Tesco & Waitrose UK Retail Strategy

This case study provides an in-depth analysis of the retail strategies employed by Tesco and Waitrose in the UK market. It examines various aspects, including PESTLE analysis, Porter's Five Forces, SWOT analysis, and the retail mix (merchandise, pricing, communication, location, store design, and customer service). The study compares how these two leading supermarket chains differentiate themselves and compete in the same environment. It also explores their objectives, target markets, positioning strategies, and brand images. The report concludes by summarizing their market positions, strengths, weaknesses, and future opportunities, offering insights into their competitive strategies and market dynamics.

A Study Of
Tescos & Waitrose,
UK
Name
Date
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Executive Summary
This paperwork relays the methodology and research of the development professionals from the
University. The research was performed in order to define and develop an assessment tool to
monitor assessment. After in-depth work on research groups, & case studies, we were able to
identify two important retailers of UK which are Tesco PLC &Waitrose which have a strong
presence across & how they compete in the same market. This report covers external & internal
factors, resources surrounding Tesco & Waitrose Company. It conducts an in-depth analysis &
identifies implementation of retail strategy mix which could differentiate Tesco & Waitrose
existing in the same environment. The core emphasis lies in the strategy planned & marketing
mix used by both in key highlighting their strength & weakness.
Both the companies are leading companies in super market stores especially in food & drink
industry. Even after having knowledge of know how techniques of handling resources in
manufacturing, management of supplies, trained staffs how they are both able to distinguish
themselves & still provide unique essence of retailing industry.
For understanding the research we measured various parameters & the scope of project by
reading reports, magazines, books & online searches.
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Table of Contents
Table of Contents
Executive Summary 2
Introduction 3
Situation Analysis 5
i. PESTLE Analysis 5
1. Political Factor 5
2. Economic Factor 6
3. Social Factor 6
4. Technological Factor 6
5. Legal Factor 7
6. Environmental Factor 7
ii. Porter’s Five Forces 7
1. Bargaining Power of Suppliers 8
2. Bargaining Power of Buyers 8
3. Threat of New Entrants 8
4. Threat of Substitute Products 8
5. Competitive Rivalry 8
iii. SWOT Analysis 9
1. Strengths 9
2. Weaknesses 10
3. Opportunities10
4. Threats 11
Objectives 12
Positioning, Targeting, and Image 13
i. Target Market of Tesco vs. Waitrose 13
ii. Positioning Strategy of Tesco vs. Waitrose 13
iii. Image of Company of Tesco vs. Waitrose 13
Retail Mix 14
i. Range of Merchandize Mix 14
ii. Pricing 14
iii. Communications 15
iv. Location 15
v. Store Design and Layout (should include visual merchandising, and atmospherics)
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vi. Customer Service 17
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Conclusions 18
CHAPTER ONE: Introduction
Leading UK companies in super-markets how they compete in the same environment facing
challenges internally or externally & how they transfer it their strength & sustain their market
share. Reading about previous strategy retail mix used, analyzing it in depth through researches
online & from reports helped in translating into a live example to resolve the current
implementation of retail strategy issues & mark it as learning for the future courses of action.
Key strategy was devised which was mapped as per the challenges levels. For the external issues,
joint ventures & diversifications were recommended & for internal retail strategy issues with the
support of promotions, advertisements & tie ups attributed into streamlining strategies to
distinguish itself from the competition. The research questions to approach this hypothesis
focused on the following main themes:
 Issues during implementation of retail strategy mix
 Solutions to smoothly implement retail strategy mix
 Strategies used in distinguishing itself
 What recommendations or conclusions can be drawn while implementing
This report summarizes implementation of retail strategy mix be it in Tesco or in Waitrose UK,
ways to strategize it and optimizing it to capture maximum market share. All the key topics are
bifurcated into seven chapters which comes helpful in learning & concluding issues. First, it
highlights the key topic covered in an introduction. The next section includes situation analysis
& then it covers objectives. Chapter 4, explains the Positioning, targeting, image & Chapter 5
explains retail mix strategies to understand market & ways to capture it. Last chapters draw
conclusion part.
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CHAPTER TWO: SITUATION ANALYSIS
In this chapter, we draw comparisons between Tesco & Waitrose by understanding the situation
in which both the company coexists and for this we did extensive research in situation analysis.
i) Comparative PESTEL Analysis framework of Tesco & Waitrose
1. Political
For Tesco, UK political market has always been favorable and for Waitrose same is the scenario.
The challenge remains when it requires penetrating into new global market segments it needs a
political support & permission of targeted countries. For eg. Penetrating into India it needs to
check political stability, favorable reforms & then decide launch of new stores & products. For
this Tesco have huge resources and funds to sustain while diversifying globally but same is not
the case with Waitrose which has limited resources with optimum utilizations.
Tesco has a vision to penetrate globally & keeps a check in a peer strategy for the road blockage
while entering into new market domain & segments. On the contrary, Waitrose captures majorly
in UK & has penetrated less globally hence it only compliances with UK government rules &
reforms.
2. Economic
Favorable economic factors globally & locally are a big concern for both the companies.
Downturn in economy results in consumer changed behavior while tough reforms leads to price
dropping & no sales growth especially in non food items.
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However food items are last dropped item form the list during high inflation & economic
downturns but still to sustain in existing scenarios & retain customer base TESCO should launch
more loyalty & warrant cards scheme (Euromonitor, 2010).
While for Waitrose it is highly dependent on UK economic reforms. As of now it has stable
prices but due to the bad recession in 2008 it resulted in customer switching & heavy losses.
Hence regular schemes, promotions, cards loyalty should be launched to maintain customer
database
3. Social
Change in lifestyle, buying behavior, improved health awareness leads to changes in pattern.
Tesco should consistently foresee changed social behavior & choose alternative plans.
For example : keeping more organic or non-organic food items for a health- conscious people.
Tesco keeps a tab on the payment methods used such as cheques, cash credit/debit card, bank
transfer or payment through customer loyalty or cards which help in serving satisfied customers.
While Waitrose has adopted itself to changed mindsets of consumer behavior because of buying
patterns, new lifestyles, habits & preferences. Waitrose follows an updated market trend of food
or non food items & has excluded outdated stuff. Keeping abreast with Waitrose focus it came
with up market promotional activities.
4. Technological
Keeping stocks fresh, introducing latest technology, maintain logistics is all tricks to penetrate
easily in the market & cater to the needs of customer (Office for National Statistics, 2010).Tesco
upgrade itself to latest style & technology in order to sustain & compete with peers.
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Customer Loyalty programs, cards, schemes, convenient payments system result in customer
loyalty which has very well utilized by Tesco (Sun, 2009).
While Waitrose keep itself updated & adapted patterns changed technology, storage, supply
deliverables, transportation in grocery food items segment catering majorly to UK citizens.
5. Environmental
Government support & strategically encouragement resulted in Tesco promotions in the targeted
company. Carbon footprint resulted Tesco introduction in organic & non organic food items
(Wood, 2009).
For Waitrose, reduce food waste, ban of plastics & using of more environment friendly
decomposable stuff (Yuthas, 2009).
6. Legal
Service tax in food items & VAT in non-food items has been applied as per targeted countries in
Tesco.
Minimum wages pay & gender equality has been implemented in the Tesco as per the specific
country norms.
While for Waitrose its more a pro UK oriented & hence domestically it includes all laws,
reforms, taxes etc. & globally it adheres to quality standards set by institutes reforms to
strategize penetrated markets.
ii) PORTER competitive analysis for Tesco plc & Waitrose
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These can be distinguished & analyzed on the basis of below points-:
1. Bargaining power of suppliers: Tesco strategies through low specific suppliers dealing in
the market & price rise in inputs result in producing products at higher costs while for
Waitrose switching to the alternative suppliers due to cheap supply are low since margin
are quite low.
2. Bargaining power of buyers: Since companies like TESCO exists in a perfect market
hence their end products should be of same price while for Waitrose switching costs are
readily available due to many options available (Davey and Laurance, 2008).
3. Threat of new entrants: New entrants in various sectors delivering products & services at
a cheaper prices, breaking market share of Tesco PLC. While for Waitrose it is able to
sustain in the market, capturing market share since it provides better crème class products
& services at same price Sainsbury charge its customers. Waitrose unique essence of its
product is high quality products which keeps it class apart from other competitor M&S.
4. Threat of substitute products: For Tesco, cheaper substitutes products are readily
available in the market while Waitrose caters to a specific domain of retail market hence
levels of substitutes are quite low. For Tesco, some existing players are big & dominant
in the market hence entering into a completely new domain will result in resistance &
forces. For, Waitrose if it wants to enter in a new market they should have hands on
experience & market knowledge (John Lewis, 2012).
5. Rivalry among the existing players: For Tesco, constant competition between Wal-Mart,
Carrefour, J Sainsbury, ASDA, and K-Mart & thinking of new strategies & techniques to
keep rivals at bay. (Peter & Donnelly 2002) while Waitrose competitors are M&S &
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Sainsbury need of middle class delivering products with freshness & crème upmarket
products.
iii) Comparative SWOT Analysis of Tesco & Waitrose
A strengths, weaknesses, opportunities and threats (SWOT) analysis of Tesco &Waitrose
has been provided below.
1. Strengths
Tesco main strength lies in-:
 TESCO caters in various divisions & sub segments & has a 4,331 stores in the USA,
Europe and Asia.
 After Walmart & Carrefour, Tesco captures a third largest grocery retail market share in
the world (Euromonitor, 2010).
 Strong strategy adopted is the customization to products & services as per market
demands & customer needs.
 Tesco introduced a loyalty scheme card as a ‘Tesco Clubcard’ for the regular customers.
While Waitrose main strength lies in-:
 Waitrose Company has an exclusivity supply to Prince Charles.
 With a 300 stores it’s able to capture 1/6th market share in UK.
 Marketing & through strategy promotion of ‘upmarket’ it has penetrated into the minds
of consumers & proved to be a strong competitor.
 myWaitrose loyalty card launch resulted in customer retention scheme.
 With employee strength of 1,00,000 it got appreciated with many rewards & recognition
for best quality products.
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2. Weaknesses
Tesco weakness lies in:
 Cut throat competition resulting in changing alternative strategies & cost cutting.
 Due to the tough competition certain Tesco products could not survive with peers
competitors& had to be recalled due failed strategies & losses. It deeply affected brand
image of the Tesco as they opted for the using cheaper alternatives with high quality.
 Due to the lack of geographic diversifications & market knowledge TESCO main
concentration was from UK which highlights existing systemic risks of the UK market.
While Waitrose weakness lies in-:
 Niche & focus on one segment of retail. It should diversify into more market segments.
 High Price wars & cut throat competition in the market resulting in slashing of prices.
 Negative feedback & bad image portrayed due to the magazine Waitrose Kitchen.
3. Opportunities
The opportunity of Tesco lies in
 Since TESCO has secured a global place hence its commercial portfolio should widen up.
Focusing on the geographic diversification & opening up of more stores will capture
more market share customizing to the needs of the customer.
 Due to the global presence the customer base has also increased & scope is to diversify
into more customer segmentation which will generate more per unit sales.
 To expand in various countries & break barriers to entry they can tie up through joint
venture & franchise options. (Daily Mail, 2010).
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While Waitrose opportunities lies in-:
 Penetrate into more diversified segments & capture more market share.
 Build heavy loyal customer base & launch more schemes & loyalty cards.
4. Threats
Threats for Tesco:
 Aggressive competition in the market leads to revise strategy planning & invest more
alternative strategy to save market share.
 Unemployment, market down turn leads to changing behavior of consumer for non food
items hence threat lies in cost cutting techniques.
While Waitrose threats lies in-:
 Competition wars & penetration into new segments will result in price wars and Waitrose
has limited funds.
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CHAPTER THREE: OBJECTIVES
This chapter discusses about the Tesco & Waitrose objectives & how they capitalize same
market still mark itself differently.
The objective of Tesco is to expand globally & diversify, promote more of nonfood
section/divisions, while that of Waitrose is to provide quality groceries, wine, and spirits at a
lower price & maintain a customer loyalty. Both the companies’ objectives are suitable as per the
individual orientation.
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