– Governmental changes in law could
cause changes in transportation methods, the selection of products allowed to
be sold e.g. fat, sugar content, the types of stores (energy consumption, light,
Awareness of Environmental Destructive
– Global warming, animal welfare,
reduction of waste, recycling, preservation of biodiversity etc. are all issues
which force companies to focus on the choice of products, packaging, stock
management, means of transportation.
ANALYSIS: PORTERS FIVE FORCES
4.1 Competitors (high)
Big 4: Include Tesco, Asda,
Sainsbury’s and Morrisons. The three supermarkets are similar to Tesco in terms
of store formats (superstores, supermarkets, convenience), product offer and
pricing (Downie, 2015).
Up-Market Stores: Waitrose, Marks
both offer premium quality products, across fewer stores, at a
high price, and so appeal to higher income segments.
Discounters: German brands
Aldi and Lidl, place less focus on customer shopping experience, store
presentation and product range. Their success lies within the very low pricing
of their own brand products, targeting lower income customers (Downie, 2015).
intensified in the recent years, especially due to customers changing their
shopping habits and steering more towards discounter retailers (McKevitt, 2017)
4.2 Bargaining Power of Suppliers (low)
Due to its
leading role in the grocery market, product demand is high and thus Tesco has a
strong relationship with its suppliers, strong buying and negotiating power.
4.3 Threat of New Entrants (low)
relatively low, as the UK grocery retailing industry is mostly dominated by the
Big 4 supermarket brands. It is difficult for new brands to establish
themselves within the market, especially due to the high investments involved. Additionally,
potential new entrants will be hesitant in entering the market, due to Brexit’s
4.4 Bargaining Power of Buyers (relatively
intensifying competition and the emergence of e-commerce (Bakos, 2001), the mobility of consumers is increased. At the click
of a button customers can switch online between supermarket retailers, or
equally walk next door to the competing stores.
4.5 Threat of Substitute Products
or Services (low for grocery products)
provide food substitutes include off licenses and smaller convenience stores.
In comparison to larger retailer brands such as Tesco, the threat is relatively
low. However, Tesco Metro and Express help combat this slight threat (Felsted, 2012).
Tesco has always adopted a wider market segmentation approach, in
comparison to other competitors. Waitrose and M&S simply food, have a
focussed target on higher income segments, and Aldi and Lidl attract the lowest
income segments. Tesco avoids extremes and is therefore able to appeal and
cater toward a larger customer base.
Nevertheless, it has not always been easy. The lack of segment
specialisation, in combination with increased competitive rivalry (especially
discounters), changing customer demands, financial scandals etc., has lead to
great difficulty in satisfying the full range of customer segments.
Although Tesco has recently been portrayed positively in the news; “Tesco
continued to outperform its four rivals in October” (Bowden, 2017:1), “Tesco
profits rocket as turnaround gathers pace” (Goldfingle, 2017:1), new marketing strategies
and policies must continue to be implemented, in order to improve and guarantee
MARKETING STRATEGY RECOMMENDATIONS
Considering Tesco’s current situation, the company’s long-term
objectives, SWOT Analysis (See Appendix), Micro and Macro environmental factors,
the following recommendations should be carefully considered:
Brexit’s unpredictable and uncertain political nature, means it would be
too risky for Tesco to pursue an aggressive strategy of creating a new brand
and specialised stores, in order to overcome competitors. Financially, this
would also require huge investments and complete brand restructuring. In
addition, European competitors such as Aldi and Lidl might decrease their market
share in UK due to legislative changes.
Data Availability and new technologies allow grocery retailers to
instantly obtain detailed consumer shopping behaviour. For every single store,
Tesco should combine internal store data (Clubcard) with external data for geographic,
demographic, psychographic and behavioural variables to create its store target
market segmentation and consequently its differentiated store marketing mix. Tesco
has a competitive advantage in terms of consumer data with the acquisition of
data company dunnhumby (Tesco PLC, 2017).
Online Shopping will continue to grow at a fast pace as society rapidly
becomes more digitalised. Between the years 2017-22, the estimated growth of UK
food and grocery shopping is 53.8% (IGD, 2017). Tesco should aggressively
amplify its marketing strategy regarding its online grocery channel.
Changes in Government laws and consumer demands directly affect the
company’s marketing mix. Tesco should regard such matters as top priorities. Current
concerns revolve around environmental issues (sustainable sourcing, pollution,
waste, recycling) and health related issues (organic and dietary requirements).
The increase in competition has significantly increased consumer
bargaining power. Tesco should consistently and frequently make comparisons against
its competitors, regarding product range, pricing, services etc., so that the
most successful marketing strategies are promptly implemented.
Tesco should continue its internationalisation efforts, focusing more
towards non-European countries, compensating for eventual reduction in European
investments after Brexit. Tesco has been successful in Asia, with investments
in Malaysia, Thailand and South Korea (Butler & Neville, 2013).
MARKETING MIX RECOMMENDATIONS
7.1 Market Offerings
1) Increase of own brand basic products in poorer, lower income regions.
Increase customer satisfaction in such regions, by placing greater emphasis on
the relevant segment (multi-segment approach isn’t always appropriate).
2) Increase premium product availability – Tesco Finest*, Organic, ready
made meals. Target stores in medium/higher income areas, where packaging
quality and product presentation is of greater importance.
3) Bring Product Innovation: meal deals (younger generations/students),
meal plans (busy families), dine for two (matching M), new products (e.g.
superfoods, trendy ready-made meals).
4) Increase number, variety and guarantee of quality (e.g. more fresh) of
online products (tescoDirect) to further attract e-commerce customers
5) Reduce Food Waste (FareShare program – feed local poor populations)
to support governmental law changes and environmentally friendly customer
7.2 Distribution/Channel Strategy
1) Adapt store sizes to consumer needs and demands in differing
demographic regions. Younger generations seem to prefer convenience stores that
complement their on-line shopping (The Guardian, 2017).
2) Improve Store layout: better shopping experience for customers, easy
to find what they want. Digital channels should be used to their full
potential. E.g. Younger generations prefer hand-held scanners, self-service
3) Improve On-line shopping. Maximise click (same day),
increase time slots and same day home delivery options, update delivery fleets
(more environmentally friendly, mopeds/small vans for small deliveries).
4) Increase offer of in-store shopping with same day home delivery.
Targeting older generations (cannot carry groceries), parents after school
5) Offer in-store coffee and tea for club members (matching Waitrose
offer), important for older generations. Small gestures to loyal customer help
shape brand value.
6) Increase in-store staff especially during peak hours, school ends,
7.3 Promotional (Integrated
Marketing Communications) Strategy
1) Keep Clubcard (app, scan) as competitive advantage (easy rewarding
system- no minimum spending); important to collect data (e.g. incentivise
clients to include DOB when registering by offering rewards).
2) Progressively reduce paper coupons and discount vouchers to adapt to
digitalised world. Nevertheless, coupons are still important for older
generations and ensure customers still shop in stores.
3) Allow automatic login to store wifi, so customers receive offers
during their shop, creating a more efficient and personalised experience.
4) Increase mass use of Social Media (FB, Twitter, Bloggers, Instagram)
– very cheap and favourite channel for younger generations.
5) Use stores as channels to advertise other Tesco’s group offers
(F&F clothing, banking)
6) Be Community champions. Participate in local charities/school events (especially
top management) to increase brand visibility, exceed customer expectations and
increase brand loyalty.
7) Strengthen brand appreciation through little actions (e.g. little
birthday gift on home deliveries, free new product samples).
7.4 Pricing Strategy
1) Extend Price match strategy to wider range of products and
competitors, avoiding constant price wars.
2) Reduce inflation impact on prices by reducing costs across company
cost structure (as done recently).
3) Continue to build an image and recognition as a value brand (not
necessarily the cheapest) and a valuable shopping experience for Tesco