This insightful blog sheds light on the vitality of TESCO marketing objectives that helped it to survive the aggressive competitive landscape in the business arena. We have also covered the Tesco business strategy for their new market development, alongside some factors affecting the internal and external business environment with the help of Tesco survival strategies i.e. PEST and SWOT.
The main focus of this detailed documented blog is to discuss Tesco growth strategy with an emphasis on its potential of further improvement in business. Lastly, we evaluated the current corporate strategy for Tesco’s expansion into overseas grocery markets that is essential to sustain a Tesco competitive advantage.
The targeted company is none other than Tesco that has a British origin – a multinational grocery and general merchandise store founded by Jack Cohen in the year 1919 in East London. It is now the second-largest British retailer by both global sales and domestic market share, with profits beyond £3 billion. Initially originated as a retailer for food and drink, Tesco diversification now entails areas such as financial services, telecoms, clothing, consumer electronics, and home and health products.
Some of the most famous products of Tesco are camel milk Tesco and Ajax powder Tesco.
Tesco product development nowadays is so diversified as compared to the old days, making it more reachable to a greater proportion of consumers.
The rest discussion is what fully justifies the reason for penning down this article. Here is everything you needed to know about Tesco marketing techniques and strategic plans.
Let’s start with Tesco branding strategy operating as a two-tier.
Tesco is functioning as a two-tier strategy.
The first Tesco marketing tier includes its extension into non-food products within its home market in the UK and creating strategic healthy ties with RBS (Royal Bank of Scotland) for instance, to foster Tesco Personal Finance. The Tesco clipboard involves providing pharmacy, telecommunications, home and health, and financial services products. This strategy has evolved to sustain its market share in its grocery sales via destructive pricing and targeted marketing while growing into more risky and high-profit areas with attainable success.
The next Tesco marketing strategy tier includes an aggressive expansion into abroad grocery markets such as into Continental Europe, India, South East Asia, and the Middle East.
This section deals with the three main Tesco strategic plans based on Porter’s Generic strategy which has assisted TESCO to sustain a competitive advantage.
These three Tesco strategies are cost leadership, differentiation, and focus/niche strategy. Let’s discuss each one by one.
One of Tesco business objectives is Cost leadership. It deals with a company that is producing products at the lowest cost to obtain a competitive advantage. This strategy is suitable for Tesco’s business operations in India as presently their involvement is limited to the wholesale sector. A low-cost/low Tesco pricing strategy model promises to yield the highest returns and sales volumes due to the giant size of India’s population.
This strategy deals with the selling of products that have exclusive attributes favored by customers and as a result, they are agreeable to pay a higher price. Although Tesco’s business of selling grocery products is not exceptional, its business model differentiates it from competitors. Particularly its club card loyalty program permits Tesco to respond to changes in customer preferences faster and gain benefit by being the first one to tackle any new demand for products.
It’s usually suitable for smaller corporations, they can penetrate a particular segment of the market and offer specialist products.
A combination of differentiation and niche strategy is vital to remain profitable in the UAE market due to its fewer population but rising GDP per capita.
This model is used to review the competition in the target market in assistance with generic strategy’s attributes – to defend against these competitive forces. Porte’s 5 Forces explains that the level of competition and profitability for Tesco in UAE and India is determined by 5 forces. However, the pack of these five forces is generally complex due to the rise and decline of varying industries and their survival needs to meet the varying requirements of these industries.
Porter had a firm belief that the fundamental economic configuration in any market is ingrained in competition in any industry. These under-discussion five forces are defined in a little detail as follows:
The first force is the threat of new entrants. Tesco’s rivals including Wal-Mart and Carrefour are also expanding its existence into abroad markets and this could lead to destructive pricing to preserve market share which may have an unfavorable effect on profit margins. Currently, Tesco possesses sufficient purchasing power to practice economies of scale which acts as an obstacle to entry for other businesses. Also, it is setting up a partnership with Bharti Enterprises in India where Tesco will dominate the wholesale market and distribution network accountable for supplying products to 5000 stores.
This is the threat of substitutes. Grocery products have consumer demands and customers find alternatives if the price is made too high.
For instance, in UAE retail sector, Tesco may settle itself as a premium grocery retailer. One way to lessen the risks of substitutes is to expand the business into non-food sectors. It could establish a strategic alliance with local companies to provide services, in the same way, it has partnered with RBS in the UK.
This is the risk imposed by the bargaining strength of buyers which is strong for all retailers in the grocery market.
This force could help to gain substantial market share if it renders products to cater for western expatriates as currently there is restricted accessibility of English grocery items. Besides, it could lessen the threat of substitutes by expanding its loyalty program to the UAE. Such as Healthy living club, club card scheme, and Tesco Vine club, etc. With prices for eating out exceeding, it could provide the finest and healthy range ready meals to strengthen its customer base.
This force discusses the threats posed by suppliers’ bargaining power that is fairly low for Tesco. Also in terms of business competition, there are numerous small supermarkets within the UAE but none of the big ones such as Carrefour and Wal-Mart have yet penetrated the industry.
Tesco SWOT analysis 2013 has proven to be the most durable analytical method used in strategic management. Today we carried out a SWOT analysis to present Tesco’s corporate strategy stressing over the external factors that impact the business.
Strengths of SWOT include Tesco’s high expansion in the UK and overseas and its commercial existence as a known strong brand. Tesco’s target market is non-arguably in this situation seems to be the UK. On the basis of its size and creditworthiness, Tesco has access to cheap lending and economies of scale and its biggest power lies in its consumer-centric approach which caters to the needs and demands of local customers.
Supporting the claim, we want to discuss that Tesco has recently published a sales gain of 13% for UK markets which is greater than its competitors in the UK and 26% revenue gain in international markets. Tesco’s aim and objectives in 2013 clearly fostered to embrace of a competitive edge by hitting the UK.
The Tesco strategy is very flexible, they don’t always put forward its brand name unless it has a benefit when entering a market, and for instance in Turkey Tesco has maintained the name Kipa as local customers were aware of the name.
A weakness embraces chances to enter into price battles with has a negative effect on profit margins. Also since it may provide varying nonfood product lines it may not be capable to participate with specialist retailers. Finally, regulatory barriers in India that limit foreign ownership of retail stores could decelerate extension into the region.
There are regulatory barriers to obtaining retail trade licenses in India. At current, an overseas company can only function as a distributor/wholesaler. However, it is still a good break to enter the market as a wholesaler and establish Tesco distribution channels for marketing dissertation Help for a better and sustainable business proliferation.
If it enters into a price conflict with local retailers, the margins will have to bear consequences and because the UAE population is only 6million, the low margin high volume strategy will not benefit. Tesco is a public company and if it spends more of its capital on foreign expansion the UK market will suffer in the short term and shareholders may go up against some expansion decisions.
However, Tesco may provide multiple product lines in the same store, but since there are specialist stores for electrical products for instance; Tesco will have to struggle in the non-food sector.
In a nutshell, the nature of marketing is either a science or art: it can be defined as science because it makes use of scientific realism. In this era of globalization, a company can no longer spread its merchandise in its region and survive a competitive advantage. From all the discussion above, it is concluded that Tesco needs to persist in its growth overseas as the UK market has reached saturation point in the grocery sector. It needs at least half of its revenues from abroad operations to lessen its over-dependence on UK sales. Porter’s generic strategy and SWOT analysis have clearly shown some hopeful opportunities in India and UAE which could turn into cost-effective operations. Due to this, some of the potential threats can easily be beaten.
The key to success for Tesco in its expansion strategy is timing and flexibility. To strengthen and earn the people’s trust, its marketing strategy also embraces giving Tesco free samples.
India has recently permitted some overseas Direct Investment even though it’s restricted to possession of the wholesale sector, however, it’s a fruitful opportunity – as retail sales in India are forecasted to be $430 billion by 2010. Unlike Wal-Mart which became unsuccessful in entering the market in Germany and Brazil due to limited knowledge of local trends and consumer preferences. However, Tesco embracing its Tesco strategic objectives has been successful in entering several overseas markets. And this became possible due to their consumer-oriented approach and their study of local demand prior to setting up.
Before expanding its business claws into the United States, researchers, including a small legion of Tesco’s top executives, spent their two weeks executing Tesco market research by dwelling with 60 American families and observed their grocery purchasing habits.
Summing up all, Business Growth is what Tesco believes in and even though the economy is going through a recession period, they have strategically planned and prepared long-term to expand, extend and invest in the UK and internationally which will foster up to 30,000 jobs. In recent recessions, Tesco has commendably evolved to invest which they consider is one of the best. It stood firm on its Tesco mission statement2013 of not getting hit with any fall, but to rise.