How Does Tesco Maintain Its Lead in the Online Grocery Market - Case Study Example

? How does Tesco maintain its lead in the online grocery market? Introduction The growth and development of the new information and communication technology (ICT), particularly the internet, has dramatically changed the way people conduct business during the contemporary period (Haag, Cummings & Dawkins, 2006). For instance, the internet has significantly improved the way individuals and organisations exchange information, as well as conduct their business. Through the use of the internet, it can be noted that consumers now have the opportunity to evaluate their choice with regards to products offered and the marketers, on the other hand, are also capable of reaching a wide range of people at a faster pace regardless of the geographical gap that may exist between the parties involved (Antion, 2005). Against this background, this essay seeks to critically evaluate the measures implemented by Tesco in order to maintain its lead in the online grocery market. The paper starts by outlining the historical background of the supermarket chain; this is followed by a detailed analysis of how it harnesses the use of the internet in its operations. Background information about Tesco According to Datamonitor (2004), Tesco PLC is the largest food retailer in the UK and it operates around 2,318 stores worldwide where 1,878 stores are located in the UK. The supermarket chain also operates stores in the rest of Europe and Asia and it is headquartered in Hertfordshire, the UK. The company is comprised of 367,000 employees worldwide (250,000 of them in the UK), sales of more than ?37billion and it has an estimated 30 % of the market share in the grocery industry in the UK. However, Paton (2005) suggests that Tesco now ranges far beyond food, given that it now offers services which include “banking, flower delivery, online diets, legal advice, DVD rental and telecoms.” Tesco prides itself in training and retaining talented workers despite criticisms by other sectors of the society. Technological factors Technological development in ICT has immensely contributed to the positive growth of the organisation, especially through the use of the internet. For instance, online shopping has significantly improved the operations of the organisation given that the bulk of its customers can conduct their business in the comfort of their homes. The supermarket chain has fully harnessed the use of the internet in its online grocery market. The supermarket chain is comprised of Tesco.com, a wholly-owned subsidiary offering a complete online service, including tescodirect.com and tesco.net (Datamonitor, 2004). The company is also in a better position to maintain its lead in the online grocery market because it offers a range of online financial services. According to information obtained from (http://www.essaycoursework.com/modelanswer/business/help/pestle/tescos.php, ND), Tesco.com is regarded as the world’s biggest online supermarket and it is believed that it generates sales worth over ?577 million every year. There are different factors that contribute to the success of Tesco’s online business. Specially designed website Through the use of a specially designed website, Tesco is able to appeal to the interests of many customers as possible regardless of their geographical location. It acts as a global store whereby people from all corners of the world can make purchases online which is a great advantage for the organisation. The other reason for its success in online business is that its website has a catalogue of every product offered, which makes it relatively easier for the customers to do online shopping in the comfort of their homes without any hassle. The website is user friendly given that it is easier to navigate in search of different products. Research has shown that there are more than one million households that use the company’s online services across the whole world and this is seen as a competitive advantage to the company since it is better positioned to receive more revenue from its operations (Datamonitor, 2004). Tesco also uses the technique of reducing prices in order to appeal to the interests of a wide range of online shoppers across the globe. This is meant to waive the tight competition that exists in the retail industry in the UK. Periodic market research The internet allows the organisation to carry out periodic market research which helps it to stay abreast with the needs and interests of the customers. Through the effective use of the internet, it is easier for the company to gather information about the needs of the customers which is very important for its survival. Essentially, marketing is concerned with satisfying the needs of the customers profitably (Lamb, 2008). Information gathered is then used in the development of the products with the aim of satisfying the needs of the customers. According to information obtained from (http://www.essaycoursework.com/modelanswer/business/help/pestle/tescos.php, ND), the UK is a multicultural country as a result of increased immigration from different countries. It can be noted that the customers in the UK in particular have varied tastes and Tesco tries its level best to satisfy the needs of different people. Through careful market research, Tesco is in a position to appeal to different segments of the market. Research by Datamonitor (2004) has shown that there has been an increase in the number of young professionals over the recent years and this has also resulted in an increase in the demand for readymade food and the supermarket chain has positively responded to such kind of demand. Thus, it can be observed that the company’s ability to gather information through its online services has enabled it to be in a better position to offer products that are satisfactory to different tastes of different customers. Creation of value chain online Kottler (1999) posits to the effect that in order to keep pace with the changing value systems of people, information is required. Consumer tastes are not static, hence, there is need to constantly create value which is meant to appeal to the interests of the customers. This is mainly concerned with attempting to establish what the people actually want and why they want it. It can be noted that Tesco has been able to maintain its lead in the online grocery market through its endeavour to create value among its customers. Research entitled ‘Tesco has launched a Fairtrade grocery range of 15 products and this move highlights the growing consumer demand for higher ethical standards from retailers and producers’ by Datamonitor (2004) shows that the company has effectively utilised its online services to appeal to the interests of the consumers through value creation. The consumers are also concerned with deriving emotional benefits that could make them feel satisfied from consuming certain products and Tesco has pursued this strategy through the effective use of the internet to market the launched Fairtrade products. This differentiated its products in the market which was also a source of competitive advantage. It can also be noted that research has shown that Tesco is the only supermarket chain in the UK which has attempted to pursue growth strategies in overseas markets through value creation of different products offered to the customers. Responsiveness to the customers Tesco is responsive to the needs of the customers given that its online services are available for 24 hours a day. Customer queries can be responded to at any given time of the day and this has greatly enhanced the creation of mutual understanding between the organisation and its customers. Transactions are also done online throughout the day and this has enabled the company to establish a long lasting relationship with the customers. This is a big competitive advantage because business can be done at any given time from any place. The company’s delivery system is very effective given that all deliveries can be tracked online. This has greatly helped in booting confidence among the customers as they have gained the much needed trust that they will get their goods once the transactions have been finalised. Products purchased online can also be delivered to the customers in different parts of the globe which is unusual in the retail industry. This has enabled the company to enjoy more sales from different customers across the globe and this significantly contributes to an increase in the revenue generated by the organisation. Through the use of the internet, the marketers of the organisation are better positioned to communicate directly with the customers and have significantly contributed towards the creation of loyalty among them. The viability of an organisation mainly depends on its ability to retain them. This is one important aspect about the operations of Tesco through its online services. Loyalty programmes It can also be seen that the organisation has loyalty programmes that are conducted online. This is a very effective strategy given that the customers will develop a strong sense of identity towards the organisation given that their needs and interests will be catered for. For instance, Tesco has a programme which is meant to appeal to the interests of the customers through offering discounts to new products offered to all the people in their database. According to research conducted by Datamonotor (2004), all customers in the company’s database are contacted through their e-mails in the event that there is a new product being launched. Price discounts are also offered to existing customers so as to enhance loyalty among them. As illustrated above, the fifteen Faitrade products offered by the company are designed to appeal to the interests of the customers. Thus, loyalty among the customers entails that they will make return purchases which is advantageous to the organisation. Establishing a long lasting relationship with the customers is always advantageous in that the organisation will be guaranteed of generating more revenue in the long run. Through the use of new ICT, it becomes easier to manage the database of the company which gives it a competitive advantage. In this case, it can be noted that Tesco is on top of other retail supermarkets in terms of its online shopping as a result of the fact that it has a large database of customers covering a wide range of people from diverse backgrounds across the globe. Customer relationship marketing is very important during the contemporary period as it seeks to establish a long lasting relationship with the customers. Customers form the foundation of an organisation that is concerned about making its profits. As such, it can be noted that Tesco makes an effort to stay in touch with the customers through conducting periodic surveys online in order to get their views about the products offered. This has significantly contributed towards the creation of a long lasting relationship with the consumers which contributes towards its sustainability in terms of online shopping. Another important aspect is that Tesco tries to operate in an ethical fashion and all the customers are treated as valuable assets to the assets to the organisation. Failure to establish mutual understanding between the organisation and its customers may be detrimental to its operations. Conclusion Over and above, it can be noted that the internet has revolutionised the way organisations carry out their business during the contemporary period. For instance, communication through the internet is fast and effective and it allows the organisation to reach a wide range of people from different parts of the globe instantly. A critical analysis of the operations of Tesco carried above shows that it has managed to maintain its lead in the online grocery market through the implementation of various strategies that are meant to appeal to the interests of its customers. Basically, Tesco is regarded as the largest retail supermarket in the UK and it also operates in different parts across the globe. Through the effective use of its online shopping, Tesco is in a better position to conduct market research with the aim of satisfying the needs and interests of the customers which is the essence of marketing. The organisation is also able to appeal to the interests of many people through the use of a specially designed website which is comprised of all the information about the products and services offered. The other important aspect about Tesco’s online shopping strategy is that the organisation is responsive to the customers and it also attempts to create value chain among the customers through loyalty programmes. All these factors have significantly contributed to Tesco’s dominance in the online grocery market. References Antion, T., 2005. The ultimate guide to electronic marketing for small business, John Wiley & Sons, New Jersey: NJ. Datamonitor, 2004. TESCO PLC Company Overview, Viewed, 04 May, 2012, Haag, S., Cummings, M. & Dawkins, J., 2006. Management information systems for the information age, 2nd Edition, Irwin McGraw-Hill, Boston. Kotler, P., 1999. Kotler on Marketing: How to create, win and dominate Markets, Free Press, London. Lamb, C.W., 2008. Marketing, Oxford University Press, CT. Paton, N., 5July 2005. Supermarket sweep: Tesco, Viewed 06 May, 2012, PESTEL analysis for Tesco, ND, Viewed 04 May, 2012, . Read More