Marketing Mix Tesco Poland Case Study Essays

Marketing Mix Tesco Poland Case Study Essays Marketing Mix Tesco Poland Case Study Essay Marketing Mix Tesco Poland Case Study Essay In this report I will discuss the marketing mix for Tesco Poland and also the current and potential treats in the marketing/competition environment and suggested some recommendations. Tesco started its activity in Poland in November 1995 with a strategic investment in the Savia supermarket chain. The first store with Tesco’s logo was opened in 1998. From 1995 Tesco made many mergers and acquisitions (table one p. 13) and this was the first stage in the development of Tescos Poland network, which in the past two years has developed a chain of small size shops in whole country (Figure 1) (Tesco, 2010). Tesco apparently has ambitions to take over the Netto and Billa chains, amounting to 183 retail outlets in total (IFO, 2010). The main strategy of Tesco Poland is to taker over weaker, competing networks and engaging fierce, competitive struggle with others. The strongest Tesco’s competitors currently are Carrefour and Biedronka which use the same methods of competition (table one p. 13). To increase turnover and profits Tesco operates as a limited liability company under the name of TESCO Polska Sp. z o. o.. Figure1. Reflected location of Tesco’s stores across the Republic of Poland Marketing mix using Tesco Poland as an example Marketing mix takes a systematic approach to an analysis of the market and outputs of which enable Tesco to maximise customer satisfaction. Each of the marketing mix factors should not only be internally integrated, but also should have a high degree of efficiency and effectiveness. Traditionally the marketing mix consisted of just 4 Ps (Product, Price, Place, Promotion) but has been extended to 7 Ps (People, Process, Physical evidence) (Dibb Simkin, 2001). 1. 1Products Tesco Poland has a wide range of products designed for different consumer segments: grocery, medication, food supplements and hygiene articles, household goods, toys and gifts, bicycles and scooters, clothing, shoes, entertainment and books, PC, photo, games, home electrical, sound and vision, phones, sports and leisure, furniture and kitchen, baby and toddler, gardening (seasonal outdoor of stores), alcohols and tobaccos, banking, petrol and others. Sir Terry Leahy in 1993 in his National Business Awards was asked: â€Å"What’s your secret for making Tesco, Britain’s number one retailer? and his answer was: â€Å"We sell what people want† (Seth Randall, 2005). And that is a key to the success in Poland as well. Products in Polish branches are split into good quality such as brand products, Polish products and regional products and inferior quality such as discount price, Tesco value and other Tesco products. Figure2. Types of food products in Tesco Poland 1. 2Price Since the expansion in Poland, Tesco has competed over price with its biggest competitors such as Real, Carrefour, Biedronka and Lidl. From the beginning March 2009 Tesco introduced products at discount prices in Poland as well as iscounts of 30 to 88 percent on selected articles (WP, 2010). Through cutting prices offering their own payment cards, vouchers and temporary promotions Tesco became attractive to customers. Price cuts were possible because of the pressure exerted by Tesco on their suppliers (Appendix 1). However not everything is cheap in Tesco. Regional managers usually cut prices of the most popular goods in each store, because in that way Tesco is attractive for potential customers. Of course the customers are buying other, more expensive goods too, so the overall margins are maintained. 1. 3Place The principle of Tesco’s distribution is: â€Å"the right product in the right place, at the right position, at the right time and at the right cost† (Tesco, 2010). Tesco applied composite distributions, which consists of a smaller number of composite warehouses. Warehouses can store a lot of products at different temperatures, and thus provide more efficiency in terms of cost in relation to daily deliveries to all stores. Warehouses operate 24 hours a day, 365 days a year. Delivery vehicles for wholesale composite have trailers, divided into chambers, so they can keep three different temperature levels at the same time. There are three main distribution centres in Poland (Tesco, 2010): Teresin near Warsaw – 55 000 m2 (fresh and dry food) and 30 000 m2 (manufacturers), Strykowo – 18 000 m2 (ensures delivery to the smaller shops) Legionowo – 17 000 m2 (ensures delivery to the smaller shops). Overview of the relations between Tesco and its suppliers is given in Appendix 2. Figure3. The biggest logistics base and the main distribution center of Tesco Poland. Teresin near Warsaw. 9 Promotion Promotion is based on informing consumers about products or services, and the company itself in order to create preferences for them on the market. Tesco Poland uses most of the available means of communication/promotions to gain customers: sales promotion (offer of the week, special offer, hit of the month, buy now pay later, discount price, buy one get one free/half price – rarely used) advertising (TV, radio, newspapers, magazines, billboards, internet, adverts on public transport vehicles and Tesco’s transport, adverts in own stores, shopping centres and parking) personal selling (cashiers, shop assistants, call centre consultants etc) direct marketing (correspondence with coupons, monthly newspapers and quarterly catalogues delivered to homes of all inhabitants of town/city) public relations (social campaigns: Tesco for Schools, Clean Up the World with Tesco. Be beautiful with Tesco, Ekstraklasa (graduate scheme), Tesco for you and your family). An overview of the promotion instruments along with examples used by Tesco Poland is in Appendix 2. 10 People Tesco currently employs almost 27 000 people (Tesco, 2010) and offers: Professional training regardless of employees’ positions. A program for graduates (EKSTRAKLASA launched in 2008). A bonus scheme (demanding standards) Employee discounts on goods purchased (after one year of employment). Despite this, Tesco does not belong to the popular employers. Forced overtime together with long hours, minimum wage payments, adverse employees’ contracts and generally poor conditions of work produced weakly motivated and frustrated employees (Macalister, 2008; just-food, 2008; JS, 2009). Also Tesco has a serious problem with mobbing in the workplace. In late April and early May 2009 Tesco was visited by inspectors of the National Labour Inspectorate. As a result of control at one store inspectors issued 50 negative opinion and decisions. That illustrates the scale of the phenomenon – said Michal Olesiak from National Labour Inspectorate (Piatek, 2009). This treatment of employees is not good for the image of Tesco and the average consumer quite often chooses alternatives to Tesco because of his reputation. Figure4. â€Å"Too much, too hard, Tesco† – strikes of the Tesco’s employees in Poland 2008 – 2009 (photos from the private collections of protesting staff). 11 Process In Poland due to the dissatisfaction of workers and the creation of an unpleasant atmosphere around Tesco stores a hotline was created to facilitate customers in making decisions about shopping at Tesco and in dispelling doubt (Tesco, 2010). Consultants of the hotline take over some of responsibility from shop assistants and assistants in customer services. Currently customer service in Tesco looks much better, however there still are problems with dissatisfied staff. Tesco Poland needs accomplish profound changes in personnel policy because weakly motivated and appreciated employees who do not provide customer service in the relevant standard. 12 Physical evidence Tesco is not just a shop but is also a commercial space. Tesco stores are a developed infrastructure with specific interior and surroundings: 1. 7. 1 Parking Inseparable from every Tesco hypermarket is parking (sometimes multilevel). Before Christmas some parts of the parking are turned into marketplace and in spring and summer parts of the parking are turned into space for selling plants and accessories for the garden. [pic] Figure5. Tesco car parks – Poland (psboy, 2010) 1. 7. 2 Buildings Tesco hypermarkets are usually built outside the town/city center. Tesco and unlike the other chains do not form part of a larger shopping complex. This is one of the weak points of Tesco, because when customers choose other supermarkets they have the option to visit shops, restaurants, cafes and even a cinema or bowling. Currently Tesco is changing its strategy and has started building whole commercial complexes. Figure6. Modern Tesco in Krosno with large shopping galleries (Krzanowski, 2010) 1. 7. 3 Stores/decor/furnishings The interior of commercial establishments is designed in the same style for the whole network. Dominant colours are yellow, red and blue and have importance in relation to the psychology of colour: Yellow – associated with the sun, inspires sympathy, improves mood Red – attracts the eye, stimulates the action, energises Blue – the shade used in Tesco is strengthens feeling of security, reliability, honesty and trust. Figure7. Tesco Poland – interior of store (Tesco,2010) Keeping the store clean, regular shelf re-stocking, disposal of empty packaging and the regular cleaning of floors, windows and furniture is the foundation of any Tesco store. Micro environment competition â€Å"The marketing environment is defined as those external trading forces that directly or indirectly influence an organisation’s acquisitions of inputs and generation of outputs† (Dibb Simkin, 2001). [pic] Figure8. Factors impacting on a firm (Loh, 2009) One of the important factors of a micro environment is competition. Giant hypermarket networks on the Polish market suddenly appeared and immediately became a serious threat to local small and medium-sized companies. The real competition takes place between international networks such as Tesco, Carrefour and Biedronka (Ladybird). In estimates of Grupa Muszkieterow the top ten largest retail networks in terms of value sales in Poland are: Biedronka, Tesco, Carrefour, Real, Auchan, Lidl, Intermarche, E. Leclerc, Polomarket and Kaufland (PB, 2010). Figure9. Top 10 retail chains in Poland – turnover in 2008 and 2009 (ITM Pl, 2010) Figure10. Percent market shares retail chains in Poland in 2009 (top five)(PMR, 2010) 2. 1Tesco vs. Biedronka (Ladybird) Signs of rivalry between the two networks can be seen in their advertising campaigns. Biedronka attracts customers mainly by offering low prices. Tesco announce in their advertisements that it holds cut prices for a long time and that shoppers cannot buy cheaper anywhere else. At the same time Biedronka’s advertisement answered: â€Å"Simulate the Ladybird and being Ladybird – that is a big difference! †. While other supermarket chains put on loyalty programs for clients, Tesco mainly lowers prices but also competes by investing in small local shops in areas dominated by Biedronka.