UGB161: Marketing Audit of Tesco - Strategy and Segmentation

This report presents a comprehensive marketing audit of Tesco, a global retail business. It begins with an introduction to marketing and its significance, followed by an analysis of Tesco's marketing strategy. The main body includes a PESTLE analysis of the macro environment, SWOT analysis of the micro environment, and a competitive analysis using Porter's Five Forces. The report also examines Tesco's marketing mix (product, price, promotion, and place) and the marketing tools it employs, such as social media marketing. The analysis aims to evaluate Tesco's current performance and market position, culminating in a conclusion summarizing the key findings. The report fulfills the assignment brief by providing an in-depth assessment of Tesco's marketing strategies and offering insights into its operational effectiveness.

UGB161 Introduction to
Marketing Assessment

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Marketing is an immensely important and significant business process through which the
business organisation advertises and promotes about its produced services and goods to the
potential consumers in the external populations (Kotler and et.al., 2017). This report analyses the
marketing strategy of Tesco, which is a global retail business organisation that was founded in
1919 and has successfully operated within the retail marketplace of UK ever since. Tesco
specialises in selling to the consumer general merchandisers and grocery products through their
various retail establishments across the world, with their headquarters being located in
Hertfordshire, England, UK. The long lasting productive operations of Tesco in the retail
industries of the UK has enabled Tesco to grow its operations and expand its business to various
international markets, in an effort to increase their financial and operational performance.
Currently Tesco operates more than 6,800 different stores across 11 distinct countries of the
world and thus has been able to become the third largest retail business, on the basis of generated
gross revenues.
MAIN BODY
Marketing audit of a business organisation such as Tesco refers to the systematic and
comprehensive analysis and evaluation of the business’s micro and macro environment, its
competitors within the operational industry, the marketing strategies used by the business
organisation so that the business’s overall financial and operational performance within the
operational industry can be further enhanced and improved (Perreault, 2018). In order to
effectively conduct marketing audit for the operations of Tesco, this report makes use of various
strategic models and frameworks towards effectively analysing the macro and micro
environment in which Tesco operates in, the competitive analysis of Tesco, its marketing
strategies etc.
 PESTLE Analysis:
In order to effectively analyse the macro environment that Tesco operates in, this report
makes use of the PESTLE analysis as follows:

Political Factors: The most important political macro factor to have an effect on the functions of
Tesco relates to the current uncertainty in the political landscape of UK due to Brexit. Though
the detail of alterations to the UK policies are still not clear post Brexit, this political factor can
have a beneficial impact on the global trading functions of Tesco through relaxation of
international trading policies, making them more transparent and easy.
Economic Factors: The decrease in the corporate tax, that was announced by the government of
UK from 19%, charged on the business’s profit margins, to 18% from 2020 onwards, will
inevitably have a positive impact on the financial profit margins of Tesco, as it would have to
pay the government of UK less amount of taxes, even if Tesco manages to service the same
number of customers as it did in the previous fiscal year, aiding the financial performance of
Tesco.
Social Factors: The most prominent social factor affecting Tesco’s operations relates to the
social trend in which increased number of UK consumers are now opting to conduct their
shopping operations through digital online stores (Hollensen, 2019). This social factor has the
potential to have an immensely positive impact on the financial and operational performance of
Tesco as directly through this social trend, Tesco’s online stores can gain increased number of
customers, satisfying their needs and requirements to gain financial profitability in UK.
Technological Factors: Advancements in the external environments relating to new
manufacturing equipment and machines that are capable of performing at higher manufacturing
rates while also making efficient use of organisational resources and energy can also have an
immensely positive impact on the operational performance of Tesco, should the leadership and
senior management of the business choose to install and upgrade to these new and innovative
manufacturing machines, which would allow for them to operate with increased financial and
operational performance.
Legal Factors: Any changes made by the government of UK relating to the legislations and
regulations that Tesco is mandated to adhere to such as the Minimum Wages Act, Health and
Safety at Workplace Act etc., can have an adverse impact on the financial and operational
performance of Tesco, as this would require Tesco to make organisation wide changes that
consume resources and require time.

Environmental Factors: Should the government of UK make any kind of changes to the
environmental legislations and regulations that the supplier of Tesco and the retail business
organisation are themselves mandated to adhere to, then these changes can also have an
immensely negative impact on the financial and operational performance of Tesco, which can
also result in the prices charged by the suppliers of Tesco to be increased affecting the overall
financial and operational performance of Tesco in a negative way.
 SWOT Analysis:
The micro environment of Tesco can effectively be analysed by making use of the SWOT
analysis which details the internal weaknesses and strengths of the organisation and the external
threats and opportunities it faces.
Strengths:
 The high brand value, awareness and reputation metrics of Tesco within the retail
marketplace is a huge strength of the retail business organisation.
 Tesco’s leadership and management has also invested significantly into their overall
operational infrastructure, with the current developed infrastructure of Tesco also being
one of the key strengths of the retail business organisation (Chaffey, 2019).
Weaknesses:
 Tesco has failed to successfully merge or acquire the operations of another business
organisation in the past, with this being a major weakens of the retail business
organisation.
 Tesco has also been dragged in price wars by their competitors in the past, with this
having a significantly adverse impact on the overall financial performance of the business
organisation.
Opportunities:
 Tesco can service and meet the needs and demands of a huge number of potential
customers through their online digital stores, with this opportunity having the potential to

significantly increase the market share, financial and operational performance of the retail
business organisation.
 Tesco can also expand their retail operations to international markets in various other
countries, which would allow for Tesco to effectively diversify their business operations
and increase their financial and operational performance metrics.
Threats:
 The extreme competition from the various other business organisation that operate in the
retail marketplace of UK is a major threat to the financial and operational success of
Tesco.
 External economic factors such as inflation in UK is also a major threat to the operational
and financial success of Tesco as this can result in a shrinkage of the purchasing power of
Tesco’s customers.
 Competitors Analysis:
In order to assess the competitive environment that Tesco functions in, this report makes
use of the Porter’s Five Forces model, which details five forces which can be used to effectively
assess the competitive environment of Tesco. These five forces are as follows:
Competition Within the Industry (High): Tesco faces extreme competition from the numerous
business organisation that operate in the retail marketplace of UK such as Aldi, Lidl etc., with all
these organisation operating towards similar organisational objectives as of Tesco relating to
increasing their own client base, financial and operational performance and market share within
the retail marketplace of UK (Mix and Brand, 2017). To combat the negative effects of the
extreme competition within the retail industry and continue its successful operations, Tesco
requires a sustained competitive edge against its competing business organisations.
Supplier’s Bargaining Power (Low): The suppliers of Tesco who are essential for the
operational success of the retail business organisation as they provide the business with essential
raw materials and goods for Tesco’s manufacturing operations possess low bargaining power.
This is because the retail sector possesses numerous suppliers all of who provide similar services

to each other. So in case if the suppliers of Tesco increase the prices charged of the raw materials
and goods, Tesco can easily switch to other competitors without facing significant issues or
challenges.
Threat from Substitutes (Moderate): Tesco faces moderate threat from the alternative and
substitute products that are available to the consumers within the retail sector of UK. This is
because though the goods and products manufactured by Tesco are quite similar in function to
those manufactured by its competitor business organisations, many of the products and goods
manufactured by Tesco have been highly differentiated from the alternative and substitute
products that are available to the consumers in the retail markets.
Consumer’s Bargaining Power (High): Tesco’s consumers possess high level of bargaining
power over the business organisation. This is due to the consumers having access to conduct
their retail operations from numerous business organisations that operate within the retail
marketplace of UK, offering products and services to the consumers that are quite similar to each
other. This is why Tesco is recommended to place increased focus on their customer service and
satisfaction operations, in order to gain the long term loyalty of their customers.
Threat from New Entrants (Low): Tesco does not face any significant threat from new business
organisations trying to enter into the retail marketplace of UK. This is because entering into the
retail marketplace requires significant financial resources and investments for a business
organisation (Cateora and et.al., 2020). Tesco having already invested and developed its
operational infrastructure does not face any significant threat from new entrants as these
businesses cannot hope to compete with the developed infrastructure and network possessed by
Tesco.
 Marketing Mix of Tesco:
The marketing mix is a strategical framework that details the set of tactics or actions that
Tesco makes use of with the intention to promote and advertise its brand and manufactured
products to the consumers in the external markets. The marketing mix primarily consists of 4 Ps
which are as follows:

Product: The products that are manufactured and sold to the consumers by Tesco are quite
varied ranging from groceries to general merchandises to clothes to houseware essentials to
children’s toys (Shilbury and et.al., 2020). All these products are manufactured specifically to
satisfy the needs, demands, preferences and requirements of the customers of Tesco allowing for
the business to effectively service their customers and provide value to them.
Price: Tesco operates on a competitive pricing strategy, that allows for the retail business
organisation to maintain its generated profit margins, while also providing to its customers
manufactured goods and products at affordable prices, which can be easily purchased by them in
order to gain value.
Promotion: Tesco advertises and promotes about its manufactured products and services to their
customers within the UK’s population through various digital and traditional marketing tools in
order to be able to effectively generate their interest towards the business organisation and its
products and convert them into making financial transaction with the business organisation
(Deepak and Jeyakumar, 2019). Such digital and traditional marketing tools include social media
platforms, online websites, emails, billboards, TV and radio commercials, newspapers,
magazines, etc.
Place: Tesco sells its manufactured retail goods and products to the customers through its
strategically located retail establishments which are located in popular localities where a large
number of consumers can easily make a visit and conduct their shopping operations. In addition,
Tesco also sells its manufactured goods and products to the consumers through its own digital
online store, where the consumers can efficiently browse through the various product ranges that
Tesco offers, buy desired products and have them delivered to their preferred destination.
 Marketing Tools Used by Tesco:
Tesco makes use of various digital and traditional marketing tools with the intention to
effectively promote about their produced goods and services to the UK population, generate their
interest towards the business organisation and its manufactured products in hopes of converting
them into conducting a monetary transaction with the business organisation. Tesco uses the
following digital marketing tools:

Social Media Marketing: Tesco uses the various social media platforms such as Facebook,
Twitter, Instagram etc., to effectively promote and advertise their manufactured products to a
large base of audience through the internet, while incurring significantly decreased costs.
Through such social media platforms, Tesco can effectively interact and engage with a very large
section of their customers in order to generate their interest and convert them into conducting a
monetary transaction with the business organisation (Kotabe and Helsen, 2020). This requires
Tesco to possess immensely skilled and experienced customer representatives as all interactions
between the business and its customers online are required to be positive.
Online Website: Tesco also makes use of their official online website for their promotional and
advertising operations. Through their online website, the retail business organisation is able to
effectively promote the various ranges of products that it manufactures to the public. This
requires Tesco’s marketers to create an aesthetically pleasing and functional website that
contains marketing content that is interesting, valid, reliable and engaging for their customers.
Tesco also makes use of the following traditional marketing tools:
TV and Radio Commercials: Tesco also uses traditional marketing tool of paid commercials on
TVs and radios in order to effectively advertise their products to a very large section of the UK
population. Though this method of marketing is costly, it advertises to a very large section of the
UK population and requires interesting and engaging marketing content from Tesco’s marketers.
Newspapers and Magazines: In addition, Tesco also makes of use Newspapers and magazines to
conduct their promotional and advertisement operations in an effective manner. Through such
paid advertisements in newspapers and various assortments of magazines, Tesco’s marketers are
able to effectively communicate the marketing content of Tesco to a very wide section of the UK
population. This tool also requires marketing content that is engaging, interesting and interactive
for the consumers in order for the marketing operation of Tesco to be successful.
 Market Segmentation and Target Market of Tesco:
Tesco can effectively segment their customer base on economic grounds, choosing to
target customers belonging to the lower and middle economic classes of the UK population, as
these are the customers who possess the interpersonal disposable income required to financially

interact with Tesco in relation to purchasing the goods and services manufactured by the
business organisation. Choosing to target customers within the lower and middle economic
classes of the UK population allows for Tesco to place focus on a vast majority of the
population, with the number of customers being in the middle and lower economic classes vastly
outnumbering the small number of customers it would not target in the upper economic class of
UK population (Kotler and et.al., 2018). Choosing customers in lower and middle economic
classes of UK can allow for Tesco to effectively service a vast majority of the UK population
through their high quality and affordable goods and services through which the business can
effectively enhance their financial and operational performance, allowing for the business to
grow its operations.
Tesco can also segment its customer base on demographic basis, choosing to further
target customers on the basis of their age, gender, occupation, family size, nationality etc. Tesco
is recommended to segment and target customers belonging to the age ranges of 10 to 65 as the
goods and services provided by Tesco are able to meet the needs and demands of this age
demographic (Tuten and Solomon, 2017). Tesco is also recommended to target all customer
genders, religions, nationalities in order to effectively increase the number of targeted customers
while also being able to effectively satisfy the demands and requirements of this demographic.
Further Tesco should segment target customers who are single, bachelors, couples, or of any
family size as Tesco’s manufactured goods and products are also effectively able to satisfy their
requirements and needs.
Segmenting target customers on the basis of economic or demographic grounds can
effectively allow for Tesco to satisfy the needs, preferences and demands of their target
customers, gain their long term loyalty towards the business organisation and increase their
overall financial and operational performance, allowing for Tesco to grow and expand their
business operations effectively.
 Consumer Behaviour:
As there exist various business organisations functioning in the retail marketplace of UK
apart from Tesco such as Aldi, Lidl etc., the customers have access to a variety of alternate
businesses and this significantly impacts the behaviour of Tesco’s consumers. One of the most

significant factors that influences the behaviour of Tesco’s customers relates to the prices
charged by Tesco. Should Tesco increase the prices of its manufactured goods and services, then
this has a negative impact on its consumer’s behaviour, making them switch to the competitors
of Tesco. This is why choosing the consumers in the lower and middle economic classes of the
UK population is advantageous for the operational and financial success of Tesco as targeting
these customers allows for Tesco to provide goods and services that are affordable by a very
large portion of their customer base, allowing for the business organisation to positively
influence the behaviour of their customers while also gaining their long term loyalty which is
essential for the growth of Tesco. Another factor that has immense impact on Tesco consumer’s
behaviour relates to the overall quality of the Tesco products (Armstrong and et.al., 2018). If
Tesco provides their customers with low quality goods, then this adversely affects their
behaviour, making them switch to the competitors of Tesco. Tesco take advantage of its large
scale operations and make use of the manufacturing principle relating to economies of scale in
order to effectively manufacture high quality goods at affordable costs and satisfy the needs and
demands of their target customers, positively influencing their behaviour towards the growth of
the retail business organisation by gaining their long term loyalty.
CONCLUSION
Through the report’s findings, it is effectively concluded that the marketing strategies
used by Tesco in addition to its segmentation of targeted customers has immensely contributed
towards the long term sustained productive operations of Tesco within the retail marketplace of
UK. Tesco makes use of digital and traditional marketing channels and the various marketing
tools that these channels provide to effectively promote and advertise about their manufactured
goods and services to the external populations in an attempt to generate their interest and engage
in financial transaction with the retail business organisation. Tesco’s marketing strategy has also
effectively incorporated the purchasing behaviour of their customers in an effort to be able to
effectively satisfy their needs, requirements, demands and preferences so that their long term
loyalty can be gained by Tesco for their sustained successful operations.

REFERENCES
Books and Journals
Kotler, P. and et.al., 2017. Marketing for hospitality and tourism.
Perreault, W.D., 2018. Essentials of marketing. New York: Mc Graw Hill.
Hollensen, S., 2019. Marketing management: A relationship approach. Pearson Education.
Chaffey, D., 2019. Digital marketing. Pearson UK.
Mix, M. and Brand, C.B., 2017. Marketing management.
Cateora, P.R. and et.al., 2020. International marketing. McGraw-Hill Education.
Shilbury, D. and et.al., 2020. Strategic sport marketing. Routledge.
Kotabe, M.M. and Helsen, K., 2020. Global marketing management. John Wiley & Sons.
Kotler, P. and et.al., 2018. Marketing management: an Asian perspective. Pearson.
Armstrong, G.M. and et.al., 2018. Marketing: an introduction. Pearson UK.
Tuten, T.L. and Solomon, M.R., 2017. Social media marketing. Sage.
Deepak, R.K.A. and Jeyakumar, S., 2019. Marketing management. Educreation Publishing.