Marketing report of Tesco

Executive Summary

The main aim of marketing is to understand customer’s needs and to develop a right way that can cover all this essential matter. Basically marketing jobs is make sure always and find out about customer requirements.

Aim of this easy focus on Tesco marketing operation and how they control their domestic and international market. The information that use in this report is secondary data and also different techniques, analysis such as PESTEL analysis, SWOT analysis, Marketing mix analysis, market segmentation, targeting analysis etc are used to discover Tescos marketing position in national and international place.

Introduction

TESCO is top leading retailer in UK. It manages over a thousand supermarkets, hypermarkets, and convenience store in the United Kingdom, Ireland, central Europe, and Asia. TESCO started life in 1919 when Jack Cohen started surplus groceries from a stall in the East end of London. MR Cohen made profit of 1 from sales of 4 on his first day. TESCO brand first appear five years after in 1942 when he bought shipment of tea from a MR T. E Stockwell. From that time TESCO slowly improve in retail business and now they are take top position in UK retail business. Tesco aim is provide best products for their customer and make sure about customer requirements.

Definitions of Marketing

The definitions of marketing of marketing can be divided into two categories:

1. Classical (narrow) and
2. Modern (board)

The classical definition of marketing has several weaknesses that are overcome in the modern definition. A proper definition of marketing should not be confined to goods and service. It should cover organization (for example, Florida Orange growers), people (political candidates and celebrities), place (Denver, Colorado), and ideas (the value of a college education). Figure 1-1 definition of marketing:-

Classical / narrow

1. Marketing is the performance activates that direct the flow goods and service from producer to consumer or user. (Ralph S.Alexander (Chairman), “Report of the definitions committee,” journal of marketing, vol. 12 (October 1948), pp. 202-217)
2. Marketing is the process in a society by which the demand structure for economic goods and service is anticipated or enlarged and satisfied through the conception, promotion, and physical distribution of such goods and services. (Statement of the Philosophy of the marketing faculty, the Ohio state University, The journal of marketing, vol. 29 (January 1965), pp. 43-44).

Modern / board

1. Marketing is the exchange taking place between consuming groups on the one hand and supplying groups on the other.

2. (Wroe Alderson, marketing Behavior and Executive Action (Hoewood, 3 Richard D. Irwin, 1957), p. 42).

3. Marketing is concerned with regulating the level, timing, and character of demand for one or more products of an organization. (Philip kotler, “The major task of marketing Management,” Journal of Marketing, vol. 37 (October 1973), p. 42).
4. Marketing is human activity directed at satisfying needs and through exchange processes. (Philip kotler, Marketing Management: Planning, Analysis, and Control, fourth edition (Englewood Cliffs, N.J.: Prentice-hall, 1980), p. 19).

Main Characteristics of Marketing

There are four main characteristics of marketing oriented organization:

1. Production Orientation: This is organizational or values where competitive advantage is attained through increase productivity or volume. It’s a traditional orientation that exists in the Henry ford era. In modern times this is practiced in compliment with other orientations.
2. Product Orientation: An organizational culture where competitive advantage gained through the creation of product leadership (high quality features) becomes the sole objective of a business.
3. Sales orientations: An organizational culture where competitive advantage attainted through the creation of superior sales force to generate adequate sales becomes the objectives of a business. Carphone warehouse attained its objectives through telemarketing.
4. Marketing Orientations: An organizational culture where beating competition through the creation of superior customer value is the paramount objective throughout the business (piercy, market led strategic change 2001).

Key elements of market orientation

The main key elements of market orientation are:

1. Customer orientation: Understanding customer well enough to create superior value for them.
2. Long term profit focus: Having this as strategic focus business objective.
3. Interfunctional coordination: Mobilising all company resource to create value for target customer.
4. Competitor orientation: Awareness of the short and long term capabilities of competitors.
5. Organizational Culture: Management and employee behavior to focus on customer satisfactions a value.

These are the key aliments that must be flow in oriented organization.

Benefits of marketing approach

• High customer satisfaction, loyalty and retention
• Increase sales and market share
• Growth in profitability
• Enhanced competitive advantage
• Improved corporate image

Cost of marketing approach

• Increasing customer expectations
• Staff training and development needs
• Technology requirement for customer contact and improved ways of doing business
• Increase resource demand to providing customer specific marketing
• Complex customer growing needs and power

Market orientation assessment

Customer orientation

• Regular collection of information on customer needs
• Customer focus corporate policies and objectives
• Regular customer satisfaction review and improved service levels
• Responsiveness to customer needs
• Market offers reflecting the various needs of distinct segments

Competitor orientation

• Regular collection of information on competitor activities
• Responsiveness to competitor actions
• Bench marking on competitor offering
• Differentiating on the basis of customer needs

Market segmentation criteria

In addition to having different needs, for segments to be practical they should be evaluated against the following criteria:

• Identifiable: the differentiating attributes of the segments must be measurable so that they can be identified
• Accessible: the segments must be reachable through communication and distribution channels.
• Substantial: the segments should be sufficiently large to justify the resource required to target them.
• Unique needs: to justify separate offerings, the segments must respond differently to the different marketing mixes.
• Durable: the segments should be relatively stable to minimize the cost of frequent changes.

A good market segmentation will result in segment that are internally homogenous and externally heterogeneous, that is, as similar as possible within the segment, and as different as possible between segments.

Base for Segmentation in consumer markets:

Consumer markets can be segmented on the following customer characteristics:

1. Geographic
2. Demographic
3. Psychographic
4. Behavioralistic

http://www.netmba.com/marketing/market/segmentation/ (access-05-01-2010)

Targeting Strategy

There are several different target-market strategies that may be followed. Targeting strategies usually can be categorized as one of the following:

• Single-segment: strategy – also known as a concentrated strategy. One market segment (not the entire market) is served with one marketing mix. A single-segment approach often is the strategy of choice for smaller companies with limited resources.
• Selective specialization: this is a multiple-segment strategy, also known as a differentiated strategy. Different marketing mixes are offered to different segments.
• Product specialization: the firm specializes in serving a particular product and tailors it to different market segments.
• Market specialization: the firm specializes in serving a particular market segment and offers that segment an array of different products.
• Full market coverage: the firm attempts to serve the entire market. This coverage can be achieved by means of either a mass market strategy in which a single undifferentiated marketing mix is offered to the entire market, or by a differentiated strategy in which a separate marketing mix is offered to each segment.

The following diagrams show examples of the five market selection patterns given three market segments S1, S2, and S3, and three products P1, P2, and P3.

http://www.netmba.com/marketing/market/segmentation/ (access-05-01-2010)

A firm that is seeking to enter a market and grow should first target the most attractive segment that matches its capabilities.

Affects of buyer behavior

One of the most important parts of marketing is buyer or customer behavior. Because of that TESCO must understand why a customer or buyer makes a purchase. Without such an understanding it is hard for TESCO to respond customer’s needs and wants.

“According to Peter Clark, co-editor of the Wise Market and co-author of the loyalty Guide reports series,” there are six major factors that play key roles in influencing the loyalty and commitment of customer:

http://www.thewisemarketer.com/news/read.asp?lc=w29860tx2320zs (access-05-01-2010)

This six factors working when every customer goes to buy something. There for TESCO contain to this factor. Because of customer different needs TESCO has focus to maintain what they want and it also depend on different buying situation.

There are two main factors that influence a purchase:

1. Cultural factor: Cultural factors have a significant impact on customer behavior. Culture is the most basic cause of person’s wants and behavior. Growing up, children learn basic values, perception, and wants from the family and other important groups.
2. Social factor: A customer buying behavior is also influenced by social factors, such as the groups to which the customer belongs and social status.

http://www.tutor2u.net/business/marketing/buying_introduction.asp (access-5-01-2010)

This all factor effects on TESCO marketing operation because customer is now king and every business have to make sure about there needs. For example in local market means UK TESCO can sale pork but in Asian market it is not possible to sale pork in every place. Organization duty to make sure about customer requirements and also maintain there cultural and social wants.

Marketing Mix

The concept of a marketing mix is best described by (1990, 43) claiming that is “the set of controllable marketing variables that the firm blends to produce the response it wants in the target market” it is compose of 4ps: product, price, place, and promotion. In the context of TESCO, their entry to the Chiness market should significantly adapt to the culture of the consumer in the said location. However, the company should take into keep in mind the basic standards to which their company adheres to.

A. Product: The management of TESCO should set off product development strategies once they have taken control of their shop in China by marketing their existing products, exporting products in different province of the country and in so doing pressing forward on the possible opportunities of boosting the company’s market penetration and market share. Tesco should consider restoring or revising models of their product to provide the Chiness customers what they want and what they need. In this way Tesco could develop the store’s own brand product which could be marketed strategically within the territory of china.

B. Price: Looking at the situation of Tesco, one way that it could acquire cost advantage is by enhancing process efficiency, expanding exclusive contact to a large supplier of lower cost materials, or steering clear of several costs in general. If rival organizations in the country are incapable to lower their costs by a comparable quantity, Tesco will be capable of sustaining a competitive anchored cost leadership.

C. Place: To develop its success in its retail operations, the Tesco should make multi-million pound investments in store expansion in low-income districts and localities. By getting involved with similar-minded public and private sector groups like local community based associations, colleges, and chambers of commerce, the Tesco will be able to open sites in economically disadvantage districts in china. Targeting these areas will enable the company to gain of local luminaries and gain favor from the local government by providing employment to the locals.

D. Promotion: The Tesco’s approach should constitute a long-standing strategic plan that centers on generation value to expand the loyalty of their customer which takes account of preserving a well-built central Chinese business, to be as strapping in non-food as food product and services, to develop globally and to set the ball rolling on retailing services like on-line shopping.

http://ivythesis.typepad.com/term_paper_topics/2009/08/tesco-marketing-mix.html (access-05-01-2010)

The bottom-line is that object of the marketing mix is to satisfy the customer and in this analysis we can see place play most important roll in china situation. Because of that Tesco not catch that much success like UK or other place. Other hand tesco product price is contribute to get success of Tesco and for that in UK Tesco is a number one retail company.

Different between domestic and international market

There are eight main factors which is play the key roles to different between domestic and international market. The factor is below:

1. Market size
2. Market rate of growth
3. Government regulation
4. Economic and political factor
5. Market share
6. Product fit
7. Contribution margin
8. Market support

(Marketing Today: Gordon Oliver 3rd edition; (1990) prentice hall Inter. (UK) limited. Hertfordshire)

These are the key factor which is making different in global and domestic market. For example: In the case of Tesco, Malaysia, economic development condition, food supply chains are being rationalized according to more complicated major retail and food service consumers who wants to make business with fewer, larger, better-resourced manufacturers, suppliers and farmers. Therefore, power is polarizing the global retail industry. However Tesco has a long term business strategy in order increase profits, the company has three different dimensions in their strategies, and these are: corporate, functional and global or international. In this example we can see that how and why international marketing operation of Tesco deferent from domestic market operation.

http://ivythesis.typepad.com/term_paper_topics/2009/11/strategic-marketing-tescopestleswotbcg.html (access-06-01-2010)

Different marketing strategy of Tesco

Tesco brought about o lot of changes in these marketing strategies and has grown to become UK’s number one retailer. “Today in the UK, the retailer has been dominant force more than 10 years”-(Seth, A. & Randall G., The Grocers: The Rise and Rise of the supermarket Chains). If we look in Tesco history we can see Tesco always change there strategy within time base and for that they get success constantly.

In 1973 Lesile Porter and managing director lan MacLaurin applied one philosophy that is “pile it high, sell it cheap” which had left the company “stagnating” and with a “bad image”. In 1977 Tesco launched “Operation Checkout” which included the abandonment of green Shield stamps, price reductions and centralized buying for all stores. The result is a rise in market share of 4% in two month.

1990s

In 1994 the company took over the supermarket chain William Low, successfully fighting off Sainsbury’s for control of the Dundee-based firm which operated 57 stores.

Tesco introduced a loyalty card, branded ‘Clubcard’ in 1995 and later an internet shopping service. In 1997 Tesco and Esco (part of Exxonmobil) forged a business alliance that included several petrol filling stations on lease from Esco, with Tesco operating the attached stores under the Express format. Ten years later over 600 Tesco/Esco stores can now be found across the UK.

2000s

In October 2003 the company launched a UK telecoms division, comprising mobile and home phone service, to complement its existing internet service provider business. August 2004, it also launched a broadband service.

In 2007 Tesco took part in a joint venture with O2 to from the Tesco Mobile virtual network operator in Ireland. In April 2009, Tesco announced that it had created a super tomato “doesn’t leak.” We can see here that how Tesco change their strategy from beginning to until now.

Other hand we can see Tosco’s almost entire relationship marketing strategy based on its “Clubcard” scheme. It has been able to use the Clubcard very effectively in addressing different customer segments and in attracting customers of all types.

PESTEL Analysis

http://www.learnmarketing.net/pestmarketing.jpg (access 17-12-09)

PEST analysis shows the main external impacts of organization. PESTEL stands for political, economical, sociological, technological, ethical, and legal, in TESCO the following external will have great effects whether negatively or positively.

Political: following the European integration and free trade Agreements, the market has opened up for British Companies to invest in Eastern Europe. Tesco already has 60 Hypermarket store in hungry.

Economic: the Retail sector is fairly recession prawn and also very sensitive t change in interest rates. Since the events of September 11th the world economics have suffered heavily, stock plummeted and price is at all time lows. The world economy is however, now on the up post September 11th.

Sociological: Change in consumer taste and lifestyle represent both opportunity and threats for the industry.

Technological: change in retailing methods as such clothes sales via the internet is now a common place in retailing. Paperless operation, the management and administration of the company are undertaken on IT system, which are accessed through secure servers provide flexibility in the running of the business.

Environmental: the threats are in terms of legal consequence for livestock’s in terms of heath and safety. The renewal source of resource used in production, namely cotton and wool are environmentally friendly.

Legal: the legal factor is national legislation for health and safety both in terms of consumer and also in terms of production of own natural renewable resource for making clothes.

http://www.universitydissertations.com/Marketing/Tesco-Marketing-Strategy.php (access-07-01-2010)

SWOT analysis of TESCO

http://wc1.smartdraw.com/examples/content/Examples/06_Quality_Control/SWOT_Diagrams/SWOT_Diagram_-_Market_Analysis_L.jpg (access-07-01-2010)

Strengths

• TESCO have secured commercial standing within the global market place wining Retailer of the Year 2008 at the “World Retail Awards” this can be used marketing campaigns to drive advantage towards the demographic base for future growth and sustainability.
• In an environment where global retail sales are showing decline or level performance on a like basis TESCO Group have published sales gain of 13% for UK markets and 26% growth in international markets.
• As a business looking for continued expansion TESCO have reserve funds of credit coupled with income derived from property portfolio development funds.

Weaknesses

• TESCO finance profit levels were impacted through bad debt, credit card arrears and household insurance claims.
• TESCOs position as a price leader in UK markets can lead to reduced profit margins in order to retain the key price points on must have commercial items.
• Grocer outlets are not set up to operate as specialist in specific areas of product which can be capitalized on by other smaller bespoke retailer.
• Whilst current economic conditions suggest TESCO key value massage will succeeded there is a weakness in nonessential, mind to high ticket price items which will suffer from the rising cost of living and lower disposable incomes.

Opportunities

• Statistics suggest TESCO is the third largest global grocer which indicates a level of buying power to ensure mainstream economies of scale.
• The acquisition of Homever provides the opportunity to develop the brand through Asia, specifically South Korea and further grow international markets for the group.
• The development of TESCO Direct through online and catalogue shopping will grow the use of technology, providing the launch pad for large non food based products with moderate to high margin returns and less focus on sale and margin per foot return to space.
• TESCO mobile have grown ¼ million customer in 2008 and moved into profitable status suggesting further growth and development within this technological area can be developed.

Threats

• UK and America markets have been affected by economic through the “credit crunch” Lower available income and strategic focus may need to change to lower priced basic products with less focus on higher priced brands suggesting a switch in price architecture.
• Rising raw material costs from both foods will impact profit margins overall.
• Changes to consumer buying behaviors require further analysis – as technology develops consumers buying patterns change which will result in product areas requiring evaluation.
• For TESCO there is a persistent threat of takeover form the market leader Wal-Mart who has both means and motive to pursue such action.

http://www.businessteacher.org.uk/business-resources/swot-analyis-database/tesco-swot-analysis/(access-07-01-2010)

Another element of marketing mix

People: People play c crucial role in the production and delivery of products and service. The physical presence of people performing the job is a vital aspect of customer satisfaction.

The people mix issue:

1. careful job selection
2. careful policies of selection
3. Institute programmers in staff training etc.

Process: process involved the ways in which the market’s task is achieved.

The process mix:

1. company policies
2. accessibility
3. service feature
4. Capacity levels etc.

Physical: The physical evidence relates to those aspects of the service provider that customer can see and fell so as to from an impression of the service or its provider.

The physical evidence mix:

1. logos
2. colours
3. equipment
4. company vehicles
5. labels
6. Packaging etc.

Three new marketing mixes also create importance in marketing. There fore Tescos marketing operation also effect by this new marketing mix.

Conclusion

Present time Tesco is the number one retail company in UK. They expand there business all over the world for example: China, India, Malaysia etc. TESCO have to understand that international marketing and domestic marketing both are complex process. Therefore they have to maintain their marketing progress and keep focusing on customer. In this report we try to show that how Tesco operate there marketing system, what is there aim, and what they can do. So TESCOs main objective is to take long term decision to make profit and also full-fill customer needs.

Recommendation

Based on this analysis we can say that TESCO doing vary well retail market in UK. Now they expand their business all over the world and for that TESCO need to care full about there marketing because different country has different type of customer and their needs also no same.