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13226 Downloads1 I Published: 16 Feb ,2017
As every organization operates in a highly competitive as well as a dynamic market, it needs to have strategic marketing. In this, companies have to enhance their knowledge about competitors they are having with their strategies. Strategic marketing is a process of making long term plans which ultimately integrates with business strategy (Davies, 2011). It provides guidelines for assessing customer preferences and also helps in creating a strong relationship with them.
In this report, complete knowledge about role of strategic marketing and the relation between corporate strategy and marketing strategy is being discussed. It will be done by keeping a firm, Tesco in focus. It is one of the largest retail organizations in UK (Ries, 2003). Here, an elaborative study on its internal and external environment will also be done. At the international level Tesco faces many local challenges and there has been significant speculation about possible exists from underperforming markets, due to recent scandals as its share fell to 11,5% to 11 year low. (Guardian 2014). But the company had been reluctant to withdraw from further markets if there are other options available.
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According to Boykin, (2014), strategic marketing can be defined as identification of one or more sustainable advantage that firm can have in order to get competitive advantage in market in appropriate manner. It allows companies to deal with different kinds of issues like the products that can be launched in market, the price of products, distribution strategies, etc. According to Hunt, and Arnett, (2004), strategic management can be defined as proper formulation and implementation of different goals and initiatives that are taken by company so that it can present itself strongly in market and also in most suitable manner.
At Tesco, the main role of strategic marketing is to know about the markets where they are going to operate and compete. After that it decides how they will compete and can gain competitive advantage. The time of entrance in those markets is also predetermined so as to know at which time they would get the highest benefit (Nandakumar, Ghobadian and O'Regan, 2011). To maintain the high position within the retail industry and to promote goods and services among its customer, in effective manner these preparations are essential.
Tesco performs strategic marketing so as to build customer relationship by creating value for them. It helps in market research as it is done according to the plans Tesco has made. (Marketing Week. 2015). For instance, Tesco Club card strategy has been specified as the most effective promotional tool which greatly contributes to the business strategy of cost advantage. It helps the company in collecting some valuable information about consumer behavior as well. Furthermore, it has helped the company in achieving value for the brand. For the purpose of marketing, the brand will continue to open stores where opportunities exists and focus on displaying some imaginative thinking in all sizes of stores.
The main aim behind strategic marketing is to increase the market share and establish a good identity among the people. Tesco uses strategic marketing to show their unique features and capabilities (Yannopoulos, 2011) and it justifies their mission statement. Through the strategies which Tesco has made, actionable goals can be formulated. Marketing strategies are made for the products that the company offers and the audience to which they are offering. Strength of the products of the organization can be easily determined through these strategies (Roetzer, 2011). At Tesco, competition and revenue also plays an important role in strategic marketing. Competition pricing, as well as its distribution criteria, are also important parts of strategic marketing (Marketing Week, 2015).
Corporate strategy is a set of goals and the steps leading towards reaching these goals; therefore corporate strategy is something that is decided to bring effectiveness in the business processes. Undertaking of a corporate strategy requires great concentration and focus on different types of factors. It is to be adopted when company is in need of improvements and enhancements. Marketing approaches are part of corporate strategies.
One of the major corporate strategies of the Tesco to provide value for money and based on that only company market itself as one of the companies that has cheapest and most qualitative products available. The company also has a strategy to focus on customer services and customer loyalty and for that it has launched different loyalty card schemes and other loyalty programs which have helped it to attract customers in most appropriate manner (Jordan, 2015).
Tesco's corporate strategy is one which primarily focuses on value for money and offering quality customer service. For this, company gives training and development on regular basis from which standards services can be offered to customers. For increasing revenues, this firm has taken various initiatives as it diversified its number of products. It also bought another business so as to enhance their business (TESCO Annual Report, 2014). It assesses new technologies and also takes steps to increase sales volume of their products (Daft, 2008).
At the time of making business plans, Tesco's executive management has to be in contact with the marketing department. This is to check whether business strategies are aligning with marketing strategies or not. Through marketing strategies, research is done on things like consumer behavior and their needs. It also tells people about their superiority on competitor’s product (Narasimhan, 2005). Without giving attention to marketing strategies, the long term business strategies cannot be made. Whenever a corporate strategy has been made, it may look hopeful but if strategy at marketing level is not referred, it will fail.
At Tesco, to be a good business unit first it has to be a good marketing unit (Linus, 2001). Both these strategies can be described as same as they are a customer oriented. As for the corporate strategy of Tesco, the focus is on the overall business concept, and it is made by the top management. While marketing strategies are made at middle level and here the focus is on the product, its advertisement and selling (Hunt, and Arnett, 2004). Business plans are made for all the departments in this company. Marketing plans are just for its department only. In addition to it, company focuses on CSR activity also in order to develop sound related with society. For this purpose, company runs different campaign such as environmental steering group, energy saving, ecofriendly transport packaging design, conserving water and other related. It has framed the tag line for CSR i.e. “we see ourselves as good neighbors with a real sensitivity to environmental concern.”
A well-defined marketing strategy proves to be very helpful in setting mission, vision and objective of the firm. It helps in gaining competitive edge and contributes towards earning revenue and profits. It has to be made with great concentration and focus. Strategy is something which helps in achieving differentiation for the business. It is very evident that retail industry is highly dynamic and competitive. Companies operating in the industry are required to adopt effective marketing approaches from time to time so that awareness can be created and customers can become familiar with the products and services.
At Tesco it provides a framework in which information about what steps need to be taken are mentioned (Holm, 2006). Tesco develops its marketing strategies through various steps. These steps are as below:
Identifying business goals – In the first step, Tesco decides about their business goals which they have to achieve within a stipulated period, time, term. Its objectives can be to increase awareness about products they are offering or to capture a new target market (Klausner, 2013).
Stating the marketing goals – In the next step, marketing goals of the firm is being decided. These targets will specify the standards which they have to meet. Benchmarks help the employees of Tesco to achieve their goals on time (Clayton and Heo, 2011).
Market research – For any marketing strategy, research is the most important part. It includes the complete knowledge and information about market as its size, social trends and growth. It is essential to do this so as to know if there are any changes in the environment occur (Brooks and Simkin, 2012).
Profiling the potential customers – Then Tesco profiles those customers who come in its target market for assessing their needs. It helps it to identify their buying patterns as well as in maintaining a relationship with them.
Profiling the competitors – Then it is identified that what competitor is offering LIKE their products and services, supply chains and their pricing strategies. It helps Tesco to have competitive advantage (Banerjee, 2009).
Developing strategies helping in marketing goals – The strategy is made in this phase in order to attract the target market and retain existing one. Here, advertising is used in different ways.
Using 5 P’s of marketing – Product, price, place, promotion, process and physical environment are taken into consideration in this step to make marketing strategy more successful (TESCO, Annual report, 2013).
Testing ideas – In the last step, a new idea or decided strategy is being checked by taking reviews from staff and customers of Tesco. It proves to be very helpful in improving the sales results. (TESCO, Annual report, 2014).
For the purpose of assessing the internal environment, SWOT analysis can be done. It includes strength and weakness which are internal factors whereas opportunities and threats are external factors. With the help of it, company can able to manage their threats and weakness through its strength and market opportunities.
It is a valuable technique for understanding, evaluate our company Strengths and Weaknesses, as well as identify Opportunities, Threats you will face, during the analysis.
Strengths: It possess description regarding capabilities of the business
Weaknesses: It includes low side of the business
Opportunities: It comprises actions that can be taken for boosting the operation of the company.
Threats: elements that can affect the operation of company (A. Humphrey 2012)
Referring to the above for evaluating the internal environment of the organization, Tesco uses some approaches like SWOT Analysis and Value Chain Analysis as well. In some cases, functional approach is also being used. Through value chain, the organizational, functional activities can be determined. It also helps Tesco to know how they are creating values for their customers. These have proven to enable the company to understand what activities are creating maximum value for their customers (Parry, 2004). Primary and supportive activities can be differentiated here with respective strategic target areas. For evaluating the internal environment of this company, this approach sometimes creates confusion as it is somewhat complex in nature (Narasimhan, 2005).
Using SWOT Analysis helps Tesco to know about their strengths and weaknesses. It will also help the company identify the areas from where they can increase their profits. Areas which can reduce their revenues are also identified through this approach, and also creates many benefits for it (Linus, 2001). It tells about the strengths of competitors from whom it is having threat. Ultimately it reduces the risk which can occur due to any uncertain event.
Furthermore, there is one more tool that can be used by the company in order to understand its resources based capabilities and that is VRIO (Value Rarity Imitability And Organization) (Klausner, 2013). It is one of the best frameworks that can be used by Tesco in order to understand its capability to determine competitive potential. It helps the company to see its resources from 4 perspectives which are from the point of view of rarity, value, imitability and organization. Tesco has been using this particular analysis on the regular basis in order to place its products in market and to claim that they are different from others (Butler, 2014). For example, Tesco loyalty cards were marketed on the basis of their rarity and imitability in market and it helped the company to increase its value and attract customers directly. Loyalty program helps the company in attaining an edge over the rivals as it aids in gaining repeat purchase.
External factors include varied influences that affect the operation of company. To ascertain the same, PESTEL analysis can be done that comprises of political, economic, social, technological, environmental and legal factors. Based on it, factors and supporting company can be identified through which appropriate strategies can be considered.
There are many factors which influence the external environment of Tesco. PESTLE analysis is an effective tool to evaluate the external factors that influences the business operation of the company. It helps in focusing on the various forces that affect the business unit and influence the working system (Butler, 2014). If the external environment of this company is assessed, both macro and micro environment can be studied.
Before entering into any new market, its economic conditions can thus be seen as well as the role of government there, which must be analyzed in order to obtain appropriate information of the regulatory framework of the country or market in respect of the organization (Hunt and Arnett, 2004). It helps in knowing the restrictions that the government has imposed on some firms. The complete regulatory framework is studied while operating a new business. Legal environment plays a vital role in the success or failure of any firm. If government rules and regulations are being ignored, it can lead the firm to failure. Tesco takes various initiatives for having feedback from their customers so as to know at which areas they fail (Holm, 2006). Through this, they make their products according to the demands of people. It increases customer satisfaction which ultimately leads to increase in sales as well as profits. Technology also plays a very important role in affecting external environment of this organization. Those techniques which create highest profits for the firm are being used. To select the best technology for the organization, the firm closely observes the competitor's process of working and the technology they have implemented to acquire the desired results. Selecting the wrong technology can entail huge losses for this company (Clayton and Heo, 2011). The social values of a new target market are studied in which Tesco is going to operate. This is being done to make their product successful. To stay in the market in the long run, Tesco needs to have proper knowledge about its external environment.
Competitor analysis of Tesco can be done from one of its biggest competitors that is called Morrison which is also a UK based retailer. Both of these companies represent different characteristics in grocery retailing industry (Butler, 2014). Tesco is market leader in the industry and it uses different types of strategies in order to influence the whole market. On the other hand, Morrison can be called a market follower and can act vulnerable against Tesco. Tesco has more than 3000 stores in the UK and it delivers different services to fulfill needs of different people. Morrison on other side has fewer stores than Tesco and its market share is also very low compared to the company (Marketing Week. 2015). In the past few years it has been observed that the sales of Tesco has reduced because of not analyzing needs of consumers appropriately and Morrison has taken this as an opportunity to present the market with goods that are demanded. It has helped them to increase its market share appropriately.
Based on SWOT analysis, company is able to identify the market opportunities and threats. Further, PESTEL analysis aids in identifying the factors that can affect its operation. Based on it, company is able to make choices for future expansion.
The graph above shows the integration of internal and external environment of the company. If the internal and external analyses of Tesco's environment are integrated, it would help to formulate future strategies for the organization. When there is a complex knowledge about the internal and external factors of the company, it would also increase the quality of performance of employees working at Tesco. By having thorough knowledge about both of the environments, its opportunities can be captured by assessing its strengths (Brooks and Simkin, 2012).
Weaknesses of the firm can be rectified through offsetting threats. It helps in making the organization adoptable to changes wherever necessary and make employees agree to accept change. Integration of internal and external environment of Tesco would build predictions for the future in advance. It will also tell about resources they are having and those which they need (Banerjee, 2009). It provides information about the areas where they have to improve themselves so as to maintain their position as well as goodwill.
Tesco can easily merge its strengths, weaknesses, threats with its political, legal and other analyses. One major weakness that was analyzed by Martin in the Asian Sector as the Tesco as a company was not able to represent themselves appropriately in front of people (Martin, 2014). In India the company was forced to shut the stores that had been established in collaborations with some third party companies because it hurt local retailers. In order to cope with that the company made different deals with local retailers and continued its business on the name of partner through which business was initiated. Furthermore, the company also made an agreement with government to ensure that if rules are changed in the future, the company will be given some advantages (Butler, 2014).
Corporate level can be referred as top level management that develops strategy and tactics for business growth. Also, it takes critical decision at the time of deviation so that chances of losses or negative impacts of company can be reduced. Also, it takes decision for pumping funds in the company for attaining growth.
As in any organization, at Tesco also, decisions and choices are being made on three levels. These are top, middle and lower level. Corporate decisions affect all these levels in one way or another. Decisions which are directly related to the objective or goal of the firm are made at corporate level (Nandakumar, Ghobadian and O'Regan, 2011). It is the highest stage where resources are allocated to each area and strategies at all levels are coordinated.
Decisions taken at corporate level includes for example the diversification in products. Here, it refers to either superiority on quality or price of Tesco's products. At its corporate level, decision is taken regarding different features that the company wants to provide to their customers and that no other firm has (Indridason and Wang, 2008). Therefore strategies are being made at the top level of the organization, including differentiation in its products like change in taste or packaging. Further, top level officials take decision regarding business expansion also through Ansoff’s matrix. In this, decision is taken by Tesco regarding market penetration, product development, market development and diversification.
Marketing activity makes an impact on business unit as it demands to group members from which appropriate marketing plan can be developed. Also, it includes funds which certainly affect the business operation if not plan it in appropriate manner.There are different decision that influences the marketing at business unit and functional level. These include decision regarding segmentation, promotion, price setting, selection of source for promotion, targeting strategy and other related. In order to manage the same, proper market research and feedback from customers need to be taken so that effectual results can be attained through it.
Tesco is a large corporation and has various business units. Decisions taken in those units are like studies of different markets that it has according to its product and customers. Taking decisions on competition as well as on different channels of distribution are also done here (Doole and Lowe, 2008). For dissimilar product groups, different strategies are being made. It is the responsibility of each business unit to set its own strategy for its specific product group. Coordination in between all these units with their decisions leads to accomplishment of corporate level strategies (Daft, 2008). There must be proper cooperation in between these business units as without this; the ultimate result of the organization cannot be achieved. However, it does not mean that corporate strategy is the total sum of business strategies. Nevertheless, decision taken at these units has its crucial impact on decisions at top level of Tesco (Fuchs and Diamantopoulos, 2010).
In Tesco, functional or tactical decisions are taken by different departments of each business unit. Here, there are strategies such as marketing strategy and pricing strategy that come into the picture (Dekimpe and Hanssens, 2004). Various specialists are involved in Tesco to make these decisions. All the functional strategies have to be properly linked with business and corporate strategies to make their best use in achieving the organizational goal.
For competitive positioning, different measures can be taken into account by company such as offering sound customers service, loyalty card, customer oriented products, low queue for payment system and other related.
At Tesco, competitive positioning is done through various ways like it can be done by becoming the market leader or follower or challenger. To become a market leader, its positioning will be based on its quality. In this endeavor, it will try to keep in mind of consumers that they are the providers of the best quality of a particular product (Yannopoulos, 2011). Therefore Tesco has to make various strategies to show their superiority over competitor's products. It will bring differentiation as well as diversification in their products and will create value for the market. Without showing how the product is different from others, it will take more time to position that (Roetzer, 2011). Aditional method that Tesco is using to position their product is cost leadership that is to provide the cost to the people that is easily affordable to them. Also, they do not have to compromise at quality. This strategy proves to be the most advantageous for gaining higher profits for the firm as the target market as well as the competitor's market can be easily captured through this. Product specialization is also used by this company to position its separate category of products for a specific group of people only (Ries, 2003). It can be done for their luxurious products which are highly expensive too.
Tesco has many strategies which contribute to the competitive advantage it gains in the market so as to bring stability. The most common among these are defensive strategies. It helps the firm to maintain competition for its business from other firms and gaining an advantage from that (Badur, 2011). In reducing risks from uncertain activities as well as from the threat of competitors, it proves to be the most effective. By bringing innovation in their products through the use of latest technologies, Tesco gains the competitive advantage of providing the most advanced product. In the present scenario, people want innovation in things which they are using, and this company is successful in providing this (Nandakumar, Ghobadian and O'Regan, 2011). Their customer service is also one of the best strategies they are using for making benefits from their competition. As they are providing many products which are the same as those of competitors, to attract customers they have to adopt the defensive strategy. It increases the satisfaction level of customers (Indridason, and Wang, 2008). Also, it helps to increase customer loyal towards Tesco’s brands as they get their demands, expectations and needs fulfilled.
Furthermore, there are some more strategies that can be used by the company:
Market Development- It will allow Tesco to gain competitive advantage. Through this the company can advance its business by entering into new market segments (Doole and Lowe, 2008). For this, the company will require a good marketing strategy so that proper mission of market development can be defined. This particular strategy will allow the company to gain more revenues and it will also be able to capture new customers.
Differentiation- It is one of the best strategies that can be adopted by Tesco in order to enhance perceived value of its brand. Company can attain differentiation by developing techniques like competitive pricing, distributor location, enhancement of functional designs and features and expanded distribution channels (Badur and et.al. 2011). By offering unique and good services to customers, the company will be able to attract more and more customers and it will also help them to create a unique brand identity in market.
Cost Leadership- This strategy facilitates competitive advantage. By using this, the company can set the prices of goods low but still keep the quality of products very high. It will create a positive impression in the mindset of customers and they will become loyal customers of Tesco. By using this, the company will also be able to increase its revenues and enhance market share as compared to its competitors (Nandakumar, Ghobadian and O'Regan, 2011).
Marketing communication can be referred to a practice of sharing messages to customers and potential customers so that brand awareness can be increased.
Through the use of marketing communication, brand awareness is being increased by Tesco towards their consumers. With the help of this, customers make perceptions about what information they get from the market. It also helps in positioning its products to the target market. Public relation can be maintained through this. Tesco uses target and benefit strategy for marketing communication (Gurau, 2008). Benefit strategy shows various profits along with its products so as to make customer believe that they have benefit and value for what they are spending. For this, Tesco uses many promotional activities like advertising showing product's features with benefits. In target strategy, the communication is done in order to know which market segment is going to produce the highest revenues for the amount invested (Doole and Lowe, 2008). This is defined as segmentation as well as prioritization. Personal selling and direct marketing is also applied in marketing communication of Tesco. It is helpful in interacting face to face with the customer as in this; their actual and instant reaction can be captured. Ultimately it helps in making various decisions regarding a particular product (Daft, 2008).
Some of the marketing communication strategies that can be used by Tesco are:
Direct communication - This method targets the consumers directly and personally. In this, popular media tools like TV, radio are not used but instead some personalized techniques like event organization, door to door selling, etc. are used to attract customers (Boykin, 2014). Through this, Tesco will be able to define its key consumer groups rather than mass audiences. Some techniques that can be used in this are personal selling, public relations, sponsorship, etc. It is a traditional mode of promotion but is very effective in the existing business environment also. It helps in knowing the customers in more personal manner and provides more information about their taste and preferences (Doole and Lowe, 2008).
Above the Line Promotions- This technique can be used in order to communicate with people via mass media channels adequate to the intended target audience in an appropriate manner. There are different methods like print, TV, radio, advertisement which are used under this approach (Roetzer, 2011). This helps in reaching maximum audience thus creating high measures of promotion for the company (Badur and et.al. 2011).
PR- is an indirect influence of public (customers and business partners) by portraying positive image on the corporate in media. Most typically, PR articles show the company and brand name in connection/when delivering news on charity events or supporting social causes.The objective of PR activities and PR communication is both increase brand awareness in the relevant public audience as well as enhance brand image.
Tesco implements a variety of strategies in its organization to ensure smooth functioning. These strategies are applied in the firm to manage its resources as well as to achieve its target in the most effective and efficient way (Davies, 2011). Some of these strategies are:
Scarcity marketing – Tesco provides some products whose raw materials are not easily available because of their higher quality. In this case, the company makes these products only for those customers who can afford them (Root, 2014).
Diversified marketing – Tesco targets different segments of customers. It includes distinct tastes, beliefs and expectations of people for whom certain products have been made (Boykin, 2014).
Relationship marketing – Tesco believes in building relationship with their customers so as to increase their brand loyalty and satisfaction, too. It helps in maintaining stability in the organization and also increases its period, time and term to stay in the market for further years (Salaimeh, 2008).
Furthermore, there are some more strategies that can be used by Tesco:
Direct Marketing- It is the most basic method of marketing that can be adopted by Tesco in order to attain all objectives in an effective manner (Clayton and Heo, 2011). This particular method includes different techniques like personal selling, emails, telephone conversations, filtering, catalog distributions, etc. These methods are very costly but they generate quick results for the company (Brooks and Simkin, 2012). Using this technique, the company will be able to contact its customers in an appropriate manner and this will help them to achieve their business objectives more easily.
Online Marketing- This type of marketing strategy is considered as increasingly significant these days because more and more consumers are moving towards the online market and with this technique the company will be able to target people more efficiently (Fuchs and Diamantopoulos,2010). Marketing is done through social media websites, websites and other sources of internet. Through this, the company will be able to attract large masses with very low cost (Roetzer, 2011). Furthermore, the company can also make use of interactive media to target the customers appropriately.
Organizational Monitoring - The Company can directly monitor the performance of all the strategies that it has implemented as it will help them understand drawbacks of all these strategies which will focus them on corrective actions (Yannopoulos, 2011).
Strategic marketing helps the company in developing the competitive edges of the company, to evaluate the actual measures, to promote its products and services and to establish the brand image in this competitive market. It can be concluded from this report that Tesco's strategic marketing is powerful enough to generate high revenues for the firm. All strategies whether they are made at corporate, business unit or functional level, are important for the organization. These have helped the company in creating an edge in the retail market, in developing its business and evaluating the scope of growth as well. To enhance the relationship between Tesco and their customers, its marketing communication proves to be efficient (Singh, 2007). It increases the satisfaction level of the customers and thus leads them to stay with the company for many years. Tools like PESTLE helped in analyzing the internal and external factors affecting the business of the company. In order to cater the needs of customers, Tesco needs to employ more modern and dynamic methods of marketing.
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