Jack Cohen from East End of London use to sell excess groceries from a stall and due to this the Tesco was found in 1919. On the first day of Tesco Mr Cohen sales were £4 and the profit of £1. Five years later when Mr Cohen got a consignment of tea from Mr T E Stockwell, essentially it appeared as a brand in 1924. The company combined initials and letters to form Tes-co and 1929 in Burnt Oak North London a flagship Tesco store was opened by Mr Cohen.
In the 1990's, Tesco were opening new store and aggressive marketing campaign to tighten its grip on the UK to compete Sainsbury's were the UK's leading grocer.
To keep up its grip on the UK Market Tesco continued to open more stores and aggressive marketing campaign in an attempt to surpass Sainsbury's as the UK leading grocer.
Tesco supermarket was expanding its range of products which includes clothes, electrical and personal finance with the help of Tesco.com which was launched in 2000. In 2004 Tesco entered the broadband market.
Tesco started expanding their shops overseas in Poland Slovakia and the Czech Republic as the company had introduces its first24 hour store in the market.
Tesco has gone globally as well, operated in 13 countries and launching ambitious plans to open stores in the USA under the brand ‘Fresh and Easy'
Throughout the country Tesco has got access in every single areas postcode, however in UK in Harrogate in North Yorkshire there is only one postcode which does not have a Tesco.
Hence, Tesco is the largest British retailer by both global sales and domestic market share with profit exceeding £3 billion. It is third largest global retailer based on revenue after Wal-Mart and France Carrefour. But second largest based on profit. It has diversified its market such as consumer electronics, clothing, financial services, telecoms, home health and car insurance, dental plans, internet and software.
Marketing planning process is a fundamental part of Marketing Audit. It is conducted not only at the beginning of the process but also during and after the process completion. Marketing audit not only consider its own plan but also considers internal and external factor that affects marketing planning. Some important tools used by marketing audit are SWOT for internal and external environment where as PEST and Five Forces Analysis which focus only on the external environment.
It can be viewed as an ‘umbrella that covers efforts to asses customer needs and wants and to understand community patterns. External environment is reviewed at micro and macro level.
The marketing Audit has been defined by Phillip Kotler as a comprehensive, systematic, independent and periodic examination activities and resources in order to determine problem areas and opportunities and to recommend a plan of action.
As per the definition:
Marketing Audit is Comprehensive, systematic, independent and periodic features. In simple words marketing audit is the complete review of the environment that includes both internal and external environment of any organization. The marketing audit follows the following areas as components of marketing audit:
· Environmental Audit which includes Macro Environmental Audit and Micro Environmental Audit.
· Marketing Strategy Audit
· Marketing Organization Audit
· Marketing System Audit
· Marketing Productivity Audit
· Marketing Function Audit
Processes used for auditing the marketing auditing environment follows simple three steps are:
a) Agreement on objectives, scope and approach: Marketing auditor must prepare for the marketing audit by holding discussion with the CEO and the executive staff and briefly reviewing some financial and marketing data. Often objectives are discussed in the meeting such as determine how market views the company and its competitors, recommending a pricing policy, determining sale activity. The audit would cover the marketing operations of the company as a whole.
b) Data collection: More time is spent on the gathering data. More auditors are involved when the project is large. Auditor has to spent time in deciding what question to be asked, who will be interviewed and so on so forth. Daily reports of the interviews are to be written up and reviewed.
c) Report preparation and presentation: When the data gathering is over, auditor prepares notes for a visual and verbal presentation to the company officer.
Techniques used for auditing the marketing environments are as follows.
1) SWOT Analysis: It is the most useful key of marketing audit. It gives a lot of help to marketers at the start to begin the marketing audit process. It has advantage as well as disadvantage. Some of the disadvantage are subjective and cannot be relied too much. Therefore it should be used as a key in the marketing planning and not as a recommendation to the process.
2) PEST Analysis: Various factor of the marketing is analysed by PEST analysis that effects upon the marketing process. An organization that is carrying the analysis needs to study the environmental factors that are internal and external.
3) Five Force Analyses: This helps the marketers to analyse the clear picture of competitors in the market. This analysis has some similarities with PEST analysis. In this analysis the marketer goes through five areas of concerns.
Analyse and evaluate the external environment of the organization by using PEST framework, Porter's Five Force model and Product life cycle.
Tesco has more than 2300 supermarkets and convenience stores in the UK, Ireland, Central Europe and Asia. It is operating in almost areas such as small urban stores (Tesco Metro), Financial service (Tesco Personal Finance), hypermarkets (Tesco Extra) and gasoline retail (Tesco Express). It covers up to 35% stake in US grocery. M&S is now expanding its business with a retail based education institution and TV channel and a where it is already the leading online grocery store in UK.
A PEST Analysis of the industry examines the, social, economic, local, technological, national, political, and global influences to understand opportunities and threats well.
Sweden the retail industry had an assumption that to some extant these factors (political, economic, social, legal and environmental) will apply to the retail industry.
Political: Following the Free Trade Agreements and European Integrations, British companies had opened market to invest in Eastern European. It has 60 stores in Hungary. Lidl to maintain its pricing strategy against Tesco they are fighting hard to maintain its market share.
Economic: Retail industry is very sensitive to interest rate and also fairly recession proof. Because of September 11 events, stocks were plummeting and prices are low all time due to this the world economy have suffered heavily. However after the September 11th attack the world economy is up and the retail industry are boosting again and consumers are becoming more optimistic.
Social: There are changes in consumer taste and lifestyle present both opportunities and threats for the retail industry. There are alternative Sweden national retailers which poses additional threats to the Tesco while entering in the Sweden market industry.
Technical: In retail industry the introduction of online shopping via internet is now a common place for shopping. IT system undertakes the company's administration, management, and paperless operations which are monitored by the secured sever, it provides a flexible base for running the business. Sweden is at the forefront of technologically developed with national companies like Ericsson, hence Tesco gets an advantage of developed logistics and distribution channels already in place.
One other tool that will be used in these areas is Porter Five Forces. This model can be used to good analytic effect alongside other models such as the SWOT and PEST analysis tools.
Five Forces analyses five important in the determination of competitive power and these are:
· Buyer's power:
· Suppliers' power:
· Rivalry among competitors:
· Threat of new entrants:
· Threat of substitute products:
The Problems which Tesco is facing and threats of substitute supermarkets, supplier power, buyer power and the power of customer can be explained by Porter's five forces.
Buyer power also decides the prices in the market. If products are expensive in Tesco then they will purchased from Sainsbury. This mean market is disciplined which make the pricing disciplined as well and stops them to destroy the market in a profit war.
Supplier power is an essential part of this model. Suppliers demand that retailers should pay them certain price for their goods supplied.
There is always a threat of substitution, although Tesco tries to ensure brand image and quality by having the best value for the products.
Tesco acknowledges the fact that there have always been threats from the competitors and new entrants into the markets and therefore always plan to improve upon developments in its stores.
As Tesco wants to enter the Swedish market, it has to make sure that the product it wants to launch should be according the needs and style of the Swedish people. Tesco has made a complete research and aspires to launch baby clothes in the market. On the basis of the research Tesco has come across different opportunity and threats that Swedish market offers.
Tesco is preparing to enter the Swedish market and hence it will face some barrier while implementing its marketing plans. There are different barriers in the market some of them are lack of support from the top management. Lack of line management support due to any of the following such as Hostility, Lack of skills, and Lack of information, Lack of resources, Inadequate organizational structure, Confusion over planning terms, Numbers in lieu of written objectives and strategies, In detailed, Once a year ritual, Separation of operational planning, Failure to integrate marketing planning into total corporate planning system, Delegation of planning to a planner
Tesco needs to face the markets and so it would need to overcome the barriers listed above in some of the planned ways:
Finally there are many human organizational and culture barriers which prevent a Tesco deriving the maximum benefit from marketing planning.
Marketing plans should be realistic which understand the plus and limitation of Tesco operations. Marketing plans should be monitored throughout the plan.
Tesco needs to focus in the plans throughout its implications process. Tesco needs to believe that what it wants from the market and wants to present itself in the market.
Watch the budgets:
Marketing plans needs some extra time in making some profit. Tesco needs to make sure that it does not exceed its budgets at the start stage.
Tesco needs to analysis all the areas in the market thoroughly to make sure it does not have a foul in the executing plans.
Tesco is focusing on different markets by sticking to its principles' every little helps' and due to this company is doing really well. Tesco implements market planning specially on product development, market penetration, diversification and market development in order to see which ways is competing with the competitors in the market. To defend market share with strategies such as flank, pre-emptive or mobile, Tesco battles by expanding market demand and increasing its market share. Competitors are using offensive strategies such as flank to gain market share.
In order to overcome the barrier and to be specific to the needs of the consumer which is measurable, attainable, and relevant and time limit Tesco must ensure its SMART marketing objectives.
Marketing Plan for introducing the baby clothes in Swedish market:
In order to formulate the marketing plans as the Swedish market is very competitive, Tesco must use their financial resources to create and sustain a high profile with multi level marketing campaign to raise their profile in Sweden and establish the idea of quality children clothes at Tesco.
Need to be innovative in the market are as follows:
a) Business survival: Tesco has to be innovative in the market for the business survival. If they don't be innovative the market is going to be captured by their competitor's.
b) For better returns: Innovation not only helps to gain the market share from the competitors' but also helps the company to gain better returns from it.
c) To take advantage of opportunity: Modern market is full of opportunity but only for those who can grab the opportunity. Tesco has to take the opportunity from their competitors and hence they have to be innovative.
d) For profitability: Tesco believe in quality with value for price. Cost cutting is something that Tesco will not agree on and hence to gain profit than cutting cost will arise the needs for innovation.
e) Competitive Advantage: Innovation will help Tesco to have an edge over the competition which is possible only by having an innovative ideas and technology.
Other reason and needs for the innovations are such as for the progression of human well being, economic growth and etc.
Tesco's Marketing Plan for new product launch in Sweden.
various range of products
Available 24 hours a day
Cash Flow Position is strong
Increase turnover and trading profits
Balance Sheet is strong
UK's Leading Supermarket Chain
Awareness of Brand
capability to turn assets into advantages
Globally Developing brand alertness
Forming New Markets
Globalising the Market
GM crops- growth in Health awareness
Alliances & Innovation
Growth in Low cost brand
Offering available new markets with advanced margins - Non-food
observation of low quality -(Tesco value brands)
requires local awareness of customers and culture
existing & New competition
Raw materials prices are instable
downturn in Economic
Globalising the shifting market
Low cost brands from Far-East
Extremely high competition for resources and customers
To identify direction for Tesco's strategic development Tesco will use Ansoff's matrix product market. This will help to give Tesco products and market coverage knowledge taking into the account its capabilities and also expectation from its stakeholder. Below is the diagram explaining its Swedish market for Tesco.
With existing capabilities
With new capabilities
Beyond current expectations
With new capabilities
Beyond current expectations
With existing capabilities
With new capabilities
Beyond current expectations
Source: Johnson, G., Scholes, K., Whittington, R., (2005
Above Ansoff's matrix, it is apparent that there is an involvement in market development in Sweden with the launch Tesco's Baby wear. Sweden offer new market for Tesco and so Tesco needs to conforms whether the existing product serve the necessary criteria. Therefore, to determine its generic strategy it is important to decide on the appropriate market segment. If it has to compete with Sainsbury's new TUI range and ASDA George brand, then it must consider cost leadership strategy. Tesco needs to have premium prices with luxury end to stand its competitor in the market. Tesco needs to have Differentiation Strategy to enter in the market as the Sweden market prices are low with good quality product, therefore Tesco will incur high cost and needs to have differentiation strategy with the high end market which will allow the entering in the Sweden market for clothes made for renewable sources such as wool and cotton and paying attention to environmentally friendly approach.
Market analysis needs to be taken:
The market size for baby and infant in Sweden
Market share of the competitors
Market segment, profile for the new buyer, targeting methods, marketing campaign.
To increase the profit by 12%
Swedish market share by 21%
Tesco's strategy is clear, areas such as UK grocery business, non food, global expansion, financial services, dotcom business and telecommunication business and hence Tesco can use its core areas to keep the business alive in the risky areas.
Tesco will use Differentiation Strategy to launch itself in the Swedish market by charging premium price from the elite customer who can afford to buy totally sustainable materials manufactured in Sweden itself against Florence and Fred or Cherokee names. However before deciding all this Tesco's needs to carry out market research to test the new product concept launch in the Swedish market, pricing strategy, attitudes towards the brand image as a retail outlet, buyers purchasing habits and so on.
Having defined the product specifications, differentiation strategy is applied which involves a detailed decision on Price, Product and Distribution.
Premium price can be charged on the basis of the quality and style being offered. Tesco cannot demand a premium price as compare to the price in the boutique as the product will be distributed throughout the Tesco chain.
Sweden population is over a wide geographical areas and its huge country and the. So, Tesco needs to decide distribution ways such as internet selling, joint venture or own stores chain. To sell its product, it has to cover maximum area. As Swedish people are technology savvy, internet selling can be a option,
Communication is very important, if product is not made known to the local and every people then the product launch would be a failure. Heavy marketing campaign will be carried to communicate to the common people in the vast geographical areas such as TV and radio repeated interval all day, Local newspaper, Media PR the alliance partner to issue press releases and talking to local people about Tesco and benefit such as jobs creation. Political PR, Billboards campaign, Direct mailing, flyers, and internet ads and so on.
Marketing Ethics are the standards or moral principles governing the marketing profession.
In January 2007, Marks & Spencer step in the era of the eo-plan and with it a sense that a sustainable business model to broaden the range of retail and manufacturing industries. M&S is committed to doing the right thing for their customer, colleagues, shareholders, suppliers, the environment and local communities. M&S brand values of Quality, Value, Service and Innovation of their product and service. M&S follows values of loyalty and confidence for all customers above all else. M&S always make sure that labelling, advertising and other forms of communication are clear honest and accurate and will always work to respect cultural and ethical beliefs. M&S products are sourced from around the world, respecting
Third party and design integrity so that customers can get with the best quality products with competitive prices. All suppliers are complied with M&S Global Sourcing Principles and recognises international standard in Ethical Trading Initiative Base Code.
As Tesco is a brand name in the global market, hence it has to follow some marketing ethics. Tesco will face some marketing ethics issues which are as follows:
1) The search for universal values as a basis for international commercial behaviour.
2) Comparing the business ethics in different countries.
3) Comparison of business ethical tradition from various religious perspectives.
4) Other ethical issues such as fair trade movement or transfer pricing.
5) Globalization and cultural imperialism.
6) Varying Global standards such as use of child labour.
Other factors affecting marketing plan in Swedish market would be Lack in pricing, Price fixing, Dumping selling at a loss to increase market share and destroying the market so as to do price increase, Claiming prizes through premium rate numbers, Bait and Switch selling to enforce for more expensive alternative, High pressure selling, Goods and Brands piracy practice, Misleading customer by copying the style of packaging, Deceptive advertising, Unethical practices in market research and competitor's intelligence, International marketing of products which are banned at home, Altering side effects information, Production unsafe product, Inaccurate and incomplete testing of products, Treatment of animals in product testing, Use of child labour and forced labour, Violation of the basic rights of workers and Ignoring of health, safety and environmental standards.