Marketing and Management: Tesco's Organic Grocery Product Report

This report presents a marketing assessment for Tesco, focusing on the introduction of organic grocery products within the UK market. The report begins with an introduction outlining the scope and objectives, followed by a comprehensive macro-environment analysis using the PESTEL framework to identify political, economic, social, technological, environmental, and legal factors influencing the market. A growth opportunity is then identified and justified, specifically the launch of organic grocery items. The report subsequently delves into segmentation, targeting, and positioning strategies, detailing the demographic, geographic, psychographic, and behavioral segmentation approaches. The report suggests targeting all age groups and income levels. A detailed marketing mix analysis is provided, covering product, price, place, and promotion strategies tailored to the UK market. The report concludes by summarizing key findings and recommendations, emphasizing the importance of adapting to consumer preferences and leveraging market trends. The report provides a strategic roadmap for Tesco's entry into the organic grocery market, with the aim of attracting customers and developing positive customer experiences.

Running Head: MBA7003
Marketing & Management
Student’s ID:

1
Marketing Assessment 1
Table of Contents
Introduction.................................................................................................................................................2
Macro-environment Analysis......................................................................................................................2
Growth Opportunity....................................................................................................................................5
Segmentation, Targeting, Positioning and Long-Term Strategic Direction..................................................6
Marketing Mix.............................................................................................................................................8
Conclusion.................................................................................................................................................10
References.................................................................................................................................................11

2
Marketing Assessment 1
Introduction
The report will select an organization and develop a new market offering for the organisation. It
will target the UK market and design and deliver a new product offering in the cluttered market.
It will create a specific market space for the new product with a clear target audience and
strategies. It will research the macro-environment factors to determine the current trends in the
market of UK. It will develop the strategy of targeting and positioning of the organization.
Moreover, it will recommend some suggestion under the marketing mix which will analyze the
strategies that will be adopted by the organization to attract its customers and to develop the
customer experiences.
Macro-environment Analysis
PESTEL Analysis
Political Factors Economic Factors
 The government of UK is taking actions
to address the declining economy that
consists of a combination of economic
and financial initiatives. It has declared
several measures to revive the ailing
banks and control the increasing
unemployment in UK. In the Budget of
2018, income tax rates has been revised
up to 45% (Assimakopoulos et al., 2017).
This is estimated to revive the economy of
UK. The current corporation tax rate for
company profits is 19%. The UK
government has declared a reduction in
the business tax at the Budget. The
business rate will be 17% from 1st April,
2020
 Although Brexit has built uncertainties
and political arguments in the UK, but the
 The rate of economic growth was
confirmed to be 0.2% in December 2018.
Government investment and domestic
consumption has supported the growth,
whereas total capital and trade growth has
added negatively to the growth of the
GDP rate. The GEP rate in 2018 has
increased to 1.4% which was slower than
the GDP rate in 2017. The GDP rate in
2017 was 1.8% (Bahl and Chandra, 2018)
 The GDP in the year 2018 was
$2,822,817 million, which has positioned
UK 5th place in the ranks of GDP among
the 196 nations. The total value of GDP in
UK has increased to $194,407 million
than 2017 which was $39,800 (Datta,
Ailawadi and van Heerde, 2017). The
growth rate of economy in UK is high. At

3
Marketing Assessment 1
greatest strength of UK is the political
stability of the nation. Tesco completely
enjoys the advantage of UK’s political
stability. The primary aim of any firm is
to increase its revenues and maximize its
profit margins. The political stability of
the UK permits Tesco to enjoy the
advantages from its stability in several
taxes, duties and charges (Bahadir,
Bharadwaj and Srivastava, 2015). This
will help the firm to launch its new
product in the UK
present, Tesco has 30% shares in the retail
market of UK. As the per capita income of
the people of UK is high, it will help the
firm to increase its product’s sales
Social Factors Technological Factors
 The age of the working population is
between 15 and 64 in UK which sums up
for 67% of the overall population of the
nation, where 17.2% of the people are
between 0 to14 years and 15.8% are
above 65 years (Diallo, Burt and Sparks,
2015). This issue will worsened by the
fast growing ageing population. As the
ratio of dependency will increase, it will
become more challenging to maintain the
living standard of the dependent people as
the relatively declining workforce is under
stress
 The government of UK faces the issue of
balancing the social wellbeing for these
future growths. Improvements need to
occur as soon as possible and are
necessary particularly in healthcare
 It is estimated that in the UK broadcasting
and telecoms services had made almost
£54.7 billion in 2018 and on an average an
individual spends nearly more than eight-
nine hours each day in internet browsing
in the UK. The total number of broadband
internet subscribers are increasing
dramatically, with the subscribers have
rose to 26.2 million in UK, which makes
38.2% of UK’s broadband subscribers in
UK, a 7.6% increase from 2017 (Hood,
Clarke and Clarke, 2016)
 UK is a nation that depends mostly on
digitalization. But, Tesco is always up-to-
date with new technologies and thus the
firm has launched advanced systems such
as RFID Technology to improve
experiences of the consumers within the

4
Marketing Assessment 1
facilities and have to deal with the excess
burden which will be meant to be placed
before them in the distant future
 There are various social aspects which
differs according to the sustainability of
Tesco such as purchasing behavior,
lifestyle, values and ethics. The living
standard of the people of UK is high and
so it has positive influence on the buying
power of the consumers (Dibb and
Simkin, 2016). However, in last few
years, UK had underwent through
declined birth rates and increased life
probability of the people that has led the
company to shift according to the tastes of
the individuals. The online shopping of
the grocery items which will be enabled
by Tesco will take the mobility concerns
into consideration (Grant, 2016)
store (Hutchinson et al., 2015). It has also
introduced PayQwid where consumers
could pay through online. It will help the
company to get the competitive advantage
while launching the new product in the
UK market
Environmental Factors Legal Factors
 A government organization known as
Defra is responsible to regulate of the
food industry of UK and also the
environmental problems. The duty of
Defra is to allow the people to live in the
clean and green environment (Ieva and
Ziliani, 2017). Generally, the
environmental policies of the UK are
made on the principles of control and
command that might give the polluters a
fixed standard
 There are several legislations and
government bodies which deal with the
legal issues of the firm. In the context of
agricultural products, the government of
UK have modified the rules by allocating
subsidies to the farmers (Kajalo and
Lindblom, 2015). This might impact the
ability of the farmers to fulfill the
standards fixed by Tesco. Thus, the
legislations and government bodies might
have direct influence on the launching of

5
Marketing Assessment 1
 The UK faces the pollution issues. So, UK
has focused on monitoring global
warming and reducing the use of
greenhouse gases. The greenhouse gases
and pollution might impact the operations
of Tesco. That is the reason Tesco will be
launching the organic grocery products to
save the environment and its people from
any health risks (Izogo, Ogba and
Nwekpa, 2016). It has also implemented
several measures such as collection of
unwanted plastic bags from the consumers
and then recycle the bags
new grocery product
 According the Labor Law of European
Union, the maximum working week is 48
hours within seven days, with minimum
break of 11 hours in 24 hours (Ledikwe,
Roberts-Lombard and Klopper, 2019. The
UK also follows the same rules and also
permits to work more than 48 hours as per
the Directive of European Working Time
Growth Opportunity
Identification and Justification of New Product Offering by Tesco
Tesco will launch new organic grocery items which will include organic fruits and vegetables in
the market of UK. Organic grocery items are those products that are produced by techniques
which comply with the organic agriculture’s standards (Li et al., 2015). The standards might
vary all over the world, but the practices of organic agriculture features cycling of resources,
promoting of environmental balance and conserving of biodiversity. The organizations which
regulates the organic products might restrict the usage of certain fertilizers and insecticides in the
agricultural techniques which are utilized to produce the organic grocery items. Organic grocery
items are normally not processed utilizing radiation, solvents of the industries or artificial
additives of foods.
The terms “organic” are currently in trend on the menus of trendy restaurants and food stores in
the market of UK, although it was hardly utilized a few years before. Still organic products
occupies a small portion of the entire food market of UK, and regular consumers are mostly the
few rich people as it is an expensive product. It will be an advantage for Tesco to launch the
organic grocery items to all range of income groups at low prices. All the income groups can buy

6
Marketing Assessment 1
the organic grocery items at low price and take the benefits of the organic grocery items (Liu et
al., 2017). If more and more consumers continue to purchase more organic groceries from
Tesco, it will be good news for Tesco. Tesco have to be confident that more customers buy its
products and Tesco can expand its organic food like other companies even though there is a limit
to the potential development of the organic food industry. . It will become difficult to attract the
consumers to buy more items if they cannot see any attractive offers in front of them.
The market of UK has immense growth opportunities to Tesco to sell its organic grocery items as
the sales of organic foods in the supermarkets of UK have increased by 4% in 2018 which has
revealed new statistics and marked growth of seven consecutive years. In spite of an extremely
hot and dry summer and cold winter in UK which plays havoc with the crops, the sales of
organic fresh products has remained the leading drivers of increasing growth of the whole UK
market, with record sales of £2.2 billion (Luo and Song, 2015. The shoppers of supermarkets had
spent almost £1.5 billion on the organic foods to the end of June in 2018. It represent the sales
through retail outlets of UK mostly the big supermarkets along with small ratio from smaller
supermarket chains like Costcutter and Nisa (Makgosa and Sangodoyin, 2018). It will become
difficult to attract the consumers to buy more items if they cannot see any attractive offers in
front of them.
The sales of fresh organic vegetables and fruit increased by 5.3% in 2018 to the end of June. This
data had been reported by Soil Association, the business organization which give licenses to
organic products and endorses organic agriculture through the campaign known as Organic
September which is held every year in UK. Tesco have to take permission and sanction its new
organic grocery items from Soil Association (Nguyen et al., 2017) . Interests in the organic
foods has been developing from last few years and it is great to perceive that the farmers are
rewarded for cultivating organic food, with no synthetic additives, few insecticides, not
genetically modified (GM) and with highest animal welfare standards.
In 2018 sales had continued to increase though all the agricultural businesses in UK had suffered
from the record heat and drought that had affected large parts of the world. Soil Association
sanctions almost 70% of all the organic products in the UK had sanctioned nearly 3,000 new
products and producers in 2018 alone which included kefir and hot cross buns and also seaweed

7
Marketing Assessment 1
gin (Shamout, 2016). It is hoped by Soil Association that organic foods will become 10% of the
UK market in 2019.

8
Marketing Assessment 1
Segmentation, Targeting, Positioning and Long-Term Strategic Direction
Segmentation
Demographic Geographic
 Age: 0-99 years. Everybody needs
products of grocery
 Income Range: Lower to higher income
 Profession: All kinds of professions that
from students, professionals,
businesspersons to even the unemployed
people
 Individuals from UK with high
purchasing power and high demand for
grocery items
 Density: Urban, metropolitans and sub-
urban
Behavioural Psychographic
 Purpose of purchase: For daily
consumption
 Status of the customers: Regular
customers as well as potential customers
 Status of the customer’s loyalty: Loyalty
card scheme for retaining the loyal
consumers as well as for attracting non-
loyal and potential consumers (Thompson
and McLarney, 2017)
 Social class: Offering to all range of
income groups from lower to higher class
(Tse et al., 2016)
 Lifestyle: Health conscious individuals
Targeting
The target market of Tesco for offering the new product will be the between 0-99 years of people
as everybody needs products of grocery. The strategy of targeting by Tesco will be determined
by demographic, geographic, behavioural a nd psychographic factors for better direction in the
product offering. However, Tesco will implement the undifferentiated strategy of marketing as
retail markets are likely to produce grocery products that will suit all the needs of the customers.
Tesco will want to manufacture everything which will be found relevant by everyone for
themselves. In demographic, Tesco will focus more in all range of income groups as it will help

9
Marketing Assessment 1
the company to generate huge profits (Wood, Wrigley and Coe, 2016). In geographic, Tesco will
concentrate on individuals from UK with high purchasing power and demand for grocery items.
In behavioural, Tesco will pursue the loyalty of the customers and will always seek to improve
and make changes in its Loyalty card scheme. In psychographic, Tesco will be observing the
lifestyle of the individuals as the product have to be fit according to the preferences and tastes.
Positioning
Tesco has already made itself as a customer focused organization after launching Loyalty card
scheme as a mean to give something back to the consumer for their regular support to its
products and also for attracting the potential customers. In the context of the new product, Tesco
have to position itself successfully in the mind of the customers as the company will offer high
quality of product at low costs (Wu. and Tseng, 2015). The company also have to gain benefit by
offering an online store so that the customers become satisfy to see it and it will also be
convenient and time-saving for the customer’s shopping experiences.
Long-Term Strategic Direction
One of the long-term strategic objective of Tesco will be to achieve the top position in the retail
industry in market of the UK. Secondly, the compnay want to market since it want the people to
recognise and select its product as the company will offer high quality of product at low costs.
Thirdly, the company also want to promote their versatileness as a multi-channel store having the
combination of store and online facility (Zhang et al., 2015). Fourthly, as its core business is in
UK so the company want to promote itself with the hope to keep its core market strong. Finally,
as a responsible organization and also for its recognition as one to leading retailer in UK for
handling the climate changes, Tesco hope to adopt a green environment for shopping by
providing organic grocery items where the consumers can also have a role for consuming organic
products as being health conscious.
Marketing Mix
Product - Tesco will provide new organic grocery items which will include organic fruits and
vegetables. This product line will cater to all the possible needs of its customers and also expand
it in the online marketing industry. It will offer delivery service of grocery besides the other
products which the retail store already exhibit. Within the each category of new organic grocery

10
Marketing Assessment 1
items, Tesco will provide wide variety of options extending to several different brands, types,
and other varieties ((Datta, Ailawadi and van Heerde, 2017). It will not allow the customers to
lack of options when they will come to stores fo buying the new grocery products.
Price - Tesco will sell the new organic grocery items in low prices. The company will try to
maintain the low prices as far as possible without decreasing the product quality or running the
company in losses. To pass all the cost benefits to its consumers and to retain them, it have to
utilize a several measures. The strategy of low prices by Tesco will make it possible for the
company to exceed all the expectations as it is the top supermarket in UK before Sainsbury and
Asda. Moreover, Tesco will utilize its loyalty card system to enable its consumers to collect
points for its purchasing, which could be converted into money at later phase. This will serve as
a brilliant pricing strategy of offering additional discounts to the loyal consumers. This type of
pricing strategy will help to decrease the costs further and increase the sales without much
affecting the profits.
Place - The headquarters of Tesco is in Welwyn Garden City in Hertfordshire of England. It will
employ two major distribution channels for selling its products, offline and online. The offline
distribution channels will include six stores of Tesco, Tesco Extra, Tesco Express, Tesco
Compact, Tesco Metro, Tesco Superstore and Tesco Homeplus (Diallo, Burt and Sparks, 2015).
The earlier researches by Tesco has shown that all the customers were not comfortable at big
stores such as Tesco Extra and it is also not possible to set up other stores for selling the new
organic grocery items. So, it will make utilization of small stores of Tesco for easier convenience
for the customers. Its online distribution channel will be Tesco Direct which includes the official
website of Tesco, www.tesco.com.
Promotion - The biggest benefit of Tesco for selling its new organic grocery items will be its
low prices. This will help Tesco to set apart from other supermarkets of UK and to improve its
brand image. The primary target of Tesco will be launch the new organic grocery items, sell it
low costs and maximize its profit as well as enhance its brand image. The company will utilise
TV ads, promotional offers and discounts, organize charitable programs and utilize strategies of
point of All the ads of Tesco will focus on one motive that is its low costs. It will also provide
several attractive discounts and offers to its consumers all over the year. It will easy for any
consumer roaming across the grocery stores and find offers such as 50% discounts and ‘buy one

11
Marketing Assessment 1
product get one free. It will try to attract its consumers to buy more items while perceiving the
feeling that like they have saved a lot.
Tesco will also use the loyalty card service to provide extra discounts to the customers. This will
help the company to observe the patterns of customer’s demand and know the present trends of
UK market. It will also allow the company to segment its market and make strategies properly.
Easy approachability and accessibility will also help the company to gain more loyal consumers.
Its online facilities will also help to appreciate and receive brilliant responses. The payment
processes have to be easy in both offline and online distribution channels. The stores of Tesco
have to implement both the options of self-service and payment. Purchases through online are
generally of low-cost than purchases through offline. It might not work for the stores as the
expectations of the customers as the stores will decrease its revenue significantly as the
customers will not have much options in online than offline. It will become difficult to attract the
consumers to buy more items if they cannot see any attractive offers in front of them.
Conclusion
The report had chosen Tesco and developed a new market offering for Tesco. It had target the
UK market and designed and delivered the offering of new organic grocery items in the cluttered
market of UK. It has created a specific market space for the new product with a clear target
audience and strategies. It had evaluated the macro-environment factors with the help of
PESTEL analysis to determine the current trends in the market of UK. It had developed the
strategy of targeting and positioning of Tesco in the context of new product. It had recommended
some suggestions under the marketing mix which had examined the strategies adopted by Tesco
to attract its customers and to improve the customer experiences.