Unit 1 Marketing

Presented by
Parminder pal singh khosa
Scm/26/10

Presented to
Mr Hussain
Introduction

This report will assist in the understanding and the formulation of

an international marketing strategy for Tesco Plc. The report
will use PESTLE and SWOT analysis to provide an insight into
Tesco's current market situation and will provide a valuable source
of help in enabling the management team to make the correct
strategic choices in terms of corporate and international strategy
relating to the launch of designer baby wear (infant & toddler
clothes) into Northern Europe (Namely, Sweden). The report will
outline how Tesco intends to make such market diversity and also
manage its corporate portfolio. The Ansoff Matrix will be used to
consider market entry models. The final part of this report will
provide an activity plan for Tesco along with a profit and loss
account. Measurements and control with contingency plans will also
be discussed.

Company Profile

Tesco runs more than 2,300 supermarkets, hypermarkets, and

convenience stores in the UK (where it is the market leader in food
retail), Ireland, Central Europe, and Asia. Its operations include
convenience and gasoline retailing (Tesco Express), small urban
stores (Tesco Metro), hypermarkets (Tesco Extra), and financial
services through Tesco Personal Finance. A global leader in online
grocery sales, it owns a 35% stake in US grocery chain Safeway's
Grocery Works. It is the leading online grocery store and it is now
expanding its business with a TV channel and a "retail based
education institution.

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SWOT Analysis of Tesco Plc

A Swot analysis giving an overview of the key internal and external

factors pertinent to Tesco, was undertaken, appendix 1, and from
this key strengths, weaknesses, opportunities and threats were
noted. These were now further refined
Strengths. Weaknesses
1. Brand awareness 1. Lack of local knowledge
2.Strong financial situation 2. 'Foreign Brand
Opportunities SO WO
1. Brand awareness
growing globally
2. Innovation and
alliances
Threats ST WT
1.Existing competition
2.High Competition for
customers and resources

In considering using strengths to make the most of opportunities

(SO)
• Tesco has a strong home brand which is becoming known
throughout Europe due to existing expansion programme
• Tesco could build on the strength of it's brand to join with a
leading Swedish manufacturer of children's clothing and jointly
there could be promotional opportunities for both Tesco and
the Swedish company concerned.
• Tesco is in very good financial health, so could very well
afford to pay for expansion plans incorporating marketing
programmes.

In considering how opportunities could be taken to address the

weaknesses, provided that SO was achieved
• Tesco's growing brand awareness throughout Europe could
overcome lack of local knowledge by using local Swedish
general managers to both run the stores, and recommend
location, and by ensuring their involvement in local marketing
initiatives.
• By forming alliances with Swedish clothing manufacturers
and by building upon their knowledge of the local population's
sizing and purchasing habits, it can only be a win win situation
for the companies concerned.

In reviewing the key threats and applying the strengths

 • Existing competition in the Swedish market means that
Tesco will need to use their financial resource to create and
sustain a high profile and multi level marketing campaign to
both raise the profile of Tesco within Sweden and introduce the
concept of quality children's clothes at Tesco and to reinforce the
message periodically throughout the year

Market Entry Strategy and Target Customers

We can use Ansoff's product/market matrix to identify directions for

Tesco's strategic development. This matrix offers directions for
strategic option available to Tesco in terms of products and market
coverage, taking into account its strategic capability and also
expectation of stakeholders

Products
Existing New
Markets Existing Protect/build Product development
Consolidation With existing capabilities
Market penetration With new capabilities
Beyond current expectations
New Market development Diversification
New segments With existing capabilities
New territories With new capabilities
New users Beyond current expectations
With new capabilities
Beyond current expectations

Source: Johnson, G., Scholes, K., Whittington, R., (2005)

From the Ansoff Matrix above, it will be presumes that
Tesco's launch of Baby wear in Sweden will involve a market
development strategy. Tesco already sells children's clothing
(existing product) but Sweden will be a new market and Tesco will
need to consider whether it's existing products conform to Sweden's
criteria to be made from renewable sources, or whether they will
need to form an alliance with a strategic partner, as suggested
following the SWOT analysis. Both capability and market
consideration has driven Tesco into the development of new
markets. In today's 'green environment' children's clothing made
from renewable sources is a new slant on a product that can be
exploited in other market segments and countries. Tesco may
encounter some difficulties around creditability and expectations for
the clothes they currently supply through their stores are marketed

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 as affordable everyday wear whilst the new range is going to be
aimed at the quality high end of the market. Tesco may not be seen
as a credible 'mainstream' supplier of quality clothing.
It is important for Tesco to decide on the appropriate market
segment to target in Sweden as this will subsequently determine its
generic strategy. If it wishes to compete with the low cost
retailers, as it currently does in the UK against the ADSA George
brand and Sainsbury's new TUI range, then it must adopt a cost
leadership strategy. Alternatively it will have to look for
differentiation so that it can charge premium prices at
the 'luxury' high-end of the market. As the competitive rivalry in the
low cost market is intense, profits relatively low and market entry
costs high, Tesco should enter the high-end market with a
differentiation strategy which would exploit the Swedish criteria for
clothes made from renewable sources such as cotton and wool and
emphasising the environmentally friendly approach.
However, before Tesco decides on its target customers, a market
analysis will need to be undertaken in terms of
• The size of the baby and infant clothing market in Sweden
• Market shares of all the existing firms in this market and
finally
• Segments/ demographics within the market, to identify the
profile of the new customer to ensure the best method of
targeting is used and the marketing campaign appropriate to
address their needs.

Marketing Objective

Profitability, in terms of operating margin (a 10% target)

Swedish Market share (a 20% target)

Customer advocacy (the number of customers who recommend

Tesco branded clothing, repeat business)

Respected company/ brand awareness (the number of community

stakeholders who respect Tesco)

Employee motivation (the number of employees who feel motivated

to deliver Tesco's goals)

Tesco must ensure that it sets 'SMART' marketing objectives that

are specific to the needs of the audience, measurable, attainable,
relevant, time limited,

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Marketing Strategy

Tesco's strategy is clear, with growth being pursued from four areas
- the core UK grocery business, non-food, international expansion
and retailing services such as financial services, the dotcom
business and telecommunication packages. Basically, Tesco is using
its strong stable core to keep the business ticking over while it
forges new riskier areas of growth. Pushing further into non-food in
the next phase (Johnson, G., Scholes, K., Whittington, R., (2005)).
Lidl is currently "destroying" the market by selling the products
below cost price.
Having undertaken the SWOT analysis, Tesco's generic strategy will
have to be differentiation so that a premium price can be charged.
It will do this by joining forces with/ forming a strategic alliance
with an existing manufacturer of Swedish children's clothes with a
credible reputation for quality clothes at the high end of the
Swedish market and by creating a new 'children clothes brand', not
using the current Florence and Fred or Cherokee names. All clothes
will be manufactured from totally sustainable materials and
manufactured in Sweden itself. The new line of children’s clothes
will eventually be rolled out through the rest of Europe and the
Swedish and the brand values will mean quality and style .
The marketing strategy will involve analysing the markets,
and determining which products to offer and the exact age range of
the children to be suited, considerations relating to sizing, fashion,
seasons and so on will need to be made, as well as the
appropriateness of each garment for export to other Tesco shops in
neighbouring countries. Tesco may well decide that there will be a
'core' European range of environmentally friendly clothes which
could be exported throughout Europe, whilst there would be a
broader range available for local customers. However before any
decisions are made, a detailed market research activity will need to
be undertaken to test the concept of the new range, the intended
pricing parameters, attitudes towards Tesco as a retail outlet and
attitudes towards the new Swedish Alliance partner, purchasing
habits of the customers (parents buying for children) and so forth.
Having determined the clothing (product) specifications, the
strategy is implemented through marketing tactics, which involve
detailed decisions about factors such as the price and the way the
product is distributed. With regard to price, consideration must be
given that the new Swedish range is to be synonymous with quality
and style and so would demand a premium price. Certainty it must
be higher than Cherokee and Florence and Fred, such as the price

5
differentiation in Marks and Spencer between it's own named
brands. However, consideration would also need to be given to the
fact that the reality is that it is distributed throughout a chain store,
so a premium price charged within a Tesco outlet cannot demand
the same price as a boutique.

So Tesco must decide on its model of entry into the Swedish market
(place) in terms of, own stores, Internet selling or joint venture with
an existing national retailer. Sweden is a huge country and the
population is spread over a wide geographical area. It is likely that
Tesco will need to cover as many methods of distribution as
possible.
• Tesco promotes the concept that you can buy whatever you
like in just one shop at it's retail stores and so must offer this
to ensure consistency of global message..
• Other outlets should also be considered, especially as they
will be using an alliance partner to design and promote the
new range. This partner must already have outlets that they
use for their own ranges and there ought to be a possibility of
Tesco using these outlets for their new clothing range too and
visa versa. In fact the partners relationship is of strategic
importance to each other.

Having decided to enter the high end children’s clothing market it is

important that such an entry be supported by a high profile 'burst'
marketing campaign. Whilst the promotional side will be expensive,
the SWOT emphasised Tesco's financial security.
Such a campaign would consisting of
• TV and radio advertising repeated at regular intervals
throughout the day
• Advertisements placed in both national and local papers
• Media PR. Tesco talking about their commitments to
working together with Swedish people for Swedish people,
supplemented with press releases
• Media PR - The alliance partner issuing press releases and
talking on both national and regional TV/ radio about the
benefit of Tesco using his company and the benefit to Sweden
in creating thousands of new jobs
• Political PR - The introduction of an environmentally friendly
range based on Sweden's strict policy will raise the profile of
Sweden amongst Europe as a leader of environmentally
friendly policies and that the UK is encouraging such political
emphasis on 'green' emphasis during the recent election
campaigns
. 6
• Billboard campaigns
 • Internet ads and viral 'contagion' campaigns
• Direct marketing to known customers(i.e. if loyalty cards in
place)
• And so on

Profit & loss account

Measurement & Controls

Tesco must also have in place both financial and strategic controls.
Financial controls are in terms of profit targets, capital bids and
performance appraisal. Strategic controls in terms of overall
strategic balance, agreed business plan, optional services and
infrastructure and any short-term constraints such as human
resources.

Contingency Plan
The contingency plan must be in place to ensure that if the product
fails having made large capital investments in new store, Tesco
must have other products within its portfolio, which it can launch

Conclusion
After all this research on Tesco . I have found out a lot of strengths
and some weaknesses of Tesco and they are
Strengths
Diverse ranges of products
Open 24 hours a day
Strong Cash Flow Position
Increase turnover and trading profits
Strong Balance Sheet
Leading Supermarket Chain
Brand Awareness
Human resources
Online Shopping
Capabilities to turn resources into advantages
Weaknesses
Perception of low quality -(Tesco value brands)
Lack of local knowledge of customers and culture
Foreign brand

References
http://www.forbes.com

Johnson, G., Scholes, K., Whittington, R., (2005) Exploring

Corporate Strategy Text and Cases, 7th Edition, FT Prentice Hall

http://www.hoovers.com/nike/--ID__14254--/free-co-
factsheet.xhtml

ACCA Paper 3.5 Strategic Business Planning and Development

(2001) The Financial Training Company

M.E. Porter, Competitive Advantage: Creating and Sustaining

Superior Performance, Free Press, 1985

Jeannet, J., Hennessey, D.H, Global Marketing Strategies, 6th

Edition, Houghton Mifflin