Mehboob Akhter

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Assignment
Marketing Management BMK 0101 Mehboob Akhter U1161013 Marketing Management (MSc)

Mehboob Akhter

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1.0 Introduction ...................................................................................................................... 1.1. Internal Industry Analysis ......................................... Error! Bookmark not defined. 1.2. 1.3 1.4 Micro Analysis .......................................................... Error! Bookmark not defined. Macro Analysis ....................................................................................................... 7 SWOT Analysis ...................................................................................................... 8

2.0 Segmentation, Targeting ................................................................................................. 2.1 Market Segmentation ................................................................................................ 9 2.2 Targeting ..................................................................................................................10 3.0 Positioning, IMC Strategy ................................................................................................ 3.1 Positioning ...............................................................................................................11 3.2 Communication Strategy ..........................................................................................12 4.0 Product Life Cycle ........................................................................................................14 5.0 Competitive Strategy ...................................................................................................15 6.0 Reference ....................................................................................................................17

Mehboob Akhter 1.0 Introduction

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Tesco plc is a well reputed retailer store in the supermarket chain and it is one of the leading supermarkets in United Kingdom and operating in 14 countries around the world. It is basically found by Jack Cohen in 1919 by Tesco (TSCO.L) in the small areas of United Kingdom. After getting early success then it started to expand firstly in the UK and then in 1995 Tesco was firstly expand in the internationally environment when the first superstore was opened in the Hungry, Poland, Ireland, Slovakia, and some other European countries. 1.1 Internal Analysis of Tesco The firm has maximum control over the internal environmental factors and these factors can be changed by firms based on the needs and requirements. Stores and Labour The Company are currently operating 2300 stores in the UK where 326,000 people are working. Facilities Tesco is the largest food retailer in the world with revenue in excess of 55 billion in 2010 The portfolio of tesco is, it is operating 980 express stores which are selling approximately 7000 product like fresh foods at suitable locations, 180 Metro stores selling of variety of food product in town and city centres and 450 superstores which are selling both food and non food product. It is also providing online retailing service through their websites tesco.com and Tesco. Direct. The company product portfolio lays three levels like value, normal, and finest. As for the connivance of the customer the company started petrol and gas station which is the UK largest independent petrol retailer. Tesco also offered personal financial facility in the Tesco banks. Working hours Tesco opens 7 days of week but its timing are different from Monday to Fridays it opens 8am-midnight, Saturday it opens 8am-10pm and on Sunday it opens from 6am-4pm.

Mehboob Akhter 1.2 Micro Analysis

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Porter five forces model was developed by Michael Porter in 1980 for measuring the degree of competition for any industry. It analyzes the level of competition between new entrants, competition, buyers, substitutes product, and supplier in the industry.

New Entrants Low to Medium High capital requirement

New Entrants

Supplier Low to medium Many suppliers in market offering similar product at competitive price Power of Buyers Medium to high Other supermarkets offer same product at competitive price

Industry Competitor Intensity Of Rivalry

Supplier

Buyers

Competitor / Rivalry Sainsbury Asda Morrison

Substitutes Banking sectors Petrol station Gas station

Substitutes (Hill and Jones, 2008)

Mehboob Akhter Threats to New Entrants

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The threats of new entrants in the supermarket in the UK is very low because it requires huge investment to start the business and establish a brand name because Major brands that have already captured the food retail and they account for 80% of all shopping in the UK (Mintel, 2010). Competitor The higher is the intensity of rivalry when the firms offer identical products and services (Hoye et al, 2009). The competition in the food and grocery retail industry is very high. These are the top competitor of Tesco ASDA Group Limited Carrefour S.A The Big Food Group Plc Sainsbury plc Marks and Spencer plc Safeway plc Wm Morrison Supermarkets PLC ALDI Group Market share of Tesco Tesco has demonstrated strong growth in the last decade although the growth rate was not as strong as expected in the last year. The comparative positioning of Tescos market share with respect to other leading players in the market has been illustrated as follows (Euromonitor, 2010)

Share of Leading Players in UK Food Retail Market in 2010

Supplier The power of supplier in the supermarket is low because supplier are now inclined towards large supermarket so in this stance the supplier negotiate with the supplier and give the much lower rate to supermarket stores and tesco .

Mehboob Akhter Bargaining Power of Buyers

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The buyers are the key who spent time and money on buying the service and product. The buyers have more power because in the supermarket lot of options which provide almost the same range of product and non product facilities. It tends to be higher when other competitors offer similar service at competitive price (Thomson & Martin, 2005). Substitutes As competition between supermarkets is rapidly increasing among different chains thats why tesco is also operating in other sectors like, financial services, petrol stations, banking sector etc.

Mehboob Akhter 1.3 Macro Analysis

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PEST analysis is useful in analysing the macro environment factors or external factors affecting the organization. The organization has no direct control on the PEST factors. It is the acronym for Political Economic Social and Technological (Worthingto Britton, 2009).

Political and legal Factors This mainly includes legal aspects and rules laid by the government (Thomson & Martin, 2005). Supermarkets political factors include employment laws, tax policy and maintain a good friendly environmental in the stores and healthy product, training etc. currently tesco has very good staff in the store to help out in finding the relevant things and it will encourages people to come and make purchase. Economic The down turn of the world results increase in the unemployment ratio which push the people in the low spending last year was very crucial for tesco because it sales goes down from 1.45bn compared to 1.46bn as compare to the last year (Hall and Fletcher, 2011). Economic factors which are affecting on the tescos sales are Inflation: The lower the inflation rate, it is more better for businesses as its means that consumer can spend more and the price of the products are affordable, if its reverse then people spend less and it will lead to the increase in the prices of the product and then tesco is not making a good profit. It is affecting tesco in the same way as tax affect the company.

Mehboob Akhter

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Unemployment: As the unemployment increase it means that people would not earning and this might have to cut back on some products like chocolates and the things which are not a not necessary. Interest Rate: if the interest rate is too high then tesco would not borrow so much money for its further expansion and if it goes up then the company will also pay some extra money and its effects on the profit of the company. Socio- cultural This part of analysis includes demographics, culture aspects. Attitude, interest and opinions are the factors which affect on the behavior of the people. The people are now becoming more health conscious and now they are looking towards health conscious product and superstore markets provide these types of products. A general increase in health consciousness, for instance has stimulated the launch of a wide variety of product with low of fat and sugar, fewer artificial ingredients and no additives (Brassington, pettitt, 2006 p: 49). Technological The advancement in technology has been influencing people by changing their minds to expect more (Worthington & Britton, 2009). Online shopping has become a major part of the companys success. Tesco website invested its heavy part in the recent profit of tesco by contributing to 48 million and online grocery orders were 7.5 million in last year. Tesco has reported its annual profits rose 10.1% to 3.4bn in the 12 months to 27 February 2010, spurred by an increase in online sales (Shields, 2010)

1.4 Swot Analysis

STRENGTHS Well establish brand Market leadership Online service Increasing in market share WEAKNESS Reliance on UK market Not dominating the city centre marketplace Reduction in Debt Business model of tesco in UK is not suitable for the rest of the country OPPORTUNITIES Tescos sales in non food product will be double in next few years. Growth in the tescos hypermarket in UK. Increasing in the health and beauty industry is a good opportunity for the tesco health sector. THREATS Fluctuations in the stock exchange. Price reduction from competitor. increasing competition in supermarkets UK structural change could spark a price war.

Mehboob Akhter 2.0 New Format

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As Tesco is already providing the online shopping facility but in this new format of Tesco virtual store we make tesco virtual stores on the commuters on the subway station for passengers who are waiting for train and buses. Our target audience for this format will be professional busy people who dont have enough time to go supermarket for their purchasing and they dont want to waste their weekend in shopping. The difference of this format is consumer use their iphone. They just scan the QR codes and the picture of the product and add it into their online shopping cart ant purchase will automatically be done and it will be delivered after get to home.

SEGMENTATION Identify different customer groups

TARGETING Selecting the segment to serve

PRODUCT (Service)

PROMOTION POSITIONING Applying the selected appeal to the chosen segment

PRICE

DISTRIBUTION

(McDonald M and Dunbar, 2004)

2.1 Market Segmentation The identification of individual or organizations with similar characteristics that have significant implication for the determination of marketing strategy (Jobber, 2007 p: 275). In the market segmentation following factors are used. Demographics: The market is divided into group on the basis of variables such as age, family size, income etc and information of the customers are easily available and is cost effective (Kotler & Keller, p:249). For this new tesco format our target audience are in between (25-40) years old so further age factor is discuss. Age: Consumer needs and wants are changed with their age. For this type of format our target audience are those who are very busy after a long working shift of the day and age of this group of target market will be in between 25-40 years because this age group are very busy and they dont waste their weekend in doing shopping.

Mehboob Akhter 2.2 Targeting

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After identifying the various market segments, the next step is to select the desire customer segment and communicate with that segment with the product or services. A firm needs to evaluate the segments and decide which one to serve (Jobber, 2007 p: 297). Differentiated: A differentiated target marketing strategy exploits the difference between marketing segments by designing a specific marketing mix for each segment (jobber, 2007 p: 301). This type of strategy reduce the risks to the organization by spreading its marketing strategy across the market but this type of marketing segments will require good marketing research. For Tesco virtual store format this type of strategy can be used to target the segments effectively. For this segment we have only one target market (25-40) years. Our customers are really busy and many don't have enough time to go to the supermarket and make purchase of grocery. This segment will be targeted in Huddersfield subway stations.

AGE- 25 to 40 Busy Professional People

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Mehboob Akhter 3.0 Positioning

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It is the process of the designing the companys offering and the image of the brand occupy a distinctive place in the mind of the target audience. A specific marketing mix is necessary to influence target segment over all perceptions of the service (Hooley, et al 2008). Tesco is the well established brand in the supermarket industry and the entire consumer aware its name. In order to facilitate more to the consumer from this new format the company has to do The company establish a good relation with the cafe store on the subway station. This can create a synergy. Tesco is the leader of the supermarket in UK and to build a more good relationship with busy professional people company offer if the make purchase before 13:00 pm then their goods will be delivered on the same day.

Perceptual Map Perceptual map of this new format is to provide wide range of product at an affordable price and good service of delivery.

Kotler, 1997

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Mehboob Akhter 3.1 Communication Strategy

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The different communication channels are integrated and coordinated in order to deliver a lucid, effective and consistent message about the service or product to the desired market segment (Fill, C, 2009). For this new tesco format communication with customer will do through these medium Marketing Plan Objective The online sale of tesco in 2010 was 30.6% and objective of this new format is to increase the online sales up to 40% at the end of this financial year. Target Audience Target audience for our new format are busy professional people it includes both male and female. Selling Strategy As tesco is known as the good quality product at an affordable price so for this format we use the same selling strategy with extra delivery service.

Advertising It is a type of informal promotion done by means of a mass medium (Brassington & Pettitt, 2006). For this new tesco format following medium will be used Metro News paper Our target audience of this format is professional busy people and to aware them we give advertisement in popular news papers which are distributed every day on public transport and professional people prefer to read news paper so advertising in metro paper will help to reach our target audience. The advertising will continue the first three month rates are given below in the table Advertisement on Billboard and Public Transport: Advertisement on billboard on the subway station and on the public transport is another medium to communicate with our target audience because they visit these two premises on a regularly basis. The advertising will continue for first three months the rates are given below Facebook Facebook is the leading social networking site and almost all people have an account on facebook and almost once in a day they check their status. Advertisement on this medium is free.

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Mehboob Akhter Budget Table

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No. Detail

Number

Cost (per Total (Pound) campaign)

1.1

Designing the Advertisement

2000

1.2

Advertisement on Billboard

12 x 24 feet

90000

90000

1.3

Advertisement on Transport

96 x 30

6300

6300

2.1

Metro Newspaper

50 mm high x 70200 35 mm wide

70200

3.1

Facebook

5cms high x Free 3cms wide

Free

TOTAL (Note) these rates are adopted from

168000

Metro.co.uk CAPMETRO.ORG CreationDepot.com Communication Schedule Activities

JAN

Month
FEB MAR

Facebook Newspaper Advertisement on Transport & Billboard

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Mehboob Akhter 4.0 Product Life Cycle (PLC)

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Product life cycle refers to the life of the whole product or service from its introduction to decline period. During the whole period of its PLC significant changes are made for its long sustainability in the market. The understanding of PLC concept for companies will helpful in terms of when we have to introduce it in market and withdraw it from the market. Now I am going to discuss various stages of PLC for this new tescos format. Introduction The introduction phase of a product includes the product launch with its requirements to getting it launch in such a way so that it will have maximum impact at the moment of sale (Komninos, 2002). The product or service which launch in this way it will have a maximum impact on the sales of the company and if the product is truly innovative, there may be no competitor yet so this type of product gain a success in his introduction stage (Brassington and Pettit, 2006 p:313). Tesco virtual store is a unique type of store in the Supermarket industry and tesco is the market leader in the UK so this format gain success in their early stage and the online sale of the tesco will increase. Different promotion channels will be used to address our target market. Growth In this stage the sale is rapidly increase because people have now come to know about this and they start buying and this is the appropriate time of increasing market share of the company. Tesco virtual store is unique store in the market so it will easily achieve the market share and this new growing market alerts the competitions attention (Komninos, 2002). At this stage we gain the customer loyalty by providing them a convenient shopping experience and delivery service on the same day. At this stage of the our new format we also target some additional market segments and due to the increase in the competition firm will also increase its promotional cost to make more consumer aware. Maturity Competitors come in the market and the price of the product or service is slow down then product enter into his maturity stage. At this stage the product achieves as much sells as it can. At this stage the repeat purchase will take place and if the customer is satisfied with the product or service then they will go for the purchase of the product or service. Many products in the maturity stage appear to remain unchanged for long periods, most successful ones are actually evolving to meet changing consumer needs (Kotler & Armstrong, 2010 p: 301). Tesco virtual store aim is to provide a good service to their customer and our target market is quite helpful for this kind of format because it reduces their tension of making purchase in the supermarket. Decline Due to some factors the sales of the product or service will stop and it goes to his decline stage and product reaches at this stage means that a company withdraw it from the market. For this new tesco format competition will increase but we are the first who introduce this format so we must gain some advantage and people adopt a new technology prefer to do shopping in this format so very few chances of the decline of this new format. 14

Mehboob Akhter 5.0 Competitive Strategy Porter Generic Competitive Strategy

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The basic fundamental of the business is to generate profit and its long run and these two aims can be achieve when you compete your competitor in the marketplace. There are two basic types of competitive advantage in the market low cost or differentiation, these are basic types and it combines three other generic strategies like cost leadership, differentiation, and focus and focus has further two variants, cost focus and differentiation focus. Cost leadership In this strategy the firm set themselves as the low cost in the market as tesco is already low cost in the market. In this strategy the firms dell their product either average price to gain a good profit higher than competitor or they sell their product below the average industry rate and gain the good market share. For this tesco format we use the same methods of low cost because tesco is already market leader and we can easily adopt this strategy. Low cost producers typically sell a standard, or no frills, product and place consider emphasis on reaping or absolute cost advantage from all sources (Porter, 1985 p: 13).

Differentiation In this strategy the firm offer a product or service perceive customer as unique in the industry. This format is the new in the UK market so customers perceive it as a unique store which bring them connivance and comfortable in their grocery shopping normally the unique product or service charge a premium price but we are focusing on making a long term relationship with our customer and continue our promise by providing them product at low cost and delivery service. The logic of differentiation strategy requires that a firm choose attributes in which to differentiate itself that are different from its rivals (Porter, 1985 p: 14)

Porter, 1985 p: 12

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Mehboob Akhter Focus Strategy

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This strategy is focusing on serving the specific segment of the market and the needs and wants of that group are only considered. Due to this type of strategy the firms often enjoy the high degree of customer loyalty and after getting the response from target audience then it becomes difficult for competitor to gain the edge in the market. For this format we have one target audience so we make our strategy according to their needs and wants and gain the edge in the market. By optimizing its strategy for the target segments, the focuser seeks to achieve a competitive advantage in its target segments even though it does not possess a competitive advantage overall (Porter, 1985 p: 15). We run this strategy for our new format because it will help on achieving our objectives and also for strengthen our relationship with our customer and fulfilling our promise low cost at an affordable price.

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Mehboob Akhter Reference

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Books & Articles 1. Baines, P. et al. (2011) Marketing. 2 ed. UK: Oxford University Press. 2. Brassington, F. and Pettitt, S. (2006) Principle of Marketing. 4 ed. UK: Pearson Education Ltd. 3. Euromonitor International, (2008) 'Local Company Profile: Tesco Plc Retailing UK pp. 1-3 4. Fill, C. (2009) Marketing Communication. 5 ed. UK: Essex: Pearson Education limited. 5. Finch, P. Wiersema, F. (2004) 'Supply Chain Risk Management, Supply Chain Management' An International Journal, Vol 9, Issue: 2: pp. 183-196. 6. Hall, J. Fletcher, R. (2011) '' , [online] Available at: <http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/6258114/Tesc o-profits-hit-by-economic-downturn.html> [Accessed ] 7. Hill, C. Jones, G. (2008) Strategic Management Theory. USA- South Western Cengage Learning. 8. Hooley, G.J. et al. (2008) Marketing Strategy and Competitive Positioning. 4 ed. UK: Essex: Pearson Education limited. 9. Jobber, D. (2007) Principle and Practice of Marketing. 5 ed. UK: McGraw Hill Companies. 10. Komninos, I. (2002) 'Product Life Cycle Management' Urban and Regional Innovation Research Unit. 11. Kotler, P. and Keller, K.L. (2006) Marketing Management.12 ed. New Jersey USA Prentice Hall. 12. Kotler, P. and Armstrong, G. (2010) Principle of Marketing. 13 ed. USA: Pearson Prentice Hall. 13. McDonald, M. and Dunbar, I. (2010) Marketing Segmentation. UK: Goodfellow Publisher Ltd. 14. M, E, Porter. (1985) Competitive Advantage USA: The Free Press. 15. Ritz, P. Wiersema, F. (2005) 'Store Wars' Business Review, Vol 11, pp. 22-23. 16. Shields, R. (2010) , [online] Available at: < http://www.nma.co.uk/news/tescoreports-%C2%A3136m-profit-from-online-sales/3012439.article> [Accessed]. 17. Thomson, J. and Martin, F. (2005) Strategic Management: Awareness and Change. 5 ed. UK: Thomson learning 18. Worthington, I. and Britton, C. (2009) Business Environment. 6 ed. UK: Essex: Pearson Education Ltd.

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