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Background of Tesco

Tesco is a British multinational groceries company and also had its operations in general merchandising. In terms of gross revenues Tesco is currently the third-largest retailer in the globe. The company is the current market leader of groceries in the UK. The company is currently holding 4008 stores in the UK and the Republic of Ireland and also has its own franchise stores. As of 2021 reports Tesco market revenues calculated up to 53 billion British Pounds in the UK. Tesco stores have employed more than 5000 people in the UK and also dominate the grocery retail of offline and online segments (Awadari and Kanwal, 2019).

Tesco started in 1919 as a small grocery store has now converted into a supermarket giant in the UK through its brand value offering. Tesco's marketing strategy targets its consumers with its well-positioned brand image. Tesco is currently in the retail sector selling different products and services including household products, groceries, a wide array of food and non-food products. The company also offers service to its customers through its tertiary sector where the brand manufactures its products for example Tesco Value and Tesco Finest. The main customers of Tesco are the cost-conscious individuals who are interested in sales and bargains and want to purchase products providing quality at a reasonable cost. Tesco in the UK has the largest supermarket chain and also enhances its support to UK armed forces and Governance through corporate responsibility in the UK the company to provide its consumers with affordable, sustainable, and healthy foods ( Aiello et al., 2020).

Strengths
  • Tesco is the biggest retailer in terms of grocery selling and the leading supermarket giant in the UK. According to a 2018 report, the company's annual revenues growth has shown a rise of 28% (Statista, 2022).
  • In technology and innovation, the company has adopted new techniques to bring performance and efficiency and to enhance the shopping experience of consumers in the UK market. The company has launched a new technology called  RFID-enabled barcode system in order to count products automatically and systematically.
  • The company has diversified its products portfolio from home-ware items, clothing range, groceries and also has diversified stores in its belt for example Tesco Express, Tesco Metro, Tesco Homeplus, and many more (Wood, Wrigley and Coe, 2017).
  • The company profit margin is low as the company is providing products to consumers regarding cost leadership strategy.
  • Tesco's global expansion has not been successful in a few countries including Japan and USA.
  • In June 2020 the company has received negative publicity where the stakeholders of Tesco voted against a greedy decision of the company is inflating the bonuses (Rosnizam et al., 2020).  
  • The company can expand its products portfolio and services through strategic alliances with other brands to dominate the UK market in different sectors and departments.
  • Tesco has launched its Cashless stores for the safety of the public due to pandemics and should focus on operating more cashless stores in the UK as currently, the count is only one (Sparks, 2019).
  • Tesco should consider matching the pricing of its competitors like Aldi to gain a competitive advantage and to create a stronger position in the UK market.
  • The company is getting stiff competition from other market leaders like Walmart which has acquired ASDA and Carrefour which can bring disruption in Tesco’s market position (Field, 2018).
  • An increase in trade costs and tariffs, trade barriers, import and export taxes can increase the cost of products of Tesco.
  • Political factors include tax rates, the impending and current change in legislation, and the economic condition of the country. The current pandemic condition and EU referendum is proposing a risk factor for the brand Tesco. Also, referring on tax of supermarkets known as Tesco Tax has been proposed by the local council but refused by the UK Government to reduce price hike has affected Tesco Business (Bober, T., 2018).
  • Economic factors include labour wage rate, cost prices, and profits. The annual wage rate in the UK has increased by 4.4% which has cost Tesco millions of pounds. Tesco is still dependent on the UK despite having a global presence as it shares 27.7% of the UK grocery market (Adamyk, 2019).
  • Social factors include taste and preference and buying behaviour of consumers. Tesco should focus on its services like product returns policy and consumers' shopping trends to create an impact regarding brand loyalty and value.(Alam and Raut-Roy, 2019).
  • Technological Factors include innovation to increase the performance of the brand and adoption of new technologies to help consumers in the seamless buying experience. Tesco has adopted new technologies like its own online payment system called PayQwid.  Customers can link the app with NFC and Clubcard for paying and gaining loyalty points. Tesco has also launched scan as you shop checkpoints for convenience shopping (Verasophon, 2019).
  • In this current situation, companies have to address environmental issues to bring sustainability. Currently, Tesco is focusing on minimizing its carbon footprint by 50% and also established the first-ever carbon-free supermarket. The company should encourage its consumers to use the online website for purchasing to reduce unwanted plastic bags.
  • Change in Law and legal actions can impact the image of the brand in the marketplace. Tesco has faced legal actions like accounting fraud and misleading investors which has led the company to pay GBP 12 million to settle the action. These activities are to be prohibited by the brand to sustain its position and image in the market (Adamyk, 2019).
Marketing Analysis
  • The company has expanded its business in different product portfolios to enhance its diversification in a different department. The company product category includes electronics, groceries, baby products, health and nutritious products, décor, and many more. Tesco has catered to the needs of various consumers across segments with its brands like Tesco Lotus, Tesco Kipa, Tesco Value, and many more.
  • Tesco's pricing strategy includes cost-effectiveness and providing value for pricing for the customers. Utilizing the large outputs produced by the company has helped Tesco to spread the fixed costs overall its quantities and provide cost-leadership. Direct and indirect costs are also minimized to reduce the cost of items with the best quality offering in that price range (Phillips and Moutinho, 2018).
  • Tesco has a large distribution channel across the UK with various diversified shops to cater to the requirements of the customers. Tesco has superstores that sell non-food items and groceries. Tesco Metro are smaller stores situated mostly in towns and cities. Tesco Express is a smaller story that deals with high-margin products. Tesco has tried to reach each section of customers through both offline and online channels (Jonah, 2018).
  • Tesco promotion activities include print and media advertising. The company also provides discount and promotional offers to customers. for loyal customers, Tesco has established club cards that can be redeemed by owners to get extra discounts and rewards (Nilova and Malyutenkova, 2020).
  • Tesco segmentation includes four factors Geographic which includes the region and density of consumers, Demographic which includes Age of customers, Gender, Occupation, and income. Psychographic which includes company’s view on the lifestyle of People and personality and behavioural which depicts Benefits sought, occasions and User Status. The company has catered to all sections of society from lower to upper class through its cost leadership strategy and premium strategy through Tesco Express (Aiello et al., 2020).
  • Tesco has targeted consumers through different supermarket chains. The company has targeted customers that want quality at a reasonable price and also targeted customers who need premium quality at a premium price. While applying this strategy Tesco has catered to every customer in the UK by differentiating its products variation for various customers.(Field, 2018).
  • Tesco offers four positioning methods Functional, Symbolic and price, and multi-segment in the UK. Functional positioning refers to providing customers with the finest products depending upon needs, Symbolic refers to a  Fair-trade product range like clothing to a narrow customer segment. The price positioning is established by Tesco for its own branded products and multi-channel refers to targeting several customers at the same time through value store (Foabeh and Achaleke, 2020).
  • Tesco should apply more focus on digital marketing by catering to more customers in social media and SEOs to attract more customers in the market.
  • Tesco should promote its CSR activities to attract more stakeholders and to improve its brand image being a market leader in supermarket chains.
  • Tesco should constantly provide its customers with satisfaction and gather feedback to know about consumer perception and trends.
  • Tesco should consider expanding its business to some of the emerging markets at the global level to sustain its position outside the UK.
  • Tesco should acquire smaller brands to gain access to more products segments and should optimize its costs to be more cost relevant like Aldi with quality superiority as an edge.

Conclusion 

The above report analyses Tesco as it is one of the leading brands providing support to customers through its valuable products and services. The company has been constantly innovating its services with new shopping techniques and tools to make the experience of customers more reliable and smoother. The company has been emphasizing its services in availability, variety, and customer service. Customers are very much loyal to the brand in UK and referring it to Tesco, the company has a huge market base in terms of consumers. The company has gained popularity through the offering of convenience and affordability.  Tesco has always brought enhancement in its innovation to bring development to the organisation.

References 

Adamyk, K., 2019. PESTLE Analysis on Tesco PLC.

Aiello, L.M., Quercia, D., Schifanella, R. and Del Prete, L., 2020. Tesco Grocery 1.0, a large-scale dataset of grocery purchases in London. Scientific data, 7(1), pp.1-11.

Alam, S. and Raut-Roy, U., 2019. Evaluating the Effectiveness of Reward Strategy at Tesco: Evidence from Selected Stores in UK. Indian Journal of Industrial Relations, 55(1).

Awadari, A.C. and Kanwal, S., 2019. Employee participation in organizational change: A case of Tesco PLC. International Journal of Financial, Accounting, and Management, 1(2), pp.91-99.

Bober, T., 2018. Virtual Business, Feasible Competitive Advantage-The Retail Sector Case Studies . ToKnowPress.

Field, D.,2018. CUSTOMER PERCEPTION IMPACT ON BRAND LOYALTY, WITH RESPECT TO CSR. A CASE STUDY OF TESCO.

Foabeh, P.A. and Achaleke, H.F., 2020. ATTITUDES AND PERCEPTIONS OF SHOPPERS’GROCERY SUPERMARKET CHOICES: A COMPARATIVE ANALYSIS BETWEEN BIG C AND TESCO LOTUS. International Journal of Research-GRANTHAALAYAH, 8(7), pp.67-79.

Jonah, U.I., 2018. The Influence of Transaction Costs on the Business Performances of Tesco Supermarket. International Journal of Business and Social Science, 9(5).

Nilova, L. and Malyutenkova, S., 2020. Challenges and opportunities for promoting functional foods in e-commerce. In E3S Web of Conferences (Vol. 164, p. 09012). EDP Sciences.

Phillips, P. and Moutinho, L., 2018. Strategy. In Contemporary Issues in Strategic Management (pp. 25-45). Routledge.

Rosnizam, M.R.A.B., Kee, D.M.H., Akhir, M.E.H.B.M., Shahqira, M., Yusoff, M.A.H.B.M., Budiman, R.S. and Alajmi, A.M., 2020. Market opportunities and challenges: A case study of Tesco. Journal of the Community Development in Asia (JCDA), 3(2), pp.18-27.

Sparks, L., 2019. Tesco: how supply chain strategy supports retail success. The Business & Management Collection.

Statista, 2022. Topic: Tesco PLC. [online] Statista. Available at: <https://www.statista.com/topics/3807/tesco-plc/> [Accessed 19 March 2022].

Verasophon, P., 2019. CRM and the critical analysis of database marketing: a case study of Tesco Clubcard.

Wood, S., Wrigley, N. and Coe, N.M., 2017. Capital discipline and financial market relations in retail globalization: insights from the case of Tesco plc. Journal of Economic Geography, 17(1), pp.31-57.

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