Table of Contents

Contents Page Numbers

Analysis of Tesco Background 2-3

Analysis of Market Situation

-Market Share, growth and potential 3
-SPICC analysis 4-5

SWOT Analysis 5

Tesco's Competitor Analysis 6

Marketing Objectives of Tesco 6

Marketing Plan of Tesco

-Segmentation of Tesco 7
-Targeting of Tesco 8
-Positioning of Tesco 8

New Product or Service Idea of Tesco 8-9

Future Marketing Strategy of Tesco 9-10

Financial Forecasts for Tesco(2012-2015) 10-11

References 12-15

Analysis of Tesco Background

1.
 Tesco dated back to 1919 and was founded by Jack Cohen when he began to sell surplus
grocery products from a store in the East End of London. During that day, he managed to earn £1 on
sales of £4. In the year 1924, the brand name Tesco first appeared in Jack's very own-brand
products called Tesco Tea. The name Tesco was a combination of the initials of TE Stockwell, a
partner in the tea suppliers firm , and the first two letters of Jack's surname,Cohen. The first Tesco
store officially started business in 1929 at Burnt Oak, Edgeware, North London.
Throughout the 1930s, Tesco expanded into a private limited company. Tesco grew from
stores to supermarkets and they also bought a plot of land at Angel Road, Edmonton to build its
headquarters and warehouse. Following the success of self-service stores in the US, Tesco opened
its first self-service supermarket at Maldon in 1956. During the 1960s, Tesco worked diligently to
build its brand name and they soon became a family household name. By the end of the 70s, Tesco
had achieved an annual turnover of £1 billion.
In 1982, Tesco achieved an annual sales exceeding £2 billion. During the 1990s, Tesco
further grew its business as well as its international presence, having stores opened in many
European and Asian countries due to growing responses like Poland and Hungary as well as
Thailand and South Korea. Up until now, Tesco already has 6,234 stores operating across 14
different countries and accumulated annual sales of £72 billion from all the markets and the
numbers are expected to increase as Tesco intends to make its presence be known in more
unexplored territories.
Like others, Tesco also has its own mission and vision. The core purpose of Tesco is to
create value for customers to earn their lifetime loyalty. Tesco envisions themselves as the most
highly valued business in the world. Not only by customers, but also by the communities they work
in, the staffs and the stakeholders. Tesco also hopes to be viewed as a growth company that always
strive to grow in all parts of their business-in the UK, internationally as well as in various services.
They will be a modern and innovative company that is able to predict changes and adapt to
circumstances. They also see themselves winning locally by utilising their global skills and
knowledge which also benefit the performance of their business all around the world.
Tesco upholds the value that no one tries harder for customers than them as they will
understand and be the first to meet the needs of customers. Besides, they also strive to act
responsibly in the communities they work in. Another core value is that they treat people how they
like to be treated. Tesco wants its staff to work as a team and to learn to trust and respect each other.

2.
Tesco also values listening, supporting and saying thank you to the people they interact with and be
willing to share the knowledge and experience that they have. Tesco's success depends a lot on the
people they work with and also the people who shop with them. By performing the values, they are
able to create a fun and lively environment to work in(Tesco Plc, 2012).

Analysis of Market Situation

Over the years, Tesco has successfully build up a strong brand name within the UK as well
as many other countries outside of it. Within the UK market, Tesco is the leading business for the
retailing industry, owning a market share of 30.2% whereas competitors like Wal-Mart owned
Asda,17.9%, and J Sainsbury Plc,16.6%, remained a distant second and third respectively. In terms
of its growth, Tesco has a revenue growth of 2.7%. Although it is lagging market growth of 4.0%
but in comparison to a month ago, it had made tremendous improvement from the initial 2.5%
(BloombergBusinessweek,2012).
On the international level, Tesco has made a great effort to place themselves as the third
largest world retailer behind US giant Walmart and French owned Carrefour in terms of sales. But,
according to IGD as stated in TalkingRetail(2012), Tesco is expected to have the strongest growth
among the top four global retailers with an estimated annual growth rate of 6.8% between 2011 and
2015. Besides having physical stores, Tesco also sought for other alternatives to expand its business,
this meant opening an e-store, www.tesco.com. In this field, Tesco has made it so big that it is now
the world leading Internet grocer with an estimated 55% market share of the online food industry in
the UK. Tesco online recently became UK's third most trafficked site behind Amazon Europe and
housewares retailers Argos, proving that Tesco has a strong growth as it slowly increases its
position as one of the most trafficked site in UK.

3.
 Suppliers -Relations with supplier
-Distribution channels
Publics -Shareholders
-Government
-Environment
Intermediaries -Promoters
-Physical Distribution Firms
Customers -Creates value
-Competitive pricing strategy
Competition -Wal-Mart -Sainsbury's
-Carrefour -Morrisons
-Asda

Table 1.1 SPICC breakdown of Tesco

Suppliers: Tesco has cultivated a bond with its suppliers to develop its “Tesco Better Value”. Tesco
likes to treat its suppliers as its customers. To gain this competitive advantage, Tesco utilises the
local knowledge and skills of local suppliers in existing markets. Like that, Tesco is able to find and
purchase products that fit to local needs. In addition, it is also able to avoid custom fees and
enhance its distribution channels, therefore, ensuring quality products at low prices(Louis P., 2010).

Publics: Tesco has always been committed to maintain a good dialogue with its shareholders to
ensure what's expected of Tesco and to provide opportunity for Tesco to respond to a wide range of
enquiries. Besides, Tesco also depends on the government to assure that the products they produce
meets quality standards qualification. Tesco is committed to play a role in helping to care for the
environment. One of the ways Tesco is doing so is by being proactive in promoting recycling in
their UK stores(Tesco Plc, 2012).

Intermediaries: Tesco has employed promoters to help advertise its own brand products. Tesco is
able to gain more profit because the promoters are able to explain in details the use of the Tesco
product directly to customers, thus increasing the chance of them purchasing more of it. Besides,
Tesco also acquired the use of distributors to help them deliver products straight to customers'
homes. Like in Korea where customers can do shopping even in the subway, after the purchase is
made, the distributors would have already delivered the products to customers' doorsteps.

Customers: Tesco holds the core purpose of creating value for its customers. In that case, Tesco is

4.
always determined to provide the highest quality of products at low prices for its customers. Thus,
Tesco has decided to focus more on competitive pricing strategy of its products and reduce
promotions. For example, The Telegraph(2008) has reported that Tesco has made an effort to halt
any price increase of its products by the suppliers as they want to protect the customers' interests by
offering them the lowest prices possible.

Competition: For many years, Tesco has relied upon its competitors so that it can improvise and
adapt to changes in the grocery industry. According to Powell(2012), Tesco is able to adapt to
competitors' challenges and reduce its price even lower, if not the lowest, to make their products
even more attractive to customers compared to its competitors.

SWOT analysis of Tesco

Strengths Weaknesses
 Brand value- offers low price and  Reliant on UK business- majority of their
customer focused profits comes from UK
 UK market leader- diversify into new  Stores not specialized in selling a
sectors, strengthen its leadership position specified product- smaller retailer can
 Strong customer loyalty- Clubcard, capitalize on
offers rewards and vouchers  High employee turnover rate- many
employees left after one or two months
of work
Opportunities Threats
 Tesco Direct(online)- grow the use of  Rising raw materials costs- impact on
technology, provides a platform for non- profit margin
food based products to generate more  Stiff competition- Walmart, Carrefour,
returns Asda and Sainsbury
 Further international growth- Indian  International expansion- lucrative but
market, provide a huge market with expensive, incurs huge investment and
lucrative returns marketing cost, sometimes new brand
name is required
Table 1.2 SWOT analysis of Tesco

5.
Tesco's Competitor Analysis

The largest and main global competitor of Tesco is none other than Walmart. Walmart is
currently the largest retailer in the world and has an annual sales eight times of that of Tesco's. In
terms of number of stores, Walmart has 8838 stores which is almost double the number of Tesco
stores. Riding on the economies of scale and making direct purchases from manufacturers, Walmart
is able to sell many of its products at lower prices as compared to others(Carvin N.,2011). In the
UK, however, Walmart has intimidated Tesco by taking over Asda. Asda has in recent years
challenge the retail market leadership position by consistently increasing its market share from year
to year.
Besides Walmart, the second largest retailer in the world, Carrefour, also has the ability to
affect Tesco's sales. In Europe, Carrefour is the first to open the hypermarket which means they are
an extremely innovative company and can anytime come out with a new format store that can
influence Tesco's position. Besides, Carrefour is also an organic company as they are able to ensure
that the products they sell are at high environmental quality. Partnering with WWF, they can make a
daily approach to biodiversity conservation and also waste reduction. So, they pose a direct threat to
the green approach of Tesco as well(Carrefour Group, 2012).

Marketing Objectives of Tesco

One of the main marketing objectives of Tesco is to achieve the leading position in the
retailing industry in every market that they operate in. Secondly, Tesco also markets because they
want people to know and choose their brand as the brand that offers high quality products with a
broad range at low prices. Third, Tesco also wants to promote their versatility as a multi-channel
retailer wherever they trade, that being the combination of stores and online. Fourth, as UK is their
core business, they also advertise themselves in hopes to keep their UK market strong and growing.
Fifth, as a responsible company to the environment and also with the recognition of them being the
top retailer in the world for tackling climate changes, Tesco hopes to foster a greener shopping
environment where customers can also play a role in helping to reduce carbon emissions. Lastly,
Tesco also wants to promote their active involvement in social issues and highlight their efforts in
the creation of new jobs in wherever they open their stores.

6.
Marketing Plan of Tesco
Segmentation of Tesco
Geographic : Demographic :
 Countries that have or would have high  Age: Ages 0-99, everyone needs grocery
consumer buying power and demand for products
retail items. Example
 Country: UK, US, South Korea, Thailand Kids( Tesco Goodness)
and etc. Elderly(Tesco Healthy Eating)
 Density:  Income:
Urban Middle to high income
Tesco Metro Finest range
Sub-Urban Lower income
Tesco Superstore, Tesco Extra, Tesco Everyday Value range
Express  Occupation: All types of occupation
(students, businessmen, professionals,
unemployed)
Psychographic : Behavioural :
 Social Class: Offering best range to all  Purchase Occasion: Seasonal promotions
income groups from the lower lower Example
class up till the upper upper class. Christmas
 Lifestyle: Offering different styles and New Year
functionalities which fits to every Summer/ Winter
individuals own preference. (Tesco F&F)  User status: Attract potential/regular
Youngster users and ex-/non-users
Stylish and hip fashion Example
Business class Private labels
Professional wear Own-brand products(Tesco Brand)
 Loyalty status: Produces Clubcard
schemes to retain absolute loyal
customers and also attract none loyal
customers.

7.
Targeting of Tesco
The targeting strategy of Tesco depends on the geographic, demographic, psychographic and
behavioural elements for a better direction. But nonetheless, Tesco will generally employ the
undifferentiated marketing strategy as retail markets are prone to produce items that suit all needs.
Tesco wants to produce anything and everything that everyone finds it relevant to themselves.
However, in geographic, Tesco will focus more in UK as it is their core business. In demographic,
Tesco will concentrate more in their Everyday Value range as in the past years this range has
generated huge amounts of profits. In psychographic, Tesco will be eyeing on people's different
lifestyle as their Tesco F&F fits to all types of tastes and preferences. In behavioural, Tesco will
want to pursue customer loyalty therefore they will always be seeking for ways to improve and
improvise their Clubcard scheme.

Positioning of Tesco
Tesco has successfully positioned themselves in customers perception as the brand that
offers wide selection of high quality products at low prices. Tesco has also gained an advantage by
having an online store which customers see it as extremely time saving and convenient for
shopping. Tesco has also made themselves be seen as an extremely customer focused company as
they launched the Clubcard as a mean of giving something back to customers for their frequent
patronizing in Tesco.

New Product or Service Idea for Tesco

Tesco has recently adopted a revolutionary packaging whereby it is able to prolong the
freshness of tomatoes and avocados and others alike for days longer. The packaging contains a strip
coated with a natural product that can absorb ethylene, the hormone that causes the ripening of
fruits and then turn mouldy. It is safe and also 100 times more effective than any other existing
materials, and it is also able to combat food waste and potentially save the fresh produce industry
tens of millions of pounds each year!
Besides, Tesco has also replaced its Value range with a new range called the Everyday
Value. The first notable difference being an improved quality in the Everyday Value, with no extra
charge on customers. The new range does not contain MSGs, artificial flavours or colours and
genetically-modified ingredients. Second, Everyday Value is also a healthier choice as it will have a
lower fat content. Third, the Everyday Value also spots a more attractive packaging as it is more

8.
colourful and softer than the blue-and-white of the Value range. The packaging is more convenient
as some products are available in easy-open packets and resealable bags.
Tesco has also launched their first ever virtual 3D fitting room online. This application
featured on their Facebook page clothingattesco is able to help customers find the perfect size and
fit of clothing when they shop for clothes online. Customers can create 3D digital figures of
themselves just from a photograph uploaded onto the page. Customers can find their perfect
matching look with the accurate size without the hassle to shop and best of all, there is no queue in
the fitting rooms which means customers can style endlessly(Tesco Plc, 2012).
Tesco has also included some in-store innovations or services to make the shopping
experience a lot easier. One of the distinct features is the “Scan as you Shop” system whereby
customers can bring along a bar-code scanner with them as they shop which saves them the trouble
to find for one. Another excellent service is the provision of smart badges for staffs. This is a quick
and effective technology where it is used to scan QR codes of items and information such as stock
availability and price will be shown on the badge whenever customers enquire about the item. It
saves time and also provides immediate answers to customer enquiries.

Future Marketing Strategy of Tesco

Tesco will be concentrating in the UK by investing an expected £1billion to revitalize its
business. One of the main strategy Tesco will be emphasizing on is building their team of staffs to
bring new levels of excellence to the work and to customers. Tesco will be expected to invest
£200m in providing additional training and equipment to staffs to better equip them with the skills
and tools to serve customers well. These changes will be targeted at the larger stores and fresh food
departments like meat and chilled convenience food.
Besides, Tesco also plans to upgrade their existing stores by giving it a warmer feel and
attractive look. These refreshes will be targeted on the fresh departments as well as the service
counters. In 2012/2013, Tesco plans to refit or refresh some 430 stores with these new looks. With
the booming business of the online industry, Tesco will seek to reduce their new space in 2012/2013
by 38% compared to 2011/2012. They will also allocate their capital efficiently by decreasing
capital investment but will be focusing their expenditure on growing their existing stores with
priorities given to Express stores and also dotcom-only stores.
Gaining the first mover advantage, Tesco has positioned themselves to prosper in the online
industry. With the new Tesco Direct recently launched, Tesco hopes to shift customer shopping

9.
habits to online by doubling its offering range to 75,000 products and also fully integrating it in the
mobile devices for the first time. Tesco expects to invest £150million in upgrading the online
industry like creating 700 new Click and Collect points to offer more convenience for customers.
After good progress in Korea and Prague, Tesco will soon be launching another dotcom industry in
Warsaw. Tesco also hopes to accelerate growth by operating dotcom-only stores so that it can free
up more room for existing growth and extra 2 be added by the end of 2013.
As Tesco Bank's systems migration approaches its final stage of completion next month, it
has ensured that when it is done, it will be in a strategic position to deliver good growth. As 75% of
the Bank's business is done online, the new infrastructure would include some important customer
service improvements like instant decisions on loan application and the opening and funding of
savings account can be done easily within 10 minutes( previously 2 weeks). In 2013, the Bank is
predicted to offer the service of current accounts and mortgages. With these offerings, Tesco Bank
will be paving its way towards being a full-service bank to Tesco customers and will be able to
contend with mainstream banks(Adisa A.,2012).

Financial Forecasts for Tesco( 2012-2015)

Graph 1.1 Tesco Group Income Statement Evolution Graph (4-traders, 2012)

10.
 2012 2013f 2014f 2015f
£m £m £m £m
Group sales 72035 77366 83091 89239
Group revenue 64539 68164 72186 75012
Capital
3800 3300 3988 4283
Expenditure
Group trading
3761 3810 3859 3910
profit
Profit for the
2814 2966 3126 3295
year
Table 1.3

According to the forecast in Graph 1.1, the sales bar actually indicating the revenue of the
group is expected to increase from £65billion in the year 2011/2012 to an approximate £75billion in
the year 2014/2015 with an estimated average annual growth rate of 5.2%. In table 1.3, the group
sales in 2011/2012 is £72billion but with a constant exchange rate, the sales is expected to grow
until £89billion in 2014/2015 with an average annual growth of 7.4%. These increases are most
likely caused by the recent entry and potential growth in the Indian market. Besides, the promising
improvement in US soil also causes the group sales to increase as it has a total sales growth of
27.1% this year and also expected break-even to happen at the end of 2013.
From the Table 1.3, capital expenditure is expected to experience steady growth from
£3.8billion in year 2012 to £4.2billion in year 2015. But, during the year 2013, expenditure is
expected to decrease until £3.3 billion as there will be reduced new store opening in the UK instead
will be focusing on investment in existing stores and online(Tesco preliminary results 2011/2012).
Group trading profit and profit for the year will also be expected to increase steadily with an annual
growth rate of 1.3% and 5.4% respectively with comparison to last year's results as a baseline.

(Word Count- 2864 words)

11.
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