Analysis of Tesco's Global Marketing and Digital Business Model

This report provides an in-depth analysis of Tesco's global marketing and digital business strategies. It begins with a background of the organization and an industry analysis using Porter's Five Forces, followed by external (PESTEL) and internal (SWOT) situational analyses. The report examines Tesco's internationalization strategies, including its preference for joint ventures in Asian markets, driven by cultural considerations and transaction cost analysis. It details Tesco's marketing activities, covering segmentation, targeting, positioning, branding, and responses to consumer trends. The report also explores Tesco's online activities and concludes with recommendations for improvement, focusing on areas such as addressing competitive threats and enhancing customer experience.

Running head: MARKETING
Global Marketing and Digital Business
Name of the Student:
Name of the University:
Author Note:

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Executive Summary:
The aim of the report is to provide an insight into the global marketing and digital business
scenario of Tesco, one of the third largest supermarket chains of United Kingdom. The report
focuses on the internationalization of Tesco in various countries along with a focus on its online
business. The report puts across background information and conducts an industry analysis.
There is also focus on the internal and the external analysis of company. There is also discussion
about the internationalization strategy of Tesco and an overview of the company’s marketing
activities that focused on targeting, segmentation, consumer trends, positioning and branding.
There is also insight to the online activities undertaken by Tesco which is followed suitable
recommendations.

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Table of Contents
Organizational Profile and Industry Analysis..................................................................................2
i. Background of the Organization:.................................................................................................2
ii. Porter’s Five Forces Analysis:.....................................................................................................3
Situational Analysis (External and Internal)....................................................................................5
i. PESTEL Analysis:........................................................................................................................5
ii. SWOT Analysis:..........................................................................................................................6
Models and Theories:......................................................................................................................8
Marketing Activities:.....................................................................................................................11
i. Segmenting:................................................................................................................................11
ii. Targeting:..................................................................................................................................12
iii. Positioning:...............................................................................................................................12
iv. Branding:..................................................................................................................................12
v. Consumer Trends:......................................................................................................................12
Online Activities:...........................................................................................................................13
Recommendation:..........................................................................................................................13
Conclusion:....................................................................................................................................14
References:....................................................................................................................................15

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Introduction:
The report aims at providing a review of global marketing and digital business of Tesco.
It is a British supermarket chain found in 1919 by Jack Cohen with headquarters in the United
Kingdom (tescoplc.com 2019). In 1990, Tesco expanded the operations to close to eleven
countries that included various countries of Europe and Asia and Turkey and United States
(Butler and Neville 2013). Besides, Tesco also operates through a digitized platform for
providing the customers with facilities of click to collect functionality and a digitized store
experience. The report commences with background information of the organization and an
industry analysis focused on the Porter’s five forces. The report also provides an internal and
external analysis of Tesco. The report also puts across an insight into the internationalization
model of Tesco along with an overview of the marketing activities that included segmentation,
targeting and positioning, consumer trends and branding. The report further discusses the online
activities of Tesco followed by recommendations that mentioned the suggested areas of
improvement.
Organizational Profile and Industry Analysis
i. Background of the Organization:
Tesco originally known as the UK grocer expanded to eleven countries during the 1990s.
Operations in the USA were however discontinued in the year 2013 (Geoghegan 2011). Tesco
ranks third in the world in terms of the gross revenue. During 1950s and 1960s the company
experienced an organic growth and through acquisitions owned close to over 800 shops. It was
during the 1960, Tesco undertook diversification in areas that included electronics, book

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retailing, clothing, electronics, petrol, furniture, toys, software, telecom, internet and financial
services (Reece 2019). The company repositioned itself during 1990s from being one of the
down markets higher volume lower cost retailer to the ones designed for attracting social groups
through offering finest range of Tesco products (Ho, C. and Temperley 2013).
ii. Porter’s Five Forces Analysis:
Threat of
Substitute
Products
Threat of Entry
of Newer
Competitors
Intensity of the
Competitive
Rivalry
Bargaining
Power of the
Buyers
Bargaining
Power of the
Suppliers
1. In retail
market for food,
the substitutes of
the key food
retailers
especially the
small chain of
convenient store,
off license and
the organic shops
mostly acts as a
threat to Tesco as
they provide
higher quality
products at lower
1. The entry of
the newer
competitors is
lower in the
retail industry
since massive
capital
investment is
required to
become
competitive and
ensure the
establishment of
the brand name.
In other word,
1. Tesco faces
intense
competition from
competitors like
Asda, Morrison,
Sainsbury and
Waitrose that
competes with
one another over
the product price
and the
promotions
(Evans and
Mason 2018).
There has been
1. The
bargaining power
of the buyers has
been fairly
higher for Tesco
(Schleper, Blome
and Wuttke
2017).
2. It is also to be
noted that
customers are
mostly likely to
be attracted to
lower prices.
1. The bargaining
power of the
suppliers is fairly
lower for Tesco
(Richards et al.
2013).
2. Suppliers
remains inclined
towards the
major food and
the grocery
retailers and
remain
apprehensive in

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prices.
2. The threat of
the substitutes
for the non food
items like
clothing is higher
in Tesco. Hence,
customers will
remain inclined
towards the
discounted
prices.
Therefore, Tesco
acts as threat to
specialty shops
newer entrants
needed to
introduce certain
exceptional
things in order to
capture the Tesco
market.
2. Gaining
planning
authorization
from local
government
takes a
considerable
amount of time
to establish new
supermarkets
which acts as a
barrier to newer
entrants.
increasing
market shares
from competitors
that strengthened
the rivalry with
market thereby
threatening the
position of the
market
leadership of
Tesco.
2. Hard
discounters like
Lindl and Aldi
however took
over the market
in the times of
the recession and
recorded growth
sales closer to 25
percent.
losing business
contracts with
the larger
supermarkets.
This strengthens
the position of
Tesco in
strengthening
their positions
and ensures
positive
negotiations in
terms of lowest
possible price
from suppliers.

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Summary:
As far as the threat of substitute products are concerned, the small chain of convenient
store, off license and the organic shops mostly acts as a threat to Tesco. The supermarket chain
however tries to get hold of the shops by opening express stores in city centre and local town
thereby creating huddle for the substitutes in entering market. The entry of the newer
competitors is lower in the retail industry since it requires massive capital investment and
considerable time for establishment. On the hand, Tesco faces immense competition and faces a
hard time from massive discounters like Aldi and Lindl. Tesco faces a high bargaining power
due to slighter differentiation and more standardization. It leads to lower switching cost and the
buyers have tendency of switching from one brand to other. Nevertheless, the bargaining power
of suppliers is lower as they have the fear of losing the business within larger supermarkets
which strengthens the position of Tesco.
Situational Analysis (External and Internal)
i. PESTEL Analysis:
Political Economic
1. The political factors that impact the
operations of Tesco.
2. The tax imposed by local council was
refused by the UK government for avoiding the
price which had a negative impact on Tesco.
1. Labor cost is a vital economic factor that
affects the supermarkets of UK (MacKinnon
and Cumbers 2014). There is an implied an
upward shift in enhancing the expenses of
Tesco.
2. Tesco is also influenced by prices, cost and

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profit.
Social Technological
1.The shopping trend of consumer’s changes
over time constantly. Tesco should therefore
provide services for meeting the issues
(Pookulangara and Shephard 2013).
1. Tesco adopted advanced technological
means for enhancing the customer experience.
Environmental Legal
1. In response to the benefit of the society,
Tesco encourages the customer to shop online.
1. Tesco faced legal action based on gender
discrimination and lower pay rates for
weekend, night and the bank holidays.
Summary:
As far as the political factors are concerned, Tesco is affected by tax rates, impending and
current legislation, rate of unemployment, political instability and the economic condition of the
country in which they operate (Gouldson and Sullivan 2014). As far as the economic factors are
concerned, the crucial ones are the labor cost that impacts Tesco. The supermarket has therefore
adopted diversification for determining success of Tesco. As far as the social factors are
concerned, Tesco should realize that the demand for goods depends on the beliefs and attitude of
the consumer. The supermarket chain should also consider the issue of obesity within society
while introducing products. Besides, the supermarket should also take into account the change of
behavior and the demand for the organic food. To keep up with the technology, Tesco introduced
RFID technology for increasing the in store experience of the customers and also adopted an

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online system of mobile payment known as the PayQwid (Zhou 2013). It also introduced self
scan check points where customers can not only shop but tag the products thereby saving labor
cost and time. To ensure an environment friendly approach, the delivery vans use shortest route
and also collect plastic bags from the customers for recycling (Zhao and Zhong 2015). The
supermarket chain also targets in using renewable energy sources and minimize the carbon
footprint. To avoid facing any kind of legal action, Tesco should undertake operation based on
strict code of the practice put forward by the Food Retailing Commission (FRC).
ii. SWOT Analysis:
Strengths Weakness
1. Have a leading market share presently
standing at 28.1 percent.
1. Tesco has been charged with fraud as
investigations revealed misrepresenting profits.
2. On 25th April, the share prices have been
below the peak. Although the market share
rose slightly but it was nowhere near the peak.
Opportunities Threat
1. Tesco has announced some of its products at
a cost lower than its rival Lidl and Aldi. This
created growth opportunity of the business
thereby positing it as lower cost rival.
2. The company has enhanced the premium
range of the products.
1. Gain in the market share for the low cost
rivals like Lidl and Aldi.
2. The impacts of Brexit. As there has been no
such trade deal with European Union so there
has been uncertainty over the cost while
importing from the European Union or in

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dealing with the supplier.
Summary:
As far as strengths are concerned, Tesco not only adopts a successful strategy for
diversification but also have large number of product variety and options to choose from.
Weakness of the company lie in the buyout which have not been expensive but did not match
ethos put forward by the company. For Tesco there have been opportunities in the adoption of
the strategies of diversification, opportunities for the online business growth and the growth in
overseas market. The threat of the company lay in reducing the value of pound that resulted in
the increase in Tesco to be at par with the low cost rivals.
Models and Theories:
Tesco makes an entry into the foreign market either through joint ventures or mergers and
acquisitions as it allows the company in serving the local market (Lasserre 2017). The company
also aims at becoming the market leader in foreign count and has registered major success in
most of the Asian and the European market. Tesco have continuously had preference for using
the international joint ventures as the entry strategy in Asian market (Yan and Luo 2016). This
has been due to the presence of the higher context cultures that required the organizations in
building interpersonal relationships. In such cultures, relationship networks amongst the
colleagues, clients and the business associates remains personal and close hence it is vital for the
firms in building relationship and trust during the business interactions. In such cultures,
relationship network amongst the colleagues, business associates and clients tends to be personal

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and close. Hence, the firms should not only be able to build relationship but also trust during the
business interactions. The significance of relationship arises from higher level of avoidance of
uncertainty, ambiguity and risk. For example, international joint venture with Samsung in in
South Korea enabled Tesco in establishing contacts with local manufacturers and suppliers. This
was necessary for penetrating the market of South Korea as customers’ shops at regular intervals
with a preference for fresh meat and vegetables that are different from the customers of UK.
According to the Transaction Cost Analysis (TCA), it has been found that while
undertaking internationalization, Tesco focuses on minimizing the costs linked with the
exchange of resources with environment and the bureaucratic cost of the exchange within firm
(Brouthers 2013). Hence, they weigh cost of exchange of the resources with the environment
against the bureaucratic ones arising from the performance of similar operations within firm.
Therefore, it perceives the market and the institutions as the possible forms of coordinating and
organizing the economic transactions. Tesco experiences growth where external cost is found to
exceed internal cost of bureaucracy since they remain capable of operating more cheaply in
comparison to the performance of the similar operations in market. Tesco also downsize the
bureaucratic costs when they exceed the external cost of transaction. Hence, Tesco will remain
expanding till the time they are able to carry operations cheaply in comparison to carrying out
outsourcing to the external market providers.
The entry strategy of the supermarket has been influenced by the cultural factors known
as the psychic distance which refers to the degree at which the firm remains uncertain about the n
nature of foreign market. International joint ventures and acquisitions with local business in
higher context cultures remains vital in reducing the risk, psychic distance, adaptation cost and