Tesco Market Oriented Approach

Businesses can develop new products based on a marketing oriented approach. What benefits and costs are associated with this approach for TESCO? (Outcome 1.2)

Benefits and costs associated with market oriented approach of TESCO

TESCO is top leading retailer in UK. It manages over a thousand supermarkets, hypermarkets, and convenience store in the United Kingdom, Ireland, central Europe, and Asia. TESCO started life in 1919 when Jack Cohen started surplus groceries from a stall in the East end of London. MR Cohen made profit of 1 from sales of 4 on his first day. TESCO brand first appear five years after in 1942 when he bought shipment of tea from a MR T. E Stock well. From that time TESCO slowly improve in retail business and now they are take top position in UK retail business. Tesco aim is provide best products for their customer and make sure about customer requirements.

Benefits of marketing approach – TESCO

TESCO have secured commercial standing within the global market place wining Retailer of the Year 2008 at the “World Retail Awards” this can be used marketing campaigns to drive advantage towards the demographic base for future growth and sustainability.

In an environment where global retail sales are showing decline or level performance on a like basis TESCO Group have published sales gain of 13% for UK markets and 26% growth in international markets.

As a business looking for continued expansion TESCO have reserve funds of credit coupled with income derived from property portfolio development funds.

Cost of marketing approach – TESCO

TESCO finance profit levels were impacted through bad debt, credit card arrears and household insurance claims.

TESCOs position as a price leader in UK markets can lead to reduced profit margins in order to retain the key price points on must have commercial items.

Grocer outlets are not set up to operate as specialist in specific areas of product which can be capitalized on by other smaller bespoke retailer.

Whilst current economic conditions suggest TESCO key value massage will succeeded there is a weakness in nonessential, mind to high ticket price items which will suffer from the rising cost of living and lower disposable incomes.

Task 2

2.1 Contemporary changes that occur within the macro and microenvironment heavily influence market decisions. Using the case study illustrate this. (Outcome 2.2)

Broadly speaking, the environment of business is composed of the microenvironment and microenvironment.

Micro Environment – The microenvironment is also called the operating, competitive or task environment. It consists of sets of forces and conditions that originate with suppliers, distributors, customers, creditors, competitors, and shareholders, as well as trade unions, and the community in which the business operates.

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Macro Environment

This environment refers to the wide ranging economic, socio-cultural, political and legal, and technological forces that affect the organization and its operating environment. These forces originate beyond the firm’s operating situation. The microenvironment is also called the external or remote environment. The macro environment presents threats and opportunities that are often difficult to grapple with (that is, identify and respond to), than with events in the microenvironment.

Macro and microenvironment – TESCO

Political: Politically, the recession is one of the main spectrums that are currently affecting all the countries which may lead to higher numbers of unemployment. As one of the largest and fastest growing retailers more jobs will be available with TESCO therefore helping to reduce the levels of unemployment.

Economic: One of TESCO’s competitive advantages at present relates to their overwhelming physical presence, there are issues about TESCO driving out the competition from other retailers. Under EU law, there is presumption that an organization with a large market share is dominant. The concerns with this are that quality of products and services will slip and there is a risk of paying higher prices. TESCO to date has not been assessed as posing a risk of exploitation but should bear this in mind.

Social: Sociological aspect involves lifestyle trends, demographics consumer attitudes and opinions, consumer buying patterns major events and influences buying access and trends in the case of Tesco considerations such as the increase in immigration of Eastern Europeans or increase in young professionals.

Technological : Technological factors which have perhaps had the most impact on TESCO has been the growth in the use of the internet .Internet has given new shape to new day shopping They have capitalised on the use of online shopping forum Tesco direct and provide a delivery service through their website at www.tesco.com.this has aided the company to cater to a larger segment of people at their convenience.TESCO’s are also instrumental as a retailer in supporting carbon reductions and have created a £100 million Sustainable Technology Fund for this purpose.

(http://www.businessdictionary.com/definition/organizationalbehavior.html#ixzz16Vjf8nTW

(http://www.tesco.com)

2.2 Looking at market segmentation principles, propose a segmentation criteria to be used in TESCO’s for their products in different markets (Outcome 2.2)

Market segmentation – It is a marketing strategy that involves dividing a broad target market into subsets of consumers who have common needs (and/or common desires) as well as common applications for the relevant goods and services. Depending on the specific characteristics of the product, these subsets may be divided by criteria such as age and gender, or other distinctions, such as location or income. Marketing campaigns can then be designed and implemented to target these specific customer segments, addressing needs or desires that are believed to be common in this segment, using media that is used by the market segment.

TESCO and Market Segmentation

Using segmentation analysis helped Tesco PLC, Britain’s largest retailer stores to decide on their future marketing strategy and to appraise their competitive strengths. Tesco realized the requirements for effective segmentation and that it must be measurable, accessible, differentiable, substantial and actionable.

To measure the size, purchasing power and characteristics of each segment Tesco used Club card program, giving cardholders discounts in exchange for their name, address and other personal information and optional questions about the size of their household, the ages of their children and dietary preferences they used this data to gain customer feedback which allowed Tesco to do further study on consumer segmentation on their purchasing behavior resulting from their lifestyle.

Differentiability is very essential for an effective segmentation, so TESCO offered different benefits to the same club card program is depending on demo & psychographic profile of each segment.

For the segmentation to be sustainable TESCO target was homogeneous and large so it was always profitable enough to serve By analyzing the data that club card generates Tesco was able to group the customers into segments according to their similar needs and benefits those are examples of grouping the customers keyed to their buying profile in Tesco’s database .

TESCO concentrated on reaching the segment by all possible means as the Accessibility of segment is very essential in segmentation, and every program used was attractive and served the segment to make the segmentation actionable and here are examples of segmentation used by TESCO.

(http://www.businessdictionary.com/definition/organizationalbehavior.html#ixzz16Vjf8nTW)

(http://www.tesco.com)

2.3 Select a product / service from TESCO’s range and propose an appropriate strategy to help boost sales for TESCO’s. (Outcome 2.3)

Developing a marketing plan or strategy to introduce a new technical product can be painless, and seems confusing only when we lose sight of objectives.

Devising a strategy for boosting sales General outline

Start by writing an outline of your marketing strategy. Then begin by gathering required information for each section in your outline. As you gather your market information, you may see critical gaps. Find a way to fill the gaps (e.g. telemarketing). Then polish the information with helpful tables, charts and graphs.

Outline to develop marketing strategy for boosting Sales TESCO product

TESCO product – Seven Seas Extra High Strength Cod Liver Oil 1050Mg 60

Mission Statement – To enhance the sale of Seven Seas Extra High Strength Cod Liver Oil 1050Mg 60

Market Segmentation – It should preferably be positioned in those markets where there is likely deficiency of vitamin A and D in general food habits due to non-availability or cost prohibition. It will also attract market in colder regions.

Competitors – There are a number of companies which are providing cod liver and fish oil. We have to be ahead of them in quality control.

Product – Seven Seas’ pure cod liver oil contains 525 mg of pure cod liver oil, 120 mg of omega 3 nutrients. Other ingredients include capsule shell, Vitamin A and Vitamin D3. Recommend to take one capsule with liquid each day.

If possible, do market testing –  That will be done through various contemporary methods in vogue.

Customers – There are thousands of customers especially mothers who will be interested to supplement their children diet with cod liver oil.

Position – The product is superior to others due to quality control.

Promotion – Through internet, TV advertisement etc.

2.4 Buyers behavior affects an organization’s marketing activities. Using a working example of choice demonstrate this in terms of different buying situations. (Outcome 2.4)

Buying behavior – It is the study of individuals, groups, or organizations and the processes they use to select, secure, and dispose of products, services, experiences, or ideas to satisfy needs and the impacts that these processes have on the consumer and society.

TESCO consumer buying behavior

Tesco’s retail process penetration, repeat buying of product at the same store group, multi-store buying all follow the same theoretical patterns as have been established previously for brands. Retail choice is like brand choice. Retailing ways at to Tesco brand within particular chain is known as customers spread purchases of the product extensively to other brands and other chains directly in line with market shares. Thus, it is important to have methodological ideology when dealing with buying behavior patterns of such brands as it is ideal to compare levels of service, brand and store image cues, brand empowerment and quality the retailer brings. TESCO is good at selling dry goods while Wal-Mart is known for wet based goods, and how it affects the buying behavior of consumers with special attention to branding assimilation. It can be recommended that this research will be a mixture of methods and will utilize both qualitative and quantitative approach despite case study dominance.

The case of Tesco also indicates that the internationalization process of retail multinationals is not always a progressive and straightforward process (Alexander and Quinn, 2002; Burt et al., 2002, 2003; Mellahi et al., 2002). The findings add new insights into the complexity of the international retail divestment process. It appears that Tesco had learned rather valuable lessons from experiences, while other retailers’ international market withdrawals provided an opportunity to observe overt behavior. Alexander and Myers (2000) have remarked that the differences between ethnocentric and geocentric operating structures will impact the international learning process. Tesco viewed their early international moves abroad as business extension and redirection of free cash flow limiting organizational learning opportunities (Palmer, 2002).

2.5 Using an organization of your choice pick product / service and suggest new improved, marketing position and the methods that need to be employed. (Outcome 2.5)

Market Position – Cheese (TESCO – Ireland)

Cheese in Ireland is one of the most important foods in their daily life. Although the economy is recession, the cheese market in Ireland still has growth, mainly from the natural sector as grated and blocks continue to increase in sale (AC Nielsen, 2005).

The main distributions – Supermarkets and hypermarkets

Key suppliers – dairy farmers, house made family, and key manufactories.

Size of cheese market -The Irish cheese market grew by 3.5% in 2008 to reach a value of $155.6 million, representing annual growth rate of 2.8% for the period spanning 2004-2008. The Irish cheese market grew by 3.1% to reach a volume of 16.4 million kilograms in 2008. Market consumption volumes increased with 3.5% between 2004-2008.

Price trends: Under the Baseline, dairy product prices are projected to decline by 7 percent for cheese by 2012 (Teagasc, 2003).

Demand: The customer demand for high quality cheese products is increasing. Consumers prefer to try new formats and flavors. And there is also fuelling new uses for milk-based ingredients, rising demand for cheese variety, an increase in niche product markets and increased product shelf life.

Analysis of Segmentation- despite Tesco has variety of the cheese products, their product display is clutter. Tesco does not categorize the products well. Cheese products in Tesco Carlow mainly are classified according to brand, but also in a mess. In addition, Tesco want to place the products base on all the forms with brand, such as types, flavors place of origin. It is not convenient to find the product which customers look for. The chart 2 illustrates Tesco’s current cheese product segmentation.

(http://www.businessdictionary.com/definition/organizationalbehavior.html#ixzz16Vjf8nTW)

(http://www.tesco.com)

Task 3

3.1 Certain products / services develop and sustain a competitive advantage over a long period of time. Using a product / service with such attributes, explain how and why. (Outcome 3.1)

Competitive advantage is defined as the strategic advantage one business entity has over its rival entities within its competitive industry. Achieving competitive advantage strengthens and positions a business better within the business environment.

Distinctive Capabilities – These are the basis of your competitive advantage. According to the new resource-based view of the company, sustainable competitive advantage is achieved by continuously developing existing and creating new resources and capabilities in response to rapidly changing market conditions. Among these resources and capabilities, in the new economy, knowledge represents the most important value-creating asset.

Leadership – It is the necessary condition for long-term competitiveness. In particular in the knowledge economy, what is proving to be most effective is “the emerging style of values-based leadership, both as motivation for constant innovation up and down all organization levels and as a source of unity and coherence across fragmented firm boundaries.

Systemic Innovation -Innovation used to be a linear trajectory from new knowledge to new product. Now innovation is neither singular nor linear, but systemic. It arises from complex interactions between many individuals, organizations and environmental factors.

Competitive Strategy of Microsoft – Although Bill Gates, Founder of Microsoft, built his empire on technological products, his business mastery is even more important than his technical skills, and his competitive urge is a huge driving force. The early success of Microsoft was founded on the company’s competitive strategy.

3.2 Customer conveniences are a very important concept in marketing. Using the case study explain how TESCO distribution is arranged in a particular way to facilitate this. (Outcome 3.2)

Customer convenience means – doing business the way customers want to do business with you.” Makes sense doesn’t it? Customers don’t care even if your product is made from a space age material from the center of the earth, was manufactured in Jupiter, made its quality inspection in Mars, packaged in Pluto and then delivered via space shuttle, if they don’t want your product.

Customer convenience in distribution – There are several ways in which businesses arrange distribution to provide customer convenience. The methods used may vary slightly based on what sort of business is being operated.

For example, those who are running an e-commerce business will have different techniques than those who have a standard “real world” business headquarters. Also, different real world businesses may have different techniques dependent upon the size of the business and where they may be dealing with customers.

First, let’s look at e-commerce. Amazon.com is a great example of how distribution can be arranged to make things more convenient for customers. Amazon offers freestandard shipping for items that are advertised through Amazon. One of the reasonsthat they are able to do this is because they have distribution centers located all over the place. When you make a purchase from the site, you will receive your packages from a particular distribution center and the location of the center is based on whichever one of the Amazon fulfillment centers is nearest you and contains the item within its standard inventory.

TESCO distribution

Improving the customer offer i.e listening to customers in a wide variety of ways is key to what TESCO do. They engage with customers through a range of focus groups and ongoing research trackers, and actively seek feedback on what is good or not so good.

TESCO loyalty schemes, such as Clubcard or Legou Tesco Membercard in China, are not only great for customers but also provide data insight to continually improve the shopping trip.

A great range of products – In food, general merchandise and services, TESCO work with suppliers and develop brands to bring a great range to customers. The relationship with our suppliers is the foundation of their customer offer.

The right products are launched at the right time.

The best shopping trip – Whether in store, online or a combination of both, TESCO pride on delivering a great shopping trip for customers. With opticians, pharmacies and phone shops available in larger stores, and Tesco Bank products available to buy in store, over the phone or online, we are deepening our customers’ relationship with Tesco, bringing a value of convenience, simplicity, reliability and great customer service into what can be complex markets.

The virtuous volume circle – By keeping customer focus central to business model, TESCO is able to provide a leading customer offer: a broad range of products and services at great prices, sold in shops in convenient locations and, increasingly, available online.

3.3 An organization’s objectives dictate how prices are set in balance with market conditions. Using TESCO’s or an organization of your choice illustrates this. (Outcome 3.3)

TESCO has set out its own aims and objectives that they wish to achieve. These aims are to ‘retain loyal people’ and ‘create value for customers and earn their lifetime loyalty’.

Firstly – there is retaining loyal people. These people are not described as customers but just people. This means that this mission statement is not solely aimed towards their customers. This is aimed at staff as they need loyal staff to create a working environment that thrives. No one wants to shop in a supermarket where the staff is unhappy, so keeping their staff happy adds to their customers and therefore their growth. They also wish to retain their shareholders; these are the people that keep Tesco going from the top end. Keeping these people happy is primarily by keeping money going into their pockets. This too is done by retaining loyal customers and opening new stores, which are also beneficial to customers. All of these combined are great to keep their custom base but also great ways to keep their profits rising. More profits always mean more growth and therefore a more successful company.

Their other objective – is to create value for customers and earn their lifetime loyalty. This is done by splitting this objective into the 4 P’s. These are Product – having the right product range for the customers. This differs from store to store and area to area. Price – keeping their prices competitive.

Place – accessible locations for customers.

Public – thinking of their public. Their corporate and social responsibility is spoken about by their PR team frequently and they do give to charity and the local community out of their profits.

Tesco can see buying patterns from their Club card information and this gives them the insight into what people want and what is in demand which helps achieve these customer led goals.

3.4 Promotional activity is essential to achieve organizations marketing objectives. Using TESCO’s show how promotional activity is integrated into its marketing objectives. (Outcome 3.4)

Promotion Activity – A successful product or service means nothing unless the benefit of such a service can be communicated clearly to the target market.

TESCO promotional activity TESCO promotional activity is integrated into its marketing objectives as follow:

Advertising: Is any non personal paid form of communication using any form of mass media.

Involves developing positive relationships with the organization media public. The art of good public relations is not only to obtain favorable publicity within the media, but it is also involves being able to handle successfully negative attention.

Sales promotion: Commonly used to obtain an increase in sales short term. Could involve using money off coupons or special offers.

Personal selling: Selling a product service one to one.

Direct Mail: Is the sending of publicity material to a named person within an organization. There has been a massive growth in direct mail campaigns over the last 5 years. Spending on direct mail now amounts to £18 bn a year representing 11.8% of advertising expenditure ( Source: Royal Mail 2000).

Organizations can pay thousands of pounds for databases, which contain names and addresses of potential customers. Direct mail allows an organization to use their resources more effectively by allowing them to send publicity material to a named person within their target segment. By personalizing advertising, response rates increase thus increasing the chance of improving sales. Listed below are links to organization who’s business involves direct mail.

Message & Media Strategy – Click here if you want Edward to read this bit.

An effective communication campaign should comprise of a well thought out message strategy. What message are you trying to put across to your target audience?. How will you deliver that message? Will it be through the appropriate use of branding? logos or slogan design?. The message should reinforce the benefit of the product and should also

3.5 The marketing mix is an important concept. Why has there been an emergence of the additional elements (extended marketing mix)? (Outcome 3.5)

The marketing mix is a business tool used in marketing and by marketing professionals. The marketing mix is often crucial when determining a product or brand’s offering, and is often synonymous with the four Ps: price, product, promotion, and place; in service marketing, however, the four Ps have been expanded to the sevenPs or eight Ps to address the different nature of services.

The 4 P product oriented model – It included:

Product – A product is seen as an item that satisfies what a consumer needs or wants. It is a tangible good or an intangible service

Price – The price is the amount a customer pays for the product. The price is very important as it determines the company’s profit and hence, survival.

Promotion – represents all of the methods of communication that a marketer may use to provide information to different parties about the product.

Place – refers to providing the product at a place which is convenient for consumers to access. Place is synonymous with distribution.

In recent times, the concept of four Cs has been introduced as a more customer-driven replacement of four Ps. And there are two four Cs theories today. In consonance with the evolving markets a new 7 Cs model evolved. The main ingredients are:

(C1)Corporation – The core of four Cs is corporation (company and nonprofit organization). C-O-S (Organization, Competitor, Stakeholder) within the Corporation.

The four elements in the seven Cs compass model are:

A formal approach to this customer-focused marketing mix is known as Four Cs (Commodity, Cost, Channel, Communication) in “the seven Cs compass model. The four CsModel provides a demand/customer centric version alternative to the well-known four Ps supply side model (product, price, place, promotion) of marketing management.

Product → Commodity

Price → Cost

Place → Channel

Promotion → Communication

(C2)Commodity – (Original meaning of Latin: Commodus=convenient) : the goods and services for the consumers or citizens. Steve Jobs has been making the goods with which people are pleased. It is not “product out”.

(C3)Cost – (Original meaning of Latin: Constare= It makes sacrifices) : There is not only producing cost and selling cost but purchasing cost and social cost.

(C4)Channel – (Original meaning is a Canal) : marketing channels. Flow of goods.

(C5)Communication – (Original meaning of Latin_Communio=sharing of meaning) : marketing communication : Not only promotion but communication is important.

(C6)Consumer – (Needle of compass to Consumer)

N = Needs

W = Wants

S = Security

E = Education:(consumer education)

(C7)Circumstances – (Needle of compass to Circumstances ) In addition to the consumer, there are various uncontrollable external environmental factors encircling the companies.

(http://www.businessdictionary.com/definition/organizationalbehavior.html#ixzz16Vjf8nTW)

(http://www.tesco.com)

Task 4

4.1 Propose two separate marketing mixes for two different segments in the consumer markets, using product / services from TESCO’s (Outcome 4.1)

The Marketing Mix

The concept of a marketing mix is best described by (1990, 43) claiming that it is “the set of controllable marketing variables that the firm blends to produce the response it wants in the target market.” It is composed of four Ps: product, price, place, and promotion. In the context of Tesco, their entry to the Chinese market should significantly adapt to the culture of the consumers in the said location. However, the company should take into keep in mind the basic standards to which their company adheres to. Changes in the provision of services in terms of the four Ps should not completely deviate to the standards inherent to the company. The preceding discussions reveal the suggestions of the researcher.

Marketing mixes for two different segments in consumer market – TESCO

In the context of TESCO, their entry to the Chinese market should significantly adapt to the culture of the consumer in the said location. However, the company should take into keep in mind the basic standards to which their company adheres to.

Product: The management of TESCO should set off product development strategies once they have taken control of their shop in China by marketing their existing products, exporting products in different province of the country and in so doing pressing forward on the possible opportunities of boosting the company’s market penetration and market share.

Price: Looking at the situation of Tesco, one way that it could acquire cost advantage is by enhancing process efficiency, expanding exclusive contact to a large supplier of lower cost materials, or steering clear of several costs in general.

Place: To develop its success in its retail operations, the Tesco should make multi-million pound investments in store expansion in low-income districts and localities.

Promotion: The Tesco’s approach should constitute a long-standing strategic plan that centers on generation value to expand the loyalty of their customer which takes account of preserving a well-built central Chinese business, to be as strapping in non-food as food product and services, to develop globally and to set the ball rolling on retailing services like on-line shopping.

The bottom-line is that object of the marketing mix is to satisfy the customer and in this analysis we can see place play most important role in china situation. Because of that Tesco not catch that much success like UK or other place. Other hand TESCO product price is contribute to get success of Tesco and for that in UK Tesco is a number one retail company. Different between domestic and international market

4.2 Marketing tactics used on a consumer is different to the marketing tactics used for a business. Using an example illustrate this. (Outcome 4.2)

Marketing tactics for consumer vs. businesses

Although on the surface the differences between business and consumer marketing may seem obvious, there are more subtle distinctions between the two with substantial ramifications. Dwyer and Tanner (2006) note that business marketing generally entails shorter and more direct channels of distribution.

While consumer marketing is aimed at large groups through mass media and retailers, the negotiation process between the buyer and seller is more personal in business marketing. According to Hutt and Speh (2004), most business marketers commit only a small part of their promotional budgets to advertising, and that is usually through direct mail efforts and trade journals. While that advertising is limited, it often helps the business marketer set up successful sales calls.

Marketing to a business trying to make a profit (business-to-business marketing) as opposed to an individual for personal use (Business-to-Consumer, or B2C marketing) is similar in terms of the fundamental principles of marketing. In B2C, B2B and B2G marketing situations, the marketer must always:

successfully match the product or service strengths with the needs of a definable target market;

position and price to align the product or service with its market, often an intricate balance; and

communicate and sell it in the fashion that demonstrates its value effectively to the target market.

4.3 Marketing a product / service internationally would employ slightly different methods than nationally. Using a working example show how. (Outcome 4.3)

Marketing is the efficient and effective management and utilization of a company resources to meet the consumers demands and the company’s objectives. It involves selling the company’s products to satisfy the needs of consumers.

It includes planning, conception and execution of ideas, pricing, promotion, and distribution of a company products with the purpose of obtaining the company’s objectives and satisfying the consumers. Marketing can be done within a local or domestic market or across national borders or in the international market.

Domestic Marketing

Domestic marketing is the selling of a company’s products within a local financial market. It deals