Tesco's Marketing Analysis



Tesco's Marketing Analysis

Tesco is the market leader in grocery retail market. They have attained this position by using their competitive advantage to compete on grounds of pricing and distribution strategies. Tesco also sustains its competitive advantage through strategic competitive pricing and product portfolio expansion to maintain its position.

Tesco's Marketing Environment Analysis

Following are the dynamic business environment factors that affect the marketing decisions of Tesco:

Macro Environment Factors

Political and Legal Factors

The UK Government encourages fair business practices and competition; this affects Tesco in the following manner:

The laws and regulations introduced by the Government are affecting the rapid growth of Tesco. According to OFT- Office of Fair Trade, in 2007 Tesco was involved in anti-competitive practices, in the prices of milk, and thus, was heavily fined. This affected Tesco's margin and discounter strategy by limit their profit maximisation.

Tesco uses land holdings to hinder competition by buying land in large size so as to prevent its rival from competing with them. However, the land commission has introduced a law that prevents super stores from banking lands. Tesco, therefore, will not have exclusive stores' locations anymore.

Economic Factor

Since UK economy is undergoing a decline due to the credit crunch, the average disposable income level has gone down in the country. This has instigated more savings than consumption. Tesco has had the worst UK sales performance level due to the heavy discounter strategy it employs. Tesco is experiencing the adverse effect of the recession as in order to make their products affordable for consumers they have to reduce their profit margins.

Socio-Cultural Factors

Due to the credit crunch in order to reduce expenditures and because of healthy eating, people buy health foods at supermarkets as it is more affordable. This has increased Tesco sales volumes, as they offer lower prices than their rivals. They spent £4million on advertising their affordable pricing in 2007 and gained goodwill in the market.

Technological Factor

Tesco has used the technological advancement to its benefit by exploiting the business opportunities it presents and gaining a competitive edge, as a result. Their online shopping is one example of this, as they account for 66.2% of the online food and grocery shopping in UK.

Environmental Factors

Tesco has used the concept of recycling to appeal to its target market as an environmentally responsible organization. The announced £500m five years plan for environmental initiatives. Also, their delivery services' fleet has zero emission vans.

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