Market Share For Tesco Plc Marketing Essay

Published Date: 23 Mar 2015

Tesco PLC as it is known today, was founded in 1924 by John Edward Cohen in United Kingdom. Tesco is one of the leading Super market retailers in the whole world. Today TESCO lies fourth next to giants like Wallmart of America, Carrefour of France. Tesco is the number one British retailer both by domestic and global sales. It is the second largest supermarket in Europe next to carrefour of France.

Tesco operates 2,318 stores in 12 countries. It employs 326,000 people all together. 237,000 in the U.k itself. Tesco operates 1,878 stores in the U.k, 261 in Europe, 179 in Asia and is planning to open up 184 new stores. TESCO is a mass retailer with so many different products, originally food products and now its selling clothes, consumer electronics, consumer financial services, internet services and consumer telecoms.

1.1 Company situation

Tesco's success originates from its overseas expansion that is in other countries in Europe and Asia mainly. A higher margin of non-food merchandise and maintaining a strong U.k core business. Tesco's overseas expansion has been tremendous in the last few years, with many profit accumulating stores in various countries. In late 2004 the amount of floorspace Tesco operated outside the United Kingdom surpassed the amount it had in its home market for the first time, although the United Kingdom still accounted for more than 75% of group revenue due to lower sales per unit area outside the UK.

1.2 Financial situation

Tesco is listed on the London Stock Exchange under the symbol TSCO. It also has a secondary listing on the Irish Stock Exchange with the name TESCO PLC. It also trades on the NASDAQ under the symbol TESO.

All figures below are for the Tesco's financial years, which run for 52 or 53 week periods to late February. Up to the 27 February 2007 period end the numbers include non-UK and Ireland results for the year ended on 31 December 2006 in the accounting year. The figures in the table below include 52 weeks/12 months of turnover for both sides of the business as this provides the best comparative.

1.3 Management overview

Tesco's international expansion strategy has responded to the need to be sensitive to local expectations in other countries by entering into joint ventures with local partners, such as Samsung group in South Korea and charoen pokphand in Thailand, the synergy between the two organization helped a great deal because the ideas and experience that the staff have could be shared among themselves for the good of the company's. They had to appoint high qualified personnel to the management positions.

In late 2004 the amount of floor space Tesco operated outside the United Kingdom surpassed the amount it had in its home market for the first time, although the United Kingdom still accounted for more than 75% of group revenue due to lower sales per unit area outside the UK.

In September 2005 Tesco announced that it was selling its operations in Taiwan to Carrefour and purchasing Carrefour's stores in the Czech Republic and Slovakia. Both companies stated that they were concentrating their efforts in countries where they had strong market positions. This could be as a result that they saw opportunity in the two countries and they wanted to maximize it

1.4 Mission statement

Total commitment with guaranteed service.the statement directly point at the line in which the company is actually dealing in. Tesco is more in the service industry and they would like to offer the best services so far to its customers as a way to retain and attract more in the near future.

1.5 Value and market share

According to TNS World panel, Tesco's share of the UK grocery market in the 12 weeks to 27 December 2009 was 30.5%, up 0.1% on 12 weeks to 27 December 2008 largely in line with the increase of the other four largest supermarkets. These increases follow a decline in the market share of discount chains Lidl Aldi and Netto in the same period, collectively of 0.1%.

Supermarket

Market Share

December 2009

+/- from

December 2008

Tesco

30.5%

increase 0.1%

Asda

16.9%

increase 0.1%

Sainsbury's

16.3%

increase 0.2%

Morrisons

12.3%

increase 0.5%

File:Tesco Market Share.jpg

2.0 Market situation

2.1.Political

Under the political forces, there are a number of critical factors to consider and they are explained below;

Government (political) stability is a major factor. The UK is a parliamentary democracy which has been stable since the 2 great world wars. Security is good and this provides a a good opportunity for Tesco PLC to establish its self firmly in the as it has exploited that favourable factor.

There has been no major threats of war on the UK mainland apart from a few terror attacks like the 7/7 bombings. This kind of incidence scares off customers from going to public places, for instance Tesco. Hence being a threat. But other than that Tesco PLC has managed to maintain its customers

Taxation policy of the UK government can determine a retailer's expansion into a market. Tesco Plc has regulations it has to abide by the government, regarding the taxation policy of Hyper Markets Giants like Tesco.

2.2Economic factors

The UK business cycle has been growing in the last decades, since its fall during the 2nd world war. UK is the 5th largest economy in the whole world. It's the 6th in the power purchasing parity. According to world bank, it has a G.D.P growth rate of 2.75%, G.D.P per capita at 35,000$.. It's G.N.P stood at $1,173 billion in 1990. This kind of growth favours Tesco PLC to do well in the UK Market.

Uk's inflation rates is measured at 2.3%, under consumer price. This is a threat for tesco because it might affect its pricing policy. The increasing interest rates of banks have changed or increased from 5.5% to 5.75% and this might affect Tesco's cash flow.

UK's unemployment rate is low at 5.4%. This provides an opportunity for Tesco in a way that it cannot run out of employees. The disposable income of the UK market is measured at an average of 30%, which means people have a lot of surplus money to spend hence an opportunity for TescoPLC.

2.3 Social factors.

UK's population was recorded at 60,776,238 in 2007. This is more than enough market potential for Tesco PLC as an opportunity to explore it Like it has done. Uk's mobility is mainly by public transportation such as trains, buses, coaches and others. This gives Tesco a chance to locate its stores in strategic positions to create convenience for its customers. Life style changes can affect the market for Tesco PLC, for instance workers attitudes towards medical insurance, pensions and demand for increasing pay to the suppliers can affect the Tesco operations. The trend on consumerim in the UK market is changing. People nowadays according to www.esrc.ac.uk/ESRCInfoCentre/facts/index50.aspx, people are reducing their spending. Priorities are more to housing, transport, recreation and culture. Most of the UK population is literate, hence a challenge for Tesco to standardise goods sold to this kind of market. UK has a big percentage of aging population, but this can't change the buying sequence because all have the same preference for shopping. The social cultural forces in the UK provide an opportunity for Tesco PLC to establish its self as it has done, in this Market.

2.4Technological factors.

The UK government has spent so much money on research and development of technology. Emphasis is put on science, engineering and technology. The mushrooming of Information Technology in UK has given tesco an opportunity to strengthen the relationship with its consumers. For instance the use of online purchasing. The communication network in UK like the use of telephone systems is a critical factor because it has led to the speeding up of operations hence an opportunity for Tesco PLC.

2.5.Enviromental factors

The UK environment has many laws that govern it. For instance Air pollution, law of the sea, marine life conservation, Ozone layer protection and many more. The UK government passed regulations to all industrial companies including Tesco to reduce their dumping of wastes in landfill sites to 85%. Recycling is another environment law passed on to all industries in order to reduce the pollution of land and Air. More of UK''s energy is consumed in cold weather. Therefore, these environment factors are an opportunity for Tesco because it can afford to reduce cost and improve efficiency.

2.6.Legal factors

In UK corporations have a set of standardized corporate and competion laws they have to follow. For instance anti competition practices, merger control and introduction to leniency policy. This is a threat to Tesco PLC in a way that it might affect its game plan. Employees are under the health and safety work act 1974 and customers are protected under the General Product Safety Regulation 2005. In other words Tesco has managed to fulfill these protocols because it has managed to protect both its employees and consumers, hence an opportunity.

3.0 SWOT analysis

Strengths

Weaknesses

Increasing market share

Insurance

Tesco online

Brand value

UK market leadership reinforced

Reliance upon the UK market

Debt reduction

Signs point to serial acquisitions

Opportunities

Non-food retail

Health and beauty

Further international growth

Threats

UK structural change could spark a price war

Overseas returns could fall

Wal-Mart/Asda challenge

International expansion

4.0 Objectives and Assumptions smart and other variations?

Profitability, in terms of operating margin (a 10% target)

Swedish Market share (a 20% target)

Customer advocacy (the number of customers who recommend Tesco branded clothing, repeat business)

Respected company/ brand awareness (the number of community stakeholders who respect Tesco)

Employee motivation (the number of employees who feel motivated to deliver Tesco's goals)

Tesco must ensure that it sets 'SMART' marketing objectives that are specific to the needs of the audience,measurable, attainable, relevant , time limited,

4.1 Societal

4.2 Financial

4.3 Marketing

5.0 Competitive strategy?

This is a marketing strategy involves analysing the markets to determining which products to offer and the exact age range of the children to be suited, considerations relating to sizing, fashion, seasons and so on will need to be made, as well as the appropriateness of each garment for export to other Tesco shops in neighbouring countries. Tesco may well decide that there will be a 'core' European range of Environmentally friendly clothes which could be exported throughout Europe, whilst there would be a broader range available for local customers. However before any decisions are made, a detailed market research activity will need to be undertaken to test the concept of the new range, the intended pricing parameters, attitudes towards Tesco as a retail outlet and attitudes towards the new Swedish Alliance partner, purchasing habits of the customers (parents buying for children) and so forth.

Place

This is the major challenge that a firm can have difficulties while laying down its international marketing strategy mix, It involves the management processes in bringing products to the end consumer. Tesco carefully focuses on location of its outlets and they have to make sure that every branch is in the best location. Tesco take the advantage from its rivals by having excellent locations, you find out that they are always located in visible areas that are easy to locate and the surrounding is always very interesting to be visited. These locations are the main source of attraction for both consumers and for the services that the company provides. For example the outlets which are opened at the leisure centers will attract so many people who will keep on visiting the place more frequently.

Price

In every organization, pricing plays a very important role in the international marketing mix; this is because it is governed by competition, production costs, and company objectives (Kotler, P. & Armstrong, G., 1994). This is one of the most important elements of the marketing mix, as it is the only mix which generates a turnover for the company. Pricing could not possibly be standardized across the globe without considering factors like fixed and variable costs, competition, company objectives, proposed positioning strategies, target group and willingness to pay.

Promotion

The objectives of every firm's promotional campaigns is often expressed as being both to increase the commitment of existing consumers to the product and to capture new customers in every country. It also helps to build and maintain relationships by informing and persuading the public.It is the most direct link between a firm and its customers (Kurtz, 2009). The company must conduct a research before entering markets by analyzing consumers' attitudes, usage patterns, ethnic, moral and religious. These can help to focuses on the needs of targeted communities before launching the promotions.

Tesco has maintained an extensive advertising campaign for decades. As in the worldwide image, In addition to the usual media, the company makes significant use of billboards, brochures and offering samples for its customers. In a situation where the organisation is targeting a particular market, the company has to use advertisement which suits the particular region for instance in China, newspapers and magazines are commonly used for promotion but not television adverts. This is because people tend to avoid the commercials because at that time they will be watching programmes then later on the advertisement is featured between episodes (Vignali, 2001).

Product?

This is a broad concept which involves the satisfaction of all consumer need in relation with the goods and service. It includes decisions about brand names, package designs, trademarks, patents, positioning and new development.

Looking at the best global brands study in 2006, McDonald's was ranked number nine with its brand valuation highly at US$27.5 billion. In 1960, it was renamed as McDonald's Corporation from Kroc's company with the logo of letter of 'm'. The company's brand mission was to "be our customers' favourite place and way to eat". After which the re-branding campaign in 2003 which led to the launch of its international motto, "I'm Loving It" and the message from its music and sponsorship, giving a boost to its image and branding with a new attitude and direction.

The Corporation also introduced a new brand McCafe' which offer premium coffee and cappuccinos at an affordable price. This helped it to go hand in hand with some of their competitors in order to capture the market share, since market shows that the popularity of drinking coffee is on rise

As a multinational enterprise, it aims to lay down the standard menu which had the same taste in all over the world. However, different places have different cultures. The corporation adapted the concept of thinking globally as long as they meet different people's needs in different countries. They made innovations and offers locals menu beside standardized menu. For example, in India, 75% of the menu available is designed in a manner that they serves Vegetable McAloo Tikki Burger,chicken McCurry Pan and a mutton-based Maharaja Mac (Big Mac). It took the initiative to recognizes the laws in Hindu religion. Since 80% Indians don't eat beef. In addition to the respective religions, foods are segregated into vegetarian and non vegetarian lines, cooks preparing vegetarian dishes wear distinctive green aprons. The French fries also not flavoured with beef tallow, even the mayonnaise and ice cream contain no eggs. In other places such as in Norway, they sell the McLaks, a sandwich made of grilled salmon and dill sauce.while customers in Chile can add avocado paste instead of ketchup to any burgers. Cheese empanadas are also sold in all McDonald's outlets in Chile under the same category as fries