The Business Strategies Of Tesco And Asda Marketing Essay

The Business Strategies Of Tesco And Asda Marketing Essay ushers Five Forces Named subsequently Michael E. Porter this model identifies and analyses five competitive forces that helps in determination of an organisations strengths and weaknesses. These forces al subaltern inAccording to classical economics rivalries between companies must drive salary to zero because of the threat of substitutes. General substitution is sufficient to reduce bespeak for a particular product, as there is a threat of consumers dis mailment to the alternatives (Porter M. 1980). For example, if Tescos competitor ASDA provides substitutes for their goods then this pass on drive the outlay of groceries down for guests of twain companies. Buyer berth forces prices down. Fortunately the securities industry is disciplined and they put up a disciplined approach to price setting which prevents them from destroying each other in a profit war.Bargaining power of supplier may support implications for Tesco and ASDA. Supplier power is demonstrated by suppliers pick out that they argon nonrecreational a certain price for their goods. If retailers dont agree they dont get the goods to sell. But larger-than-life super grocerys give care Tesco and ASDA give an all everywherewhelming advantage over the thin shopkeeper. These super foodstuffs displace dictate the price they pay the supplier. If the supplier does non agree they will be left with a much smaller market for their products.The sunrise(prenominal) competitor factor of porter model in like manner does not ware much adverse implications on already established supermarket chains like Tesco and ASDA In fact they put up a lot of barriers to foundation either implicitly or explicitly. For instance, Tesco may have cornered the market for somewhat specific goods which the unsanded supermarket will not be able to find cheap, reliable suppliers. Tesco and ASDA also has the advantage of economies of scale. They buy good s in raft or in large volumes thereby considerably sinking the price they pay to suppliers per-item. A wise small supermarket chain not come up established can only buy a relatively small volume of goods and that will be at much eminenter rates.Porter theorized that the more than(prenominal) products that manufacture standardized or undifferentiated, the starting timeer the switching court, and hence, more power is yielded to buyers (Porter M. 1980). Tescos Clubcard re principal(prenominal)s the most successful tool in client retention strategy and is bluely effective in dealing with this caper of bargaining power of customers.PEST ANALYSIS FOR TESCO semipolitical FactorsTesco with its massive trading operations on global scale is highly influenced by the political and intelligent conditions of host countries. For employment legislations, the government encourages retailers to provide a mix of mull over opportunities from flexible, lower-paid and locally- found jobs t o highly-skilled, higher-paid and centrally-located jobs (Balchin, 1994).Economic FactorsThese factors mostly dissemble demands, cost, and profits and thus have implications for Tesco. They are largely beyond the control of Tesco, except their effects can be profound. Tesco is expected to do well internationally but is highly subordinate on UK markets and any slowing may have adverse affect on Tescos performance.Social FactorsChanging shopping trends indicate shift towards one-stop and hatful buy to accommodate this Tesco has increased the number of non- provender items available. Changes in population demographic and eating habits means retailers are focusing on products with added- look on.Technological FactorsThe found of the Efficient Consumer Response (ECR) initiative provided the shift that is now apparent in the management of food supply chains (Datamonitor Report, 2003). Tesco has fully integrated new technologies like intelligent scale, electronic labelling, self che ck-out machine with its operations.The use of electronic Point of Sale (EPoS), Electronic Funds Transfer Systems (EFTPoS) and electronic scanners have greatly improved the efficiency of distribution and birthing activities, with needs world communicated virtually in real time to the supplier (Finch, 2004). study ANALYSIS FOR TESCOStrengths1. trade magnitude market share Tesco already holds major share in the realness market and because of strong fundamentals and multi-format will continue to do so. Their main strategy of attracting more customers through various methods like Tesco Clubcard has been real emotive in winning customers long term loyalty.2. Insurance In monetary 2003 Tesco Personal Finance became the fastest festering take insurance provider by crossing the important mark of one million motor insurance policies.3. Tesco online is the worlds liberalgest online supermarket with operations in more than 270 stores throughout the country.4. Brand rate Tesco has a strong brand image, associated with its good quality, pullworthy goods representing excellent value.5. Tesco has act to develop a successful strategy to maintain its market leading position.Weaknesses1. Tescos high dependence on the UK market may be of busy in incoming for example, the Morrisons sort outs takeover of Safeway chain may alter the power balance.2. Debt reduction Tesco has aggressive expansion plan which leaves little free interchange for any other operations.Opportunities1. expansion in non-food retail Tescos telecom is the latest example of how it can expand in non-food retail industry.2. Expansion into health and beauty Tesco currently operates 19 stores with opticians and nearly 200 stores with pharmacies.3. Tescos massive buying power gives it added advantage of economies of scale.4. Tesco can further develop its revenue sprout of online operation.Threats1. Lower profit margins because of rising raw material costs for food and non food.2. Structural ch anges in domestic markets may trigger price war.3. Wal-Mart/ASDA contest Wal-Marts takeover of ASDA threatened Tescos rank as the top UK supermarket.4. International expansion is good but is expensive and requires heavy investment.PEST ANALYSIS FOR ASDAPolitical FactorsLike any other supermarket ASDA will also be modify by political factors whether they are new legislation regarding taxes or new employment laws. Thus EU enlargement, the euro etc all may have some implications for ASDA.Economic FactorsFactors such as national income, recession, inflation may have some adverse affect on the performance of ASDA. Unemployment is the most important factor on the saving. It lowers the demand for many goods thereby affecting the demand required for production of such goods.Social FactorsThe type of goods demanded by consumers reflects their brotherly conditioning. One important factor applicable especially in the UK is increase ageing population which has increased the costs for secu res who are committed to reward payments for their employees because of their staff are living longer. ASDA has started to recruit older employees to tap into this growing labour pool.Technological FactorsTechnology is a major environmental covariant which can help in development of many various practiced processes and methods for cost reduction like improved efficiency in stock control due to bar coding, self scanning products etc.SWOT FOR ASDAStrengths1. ASDA after its takeover by world giant Wal-Mart has increased its market share considerably and at present is just behind Tesco in UK markets.2. Major employer in UK markets thus it has a major pool of intellectual and experienced work force. It has a focused strategy in place for human resource management and development.3. Well established brand take a shit with strong social image.4. ASDAs strategies of smart price, price underwrite offer and ASDA civilise have really changed the way customers look at them.Weaknesses1. I n comparisons to its competitors ASDA has low market penetration.2. Lack of smaller superstores to compete with Tesco express, metro etc.3. harvest-feast recalls which not only affects the business financially but also adversely affects the brand name.OPPORTUNITIES1. ASDA can widen its product range especially non-food retail.2. Expansion into European markets. With well established management strategies and strong parent firm like Wal-Mart this is the area where it should focus.THREATS1. Major threat to ASDA is from its competitors especially Tesco principally being the threat of substitute products available through the competitor stores at lower prices.2. ASDAs major market is still in UK, so any slowdown or downturn in UK economy may affect ASDA very badly.3. Consumer tastes and shopping trends are continuously changing. It is important for ASDA to continuously accommodate those changes if they compulsion to keep their competitive edge.4. Rising labour cost can also cut into ASDAs profits.SCENARIO PLANNING AND GAME THEORYEvery organisation in order to develop strategic options and be future prepared needs to anticipate and think through how different options will impact them. to the highest degree organisations therefore use scenario planning and game theory to be future prepared.Tesco and ASDAScenario 1 My wayThe conditions Customers have do it yourself attitude.The society and economy is dynamical with consumers requiring more product information therefore the companies would have to continuously discern new methods to maintain their competitive edge. Products and services have undergone major changes with march on technology like smart packaging that refrigerates individual packaging, fuelled by cells that automatically turn off on the use-by date. (The grocer, 2007). Consumers no longer combining big brands and do business through network of friends causing major change in retail structure with power balance shifting to individuals with high l evel of consumer trust. Large supermarkets chains like Tesco and ASDA will have to become logistics expert at local level.Scenario two Sell it to meCustomers have do it for me attitudeIn this scenario there is high customer confidence, good economy and customers trusting big brands and expecting organisations to solve problems for them. Large supermarkets like ASDA and Tesco do not undergo major changes and still dominate. The only major change that comes is the more personalised touch they give to their businesses like customised products based on the customers nutritionary or personal requirements.Scenario three from me to you.Here we have uncertain economy, slight prosperity, environmental disasters, climate change. Consumers have do it yourself attitude as they dont trust the government and large organisations. Brand loyalty is almost nonexistent and customers elect home grown cheaper solutions.Retail structure is badly affected with high street struggle.Scenario four Im in your handsThe economy is shaky, slow growth, debt crisis, with do it for me attitude of customer. Only trusted brands have survived. Development of new technologies is at much slower pace. It is the most favourable situation for Tesco and ASDA with smaller units struggling to survive with them dominating high streets. They enjoy strong customer trust with compulsory loyalty card schemes. (The grocer, 2007).PORTERS DIAMONDWe now with the help of Porters baseball field try to identify which of Tesco or ASDA is more competitive.Factors ConditionsTesco gained competitive advantage over ASDA through advanced factors mainly by successful technological integrating into their business. Tesco has been successful in using these factors to make themselves more attractive to the customers. It was the counterbalance to diversify into various other nonretail sectors like mobile phones, insurance, digital entertainment. ASDA although has embraced these changes but by being first Tesco has gaine d an upper hand over ASDA. inquire ConditionsTesco was the first one to start own-label products. These are highly appreciated and in demand among the main middle class target group of these supermarkets because of low prices and good quality. Unlike ASDA Tesco stores are differentiated into various formats on stem of sizes and location like Tesco unneeded, Tesco metro, Tesco express making them easily accessible to everyone locally. link And Supporting IndustriesTesco gained advantage in this third attribute by mainly developing new products and selling it to existing customers.Strategy, Structure And RivalryTescos cost leadership strategy has given it a competitive edge over ASDA. Tesco is still continuing with its initial approach of pile it high, sell it cheap.Tesco stores in UK are divided into 6 classes depending upon their size, structure and range of products they sold. These size based structure helps it to serve their main target middle class group more effectively than ASDA.VISION MISSION AND GOALSTescoMission statement Creating value for customers, to earn their lifetime loyalty.(Tesco PLC, our values, 2010).Tescos people centred value, our success depends on people two people who shop with us and people who work with us, explains how they would go an extra mile to win the loyalty of their customers and employees. Their Clubcard initiative has been their most successful customer retention strategy by gaining customers loyalty.ASDAMission statement To be Britains silk hat value retailer exceeding customers needs.. alwaysStatement of purpose To celebrate everyone money, everyday. (ASDA, all about us,2008)Thus according to the mission statement they inadequacy to become best retailer with priority on the customer satisfaction. ASDA has been on the job(p) relentlessly towards this aim laying down various strategies to become market leader. One of these strategies as discussed in SWOT analysis is of price guarantee where the customers can easily do an online comparison with other supermarkets and if they are not cheapest then customer gets a printable voucher redeemable at ASDA stores. This along with ASDA smart price strategy shows their commitment towards their mission statement.