Tesco's Marketing Environment, SWOT and PESTLE Analysis

Introduction

Today, a number of retail grocery and general merchandise corporations compete at the global level, including Walmart, Carrefour, and Tesco. Although Walmart remains the largest retailer in the world, Tesco is fast acquiring market share in several regions, especially China. Moreover, the company's innovation in providing efficient products and services to its customers has given it a distinct competitive advantage in its core United Kingdom domestic market, where it remains the largest grocery retailer in the country. One of the main themes to emerge from this research is just how important Tesco is to its customers, with most simply taking the company's presence for granted.

To determine how Tesco achieved this impressive level of performance, this paper examines the company's proven track record of superior performance in a highly competitive industry in order to identify best practices as well as recent and current trends. The paper provides a review of the relevant literature to identify the company's competitive position, its financial performance, and its current brand strength and potential weaknesses. In addition, a summary of the company's micro and macro marketing environments — including marketing intermediaries, customers, and suppliers — is followed by an application of a SWOT and PESTLE analysis to Tesco's current situation. Finally, important findings concerning Tesco's marketing practices and likely future trends are presented in the conclusion.

The Marketing Environment: Micro and Macro Overview

Today, the retail chain Tesco PLC is the largest retail chain in the United Kingdom, with approximately 16% of the market share (Kita & Mazikova 2012). Not only is Tesco the leading retailer in the UK, it is also one of the top retailers in the world by annual sales, trailing only US-based Walmart and France-based Carrefour (Kita & Mazikova 2012). The company's first store was established in 1929 in North London (Ritson 2004); it launched its first superstore in Crawley, West Sussex in 1968 and its first petrol station in 1974, and by 1995 Tesco was the largest food retailer in the United Kingdom (Benady 2009). The company currently features four main store formats: (a) Extra, (b) Superstore, (c) Express, and (d) Metro (Ritson 2004). As Ritson (2004, p. 18) notes, "Throughout the 80s and early-90s, Sainsbury's had been the dominant supermarket chain. Tesco overtook it as the UK's biggest food retailer in 1995. The same year saw the introduction of Tesco's Clubcard, the UK's first customer loyalty card."

Tesco and its subsidiaries currently operate more than 6,200 stores in 13 countries besides the UK, including locations across Asia, Europe, and North America; however, approximately 50% of the company's operations are located in the UK (Kita & Mazikova 2012). The company's founder, Jack Cohen, established Tesco's original creed of "pile it high, sell it cheap," but the company's leadership has since evolved the business model from a discount format to a multi-format brick-and-mortar and online retailer (Kita & Mazikova 2012). The company's banners include Tesco Extra superstores; Tesco Express, Tesco Metro, and One Stop convenience stores; Homeplus hypermarkets and small express stores and online stores in South Korea; and Dobbies gardening stores in England, Scotland, and Northern Ireland (Tesco Business Summary 2013).

Established in 1919 by Jack Cohen from a market stall in London's East End (Tesco History 2013), Tesco is today headquartered in Cheshunt, United Kingdom (Tesco Business Summary 2013). The company's stated vision is comprised of five elements that define what type of company Tesco wants to be:

The company's stated seven-part business strategy for growth is as follows:

The US retailer Walmart launches dozens of new stores every year and continues to experience healthy year-to-year growth, but the market in Asia — and China in particular — is exploding, with retail sales doubling approximately every five years (Ward, Tripp & Maki 2013). According to Ward and his associates (2013, p. 82), "The result is unbridled competition, making it one of the world's toughest markets. Walmart, Tesco, Carrefour and Metro headline the foreign entrants. Japanese and Korean retailers are also pressing hard." Song (2012, p. 207) further emphasizes that in the burgeoning Chinese retail grocery sector, "Many Western retailers, such as Tesco, introduce high quality new products on a yearly basis, in competition with national brand manufacturers." At present, the five main retail grocery chains competing in the United Kingdom are Tesco, Sainsbury's, Asda, Waitrose, and Ocado (Leong 2013).

Marketing Intermediaries, Customers, and Suppliers

The company markets its goods and services through intermediaries that compete primarily in the retail grocery sector but also encompass other business units, including retail facilities and online services offering food items, clothing, electrical products, and general merchandise. The company also operates a banking, financial, and insurance services unit, as well as providing data analysis services and property and distribution operations (Tesco Business Summary 2013). According to the company's business summary (2013, p. 2), "With more than 530,000 employees worldwide, the company operates in the United Kingdom, China, India, Malaysia, South Korea, Thailand, the Czech Republic, Hungary, the Republic of Ireland, Poland, Slovakia, and Turkey." As of April 17, 2013, the company operated approximately 6,700 stores across these 12 countries, together with its extensive Internet-based sales operations (Tesco Business Summary 2013).

Notwithstanding the company's transition from a discount format to a multi-retailing business model, Tesco's fundamental business strategy remains offering customers the highest quality possible at the lowest cost possible. Childs (2002, p. 136) advises that "Underpinning Tesco's success is excellent management and an obsession with operational efficiency and productivity gains, which the company uses to keep prices low or to improve service rather than to increase its operating margins." Although Tesco remains smaller than Walmart in absolute terms, it has historically been growing more rapidly (Childs 2002). In the UK, Tesco customers are ubiquitous — even those who occasionally shop at Asda or Sainsbury's. As the editors of Marketing put it, "Most people like Tesco, as much as a vocal minority loathes it. Scoff if you like, but you scorn a nation if you do so. Who else gives Tesco £1 in every £7 spent?"

Although Tesco is characterized as a potential global competitor to Walmart, its main competitor for UK customers is Sainsbury's (Ritson 2004). In contrast to Sainsbury's comparatively bland brand positioning, Tesco is described by Ritson as "the world's leading example of 21st-century branding" (2004, p. 19). The Tesco brand represents a commitment to delivering total customer value throughout every aspect of its business, including its international expansion, industry-leading customer relationship management strategies, savvy supplier negotiations, ability to identify and develop new store locations, excellence in employer branding, private-label brand architecture, award-winning Internet strategy, brand extension strategies, and innovative public relations (Ritson 2004, p. 19). In sum, Tesco has "out-branded" its main competitor through brand positioning that places its commitment to customers at the centre of its approach to doing business (Ritson 2004).

The company's supply chain partners are increasingly being called upon to follow Tesco's lead in establishing and following environmentally sound business practices (Tesco Business Strategy 2013). In addition, Tesco has established more efficient ways to share product data with its supply chain partners. Legner and Schemm (2008, p. 120) emphasize that "A growing number of studies report that poor data quality, in particular outdated or wrong product information, negatively impacts the benefits that retailers and their suppliers pursue as they implement tighter forms of collaboration." In response to this challenge, companies such as Tesco have implemented the Global Data Synchronization Network (GDSN), introduced in 2004 as a superior approach to sharing product master data between retailers and their suppliers (Legner & Schemm 2008).

Conclusion

The research showed that Tesco is currently the leading retail grocery chain in the United Kingdom, with retailing operations extending worldwide across approximately 6,700 stores in 12 countries, supported by extensive Internet-based sales operations. With hundreds of thousands of employees, thousands of retail outlets, and a strong online presence, Tesco is well positioned to leverage its existing marketing infrastructure to promote its products and services in innovative ways — including its heavy use of social media to interact directly with customers and deliver its corporate goals cost-effectively.

Despite some criticism of the company's relentless pursuit of international growth, Tesco's leadership team has demonstrated a strong track record of analysing potential markets and identifying the most appropriate store format for each. In the final analysis, Tesco PLC is a highly diversified global corporation that has set a benchmark for others competing in the retail grocery and general merchandise sector. However, the company will face increasingly difficult cross-cultural management and marketing challenges as it continues to pursue growth in new markets around the world.