Analyzing The International Marketing Strategies Of Tesco In An Essay.

1.Analyse and evaluate the key strategic issues and decisions affecting the process of internationalizing marketing efforts
2.Demonstrate a clear understanding of the operational imperatives of marketing at an international level.
3.Critically evaluate marketing issues in relation to new product developments, and new markets in an international context. 
4. Appreciate the significance of cultural diversity in international marketing and apply relevant theory to the solution of problems posed by this for international marketing activity.

Background to the company and the nature of its business

The report is analyzing the international marketing activities of Tesco, which is operating into the marketplace of UK. It also analyzes the key strategic issues that are affecting the business process of Tesco. It demonstrates an understanding of operational essentials of marketing at the international level. The main operational areas where Tesco operates are Asia and Europe. The report also evaluates on the marketing issues based on development of new product and enters into new marketplace. Different strategies are analyzed such as international expansion strategies, market entry strategies, pricing strategies and branding strategies. By implementing the strategies within the business operation of Tesco, the company expands into the marketplace of UK. The organization gives value to their customers so that customer loyalty is earned. Distribution and transport management is evaluated such that the distribution network channel is identified.

Tesco is a British multinational grocery retailer with headquarter in Hertfordshire, England, United Kingdom. Based on the profit measurement as well as revenue, Tesco is the third and fifth largest retailer within the world respectively. The organization is the market leader within UK along with operating in 12 countries across both Asia as well as Europe. Tesco consists of market share of 28.4 percent. The company was founded in the year 1919 when Jack Cohen began to advertise groceries from the stall in East End market of Brixton in London (Tesco plc, 2014). The business nature of Tesco is to build of customer loyalty. Tesco aims to expand their business to diversify their business globally in order to achieve sustainable long-term development. The main strategic targets of Tesco are to grow in the UK marketplace, become a global in-store and online retailer. The vision of Tesco is to focus on the requirements of their customers and workers (News.bbc.co.uk, 2015). The mission of the organization is to create customer value to earn customer loyalty. Their business is based on three product types such as Supermarket, Hypermarket and Superstore.

Tesco took the decision to expand their business outside UK. In the international level, Tesco expands their non-food items. The organization also opened a petrol stations as well as offered finance services within Czech Republic. Due to expanding their operations in two areas, Tesco became a market leader within the country. Tesco also owned French food retailer in France with operating a chain of 92 stores. In France, the organization sells wine, spirits as well as beer. Mostly, in the international market, Tesco opened hypermarket, which is not possible to open in UK (BBC News, 2016). Currently, the company is involved as hypermarket retailer with selling of clothing as well as finance services to their targeted customers. They are selling different brands and their own branded line of products. Their primary activities are in petrol stations and financial services. In Slovakia, Tesco expands their international market with selling of their organic products. Tesco also offers home delivery shopping services that helps the organization to expand more in the international market. The organization makes the shopping easier with use of advanced technology (Papadopoulos and Heslop, 2014). They are providing online shopping, electronic self-labeling and other technical products such as wireless devices.

The current level of international activity the company is involved in

Currently, Tesco operates in UK and in other international countries such as Asia, six of the European countries as well as North America. Tesco produces healthier as well as organic products to their customers in order to gain customer loyalty. The organization is aware of their customer’s requirements. They are supplying more food items such as clothes, furniture as well as accessories. Mostly, Tesco operates and expands their international business in Asia such as in China. From China, Tesco acquires 50 percent of their equity stake (Tesco plc, 2014). The organization operates as a hypermarket retailer in China such as selling of clothes and providing finance services (Butler and Farrell, 2014). The marketing environments of Tesco are based on their customers, suppliers, competitors as well as distributors. Tesco is serving around 20 million customers within a week. The main competitors of Tesco are Asda, Saisbury, Marks, and Spencer. The organization competes with their competitors due to their strength of online shopping and international market growth. It helps to increase the market share of Tesco (Czinkota and Ronkainen, 2013). While operating in international level, Tesco comes to know the taste and requirements of the international customers.

Tesco is expanding into the geography of both Ireland as well as France. In the year 1979, Tesco entered Ireland to acquire 51% equity stake. However, after sometimes, Tesco found that they are unable to operate as the customers rejected British products. In the year 1992, Tesco entered into France by acquiring equity stake of 85%. It also failed in France due to competition with retailers of France (Telegraph.co.uk, 2014). From this marketing expansion experience, Tesco learned that in order to expand the market internationally, Tesco should implement the following international expansion strategies:

Cost minimization strategy: The Company decides to sell their products at cheapest rate. This strategy helps to attract more customers towards their business process (Paliwoda and Thomas, 2013). It also serves to brand as a store for middle class consumers offering them with low-end image.

Hire of local staffs: Tesco should hire of local staffs and personnel to sell their products on other countries. Tesco distributes limited resources to the international countries as if they are not able to expand their market, then it will not hamper their profitability. The local staffs can know about the local people’s taste as well as their needs (Akgun, Keskin and Ayar, 2014). Therefore, they can help in decision making to supply the products to the customers as per their choices.

Market oriented strategy: This strategy captures the market share of the international market. The main objective of this strategy is to maximize the profits of the business by selling of products and maximizing the level of customer satisfaction (Akaka, Vargo and Lusch, 2013).  It also provides customers with quality goods as well as services as per needs of customers.

Upgrade of technology: While operating into international level, Tesco upgrades their technology as well as offers their customers with innovative products. Innovative products are delivered to the customers by gathering of data through process of communication with the customers (Samiee, Chabowski and Hult, 2015). It helps to gain customer loyalty through use of club cards. New as well as advanced technology helps in making innovative buying decisions of the customers.

The current marketing environment and the locations where this is taking place

Market segmentation strategy: This strategy helps Tesco to plan as well as classify their labeled products into various brands such as Tesco healthy living, Tesco value, Tesco fair trade, Tesco finer, Tesco kids and others.

The market entry strategies of Tesco into the international market are joint ventures with the local partners, strategic acquisition as well as Greenfield investments.

Joint ventures: By this market entry strategy, Tesco should deal directly with the suppliers to get benefit in the business. It provides the company with an opportunity to gain new capability. Business risks are shared with the venture partner (Skarmeas, Zeriti and Baltas, 2016). It enables Tesco to market their products in the foreign country with help of local foreign partners. The local partners give them information on governmental regulations, local markets as well as distribution channel. It is perfect for Tesco to understand the foreign market. As for example, Tesco made joint venture to enter China (Majaro, 2013). The joint venture would create a business of 10 billion pounds.

Strategic acquisition: This strategy is best for Tesco as using this organization can quickly execute their business. It enables the firm to anticipate their competitors. Through foreign acquisitions, Tesco acquires an interest to sell their products into local firm throughout foreign direct venture (De Mooij, 2015). It is perfect for Tesco as it helps the organization to acquire other countries, which are performing within foreign markets.

Greenfield investments: This market entry strategy helps in foreign investment, which involves into international marketplace by starting of new subsidiaries (Tan and Sousa, 2013). This strategy is suitable for Tesco as it permits to venture into new unexploited markets as well as develop the opportunities present.

While entering into the international markets, the firms are adapting as well as standardizing the marketing mix. The key elements of marketing mix are product, price, place and promotion. The product is hard to adapt. Standardization is chosen due to its greater sales volume, low production of cost, superior profitability as well as incorporated image (Demangeot, Broderick and Craig, 2015). When an organization requires becoming a market leader in the market, then adaption is required.

6.1 Adaption or standardization issues of products

Tesco provides with wide range of products such as food, financial services, clothing and others. In order to standardize their products into international market, the product line caters the requirements of customers. It is required for Tesco to offer product to gain customer loyalty. The product should be compatible with culture (Akgun, Keskin and Ayar, 2014). The standardization issues in customer’s products are that there is a huge difference between home culture as well as foreign culture of Tesco. The organization is not offering with wide range of choices of brand and product types. Tesco should focus on local requirements and demands of customers (Cavusgil et al. 2014). The elements those are adapted into local market with a product are design, packaging and product quality.

Tesco maintain low prices for their products without making reduction in product quality. The organization uses the strategy of “every little counts”. Within the large stores, the prices are lower and in small stores, it is little more due to high overhead cost. There is huge competition of Tesco in the international market (Zeriti et al. 2014). Therefore, pricing differentiation is based on competitive situation of Tesco. The factors, which drive price standardization, are decrease in cost of transportation and improve in communication. The prices of products are decided based on foreign market as well as consumer’s revenue.  

Evidence of International expansion strategies of Tesco

Tesco uses two distribution channels for their products such as online as well as offline. It is difficult to standardize the place for Tesco as there is huge variation of distribution channel depends on international country. Each countries follow different channels to deliver the products to the customers (Magnusson et al. 2013). In international market, the distribution channel may be small shop or supermarket. The product distribution channel is less varied with sales force of manufacturer, dealers as well as agents.

Tesco uses television advertisements, sponsors events and promotional discounts as their promotional strategies. The advertisement is based on lower price. It may be standardized or adapted. Tesco should create advertisements, which work in various countries. In order to standardize the product, the organization should create message, which should convey to customers (Altuntas and Turker, 2015). It may be difficult to determine which message should attract the international customers towards the business. Language, laws, media accessibility, religions and financial differences also influence promotion. Those factors require adaption for advertising the messages.

While doing business in international country such as China, Tesco faces cultural issues due to which Tesco leaves China. The cultural issues are that Tesco did not investigate on the culture of international countries before they enter into new market (Li, Qian and Qian, 2014). Tesco offers the Chinese customers with club cards but the customers are not impressed by it. Tesco has lack of localization knowledge due to which they are not able to expand their business in China and America (Telegraph.co.uk, 2014). Due to global economic slowdown in UK, Tesco faces challenging trading conditions. It causes sales growth of only 2 percent. While there is challenging trading conditions, Tesco is benefited from their international sales and gains sales of 32.7 percent (News.bbc.co.uk, 2015). At the time when Tesco is operating in the international market, the company faces other international competitions such as Wal-Mart. High competition is a challenge for Tesco to operate in the market. High number of unemployment affects the business environment of Tesco. Due to demographic changes like people age, increase in female workers and decline in home meal, the retailers are focused on services as well as value further products. Due to improvement in supply chain, it drives price exposed of the business. Therefore, the organization should adopt a cultural environment in their business environment.

The segmentation of customers is done based on geographic, demographic, behavioral as well as psychographic factors. The customer segments of Tesco in the international market are targeted based on various supermarket chains (Helm and Gritsch, 2014). Targeted customer segments are varied based on the international country. Therefore, it is difficult o determine right age, income, status, gender and family size of the customers. The lifestyle, personality and occasions are also difficult to analyze. There are also implications on buying behavior of the customers. Global financial as well as crisis in financial plan are the implications in the buying behavior of the customers (Griffith and Dimitrova, 2014). It reduces customer-spending levels.

Market Entry strategies of Tesco

Tesco plans to develop into a global brand owner in the market by launching of new products and services. Recently, Tesco launches non-Tesco-branded ice cream as well as pet food ranges for their business. The goal of organization is to sell the products in petrol stations as well as garden centers (Gnizy and Shoham, 2014). Tesco launches customer loyalty program. For female customers, Tesco offers that the female can able to accumulate points in exchange of daily purchases within hair products as well as discount coupons. In the international market, Tesco offers with own branded products, which save publicity cost, packaging and therefore the organization, can take advantage of pricing.   

The international pricing strategy of Tesco is based on insistent price competition as well as cost of living of persons. The populations of countries are struggling due to rise in petrol and energy prices, food cost as well as muted growth in wage (Rask, 2014).  Tesco introduces a pricing guarantee scheme such as they guarantee 10 percent cheaper pricing of the products and services as compared to rivals. With fall in market share, Tesco changes the pricing strategy of their business. Tesco follows a strategy of “Big Price Drop” such as they cut the price of 3000 foodstuffs by upon range of 30 percent. It will take huge cost to do so. The organization also doubles the club card point’s prize recommend as well as reverts to single point for each pound spent will accumulate £350 million amount of Tesco. Therefore, the pricing strategy of Tesco should become an implication for the rivals (Telegraph.co.uk, 2014). Tesco has a plan to reduce price disparity among the markets of sourcing merchandise in favor of retail internationalization procedure. Therefore, Tesco should adopt those pricing strategies to attract the international market towards their business.

The brand of Tesco is related with slogan of “Every Little helps”. It is used as a marketing tool in order to communicate with the customers and promote their product in the marketplace (Lages, Mata and Griffith, 2013). This slogan is entered into customer’s minds through outlines of promotion. Sales promotion plays a significant role in the marketing communication and promotion strategy of Tesco. The following are the ways in which the sales promotion is facilitated:

Introduction of Tesco Clubcard: It helps the customer to learn information. It is a communication campaign (Cavusgil et al. 2014). It is an innovative scheme through which the customer relationships are building to achieve customer trust and loyalty.

Message and media: It is also a communication channel for Tesco. The messages such a “one in front” defines a scheme step to ensure that the customers serve as quickly as possible. Green clubcard focuses to convey message to help the environment (Altuntas and Turker, 2015). The promotional tools used by Tesco are advertisements in social networking site, newspapers and magazines.  Advertisements in the social media are most important tool that assists set the brand image of Tesco as well as it is contributed to stable their performance within the marketplace.

Free Gifts: The free gifts or coupons are given to the customers like buy-one-get-one-free which are used to increase the sales of variety of products and services.  

The logistics management system of Tesco is effective as the organization is continuously upgraded their supply chain. Tesco has directed to store delivery (DSD). Both the suppliers as well as manufacturers deliver the goods directly to the store (Griffith and Dimitrova, 2014).  However, due to this transportation process, there is inconsistent of quality of product, prices as well as availability. Therefore, Tesco decides to implement of centralization from the DSD system (Lages, Mata and Griffith, 2013). The head office takes control over costing, ranging as well as managing stock. The centralized system helps the organization to transport goods in lead-time with utilize of handling system. It also helps the organization to execute new distribution centers that transmit to store location outline. Tesco also introduces continuous replenishment policy in their business, which is based on two features (Parente and Strausbaugh-Hutchinson, 2014). Firstly, a flow system is introduced with replacement of old batch data handing out. Secondly, various deliveries are taken place into the flow system. It results into reduction of stock handling as they are not stored into warehouse.

If there is change into replenishment, then all the suppliers can receive the orders as per their profile. Store order calculation and in-depot stock awaiting delivery are taken place into the logistics management system of Tesco (Shen et al. 2016). Therefore, Tesco tries to manage their distribution in addition, transportation management system for distribution of products at new place by keeping in intelligence the brand image of Tesco. The benefits of the system in the international market are that they can control over their operations as well as movements of products and services. It reduces both delivery time and delay in receiving of goods (Skarmeas, Zeriti and Baltas, 2016). Apart from this, the international countries can receive their goods on time. Centralized system benefits Tesco by implementing a strong distribution network infrastructure.

Unethical and criticism are aimed at Tesco from different groups such as national businesses, trade bodies, consumer groups and individuals (Samiee and Hult, 2015). One of the biggest criticisms, which Tesco faces, is perception of threat it causes to small organizations due to control it compels over the products. Other criticisms are staff’s treatment, trading deals with the suppliers, relations with customers and approach for international businesses (Demangeot, Broderick and Craig, 2015). Tesco supermarket is involved with injury from customers, claims of unfair dismissal from the staffs and others. Media in UK as well as Ireland criticize the organization. The ethical considerations are that Tesco should give proper treatment to their suppliers, build strong relationship with customers and success in the international business.  

Conclusion 

It is concluded that the success of Tesco is due to its branding of products and service delivery. Due to rapid change in the business environment and pressure from the competitors of Tesco, the organization adopts new expansion strategies and pricing strategies into their business. The strategies are implemented in the business so that the organization can expand their business into international level to gain profitability and success. Tesco provides home delivery shopping services that assist the organization to develop in the international market. The organization makes the shopping easier with use of advanced technology. The international expansion strategies of Tesco are cost minimization, hiring of local staffs, market oriented strategy, market segmentation and upgrade of technology. In order to standardize their products into international market, the product line of Tesco caters the necessities of customers. The advertisement is based on lower price. It may be standardized or adapted. The customer segments of Tesco in the international market are targeted based on various supermarket chains. The communication and promotion strategies are media, gifts and introduction of Tesco clubcards. The centralized transportation system assists the organization to convey of goods in lead-time with use of handling system. It also helps the association to carry out new distribution centers that convey to store location outline.

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