Unit 2 Marketing Essentials Assignment – TESCO

Introduction

Marketing planning is an essential task that needs to be done by all organization so as to ensure its success in local and global market. A marketing plan is basically an outline of the marketing effort of an organization. The perspectives of the marketing plan and its design changes over the years in line with the changes in the environment in which the organization operates. In the following pages a marketing audit report is being compiled followed by the development of a marketing planning proposal.

Task 1

AC 1.1 Explain the changing perspectives in marketing planning in an organization in UK

A unique position in the British retail industry is occupied by Tesco. The supermarket is visited by millions on a regular basis but at the same time it has been subject to severe controversies. There is a statistics about Tesco which says that at a time when the organization was at its peak, one in every seven pound spent in UK, went to Tesco. Tesco started its journey in 1919. At the end of World War 1 where Jack Cohen was employed in the Royal Flying Corps used the money to buy excess supply from the army and sell it from Hackney. The first stock that he sold was fish paste and golden syrup. By the year 1924, he started selling his own brand of tea. The name of the brand was made up by combining the first three letters of his supplier and the first two letter of his name (Winterman, 2013). The first TESCO shop was set up in 1929. The business model that was used by Cohen in his company was to stack the goods high and sell them at very low prices. The people gave them the nickname of “Slasher Jack”. At this time there was lot of austerity around and the fact that Cohen was able to develop his business during such a time gives a lot of credibility to him. At the start of the recession during the 1990’s Tesco learned that the customers wanted that their money should go further. In this realization the value range was launched by the company in 1993 which helped it to become the second largest grocery brand in UK.  By the year 1996, sales of Tesco in UK had marched ahead of Sainsbury. The size of the company at that time allowed the company to get the biggest bargains even from the biggest of the manufacturers. Tesco was found to be very aggressive in its bargains and got the best deals from its customers (Winterman, 2013). However, the single most important fact that helped Tesco in dominating the market is watching the behavior of customer. Tesco club card launched in this regard was the single most important step in the history of the company. This helped Tesco to collect raw data about the goods that were bought by customers and the company was able to turn this information for making profit out of it.  Tesco was also able to give personalized discounts to customers. Tesco launched the club card across the nation in 1995 and by the next year it had become the top super market in UK.  In fact the reason behind the success of the company lies in its ability to spot and cash on opportunities before others could identify the same. However, there has been change in times and Tesco has lost a great amount of market share in the past few years. At the time of joining Tesco, CEO Dave Lewis and Tesco got themselves embroiled in a big accounting scandal and also the company had reported a £6.4bn loss which was one of the worst in the corporate history of UK (Vizard, 2015). In this new reality there was a change in the business planning and the marketing planning. In line with the falling market share of the company the first year under the new CEO has been about get the basics right for the company and bringing the stability back (Vizard, 2015). In this regards Tesco has been hiring a greater number of shop floor staffs so as to serve the customers well, has cut prices of the products so as to bring them at par with the market and has at the same time reduced its range of products. This means that the company is aiming for less amount of duplication and is trying to allocate more space for products and brands that are actually brought by customers. Tesco wants to place itself as a retail destination where the customers can purchase full range of products rather than going to more than one shop. In regards to marketing effort the company is trying to differentiate itself from the discounters who are taking on a major share of the market by talking a lot about food and product and there is much less talk about price.

AC 1.2 Evaluate your selected organization’s capability for planning its future marketing activity

Tesco has been losing market share for quite some time and had reported one of the largest losses in the corporate history of UK. In order to help the company make a turn around the marketing strategy of the company needs to change. The new marketing strategy of the company is required to reflect the new direction of the company and differentiate it from its competitors. In order to take the company to a new direction there needs to be a change in the strap line of the company from ‘Every little helps’. If the strap line of the company is changed as per the new marketing strategy, then it is also important for the company to get a new strap line that explains to the fullest the answer to the question of what the business is about.  This is an important next step in the revival of Tesco wherein the CEO needs to go beyond the business basics so as to fix the affection and trust of the shoppers on brand and help in luring the customers back to shopping at Tesco.

Tesco needs to decide in this regards the identity that it wants to create for itself. Does the company take a leadership role amongst the competitors through quality, fun, being serious or through value. The company needs to think about the clear choice in which the company is to be headed into for future. That is to say does the company want to distinguish from the competition by being a price leader, a leader in terms of quality, or it wants to go back to 1980s and mean all things to all people. One of the steps that the company can take is to return to the market as an innovator. The company needs to know that it can’t beat the discounters in terms of money or the price being charged on goods. However, there is a possibility that Tesco can beat the discounters in terms of service, in-store environment and depth of range.

AC 1.3 Provide techniques for organizational auditing and for analyzing external factors that affect marketing planning

The tools that can be used for auditing the organization and understanding its capability are SWOT analysis and Porter’s value chain. The SWOT analysis helps us to understand the strengths and weakness of the company and the way it can capitalize on its strengths to overcome weaknesses and address the opportunities in the external environment and also overcome the threats that lurk in external environment. The porter’s value chain on the other hand talks about those activities of the company that adds value to it. There are two types of activities in this regards and these are primary activities and supporting activities.

On the other hand the tools that are mainly used for the analysis of external environment are PESTEL and Porter’s 5 forces. PESTEL analysis helps to form a broad view of the environment and helps in understanding how factors in the environment impact the organization. The factors that are studied under PESTEL are Political, Legal, Economic, Social, Technological and Environmental. Based on the direction of these different factors the marketing strategy of the company is designed or altered. For example after noting that the country was passing through a phase of recession and in this phase the customers wanted that their money should do more, the TESCO launched value range and captured the imagination of customers. Another tool that is used for the analysis of external environment is PORTER’s 5 forces. The Porter’s 5 forces tries to analyzes the forces that play in the external market like the bargaining power of the buyer, threat of new entrants, competitive rivalry within the industry, threat of substitutes and bargaining power of the supplier.  Through this analysis the company is able to understand the right strategy that can be used to enter into a market and identify the market where there is less competition so as to taste success. For instance when the Virgin Mobile tried to enter the market in USA, it was already a very crowded market and there were lot of different players in the market. However, Virgin became successful as a late entrant into the market by identifying a blue ocean segment in the market. The company understood that the segment of Americans under the age group of 30 were underserved and a probable blue ocean. It targeted that segment and within 3 years of its launch in the US market, it had gained more than 4 million subscribers (Wolcott, 2009).  In order to cut the bargaining power of suppliers who have a major say in the garments industry, Zara does not outsource the production of its garments to the fullest extent. Over half of the production is done in house by Zara and this leads to a reduction in lead times.  Most of the retail stores of the company are directly owned by Zara and thus it can have a direct connection with the customers of the company. At Zara the design to retail cycle has been reduced to 15 days by the company. This results in the fact that as compared to other retailers where the customers wait for sales, at Zara they have to purchase the designs as soon as they appear or they are quickly replaced by the company (Wolcott, 2009). Thus Zara as a Spanish retailer can clearly dodge with the bargaining power of supplier and customer in the highly competitive garments retail environment.

AC 1.4 Carry out an organizational audit for your selected organization and provide an analysis of external factors that affect marketing planning under current issues

SWOT of Tesco

Strengths

Tesco is a powerful retail brand and ranks amongst the top 100 brands in the world in terms of value. TESCO is well known as a company that offers value for money and is the largest retailer in UK.

Weakness

The company is quickly losing its market share. It has lost connection with the customers and is no longer the brand that the customers love (Ruddick, 2015). The company had recently reported one of the largest losses in the history of corporate UK and was embroiled in a large accounting scandal.

Opportunity

The company has the opportunity to define its unique value proposition and distinguish itself from the competitors (Helms and Nixon, 2010). In this regards the marketing strategy of the company needs to be redefined. The strap line of the brand needs to be redefined in order to bring back the connection with customers.

Threat

The online retail market is on the rise and more and more customers are purchasing or preferring to purchase from online as compared to traditional retail outlets.

PEST of UK

Political

United Kingdom is a constitutional monarchy and it runs under the influence of parliamentary system. The country is stable and fair and there are plenty of opportunities within the country.

Economic

UK has a strong economic position amongst the countries in the world. The GDP of the country is high and the economy is diverse (Yüksel, 2012). However, the recovery of the country from recession has been slow. Another important factor that is important to not over here is that after its detachment from EU, the tariff that the exporters have to bear while exporting from the country depends on its relation with EU.

Social

There are many public services to the people of the country that are given free of cost. The country has a dense population. The country is also open to inbound migration and this has resulted in a cosmopolitan society. The standard of living is high.

Technological

UK as a country is known for high skills and innovation. The country has an expertise in tyerms of technology and science. There are effective laws in the country to protect intellectual property and people are early adopters of new technology. There is plenty of internal competition that results in stimulation of growth.

Legal

The legal framework of the country is quite strong and there are several laws in relation to fair employment practices, competition etc. that are to be adhered by the businesses in the country.

Environmental

It is important for the businesses to care of the environment as the customers keep a close track of CSR activities of the business along with the suppliers of the company. This can have a major influence of purchase decisions made by customers.

Porter’s 5 forces

Bargaining power of buyer- high

In the retail environment the bargaining power enjoyed by the buyer is high as there is large no. of retail outlets and the company can choose any of the outlets.

Bargaining power of supplier-low

The bargaining power of even the largest suppliers is quiet low as supermarkets like TESCO have large purchasing power and are thus able to extract best deals from the suppliers (Tavitiyaman, Qu and Zhang, 2011).

Inter-firm rivalry- high

The rivalry between the firms is quiet high as they are all trying to gain attention of the same number of customers.

Threat of new entrants-high

The threat of new entrants in the market is quiet high. For instance Aldi and Lidl were new entrants in the UK market until a few years back but have gained market shares quickly.

Threat of substitutes-high

The online retail landscape led by Amazon is providing to be a big to al the physical stores and retail in physical format.

AC 2.1 Assess the main barriers to marketing planning in your organization

The main barriers to marketing planning that is understood in case of Tesco are as follows:

Confusing over strategy or objective of the organization- In this current environment of retail that is highly competitive in the UK it is very important to define a distinct marketing objective of the company which can be considered as the USP of the company. It is very important to identify the new objective and make it synchronize with the direction in which the organization needs to move. The company needs to identify and that too pretty fast about the way in which it wants to distinguish itself from competition. The company needs to identify whether it wants to be known as a price leader, leader of quality, leader in terms of product range and depth etc.

Knowing customer expectation- It is a time in the UK retail environment wherein the customers have a lot of choices in front of them in terms of the place from where they want to purchase their goods. It is also seen that the customers purchase one thing from a particular supermarket. In this regards it is important but difficult to know the expectation of the customers and to cater the marketing plan according to that expectation.

Organizational barriers- There are organizational barriers to change and these needs to overcome as well while adopting the new marketing plan.

AC 2.2 Examine how your business, and another similar organization related to your industry, may overcome barriers to marketing planning

The barriers can be overcome only after the organization starts understanding that they exists in reality. That is TESCO or any other retailer should first understand the barriers that exist in the market. In order to change and find it’s USP which can help the company to change its marketing objective and subsequently its strategy, the company first needs to well understand the expectation of the customer and also the way it wants to project itself in front of the customers. In this regards Tesco for any other company in the industry needs to understand its strengths and weakness and have a clear understanding of the factors that differentiates itself from competition. Then the company needs to capitalize that point of strength and project itself in front of its customers using those strengths which differentiate it from competition.

Task 2

AC 3.1 Introduce a new product or service for a selected market

One of the major factors that is changing or affecting the retail landscape in the UK as is with most of the countries is the entry of online retailers. In this regards there is a need for Tesco to launch a new type of service for the customers. In this new form of business that the company should launch the customers should be allowed to shop from online from the comforts of their home. The company then delivers the products to the door steps of the customers using its distribution channel.  This will ensure that the company takes help of the latest technology as well as its dominance in the physical environment. The difference or the USP that it can provide to the customers is in terms of the fact that unlike the online retailers where the customers cannot physically inspect the product quality, here they can easily visit the store at their convenience and wish to physically has a look at the product they have purchased in online market place.

AC 3.2 Importance of marketing planning in the strategic planning process for your newly suggested product or service in your new market

Marketing planning forms an important step in the business strategy planning process of the company. The marketing planning process helps in understanding the barriers that exists in the real market. The company is able to decide on the way to avoid these barriers in the real market. Another important part in the marketing plan is the ethical consideration. The ethical consideration helps to estimate the way in which the products and services of the company are perceived by the customers or the external environment of the company. The marketing plan helps to estimate and investigate the profitable way in which the company can reach its products to the customers. It is also an estimation of the effect that ethical issues have on marketing efforts.  

AC3.3 Identify and explain techniques for the new product or service development in your market

There are several steps that are involved in the development of new service in the market. The steps involve some that are part of front-end planning and rest that are part of implementation stage. As part of the front end planning the first stage is to strategize the business development or review. The second step is strategy development for the new service. The third is the idea generation step in which new ideas are screened against the service strategy that new. The fourth step is the development of concept and evaluation. In this step the adopted concept is tested with the customers and employees. The fifth step in frond end planning is business analysis. In this step the new service is tested for feasibility and profitability. The second half of the service development process is about the implementation stage. Under this the first step is development and testing of the service. In this the prototype tests of the service is conducted. The second step is market testing. In this step the service is tested on a market and the marketing mix elements of the service is analyzed. The 3^rd step is commercialization. In this step the new service is commercialized and put into action. After implementation of new service offering Tesco finally needs to conduct an evaluation to judge the acceptance of the service.

AC 3.4 Justify recommendations for the pricing policy, and the distribution and communication mix for your product

The pricing technique that is going to be used in marketing the products in the new platform would be value based pricing. This is to say that the pricing of the goods sold in the online retail platform is going to depend on the value perception of the customer about the new environment. Although there is bound to be an influence of the prices set by competitors in determining the prices. The distribution method would be based on delivering the product direct to the homes of the customer from the retail locations. The customers would have the option to place the order online or in the retail outlets and get their orders delivered to their homes. The customers would also have the option to physically inspect the products after they place orders in the online platform. During the advertisement or promotional campaign the convenience to the customer would be highlighted and emphasized upon. Also the difference it offers from other traditional online platform would also be highlighted.

AC 3.5 Explain how factors affecting the effective implementation of the marketing plan have been taken into account

In order to overcome the barriers to implement the marketing plan the following steps have been taken.

Confusing over strategy or objective of the organization- In order to overcome this barrier the current trend in the market has been analyzed along with an analysis of strength of Tesco. Then it has been analyzed as to how TESCO can make use of its strengths to capitalize on market trends. This analysis has thrown open this new plan which has been adopted to develop a new plan.

Understanding wants of customer- In order to understand the wants of customer; survey was conducted. Besides, the trends in the market were analyzed to understand the prevalence of retail environment.

Organizational barriers- In order to overcome organizational barriers Levin’s model of change management had been applied (Kaminski, 2011).

AC 4.1 & 4.2 Explain how ethical issues influence the marketing planning for your proposed business idea

Some of the ethical issues that have an impact on marketing are the relationships that the company has with the suppliers and whether the company is marketing deceptive information. The relationships of the marketers with the suppliers are particularly important in this regards as it has been alleged in the past that retailers through their immense bargaining power try to exploit the suppliers into selling goods at low prices (Winterman, 2013). In this regards, Tesco should ensure that while it tries to extract the best deal and best price for its customers, it should also ensure that the interest of the suppliers are protected.

Another point that is important to note is deceptive information in marketing a product. In this regards, it is important to point to the horsemeat scandal that had a major blow on the reputation of Tesco and wherein horsemeat was found to be inside the burgers sold by the company (Lawrence, 2013). In this regards, it is required by the company to ensure that such incidents do not happen in future and the company does not deceive its customers in any way.  

AC 4.3 Analyze examples of consumer ethics and the effect it has on marketing planning in your product idea

There are certain consumer ethics which the company needs to follow in marketing planning. These are:

The marketing should not be targeted at minors

The marketing activities should clearly spell out the harms

The price should be clearly spelt in marketing

Deceptive marketing should be avoided

Characteristics of customers should be targeted or religious sentiments should not be abused

Ethical relationship with suppliers and stakeholders needs to be maintained

The company needs to keep note of these principles while designing the marketing plan as avoiding these principles would result in projecting a false image in front of customers and that would result in poor brand name for the company and would also have an effect on its profitability.

Conclusion

The above pages conduct a marketing audit report and a marketing planning proposal for Tesco. The marketing environment of Tesco is analyzed and how it has changed over the years is also analyzed. TESCO’s differentiation from rest of the competitors and a new marketing plan is also designed for the company. The new marketing plan for the company is also designed after capitalizing on the internal and external business environment of the company.

References

Helms, M.M. and Nixon, J., 2010. Exploring SWOT analysis-where are we now? A review of academic research from the last decade. Journal of strategy and management, 3(3), pp.215-251.
Kaminski, J., 2011. Theory applied to informatics-Lewin’s change theory. Canadian Journal of Nursing Informatics, 6(1), pp.1-4.
Lawrence, F., 2013. Horsemeat scandal: where did the 29% horse in your Tesco burger come from? [Online]. Available at < https://www.theguardian.com/uk-news/2013/oct/22/horsemeat-scandal-guardian-investigation-public-secrecy > [Accessed on 22 November 2016].
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Winterman, D., 2013. Tesco: How one supermarket came to dominate. [Online]. Available at < http://www.bbc.com/news/magazine-23988795 > [Accessed on 22 November 2016].
Wolcott, R.C., 2009. True marketing doesn't just sell the story. [Online]. Available at < http://adage.com/article/cmo-strategy/true-marketing-sell-story/138760/ > [Accessed on 22 November 2016].
Yüksel, I., 2012. Developing a multi-criteria decision making model for PESTEL analysis. International Journal of Business and Management, 7(24), p.52.