Executive Summary

Describe about the market analysis for TESCO PLC, which is one of the leading retail and super market chain in the world?

This assignment reflects the market analysis for TESCO PLC, which is one of the leading retail and super market chain in the world. The main objective is to find out the market position of Tesco in relation to the other competitors in the market. The article uses the SWOT Analysis technique to identify the market position of the company. In order to frame a definite growth strategy of the company, the Ansoff’s Matrix is used. The summary attempts to cover the broad aspect of marketing for Tesco in every respect. Here the four Ps of marketing that is Product, Price, Place and Promotion are discussed in details which will highlight the various marketing approaches of the company and about its goals and objectives. The summary encompasses the relative market share of Tesco and what are the main competitors.

Tesco Plc is a leading retailing company based in England. It was founded in 1919 at Hackney, London, England. Mr. Jack Cohen is the founder of the company. It serves across several countries of the world like China, Czech Republic, Hungary, India, Ireland, Poland, Malaysia, Slovakia, South Korea, Thailand, Turkey, United States of America and in the United Kingdom. The company has its headquarters in Cheshunt, Hertfordshire in England. It is currently the third largest retailing company in the world as per the profits and the second largest in terms of the revenues (Arslan et al. 2014). It was primarily a grocery retailer. Later on it diversified its operations into other products like electronics, apparels, books, toys, furniture, software, petrol, telecommunications, financial services and internet related services. It is listed on the London Stock Exchange. The market capitalization was approximately £ 20.5 billion as on 4^th August 2014 (Wang et al. 2014).

Fig. 1 : Logo of Tesco Plc

( Source: tescoplc.com)

This section consists of all the market related information of Tesco. Here the details of market share, competitor analysis and growth planning are given.

As per the Kantar Worldpanel, the market share of Tesco’s grocery market in the UK in the twelve weeks up to 18^th March 2012 was 30.2% (Soberman et al. 2013). It went down from 30.6% in the twelve weeks up to 18^th March 2011. This shortfall was due to the entry of the other competitors in the market. Tesco’s market share fell further in 2014 due to the entry of the rival companies in the retail sector. As of 2014, the market share of Tesco was reduced to 28.7%.

Supermarket	Market Share as on March 2012	Increase or decrease from March 2011
Tesco	30.20%	decreased by 0.4%
Asda	17.90%	increased by 0.6%
Sainsbury’s	16.60%	0.00%
Morrisons	12.30%	0.00%
The Co-operative Food	6.90%	decreased by 0.4%

Figure 2: It shows the relative market share of Tesco with respect to the competitors for the year 2012.

(Source: Barei et al. 2014, pp-280)

The competitor analysis and what are the opportunities and drawbacks for Tesco, is depicted with the help of the SWOT Analysis (Bokek-Cohen, 2014). The strengths and weaknesses are related to the internal factors while the opportunities and threats are related to the external environment. The analysis is as follows:

Market Analysis for Tesco Plc

Tesco is one of the top retailers in the world. It falls under the top 100 most valued brands of the world. It is above eBay in the listing. It offers value for money services and products. All over the world, there are 6,784 stores of Tesco (Filipovic, 2013). The number increased by 433 additional stores from 2012. The company has always used innovation in its operations. It created stores like Tesco Metro and Tesco Express. These are small stores located in the neighborhood to make it easy for the customers to shop. To name the other strengths of the company are online shopping, different joint ventures with brands of the international market as for example in China. The company also did local recruitments including some of the senior management positions. The sheer size and availability of the various facilities help Tesco to purchase from the market in bulk, thereby gaining economies of scale. This helps the company to keep the prices of its products low and compete with the other retail giants like Asda or Sainsbury’s. The company has also innovated various loyalty packages for the customers such as the Clubcard. This helps Tesco immensely in attracting the customers and also to retain them in order to build a long term relationship with them (Jensen, 2013).

Tesco has slowly emerged as one of the leading retailers with a variety of products. Starting from grocery, it slowly diversified into other products like books, garments, petrol, furniture, financial services and others (Jung, 2014). This can lead to some weakness in the company. The profit of Tesco has been adversely affected due to series of bad debts arising out of credit card issuances and several household insurance claims. Another weakness is its lack of knowledge and experience in few of the sectors where it intends to explore, such as its own branded smart phones and tablets. There is plenty of scope of development in investments in IT and web technologies (Kalenskaya, 2015).

The opportunities for Tesco are plenty in the market, such as entering into the digital entertainment section (Kashif et al. 2015).They have invested 80% in Blinkbox. The aim of the company to promote their own branded smart phones and tablets can intervene with this investment, especially in foreign markets like Thailand, China, Malaysia and South Korea. Their online shopping will help customers to order products and services from the comfort of their homes. If the market is hit by recession, then also, the customers can buy products at reasonable prices offered by Tesco (Hassan et al. 2015). There is plenty of opportunity to expand the operations into international market also like in Australia. This is because in Australia, there is very limited competition in the grocery market compared to the other parts of the world. In spite of this the retail sector is immensely price sensitive.

There are many threats to Tesco from the domestic and international market. The current position of Tesco as the largest retailer in UK retail makes it the target of the rivals like Sainsbury’s, Asda, Morrisons and others. Tesco has so far successfully resisted the takeover of Asda by Walmart (Kursunluoglu, 2014). In the UK, the branding of stores such as Asda Walmart has been on the rise. This shows the ominous signs of Walmart’s shadow looming large on Tesco. Ranking at the ninth position in the most valued brand in the world, Walmart is the largest rival of Tesco globally (Li, 2013).Walmart has all the necessary resources like skills, experience and funds to impose a direct threat to Tesco. The adverse effects of planned towns in today’s world, the customer’s dislike to go to stores which are located out of town and the Government’s concern for the livelihood of people working in the small local shops, are the main causes of threat to Tesco (Lim et al. 2015).

2.1 Current market share of Tesco Plc

The strategy implemented by Tesco for capturing the retail market and growth can be analysed with the help of the Ansoff’s Matrix.

Consumers sometimes have the tendency to run after brands more than the products. Tesco has very well understood this psychology of the consumers. To the customers, Tesco is a brand.

• Tesco first came into the market with its own advertising website known as the Tesco Property Market.
• Tesco was promoting all its products and services through the website and they were also distributing leaflets within their stores.
• In the year of 1995, Tesco crossed Sainsbury’s and became the largest retailer in the UK market (Mai, 2014).
• The introduction of the Clubcard concept for gaining the loyalty of the customers and retaining them, helped Tesco to penetrate deep in the retail market.

In order to grow and sustain in the market, a company should come up with new products and services according to the tastes and preferences of the customers. Here is a list of activities that Tesco did:

• Tesco offers a wide range of products and services like credit cards, mortgages, insurance products, various investment and savings schemes, electronic goods and others (Meershoek et al. 2015).
• Tesco has also introduced innovative products like bio-fuel in place of the standard petrol and diesel. They are even trying to improve the quality of those products.
• The company is also trying to expand in other sectors also like mobile and tablets. They have tested success in the Asian market regarding these products and earned huge profits. They are slowly moving into the telecommunications and electronics departments (Moiseieva, 2013).

• In the year 1994, Tesco Plc took over William Low, the renowned Scottish supermarket chain.
• It was in 1997, that the company also bought stakes from the Associated British Foods retail chain consisting of Stewarts, Quinnsworth and Crazy Prices (Park, 2014).
• In the month of June 2003, Tesco purchased C Two-Network in Japan.
• It was in the middle of 2006, that Tesco bought Casino’s Leader Price Supermarkets in Poland. They were later transferred into small sized Tesco Stores.
• For development of the existing market, Tesco undergoes frequent changes. In the year 2005-06 some significant changes were made in the marketing strategy of Asian and the European countries. A few examples are Japan, Poland and South Korea (Phillips et al. 2013).

• Very recently Tesco diversified its products from the food items to the non-food items. Initially Tesco started as the leading grocery retail chain. But slowly it diversified its business into garments, books, dvd sales and rental, furniture, various financial services and internet related services (Rabbanee et al. 2013).
• In the clothing department, Tesco introduced its own brands like ‘Cherokee’ and ‘F+F’.
• The food brands of Tesco like ‘Finest’ and ‘Value’ were being used in non food brands also like the electronics, health and beauty products.

Figure 3: Ansoff’s Matrix growth strategy of Tesco Plc

(Source: Sigala, 2014. Pp-211)

4.1 Product Life Cycle

The product life cycle stage of the Tesco brand can be analyzed through the BCG Matrix. Here, growth of Tesco in the global market is shown as per the Annual Report of 2012-2013.

Countries	Revenue	Revenue Growth	Trading Profit	Trading Profit Growth	Marketing Position	Loyalty Scheme Members
UK	£ 43.6 bn	+ 1.8%	£ 2272m	8.3%	1st	16m
Asia	£ 11.5 bn	+ 6.0%	£ 661m	10.3%	1st or 2nd	20m
Europe	£ 9.3 bn	+ 5.5%	£ 329m	37.8%	1st or 2nd	7m

Fig. 4: BCG Matrix of Tesco

(Source: Sudbury-Riley, 2014, pp-667)

It indicates high market share and high growth. The UK market is star for Tesco petrol. The profit rises to 11.8% with the sale of petrol product (Smith, 2013).

It shows high growth and low market share. In Asian markets people are buying Tesco products but the share prices are low due to stiff competition in telecom sector from Samsung, Jazz, Telenor, etc (Soni et al. 2014).

Here there is low growth but high market share. It is seen in the European market where Tesco has competitors but due to the brand name, Tesco’s share prices are still high.

This consists of low growth and low market share. This is mainly applicable to the financial sector of Tesco in USA. The Tesco banking sector was kicked out after 20 years of service. The pre-tax profits fell 51% to £1.96bn and the post-tax profits including the cost to exit from the US were £120m, decreased by 95.7% (Sudbury-Riley, 2014).

Tesco followed a very smart pricing strategy. In order to compete with the domestic and international rivals, it offered products and services at comparatively cheaper prices to attract the customers as the UK customers are very price sensitive. Competing with the giants like Sainsbury’s, Asda, Morrisons and others was always a big challenge which Tesco accepted and emerged as the leading retail chain in the UK Market. Tesco has the objective of being the world leader in super market through products and services which will cost lesser than the other rival brands. The company has chosen the price strategy like Penetration Pricing, Competition Pricing and Product Line Pricing (Eggert et al. 2015).

There are 7,599 Tesco stores including the franchises located all across the globe. It operates across 12 countries in Asia, Europe and the USA. It has its manufacturing units, sales outlets and offices across all these countries (Walker et al. 2013).The headquarters is in Cheshunt, Hertfordshire in England. The company is marketing its products through the retail chains present in almost all the leading countries of the world. They provide the goods and services to the customers directly.

2.2 SWOT Analysis to assess the competitive position of Tesco

Tesco uses a number of strategies to promote its products and services all across the globe. These are as follows:

• Email Messages
• Text messages
• Media campaigns like TV commercials
• Interactive websites
• Clubcards for loyalty customers
• Mobile applications where the customers can order their products through their mobile handsets.

Fig 5. Marketing Mix of Tesco Plc.

(Source: Walker, 2013, pp-290)

8. Conclusion

At the end of the assignment it is to be seen that Tesco has designed a very competitive marketing and growth strategy to promote its products in domestic as well as in the international market. It has continuously faced stiff competition from the rivals like Sainsbury’s, Morrisons, Asda and others yet it has maintained its operations in line with the Corporate Social Responsibility norms. It has procured and manufactured ethical goods and services for the consumers. Now, the company is willing to increase its market abroad and as a result of this it is following some strict and transparent marketing plans which will ensure success in the long run. The corporate strategy and planning of Tesco is the benchmark which any multinational organization should design in order to taste success in domestic and international market.

In order to succeed more in the UK market, Tesco should maintain the current pricing strategy of keeping the prices of the products at a little cheaper rate compared to the other rivals. Tesco should understand the price sensitive market in the UK. If the products are too highly priced, then the customers will not go for it and may visit the rivals like Sainsbury’s, Morrisons, Asda and others (Yavuz et al. 2014). It should also come up with innovations in product development. It has already started to manufacture products of its own like smart phones and tablets. This creativity and innovation will help it to gain more popularity in the domestic and international markets. Tesco should open more number of retail stores and outlets so that more customers can have access to their products. This will increase their revenue also. A very well thought out advertising plan is required to gain attention of the customers. Catchy hoardings, media advertising in newspapers, attractive website for the company with details, sms services, email services and various types of loyalty programs like the Clubcards concept can be developed in order to attract and retain the customers.

10. Reference list

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