Tesco Plc

Marketing and Analytics

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Table of Contents
Introduction................................................................................................................................3

Tesco - Company Profile...........................................................................................................3

Context Analysis........................................................................................................................4

Internal Analysis....................................................................................................................4

Strategy..............................................................................................................................4

Culture................................................................................................................................5

External Analysis...................................................................................................................7

Consumer Trends...................................................................................................................7

Competitors............................................................................................................................8

Environmental Analysis.........................................................................................................9

Political Factors..................................................................................................................9

Environmental Factors.......................................................................................................9

Marketing Communication Strategy........................................................................................10

Communication strategy......................................................................................................10

DRIP Model.........................................................................................................................10

Segmentation........................................................................................................................11

Targeting..............................................................................................................................13

Positioning Map...................................................................................................................13

Peer Analysis 650 words..........................................................................................................14

Conclusion................................................................................................................................14

References................................................................................................................................15

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Introduction
The present study presents the analysis of the marketing strategies and related analytics of
one of the largest supermarket brands in the UK that is Tesco. In the current report, the
analysis has been executed to determine the implications of the various internal and external
factors on the functioning of the company along with the analysis of the environmental
factors. Further, the communication strategy wherein models like the DRIP and the STP have
been used to critically analyse the same. Also, a peer analysis has been conducted for Tesco
in which the performance of the company has been analysed against the performance of 5
other competitor brands.

The purpose of this analysis is to understand the marketing dynamics related to Tesco thus
gaining comprehensive knowledge about the brand.

Tesco - Company Profile

With its headquarters in Welwyn Garden City, the United Kingdom, Tesco is one of the
largest brands operating within the supermarket industry in the UK and across the globe. The
company was first established in the year 1919 and it became online in the year 2000 with the
launch of Tesco.com [CITATION Tes216 \l 16393 ]. The ‘Everyday Value’ concept by the
brand was first launched in the year 2012 [CITATION Tes216 \l 16393 ]. The company has
been serving millions of consumers globally every week through a workforce of 400,000
colleagues [CITATION Tes19 \l 16393 ]. The company has a strong online as well as
physical presence in the UK and other nations.

The key financials of Tesco Plc have been depicted in the figure below:

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Figure 1 Key Financials of Tesco Plc, 2020

Source: [CITATION Tes215 \l 16393 ]

From the key financials in the above figure, it can be derived that though the group sales of
Tesco have declined the overall profitability of the company has improved. The most
significant trend impacting the supermarket industry in the UK at present is technological
advancement. The widespread penetration of the internet and smartphones have motivated
consumers to resort to digital marketing practices (Alliance Experts, 2021; Mintel, 2020b).
The ongoing pandemic has further accelerated this growth rate. Tesco has been boosting its
online sales and in the current situation aims at generating 77% of its sales from e-commerce
platforms [ CITATION Mar211 \l 16393 ].

Context Analysis
Internal Analysis
Strategy
The strategy of Tesco is driven by its approach towards the achievement of lower costs and
endowing the consumers with enhanced cost-benefits. Using Porter's Generic Strategy
Model, thus it can be derived that Tesco has been operating with a strategic approach of
being a cost-leader. According to this strategy the company has been catering to a wider

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consumer segment with lower prices. However, in recent approaches, the company has been
making efforts to generate value for money for its customers thus offering them differentiated
products at affordable prices.

Figure 2 Strategy of Tesco

Source: Adapted from [ CITATION Isl203 \l 16393 ]

The overall strategy of Tesco is based upon six strategic drivers namely:

 Developing a differentiated brand

 Generating more cash from its operations
 Minimising operating costs
 Developing sustainable profitability and increasing margins
 Maximisation of value related to properties
 Support innovation

[CITATION Tes192 \l 16393 ]

Culture
Based on the Hofstede model, the organisational culture of Tesco has been inspired by the
basic cultural traits of masculinity. It can be stated that the company strives to gain a higher
score in terms of achievement. The employees within the organisation are motivated through
rewards and recognition for the same [CITATION Tes214 \l 16393 ]. Another cultural trait of
Tesco is collectivism. The company focuses and motivates group efforts to achieve
substantial outcomes. Even such efforts upon being successful are duly rewarded

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[CITATION Tes214 \l 16393 ]. On the parameters of uncertainty avoidance, the company
scores a lower rank which is an indicator of the fact that the company is ready to the
management of ambiguous situations effectively. In other words, Tesco effectively manages
change by making it a part of its organisational strategy through active employee
involvement [ CITATION Awa19 \l 16393 ].

The organisational structure of Tesco that reflects its power distance has been subjected to
changes in recent times through simplification of its operational structure by removal of
hierarchy levels [ CITATION Tes181 \l 16393 ]. This indicates that the company has been
moving towards an egalitarian approach wherein the power distance is low and higher
employee participation is supported [ CITATION Tes181 \l 16393 ].

In terms of long-term orientation, the company scores higher which depicts its effort by being
prepared for the future. This is evident from the mission and the vision statement of Tesco
Plc. This statement has been conveyed through its Steering Wheel as depicted in the figure
below:

Figure 3 Vision and Mission of Tesco through the Steering Wheel

Source: [CITATION Tes19 \l 16393 ]

Tesco also supports an indulgent approach which is evident from the fact the company has an
appropriate entertainment policy and group gifts for its employees [CITATION Tes191 \l

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16393 ]. Employee efforts are recognised by the company and accordingly, they are endowed
with such benefits.

External Analysis
Consumer Trends
Consumers are significantly important for a company like Tesco as it tends to determine its
strategic course of action thereby supporting the company to meets its vision. Customer
relationship is of prime importance for Tesco. It is mainly because, Tesco is a firm believer in
the fact that satisfied customers would return to shop from Tesco and recommend the brand
to others too [CITATION Tes215 \l 16393 ]. This will help Tesco develop a strong base of
the loyal customer thereby gaining an edge over others within the industry.

Focusing on the recent trends related to consumer spending in the UK it has been derived that
there has been a considerable increase in the categories of food, alcohol and non-alcoholic
drinks. On the other hand, a decline has been experienced in areas of transport, food service,
and holidays [CITATION Minel \l 16393 ]. The same has been depicted in the figure below:

Figure 4Top 3 categories where consumer spending has increased in 2020

Source: [CITATION Minel \l 16393 ]

Also, online grocery shopping by the UK's consumers has increased exponentially with a rise
of 33% in the year 2020 itself [CITATION Min202 \l 16393 ]. Though elderly people are
facing challenges in online shopping but yet they are also compelled to do so owing to
movement restrictions imposed in the pandemic situation resulting in a change in their
behaviour [ CITATION Del212 \l 16393 ].

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Competitors
The most significant competitors of Tesco are Sainsbury, Asda, Morrison’s and Aldi
[ CITATION Swe19 \l 16393 ]. The current market share of these players along with others
has been shown in the figure below:

Figure 5 Competitors of Tesco in the UK

Source: [ CITATION Cop212 \l 16393 ]

The most significant competitors of Tesco are Asda and Sainsbury as they are expanding
their presence within the nation aggressively. These companies continue to invest in various
areas especially in developing their infrastructure for supporting online retailing which
generates a threat for Tesco in the long run. For example, in the year 2016, Sainsbury
acquired Argos, thus expanding its online presence into non-food segments like computers,
garden furniture and wedding rings [ CITATION Reu181 \l 16393 ]. Approximate 90,000
such products have been added to its portfolio. Further, the intensity of the threat aggravates,
with Sainsbury and Asda merging [ CITATION Reu181 \l 16393 ]. The merger might result
in exponential benefits for the two through the creation of a strong consumer base and getting
a higher market share thereby threatening Tesco’s leadership position.

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Environmental Analysis
Political Factors
The UK is characterised by political stability and has significant international relationships
with various nations across the globe. This provides significant opportunities for companies
like Tesco to perform effectively on a global platform. However, with the recent decision of
Brexit, there has been political dismay within the region which has had a significant impact
on the supermarket industry including Tesco as per reports by Kantar [ CITATION Wal19 \l
16393 ]. With Brexit, there has been a disturbance in the supply chains whose repercussions
are felt on products like fresh fruit and vegetables like oranges, lettuce, cauliflower,
strawberries, raspberries and blueberries with a larger number of empty shelves for such
products [ CITATION Ret21 \l 16393 ].

As a preventive measure to overcome losses, the sales figures at Tesco have been offset by an
amount of 85 million GBP for catering for the issues of increasing costs [ CITATION
Cha211 \l 16393 ]. With increasing online sales in the UK, the company also needs to abide
by the changes in the Data General Protection Regulations in the UK thus endowing
consumers with higher security [ CITATION The2048 \l 16393 ]. Further, owing to Covid-19
there has been restrictions like the closing of retail outlets, minimum workforce to support
social distancing and limited sale of non-essential items to name a few which has impacted
the financial and operational health of Tesco. However, the government is encouraging
people to shop online by restricting the movement of the people which is optimistic news for
the company [CITATION Min202 \l 16393 ].

Environmental Factors
Rapidly changing ecological balance and the climate is having a significant impact on the
supermarket industry in the UK [ CITATION Has20 \l 16393 ]. To deal with these issues,
Tesco has been strategically dedicated to minimisation of carbon footprint. Tesco aims that
by the year 2025, it would minimise its carbon emissions by 60% and by the year 2050 it
would minimise by 100% [CITATION Tes215 \l 16393 ]. These aims have been developed
in sync with the Paris Agreement and another governmental endeavour to support
environmental sustainability. In the year 2020, the company reached a mark of 77% reduction
in food wastages thus functioning in sync with the UN SDG Target 12.3 [CITATION Tes215
\l 16393 ].

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Figure 6 UN SDG Target 12.3.

Source: [ CITATION The212 \l 16393 ]

Tesco has also developed strategic associations with WWF for the provision of higher quality
and sustainable food to its customers and thus safeguarding the planet. In terms of packaging
too, Tesco has taken significant measures by removal of approximately 10,000 tonnes of
packaging materials that were difficult to be recycled [CITATION Tes215 \l 16393 ]. Also,
by the year-end of 2020, it has removed approximately 1 billion plastic pieces from its sale
products. Even plastic wrapping minimisation efforts have been executed by the company
with an intent to reduce the same by 350 tonnes [CITATION Tes215 \l 16393 ].

Marketing Communication Strategy

Communication strategy
The communication strategy of Tesco is customer-centric and is meant to convey to the
consumers the values of the brand along with informing them about the recent updates and
incidents within the company. the focus of these communication Strategies is to convey the
'great value' of the brand and the value it offers to its consumers [ CITATION Wat203 \l
16393 ].

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DRIP Model
Factors Tesco’s Communication Approach
Differentiate Tesco differentiates itself by promoting its Loyalty Card which ensures
consumers with great pay-backs and perks thereby further lowering
their shopping budget [ CITATION Cam20 \l 16393 ]
Reinforce The company has been communicating about the Brand Guarantee
scheme through which the company promises to refund in the case
certain products are priced higher than those charged by the competitor
brands [ CITATION Hob15 \l 16393 ]
Inform/Make Communicating consumers about safer shopping through instructional
videos developed using its employees and stores during the times of the
Covid-19 pandemic [ CITATION Not20 \l 16393 ]
Persuade Developing promotional campaigns with strong emotional connect with
consumers like special campaigns for Father’s day [ CITATION
Tes16 \l 16393 ]

Figure 7 Communication Campaigns by Tesco

Segmentation
The various segmentation approaches adopted by Tesco are:

Geographic Segmentation: Based on geographic specifications, the company has developed

three primary segments. These segments are:

 UK & ROI – the United Kingdom and the Republic of Ireland

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  Central Europe – Czech Republic, Hungary, Poland, Slovakia
 Asia – Malaysia and Thailand.

Source: [CITATION Tes215 \l 16393 ]

Demographic Variables: the income and purchases made by the consumers at Tesco, has
helped the company to demarcate the consumers under the following heads:

 Convenience Shoppers
o Lack time for shopping but demand for higher quality and rich food
o Consumers who either cannot cook or not willing to cook
 Price Sensitive Consumers
o Searching for the cheapest products
o Stretching budgets
 Fine Food Shoppers
o Natural Chefs
o Those wanting to cook from scratch
 Mainstream Consumers
o Involved in the purchase of kids' products
o Demand for commonplace brands
 Less Affluent Consumers
o Traditional consumers
o Highly price-sensitive consumers

[ CITATION Pie161 \l 16393 ]

Lifestyle Variables: Based on lifestyle, the various segments developed at Tesco of its
consumers are:

 Upmarket
o Affluent
o Young- generally conscious of time
o Demand luxury
o Ready for experimentation
o Healthy lifestyle and eating
o Higher environmental concerns

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  Mid-Market
o Youth
o Wider variety of food products required (broad tastes)
o Convenience shoppers – seek food that can be microwaved
o Traditional buyers – fixed and permanent list for shopping
 Cost-Conscious
o Youth
o Demand for kids’ products
o Sensitivity towards staple products

[ CITATION Pie161 \l 16393 ]

Targeting
The above segments by Tesco have been developed with the help of data analysis executed
by Dunnhumby. Dunnhumby has been responsible for developing the customer loyalty cards
for Tesco [ CITATION Paa181 \l 16393 \m Pie161]. The information provided by these
loyalty cards has helped the company develop advanced and upgraded targeting options
thereby supporting the company to sustain its leadership position. Individualised and
customised marketing is executed for the target consumers of Tesco thus attracting them to
stay loyal to the brand and continue shopping for a longer period [ CITATION Sab211 \l
16393 ].

Positioning Map
The positioning map for Tesco has been developed using three primary parameters namely,
price, range and quality. The same has been depicted in the figure below:

Figure 8 Positioning Map of Tesco

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Tesco has been differentiating itself by offering higher quality products at cost-effective
prices to its customers [CITATION Tes215 \l 16393 ]. Though the prices of Tesco are low
then those charged by brands like Aldi and Lidl are even lower. In terms of the range of
products offered by the company, it tops the list as it provides for a wider product and service
portfolio to its customers. Thus, the company acts as a 'one-stop solution' for all the product
and service requirements within the food and non-food category dealt with by a supermarket
brand.

Peer Analysis 650 words

an analysis of comparisons of peers (in FAME database).

o, Evaluate the analysis.

o What is the analysis telling the reader?

o What impacts and influenced the company financial performance? (Peer analysis, include
the top 5),

how does the company compare to the top 5 if they are not in the top 4, if they are not, why
not?

o Analyse the businesses decisions

Conclusion
Overall, it can be derived that Tesco has been performing very well within the industry in
which it operates. This is evident from the leadership position attained by the company.
However, with continuously changing environmental factors like dynamic consumer
behaviour, vibrant business environment and increasing competitive intensity. With the
emergence of widespread usage of online marketing from various channels, Tesco has been
endowed with opportunities to derive maximised benefits by being a first mover. The
company has been investing in its infrastructural developments to support the online business
portfolio. Though political and environmental factors continue to be a challenge for the
company but yet company has been developing strategic approaches to minimise the risks
and optimise opportunities related to the same. The communication strategy of Tesco keeps
on changing to meet the needs of the changing trends but at the same times maintains the
basic essence of conveying to its consumers about the 'value for money offered by the brand.

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