MG412 Principles of Marketing: Tesco Brand Extension Strategy Report

This report provides an executive summary of Tesco's brand extension strategy, focusing on its expansion into the Netherlands retail market. It begins with an introduction to the importance of marketing and brand extension in increasing profit margins, followed by a discussion of Tesco's existing brand value and target market. The report then delves into the methodology, which includes qualitative research methods, PESTLE and STP frameworks, and the Ansoff matrix. Findings cover Tesco's existing brand value, target market analysis using the STP model, and a comprehensive new market analysis incorporating PESTLE analysis and Ansoff's grid. The new product, digital toys, is explained in detail, along with the competitive landscape. The report concludes with a summary of key strategies and recommendations for successful brand extension, emphasizing the importance of understanding market trends and adapting to competitive pressures. The report highlights the challenges and opportunities Tesco faces while expanding into the Netherlands retail sector, including the need for effective marketing plans and strategies to gain a competitive advantage. The report also mentions the importance of considering factors like political, economic, social, technological, environmental, and legal aspects in the new market.

MG412 Principles of
Marketing

Executive Summary
Marketing function as well as brand extension functions of a business are very important
in order to increase on levels of profit margin. This report discusses the brand extension strategy
of Tesco. Some key marketing strategy also has been described in this report which this company
can use while brand extension.

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................4
MAIN BODY..................................................................................................................................4
METHODOLOGY..........................................................................................................................4
FINDINGS.......................................................................................................................................4
Existing brand and brand values..................................................................................................4
Description of the Target Market................................................................................................4
New Market Analysis, Including Trends.....................................................................................5
The New Product’s Explanation..................................................................................................5
Competition.................................................................................................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Marketing function always plays a very important or productive role to a business in the
market place. Currently each sector or industry has faced very higher competition, in which
upper management in almost all organisations uses various techniques and strategies of
marketing for gaining effective competitive advantage in the market place. In this modern world,
there are many companies takes various productive steps towards making different marketing
plans for gaining better outcomes while extending own business operations in the selected
market place (Swaffield, Evans and Welch, 2018). This report discusses the marketing function
and business extension processes of the of Tesco. Basically, Tesco is the leading retail company
of the UK which currently serves in over 13 countries, headquartered in England, UK. This
report discusses existing brand value of business with the description of target market. Some key
external factors also have been used below which can affect Tesco in both ways positively and
negatively.
MAIN BODY
METHODOLOGY
In this modern world, there are quantitative and qualitative methods of research
commonly used by different companies and individuals. Basically, qualitative method research
helps a business for gaining data and information through personal meetings, observation,
interviews and books & journals. On the other side, quantitative method of research has been
used by companies for collecting data through numerical and mathematical information.
However, only the qualitative method has been used here to collect data for existing research
work. On the other side, there are frameworks like; PESTLE and STP also has been used below
for enabling Tesco to successfully extend in the new market place. Recently, upper management
of Tesco has taken decision for extending own operations in the Netherlands. Basically, it has
planned to launch its new product, named; digital toys (Keane and Morschett, 2017). This
product is mainly developed to kids and children of Netherlands, and that is why company use
mainly use this particular product while extending own business operations in new market place.

FINDINGS
Existing brand and brand values
Existing brand value of Tesco is very higher in the global retail industry. Basically, this
business is known as the most leading retail organisation of the United Kingdom right now. Top-
level management of this business always believes in providing quality products and services in
the market, and this is why many of people within UK like this retail brand. There is Kapferer’s
prism of brand identity has been used to know existing brand value of Tesco in market.
Kapferer’s prism of brand identity is very useful tool to upper management many
companies to be aware about own exiting business value or brand value in own respective
industry. Prism generally includes six elements which upper management at Tesco should be
followed to measure its brand value in market place, there are all six elements of prism has been
used below;
Physique: Tesco is a very large retail venture, because currently has stores and supermarkets in
6800 locations in across the world, and this retail business has over 450,000 employees or
workers as well which works in daily operations of company to achieve its overall objectives in
the market.
Personality: Top-level management of company like to use different management and leadership
styles in daily operations for making its personality very effective as well as productive (Lamey
and et.al., 2018). Existing employees or workers are currently very satisfied with existing
personality of Tesco’s top-level management.
Culture: Tesco has an effective work culture, because upper management at this organisation
always takes various productive steps towards removing such elements from the workplace
which can negatively affect to company’s business operations. For example; it follows all ethical
and legal considerations in workplace for properly formulating a healthy and ethical work
culture.
Self-Image: Existing business image of Tesco is also very positive in market place, because
upper management of company has putted its huge efforts to do this. For example; company
fulfils its obligation of CSR (corporate social responsibility) in the market on time for working in

the welfare of society as well as people. Due to this reason, currently Tesco has an excellent
image in retail industry of the UK.
Reflection: The management of company not compromises with quality of various products and
services, and this is why company currently has the largest customer base in its home country
UK (Jumani and Sukhabot, 2020). On the other side, company’s after selling services are also
very favourable to different customers.
Relationship: Top-level management at Tesco knows the value of an effective relationship in
market, and that’s why it has used its effective communication skills to put very positive impact
on different customers and employees etc. It focuses on effective relationship management as
well to maintain an effective relationship its stakeholders, and this management can play an
excellent role to Tesco while extending own business operations in Netherlands.
Description of the Target Market
According to the management, the retail industry of Netherlands is the target market of
company. Currently this company sees great growth opportunities in this market place, and the
mindset of company is completely useful, because Netherlands also has an effective retail
industry, and currently many existing retail ventures gains very appropriate profit margins in
market place. The management will be required to use STP model in own workplace, because
this model is too useful in the terms of targeting many customers in the selected market place.
STP model
STP model is one of the most important strategies of marketing, because it provides
opportunity to a venture for systematically targeting people in market. Basically, STP model
decries three stages to target people in different segments of market, and these all three stages
has been discussed below;
Segmentation: Segmentation is the stage that informs businesses about how to create different
segments of market. In this situation, the marketing team have to use this model to turn it’s all
large into small segments of market. It can turn its large market into small segments on the basis
of many factors, like; demographic, geographic.

Targeting: Targeting is the main stage under the STP model, in which upper management have
to give order to its marketing team to systematically target its different customers in the new
market place in the Netherlands. For example; company wants to launch its new product in this
place for the business extension, named; Digital toys, so there will kids and children of this
country become key customers of Tesco after successful business extension.
Positioning: This is the last stage under the STP model, in which marketing department of
company have to be very active in the terms of maintaining an excellent relationship with local
customers (Boyaci, 2017). On the other side, Tesco will require to boost its supply chain
operations as well while extending own business operations for delivering own new product to
customers on time.
New Market Analysis, Including Trends
Analysis of market is very important and productive work to a business for identifying
key factors of the targeted market place. There are different types models also has been available
in market place which upper management of Tesco can use for analysing selected market place.
For example; PESTLE tool is very helpful for the market analysis, and this tool will give chance
to company for knowing about market trends as well while extending own venture in the
Netherlands.
PESTEL Analysis
This is the tool that currently used by different businesses in the market for being
informed about the key external factors of the business environment. This PESTLE term
generally projects six key external factors of the business environment which has been discussed
below;
Political factors: Political factor of Netherlands will positively affect to business operations of
Tesco when it will be extended its brand in this market place (Kreutzer, 2019). Basically, local
government runs different campaigns for inviting different MNCs which their authorisation area
in order to generate great employment opportunity to local people. Government will impose very
low tax rate on Tesco as well.

Economic factors: Economic factors of this country also very favourable to company, because
the Netherlands has well-developed economic conditions. Of course, after corona virus pandemic
this economy of country faces something slowdown, so this factor will impact to sales ratio of
company in something negative way. But, government of country regularly takes various steps
towards dealing with current economic slowdown, so this a positive thing to Tesco.
Social factors: Most people or retail customers of this country like to consume quality and
premium range of products, so this factor will influence to Tesco for developing only quality
products and services.
Technological factors: Netherlands has many advance technologies, in which this factor will
positively affected to company when it will be extended its business operations in this market
place.
Environmental factors: Environmental factors of targeted market place will affect to Tesco for
not conducting such operations in own workplace which can negatively influence the nature and
its different components.
Legal factors: Legal factors of Netherlands can highly impact to Tesco, because local
government and parliament has formulated different laws and regulations which each MNCs or
local venture have to follow to be legally formed in the country (Ahlers, 2019).
Ansoff’s Grid Matrix
The management of company will require to use Ansoff grid matrix as well in its
workplace while extending its business operations in the Netherlands, because this grid provides
various productive strategies to gain better outcomes.
Market penetration: Market penetration strategy will help business for offering existing
products in the existing market place.
Product development: Product development strategy can support business for innovating a new
product to use it for existing market place.
Market development: Market development strategy is very helpful to Tesco for entering in the
marketplace by using existing products and services.

Diversification: In the current scenario of company, the company have to use this diversification
strategy, because it is very helpful in entering in the new market place by using a newly
developed product (Dawes, 2016).
The New Product’s Explanation
The company has developed new product, named; digital toys which will give an
excellent experience, fun, joy and satisfaction to different kids and children in the Netherlands
(Veszelszki, 2018). On the other side, Tesco has not added such features and attributes in this
product which can harm kids and children, and this is why this product is too good to use while
brand extension. Parents will simply influence to their kids for using this product for the limited
time period, because digital toys which has recent developed by company cannot make any child
to very addictive. Upper management of company knows different concerns of parents relating
toys, in which while developing its new product, the company was considered all concerns of
parents, and this is why parents will be motivated to buy this new product of Tesco in the
Netherlands.
Competition
Currently the competition in retail industry is very high, and this factor can be a threat to
Tesco while brand extension (Hu, Chen and Yang, 2016). For example; Walmart, Iceland foods,
Aldi etc. retail companies can give very tough competition to Tesco in the Netherlands. Upper
management of company have to order its marketing team for creating an excellent marketing
plan for gaining better outcomes in the initial stage of this new market place.
CONCLUSION
It can be concluded that upper management of Tesco have to consider different strategies
and techniques of marketing while extending own business operations in the retail industry of
Netherlands. Basically, there is huge competition in the market place of this country, so that it
should use STP model for properly targeting their customers in the market place. On the other
side, it should use PESTLE analytical tool also while brand extension to be ready for dealing
with the impact of different factors of business environment.

REFERENCES
Books & Journals
Ahlers, T. J., 2019. The impact of emotions on consumer decision-making: a consumer
behaviour analysis of hedonic consumption as related to the Harley-Davidson brand.
(Doctoral dissertation, Queen Margaret University, Edinburgh).
Boyaci, T., 2017. Consumer taste uncertainty in the context of store brand and national brand
competition.
Dawes, J. G., 2016. Testing the robustness of brand partitions identified from purchase
duplication analysis. Journal of Marketing Management. 32(7-8). pp.695-715.
Hu, Z., Chen, X. and Yang, Z. eds., 2016. Research frontiers on the international marketing
strategies of Chinese brands. Routledge.
Jumani, Z. A. and Sukhabot, S., 2020. Identifying the important attitude of Islamic brands and its
effect on buying behavioural intentions among Malaysian Muslims. Journal of Islamic
Marketing.
Keane, M. and Morschett, D., 2017. The Influence of Localised Corporate Social Responsibility
and Perceived Brand Localness on Willingness to Buy at a Foreign Grocery
Retailer. Marketing ZFP. 39(1). pp.27-43.
Kreutzer, R. T., 2019. Concepts for the Development of Strategies. In Toolbox for Marketing
and Management. (pp. 49-87). Springer, Cham.
Lamey, L., and et.al., 2018. New product success in the consumer packaged goods industry: A
shopper marketing approach. International Journal of Research in Marketing. 35(3).
pp.432-452.
Swaffield, J., Evans, D. and Welch, D., 2018. Profit, reputation and ‘doing the right thing’:
Convention theory and the problem of food waste in the UK retail sector. Geoforum. 89.
pp.43-51.
Veszelszki, Á., 2018. Like economy: What is the economic value of likes?. Society and
Economy. 40(3). pp.417-429.