Marketing essay on; Critical Issues faced by Companies: Tesco
Introduction
In existing business environment, there are some of the critical issues faced by business organizations. For instance, intensive competition, and dynamic business conditions have emerged as one of the integral issues for business organizations. In direction to address such critical issues, it becomes quite crucial for business organizations to undertake some strategic steps (Zoratti and Gallagher 2012). In direction to this, the paper aims to analyze the international marketing strategy undertaken by Tesco Plc, an UK based retail business organization.
Marketing Activities of the company
Tesco is one of the major business organizations operating within the UK retail industry. The marketing activities of the organization can be considered on the basis of the market mix of the company. In this regard, there are four crucial element marketing mix of the company.
Product
In the home market, i.e. the UK, the company works as the retail business organization. Within the UK itself, the company owns 3,054 stores. The company operates as a grocery retailer within the market. The company’s stores offer a number of different products related with food, clothing, and electrical products. Moreover, the company also offers general merchandising products. In addition to the retail sectors, the company also provides services related with other sectors such as retail banking, financial, and insurance sectors (About us 2012).
Price
The company operates with in the business environment which owns some stiff competition within a market place. For the purpose of countering such competition, the company undertakes penetration strategy which focuses on keeping prices low and catering the mass market (Hamilton, and Webster 2012).
Place
In existing time, the company operates at 14 different locations across the world. The company owns about 5000 stores across different prominent countries such as the United Kingdom, China, the Czech Republic, Hungary, the Republic of Ireland, India, Malaysia, Poland, Slovakia, South Korea, Thailand, Turkey, and the United States (Profile: Tesco plc 2012).
Promotion
In order to promote its retail stores, the company undertakes a number of different measures such as print media, electronic media marketing, direct marketing and e-marketing (Zoratti and Gallagher 2012).
Industry analysis
The company operates in the global retail industry. The UK retail industry is one of the major business industries within the region. There are a number of different international as well as domestic players are operating within the industry. However in existing time period UK retailing industry is facing some tough time as the year 2012, has registered the retail growth of 1.2%, which third lowest in the last 40 years (UK Retail 2012 & Beyond 2012). The growth of sector can be demonstrated as below:
(Source: UK Retail 2012 & Beyond 2012)
Competitive analysis
Moreover, from the competitive perspective also the disposition of the country’s retail industry is quite tough for Tesco. There are a number of different foreign players such as Wal-Mart, Wm. Morrison Supermarkets plc, and J. Sainsbury plc, as well as domestic players, namely Marks and Spencer and ASDA, operating in the industry and providing competition to Tesco (Malley 2012).
Critical analysis
Entry methods for the company
The selection of the most suitable and effective mode for entering into a new business territory is one of the major aspects of the success for international strategy of the company. In the context of Tesco clear differentiation can be seen in the entry strategy used them in the past and that in current time. Conventionally the company relies on the acquisition model for getting entered into a new market (Malley 2012). In this strategy the company acquires one of the prominent domestic business organizations operating within the same industry. For example, in France, the company acquired Catteau in the years 1992; in Hungary the company acquired 51% shares of Global; in Czech Republic/Slovakia in 1994, the company acquired K-Mart business; and in 1998, the company made acquisition of 75 per cent share of Lotus for registering its presence in the market of Thailand. In such markets this mode of the entry was proved successful as the span of retail industry in such countries in not as vast as that in the UK. Owing to reason, it was quite easy for the company to apply acquisition (Mark 2005).
However in current period of time when the company has decided to explore large markets such as the USA and India, the company has to change its entry strategy as due to large span of industry and high degree of competition in such markets it is quite hard for the company to acquire any other prominent firm operating within the industry (Grundy 2012). Furthermore, legal and regulatory norms of countries across the world regarding acquisition have also now become quite strict. Owing to these reasons, the company has now shifted to joint venture and direct interment related strategy for entering into foreign market. For example, the company has undertaken joint ventures in China and India, while owning fully own subsidiary in the US. These strategies followed by the company are quite crucial for entering into tough and challenging market place as such strategies decreases the span of risk borne by the company due to different culture and business practices followed within such countries (Annual reports: Tesco Plc 2012).
In this way, it can be seen that there is a significant shift in the market entry mode considered by the company in current period of time.
Global Marketing Strategy of the company
In order to get itself established into the new market place, the company considers it global marketing strategy. As per this strategy of the company, the company its standardized marketing propositions in different markets for the purpose of reflects their unique image. This can be seen in the designing and color combinations used in the store, advertising and marketing campaigns, and products offerings in the new market.
International Marketing Mix (4 P) of the company
At the international standards, the company uses different factors of marketing, which can be regarded as the Internationals marketing mix for the company, the exploration of the international market mix can be done on the basis of four prime element of this mix, listed as below:
Product
Like domestic market place, in international market also the company deals in the retail grocery and non food items through its retail stores. At international level, primary the company follows the standardization strategies according to which, there are the least amount of variations and changes in the product offerings can be registered. Packaging and servicing are the two product-related aspects in which, standardization strategy can be seen quite clearly (Cuthbertson 2012).
Price
From the perspective of prices, the company follows penetration strategy for a new market. In this strategy, the company keeps its prices low and caters mass market. This strategy is quite useful as the company operates at economies of scale which helps it to keep its cost as well as price low in the international market also (Piercy 2012).
Place
In the international market place also, the company operates with its retail stores established at the prime location of the target country. In addition to this in some of the prominent and technological competent countries, the company has started to provide home delivery service to its prime and prominent customers.
Promotion
Promotion is one of the most crucial aspects considered by the company while undertaking its international business expansion strategy. In this direction the company undertakes different advertising channels such as newspaper and magazines ads, television and radio ads, e-mail marketing. Moreover in the markets like the USA and other European countries, the company has started to undertake the measure of social media marketing also (Doole and Lowe 2012).
In this way, it can be understood that there is strong affinity between domestic and international marketing mix for the country, which reflects the company’s standardization approach in the foreign market also.
Critically analyses as an USA market failure
Although Tesco is regarded as one of the most prominent multinational business organization across the world, yet the business operation of the company in the US market has recently seen some critical and tough period.
A. In the US market the company changed its core entry strategy, i.e. acquisition model, and adopted to have fully owned subsidiary within the market. This strategy of the company is helpful for it to have fully control over its business and operational activity in the US market. However, in this new market, which is not quite familiarized, this strategy can harm the sustainability of the company in that market (Butler 2012).
B. In the US market, the company has undertaken standardization strategy for its product offerings. In this context, the company provides products with same qualities, features and packaging in the market of the US as they offer in their same home market. Moreover the company operates with fully owned retailed outlets at various locations of the country. In the context of the pricing, the company has kept its prices low for the purpose of attracting high customer flow. Furthermore, in the market of the US the company undertakes the measures of e-marketing and social media marketing for attracting customer. In this way, the company has used its international marketing 4ps for entering the new market in USA (Geoghegan 2012).
C. The primary issue faced by the company in the US is the issue of standardization of product, services and internal operation. For the purpose of being international it is quite essential for business organizations to develop adaptation regarding external environmental conditions of the new market. As the external business environment related factors such as political, economic, social and technological cast an important impact over country’s suitability for the business operations, the company requires being adaptive towards changing business environment (Thain and Bradley 2012).
D. In the US market, the company has standardized itself in terms of product offerings, designing of the store and internal business operations. The lack of adaptation and differentiation can be seen in the context of different advertising campaigns of the company in the US market. Product offerings of the company are also quite similar to that in the home market of the company. Moreover, for the purpose of managing organization, the company follows culture in the US market also.
E. in the US market, this strategy is not successful as the norms and business environment of the US is quite different from that of the UK. Unlike the UK, in the US informal business structure is followed. The company was not able to adopt these changing business conditions of the US market.
F. Some of the crucial problems in the US market are:
- Decreasing market share of the company
- Decreasing profits and revenues
- Tough competition provided by Wal-Mart and Carrefour (O’Donnell and Malcolm 2012)
G. In order to resolve such crucial problems, the company needs to change its business structure as per the requirement and demands of the US market. In this context, the company should to undertake a competent market research for revealing demands and requirements of customers and design new business structure as per the demand.
H. There are some crucial propositions in this regard, such as effective training and development to staff to be adaptive towards the US culture, effective marketing research, and updated management information system (Davidson 2012).
I. In order to apply internationalization theory correctly, the company requires enhancing its innovative and adaptive approach. It should consider the social, economic and political factor of the target country. For instance, McDonalds has made some significant changes in its product offering as per the demand of the external market place (The Growth Agenda 2012).
Conclusion
In order to address external environmental issues, international business expansion is the strategy, which is considered by Tesco in existing period of time. How the paper has concluded that for the purpose of making this strategy successful in prominent markets like the US, the company needs to make some significant changes in its strategic orientation (McLoughlin and Aaker 2010). Changed disposition of the global business environment can be reflected as one of the prime reason behind this strategic drift in internationalization strategy of TESCO (Zentes, Morschett and Schramm-Klein 2011). In this regard, adaptation strategy is recommended to the organization in the US. This strategy will be proved quite helpful for the company to be successful in the US market and sustain its existence in the long run (Zoratti and Gallagher 2012).
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