The paper has identified strengths, weaknesses, opportunities and weaknesses as key environmental trends of TESCO in the UK. It is found that Tesco possesses the largest market share in the industry in UK while non-food merchandising and online supermarket has created opportunity for the company to build its dominant position in the UK retail market. Moreover, product variety and low price policy of Tesco has been identified as the key marketing mix, which provides Tesco with higher sales growth in the UK. The paper has mainly focused on the position of Tesco in the US since it has entered into US market. The paper addresses four main relative issues such as internal and external environmental factors of Tesco that created an opportunity for the company in the UK. Since the position of the company can have an intense effect on the position of the company in the US and Tesco could not achieve the target in the US which was expected, therefore, a comparison of the marketing mix of Tesco that adopted by the company in both countries has been carried out. With the consideration of Tesco in US, further strategies for long term and short term has been proposed using Ansoff matrix while marketing strategies that proposed using SAF analysis aims to signify the marketing needs of Tesco in the US with the help of assignment writing service.
Background and Introduction
TESCO is one of the largest food retailers in the UK, operates about 2,318 stores around the world. Moreover, TESCO operates about 1,878 stores only in the UK, Europe and Asia. TESCO also offers online service through tesco.com, tescodirect.com and tesco.net. Other services include online and offline personal finance services (Humby, Hunt and Phillips, 2008). By the end of the year 2004, TECO PLC achieved£33,557 million, and 18.7% increase compared to the year 2003, which was£28,280 million (McLoughlin and Aaker, 2010). However, the land of the United States of America has been identified as a very competitive market that is difficult to break into (Hamilton, Senauer and Petrovic, 2011). There could be a number of relative opportunities for TESCO to establish its stores in the US because retail industry is the second largest industry in the US and industry accounts for 12, 4%. Moreover, the USA is the center of the world’s largest retailer and retailer like Wal-Mart happens to be the biggest retailer in the country (Hamilton, Senauer and Petrovic, 2011). TESCO PLC has recently entered into US retail market where no UK based retailer ever succeeded before. Therefore, TESCO has introduced a new format known as Fresh& Easy Neighborhood Market positioned as creating value for the US market. The first Fresh& Easy store was opened in November 01, 2007, which operated as a pilot prior to rollout. In California, there are more than 60 Fresh& Easy outlets on the West Coast of the US (Dinkhoff, 2009). In 2009, TESCO intends to open more 250 stores in total.
Environmental Trends for Tesco
For assessing and evaluating the environmental trends that created the opportunity for TESCO Plc to build a dominant position in the UK retail market, SWOT analysis tool will be used. According to Böhm (2009), SWOT analysis together combines the internal and external environment of an organization and helps in the strategic planning. Fine (2009) argues that SWOT analysis is effective to measure the environmental trends of an organization in specific market as he suggests that through SWOT analysis, there is aim to identify the internal as well as external strengths, weaknesses, opportunities and weaknesses of an organization (Griffin, 2007). It provides a different picture relying upon the focus of the analysis. However, there are different arguments about SWOT analysis, as many believe that it is not an analysis but a summarized part of previous analysis (Böhm, 2009). The following part of the section identifies the internal and external environment of TESCO Plc using a SWOT analysis tool.
SWOT Analysis of TESCO Plc in UK
Strengths of TESCO in UK
The strengths of Tesco identified in the market of UK may include the increasing market share of the company; the general growth of the company such as return on investment shows no sign of abating, brand value of the company in the UK market, online service and leading position of the company.
Increasing Market Share
The market share of Tesco in the UK retail market is increasing and now Tesco holds 13% share of UK retail market. According to McLoughlin and Aaker (2010), the leading position of Tesco in the UK market as retailer with multi-format capabilities is the one of the strengths of the company and it is expected that it will continue growing share in the food market. Moreover, the company’s non-food retail contribution is also expected to drive market share in the UK.
General Growth of TESCO and No Abating Sign on the ROI
In the late 2002, Tesco invested intoWest-midlands based convenience store group T&S in the UK. This proved to be an aggressive move for Tesco to enter into the neighborhood market. Moreover, the investment deal was the second largest convenience store chain in the UK. Thus, the company’s growth in non-food division gave 23% revenue of total group earnings. This investment deal has made the company progress into international business and it is expected that company will make more profit over next 5 years. However, the company is able to turn this growth into regional strengths of the company with the geographical strategic planning, but Tesco must consider increasing the growth of the company in this sphere.
The personal finance of Tesco has reached one million motor insurance policies in 2003, which makes it the fastest growing motor insurance provider in the UK.
Tesco provides one of the biggest online supermarkets in the world and its online sale has reaches£577 million, which has increased 29%.
Tesco profit operational profit in Europe and Asia has increased 78% due to strong brand image and quality associated with the company.
Weaknesses of TESCO in UK Market
Dependency upon UK Market
In spite of the fact that Tesco is gradually growing and now the company accounts for greater profit in the international market of retail but still Tesco highly relies on the UK market for its revenue. However, this cannot be accounted as a major weakness, yet in the long term, if any change occurs in the retail industry in the UK the company can be affected.
Tesco has huge capital expenditure due to its investment for establishing new stores and it is not anticipated to reduce its debt. Moreover, Tesco has aggressive expansion; the company can also go through shortage of cash for other operations.
Opportunities for Tesco in UK Market
Tesco has experienced growth in the hypermarket format in the UK and this has caused the company to have 13% share in retail sales. Despite having such tremendous opportunity for growth, Tesco has not yet achieved the low cost structure using enhanced merchandising techniques. Moreover, health and beauty product range has been successful and continue to grow more. At present, Tesco is the fastest growing skincare retailer in the UK.
Tesco has experienced massive international growth in recent years and now operates in 6 European countries including UK, Ireland, Turkey and Poland. Moreover, the company also operates in Asian countries like Japan, Malaysia, Thailand and Taiwan. The company’s sale growth in international market is£770 million. This growth indicates that Tesco has sufficient potential to survive in the international market.
Threats of TESCO in UK
The price followers in the UK market are aggressive investors in price now due to new ownership and new management. Different market holders are reducing their prices up to 6%, which could cause Tesco to lose its profitability in the industry. Moreover, overseas returns can be decreased since the countries where Tesco operates are constantly facing economic crisis. Due to such economic crisis, the business model of Tesco can be fail and resulting in aggressive moves to other larger market.
International expansion is an expensive business venture and extensive international expansion needs huge investment. Huge international expansion of Tesco can cause the company to have increased debt.
Evaluate Tesco’s marketing mix in the UK versus the US. What are its strengths and weaknesses? Why has Tesco been so successful in the UK?
Successful marketing depends upon numbers of key issues that include what company produces or offers to its customers and how it reaches to its customers. Using 4 P’s for evaluating the company’s marketing strategy helps to understand the marketing position of the product. 4 P’s includes product, price, place and promotion, (Lancaster and Reynolds, 2005). The next part of the section presents evaluation of Tesco’s marketing mix in the UK versus the US using 4 P’s.
The products offered by Tesco in the UK have great variety as Tesco using different outlets offered number of food products at its store such as fresh produce wines, spirits and bakery items, grocery, meat, ready-made meal. It is claimed that having a huge variety of food items was one of the reasons of success of Tesco in the UK. Moreover, it also offers household stuff, including electric equipment, clothing, health and beauty and other garden furniture. On the other hand, in the US, Tesco realized that customers demand for fresh and ready-to-eat meal, therefore, Tesco followed customer-oriented trend as the best strategy for its marketing mix.
However, Tesco realized that US market could have imposed intense price competition, because price of Tesco was higher than retailers in the UK; therefore, Tesco had to adopt a competitive pricing policy to stabilize its position in the US. To capture the maximum market in the USA, Tesco adopted new format that offered Fresh and Easy Food at low price. However, price policy of Tesco in the UK causes the company to create profitability in the market of UK.
The success of Tesco in UK was due to its strategic marketing that brought about improved brand image of the company’s products. On this way, customer care service and customers’ feedbacks were used as the core of the marketing success of the company. Moreover, customers were targeted for promotion after analyzing their data. On the other hand, in order to create competitive advantages for store through strategic promotion, the company adopted the same way that it had adopted in the UK. In the US, Tesco worked on the customers and researched their demands and needs through taking their feedbacks. Moreover, in-store promotion and other advertisement increased the annual sale while there was important role of low prices in making the promotion successful.
In 2003, the company had adopted One Stop strategy as marketing mix in the UK for the company. The purpose of One Stop was to provide convenient shopping experience to customers, which offers 513 different stores under one roof. On the other hand, in the context of US, Tesco had to have a different approach because US was the country with tough food retail competition. Therefore, Tesco strategized to bring the supermarket or stores closer than other supermarkets. However, this strategy did not remarkably contribute to the company in terms of increasing its sale yet the company survived in the US retail market without being wound up.
Models of Strategic Marketing, Short-term& Long-Term for Tesco in USA
The new format of Tesco to introduce Fresh& Easy in the US could not achieve much success as it was expected to receive in relation to customers’ response. However, it has been identified that Tesco has been able to create core competency in the UK market based on few specific strategy. Tesco can apply those strategies in the US to achieve the maximum market share. To propose strategic marketing tactics Ansoff's matrix is used. According to Mercer (1996), the Ansoff growth matrix helps to strategize the marketing growth of a product. The use of Ansoff matrix further helps to suggest growth strategies through setting the direction for the business strategy (Stone, 2001). Using four factors existing product, exiting the market and new product, new market, the next part of the section will propose the strategy for Tesco in the US. The image given below is the depiction of four factors used to set business strategy.
Market Penetration (Existing Product in existing market)
Tesco needs to develop potential to increase the sale of products in the US market and it can be possible by implementing low price, or cost cutting strategy such as cheap supermarket. Moreover, by incorporating the idea of street corner can also help Tesco to have growth in total sale.
Market Development (Existing product in new market)
Tesco can expand its store in other areas of the country where it has not launched its store because currently Tesco is operating only in California, Nevada and Arizona.
Product Development (New product in Existing market)
Tesco has not yet adopted the strategy of introducing non-food item in the US, which was observed as a successful strategy in the UK. Tesco can attract more customers by introducing non-food product such as clothing, pharmacy, electrical goods and other services like financial and legal services.
Diversification (New product in new market)
Tesco can also expand its store in another part of the US and introducing a range of various store concepts and expansion into retailing services. Moreover, it should also focus on the delivery of retailing service such as visa card, home, motor, pet and travel insurance.
Appropriate Marketing Strategy (using SAF or another analysis) for Tesco in the United States.
According to Best (2009), SAF Analysis with the consideration of suitability, acceptability and feasibility of strategies helps to increase the effectiveness of business strategies. In order to outline appropriate marketing strategy for Tesco to increase the profit in the short and long term in the United States, the next part of this section will use SAF analysis.
Creating Brand Awareness
In the UK, Tesco has been successful due to its brand image, which is one of the strengths of the company. Creating the brand image through marketing essay writing service can increase the profit of the company both in short term and long term. The creation of brand image can be carried out to persuade potential customers for eating healthy and fresh food. The creation of brand image based on fresh and healthy food will greatly influence the potential customers because US is one of those countries where healthy awareness is increasing among the mass. The brand image can be created using simple in-store advertisement as a means of promotion of the brand message.
Through adopting different marketing tactics, Tesco can attract more customers that help to increase the sales growth of Tesco. To attract more customers, the company can market the features of products such as quality and fresh products. Tesco has been successful in the UK by using concept of quality and fresh product. Moreover, in-store marketing has also assisted the company to increase the sale in the UK. In the US, the retail food market is competitive therefore; Tesco can target young and middle age customers for its products.
This paper identified and analyzed the four different areas related to Tesco entry to US market. Since Tesco is a UK based food retailer and supermarket, paper has evaluated the Tesco’s position in the US in contrast to UK by identifying the internal and external market opportunities for Tesco in the UK market. The assessment of Tesco’s position and strengths in the UK market helped to assess different marketing mix applied by Tesco in UK and USA. In order to identify the internal and external factors of Tesco in UK, SWOT analysis has been carried out. To identify the differences between marketing mix applied by Tesco in the market of UK and USA, 4 P’s of marketing mix is used. By using 4 P’s of marketing mix, it is found that Tesco is able to more successful in the UK by focusing on its products range and pricing policy. The paper further proposed long term and short-term strategies for Tesco in the US by using Ansoff growth matrix. In the end, marketing strategies using SAF has been proposed for achieving long term and short term profit of Tesco in the US.