Strategic Marketing for Tesco: Expanding into the German Market with Organic Foods

This report provides a strategic marketing plan for Tesco to enter the German market with organic foods. It includes recommendations, PESTLE analysis, market-entry options, market segmentation, and more.

STRATEGIC
MARKETING

TABLE OF CONTENTS
Executive Summary.....................................................................................................................3
INTRODUCTION...........................................................................................................................4
MAINBODY...................................................................................................................................4
Recommendation a product and country to enter........................................................................4
Pestle Analysis.............................................................................................................................5
Market-Entry options...................................................................................................................7
Market Segmentation...................................................................................................................9
Porter’s generic strategies..........................................................................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................14

Executive Summary
The report has included different aspects of marketing strategies for the Tesco company.
Organization wanted to expand it’s business in new country along with new products whereas
marketing consultant advised for the new market Germany and new product organic foods. This
report has generated to show a marketing strategy for a new product that enters into a new
market and included all it’s aspects of strategies, competition, risks and others. Porter’s generic
strategy had evaluated for the Tesco.

INTRODUCTION
Strategic marketing can be defined as the way through which a firm differentiate itself
from it’s competitors by accessing on it’s strengths to offer best experience to customer rather
than competitors. It is important for the organization because it supports in developing goods and
services along with high profit margin. A good marketing strategy directs a firm to influence it’s
business and products in other countries which gives better values to the customer and in return
generates high revenue in the business. To understand role of strategic marketing has an
example of Tesco company in the report which uses various aspects in promoting it’s business
through available marketing tools. It helps Tesco company to choose new products and new
country to expand it’s business and product’s value in this report. To analyse external
environment of the business will use analytical tool in the report.
MAINBODY
Recommendation a product and country to enter
Ashanti Marketing Solution Limited company is a marketing corporation which offers
services in promotions, commercialism and public relation as well. Whereas Tesco has goal to
expand it’s business in new country along with new products so it takes help of senior marketing
consultant who works for Ashanti Marketing Solution Limited company.
Whereas Senior marketing consultant recommends organization to sell organic products
as new products that helps Tesco to give value to the customer. This new product plays essential
role to expand the business and attracts new customer as well as influence profit margin (Alatalo,
2016). It helps to expand business in other countries, influence market share of the new products
along with high profit margin.
Senior marketing consultant recommend Tesco to enter in Germany because it does not
have any franchise. Apart from this, Germany has good financial position so it is known as
highly developed country. It is nominated as fourth largest company, based on the GDP in the
world. so, it is the best option for Tesco to expand it’s business in the Germany market and leads
profitability on organization’s economical infrastructure. Germany market with the organic foods

supports Tesco to capture large market share of the product and expand it’s business positively.
By this product easy to attract potential customers and increase customer base.
Macro environment
Macro-environment is the combination of factors that impacts firm’s operations, performance
and productivity as well. It includes trends in GDP, inflation, demographical changes,
employment, disposable income and fiscal policy. There is an analytical model that analyse
external environment of the organization (Christodoulou and Cullinane, 2019).
Pestle Analysis
It is a analytical framework that used to analyse external environment of the country,
market and organization and helps to determine opportunities and threats so that easy to gain
high profitability in the company. The model is basically designed to analyse situation of the
market or country effectively. As per Tesco uses pestle analysis before entering in the new
country. The model is described as follows:
Political factors
It includes tax policies, fiscal policy, trade tariffs etc. political factors of Germany market
which impacts organization. For example, Germany tax rate such as income tax, solidarity
surcharge, trade tax and others estimate 30 to 33% which is quite high for the Tesco. if the
Germany tax rate increases after sometimes then it can become big threat for the firm which can
generate less profit (Fatricia, 2017).
Economic factors
Economic factors are interest rates, inflation rates, foreign exchange rates, disposable
income, employment rate and economic growth patterns etc. can impact organization’s
performance if it enters in the Germany market. For example, Germany has good financial
performance because it has been fastest growing country in the Europe along with strong GDP. It
has achieved 5th position globally economical growth in 2017. So, it is great opportunity for the
Tesco because it can target high potential customer and can influence demand of the new product
in the Germany market. Therefore, economic factors impact organization’s selling infrastructure
positively and leads profitability in the business (Härmä, 2017).

Socio-cultural factors
It includes cultural trends, demographics, disposable income and population analytics
impacts on organization’s business activity. For example, Germany has good financial position
that denotes population of the country has strong disposable income. So, it will help company to
target potential customers through new products and in return generate high revenue. So,
company uses market segmentation strategy to segments market based on the customer
preferences and needs and targets its customer effectively (Isaboke, 2018). Whereas company
finds out that people are highly health concern in the Germany market so they want such kind
product which gives positive impact on their health. It is best opportunity for the company
because company is going to introduce organic foods that helps to meet each customer objective
in the Germany market.
Technological factors
Automation emerging technology, continues change in technology etc. are the
technological factors that can impact organization’s performance. for example Germany has
good technological performance as similar UK. It is good opportunity for the Tesco because it
has advanced technology that helps to attract customer and become easier to access large number
of customers at a time. However, Germany is quite costly as compared UK that means if
company enter in the market then needs to set a specific budget which directs it, how much they
invest on the technology.
Legal factors
There are some specified laws that can affect business environment as well as some
policies i.e. consumer laws, safety standards, labour law etc. Germany’s government is more
focused for the consumer law and employment laws so they have imposed strict laws on MNC’s.
It is another opportunity for the company because it is already followed these policies so it will
easily comply with legal laws. Another is safety standard law that is also an effective opportunity
for the company because it will launch organic foods in the Germany market which is properly
designed to meet each customer objectives (Jackson, 2016).
Environmental factors

It includes climate, weather, geographical location, global change in climate and
pollution etc. that can impact on organization’s operation. Moreover, government of Germany
has been imposed eco-friendly products policies so that level of pollution decreses effectively.
So, if Tesco expand it’s business in the Germany then it can get support from the government
because it will offer organic product. these products are pollution free as well as improves good
health ratio in the country.
Threats
Market risks such as availability of inputs, cost fluctuation, competition of customer preferences
etc. can direct impact on organization’s performance. Another risk is that company will need to
recruit talented and skilful staff for the workplace so that they can keep high maintenance,
suitability and safety as well. Economic loss threat can affect organization if it does not have
good financial planning, societal factors i.e. currency fluctuation, change in taxation and others
can affect organization’s productivity if it does not keep flexible policies. To overcome
upcoming threats must create effective plan by organization based on the deep market research
and recruits skilful staff.
Market-Entry options
To enter in Germany market effectively has various models which applies for the
organization to decide in which tactic can work for the Tesco. There have three modes of entry
and selects one of them which can follow for the firm. The market entries affect organization in
three ways so it is mandatory to gather important information such as market size, level of risk,
growth, competitive intensity and availability of distribution channels as well as barriers.
Strategic alliance
Strategic alliance refers as an agreement between two companies to follow a set of agreed
objectives in working together while each firm retains it’s independences. The agreement is less
complex and less rule bounding as compared joint venture (Jánská and Olšová, 2016). This
method can be highly suitable for the if organization decides to work together with strategic
alliance in different market and projects as well. In the case of Tesco using strategic alliance may
work with other agencies in the same sector in the Germany market through new market such as
organic foods but there has chance to develop high competition. So, this model is not more

suitable for the company because it enters new product which is highly demanded in Germany
population.
Mergers, acquisitions and joint ventures
It is another mode of entering in market that used by various organization to get success
in market entry. Mergers and acquisition are good strategies that used to process the ownership
of firms, joins together with other firms to work on the same projects. When an organization
decides to take over other business in it’s sector then merging process occurs. When an
organization decides to take acquisition instead of working with other business on the specified
projects or operation that also consider into acquisition strategy. Merger and acquisitions is
beneficial market entering strategy for the organization because it can influence market share of
the firm and economical scale as well. When a organization merge with other company that
reduces costs of technology as well as taxation price if the merged firms are legally centralized
and rationalized. Merged companies are two types vertical integration and horizontal integration.
Whereas horizontal integration is the process of merging two businesses for the same project and
also assists to expand corporation’s operations into other geographic regions or increases product
line or services offering to the current market (Mehra, 2017). Tesco can apply the mode and
determine other retail companies which already exists in Germany and promotes in merging with
other companies. On the other hand, vertical integration is the process of merging together of
two firms which are at different phase of production. The vertical integration supports company
to develop better planning, coordinating and scheduling as well. It helps company to generate
high profit margins because it involves suppliers who help company to gain high profit on each
products.
Joint ventures
It is another strategic tool that is used by numerous organizations to enter into new
market. it is type of alliance that supports company to expand business in the foreign markets
based on the management contracts, franchising, licensing etc.
Foreign direct investment (FDI)

It is a type of investment that takes by firm to control it’s ownership in the business entity
in foreign country. Foreign investment are mergers, acquisition, retail, services, logistics,
products etc. that helps company to keep control it’s ownership. Tesco can apply this mode for
entering in the Germany because it can get full control of the market along with new product i.e.
organic food launching. In addition, it supports company to capture high market share, influence
customer base and leads sustainable profit on the new products. By this approach can get more
benefit from the tight control overall operation in numerous countries i.e. Germany. It also helps
company to become more focused global coordination and improves economies of scale
(MUTUNE, 2017). FDI posses some drawbacks such as it is long-term process and can become
more time-consuming as well as costly.
The joint ventures is the best mode for market entering because it helps to develop
strategic planning for reducing level of risks and costs in entering new market. Joint ventures
approach can be done in the form of franchising, licensing that helps organization to retain it’s
safe position in the foreign market. This option permits Tesco to enter into the Germany’s market
and helps to gain high market share and influences brand awareness through it’ brand name and
customer’s recognition.
Market Segmentation
Market segmentation can be defined as the process of dividing customers into different
segments based on the needs, preferences and expectation for the product or services. it is
effective tool that helps organization to target specific product for each segments or existing
product targets different segments. This approach helps to generate high profit for the firm by
market segmentation process. A good segmentation and targeting strategy assist company to gain
competitive advantage and marketing costs as well. It is further categorized into four different
segmentations such as demographical, geographical, behavioural and physiographic
segmentation. The demographic segmentation classified customers on the basis of income,
earning, gender etc. If Tesco use this category then it supports to understand customer
preferences, needs and expectation. while geographical segmentation approach classifies the
customer on the basis of their regions i.e. rural, local and national etc. if Tesco uses this approach
then can target its customer in some specified areas of the new market (Vergassola, 2019).
Behavioural segmentation helps to understand customer attitude through prices, promotion

decision-making, offers etc. Tesco can segment customers through the segmentation and assists
to improve purchasing of customer for the product. Physiographic segmentation another
approach that applies by numerous organizations to understand customer’s attitude, opinion,
preferences, interest, perception for the product or service. Tesco can use this market
segmentation strategy because it helps to understand customer’s needs and wants in different
markets through their feedbacks for the product.
Targeting
It is targeting strategy that apply by organization to target its specified customer so that it
can sell product and services effectively. The targeting strategy support to target different
markets based on the customer segmentation strategy. Tesco is a British multinational company
which plans to enter in the Germany market along with new product. So, organization uses
geographical segmentation, psychographic and behavioural segmentation strategy to target new
customer in the Germany market. the reason behind is that company will launch organic food
which is basically designed to meet each segment objectives. These segments help to understand
customer behaviour for the product or services and generate high profit margin on the product.
so, there have three different type of target markets:
Niche marketing
It is a small proportion of the market whereas very few customers are targeted only.
Tesco can generate high revenue from this group by meeting their specific needs which are more
suitable for them and company as well.
Mass marketing
It is another market whereas organization sell it’s products to all customers without any
specific segmentation.
Selective marketing
It is another targeting strategy whereas a organization offers different types of products to
different type of customer segments. This targeting approach requires wide product line and high
maintenance to gain high profit.

Positioning
It is another stage in which determine positioning of the competitors, strengths and
weaknesses of the organization. the main goal of the strategy is that it permits organization to
keep ahead itself from it’s competitors and leads understanding about the market. it is classified
by marketing mix strategy that applies for Tesco.
Product: A new product i.e. organic food to be launched in Germany.
Price: Pricing strategy will organize to meet customer’s budget because Germany’s financial
position is not too much high and not too much low. So organic food offers to the customer on
the basis of quantity.
Promotion: There are numerous type promotional tools i.e. advertising, leaflet, online marketing
etc. helps to influence brand image and it’s products in the business market. To influence level of
awareness must use mixture of promotional by the organization in the Germany’s market.
Place: To make more convenient must offer online service to the customer by organization as
result influence purchasing behaviour of the customer.
Porter’s generic strategies
It is a set of strategies framework which was proposed by Michael Porter in 1980. The
model explains that how an organization gains competitive advantage by selecting right
strategies. This model focuses on three strategies such as cost leadership, differentiation and
focus. These strategies are also known as generic strategies because these are not dependent on
the firm or industry.
Cost leadership strategy
The strategy is basically designed to gain competitive advantage from the different ways.
It involves gaining a competitive advantage by lowering cost of the product. it is beneficial
strategy for the organization if it applies in the Germany’s market. By the strategy organization
can become cost market leader (Oumaand Oloko, 2017). It allows organization to capture large
market share by targeting middle class because these type consumers generally place it’s
important based on the pricing factors. Whereas cost leadership strategy is the effective strategy

that helps to meet needs of this customer segments. The drawback is this it requires good
financial positioning the company can take competitive advantage.
Differentiation strategy
It is another but more commonly used strategy that builds competitive advantage.
Organization can use this strategy for the Germany’s market and can gain growth objectives. To
implement this strategy needs expand customer base through its unique product features. This
strategy introduces innovation in the exiting products so that it can meet each customer’s
expectation. it is also known as innovation strategy because it helps organization differentiate
itself from other by offering uniqueness in the product or it’s services. it also has a drawback
such as it requires well-organized R&D department that can support company to lead uniqueness
in the product.
Focus strategy
It is third generic competitive strategy that inspires organization to focus their resources
on expanding niche targeted markets (Shi and et.al., 2018). Most of the organization uses this
strategy to differentiate it’s products for the niche market segments which helps to take
competitive advantage on it. This strategy is the combination of two strategies i.e. cost focus and
differentiate focus. By the approach organization can fulfil demand only niche market but it is
not effective for the mass target segmentation.
Tesco can follow differentiation strategy as compared others because it has good
financial position and well-organized R&D department which helps company to differentiate it’s
brand and products from other competitors in the German’s market. The country has good
financial position as well as technology performance, so it is important for the company keep
uniqueness in the product and services as well. Therefore, Tesco must use differentiation generic
strategy in the Germany’s market (Smigielska and Stefanska, 2017).
CONCLUSION
The brief study provided understanding about strategic marketing such as it assisted
corporation to make optimum utilization of it’s resources and capabilities as to give sales

message to it’s target market. To analyse situation of the Germany applied Pestle analysis which
supported to determine opportunities and threats of market for the company in the report. It has
been summarized market entry options such as strategic alliance, mergers and acquisition and
FDI in the report. Market segmentation, targeting in general term can be concluded in this report.
Porter’s generic strategies model can be summarized in this report.

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