STRATEGIC PLANNING: TESCO
Table of Contents
Strategic Marketing Planning………………………………………………………..4
The Case of TESCO and ASDA……………………………………………………...7
Analyzing the competition
The ability of a business to stay in the industry is one measure of the business success. This means that being able to survive is a necessity and survival translates to the ability of a business to compete. Since the 1980s, marketing strategies have played key roles in planning to overcome challenges. It is believed that this line of thinking will continue to direct the activities of business into the 21st century ( 1999). In addition, it is also believed that good managers have the ability to formulate and implement competitive strategies. This is the case since competitive strategies have the capacity to make the business organization stand out among the sea of competitors within the same industrial sector. Therefore, competitive strategies can ultimately aid business organizations in increasing their profitability and achieve their goals. The following sections of the paper will be discussing the rationale behind competitor analysis. In addition, how competitor analysis can help in ensuring the survival of a business organization will also be tackled.
In order to present the theories in a more practical manner, a specific industry will be used as an example. Doing so will allow the paper to present the theories in action and how they work in real business situations. For this particular paper, the chosen industry is the food retail industry. One of the reasons behind the proliferation of groceries and public markets can be attributed to the introduction of money, making the evolution of the grocery dependent on economic changes as well as settlement patterns of people ( 1993). Along with these changes, the nature of grocery stores also changed. Mass production of food products affected the grocery trade tremendously since they would no linger have to depend on local and regional food supplies. During this time, the storekeepers solely carry out the management of store including serving the customers’ needs on top of keeping an eye on wholesales and barter trade.
The convenience that grocery stores offer to the public can also be considered as one of the stores’ positive attributes. Being able to buy all of the things needed in just one-stop sure makes these retail stores an attraction for the consumers. However, the concept of convenience is not the only focus of grocery nowadays. To be to able to compete grocery stores must be able to find ways of at least maintaining their customer base, customer retention, before tackling the task of attracting new ones. In addition, in order to this, most store managers use the concept of customer satisfaction as the basis of implementing store regulations. Providing total shopping experience is seen as one way of pleasing the customers. This process involves the offering varied products and services that will be more valuable to the consumers.
One of the leading food retail companies is TESCO. It is one of the biggest supermarket chains in the United Kingdom employing 195,000 staff in UK and 260,000 worldwide. They have 979 outlets worldwide, in South Korea, Thailand, Taiwan, Czech Republic and Slovak Republic, 729 of which are in UK. TESCO is estimated to be enjoying 16.7 percent of market shares (). However, TESCO is still aware that they must be able to maintain their competitiveness if they are to continue experiencing success. This means that the company acknowledges the presence of competition and they are also aware that competition needs to be taken seriously. What makes competition such as integral part of the business cycle? How does competition affect the overall performance of a business? These are some of the questions that this paper will attempt to discuss.
Strategic Marketing Planning
Strategic marketing planning is defined as an organization-wide planning as a way of responding to market opportunities, external environment and target audiences; when doing strategic marketing planning, the decision must be in line with the mission, vision, internal strengths and resources available to the company ( 1992; 1996; 2003; 2003). It has been stated that strategic marketing planning takes place in the context of corporate planning ( 1985; 1985; 1992; 2003).
This may be the case since strategic management is an organization-wide task. Corporate management is process of leading an organization by deploying and manipulating resources. As such, strategic management, which includes strategic marketing planning, takes place in the context of the corporate planning. In addition, the analyses being performed include the investigation of the internal weakness and strengths of the company in relation to the competitors. This means that the whole organization is involved in the process. Aside from investigating the weakness and strengths of the company, strategic positioning is also and important aspect of strategic marketing planning ( 1996; . 1998;2001).
According to (2003), strategic positioning is the process that allows organizations to develop a level of positioning, whose objective is to differentiate the organization from others within the same field or industry. This means that strategic positioning will allow organizations to have a competitive advantage over their rivals. However, once competitive advantage it does not ensure the continued success of the organization. It should be the goal of business organization to be able to achieve a sustainable competitive advantage ( 1985). This will allow them to be one-step ahead of their competitors.
According to (2000), competition is important since it affects the success of a business venture. added that competition is more than just producing and distributing products and services that matches the needs of the consumers. Competition is about the company’s capability of positioning itself in the market so that they will stand out among the rest in the perception of the consumers.
Therefore, it is important to know the factors that help in shaping the perception of the consumers towards certain products and services. On way to do this is to implement a PEST analysis. PEST stands for political, economic, socio-cultural and technological forces. These factors affect business through the consumers. Since these factors help in shaping the perception of the consumers, it suggests that it also affects the purchasing behavior of the market base.
Business can also use Porter’s Five Force and SWOT analysis to understand the competition. SWOT analysis is one of the widely accepted and used strategic tools. It is success is attributed to the fact that it is straightforward. This makes the tool easy and simple to use. The objective of the SWOT analysis is to determine the presence of factors that will help the business in achieving its goals as well as factors that will hinder its improvement both internally and externally. In doing the SWOT analysis, the company will be able to match the resources and their capabilities with the competitive environment.
On the other hand, Porter’s Five Forces Model implies that business are being influenced by five forces namely supplier power, threat of substitutes, buyer power, barriers to entry and rivalry. This model also implies that business must be able to understand the industry context in which they operate. This must be done in order to better design the strategy that the business will use to be able to compete with rivals within the same industry. It is important for businesses to determine the level of competition present within the industry. This will allow them to address potential risks before they even strike.
The Case of TESCO and ASDA
In the case of TESCO, their main competitor is ASDA. The competition is tight between the two food retail companies as well as with others like Sainsbury. ASDA is owned by Wal-Mart the largest grocery chain in the United States. They are known for low priced items. This is one of the reasons why people tend to go to their stores for their shopping needs. When they expanded in the United Kingdom, they brought with them their cost leadership strategy. This resulted to the same success that they have in the United States. However, TESCO was able to thwart ASDA last year. How was TESCO able to overtake ASDA?
According to (1985), a business positions itself based on its strengths and strength are categorized into two – cost advantage and differentiation. Furthermore, when these strengths are applied in either a narrow or a broad sense, it will result to three generic strategies – focus, differentiation and cost leadership strategy. Of the three generic strategies, cost leadership strategy played an important role in the achievement of TESCO’s competitive advantage over ASDA.
Cost leadership strategy means that the company is the low cost producer or provider of a certain quality item in a given industry. This kind of strategy is being implemented for two reasons and achieved through two ways. The first method and reason is to sale items at average industry price so that the company will be able to be more profitable compared to rivals. The second method and reason is to sale the products at below average industry price in order to gain market share. According to (1985), a company that has the ability to produce or offer less costly products will be able to remain profitable for a longer period. It is important to note that this strategy targets a broad market.
These conditions were used by ASDA to their advantage and the results showed that it worked for them. TESCO is operating under the same conditions as ASDA. Theoretically, the cost leadership strategy should work for them too. When TESCO implemented the cost leadership strategy, they were able to prove that the theory is correct. In 2005, The Grocer published that TESCO was able to increase their market share from 26.8 percent to 29.1 percent (cited 2005) . However, if TESCO and ASDA were operating under the same condition how TESCO able to overcome ASDA just by implementing cost leadership strategy? It must be remembered that TESCO has always been a UK based grocery and they have been operating longer in the region compared to ASDA. This means that have an established market base before the entrance of ASDA. When the latter entered the scene, they were able to capture some of TESCO’s customer due to cost leadership strategy. Therefore, when TESCO implemented the same strategy they were able to regain their lost customers.
Based on the above discussion, it is clear that competition allows business organization to plan strategies that will allow the company to gain a lead and thus improve their services or products, which are both, beneficial to the company and the consumers. In order for this to be achieved, the company must know who their competitors are as well as the strategies that their competitors implement in order to gain profit and market share. Acquiring these details allows companies to formulate their own strategies or copy the strategies of their competitors, which ever is more beneficial. The importance of competition analysis and strategic marketing planning has been illustrated in the case of TESCO versus ASDA, where the former was able to gain competitive advantage by copying the strategy of the competition.
In this light, it can be stated that the object of the paper to present the importance and impact of competition on business has been met. This was done through the discussion of the underlying theories and practices in relation strategic marketing planning.
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