Introduction to Strategic Marketing with Tesco

The report gives an overview on strategic marketing. The company chosen here is Tesco and the chosen country is Australia. Tesco is a multinational general merchandize and grocery store in United Kingdom measured by its revenue (Tesco.com 2018). The company gas stores in twelve Asian and European countries. However, Tesco remains the market leader of UK with around 28.4 percent market share. The report predicts Tesco’s analysis of the external business environment of Australia to determine a market entry. Australia has a highly developed mixed market economy with a GDP of around AUD $1.69 trillion in the year 2017. Australia is considered as one of the wealthiest nation after Switzerland. The report thus puts forward a PESTEL analysis of Australia. There is also discussion of the PESTEL factors that the company needs to consider. The report also ends with recommendations concerning the market attractiveness that would provide encouragement to Tesco in entering the market.

Australia, a country in Southern Hemisphere comprises of Australian continent, the Tasmanian Island and various other smaller islands in the Pacific and Indian Ocean (Davies 2012). Australia is the thirteenth largest economy that is prosperously developed. The country attains a higher rank when compared internationally in terms of quality of life, health care, public education, life expectancy and protection of civil liberties, economic freedom and the political rights.

PESTEL analysis refers to the various factors in macro environment that influences the decisions of the managers in an organization. PESTEL in the expanded refers to political, economic, social, technological, legal and environmental. Typical examples of macro changes include new law, trade barriers, demographic change, tax changes and government policy. However, for analyzing these factors specific to the country they are categorized using PESTEL model. 

Australia represents a safer destination for the purpose of investment. The regulatory and political environment of the country is open, progressive and stable thereby providing the investors with higher degree of certainty and confidence (Foucault 2013). The strength of Australia as an investment destination stems from the highly effective political system in responding to the policy direction and the economic challenges. The policy of Australian government is highly adaptable to the changes taking place in the economy and ranked amongst top two countries of the region. At the same time, the policy is considered effective and transparent. Australia has a legal framework that is efficient, open and transparent and has a lower corruption level. There is a strong system of balance and checks along with a respectable law enforcement and judicial system that is responsible for portraying the importance of the Australian market to the multinational companies (MNCs) in Asia-Pacific region.

Overview of Australia

Australia is one of the largest capitalist economies of the world and is highly dominated by the service sector. The economic growth of Australia depends primarily in the agricultural and mining sectors (Banwell et al. 2012). The country stands at the tenth position in the index representing the ease of doing business. There are various factors that ensure the ease of doing business in Australia. This includes, constant economic growth, lower unemployment, index for ease of doing business, constant inflation, lower public debt, stable and stronger financial system and a open market with minimum restrictions.

The environment of Australia consists of diverse people and the widely used language in the continent is English. The country does not have any official religion while the education level of Australia has increased compared to the past decades(Ulm 2013) However, the factors responsible for shaping the national culture include the female population compared to men that is believed to lay the foundation of an ideology of mate ship. The country is made vibrant with various multicultural benefits and have closer network with the multicultural communities having newer and booming economies. Moreover, the country also have broader business horizon and over the years have become open to the world. The multilingual workforce and the cultural diversity ensure a distinct competitive advantage to the global economy.

The influence of technology can not only reduce cost and improve quality but also lead to the process of innovation. Such developments not only benefit organizations but also its consumers. Two organizations in Australia support the research and development of the Australian government. The first is the Commonwealth Scientific and Industrial Research Organization (CSIRO) found in the year 1926 and has headquarters in Melbourne (Brown, Campbell and Crook 2014). CSIRO is an independent agency of the government that helps in supporting development and research in the field of biological and physical sciences. The second is Defense Science and Technology Organization (DSTO), mostly supported military development and research by providing technological and scientific assistance to the Department of Defense and the Australian Defense Force. This organization is headquartered in Canberra. There are however several issues that dominates the present science and technology of Australia. This includes the concentration of development and research in the national research centers and the tensions between the researchers of the University regarding allocation of the resources for funding.  Issues related to effective communication between the government, industry and the university researchers and the increasing role where Australia is playing in technology and international science collaboration dominates the science and technology in Australia. Australian continent has a high tech exports close to $ 1.5 million and government funds about 55 percent whereas industry funds about 40 percent of all the development and research. 

PESTEL Analysis of Australia

In Australia, the environmental factor refers to the non-living and living things that surrounds livelihood. This also include climate and weather change (Keast 2013). There are many industries that get impacted by the change in temperature and this includes tourism, farming and insurance. The combined factor of global warming along with greater environmental awareness is a significant for consideration by the firms. The increasing desire of protecting the environment is impacting industries including transportation and travel. In addition to this, the general move towards the environment friendly process and products influences the patterns in demand thereby leading to the creation of business opportunities (Williams et al. 2012). Water is also a scarce resource in the continent and therefore the availability and quality of water is a continuous concern. Australia also faces another significant problem in the form of inland damage caused due to the soil erosion. Moreover, the saline also affects the soil quality. The country however has around 145 million hectare of woodland and forest along with an extensive mangrove area covering an area of one million hectare.

The legal system of Australia depends on the fundamental belief in the rule of justice, law and the independence of the judiciary. Everyone is treated equally before the law. The Australian constitution established federal system of the government where power is distributed between the states and the federal government (Derbyshire 2016). However, the country is primarily affected by the criminal laws of the state and the territory thereby effecting life on a daily basis.

The PESTEL factors that Tesco needs to consider for entering the Australian market are as follows:

Before making a market entry to Australia, Tesco must consider the importance of the political and legal factors. Absence of the bureaucratic hurdles, streamlined procedures and incentives represents better indicators and the willingness of the government in inviting the foreign partners for further development of the host country (Foucault 2013). The attitude towards the foreign investment along with political stability plays a vital role in encouraging the participation of the multinational corporations. Political stability somewhat refers to the continuation of the policies. Any changes in the policies of the government can lead to difficulties in the profitability potential of the business. The retailer must also impose a check on the structure of the tax and existing legal procedures and systems before making a market entry (Xing 2012).

Western retailer giants like Tesco should realize that to serve a new market they require an entirely new set up for manufacturing and marketing. Thus, every business possesses the single goal of earning maximum profit (Smith 2013). This is possible only when the organization is able analyze customer demand and maintain quality good and service. However, there are certain economic factors that have a direct impact on the progress of the business. This includes, inflation, recession and demand and supply.  The economic growth and development of a country plays a vital role in determining the amount of revenue Tesco can earn in the chosen country. Economic growth implies the amount of finances generated by the foreign market and development refers to the volume of money invested in various channels. The retailer giant must also consider the amount of inflation of the new market that it plans to enter. Inflation refers to a situation when there is excess money supply in the economy without sufficient output of goods and services. The presence of excess money increases the prices of the goods thereby making it unprofitable for the business to sustain in the long run. The rate of interest also directly impacts the business of the retailer in driving and sustaining their growth. The higher interest rate makes it more difficult for the organization to survive. There another factor that comes into play when a company is planning to make a market entry in country (Chaney 2016.). This includes consideration of the conversion rate of the currency. This implies that if the buyer have a stronger currency then it becomes beneficial for business. On the other hand, lower exchange rates implied that retailer would have to pay a higher price. Thus, before making an investment in Australia, Tesco must consider how the economic conditions of the country influence the purchasing power of the potential customer and thereby have an impact on the revenue of the company. 

Political and Legal Factors to Consider for Tesco’s Market Entry

Before entering the Australian market, Tesco must understand that countries vary in terms of practiced religion, spoken language and food consumed (Kramarz and Skans 2014). These differences are not only significant but also real and the marketers must consider how such difference facilitates or hinder the marketing efforts of the retailer in the newer market. The retailer must also make sure that to enter a new market it might have to tailor its marketing, products and other practices of the business as per the cultural and social aspects of the country. Thus, if a business do not adapt to the social environment of the country then it would not be able to survive. Tesco must also be aware of needs and wants of the Australian people since they keep changing from time to time. Adaption to social environment allows the business to use advertising and marketing campaigns at their advantage (Ripolles, Blesa and Monferrer 2012). However, societies that values the higher education ends up providing better workforce that leads to more productivity and innovation. Therefore, businesses must focus on every factor that leads to its progress in the international market.

A company while making a market entry to a new country must also considers the technological factors (Gruber, MacMillan and Thompson 2013). This is because improved technology helps businesses in producing the goods at a cheaper cost. Thus, the presence of improved technology helps businesses in expanding effectively and efficiently. This also helps businesses in competing with other organizations in the marketplace and determines the profitability and feasibility of its new venture. Therefore, for ensuring success in the international market businesses must adopt newer technologies that help in better and efficient operation of the plants thereby reducing the cost of production.

Businesses can create uproar in the new market by considering the PEST factors. These factors ensure bigger advantages to the business as it allows them in focusing on the targeted areas that helps the business to flourish and reach greater heights.   

The recommendations involving market attractiveness for entry involves:

1. Consideration of the Market Size: The size of the market is an important determinant in enhancing the attractiveness of the market. Smaller market leads to lower revenue generation for covering the capital costs, start-up cost and the operating cost. On the other hand larger market will help in covering the initial cost of the firm and thereby ensure its survival.
2. Consideration of the Growth Factor: Growth considered as an indispensible criterion for market attractiveness in targeting the market where the business wants to flourish.
3. Consideration of Environmental Stability: The stability of the environment in terms of distribution system, production system, customer base and technology determines an exogenous factor in influencing market attractiveness.
4. Ensuring the Presence of Competition: The existences of the competitive firms are good signal for better market health. Tough market competition results in slower evolution from the short term to long term market competition thereby making entry difficult.

Conclusion: 

The report ends with recommendations concerning the market attractiveness of Australia that would encourage Tesco to make an entry. There is also discussion about the various PESTEL factors that the company needs to consider before making an entry. This discussion therefore revolves around the importance of the political and legal factors, economic factors, social and technological factors. Through the analysis one gets to know how these factors influences in business and hinders its further growth. The report also puts forward the PESTEL analysis of the chosen country. 

References:

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