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1 MARKETING AUDIT- TESCO INTRODUCTION Tesco is the largest grocery retailers in the United Kingdom and it was founded by John Edward Cohen in 1924. Tesco Plc has at present 2318 stores including supermarkets, superstores, and convenience stores across UK, Europe and Asia. In addition to supermarkets the Tesco also offers various financial products like insurance, banking services, telecommunication and electrical appliances. Moreover Tesco Plc employs over 520,000 people across the world. Tesco Plc also provides online services through its subsidiary Tesco.com. In the United Kingdom Tesco offers more than 40,000 food products as well clothing and other products under four banners such as Tesco Extra, Tesco Superstore, Tesco Metro, and Tesco Express. Recently Tesco has become the largest petrol independent retailers in the United Kingdom. There are three levels of company's label products; value, normal and finest, and the own label brands account approximately 40% of the sales (Tesco, 2012). In addition to United Kingdom Tesco has stores in rest of the EU, comprised of Hungary, Republic of Ireland, Poland, Slovakia, and Czech Republic. Whereas the stores of Tesco Plc in Asia includes South Korea, Thailand, Taiwan, And Malaysia. The products and services offering of Tesco includes, food retail, non food retail, petrol stations, home living range, Tesco Personal, life, home, motor, and home Insurances, credit cards, investment bonds etc. Tesco Plc has been named as the priority store by customers for purchasing organic food products (Tesco, 2012). This report gives an emphasis to the marketing audit of Tesco Plc, UK. In order to carry out the marketing audit, the author adopts the model of FEPSOS developed by Kotler (2008). FEPSOS stands for, Functional Audit, Environmental Audit, Productivity Audit, System Audit, Organisational Audit, and Strategic Audit. SOURCES OF DATA In order to carry out the marketing audit of Tesco Plc, the author has gathered data from various sources and that includes both primary and secondary data. An interview was carried out by author with two line managers of Tesco Metro, Upton Park as part of primary data collection. Moreover, the author utilized various books, articles, academic journals, publications with regards to Tesco, In order to collect data.

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Page 1: MARKETING AUDIT- TESCO INTRODUCTION - · PDF fileMARKETING AUDIT- TESCO ... Intermediary distribution channel: Tesco acts as intermediary ... supply chain management in introduced

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MARKETING AUDIT- TESCO

INTRODUCTION

Tesco is the largest grocery retailers in the United Kingdom and it was founded by John

Edward Cohen in 1924. Tesco Plc has at present 2318 stores including supermarkets,

superstores, and convenience stores across UK, Europe and Asia. In addition to

supermarkets the Tesco also offers various financial products like insurance, banking

services, telecommunication and electrical appliances. Moreover Tesco Plc employs over

520,000 people across the world. Tesco Plc also provides online services through its

subsidiary Tesco.com. In the United Kingdom Tesco offers more than 40,000 food products

as well clothing and other products under four banners such as Tesco Extra, Tesco

Superstore, Tesco Metro, and Tesco Express. Recently Tesco has become the largest petrol

independent retailers in the United Kingdom. There are three levels of company's label

products; value, normal and finest, and the own label brands account approximately 40% of

the sales (Tesco, 2012). In addition to United Kingdom Tesco has stores in rest of the EU,

comprised of Hungary, Republic of Ireland, Poland, Slovakia, and Czech Republic. Whereas

the stores of Tesco Plc in Asia includes South Korea, Thailand, Taiwan, And Malaysia. The

products and services offering of Tesco includes, food retail, non food retail, petrol stations,

home living range, Tesco Personal, life, home, motor, and home Insurances, credit cards,

investment bonds etc. Tesco Plc has been named as the priority store by customers for

purchasing organic food products (Tesco, 2012).

This report gives an emphasis to the marketing audit of Tesco Plc, UK. In order to carry out

the marketing audit, the author adopts the model of FEPSOS developed by Kotler (2008).

FEPSOS stands for, Functional Audit, Environmental Audit, Productivity Audit, System Audit,

Organisational Audit, and Strategic Audit.

SOURCES OF DATA

In order to carry out the marketing audit of Tesco Plc, the author has gathered data from

various sources and that includes both primary and secondary data. An interview was

carried out by author with two line managers of Tesco Metro, Upton Park as part of primary

data collection. Moreover, the author utilized various books, articles, academic journals,

publications with regards to Tesco, In order to collect data.

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TESCO – FUNCTIONAL AUDIT

Attributes Analysis Evaluation

Product Varieties of products: Tesco offers various products ranges that

includes food, electronics, non food products, banking, insurance

etc.

Over 40,000 products line: At present Tesco has over more 40,000

products line.

Strength

Price Setting price according to the demographic: This means that Tesco

sets their prices according to the income of the demographic area of

the stores located. However Tesco do not trim down the price like

ASDA, and stays somewhere in the middle

Dual pricing strategy: This means that the prices of products

excluding those at promotions will not be higher in order for the

store to make more profit.

Strength

&Weakness

Place Great store network: Tesco posses a great store network and that

comprised of six formats namely; Tesco Extra, superstores, Metro,

Express, One stop, Tesco Home plus. Tesco decides to locate the

type of store according to the nature of area.

Sophisticated online store. Tesco has sophisticated online store

namely Tesco Direct, as such customers are enabled to purchase

simply with free delivery.

Strength

Promotio

n

One off promotion: This means that Tesco match the price with

other competitor in order to attract customers. However it seems

Tesco usually is unable to match the price with ASDA, meanwhile

ASDA 10% price guarantee.

Tesco Club card: Tesco offers promotions through Club Card

through which customers get points while purchasing this points

later can be redeemed to cash.

Advertising on TV and social networking sites: Tesco has various

ads in TV as well as advertising websites to convey special offers.

Strength

&Weakness

Process Outstanding purchasing process. Tesco offers outstanding simple

and easy buying process for customers.

Various check out options at stores. In order for the customers to

save time Tesco offers two types of check out option in which

customers either pay at the till or at self check

Strength

Physical

Evidence

Store design: Tesco does not have very attractive store design and

do not give much focus on that.

Clean and calm atmosphere. It means that Tesco stores are very

Strength

&Weakness

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clean and tidy and not noisy.

People Skilled employees: To satisfy the customers, Tesco divided its staffs

in six levels and each level needed specific skills and behaviors. The

employees of Tesco are trained and developed well.

Strength

In conclusion, considering the 7ps of Tesco, Tesco has both strength and weakness. Tesco

offer broad ranges of product in both stores and online, and it is great strength of company.

At the same time pricing strategy of Tesco does not seem worthy and attractive all though

they offer dual pricing strategy. Whereas promotion strategy has also its own strength and

weakness. Advertising through TV, social networking sites, and Club Card schemes are the

strength of Tesco, while unable to match the price with ASDA through one off promotion is

the weakness of the company. Meanwhile the people and process seem strength of Tesco,

whilst physical evidence shows certain weakness as the store lay out is poor.

ENVIRONMENTAL AUDIT

Micro Environment Analysis of Tesco

Attributes Analysis Evaluation

Customers Tesco works harder for customers: Tesco works hard to

understand the needs of customers.

Be first to meet their needs. Tesco value its customers

significantly. Tesco customers spread across the world and

they expect quality food products and non food products from

Tesco.

Various customer segments: Tesco segments its customers as;

Finer foods, Healthy, Traditional , Convenience, Mainstream,

and Price sensitive.

Opportunity

Competitor

s

Various competitors in UK and outside UK: Tesco has various

competitors in UK named, ASDA, Sainsbury's, Morrison etc.

While Wal-Mart, Carrefour, Safeway plc are the biggest

competitor globally.

Significant market share: Tesco is the market leader in the UK

with share of 30.7% whilst ASDA, Sainsbury, Morrison holds,

17.%, 16.6%, and 11% respectively. However in 2011 market

share of Tesco was 31% and it dropped down in 2012.

E-Marketing strategy: Among the competitors ASDA is the

great competitor in terms of e-marketing with ASDA direct.

Threat

Suppliers Suppliers across the world: Tesco occupy various suppliers

across the world to meet the needs of diverse customers from

different culture, ethnic, and region.

Opportunity

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Tesco supply chain management: It emphasise that Tesco has

one of the best supply chain management system in the word,

that includes, transport, replenishment and IT system

Distributors Distribution network system: Tesco has the best distribution

network system globally.

Intermediary distribution channel: Tesco acts as intermediary

in the distribution where Tesco get products from producers

and distribute to customers directly. Examples of distributors

include, Jasmine rice, Sony electronic, Canon etc.

Opportunity

Stakeholde

rs

Various stake holders group: At present Customers,

staffs, investors, non-governmental organizations, suppliers

are the stakeholders of Tesco.

Opportunity

,

In analysing Micro environment of Tesco It is apparent that customers are the great

opportunity for Tesco. Tesco segments customers variously according nature of the

customers and Tesco work hard to value its customers. Whereas competitors are threat for

Tesco as they pursue various marketing strategy similar to Tesco. In has been observed that

Tesco market share has come down in 2012, thus market share need to be increased.

However in terms of supplier, distributions, stakeholders, Tesco perform well and these are

great opportunity for Tesco.

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Porters five forces analysis of Tesco

Threat of New Entrants

(Medium)

It seems to be medium, since large supermarket chains

including Tesco, Asda, Sainsbury etc. hold the

dominant position and make barriers to entry.

Bargaining power

of buyers

(Medium)

This force is measured as

medium. This is because

large supermarkets take a

disciplined approach for

price setting and this

helps them to not

destroying each other.

Threat of competitors

(High)

Rivalry from competitors is

considered as high threat for Tesco.

The other supermarket chains and

online retailers such as ASDA,

Sainsbury, Amazon etc. pursue the

same concept of Tesco. That means

whilst consumer find little difference

between the products they will

select products based on price

Bargaining power

of suppliers.

(Low)

It considered as low,

since large

supermarkets always

dictate the price they

pay to the suppliers

Threat of Substitute products

(Low)

The threat of substitute is considered as low, because

rivalry from other retailers that can provide substitute

product brings the both companies' prices down.

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Macro environment

Attributes Analysis Evaluation

Political Mix of job opportunities : Tesco is encouraged by UK

government for providing mix of job opportunities.

Regulatory and changes: Tesco is affected by the regulatory

and tax changes of the country where it operates.

Threat of activism and terrorism.

Opportunit

y &

Threat

Economical High level of unemployment: The level of unemployment is

high that decreases the demand of many goods at Tesco.

Tesco Depends upon UK market: Tesco is is relied on the UK

market and therefore the downturn in the UK food market are

exposed to market concentration risks.

Threat

Socio

Cultural

Current trends of one stop and bulk shopping: According to

the current trends UK customers moved one stop and bulk

shopping.

Aging population and increase in female workers:

Demographic changes like enhance in female workers and

aging population and decrease in home meal preparation

forces retailers to focus on ready to eat and value added

products services

Opportunit

y

Technologic

al

New technological advancement: The new technological

advancements is advantageous for customers and company.

New technology makes shopping more convenient and service

become more personalised.

ECR system: Food supply chain of Tesco is improved by

introduction of Electronic computer response system.

Opportunity

Environme

ntal

Strategy of sustainable consumption and production: The UK

government launched a new strategy for sustainable

consumption and production to reduce waste, thus this forces

Tesco to reduce consumption of resources.

Climate change and sustainability: Climate change and

sustainability affects the operation of Tesco in various

countries.

Threat

Legal Policy for controlling monopoly: The government' policy for

controlling monopoly and reducing buyers control may limit

the industry

Threat

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To conclude, in evaluating the macro environment of Tesco, it has been observed that there

are both threat and opportunity for Tesco. It shows that Tesco has opportunity in

considering technological and social factors, while there is threat for Tesco in considering

environmental, legal and economical factors. However according to political factor it has

both threat and opportunity on Tesco. Thus Tesco need to give focus on threat and

overcome this by pursuing new strategy.

PRODUCTIVITY AUDIT

Attributes Analysis Evaluation

Profitability Sales growth: Tesco achieved groups sales of £72bn with

7.4% groups sales growth in 2012 globally.

Strong international performance and online: This

means that At present Tesco perform well international

market.

Reduction in UK business. There is reduction in UK profit

of Tesco

Strength &

Weakness

Cost

effectiveness

Fixed Asset increases: Increase of fraud and dishonesty

increases.

Efficiency in supply chain management: Outstanding

supply chain management in introduced by Tesco to

increase cost effectiveness

Strength

In sum up, it is observed that , in terms of profitability Tesco is performing well as they

achieved groups sales of £72bn as well as Tesco shows great international performance. It

is a great strength of company, Nonetheless, there has seen a decrease in UK business in

2012 and it emphasises that Tesco is in weak condition in the UK market. Considering the

cost effectiveness, Tesco seems good as there has seen an increase in fixed asset and in the

efficiency of supply chain management.

SYSTEM AUDITING

Attributes Analysis Evaluation

Marketing

information

system

Decision support system: Streamless flow of information

from top to bottom. That means it comes through front

liner-middle to top management.

Supply chain management system: Tesco innovative supply

chain management system that controls the supply chain all

over the world

Point of sales system : Tesco gather, use, protect and keep

track its sales and financial records with this system

Strength

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New product

development

system

Oracle EPR: Tesco utilizes EPR system for product or service

development. It helps Tesco to identifies and solve issues

and finally take decisions.

Strength

Transaction Transaction processing system: Tesco utilizes this

information processing to collect, and retrieve all the

information of customers on online ordering service

Strength

To conclude, Tesco has innovative marketing information system that includes the

components of decision support system, supply chain management system and point of

sales system. It looks to be great strength of Tesco. Considering the new product

development system Tesco introduced Oracle EPR system while transaction processing

system was implemented to improve the transaction process in Tesco Direct. These give

Tesco to gain competitive advantage in the market.

Organizational audit:

Attributes Analysis Evaluation

Shared

Value

Corporate Social Responsibility: Tesco significantly focus on CSR

on solving social problems.

Tesco beliefs: Belief of Tesco is in enhancing its sophisticated

management techniques to the higher standard value.

Strength

Strategy Business model: Tesco's strategy is to put into action through

business model: 'To create value for customers to earn their

lifetime loyalty'.

Right products at the right time: Tesco offers right products at

the right time

Best location and store format: Tesco locate and make the

format of the stores according nature of the location.

Store Design and Logo : Tesco does not attractive store design

and logo

Strength &

weakness

Structure Hierarchical structure : Tesco is hierarchical structure, therefore

there is a close control of workers.

Specialized team: Tesco has specialized team who span the

breadth of purchasing requirement

Strength

Staffs 52,000 employees: Tesco employees about 52,000 people

across the world.

Skilled employees: Tesco provides training and development for

the employees to work effectively and to increase skills.

Strength

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Style Steering wheel approach: Tesco uses steering wheel approach,

so that major areas; financial, customers, operations and

employee performance are considered.

Strength

Skills Providing development and training: Tesco provides training

and development to improve the knowledge of employees.

Knowledge of the product: Temporary staffs do have adequate

knowledge on the products

Strength &

weakness

System Steering wheel approach: Tesco uses steering wheel approach

to effectively accomplish its organizational objectives and to

facilitates employees

Strength

It can be concluded that , considering the Mckinseys 7s, It is clear that Tesco has significant

strength in the market. Shared value, strategy, structure, staffs, system, style, skills are the

vital strength of the company. However, there is certain weakness shows on the skills of the

employees. All though Tesco provide training and development to permanent employees,

the temporary staffs don not get adequate training thus they do not have sufficient

knowledge on the products and services. Beside , the strategy of Tesco also shown a

weakness in some extent based on the store design and logo, therefore this need to be

reconsidered.

STRATEGIC AUDITING

Attributes Analysis Evaluation

Mission

statement

To be greatly valued by the customers we serve, the

communities where we operate, and by our committed and

loyal staffs; to be a successful, modern and innovative

organization. It means that it is the strength of Tesco, as the

clearly stated the mission statement

Strength

.

SMART

objectives

To grow the UK core business.

To become strong in non food as in food

To develop retailing services.

To put the community at the heart of what we do.

To be a successful international retailer.

It gives an emphasis that Tesco has set up smart objectives,

thus they are succeeding continuously day by day. It is the

strength of Tesco.

Strength

Current

strategies

Various types of formats like Express, Metro etc.

Making corporate social responsibility integral.

Offering quality products, great price ranges, and

Strength

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services.

Offer various service such as Tesco Telecom, Tesco

personal finance etc.

Best location and store design.

Developing people

Right products at the right time.

Segmentation

strategy

Various segments: Tesco follows mass, local and niche all

market segments. Tesco study the taste and preferences,

attitude, buying behaviour prior to segmentation . Tesco

segments its customers as; Finer foods, Healthy, Traditional

, Convenience, Mainstream, and Price sensitive.

Strength

Considering the strategy audit of Tesco, Tesco shows ground breaking movement in all

attributes strategy auditing. In evaluating the strategy it is apparent that Tesco pursue that

strategy in order to meet the SMART objectives. They embrace various strategy according to

the obejctives. Moreover Tesco segments their market well to reach all types of customers

in all region. Meanwhile Tesco has given much focus SMART objectives as it can be seen that

they have set up smart objectives to gain significant success. Whereas the mission

statements itself gives an emphasis that Tesco place customers at the very top and it is the

great strength of Tesco

SWOT analysis of Tesco

Strength

1. Brand image: Tesco holds the brand

image.

2. Market leader. Tesco is the largest

retailer in UK whilst 3rd largest in the

world.

3. Diversified business worldwide.

Tesco has food and non food

business worldwide.

4. Leadership in UK market intensified.

Tesco continue to hold the leadership

position in UK.

5. Great distribution channel. Tesco's

distribution channel is very strong.

Weakness

1. Reliance upon the UK market. Tesco

is still relied on the UK market even

though global business is still

growing.

2. Debt reduction.

3. Missing out North American market:

All though Tesco is successful across

the word, they did not attempt to set

up business in potential NA market.

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Opportunities

1. Increasing presence in global market

2. Increase presence in Health and

beauty. The health and beauty of

range of Tesco continues to grow and

there is an opportunity to become

the largest skincare retailer in UK.

3. Enhancing demand of private

labelled products. Nowadays

customers in UK demand private

labelled products.

Threats

1. Changing economic conditions: The

ever changing economic condition

like economic down turn is big

threat.

2. Discounted supermarket stores: The

increasing numbers supermarket is

another biggest threat.

3. Threat of new entrants

4. Competitors rivalry. Now Tesco faces

tight competition from ASDA and

Sainsbury to get the top position in

the UK market.

In analysing the SWOT of Tesco, it has been observed that Tesco has more strength

compared to weakness. It must be taken to consideration that Tesco need to embrace new

strategy in order to overcome the significant weaknesses. In addition Tesco need to

consider the threats which are going to affect Tesco and take adequate actions to address

the threats like economic downturn, emergence of new supermarkets, and increasing

rivalry. Meanwhile Tesco has to exploit the opportunities that pose to them while retaining

and increasing the strengths that currently Tesco having.

REFERENCES

Browne K (2010) A Frame work for marketing management, fourth edition, Pearson

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Isobel D and Robin L (2008) International Marketing Strategy, 5th Edition, Sage

publishing.

Jobber D (2010) Principle and Practice of Marketing: 7th Edition, John Wiley

publishing, London

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