Marketing Plan of Tesco

Table of Contents

Contents Page Numbers

Analysis of Tesco Background 2-3

Analysis of Market Situation

-Market Share, growth and potential 3

-SPICC analysis 4-5

SWOT Analysis 5

Tesco's Competitor Analysis 6

Marketing Objectives of Tesco 6

Marketing Plan of Tesco

-Segmentation of Tesco 7

-Targeting of Tesco 8

-Positioning of Tesco 8

New Product or Service Idea of Tesco 8-9

Future Marketing Strategy of Tesco 9-10

Financial Forecasts for Tesco(2012-2015) 10-11

References 12-15

1.

Analysis of Tesco Background

Tesco dated back to 1919 and was founded by Jack Cohen when he began to sell surplus

grocery products from a store in the East End of London. During that day, he managed to earn £1 on

sales of £4. In the year 1924, the brand name Tesco first appeared in Jack's very own-brand

products called Tesco Tea. The name Tesco was a combination of the initials of TE Stockwell, a

partner in the tea suppliers firm , and the first two letters of Jack's surname,Cohen. The first Tesco

store officially started business in 1929 at Burnt Oak, Edgeware, North London.

Throughout the 1930s, Tesco expanded into a private limited company. Tesco grew from

stores to supermarkets and they also bought a plot of land at Angel Road, Edmonton to build its

headquarters and warehouse. Following the success of self-service stores in the US, Tesco opened

its first self-service supermarket at Maldon in 1956. During the 1960s, Tesco worked diligently to

build its brand name and they soon became a family household name. By the end of the 70s, Tesco

had achieved an annual turnover of £1 billion.

In 1982, Tesco achieved an annual sales exceeding £2 billion. During the 1990s, Tesco

further grew its business as well as its international presence, having stores opened in many

European and Asian countries due to growing responses like Poland and Hungary as well as

Thailand and South Korea. Up until now, Tesco already has 6,234 stores operating across 14

different countries and accumulated annual sales of £72 billion from all the markets and the

numbers are expected to increase as Tesco intends to make its presence be known in more

unexplored territories.

Like others, Tesco also has its own mission and vision. The core purpose of Tesco is to

create value for customers to earn their lifetime loyalty. Tesco envisions themselves as the most

highly valued business in the world. Not only by customers, but also by the communities they work

in, the staffs and the stakeholders. Tesco also hopes to be viewed as a growth company that always

strive to grow in all parts of their business-in the UK, internationally as well as in various services.

They will be a modern and innovative company that is able to predict changes and adapt to

circumstances. They also see themselves winning locally by utilising their global skills and

knowledge which also benefit the performance of their business all around the world.

Tesco upholds the value that no one tries harder for customers than them as they will

understand and be the first to meet the needs of customers. Besides, they also strive to act

responsibly in the communities they work in. Another core value is that they treat people how they

2.

like to be treated. Tesco wants its staff to work as a team and to learn to trust and respect each other.

Tesco also values listening, supporting and saying thank you to the people they interact with and be

willing to share the knowledge and experience that they have. Tesco's success depends a lot on the

people they work with and also the people who shop with them. By performing the values, they are

able to create a fun and lively environment to work in(Tesco Plc, 2012).

Analysis of Market Situation

Over the years, Tesco has successfully build up a strong brand name within the UK as well

as many other countries outside of it. Within the UK market, Tesco is the leading business for the

retailing industry, owning a market share of 30.2% whereas competitors like Wal-Mart owned

Asda,17.9%, and J Sainsbury Plc,16.6%, remained a distant second and third respectively. In terms

of its growth, Tesco has a revenue growth of 2.7%. Although it is lagging market growth of 4.0%

but in comparison to a month ago, it had made tremendous improvement from the initial 2.5%

(BloombergBusinessweek,2012).

On the international level, Tesco has made a great effort to place themselves as the third

largest world retailer behind US giant Walmart and French owned Carrefour in terms of sales. But,

according to IGD as stated in TalkingRetail(2012), Tesco is expected to have the strongest growth

among the top four global retailers with an estimated annual growth rate of 6.8% between 2011 and

2015. Besides having physical stores, Tesco also sought for other alternatives to expand its business,

this meant opening an e-store, www.tesco.com. In this field, Tesco has made it so big that it is now

the world leading Internet grocer with an estimated 55% market share of the online food industry in

the UK. Tesco online recently became UK's third most trafficked site behind Amazon Europe and

housewares retailers Argos, proving that Tesco has a strong growth as it slowly increases its

position as one of the most trafficked site in UK.

3.

Table 1.1 SPICC breakdown of Tesco

Suppliers: Tesco has cultivated a bond with its suppliers to develop its “Tesco Better Value”. Tesco

likes to treat its suppliers as its customers. To gain this competitive advantage, Tesco utilises the

local knowledge and skills of local suppliers in existing markets. Like that, Tesco is able to find and

purchase products that fit to local needs. In addition, it is also able to avoid custom fees and

enhance its distribution channels, therefore, ensuring quality products at low prices(Louis P., 2010).

Publics: Tesco has always been committed to maintain a good dialogue with its shareholders to

ensure what's expected of Tesco and to provide opportunity for Tesco to respond to a wide range of

enquiries. Besides, Tesco also depends on the government to assure that the products they produce

meets quality standards qualification. Tesco is committed to play a role in helping to care for the

environment. One of the ways Tesco is doing so is by being proactive in promoting recycling in

their UK stores(Tesco Plc, 2012).

Intermediaries: Tesco has employed promoters to help advertise its own brand products. Tesco is

able to gain more profit because the promoters are able to explain in details the use of the Tesco

product directly to customers, thus increasing the chance of them purchasing more of it. Besides,

Tesco also acquired the use of distributors to help them deliver products straight to customers'

homes. Like in Korea where customers can do shopping even in the subway, after the purchase is

made, the distributors would have already delivered the products to customers' doorsteps.

Customers: Tesco holds the core purpose of creating value for its customers. In that case, Tesco is

4.

always determined to provide the highest quality of products at low prices for its customers. Thus,

Tesco has decided to focus more on competitive pricing strategy of its products and reduce

promotions. For example, The Telegraph(2008) has reported that Tesco has made an effort to halt

any price increase of its products by the suppliers as they want to protect the customers' interests by

offering them the lowest prices possible.

Competition: For many years, Tesco has relied upon its competitors so that it can improvise and

adapt to changes in the grocery industry. According to Powell(2012), Tesco is able to adapt to

competitors' challenges and reduce its price even lower, if not the lowest, to make their products

even more attractive to customers compared to its competitors.

SWOT analysis of Tesco

Strengths Weaknesses

Brand value- offers low price and

customer focused

UK market leader- diversify into new

sectors, strengthen its leadership position

Strong customer loyalty- Clubcard,

offers rewards and vouchers

Reliant on UK business- majority of their

profits comes from UK

Stores not specialized in selling a

specified product- smaller retailer can

capitalize on

High employee turnover rate- many

employees left after one or two months

of work

Opportunities Threats

Tesco Direct(online)- grow the use of

technology, provides a platform for non-

food based products to generate more

returns

Further international growth- Indian

market, provide a huge market with

lucrative returns

Rising raw materials costs- impact on

profit margin

Stiff competition- Walmart, Carrefour,

Asda and Sainsbury

International expansion- lucrative but

expensive, incurs huge investment and

marketing cost, sometimes new brand

name is required

Table 1.2 SWOT analysis of Tesco

5.

Tesco's Competitor Analysis

The largest and main global competitor of Tesco is none other than Walmart. Walmart is

currently the largest retailer in the world and has an annual sales eight times of that of Tesco's. In

terms of number of stores, Walmart has 8838 stores which is almost double the number of Tesco

stores. Riding on the economies of scale and making direct purchases from manufacturers, Walmart

is able to sell many of its products at lower prices as compared to others(Carvin N.,2011). In the

UK, however, Walmart has intimidated Tesco by taking over Asda. Asda has in recent years

challenge the retail market leadership position by consistently increasing its market share from year

to year.

Besides Walmart, the second largest retailer in the world, Carrefour, also has the ability to

affect Tesco's sales. In Europe, Carrefour is the first to open the hypermarket which means they are

an extremely innovative company and can anytime come out with a new format store that can

influence Tesco's position. Besides, Carrefour is also an organic company as they are able to ensure

that the products they sell are at high environmental quality. Partnering with WWF, they can make a

daily approach to biodiversity conservation and also waste reduction. So, they pose a direct threat to

the green approach of Tesco as well(Carrefour Group, 2012).

Marketing Objectives of Tesco

One of the main marketing objectives of Tesco is to achieve the leading position in the

retailing industry in every market that they operate in. Secondly, Tesco also markets because they

want people to know and choose their brand as the brand that offers high quality products with a

broad range at low prices. Third, Tesco also wants to promote their versatility as a multi-channel

retailer wherever they trade, that being the combination of stores and online. Fourth, as UK is their

core business, they also advertise themselves in hopes to keep their UK market strong and growing.

Fifth, as a responsible company to the environment and also with the recognition of them being the

top retailer in the world for tackling climate changes, Tesco hopes to foster a greener shopping

environment where customers can also play a role in helping to reduce carbon emissions. Lastly,

Tesco also wants to promote their active involvement in social issues and highlight their efforts in

the creation of new jobs in wherever they open their stores.

6.

Marketing Plan of Tesco

Segmentation of Tesco

Geographic :

Countries that have or would have high

consumer buying power and demand for

retail items.

Country: UK, US, South Korea, Thailand

and etc.

Density:

Urban

Tesco Metro

Sub-Urban

Tesco Superstore, Tesco Extra, Tesco

Express

Demographic :

Age: Ages 0-99, everyone needs grocery

products

Example

Kids( Tesco Goodness)

Elderly(Tesco Healthy Eating)

Income:

Middle to high income

Finest range

Lower income

Everyday Value range

Occupation: All types of occupation

(students, businessmen, professionals,

unemployed)

Psychographic :

Social Class: Offering best range to all

income groups from the lower lower

class up till the upper upper class.

Lifestyle: Offering different styles and

functionalities which fits to every

individuals own preference. (Tesco F&F)

Youngster

Stylish and hip fashion

Business class

Professional wear

Behavioural :

Purchase Occasion: Seasonal promotions

Example

Christmas

New Year

Summer/ Winter

User status: Attract potential/regular

users and ex-/non-users

Example

Private labels

Own-brand products(Tesco Brand)

Loyalty status: Produces Clubcard

schemes to retain absolute loyal

customers and also attract none loyal

customers.

7.

Targeting of Tesco

The targeting strategy of Tesco depends on the geographic, demographic, psychographic and

behavioural elements for a better direction. But nonetheless, Tesco will generally employ the

undifferentiated marketing strategy as retail markets are prone to produce items that suit all needs.

Tesco wants to produce anything and everything that everyone finds it relevant to themselves.

However, in geographic, Tesco will focus more in UK as it is their core business. In demographic,

Tesco will concentrate more in their Everyday Value range as in the past years this range has

generated huge amounts of profits. In psychographic, Tesco will be eyeing on people's different

lifestyle as their Tesco F&F fits to all types of tastes and preferences. In behavioural, Tesco will

want to pursue customer loyalty therefore they will always be seeking for ways to improve and

improvise their Clubcard scheme.

Positioning of Tesco

Tesco has successfully positioned themselves in customers perception as the brand that

offers wide selection of high quality products at low prices. Tesco has also gained an advantage by

having an online store which customers see it as extremely time saving and convenient for

shopping. Tesco has also made themselves be seen as an extremely customer focused company as

they launched the Clubcard as a mean of giving something back to customers for their frequent

patronizing in Tesco.

New Product or Service Idea for Tesco

Tesco has recently adopted a revolutionary packaging whereby it is able to prolong the

freshness of tomatoes and avocados and others alike for days longer. The packaging contains a strip

coated with a natural product that can absorb ethylene, the hormone that causes the ripening of

fruits and then turn mouldy. It is safe and also 100 times more effective than any other existing

materials, and it is also able to combat food waste and potentially save the fresh produce industry

tens of millions of pounds each year!

Besides, Tesco has also replaced its Value range with a new range called the Everyday

Value. The first notable difference being an improved quality in the Everyday Value, with no extra

charge on customers. The new range does not contain MSGs, artificial flavours or colours and

genetically-modified ingredients. Second, Everyday Value is also a healthier choice as it will have a

8.

lower fat content. Third, the Everyday Value also spots a more attractive packaging as it is more

colourful and softer than the blue-and-white of the Value range. The packaging is more convenient

as some products are available in easy-open packets and resealable bags.

Tesco has also launched their first ever virtual 3D fitting room online. This application

featured on their Facebook page clothingattesco is able to help customers find the perfect size and

fit of clothing when they shop for clothes online. Customers can create 3D digital figures of

themselves just from a photograph uploaded onto the page. Customers can find their perfect

matching look with the accurate size without the hassle to shop and best of all, there is no queue in

the fitting rooms which means customers can style endlessly(Tesco Plc, 2012).

Tesco has also included some in-store innovations or services to make the shopping

experience a lot easier. One of the distinct features is the “Scan as you Shop” system whereby

customers can bring along a bar-code scanner with them as they shop which saves them the trouble

to find for one. Another excellent service is the provision of smart badges for staffs. This is a quick

and effective technology where it is used to scan QR codes of items and information such as stock

availability and price will be shown on the badge whenever customers enquire about the item. It

saves time and also provides immediate answers to customer enquiries.

Future Marketing Strategy of Tesco

Tesco will be concentrating in the UK by investing an expected £1billion to revitalize its

business. One of the main strategy Tesco will be emphasizing on is building their team of staffs to

bring new levels of excellence to the work and to customers. Tesco will be expected to invest

£200m in providing additional training and equipment to staffs to better equip them with the skills

and tools to serve customers well. These changes will be targeted at the larger stores and fresh food

departments like meat and chilled convenience food.

Besides, Tesco also plans to upgrade their existing stores by giving it a warmer feel and

attractive look. These refreshes will be targeted on the fresh departments as well as the service

counters. In 2012/2013, Tesco plans to refit or refresh some 430 stores with these new looks. With

the booming business of the online industry, Tesco will seek to reduce their new space in 2012/2013

by 38% compared to 2011/2012. They will also allocate their capital efficiently by decreasing

capital investment but will be focusing their expenditure on growing their existing stores with

priorities given to Express stores and also dotcom-only stores.

Gaining the first mover advantage, Tesco has positioned themselves to prosper in the online

9.

industry. With the new Tesco Direct recently launched, Tesco hopes to shift customer shopping

habits to online by doubling its offering range to 75,000 products and also fully integrating it in the

mobile devices for the first time. Tesco expects to invest £150million in upgrading the online

industry like creating 700 new Click and Collect points to offer more convenience for customers.

After good progress in Korea and Prague, Tesco will soon be launching another dotcom industry in

Warsaw. Tesco also hopes to accelerate growth by operating dotcom-only stores so that it can free

up more room for existing growth and extra 2 be added by the end of 2013.

As Tesco Bank's systems migration approaches its final stage of completion next month, it

has ensured that when it is done, it will be in a strategic position to deliver good growth. As 75% of

the Bank's business is done online, the new infrastructure would include some important customer

service improvements like instant decisions on loan application and the opening and funding of

savings account can be done easily within 10 minutes( previously 2 weeks). In 2013, the Bank is

predicted to offer the service of current accounts and mortgages. With these offerings, Tesco Bank

will be paving its way towards being a full-service bank to Tesco customers and will be able to

contend with mainstream banks(Adisa A.,2012).

Financial Forecasts for Tesco( 2012-2015)

Graph 1.1 Tesco Group Income Statement Evolution Graph (4-traders, 2012)

10.

2012 2013f 2014f 2015f

£m £m £m £m

Group sales 72035 77366 83091 89239

Group revenue 64539 68164 72186 75012

Capital Expenditure

3800 3300 3988 4283

Group trading profit

3761 3810 3859 3910

Profit for the year

2814 2966 3126 3295

Table 1.3

According to the forecast in Graph 1.1, the sales bar actually indicating the revenue of the

group is expected to increase from £65billion in the year 2011/2012 to an approximate £75billion in

the year 2014/2015 with an estimated average annual growth rate of 5.2%. In table 1.3, the group

sales in 2011/2012 is £72billion but with a constant exchange rate, the sales is expected to grow

until £89billion in 2014/2015 with an average annual growth of 7.4%. These increases are most

likely caused by the recent entry and potential growth in the Indian market. Besides, the promising

improvement in US soil also causes the group sales to increase as it has a total sales growth of

27.1% this year and also expected break-even to happen at the end of 2013.

From the Table 1.3, capital expenditure is expected to experience steady growth from

£3.8billion in year 2012 to £4.2billion in year 2015. But, during the year 2013, expenditure is

expected to decrease until £3.3 billion as there will be reduced new store opening in the UK instead

will be focusing on investment in existing stores and online(Tesco preliminary results 2011/2012).

Group trading profit and profit for the year will also be expected to increase steadily with an annual

growth rate of 1.3% and 5.4% respectively with comparison to last year's results as a baseline.

(Word Count- 2864 words)

11.

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16.

Documents

Marketing Plan of Tesco