Marketing Planning. TESCO COMPANY SWOT ANALYSIS.
Tesco is a U.K based public company and is the third largest grocery retailer in the world. This is according to a report by potter and mark (2011). The report indicates that the company was founded way back in 1919in east London but its first outlet was not opened until 1929. The founder of Tesco Company happens to be Cohen, who purchased a shipment of tea from T.E stock well. Thus the company name “Tesco”, was formed from the two initials combined with the first two letters of the founders surname.
The headquarters of the company are based in Cheshunt, U.K and the key people in the company are David Reid, who acts as the company’s chairman and Philip clerk, who is the chief executive officer of the company. In addition, according to the company’s website (Tesco.com), the company had around 472,000 employees as at 2010 which represents a 30% market share in the grocery retail business in the United Kingdom. In addition, it is the second largest in terms of profits, both gross and net profit after wal-mart. Its revenues in the financial year 2010/2011 stood at 60.93 billion pounds and the net income at 2.67billion pounds.
Apart from the United Kingdom, the company also has got stores in fourteen countries across Asia, Europe and North America. Though Tesco Company was originally U.K focused retailer, it has with time diversified its operations geographically and into areas such as retailing of books, clothing, electronics, furniture, petrol and software. In summary, the company now can be said to offer financial, telecom and internet services apart from food retailing.
The success that has been witnessed by the company is not only as a result of its large market share and popularity in the in the grocery retailing, but also as a result of its corporate strategy. As stated by Citigroup retail analyst David McCarthy, Tesco has devised a strategy to appeal to all segments of the market. The corporate strategies that the company has employed to achieve this is the use of its own brand products, for instance low-priced products such as food, beverages, clothing, mobile and financial services. Though the products are low-priced, the company has been careful to maintain the quality of its products, thus increasing its customer loyalty hence retention.
The other corporate strategy that the company employs is the innovative use of technology which it uses as an expansion strategy. Through this strategy, the company has been able to widen its market share through online purchasing and supplies both locally and internationally. The company is also involved in intensive product promotion and advertizing so as to gain competitive advantage over its competitor. This way, it has been able to create awareness to people of their new and existing products thus promoting their sale. These corporate strategies are one of the contributors that have enabled the company to increase its revenue and net income.
In addition, according to the “PDF of the 2006 Giving List” the company is also very much involved in the corporate social responsibility. As the file indicates, the company has made a commitment to social responsibility in a number of ways. One of its major contributions to corporate social responsibility is its contribution to charities, local communities and organizations. For instance, a report in the file indicates that in 2006, it made contributions amounting to 1.87% of its pre-tax profit to charities, local communities and organizations. In addition, it is said to have led the debate on corporate social responsibility thus encouraging other businesses to make contributions to the society. The other area it has manifested its corporate social responsibility is in the establishment of “Computers for schools scheme” in 1992 for schools and hospitals thus promoting technological knowledge. Finally, the company sponsors “The Tesco cup”, a football competition for young players throughout the United Kingdom. This was as from 2005/2006 football season.
A marketing oriented company is one that organizes its activities, products and services around the wants and needs of its customers (Times 100, 1995). Essentially, the company this kind of a company is characterized by an intensified market research so as to acquire relevant and detailed information about tastes and preference of the customers and their lifestyle so as to come up with products and services that best suits them. Moreover, a market oriented organization has got its products and services ranges carefully designed to fit customer preferences. They are organized in a manner that they will appeal to the customer. In addition, it views the needs of customers and consumers as being important as it develops the markets products to meet those demands.
Therefore, a marketing oriented organization can be identified by its functions and the activities it conducts in relation to those functions. For instance as indicted in Times 100, in identifying customer needs and wants a company that is market oriented will engage in marketing research to gather enough information about the customer. It will also develop products to meet the consumer needs and wants through research and development production. In deciding the value of the products to customer, the sales and monitoring department will engage in pricing that is affordable by the consumers. In order to make the product available to consumers at the right time and place, it will adopt reliable and efficient channels of distribution. And finally in order to inform the customers of the existence of the product and persuade them to buy it, the organization will engage in intensive advertising and promotion. All these functions and activities characterize an organization that is marketing oriented.
On the contrary, a product oriented organization has its primary focus on the skills, knowledge and systems that support that product. Thus, the major focus of a product oriented company is on the quality, safety and investment in technology. It also focuses on product differentiation by making the features of the products distinct from those of the other organizations in the same industry.
A strategy led organization on the other hand, engages in long term planning of actions designed to achieve a particular goal and objective. These strategies are meant to strengthen the performance an enterprise for instance in terms of its profitability. An organization of this kind develops strategies that state how business should be conducted to achieve the desired goals and objectives. It also engages itself in the review of the strategies developed through SWOT analysis.
From the above explanations, Tesco Company can be said to be a market led company because its primary focus is on its customer needs and wants and also it is careful to expand its market share through its corporate strategies such as advertizing, product and services promotion, price reduction with retained or improved quality. The geographical expansion of its outlets to other Asian and European countries is an indication that the company is aiming at widening its market share thus being marketing oriented.
TESCO COMPANY SWOT ANALYSIS
According to the ivory research.com (2005), the SWOT analysis is among the oldest and most comprehensive method of analyzing the environmental dynamics of an organization. It deals with both the internal and external environment of an organization, with strengths and weaknesses being in the internal environment of the organization and opportunities and threats in the external environment of an organization.
In relation to Tesco Company, its strengths are manifested in various dimensions. As indicated in the Daily Mail (2010), Tesco is ranked third largest grocery Retail Company in the world operating over 4,333 stores primarily within USA, Asia and Europe. In addition, the report indicates that the company has shown a strong financial performance over the years. This is as evidenced by its 54 billion pounds turnover company recording. The company also focuses on product affordability to its customer s without compromising on the quality thus maintaining good public image and enhancing customer loyalty. Moreover, it has proven customer retention strategy with the help of its loyalty scheme known as ‘Tesco club card’ through the information from the loyalty scheme which is then used for effective direct marketing.
When it comes to weaknesses, the company has not been able to perform well over the last few years compared to its competitors. For instance, a number of products were recalled by Tesco in 2009. This as resulted to a financial loss as well as damage to its brand name (Mintel, 2009). The other area of weakness that the company has portrayed is lack of geographical diversification. This is because most of the key operations of the company are concentrated in the U.K thus losing to their competitors.
However, despite the weaknesses that the company has, the market still presents an opportunity for the company to excel in business. For instance, as noted by Mintel, commercial network portfolio of the Tesco Company is on the rise. The study indicates that the company has opened over 620 stores as from 2009 of which 435 were international. This geographical diversification provides the company an opportunity to improvising its economy of scale. Moreover, given the rapidly growing popularity of the Tesco Company, there is an opportunity for the company to attract new customers and reduce the overall cost resulting to more profits. Also the company’s focus on global expansion by its entry to Indian market will strengthen its global market position. Finally, an increase in spending on food retail market is another opportunity presented to the company, despite decreased purchasing power on the part of the consumer as having enough food to eat is a priority.
Equally important are the threats that the company is exposed to. Abeysinghe T. (2010) points out that the commencement of global financial crisis in the U.K’s economy can have a detrimental impact on Tesco’s financial standing. This is due to the company’s concentration of its operations in the U.K. The other threat is the decrease in income and the rise in unemployment. This situation has resulted to lack of purchasing power by the consumers thus affecting their buying behavior. This has adversely impacted the company sales especially of the non-food products. Finally, though the Tesco Company has been leading in the sector of grocery retailing for over 15 years, as study indicates, it is faced with intense competition from its competitors who are gaining in the market share. This stiff competition in the U.K grocery market acts as a threat to Tesco Company.
This is a method used to scan the external environment of a business. It includes the political, economic, social, technological, legal and the environmental factors that affect an organization (McDonald, 2002). In reference to Tesco Company, various issues have come up in relation to PESTLE analysis.
In relation to political environment, the company has been able to achieve greatly. For instance, according to a report by Strait Times (2010), china’s accession to the WTO has promised a free flow of foreign trades by removing all barriers encouraging Western companies, including Tesco. In addition, as the report indicates, the agreement signed by the company in 2009 to set up a premeditated series of joint ventures for the development of shopping malls in china is another great milestone. The promotion of free trading blocs by governments has provided Tesco with a platform to expand its retail network across Eastern European countries.
The economic factors are a matter of concern for Tesco Company. This is because they impact directly on the buying behavior of customers. Though the U.K economy was officially declared under recession in 2008, the government’s intervention through substantial reduction in interest rates helped reduce unemployment thus increasing the spending power of customers. In relation to social environment, Tesco company has accommodated change in the lifestyle of people for instance, their demand for organic foods thus retaining their customers. On technology, the company is involved in online grocery retailing and also mobile technology is being embraced as a channel for distribution where customers can buy directly from their mobile phones.
BARRIERS TO PLANNING
According to McDonald (2002), successful planning can be hindered by a number of factors which include; objective confusion, isolation of marketing function, organizational barriers, change in management and ethical issues. When an organization’s management team is not clear when coming up with the objectives of the organization, then it may fail to take the appropriate actions to wards the achievement of the set objectives. This is because some objectives may not be well understood thus causing confusion and disagreement when it comes to executing them.
Isolation of marketing function may act as a barrier to planning in that it promotes lack of commitment to the planning process either as a result of fear of failure or lack of time to work through the required planning process. Organizational barriers and culture may also hinder effective planning. For instance, the culture of relying too much on the planning department by the management to implement the plans may act as a barrier. This is because the planning department is only supposed to conduct research, build models and project probable results. Their results are only aids to planning and formulation of the plans should be the manager’s responsibility. Change in management may act as a barrier to planning as the new management, may not be willing to continue with the policies that were adopted by the previous management in planning. This may also lead to delay in planning or ineffectiveness to planning. The ethical issue that may affect planning is reliance on inferior information to plan. Facts that are out of date, insufficient or of poor quality may hinder the process of planning. However, barriers to planning may be overcome by use of effective communication, acquiring quality and reliable information and soliciting the involvement of others in the planning process (Dibbs, Bright & Cheney, 2001).
A marketing plan is a detailed written document that describes the strategies and steps needed to achieve a specific company’s marketing objectives (McDonald, 2002). In every business, a marketing plan is of great importance due to a number of reasons. To begin with, marketing plan is used as an evaluation tool by the management. As an evaluation tool, it checks whether the strategies that have been put into record are being implemented thus taking corrective measures. In addition, it is used as a tool to determine or measure the performance of a certain product or service thus providing insight of what a given product or service requires in order to compete fairly in the market. Moreover, as Born Bright indicates (1997), a marketing plan acts as a guide for the management to revise its marketing strategies.
In marketing, after the product has come to the end of its cycle, a company may want to engage in the development of a new product and release it in the market. However, this new product development process involves various strategies before it becomes fully established in the market. After a company has developed a new product through intensive research of the customer needs and wants and government rules and regulation, the company has to do pilot testing of the product. This involves releasing a small quantity to the market and then evaluating how the intended segment is responding to the product. After the pilot testing, company will work on the feedback so that it can determine where it can improve on the products to suit the market segment.
The 7ps represent a marketing mix which is the combination of marketing activities that an organization engages in so as to best meet the needs of its targeted market. These include product, price, place, promotion, physical layout, provision of customer service and processes (Bornstein, D. 2004). In production part of the activities, an organization should ensure that the products fully suits the segment for which it is intended and that it is safe for consumption. It can also adopt differentiation strategies to make the product unique from that of the competitors and also appealing to customers. In the pricing activity, it is important for a company to offer prices that are affordable to their customers without compromising on the quality of the product. This way, the company will be able to retain customer loyalty. The place refers to the location where a company is situated. Sometimes customers may deal with the company directly by going to the actual place of production and therefore it is important for a company to create a good working environment. The levels of hygiene should be high to create a good impression to the customers.
The physical layout of a company is also of importance and therefore a high level of presentation is expected. When it comes to the provision of customer service, customers are likely to be loyal to organizations that serve them well. Therefore a company should be above reproach when it comes to customer service. Finally, the processes such as those for handling customer complaints, indentifying customer needs and requirements and for handling orders should be streamlined to avoid customer dissatisfaction.
In marketing, customer segmentation is inform of demographic segmentation, that is, in terms of age, gender and sex, social segmentation which encompasses the social class, lifestyle, income and education, geographical segmentation in terms of region, country, city or even climate, psychological and behavioral segmentation such as customer’s loyalty, product preference , interests, personality and price perception (Dashboard, 2009).
According to the American Marketing Association statement of ethics (2004), marketing ethics is an area of applied ethics which deals with the moral principles behind the operation and regulation of marketing. There are different ethical issues that can influence marketing planning. These include issues like development of competitive stance, different perceptions of ethics across nations, ethical trade-off and management cultures. In addition, ethics of marketing mix such as the management of the individual elements of the marketing mix is another factor that can influence marketing planning. Consumer ethics is another ethical issue that can influence marketing planning. An organization has to plan in a way that it avoids unethical issues such as warranty deception, misredemption of vouchers, returns of merchandise, false insurance claims, recording of music and videos and software copying.
According to Cheney (in progress), organizations respond to ethical issues by first and foremost familiarizing themselves and the staff to these issues. Then they develop policies that are in line with business ethics for instance by avoiding misrepresentation, upholding fair competition and also engaging in advertizing and product promotion without defaming their competitors. As stated above, some of the examples of consumer ethics, according to Conrad (1993a), include issues like music and video recordings, false insurance claims, misredemption of vouchers and returns of merchandise. According to Conrad (2003b), these consumer ethical issues have great impact in marketing planning as the organizations have to set their objectives in a manner that they will be aimed at correcting these issues incase they occur. They have also to develop strategies to deal with these issues which may turn out to be expensive and time consuming.
In conclusion, marketing is an important segment in any organization as it is through marketing and marketing planning that an organization gets to achieve its main objective, which is profit maximization. However, for this planning to be a success, there is need to embrace teamwork and also engage in intensive research of the trends in the market.