Marketing consultancy is an act of providing professional expertise in organizational strategies towards engaging the customers and improving business opportunities (Chari et al. 2014). The organization chosen for the study is Tesco Plc, which is a popular retail supermarket in United Kingdom. The study will provide the outline of the company along with its current position in the market. The study will also identify a client problem of the organization and assess its impact on the organization. Apart from that, the study will analyze the market situation of the organization. Moreover, the study will analyze the market situation Tesco through macro environment analysis, micro environment analysis and internal environment analysis. A summary of SWOT analysis will also be provided in this study.
Tesco Plc is a general merchandise retailer and multinational grocery in United Kingdom. Tesco has been considered as third largest retailer in the world as per its profit level. It offers almost all types of products, which are usually sold in hypermarket, supermarket and superstores. Products range from household products, electrical products, food products, pharmacy products, cloths and accessories, hardware, home furniture, health and Beauty, garden, technology and gaming, wine and lots more (Tesco.com 2017). Tesco was established in 1919 as group of market stall. Tesco has gained rapid expansion with its business success. Recently, Tesco has more than 6553 stores in 12 countries across Asia and Europe (Tesco.com 2017).
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Vision of Tesco |
“To be the most highly valued business by the customers and communities and other stakeholders with which Tesco operate”. |
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Mission of Tesco |
“Tesco makes matters better having a sense of togetherness in business”. |
Tesco Plc has been selected as the third largest company in the world as per its profit level. Furthermore, while measured it with its revenue, the organization has been considered as ninth largest retailer in the world. It is the grocery market leader in United Kingdom. Moreover, the organization has 28.4% market share in UK market (Yeomans 2017). It has market capitalization of approximately £18.1 billion (Tesco.com 2017). Moreover, it is the lowest cost producer in UK retail industry. The customers can avail its products at affordable prices. Such low-cost strategy has led the organization towards competing against the discounters Aldi and Lidl. On the other hand, the organization has been selected as 28th largest of any company in London Stock Exchange.
Considering the above map, it can be said that Tesco is having high price of products with respect to other companies with average product quality. However, due to product variety, brand trust and loyalty the consumers are attracted to Tesco. Also, it can be depicted that the top competitors of Tesco are Sainsbury, Morrisons, ASDA and Marks and Spencer’s with respect to both price and quality factor.
Tesco is the market leader in UK and its success of completely dependent of its lowest cost strategy. However, for the last few years, the organization is facing huge issues in regards to their customer loyalty. Moreover, Ruddick (2017) opined that lack of loyalty programs in Tesco has decreased the loyalty level of the customers. They are not much willing to repeat their purchase from this organization. On the other hand, Roar.uel.ac.uk (2017) opined that decreased loyalty level of the customers has ultimately slowed down the sales volume of Tesco. Moreover, the organization has faced a downfall in its sales volume by 29.7%.
Tesco is facing the issues of customer loyalty for few years. However, the organization is not taking any active initiatives towards addressing or resolving this issue. The problem has been identified as a major business issue. However, no such action has been taken from the company side towards mitigating the issue. In this way, lack of customer loyalty has decreased the sales volume of the organization. Furthermore, it can also decrease the market share of Tesco, if it is not addressed immediately.
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PESTLE Analysis |
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Political |
· Government support for industrialization of UK is helpful for Tesco towards its business growth · Increased VAT rate of UK Government can hamper business growth as it limits the consumer spending power · Increasing fat tax can also increase the operating cost of Tesco · Political stability also fosters the business growth of Tesco rapidly (Wood, Coe and Wrigley 2016) |
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Economic |
· UK economy is demonstrating positive sign of recovery from financial crisis, which increases the ROI (Return on Investment) rate of Tesco · Decline in disposable income of people has minimized their spending power, which has limited the sales volume of Tesco · Reduced inflation rate of UK is a positive sign for the increased business growth of Tesco · Recovery from economic recession has fostered the revenue growth of Tesco (Tse et al. 2016) |
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Social |
· Modern and sophisticated lifestyle of UK people has their tendency towards shopping from supermarkets · Increasing income level of the people in UK is enhancing their confidence on purchasing power · Trends of UK people for bulk shopping and one stop shopping has increased the business scope of Tesco |
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Technological |
· Global technological development has increased the business growth and global expansion of Tesco · The introduction of online shopping has increased the sales volume of Tesco · Self-checkout system has increased customer convenience and decreased labor cost of the organization (Kukreja and Gupta 2016) |
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Legal |
· Certain code of practice from Food Retailing Commission of UK can have influence on the current business practice of Tesco · Several consumer laws have major influence on the business practice of Tesco |
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Environment |
· UK environment law has limited certain business activities of Tesco · It is committed to reduce its carbon footprint by 50% within 2020 (Dawes and Nenycz-Thiel 2014) |
Table 1: PESTLE Analysis of Tesco Plc
(Source: Wood and McCarthy 2014)
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SPICC Analysis |
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Factors |
Analysis |
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Suppliers |
Ø According to Dawes and Nenycz-Thiel (2014), Tesco Plc receives fresh supplies from Booker for its food and drink products and also has been able to drive harder bargains leading to huge discounts Ø Sparks (2016) argued that Tesco often delays its payment for supplies so as to gain huge profit and limit its debt, however it is against fair trade and poor supplier interest |
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Publics |
Ø According to Monios (2015), Tesco responds to public through community plan, which includes Health and wellbeing, Supporting economy, Community involvement and fresh products with average pricing Ø Cheshire, Hilber and Kaplanis (2014) argued that Tesco has always tried to hide the information of toxic chemicals such as phthalates, triclosan and parabens on their website, which violates consumer ethics |
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Intermediaries |
Ø Mollah (2014) pointed out that by Tesco Bank, mortgage related intermediary proposition of the organization has been diversified to a huge extent Ø Liu, Wu and Luo (2017) added that distribution channel includes supermarkets, wholesaler and medium scale retailers so ensure market penetration |
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Competitors |
Ø According to Triantafyllou, Cherrett and Browne (2014), Sainsbury and Morrison are the top competitors of Tesco, which has able to create both product diversification and market intermediates Ø However, Ring (2015) argued that ASDA is the top competitor of Tesco as it delivers grocery products with huge discounts and offers throughout the year |
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Customers |
Ø According to Zhao (2014), rising economy and more health-conscious citizen of UK are the two most favorable factors for Tesco’s business Ø Yu, Ramanathan and Nath (2014) argued that with the rise in nuclear families in UK, sales of bulk items are reduced and since there are less offers for single grocery items consumers are less benefited |
Table 2: SPICC Analysis
(Source: Created by Author)
Threats of New Entrants
According to Liu, Wu and Luo (2017), new entrants face huge threats in entering into new market due to various factors like brand preferences, capital requirements, cost disadvantage, ineffective distribution channels and lots more. Various new companies are entering into UK retail industry having their competitive business featured. However, the brand value and price competitiveness of Tesco can be tough for the new entrants in entering into UK retail market. On the other hand, Sparks (2016) huge capital requirement can act as great barrier for the new entrants in entering UK market. Moreover, 80% of the UK retail marker is captured by the reputed retail organizations like Tesco, Sainsbury, Aldi and others (Manez et al. 2016). In such situation, new entrants face tough challenge in entering into UK market. Therefore, Tesco face low threats of new entrants in the market of United Kingdom.
Threats of Substitutes
In the food retail market, Tesco can face threats from small chain of convenience stores, organic shops and off licenses. Such small shops provide the same products at low prices than the supermarkets. However, Permarupan et al. (2014) opined that Tesco is likely to face such threats of substitutes, as it is capable of offering high quality products at very low cost. Moreover, Tesco face low threats of substitutes in their business.
Competitive Rivalry
According to Yu, Ramanathan and Nath (2014), competitive rivalry determines the level of competition among different companies of same industry. Tesco faces tough competition from its direct competitors like Sainsbury, Morrisons, ASDA and Waitrose. Such competition can decrease the sale growth of Tesco, which can have impact on its market share in UK.
Bargaining Power of Suppliers
According to Sogn?Grundvåg, Larsen and Young (2014), limited source of suppliers in the market enhances the bargaining power of suppliers. Suppliers are highly inclined towards providing materials to high reputed super markets. Moreover, Monios (2015) opined that the suppliers have fear of losing commercial contracts with the reputed supermarkets. Being a reputed supermarket, Tesco can have access wide and unique source of suppliers. Therefore, Tesco faces less bargaining power of suppliers in operating its business.
Bargaining Power of Buyers
According to Triantafyllou, Cherrett and Browne (2014), customer power of negotiation creates tough challenge for any organization, which can act as hindrance for business success. Customers are more likely to switch to other organization, where they get less price and extra benefits. Ring (2015) stated that Tesco is capable of providing low price for their products, but it is not capable of providing adequate discounts. Therefore, more discounts provided by other retailer often encourage the customers towards switching to those retailers. Therefore, Tesco face high bargaining power of buyers.
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McKinsey 7s Framework |
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Strategy |
· Tesco has pursued cost leadership strategy for beating the market competition · Strategies for resourcing talented employee has reduced the turnover rate · Strong distributor relationship and proximity strategy has increased the distribution coverage of Tesco · Differentiation strategy in product portfolio has increased competitive advantage of Tesco (Mukerjee 2013) |
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Structure |
· Organizational structure is highly hierarchical and comprised of layers of management from store assistance to CEO · New CEO is attempting to simplify the organizational structure · Matrix organizational structure is followed for managing the business units in different countries |
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System |
· Directional system controls and monitors the fulfillment of the core organizational objectives · Process system breaks the overall organizational goals down into manageable tasks and set milestones for the initiatives towards achieving the tasks · Day-to-day management system provides frequent feedback and report on the progress of organizational objectives (Zhao 2014) |
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Style |
· Leaders of Tesco are forward looking and highly emphasize of openness · Leaders follow collaborative style for bringing shared value in business model · The organization always provide accelerated learning opportunities to the employees for contributing to its greater good (Dawes and Nenycz-Thiel 2013) |
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Skills |
· The employees are highly dedicated and qualified towards achieving organizational success · The organization provide frequent training session to the employees for developing their skills as per the business requirements |
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Staff |
· Employees are generally recruited from different external as well as internal sources · Employees are extremely hard working and likely to incorporate innovation in their work · Proper and adequate reward are provided to the employees for valuing their contribution in organizational success |
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Shared Value |
· The shared value of integrity makes the foundation of organizational success in Tesco (Mollah 2014) |
Table 3: McKinsey’s 7s Framework of Tesco
(Source: Created by Author)
Considering the above BCG Matrix, it can be said that Tesco is performing extremely well in the retail business sector. Yu, Ramanathan and Nath (2014) pointed out that if an organization is having at least two sub-units in the cash cow section, the it will be able to supply more financial resources to strengthen its question mark units. On the other hand, Dawes and Nenycz-Thiel (2014) pointed out that if an organization is having more number of units in the question mark section for many years, then the organization needs to promote the unit products so that sales is increased. This idea has been also highlighted by Wood, Coe and Wrigley (2016), as it can be said that the company will lose more resources in strengthening the financial stability of poor performing question mark units.
Considering the units of Tesco, it can be said that it has three units in the question mark section, and based on the position of Petrol Station, it is prominent that more resources are consumed by this unit. On the other hand, cash cow section is having both hypermarket and supermarket products, which are having huge demand in the market. Therefore, these units are providing maximum cash for the organization with high market share. It can also be said that Tesco Superstore and Tesco Extra are the only units that are having wide range of products and its demand will continue to sustain in future as well. More number of Tesco Metro will need to be set up so that growth rate increases exponentially.
Marketing Mix Analysis
Product
Tesco provides wide range of product portfolio including electric, food, clothing, household, financial service and lots more. According to Ring (2015), the product portfolio of Tesco is ever expanding and its product line caters to every needs and demand of the customers. Moreover, Tesco has its own brands like Tesco, Everyday value, Tesco Lotus, Tesco Bank, Tesco Value, F&F clothing and others. On the other hand, Yu, Ramanathan and Nath (2014) stated that Tesco always provides high quality products for gaining competitive edge in the market.
Price
Tesco attempts to keep the product prices as low as possible without compromising with the quality of the products. Moreover, Dawes and Nenycz-Thiel (2013) opined that Tesco follow cost leadership strategy and offer lowest cost for their prices towards increasing the marker share. The lowest cost strategies have led them to be the leading supermarket in UK retail market.
Place
The organization has expanded far and wide in the world. Moreover, the stores of Tesco have expanded more than 12 countries around the world. Apart from offline stores, the customers can also avail the products of Tesco from online channels. The offline forum of Tesco has stores of different kinds like Tesco Extra, Tesco Express, Tesco Compact, Tesco Superstore, Tesco Metro and Tesco Homeplus (Tesco.com 2017). The stores of Tesco have easy accessibility for the convenience of customers. On the other hand, the online website of Tesco also has easy user interface for the customer convenience.
Promotion
Tesco’s promotional strategy is mostly focused on one factor like its low price. Moreover, the customer loyalty program of Tesco like Tesco Clubcard also attracts the customers towards increasing purchase. As per Wood, Coe and Wrigley (2016), Tesco uses mass media, print media and social media advertising towards promoting its brand value to the customers. Apart from that, the organization also sponsors charity events towards enhancing its brand value.
Tesco has wide global market presence across Europe, North America, Asia, North Africa and South America. High brand value seems to be the strength of the organization, which attracts the customers towards purchasing its products. Moreover, it has multi format strategy hypermarket, supermarket, convenience store and hard discount store. The high proportion of locally sourced products helps the organization to persuade low cost production and operational efficiency (Kukreja and Gupta 2016). Furthermore, huge employee base has contributed to the success of the organization. However, high brand loyalty is vulnerable to breakthrough for even any small mistake and it can be the weakness of Tesco. Negative media coverage often impacts the brand value of the organization.
Tesco has wide scope of entering into some more emerging countries towards getting the opportunities of business expansion. The organization has to be more concentrated on boosting non-food sales and private level growth. Innovative digital media advertising and promotion can boost up the sales volume of the organization (Liu, Wu and Luo 2017). However, Tesco face huge threats from the competitors like Sainsbury, ASDA, Aldi, Walmart and others. Moreover, rising raw material cost of food and non-food items impact the profit margin of the organization.
Conclusion
While concluding the study, it can be said that Tesco has become the market leader in the Retail supermarket of Tesco. The market share of the organization is 28.4%. However, the organization has issues with decreasing customer loyalty, which can decrease the market share of the organization in future. Tesco has gained huge support of Government. However, increasing VAT rate of UK government has limited the consumer spending power, which has negative impact on business growth. Tesco also faces tough competition from its direct competitors like Sainsbury, ASDA and Aldi. The organization uses cost leadership strategy for gaining competitive advantage over the rival companies. Apart from that, wide range of product portfolio has met almost every needs and demand of the customers. Therefore, Tesco has increased its sales volume through its wide product range.
Reference List
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