Marketing Plan of Tesco Plc

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BUSINESS DESCRIPTION

Tesco is one of the largest food retailers in the world, operating around 2,318 stores

and employing over 326,000 people.

As well as operating in the UK, it has stores in the rest of Europe and Asia. It also

provides online services through its subsidiary, Tesco.com. The UK is the company’s

largest market operating under four banners: Extra, Superstore, Metro and Express.

Tesco sells approximately 40,000 food products in its superstores, as well as

clothing and other non-food lines. The company’s own-label products are at three levels,

value, normal and finest. Own brand accounts for approximately 50% of sales. As well as

convenience produce, many stores have gas stations. The company has become one of

Britain’s largest petrol independent retailers. Other retailing services offered in the UK

include Tesco Personal Finance and Tesco.com. Tesco Personal Finance is a joint venture

with the Royal Bank of Scotland. It has over 3.4 million customers, and provides various

financial products and services.

The company has operations in the rest of Europe, including the Republic of

Ireland, Hungary, Poland, Czech Republic and Slovakia. Tesco’s Republic of Ireland

business operates in the region of 82 stores, and around 60 stores in the Hungarian market.

Tesco’s Polish operations include former HIT operated stores. It operates around 66

hypermarkets and supermarkets in this country. In the Czech Republic and Slovakian

markets, Tesco operates 22 and 23 hypermarkets respectively.

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Tesco also operates stores in Asia, including Thailand, South Korea, Malaysia and

Taiwan. The company operates 64 stores in Thailand and 28 stores in the South Korean

Market, while in the Taiwanese and Malaysian markets it has three stores in each nation.

Situation Analysis

Situation analysis is a crucial part of a marketing plan, as it discusses about

the organizational strategies, customers, marketing effectiveness, porter’s five forces,

SWOT analysis and marketing effectiveness. For situation analysis, FEPSOS

approach will be applied in which functions, environment, productivity, systems,

organization and strategy will be discussed.

These are as follow:

Functions: The Company operates in diverse areas that are profitable for it. It

operates a grocery home shopping service and provides telecommunications,

consumer goods and financial services online. It also provides internet based DVD’s

on rental basis to the consumers that is a profitable area for its business. It also

operates in the area of home phones, mobile phones and Voip business. The company

also executes its activities in the banking sector, as it has a joint venture with the

bank of Scotland in the ratio of 50:50 partnerships.

Environment: The firm operates in a competitive marketing environment. The

macro and micro environment both are favorable for the company operations. These

are as follow:

Micro environment: Micro environment consists of various factors that have a

direct or indirect impact over the company operations and determine the company

viability in long run.

These are as described:

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Customers: The corporation provides its products and services mainly to the

people of various U.K. apart from this, it offers its products & services to the

customers of various countries like U.S, China, Thailand, France, Hungary, Poland,

South Korea, Scotland, Indonesia, Czech Republic, Republic of Ireland, Malaysia

and Japan.

Suppliers: There are various suppliers of the firm throughout the world.

Employees: The company employees 444, 000 people in its different branches

and divisions.

Competitors: Retail companies like Wal-Mart, Carrefour, J Sainsbury and

ASDA are the competitors of Tesco plc.

Media: The firm uses online channels as the media sources for the marketing

of its products & services (Hague 2002).

Shareholders:

Macro environment: Macro environment consists of various factors, which

also have a direct or indirect influence over the business. These are as follow:

Political and legal factors: The country has Conservative and Unionist Party in

dominance. There is liberal Democratic Party that leads the UK government. Legal

foundations for economy are developed in the country that reflects the potency of UK

in terms of its legal Structure.

Social and cultural factors: In the entire UK, British culture is followed by the

residents. There are various ethnic groups residing over here and it is favorable for

the company. People in UK are more interested in the culture and literature. There is

no official language in UK, but mainly English language is spoken by the denizens.

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People in UK have different taste & penchant for diverse products & services, which

again is profitable for the different segments of the company.

Economical factors: UK has sound economic stability, which enables it to take

the advantage of numerous opportunities, but it must take care of the potential risks.

Two major issues are associated with the business growth are foreign exchange and

mounting overseas costs. UK is recognized by the presence of formalized foreign

exchange policy. Pound Sterling is the currency of UK that owns the highest value in

the world. Economic conditions of UK are also favorable for the company operations.

Technological factors: UK is identified for its strong IT that denotes its

technological advancement. The nation has taken many strategic initiatives to make

the technology updated according to the trends taking place, across the globe like the

e-governance program. This factor of macro environment is also constructive for the

company’s business (Wilson & Gilligan 2005).

Productivity: Productivity of the firm can be observed through its market

position that is third in terms of revenues and second in term of profitability in the

retail industry.

System: The company system is also effective that is up to the mark and

effective to face the challenges posed by the increasing globalization. Personal site of

Tesco, Tesco.com is the leading Internet delivery service in Britain. The company

stores have electronic shelf edge labeling all across the store, self service pre-

packaged products, self scanning tills, coffee shop on mezzanine floor and trading of

fresh products.

Strategy of Market Planning of Tesco

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Strategy: Tesco adopts effective marketing strategies to attain its stated

objectives that are viable for the long run success of its business. With the help of

these strategies, the company competes in the global market and has attained the top

position in the retail industry.

Organization: The Company is organized in a viable manner that is

responsible for its leading position in the retail industry. For this part, Mckinsey’s

model of the 7Ss like strategy, staff, shared values, structure, skills, system and style

will be applied. These are as described:

Staff: Well- skilled staff will be hired, who have diverse knowledge of

marketing concepts for the marketing plan.

Shared values: People who have integrity, honesty and fair attitude will be hired for

the marketing plan.

Structure: Formal and competent structure will be followed for the marketing

plan.

Skills: People, who have competency to carry out the marketing plan

successfully, will be hired (Peters & Waterman 1980).

System: E-marketing will be adopted to generate awareness about the fairtrade

product for which the marketing plan has been developed.

Style: Participative style will be followed for the execution of marketing plan

activities.

Porter’s five forces model: This model is applied to assess the competitive

advantage of the industry or the industry attractiveness. Tesco plc is operating in a

retail industry, which is a diverse industry. Industry competitiveness for Tesco plc is

as follow:

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Threat of new entrants: Threat of new entrants is low in retailing industry due

to higher level of barriers. New entrants like the low price discounters are posing

some challenges to the company that is a major issue of concern.

Rivalry among the existing players: Rivalry among the existing players in

retailing industry is intense due to the pricing cutting strategies. Competitors like

Wal-Mart, Carrefour, J Sainsbury, ASDA, and K-Mart are also posing challenges to

the operations of the company (Peter & Donnelly 2002).

Threat of substitute products: There are various substitute products available

in the market, so the threat of substitute products is also higher.

Bargaining power of suppliers: There are many retailers in the industry that

need suppliers for their operations. So, bargaining power of suppliers is also low.

This is also a major issue of concern for Tesco plc.

Bargaining power of buyers: Bargaining power of buyers is not high in this

industry that is profitable for the company.

SWOT analysis

SWOT analysis is a crucial part of a marketing plan, as it determines the

company’ strength, opportunity, weakness and threats that are important for it future.

These are as follow:

SWOT Table

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Some aspects have come out of this SWOT analysis conducted on Tesco,

which will assist in developing a marketing plan for the next 12 months.

Mission of the company: To develop value added products for the customers,

in order earn their long term loyalty.

Objectives: To achieve a substantial share in the market, it is indispensable for Tesco

plc to have some effectual objectives that are focused mainly on SMART pattern

(specific, measurable, attainable, reliable target). Corporate and marketing objectives

for the firm should be both customer and business oriented that is promising from the

business point of view. These are as follow:

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These are some detailed objectives that are intended to cover as a principal

part of this marketing plan. After the attainment of these objectives, it would be easy

for the company to capitalize the plentiful opportunities that are existed in retail

industry (Kotler, Armstrong, Wong & Saunders 2008)

Marketing strategy: Models

This is an important area for any marketing plan; the organization should

follow some well defined models and approaches to carry out the marketing plan

successfully. These are as follow:

The Ansoff Growth matrix serves as strategic alternatives, which assists the

company in deciding about the product and the market growth. The output of this

matrix assists in developing the growth strategies.

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Ansoff Matrix

From the above diagram, it is clear that market penetration is the best and

fitting strategy that should be focused by Tesco plc as it has to increase its

dominance in the present market with present product.

Generic strategies: Business strategies, corporate strategies and functional

strategies play a crucial role in the marketing plan of the company. These are as

described:

Business strategies: The Corporation should align all its business related

practices, in order to increase the sale of fairtrade products.

Corporate strategy: The business firm should develop effective policies to

attain the stated goals. For this, it should set a specific timeline (Drucker 2008).

Functional strategy: Company should allocate responsibility to its highly

competent employees according to their expertise. Also,it should provide resources

for the product delivery in a successful manner.

Growth vector matrix for Tesco

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Green: Areas, which the company should focus to attain the marketing and corporate

objectives.

Red: These are the areas, will be adopted in future by the company.

Sky: These are the areas, which are not of vital importance for this marketing plan.

Marketing integration mix

It consist of mainly seven segments, there are suggested strategies for each

marketing mix of Tesco. These are as described:

Product: The Company should provide value added faire trade products, in

order to maximize its customer base.

Price: The Corporation should provide the fairtrade products at lower rate in

comparison to its customers. It is essential to provide the products at value added

price, so as to lure the attention of the customers.

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Place: Fairtrade products offered by the company are gaining popularity, so it

should place them in city center marketplaces at a huge level (Hill, O'Sullivan & Hill

2003).

Promotion: The Company should adopt aggressive promotional strategies, in

order to boost its sales in next 12 months. Moreover, it should adopt online, print,

broadcast channels for the promotional campaigns. The firm should create a slogan or

logo to draw the customers towards the fairtrade products.

People: Company should hire well trained and skilled people, in order to

deliver the fairtrade products to the customers in an effective manner. Company

should provide training to its people to make them competent enough to use new

technology in an effective manner (Miller 2005).

Process: For placing the fairtrade product aggressively and effectively,

company should adopt the B2C marketing approach. It also must develop tailor-made

systems, in order to design the process more easy for the customers and employees to

communicate for the delivery of fairtrade products (MacDonald 1999).

Physical evidence: Company should improve availability of the fairtrade

products to the customers by placing them in city center stores located in U.K

(Montana. & Charnov 2000).

Marketing Budget

To accomplish these objectives, the company should develop some brilliant

strategies that are accessible within the scheduled time period. Estimated budget for

the marketing plan is $ 5000. Company should hire those people, who treat the

customer by listening carefully them and solving their problem without any issue

(Brewster & Harris 2004). A precise timeline for the actualization of these objectives

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should be developed, in order to make sure the delivery of right message to the right

person in right manner at right place.

Evaluation & control

Evaluation and control part of the marketing plan plays a critical role in the

successful execution of the intended marketing activities that are aimed to increase

the sales of fairtrade products, in order to fight with the low discounters.

Channels of distribution

More and more companies across Europe are now working with centralised

warehouses and distribution centres using JIT production and purchasing policies. As the

methods of distribution become easier the concentration of production is increasing

(Cateora and Ghauri, 1999). Tesco would need to consider the best channel of distribution to

pursue taking into consideration the nature of both their product and the Swiss environment

into which they would be entering.

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Cateora and Ghauri, 1999, Figure Factors Influencing Choice of Channels

The above model demonstrates the six C's of channel strategy, despite the

overall marketing strategy of the firm needing to embody the company's profit

goals the channel strategy itself has specific goals. Cateora and Ghauri urge that

the six C's need to be considered to develop economical and effective distribution.

Cost: This covers both the capital or investment cost of developing the

channel and the continuing cost of maintaining it. Maintenance costs would

include Tesco's selling force and also the costs of various middlemen who

handle the goods (including transporting and storing goods, providing credit,

costs of local advertising and sales representation).

Capital Requirement: The amount of capital required will depend on

the type of middleman that is used. In establishing their own sales force Tesco

would encounter the highest investment whilst using distributors or dealers may

incur less costs. In a take-over acquisition Tesco could elaborate on the systems

already in place from the previous supermarket and use the expertise of the in-

country management to advise on keeping costs to a minimum.

Control: As a channel of distribution increases in length the amount of

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control that can be exerted decreases in terms of price, promotion or types of

outlet used. By establishing their own sales force Tesco would of course have the

most control yet this is pricey so many would prefer to carefully select

middlemen who they believe it is possible to exert control over.

Coverage: Coverage of the desired market can either be decided upon

according to geographic or market segments. In sparse markets it is difficult to

develop coverage due to inadequate channels whilst in the busier segments the

competition is intense. The solution therefore is not full-market penetration but

to enter the market in specifically populated areas such as the city centres. This

would perhaps be useful for Tesco in terms of their smaller outlets to establish

themselves and build a good reputation.

Character: The channel of distribution must fit the character of the

product and company. For Tesco perishable fresh goods would be a huge

consideration here. Previously Tesco have used JIT delivery effectively to ensure

customer satisfaction at the level of freshness received.

Continuity: Many middlemen are part of small institutions that are not

particularly loyal to their vendors. If one individual is to step out of the chain

Tesco could loose all distribution in that area. Distributors and dealers are seen to

be the most loyal but manufacturers must work on building loyalty throughout the

channel to ensure that business will continue effectively in the long-term. If

pursuing a takeover acquisition Tesco would need to re-evaluate the middlemen

previously used and rapidly build up their confidence in the abilities and stability

of Tesco as a vendor.

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<http://www.tescoplc.com/plc/corporate_responsibility_09/suppliers_ethical_trading/fairt rade_products/>. Tesco’s still pushing discount products to fight back competitors, 2009, Viewed 2 November 2009, <http://news.idealo.co.uk/news/4521/tescos-still-pushing-discount-products-to- fight-back-competitors.html>. Wilson, R. M. S & Gilligan, C, 2005, Strategic Marketing Management: Planning, Implementation and Control 3rd ed, Butterworth-Heinemann.