Table of Contents Contents Analysis of Tesco Background
Page Numbers 2-3
Analysis of Market Situation -Market Share, growth and potential
3
-SPICC analysis
4-5
SWOT Analysis
5
Tesco's Competitor Analysis
6
Marketing Objectives of Tesco
6
Marketing Plan of Tesco -Segmentation of Tesco
7
-Targeting of Tesco
8
-Positioning of Tesco
8
New Product or Service Idea of Tesco
8-9
Future Marketing Strategy of Tesco
9-10
Financial Forecasts for Tesco(2012-2015)
10-11
References
12-15
1.
Analysis of Tesco Background Tesco dated back to 1919 and was founded by Jack Cohen when he began to sell surplus grocery products from a store in the East End of London. During that day, he managed to earn £1 on sales of £4. In the year 1924, the brand name Tesco first appeared in Jack's very own-brand products called Tesco Tea. The name Tesco was a combination of the initials of TE Stockwell, a partner in the tea suppliers firm , and the first two letters of Jack's surname,Cohen. The first Tesco store officially started business in 1929 at Burnt Oak, Edgeware, North London. Throughout the 1930s, Tesco expanded into a private limited company. Tesco grew from stores to supermarkets and they also bought a plot of land at Angel Road, Edmonton to build its headquarters and warehouse. Following the success of self-service stores in the US, Tesco opened its first self-service supermarket at Maldon in 1956. During the 1960s, Tesco worked diligently to build its brand name and they soon became a family household name. By the end of the 70s, Tesco had achieved an annual turnover of £1 billion. In 1982, Tesco achieved an annual sales exceeding £2 billion. During the 1990s, Tesco further grew its business as well as its international presence, having stores opened in many European and Asian countries due to growing responses like Poland and Hungary as well as Thailand and South Korea. Up until now, Tesco already has 6,234 stores operating across 14 different countries and accumulated annual sales of £72 billion from all the markets and the numbers are expected to increase as Tesco intends to make its presence be known in more unexplored territories. Like others, Tesco also has its own mission and vision. The core purpose of Tesco is to create value for customers to earn their lifetime loyalty. Tesco envisions themselves as the most highly valued business in the world. Not only by customers, but also by the communities they work in, the staffs and the stakeholders. Tesco also hopes to be viewed as a growth company that always strive to grow in all parts of their business-in the UK, internationally as well as in various services. They will be a modern and innovative company that is able to predict changes and adapt to circumstances. They also see themselves winning locally by utilising their global skills and knowledge which also benefit the performance of their business all around the world. Tesco upholds the value that no one tries harder for customers than them as they will understand and be the first to meet the needs of customers. Besides, they also strive to act responsibly in the communities they work in. Another core value is that they treat people how they 2.
like to be treated. Tesco wants its staff to work as a team and to learn to trust and respect each other. Tesco also values listening, supporting and saying thank you to the people they interact with and be willing to share the knowledge and experience that they have. Tesco's success depends a lot on the people they work with and also the people who shop with them. By performing the values, they are able to create a fun and lively environment to work in(Tesco Plc, 2012). Analysis of Market Situation Over the years, Tesco has successfully build up a strong brand name within the UK as well as many other countries outside of it. Within the UK market, Tesco is the leading business for the retailing industry, owning a market share of 30.2% whereas competitors like Wal-Mart owned Asda,17.9%, and J Sainsbury Plc,16.6%, remained a distant second and third respectively. In terms of its growth, Tesco has a revenue growth of 2.7%. Although it is lagging market growth of 4.0% but in comparison to a month ago, it had made tremendous improvement from the initial 2.5% (BloombergBusinessweek,2012). On the international level, Tesco has made a great effort to place themselves as the third largest world retailer behind US giant Walmart and French owned Carrefour in terms of sales. But, according to IGD as stated in TalkingRetail(2012), Tesco is expected to have the strongest growth among the top four global retailers with an estimated annual growth rate of 6.8% between 2011 and 2015. Besides having physical stores, Tesco also sought for other alternatives to expand its business, this meant opening an e-store, www.tesco.com. In this field, Tesco has made it so big that it is now the world leading Internet grocer with an estimated 55% market share of the online food industry in the UK. Tesco online recently became UK's third most trafficked site behind Amazon Europe and housewares retailers Argos, proving that Tesco has a strong growth as it slowly increases its position as one of the most trafficked site in UK.
3.
Suppliers Publics
Intermediaries Customers Competition
-Relations with supplier -Distribution channels -Shareholders -Government -Environment -Promoters -Physical Distribution Firms -Creates value -Competitive pricing strategy -Wal-Mart -Sainsbury's -Carrefour -Morrisons -Asda
Table 1.1 SPICC breakdown of Tesco Suppliers: Tesco has cultivated a bond with its suppliers to develop its “Tesco Better Value”. Tesco likes to treat its suppliers as its customers. To gain this competitive advantage, Tesco utilises the local knowledge and skills of local suppliers in existing markets. Like that, Tesco is able to find and purchase products that fit to local needs. In addition, it is also able to avoid custom fees and enhance its distribution channels, therefore, ensuring quality products at low prices(Louis P., 2010). Publics: Tesco has always been committed to maintain a good dialogue with its shareholders to ensure what's expected of Tesco and to provide opportunity for Tesco to respond to a wide range of enquiries. Besides, Tesco also depends on the government to assure that the products they produce meets quality standards qualification. Tesco is committed to play a role in helping to care for the environment. One of the ways Tesco is doing so is by being proactive in promoting recycling in their UK stores(Tesco Plc, 2012). Intermediaries: Tesco has employed promoters to help advertise its own brand products. Tesco is able to gain more profit because the promoters are able to explain in details the use of the Tesco product directly to customers, thus increasing the chance of them purchasing more of it. Besides, Tesco also acquired the use of distributors to help them deliver products straight to customers' homes. Like in Korea where customers can do shopping even in the subway, after the purchase is made, the distributors would have already delivered the products to customers' doorsteps. Customers: Tesco holds the core purpose of creating value for its customers. In that case, Tesco is 4.
always determined to provide the highest quality of products at low prices for its customers. Thus, Tesco has decided to focus more on competitive pricing strategy of its products and reduce promotions. For example, The Telegraph(2008) has reported that Tesco has made an effort to halt any price increase of its products by the suppliers as they want to protect the customers' interests by offering them the lowest prices possible. Competition: For many years, Tesco has relied upon its competitors so that it can improvise and adapt to changes in the grocery industry. According to Powell(2012), Tesco is able to adapt to competitors' challenges and reduce its price even lower, if not the lowest, to make their products even more attractive to customers compared to its competitors. SWOT analysis of Tesco
Strengths •
Weaknesses
Brand value- offers low price and
•
customer focused • •
Reliant on UK business- majority of their profits comes from UK
UK market leader- diversify into new
•
Stores not specialized in selling a
sectors, strengthen its leadership position
specified product- smaller retailer can
Strong
capitalize on
customer
loyalty-
Clubcard,
offers rewards and vouchers
•
High employee turnover rate- many employees left after one or two months of work
Opportunities •
Threats
Tesco Direct(online)- grow the use of
•
technology, provides a platform for nonfood based products to generate more
profit margin •
returns •
Rising raw materials costs- impact on Stiff competition- Walmart, Carrefour, Asda and Sainsbury
Further international growth- Indian
•
International expansion- lucrative but
market, provide a huge market with
expensive, incurs huge investment and
lucrative returns
marketing cost, sometimes new brand name is required Table 1.2 SWOT analysis of Tesco 5.
Tesco's Competitor Analysis The largest and main global competitor of Tesco is none other than Walmart. Walmart is currently the largest retailer in the world and has an annual sales eight times of that of Tesco's. In terms of number of stores, Walmart has 8838 stores which is almost double the number of Tesco stores. Riding on the economies of scale and making direct purchases from manufacturers, Walmart is able to sell many of its products at lower prices as compared to others(Carvin N.,2011). In the UK, however, Walmart has intimidated Tesco by taking over Asda. Asda has in recent years challenge the retail market leadership position by consistently increasing its market share from year to year. Besides Walmart, the second largest retailer in the world, Carrefour, also has the ability to affect Tesco's sales. In Europe, Carrefour is the first to open the hypermarket which means they are an extremely innovative company and can anytime come out with a new format store that can influence Tesco's position. Besides, Carrefour is also an organic company as they are able to ensure that the products they sell are at high environmental quality. Partnering with WWF, they can make a daily approach to biodiversity conservation and also waste reduction. So, they pose a direct threat to the green approach of Tesco as well(Carrefour Group, 2012). Marketing Objectives of Tesco One of the main marketing objectives of Tesco is to achieve the leading position in the retailing industry in every market that they operate in. Secondly, Tesco also markets because they want people to know and choose their brand as the brand that offers high quality products with a broad range at low prices. Third, Tesco also wants to promote their versatility as a multi-channel retailer wherever they trade, that being the combination of stores and online. Fourth, as UK is their core business, they also advertise themselves in hopes to keep their UK market strong and growing. Fifth, as a responsible company to the environment and also with the recognition of them being the top retailer in the world for tackling climate changes, Tesco hopes to foster a greener shopping environment where customers can also play a role in helping to reduce carbon emissions. Lastly, Tesco also wants to promote their active involvement in social issues and highlight their efforts in the creation of new jobs in wherever they open their stores.
6.
Marketing Plan of Tesco Segmentation of Tesco Geographic : •
• •
Demographic :
Countries that have or would have high
•
Age: Ages 0-99, everyone needs grocery
consumer buying power and demand for
products
retail items.
Example
Country: UK, US, South Korea, Thailand
Kids( Tesco Goodness)
and etc.
Elderly(Tesco Healthy Eating) •
Density:
Income:
Urban
Middle to high income
Tesco Metro
Finest range
Sub-Urban
Lower income
Tesco Superstore, Tesco Extra, Tesco
Everyday Value range •
Express
Occupation: All types of occupation (students, businessmen, professionals, unemployed)
Psychographic : •
•
Behavioural :
Social Class: Offering best range to all
•
Purchase Occasion: Seasonal promotions
income groups from the lower lower
Example
class up till the upper upper class.
Christmas
Lifestyle: Offering different styles and
New Year
functionalities
Summer/ Winter
which
fits
to
every
individuals own preference. (Tesco F&F)
•
User status: Attract potential/regular
Youngster
users and ex-/non-users
Stylish and hip fashion
Example
Business class
Private labels
Professional wear
Own-brand products(Tesco Brand) •
Loyalty
status:
schemes
to
Produces
retain
Clubcard
absolute
loyal
customers and also attract none loyal customers.
7.
Targeting of Tesco The targeting strategy of Tesco depends on the geographic, demographic, psychographic and behavioural elements for a better direction. But nonetheless, Tesco will generally employ the undifferentiated marketing strategy as retail markets are prone to produce items that suit all needs. Tesco wants to produce anything and everything that everyone finds it relevant to themselves. However, in geographic, Tesco will focus more in UK as it is their core business. In demographic, Tesco will concentrate more in their Everyday Value range as in the past years this range has generated huge amounts of profits. In psychographic, Tesco will be eyeing on people's different lifestyle as their Tesco F&F fits to all types of tastes and preferences. In behavioural, Tesco will want to pursue customer loyalty therefore they will always be seeking for ways to improve and improvise their Clubcard scheme. Positioning of Tesco Tesco has successfully positioned themselves in customers perception as the brand that offers wide selection of high quality products at low prices. Tesco has also gained an advantage by having an online store which customers see it as extremely time saving and convenient for shopping. Tesco has also made themselves be seen as an extremely customer focused company as they launched the Clubcard as a mean of giving something back to customers for their frequent patronizing in Tesco. New Product or Service Idea for Tesco Tesco has recently adopted a revolutionary packaging whereby it is able to prolong the freshness of tomatoes and avocados and others alike for days longer. The packaging contains a strip coated with a natural product that can absorb ethylene, the hormone that causes the ripening of fruits and then turn mouldy. It is safe and also 100 times more effective than any other existing materials, and it is also able to combat food waste and potentially save the fresh produce industry tens of millions of pounds each year! Besides, Tesco has also replaced its Value range with a new range called the Everyday Value. The first notable difference being an improved quality in the Everyday Value, with no extra charge on customers. The new range does not contain MSGs, artificial flavours or colours and genetically-modified ingredients. Second, Everyday Value is also a healthier choice as it will have a lower fat content. Third, the Everyday Value also spots a more attractive packaging as it is more 8.
colourful and softer than the blue-and-white of the Value range. The packaging is more convenient as some products are available in easy-open packets and resealable bags. Tesco has also launched their first ever virtual 3D fitting room online. This application featured on their Facebook page clothingattesco is able to help customers find the perfect size and fit of clothing when they shop for clothes online. Customers can create 3D digital figures of themselves just from a photograph uploaded onto the page. Customers can find their perfect matching look with the accurate size without the hassle to shop and best of all, there is no queue in the fitting rooms which means customers can style endlessly(Tesco Plc, 2012). Tesco has also included some in-store innovations or services to make the shopping experience a lot easier. One of the distinct features is the “Scan as you Shop” system whereby customers can bring along a bar-code scanner with them as they shop which saves them the trouble to find for one. Another excellent service is the provision of smart badges for staffs. This is a quick and effective technology where it is used to scan QR codes of items and information such as stock availability and price will be shown on the badge whenever customers enquire about the item. It saves time and also provides immediate answers to customer enquiries. Future Marketing Strategy of Tesco Tesco will be concentrating in the UK by investing an expected £1billion to revitalize its business. One of the main strategy Tesco will be emphasizing on is building their team of staffs to bring new levels of excellence to the work and to customers. Tesco will be expected to invest £200m in providing additional training and equipment to staffs to better equip them with the skills and tools to serve customers well. These changes will be targeted at the larger stores and fresh food departments like meat and chilled convenience food. Besides, Tesco also plans to upgrade their existing stores by giving it a warmer feel and attractive look. These refreshes will be targeted on the fresh departments as well as the service counters. In 2012/2013, Tesco plans to refit or refresh some 430 stores with these new looks. With the booming business of the online industry, Tesco will seek to reduce their new space in 2012/2013 by 38% compared to 2011/2012. They will also allocate their capital efficiently by decreasing capital investment but will be focusing their expenditure on growing their existing stores with priorities given to Express stores and also dotcom-only stores. Gaining the first mover advantage, Tesco has positioned themselves to prosper in the online industry. With the new Tesco Direct recently launched, Tesco hopes to shift customer shopping 9.
habits to online by doubling its offering range to 75,000 products and also fully integrating it in the mobile devices for the first time. Tesco expects to invest £150million in upgrading the online industry like creating 700 new Click and Collect points to offer more convenience for customers. After good progress in Korea and Prague, Tesco will soon be launching another dotcom industry in Warsaw. Tesco also hopes to accelerate growth by operating dotcom-only stores so that it can free up more room for existing growth and extra 2 be added by the end of 2013. As Tesco Bank's systems migration approaches its final stage of completion next month, it has ensured that when it is done, it will be in a strategic position to deliver good growth. As 75% of the Bank's business is done online, the new infrastructure would include some important customer service improvements like instant decisions on loan application and the opening and funding of savings account can be done easily within 10 minutes( previously 2 weeks). In 2013, the Bank is predicted to offer the service of current accounts and mortgages. With these offerings, Tesco Bank will be paving its way towards being a full-service bank to Tesco customers and will be able to contend with mainstream banks(Adisa A.,2012). Financial Forecasts for Tesco( 2012-2015)
Graph 1.1
Tesco Group Income Statement Evolution Graph (4-traders, 2012)
10.
2012
2013f
2014f
2015f
£m
£m
£m
£m
Group sales
72035
77366
83091
89239
Group revenue
64539
68164
72186
75012
Capital Expenditure
3800
3300
3988
4283
Group profit
3761
3810
3859
3910
2814
2966
3126
3295
Profit year
trading for
the
Table 1.3 According to the forecast in Graph 1.1, the sales bar actually indicating the revenue of the group is expected to increase from £65billion in the year 2011/2012 to an approximate £75billion in the year 2014/2015 with an estimated average annual growth rate of 5.2%. In table 1.3, the group sales in 2011/2012 is £72billion but with a constant exchange rate, the sales is expected to grow until £89billion in 2014/2015 with an average annual growth of 7.4%. These increases are most likely caused by the recent entry and potential growth in the Indian market. Besides, the promising improvement in US soil also causes the group sales to increase as it has a total sales growth of 27.1% this year and also expected break-even to happen at the end of 2013. From the Table 1.3, capital expenditure is expected to experience steady growth from £3.8billion in year 2012 to £4.2billion in year 2015. But, during the year 2013, expenditure is expected to decrease until £3.3 billion as there will be reduced new store opening in the UK instead will be focusing on investment in existing stores and online(Tesco preliminary results 2011/2012). Group trading profit and profit for the year will also be expected to increase steadily with an annual growth rate of 1.3% and 5.4% respectively with comparison to last year's results as a baseline. (Word Count- 2864 words)
11.
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