Environmental Laws- Governmental changes in law couldcause changes in transportation methods, the selection of products allowed tobe sold e.g. fat, sugar content, the types of stores (energy consumption, light,refrigeration, etc.
). 3.6 Environment:Awareness of Environmental DestructiveIssues- Global warming, animal welfare,reduction of waste, recycling, preservation of biodiversity etc. are all issueswhich force companies to focus on the choice of products, packaging, stockmanagement, means of transportation. 4 MICROANALYSIS: PORTERS FIVE FORCES 4.1 Competitors (high)Big 4: Include Tesco, Asda,Sainsbury’s and Morrisons.
The three supermarkets are similar to Tesco in termsof store formats (superstores, supermarkets, convenience), product offer andpricing (Downie, 2015). Up-Market Stores: Waitrose, Marks both offer premium quality products, across fewer stores, at ahigh price, and so appeal to higher income segments. Discounters: German brandsAldi and Lidl, place less focus on customer shopping experience, storepresentation and product range. Their success lies within the very low pricingof their own brand products, targeting lower income customers (Downie, 2015). Competition hasintensified in the recent years, especially due to customers changing theirshopping habits and steering more towards discounter retailers (McKevitt, 2017) 4.2 Bargaining Power of Suppliers (low)Due to itsleading role in the grocery market, product demand is high and thus Tesco has astrong relationship with its suppliers, strong buying and negotiating power.
4.3 Threat of New Entrants (low)Threat isrelatively low, as the UK grocery retailing industry is mostly dominated by theBig 4 supermarket brands. It is difficult for new brands to establishthemselves within the market, especially due to the high investments involved. Additionally,potential new entrants will be hesitant in entering the market, due to Brexit’suncertainty (MarketInspector, 2017).4.4 Bargaining Power of Buyers (relativelyhigh) With theintensifying competition and the emergence of e-commerce (Bakos, 2001), the mobility of consumers is increased. At the clickof a button customers can switch online between supermarket retailers, orequally walk next door to the competing stores. 4.
5 Threat of Substitute Productsor Services (low for grocery products)Stores whichprovide food substitutes include off licenses and smaller convenience stores.In comparison to larger retailer brands such as Tesco, the threat is relativelylow. However, Tesco Metro and Express help combat this slight threat (Felsted, 2012). 5 CURRENTSITUATIONTesco has always adopted a wider market segmentation approach, incomparison to other competitors. Waitrose and M&S simply food, have afocussed target on higher income segments, and Aldi and Lidl attract the lowestincome segments. Tesco avoids extremes and is therefore able to appeal andcater toward a larger customer base. Nevertheless, it has not always been easy. The lack of segmentspecialisation, in combination with increased competitive rivalry (especiallydiscounters), changing customer demands, financial scandals etc.
, has lead togreat difficulty in satisfying the full range of customer segments. Although Tesco has recently been portrayed positively in the news; “Tescocontinued to outperform its four rivals in October” (Bowden, 2017:1), “Tescoprofits rocket as turnaround gathers pace” (Goldfingle, 2017:1), new marketing strategiesand policies must continue to be implemented, in order to improve and guaranteefuture growth.6 GENERALMARKETING STRATEGY RECOMMENDATIONS Considering Tesco’s current situation, the company’s long-termobjectives, SWOT Analysis (See Appendix), Micro and Macro environmental factors,the following recommendations should be carefully considered: Brexit’s unpredictable and uncertain political nature, means it would betoo risky for Tesco to pursue an aggressive strategy of creating a new brandand specialised stores, in order to overcome competitors. Financially, thiswould also require huge investments and complete brand restructuring. Inaddition, European competitors such as Aldi and Lidl might decrease their marketshare in UK due to legislative changes.
Data Availability and new technologies allow grocery retailers toinstantly obtain detailed consumer shopping behaviour. For every single store,Tesco should combine internal store data (Clubcard) with external data for geographic,demographic, psychographic and behavioural variables to create its store targetmarket segmentation and consequently its differentiated store marketing mix. Tescohas a competitive advantage in terms of consumer data with the acquisition ofdata company dunnhumby (Tesco PLC, 2017). Online Shopping will continue to grow at a fast pace as society rapidlybecomes more digitalised. Between the years 2017-22, the estimated growth of UKfood and grocery shopping is 53.8% (IGD, 2017). Tesco should aggressivelyamplify its marketing strategy regarding its online grocery channel.
Changes in Government laws and consumer demands directly affect thecompany’s marketing mix. Tesco should regard such matters as top priorities. Currentconcerns revolve around environmental issues (sustainable sourcing, pollution,waste, recycling) and health related issues (organic and dietary requirements). The increase in competition has significantly increased consumerbargaining power. Tesco should consistently and frequently make comparisons againstits competitors, regarding product range, pricing, services etc., so that themost successful marketing strategies are promptly implemented.
Tesco should continue its internationalisation efforts, focusing moretowards non-European countries, compensating for eventual reduction in Europeaninvestments after Brexit. Tesco has been successful in Asia, with investmentsin Malaysia, Thailand and South Korea (Butler & Neville, 2013). 7 SPECIFICMARKETING MIX RECOMMENDATIONS 7.1 Market Offerings(Product/Service)1) Increase of own brand basic products in poorer, lower income regions.Increase customer satisfaction in such regions, by placing greater emphasis onthe relevant segment (multi-segment approach isn’t always appropriate).2) Increase premium product availability – Tesco Finest*, Organic, readymade meals. Target stores in medium/higher income areas, where packagingquality and product presentation is of greater importance.3) Bring Product Innovation: meal deals (younger generations/students),meal plans (busy families), dine for two (matching M), new products (e.
g.superfoods, trendy ready-made meals). 4) Increase number, variety and guarantee of quality (e.
g. more fresh) ofonline products (tescoDirect) to further attract e-commerce customers5) Reduce Food Waste (FareShare program – feed local poor populations)to support governmental law changes and environmentally friendly customerinterests. 7.2 Distribution/Channel Strategy(Place)1) Adapt store sizes to consumer needs and demands in differingdemographic regions. Younger generations seem to prefer convenience stores thatcomplement their on-line shopping (The Guardian, 2017).2) Improve Store layout: better shopping experience for customers, easyto find what they want.
Digital channels should be used to their fullpotential. E.g. Younger generations prefer hand-held scanners, self-servicecheckouts etc. 3) Improve On-line shopping. Maximise click (same day),increase time slots and same day home delivery options, update delivery fleets(more environmentally friendly, mopeds/small vans for small deliveries).4) Increase offer of in-store shopping with same day home delivery.
Targeting older generations (cannot carry groceries), parents after schoolshopping.5) Offer in-store coffee and tea for club members (matching Waitroseoffer), important for older generations. Small gestures to loyal customer helpshape brand value.6) Increase in-store staff especially during peak hours, school ends,weekend. 7.3 Promotional (IntegratedMarketing Communications) Strategy1) Keep Clubcard (app, scan) as competitive advantage (easy rewardingsystem- no minimum spending); important to collect data (e.g.
incentiviseclients to include DOB when registering by offering rewards).2) Progressively reduce paper coupons and discount vouchers to adapt todigitalised world. Nevertheless, coupons are still important for oldergenerations and ensure customers still shop in stores.
3) Allow automatic login to store wifi, so customers receive offersduring their shop, creating a more efficient and personalised experience. 4) Increase mass use of Social Media (FB, Twitter, Bloggers, Instagram)– very cheap and favourite channel for younger generations.5) Use stores as channels to advertise other Tesco’s group offers(F&F clothing, banking)6) Be Community champions. Participate in local charities/school events (especiallytop management) to increase brand visibility, exceed customer expectations andincrease brand loyalty. 7) Strengthen brand appreciation through little actions (e.
g. littlebirthday gift on home deliveries, free new product samples).7.4 Pricing Strategy1) Extend Price match strategy to wider range of products andcompetitors, avoiding constant price wars. 2) Reduce inflation impact on prices by reducing costs across companycost structure (as done recently).
3) Continue to build an image and recognition as a value brand (notnecessarily the cheapest) and a valuable shopping experience for Tescocustomers.