SWOT and PESTLE Analysis of Tesco - Essay Example

Global & International Business Contexts Table of Contents Part A 3 Introduction 3 Tesco, Plc 3 Strategic Management of Tesco 4 SWOT and PESTLE Analysis of Tesco, Plc 5 Market Entry Strategy and Target Customers 10 Marketing Objectives 12 Marketing Strategy 12 PART -B 15 References 17 Bibliography 19 Part A Introduction Global marketing stands to complete one’s commitment to the international market, applies the organization’s assets, experience & products in developing marketing strategies on a world wide basis. Every organization opts for marketing strategies to build their product & services better, which would enhance their competitive skills in the market. New strategy formulation is needed on the basis of current data analysis of market, advantages & disadvantages of the management, product, services and etc. Tesco, Plc Taking the case of Tesco Plc, one of the largest retailers of the world, one can find that the company has more than 2,300 supermarkets & convenience stores and has employee strength of 326,000 people. Tesco’s main business is located in Great Britain, where it is the largest private sector business house in United Kingdom and also has the largest food retail business, has more about 1,900 stores (Tesco, n.d.). In continental part of Europe, Tesco have businesses in Czech Republic, Hungary, Poland, the Republic of Ireland, Slovakia, and Turkey. In Asia, this company has business in Japan, Malaysia, South Korea, Taiwan, and Thailand. It also has financial services known as Tesco Financial Services that have 4.6 million customers which is roughly divided into credit card holders and car insurance policy holders. It also has 100-unit Tesco Express chain, due to which the company is ranked as the largest seller of gasoline in United Kingdom. It also has small urban stores known as Tesco Metro and hypermarkets known as Tesco Extra. It is now expanding its business with a TV channel and a "retail based education institution”. Strategic Management of Tesco The SWOT and PESTAL analysis show that Tesco currently has the resourcing capabilities to introduce the baby wear segment in the market and able to implement a market developing strategy built on the success of its stores in the country. Tesco targets the high-end marketing segment with the differentiation strategy. It opts for introducing a segment of baby wear in Sweden, although there numerous stores operating in Sweden. The current report, using PESTLE and SWOT analysis, will analyze Tescos situation in market and that will be a valuable information for the management team to opt for the correct and definite strategies mainly in corporate level and international level which relates to introduce designer baby wear for infants & toddlers in Northern Europe i.e. Sweden. This report shows that how Tesco tend to diversify market and will also handle its own corporate portfolio. SWOT and PESTLE Analysis of Tesco, Plc SWOT Analysis A SWOT analysis would provide a detailed view of the internal and external factors relating to Tesco. The key factors relating to strengths, weaknesses, opportunities and threats for Tesco in Sweden can be as follows: Strengths. 1. Awareness of brand 2. Having a strong financial background Weaknesses 1. Lacking in local knowledge 2. Foreign Brand Opportunities 1. Awareness of brand growing globally 2. Innovation and alliances SO WO Threats 1.Already having competition 2.High Competition for customers and resources ST WT Taking into consideration the strengths to make most of the opportunities (SO) Tesco already have a strong home brand which is known throughout Europe as because of the existence of the expansion program. Tesco can build strength of its brand by joining with a leading Swedish manufacturer of childrens clothing and a joint promotion opportunities will occur for both Tesco and the Swedish company concerned. Tesco has a good financial background; in that case they can afford well for expansion plans incorporated with marketing programs. Now considering the opportunities overlaps the weaknesses, so as to achieve SO: Tescos increasing brand awareness throughout Europe can overcome the laggings of local knowledge with the help of local Swedish managers to run both the stores, and will also recommend the location by having their presence in local marketing. In collaboration with Swedish cloth manufacturers and building local knowledge of local populations size and buying habits, that can be a win-win situation for both the companies. In removing the prime factors of threats and applications of the strengths: The existing competition in Swedish market shows that Tesco will have to use their financial resource to build and remain in a high profile and will have to use multi level marketing campaign to raise both, the profile of Tesco in Sweden and introducing the theme of superior quality childrens clothes at Tesco (University of Wisconsin, 2008). External Environment - PESTLE Analysis A PESTLE analysis was done to examine the local, national and international influences of political, economic, social and technological factors and also to know the opportunities and threats as well (Purdue University, n.d.). This assumption regarding the political, economic, social, technical, legal and environmental factors will apply to some extent to the retail industries in Sweden. Political – Taking into consideration the European integration and Free Trade Agreements, the market is open for the British Companies to invest in Eastern European countries. Tesco has 60 hypermarket stores located in Hungary. Lidl is fighting to sustain its market share along with an aggressing pricing strategy. Economical - Retail section is fairly recession proof and is also sensitive subject to changes in interest rates. Since 9/11, the economies had suffered heavily; stocks and prices have been kept low. However, the world economy has regained. Consumers are optimistic in nature and retail industry is picking up again. Social - Changes occurred in consumer’s taste and lifestyle shows both the opportunities and threats for the industry. Opportunities arise due to new markets and consumers, and threats due to the substitutes introduced by the Swedish national retailers. Technological - Abrupt changes in retailing methods like the selling of clothes through internet is common in retail sector. A paperless job, the management of the company are undertaking IT systems, which are accessed by secure servers; providing flexibility in running the business. As Sweden is technologically advanced with renowned companies like Ericsson, Tesco will enjoy the already placed comprehensive logistical and distributive channels. Legal - Sweden has a National legislation regarding the health and safety for consumer rights and also in producing their own renewable natural resources for developing clothes and the onus lies on Tesco to abide by it. Environmental - The renewable resources used mainly in production with cotton and wool are eco friendly and the company will have positive remark in the environmental segment. Market Entry Strategy and Target Customers Ansoffs product / market matrix shows the direction of Tescos strategic development. This matrix depicts the strategies available to Tesco in products and market line, along with its strategic capability and expectation of stakeholders. Products Existing New Markets Existing Protect/build Consolidation Market penetration Product development With existing capabilities With new capabilities Beyond current expectations New Market development New segments New territories New users With new capabilities Beyond current expectations Diversification With existing capabilities With new capabilities Beyond current expectations The above diagram, shows that Tescos launching of baby wear in Sweden involve a market developing strategy. Tesco already has a set market in childrens clothing but Sweden would be a new market. In todays green environment childrens clothing made from renewable sources is a new slant on the product category and that can be exploited in other market segments and countries. Tesco might encounter certain difficulties in terms of expectations for the clothes of the prospective customers as they currently supply through their stores that are depicted as affordable daily wear whilst the new range would be aimed at the high end quality of the market. Tesco may not be seen as a credible ‘mainstream’ supplier of quality clothing. The competition in low cost market is intense, as profits are low and market entry costs are high, Tesco should move to high-end market along with a differentiation strategy, which will be harmful for the Swedish criteria of making clothes from renewable sources like cotton and wool and emphasizes on the eco friendly approach. Marketing Objectives The broad marketing objectives of Tesco can be the below mentioned: Profitability of 10% in terms of operating margin About 20% target in Swedish market share Customer advocacy Employee motivation Tesco must take “SMART marketing style in accordance to the needs of the audience, measurable, attainable, relevant, time limit Marketing Strategy Tescos strategies are clear and concise; taking four areas into prime consideration – UK’s grocery business, international expansion, retailing services like financial services, site business and telecommunication packages. Tesco is strong & stable in nature, to maintain in order to maintain the business in the risky areas. The marketing strategy will be analyzing the markets, by determining the products’ quality, age range, size, fashions and marketing seasons. For export to other Tesco shops in neighboring countries, the company should have a laid down policy. Tesco may introduce a range of eco friendly clothes which will be exported throughout Europe. Tesco decided an entry into Swedish market mainly in their own stores, selling via Internet or a joint venture with already existing national retailer. Tesco need to cover many methods of distribution. Tesco promotes the theme of global message, that all day to day products are found in one retail stores. According to PESTEL analysis, Sweden is technologically advanced and so internet shopping option can be popular, for busy people and also for those people who live in remote areas. The road and transport infrastructure is good, so that the delivery segment of the business will not let them down. Using IT technology, warehousing and distribution techniques are automated. While entering the children’s market, high end campaign should be opted. The promotions would be expensive as the SWOT analysis emphasized Tescos financial security. Such a campaign will consist of TV & radio advertisement at regular intervals all the time of the day. Advertisements in both national and local papers. Media PR - Issuing press releases with the alliance partner on both national and regional TV/ radio about the benefit of Tesco with special emphasis to Swedish market. Political PR - Introducing an eco friendly range following Swedens strict policy will increase the profile of Sweden within Europe leading in eco friendly policies and even the United Kingdom encouraged such political issues on green during the recent election campaigns. Billboard campaigns Internet advertisements Direct marketing to known customers. PART -B Cultural Intelligence (CQ) is a function which is effective in situations related to cultural diversity. It mainly deals with those people who communicate with other people having different cultural backgrounds from different countries. It is also applicable for those people who have multi-cultural settings and believes in diverse religious faiths or are brought up in another country (The Cultural Intelligence Center, n.d.). International adaptability of an organization depends mainly on the market structures, demand & supply of the product among other factors. Team work is the significant part of an organization before taking any important decision about any segment; it provides all the vital data and information with the current market situation. Without such analysis, all the effort of the company goes in vain. In order to have a strong and efficient team work, important factors for consideration would be good leadership, clear communication skill, establishing roles, having a definite strategized aim, conflict resolution and etc (Article Base, 2008). For example, numerous case study approaches were used for focusing on U.S. franchise firms who have adapted their local business to Canada, Japan, and Russian markets with special focus on the modified franchise objectives, expansion strategies, marketing mix elements, control systems and support services. Findings of this project were that how fast-food companies extend their domestic franchise strategies to foreign markets while expanding internationally. However, they are adaptive in areas of franchise objectives, expansion strategies, control systems and support services. It was found that triumphant fast-food companies do not replicate their domestic franchise formula in a foreign market. There are a number of business and practical issues which they consider in deciding how much of their domestic formula should be altered so as to adjust to the characteristics of foreign markets. Factors related to expansion are domestic market saturation, the pressure of competition, and opportunities available in foreign markets. The firms analyzed in this study managed their own units, and were engaged in joint ventures and strategic alliances, rather than franchise through licensing (Sadi, 2002). Organizations in international & national level, organize themselves in such a manner so to adapt themselves in any situation or any field. Taking into consideration, the international market, they always look into matters relating in external & internal environment, adaptability of the organization in the market regarding the new launch of their product or their future assessment of their present product. After the launching of new product in the market, the product’s adaptability in such environment, taking in minds the needs & satisfaction of the consumers shows in the trend of the market. Cultural Intelligence is the main part related to this segment, before launching the product in different market of different nation, they have to look into the culture of the nation, with their taste & preferences. International Adaptability is another main component of an organization regarding their stability in the market internationally. Without having Strong Team work in an organization, it is not possible to take new market risk, with lots of capital investment, strategies, analysis of market, product & services. Changes prevailing in market, in its share, economy, inflow of foreign direct investment, more exports than imports and etc. References Article Base, 2008. The Importance of Teamwork. Team Building. [Online] Available at: http://www.articlesbase.com/team-building-articles/the-importance-of-teamwork-381813.html [Accessed May 08, 2010]. Purdue University, No Date. PEST Analysis Template. Subject of PEST analysis. [Online] Available at: http://web.ics.purdue.edu/~pbawa/421/PEST%20Template.htm [Accessed May 08, 2010]. Sadi, M. A., 2002. Adaptability of American Fast-Food Franchise Systems in International Markets. Journal of Restaurant & Foodservice Marketing. The Cultural Intelligence Center, No Date. What is Cultural Intelligence? Home. [Online] Available at: http://culturalq.com/ [Accessed May 08, 2010]. Tesco, No Date. Our History. About Us. [Online] Available at: http://www.tescoplc.com/plc/about_us/tesco_story/ [Accessed May 08, 2010]. University of Wisconsin, 2008. SWOT Analysis. University Library. [Online] Available at: http://library.uwsp.edu/admin/Self%20Study/Final%20SWOT%20f.pdf [Accessed May 08, 2010]. Bibliography Babson University, 2009. Overview. PEST & SWOT Analysis. [Online] Available at: http://libguides.babson.edu/PEST-SWOT. [Accessed May 08, 2010]. Dess, G. & Taylor, M. Strategic Management: Creating Competitive Advantages. Mcgraw Hill Book Co, 2004. Forlani, D., No Date. Strategy & Decision Tools, University of Colorado – Denver. [Online] Available at: http://carbon.cudenver.edu/~dforlani/PPT/strategy%20chs%202%20and%2010.ppt. [Accessed May 08, 2010]. Hills, C. & Jones, G. Strategic Management: An Integrated Approach. Cengage Learning, 2007. Humby, C. & Et Al. Scoring points: how Tesco continues to win customer loyalty. Kogan Page Publishers, 2007. Instituto de Empresa, No Date. Tesco: Every Little Helps. Tesco History. [Online] Available at: http://profesores.ie.edu/enrique_dans/TESCO/TESCO.pdf [Accessed May 08, 2010]. Jorgensen, M., No Date. Tesco.com: “How do they do it?” Pacific Lutheran University. [Online] Available at: http://www.plu.edu/~jorgenmr/doc/tesco-how.doc. [Accessed May 08, 2010]. Mariano Marcos State University, No Date. SWOT Analysis. Beginner’s Level. [Online] Available at: http://cbae.nmsu.edu/~dboje/sbc/pages/page3.html [Accessed May 08, 2010]. Punn, S., No Date. Managing in Turbulent Environments. Singapore Institute of Management. [Online] Available at: http://www.sm.au.edu/uploadfiles/1249459303_Managing%20in%20Turbulent%20Environment.pdf [Accessed May 08, 2010]. Read More