it doesn’t attempt to “buy” market share using traditional sales-driving techniques.
* The Tesco.com online service designed for consumers who are willing to pay extra for having their groceries collected and delivered to their door
* Tesco has formed a strategic relationship with The American company Safeway Inc to take online service ” tesco.com ” home shopping model to the US.
* Tesco should change its strategy from ¿½pile it high, sell it cheap¿½ to a ¿½hybrid¿½ strategy balancing both, price and quality.
* To prevent a product from entering the decline stage, Tesco can modify the market by going in new markets by researching the demands on the new market.
* Tesco can also modify the marketing mix. Introduction of new product or new variables for same product can be applied. They can also reduce price to beat competitors.
* Tesco can also introduce new brands on the existing market like Tesco Value.
Q4. Recommend ways you think that the organization can improve its marketing efforts.
The 4P¿½s framework can be used to suggest improvements in marketing and positioning.
* Tesco has to target wider range of consumers by introducing new products or modifying the existing product.
* In product classification, more focus should be given to shopping items like cloths along with convenience items.
* Tesco should use ¿½product line pricing strategy¿½ so that there will be two prices, one focusing senior people which fulfils the core function only and is cheaper, and one for youngsters which have many features with higher price.
* Tesco should increase the number of the stores , build stores near entertainment areas like cinema, so that X and Y generation will roam around to different stores
4. Promotion: The Company should adopt aggressive promotional strategies, in order to boost its sales. Moreover, they should pay more attention on initiating new promotion which is more of a fun rather than any moral promotion that will touch the youths.
5. People: Tesco should hire well trained and skilled people, in order to deliver products to the customers in an effective manner. furthermore, provide training to its people to make them competent enough to use new technology in an effective manner.
6. Process: Tesco should adopt the B2C marketing approach and develop tailor-made systems, in order to design the process more easy for the customers and employees to communicate for the delivery of products.
7. Physical evidence: Tesco should improve availability of products to the customers by placing them in city store
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