An investigation of Tesco’s retail market strategy as market leader

Retailing is one of the fastest growing industries in the international market as everything is going global whether it is services or goods .It is a highly developed international business, especially in the developed countries. Now days the competiton between the retail giants at their utmost level with their unique strategies .Different retail companies are using the different marketing strategies to beat each other and play the game of cat and mouse between each other.

The UK food and grocery market was worth £128.2 billion at the start of 2007, an increase of 4.0 percent compared to the year 2006,(www.igd.com).The retail market of United Kingdom is very competitive and the major players in the super market chains Tesco,Sainsbury,Sade, Safeway,Iceland and Morrison’s etc.initially they concentrated on the food products but gradually they diversified into non foods products like cloths ,electronics and medicines .

The growth in this sector has been surprising given that the United Kingdom population has been almost static and the total number of calories consumed per person is actually fallen during this period.

United Kingdom grocery market accounts for 12.5% of all houses hold spending making it the third largest expenditure after housing and transport in the world..In the year 1990s Tesco faced strong competition and needed a new strategy because they are good in buying and selling but they forget about the customers a simple question “what are we doing wrong” and after that they fully concern about there customers and started growing as a international retailer.

In last ten years Tesco changed from being the number three supermarket in United Kingdom, so it is perfectly fair to identify why they are successful and what they are successful and what they are doing to achieve that success.

From last seven years competition increased extremely mostly in london on every high street , there is war between retailers and brands to attain domination over the market .

According to research it is found that in five years the competition in retail industries will be more vivid which effect whole United Kingdom .

Recently retail giants are taking this competition globally to rule over the market , it is to be assumed that there are some factors which increase the conflict in retail industries all over the United Kingdom ,they are

1. Change in marketing technique in retail industries are enormous ,every second day of any successful products copy are available in the market. The physical existence of the shop are also very important due to the lack of shopping time in customers traditional shopping process is disappeared shoppers are converted into mobile shoppers they do their shopping while travelling .hence it is very important for the retailers to choose their store location .

2. Strength of the four major retail giants are almost similar only the difference is in their strategies and techniques , so there is no chance of getting monopoly business in retailing. Even for Tesco it is not possible till today if we look the last years of Tesco in United kingdom only 9.9% of increase in share of food and grocery industry if we again repeat the same percentage it will be maximum up to 35% which is far from getting monopoly business. ( market watch, 20007,pp-12-13)

To attract the mass it is very common strategy that lured them by different ways such as showing care, eager to help or creating a health and friendly atmosphere for shopping as it define by Underhill “a good store is the kind where the products are placed along the customers routes and sights in a way that makes the customers consider buying”. (Underhill 1999).

Literature review

Due to the intense competition in business world it is very difficult to differentiate from competitors, here customers play an important role to differentiate.

In the year 1995 sir L.Terry, CEO of Tesco played the card of customer loyalty and gains the success over the market. Curry and Curry (2000) explained about the customer marketing strategy by implementing,

* Top 20% customers generate 80% of profit in the firm

* Top 20% customers are responsible for exceed the profit rate more than 100%.

* Current customers generates more than 90% of the profit in the company

* Only 5% to 30% of the customers have potential to upgrade their level

* Retaining and up gradation of customers is only because of customer satisfaction.

Reluctant customers often attract by competitors.

According to the journal of database marketing and customer strategy management (2007,pp.14,143-145) ‘ the supermarket that ate Britain’s in the words of the famous independent newspaper headline . By the above statement it is clearly understandable that Tesco is rising in the field of retail but to hold the success Tesco implementing various strategies but the main issue is to retain the customers rather than acquiring new customers it was already proved that retaining of customers is less expensive than acquiring the new customers

Literature review-With the growth of grocery market in retail industyr the competiton is also started rising later on every industries found that this field is more profitable so the struggle was continuing between every stores in term of retaining the market leadership according the journal of marketing,(october 2007) Oliver, states that consumer loyalty can occur at four different levels cognitive ,effective ,conitive and behavioural although all four facts of consumer loyalty and important ,the cureent reserch focuses on behavioural loyalty . hence in the year (2008) another article was published where statement of Laaksonnen and Reynolds (1994) mentioned in journal of retailing and consumer services , that there is general trend where retailer brand move towards the higher level sophistaction , quality , added value as well as higher price with increased penetration of retailer brands this means increased price level at certain point.

Despite the breath and clarity of different autors , Brain Walsh , managing director of David johns delivered an argument that ” The general principle of depatment store are same everywhere” later on William Kay mentioned that “supermarkets has been the all concurring heroes of retail revolution from their introduction in UK after second world war, everything that touched has seemingly turned into gold for their owners” he quoted the above statement in his book The Battle of High Street .

Meanwhile Ian Mac Lauren ,the general manager of the Tesco- remarks that retailing is continuously revolving business .You never arrive its restless industry all compitinf for a bigger slice of a static cake. To conclude above remark shirleyet al (1981) suggest that i funcation of statage is define the nature of relatoionship between a firm and itr enveriment and to specific the type of business to be engaged is by the firm

Where as waterman(1980), got the different opion about the stargite in retailing he suggest “that the productive organation change is not a simople matter of a sturture , althogh structure is important it is not so as the intreaction betwwen stragi and structure, althought straagi is critical to. Our claim is that effective organation change is really trhe realtionship betwwen struchtre and stragty system, style, skills. Staff and something we call super ordinate goal.”

Some studies , however, have taken a diffrent appproach according to Terence Conren ,the first of eight principle drawn up to guide that development of habitat(1960) ‘Chose products that appeal to customer identify as our target thus giving the collection of homogenity that is not found in those shops that try to offer the a little of everything to everyone’ due to the efforts of the customer orientation these super malls are had started to diversify themselves as for Peter Davis of J.Sainsbury ,(1982) In journal of retail and distribution managemnt ,he comment that “it becomes even more important for the retailer to differetiate himself from his competitor by creating a personality or image which is different and which is his own”

Pierre Martineau , positioning strategy in retailing (1989) defines store image as the way in which store is defined in a shopper mind, partly by its functional qualities and partly by an Aura physological attribute ”

Again William Keayin in his book Battles of high street explained that ” shops were relly just warehouse for exchanging goods for money and design for arrogance about retailers that a certain grade of product was good enough for the masses .

Finallly Lord Rayners ,chairman of Marks and Spencer (1984) describes the we have to update the appearance of our source we need new methods , a new appearnce to presenting the goods retaining of staff to work in their different environment plus the sumof money to bring to its allabout because the high street is chnging with the review of diffrent lectures it is clear that retailing in grocery market is a shining star of future economic .

William Kay, mention that “supermarkets have been the all conquering heroes of the retail revolution from their introduction into Britain after the Second World War, everything they touched has seemingly turned to gold for their owner” he quotes the above statement in his book the battle for high street.

“if you don’t use database marketing, you’re going to find yourself in the dinosaur room at the retail museum of the history”(Smith ,1992)

Source: adapted from Thorsten Henning ,2000, pp-57

Where as Waterman (1980), got the different opinion about the strategy in retailing he suggest ‘that productive organisation change is not simple a matter of structure, although structure is important it is not so as the interaction between strategy and structure, although strategy is critical too. our claim is that effective organisation change is really the relationship between structure and strategy system, style, skills, staff and something we call super ordinate goals.’