Marketing Strategies For Enterprise Branding Of Tesco China Marketing Essay

Published Date: 23 Mar 2015

This essay mainly presents marketing strategies for enterprise branding in Chinese markets of the British company Tesco (Tesco Co. LTD). The marketing strategies are divided into different aspects which contain the External Analysis, Budgeting, Products, Services, Market Segmentation, the Brand and the Welfare State. As can be seen from the essay, the services seem to be known as the most important factor of the marketing strategies.

Tesco (Tesco co. LTD), which was founded in 1919, is known as one of the most successful supermarkets around the world, in terms of profits, reaching £59.4bn in sales at the end of 2009 according to the financial statements 2009 (Appendix 1). Whilst many areas of the world may have been partially penetrated by supermarkets, the Chinese mainland market is treated as a totally new opportunity for the fast-paced development of Tesco. Since 2004, the year when Tesco opened the first supermarket in China, this world famous company opened 89 mass merchandisers, 12 convenience stores and 4 "Lifespace" shopping plaza mainly covering 30 cities throughout China.

According to Terry Leahy, the Chief Executive of Tesco, "At a time when customers everywhere are feeling the economic strain, we are responding to their changing needs in all our markets by lowering prices, introducing more affordable products and offering even sharper promotions." He also points out that these actions, combined with their core strengths in selling food and everyday essentials, owning their own property and having a broad business base, are helping them to cope well with the effects of the downturn. All of this gives credit to their marketing strategies.

The increasingly perfected marketing strategies seem to be defined as one of the main factors which have helped Tesco register remarkable achievements, not only in sales but also in business evolution during that period of time. This essay will explain the marketing strategies for enterprise branding of Tesco in China.

Overview

With the fast-paced permeation of high technology, the retail trade, which is closely bound up with people's daily life, is becoming a focus of society's attention. However, in the retail trade industry, supermarkets are seen as the most fundamental form of marketing, not only provides consumers with the choice of food, but also non-food choices, such as electrical appliances and clothing. According to Mohan (2009), with the development of economic globalization, infinite commercial opportunities are provided for those international retail trade companies which are planning to land their ideally attractive markets. As the UK's largest and world's third largest grocery retailers, Tesco has adequately played a role of leader in this situation through the same industrial level, in terms of the ability of using IT to excavate the referable data and the marketing strategies to strengthen the loyalty index of consumers and the brand share.

On December 8, 2010, Tesco in China reported its results for the third quarter of fiscal year 2010/2011. According to the report for China, there was a strong growth in global business; group sales increased by 8.8%, international business grew by 15.7% of total sales. UK business continued to perform well, total sales increased by 5.0%. Asian markets had a rapid growth, in terms of a sales growth of 23.4%. It is particularly worth mentioning is Tesco in China opened the fourth LifeSpace shopping plaza in Anshan with the business occupancy rate of 96%.

(Data available on http://www.cn.tesco.com/en/news/tesco_news1_143.htm)

The Necessity of developing the International Market

The sustained and rapid development of the economy successfully promoted the international business expansion among a large number of retail trade companies; the choice of international markets can somehow extend the product's life cycle and ease the pressures in the local market competition. The main factors why Tesco chose the expansion of international operations are shown below:

Britain's retail market is currently in the mature stage, therefore, selecting a new breakthrough is necessary;

Europe's retailers are faced with increasingly intense external challenges and competition at present; hence, it is a wise measure to develop the potential market outside Europe;

Tesco now has established branches in 14 countries, as is shown in Appendix 2. As the UK's largest retailer, Tesco has the ability to manage and balance its worldwide operations;

In order to surmount the large number of international competitors, it is necessary for Tesco to increase its market share.

Tesco's marketing strategy in China

External Analysis

Strategy development or review logically starts with external analysis, an analysis of factors external to a business that can affect strategy. Tesco uses a particularly useful concept in conducting an external analysis, which is called strategic questions; this kind of question often suggests subquestions, each of these sub-questions can, in turn, generate still another level of sub-subquestions. This really helps Tesco know what their consumers are willing to buy. Just as Aaker (1995) said: "The goal of external analysis is to influence strategy by identifying opportunities, threats, trends, and strategic questions. Its ultimate goal is to improve strategic choices-decisions as to where and how to compete." Furthermore, external analysis also helps Tesco focus on a single segment or attempt to serve multiple segments, perhaps obtaining across-segment synergies.

Budgeting

Tesco uses the budget as the most efficient tool for management planning and controlling in China. According to McLaney (2008), "Budgets do not exist in a Vacuum; they are an important part of a planning framework that is adopted by well-run businesses." Therefore, a well-prepared budgeting is necessary for a company to develop in an international market.

Products

Lachman (1986) pointed out that marketers can expand their range of products in order to enhance consumers' satisfaction. Driven by the global economic integration, many Chinese consumers began to slowly accept Western culture, as well as the imported food which is produced by the majority of Western suppliers. As an international business, Tesco is able to leverage the advantages of a distribution for the Chinese market with a large number of imported products.

While taking into account the price, the quality of the products has been paid more attention by consumers currently. Kayl, the CFO of Tesco, said that "the only way to assure the establishment of a permanent link between us and consumers is strictly monitoring the quality of the products." Tesco can satisfy retailers, suppliers and customers, leading to a win-win situation.

Services

Firstly, although there are many 24-hour convenience stores, the size is not large enough. However, Tesco has achieved a breakthrough in this regard, that is to say building larger stores around the world.

Secondly, with the fast-paced development of the Internet, a large number of consumers will choose to shop online; Tesco has not only improved their services, and its online service is also constantly being renovated, so that consumers can enjoy the fun of online shopping. According to Tesco's official website, the online shopping sales in 2009 added 30.9%, profits create an increase of 49.2% compared with 2008. "Tesco.com" possesses 100 million customers in 2009. (Data available on Tesco official website)

Thirdly, when the holidays come, it is common that there will appear problems in supply of goods suppliers and collection systems in many supermarkets. Faced with this problem, Tesco also has its own response. Tesco and suppliers are using the suppliers' management systems that can have quick replenishments, in order to reduce the rate of the stores' OOS (out of stock). In addition, Tesco has also installed self-service cash registers, consumers can check out by scanning their product, which greatly eases the pressure of collection, saving consumers' time.

Fourthly, Tesco has for a long time implemented a system of membership cards. This system is not a simple loyalty program of filling prescriptive points for exchanging prizes; it is defined as a combination between information technology, database creation, and analyses of consumers, then accordingly to guide and access to more accurate customer segments, more targeted marketing strategies and customer relationship management system. The magnetic strip card and electronic scanning technology is really helpful to analysis each member's buying preferences and consumption patterns, Tesco can not only design the personalized quarterly newsletters for different sub-groups, but also greatly enhance the customer satisfaction and loyalty.

Fifthly, as the saying goes: "The consumer's satisfaction is basically from the employee's satisfaction." Therefore, Tesco is not only concerned about the interests of consumers, but also pays more attention to the interests of their employees. For example, in order to reduce the work pressure of their employees, Tesco provide every cashier with a seat when they are doing their work.

To sum up, Tesco has been working to improving their products and services, in terms of always trying to make up for its own shortcomings and to enhance consumers' satisfaction, for instance, some Tesco stores are planning to set up larger parking lots to satisfy China's increasing growth of car ownership.

3.5 Market Segmentation

Based on the consumer's preferences, the customers are divided into six sub-groups by Tesco; there are eight sub-groups which are distributed by life stage; and according to purchasing habits and behavior patterns consumers are divided into as many as 5,000 groups. The benefits which Tesco is gained from the detailed market segmentation include:

more targeted pricing strategies

more selective procurement plans

more personalized promotions

more attentive customer services

more measurable marketing effects

more convincing market research

The benefits stated above provide a promotion of consumers' satisfaction and loyalty to Tesco.

Brand

Another commendable marketing strategy is co-branding program, or in other words several strong brands federatively launch a customer loyalty program. Such as for women's "Me Time", family women can accumulate points in exchange for their daily purchases in beauty, hair products, or discount coupons for some companies. In these activities, Tesco and those co-operated brands achieved the effect of win-win. At the same time, Tesco has also introduced a large number of own brand products, and compared with those brands, Tesco's own brand saved a lot of costs of publicity, and packaging is relatively simple, hence, Tesco has a comparative advantage (cost of sales is lower than others) in price.

3.7 The Welfare State

Tesco has a relatively impeccable welfare state, includes retirement security, unemployment insurance system and workers' compensation. According to Maks (1990), all three types of welfare security measures effectively improved the situation that welfare state policies create failures that in the real world are more serious than those that they are imagined to cure, since the employee's rights and interests are correctly ensured.

Conclusion

As a result, with the increasingly perfected marketing strategies in China, in terms of the external analysis, budgeting, products, service, market segmentation, the brand and the welfare state, Tesco has delivered solid sales and profits in China, whilst continuing to invest in long-term strategy for growth. Tesco has made a good start to the new financial year, 2011, and Tesco will continue to make good progress even in this unknown and unstable global economic environment.

Appendix

(Available on http://www.tescoplc.com/plc/media/pr/pr2009/2009-04-21/)

Appendix 1 TESCO: GROWTH IN TOUGH TIMES (Financial Statement)

21 April 2009

53 weeks ended 28 February 2009

2008/9

Growth vs 2007/8

53-week basis

Group sales (inc. VAT)

£59.4bn

15.1%

Group revenue (ex. VAT)

£54.3bn

15.1%

Group trading profit

£3,090m

12.4%

Underlying profit before tax

£3,128m

10.0%

Group profit before tax

£2,954m

5.5%

Underlying diluted earnings per share

£28.92p

11.0%

Diluted earnings per share

£27.31p

2.6%

Dividend per share

£11.96p

(Available on http://www.cn.tesco.com/en/news/tesco_news1_143.htm)

The part of distributions of Tesco around the world

Country

Entrance Year

Number of shops

UK

1897

Czechoslovakia

1996

35

Hungary

1994

87

Poland

1995

105

Turkey

2003

8

China

2004

89

Japan

2003

111

Malaysia

2001

13

South Korea

1999

62