A2 Business CourseWork

What they found: Tesco found out that their total amount of carbon dioxide output up to February 2007 was 4.13 million tonnes worldwide, and 2.25 million tonnes in the United Kingdom which is 55% of their total output. Obviously this is a sizeable chunk, but there are clearly other areas where they are responsible for emissions (see chart on right).

Using information from DEFRA () Tesco found that they are responsible for 0.3% of the overall CO2 output for the UK and 2% for the food market and are responsible for roughly 20% of the retail markets greenhouse gas emissions.

Tesco use greenhouse gases from a variety of sources, on the right is another chart documenting how they achieve their total greenhouse gas output.

What they aim to do with this data/Progress:

• Grid electricity: Tesco set out very early on that they wanted to drastically reduce their grid electricity usage. They set out, using the year 2000 as a baseline that they wanted to halve their grid electricity usage per square foot in their UK stores. In 2007 they said that they were already pretty much their which shows their commitment to their target. They said that this was down to a variety of factors including switching to low energy lighting and cold air retrieval systems.
• Refrigeration gas: Tesco are fully aware that refrigeration gas was and is a big pollutant in their business so they are aiming to “phase out” HFC’s (a type of carbon pollution) in their refrigeration systems. To overcome this they are currently trailing natural refrigeration systems in some of their stores.
• Fuel efficiency: One of the big environmental issues at the moment is that of the emissions from cars. Tesco have therefore set out to make their distribution as fuel efficient as possible. They have set out a target of increasing the number of cases (or truckloads) they deliver per kilogram of CO2 they create. They are looking to go about achieving this aim by investing in double decker Lorries and dedicated train services.
• Renewable energy sources: Tesco say that one way of reducing their carbon output is to generate their own energy from renewable, sustainable sources such as solar, wind, biomass and geothermal. They have decided to set aside £500 million to invest in these technologies over the next 5 years.
• Carbon labelling: Tesco are the first to trail ‘carbon labelling’. This is where they simply put the amount of CO2 created by the product in its manufacturing. This gives consumers the opportunity to see how much CO2 the products they buy create. Tesco not only give the consumers the opportunity to see the impact they are having but they themselves can also analyse the sales of the products to see if that, if consumers know, if they will go for the lower carbon footprint products or not. Having this data could lead to improved marketing tactics.

Through these and other means Tesco aim to halve their total carbon footprint by 2020. They also now ensure that any new store they build produce at least 50% less carbon than the equivalent store built in 2006. All of these initiatives and goals clearly show their long and short-term dedication to reducing their carbon footprint.  

Stakeholders: Stakeholders are the people who take an active interest in a business for whatever reason. They will all want different things from the business which they will conceive to be important

Tesco’s stakeholders: As with any business Tesco will have variety of stakeholders who they will need to try and please; some of these are:

Shareholders: Any issue with the business will have to be approved by shareholders. This is because essentially they are the owners of the business and they will want the right things to be done to ensure the business success. The most important thing to a stakeholder will be to see a return on his or her investment. There will be two main reasons that will yield a higher profit in the business, and a higher return to the stakeholders. These are most likely to be the reasons why the stakeholders approved the ideas.

• Tesco in the public eye: By reducing their carbon footprint Tesco will inevitably look better in the public eye. If they achieve their goals the public will have more of an incentive to shop there. A higher number of shopper will inevitably lead to a higher level of sales and a higher profit and hence a greater return to the stakeholders.
• Reduction in costs: Electricity, fuel and gas are actually expensive things. Minimising the levels of usage the business will reduce the costs in the business and this will in turn lead to a higher NET profit, and once again the stakeholders will receive bigger returns.

The stakeholders will have had to have seen an incentive for themselves to approve ideas, and in most cases it will be themselves getting more money. In this case it is no different. The business will be reinvesting some of its profits in to reducing the carbon footprint but the improved profits will counterbalance the effect in a fairly short time. In a way most things that a business does that look good in your eye, will often be fuelled by essentially selfish motives by the business owners. It is not very frequently you get selfless acts in business, because that is not the point of business is it?

Customers: Customers are one of Tesco’s most important stakeholders. Without them the business would not make any money. That is why it is crucial to the business that they are happy with the business and therefore continue shopping there. Without providing the customers the products and things they want the business will go under. Conflicts could arise when Tesco do not provide the things that the customers want to buy. Tesco will have to listen to customer’s requests as to the things they want and ways in which to improve the business. Tesco have been clearly good at this because they have managed to keep the top market share for so long.  

Local authority: The local authority will take an active interest in the business for a couple of reasons.

• Firstly the authority will be able to generate money from the business in council tax and a large business will often donate money to local authorities for certain community projects etc. Having a large business in a town can be a real advantage to a council for this very reason. Businesses are constantly trying to win the approval of people and councils benefit from this because they will help fund things for the people of the community.
• The other reason that local authorities take an interest in local businesses is that they provide jobs to the local community. This in turn helps the local authority because it means that they don’t have to pay people benefits if they are in work, and they also indirectly get council tax from those people employed by Tesco. Employment is important to any authority because it not only helps the local community by generating money for the local economy but it also brings in money through taxes and prevents money being paid out to people on benefits. Overall it enables the council to invest in more important things.

Problems can arise between the local authority and Tesco if Tesco are not complying by local laws or standards. The authority wants to try and have a fair diverse community. If Tesco dominate everything the council will get irritated by it because they may be putting smaller business out of business. Other problems could arise if Tesco aren’t paying the correct amount of money etc. but things like this should rarely happen.

Government: The government will have largely the same interests in Tesco as the local authorities. They will want them providing jobs and paying/contributing towards local projects and things. The government though will take more of a generalised interest in Tesco’s. They will look at it from the whole business as an entity, rather than a particular store. The government will obviously take an interest in the business providing jobs and things. However they will be more interested in what they are doing for the whole economy. If Tesco’s has success, the government will benefit. The more profits that Tesco generates, the more tax they will have to pay, and more money will go to the government. The government will also have to ensure that the company are complying by guidelines laws. If Tesco break laws then the government will have to take severe action against the business which could lead to big fines or worse. It is therefore important that Tesco complies by the laws set out by the government to avoid serious action taking place.

Staff: Staff take an obvious interest in the business; they will want to get good, fair wages and bonuses. They will also want to have good working conditions and an interesting job to do. One of the worst thing for any business is to have unmotivated staff. Therefore Tesco will do a variety of things to keep their staff motivated. These can be anything from paying bonuses to job rotation etc. Either way it pays to have motivated, hardworking staff so Tesco will try their best to satisfy their needs. Conflicts could arise when unfair wages or working conditions arise. This forces Tesco to take on board any staff suggestions and try to satisfy their desires to avoid the possibility of strikes etc.

Suppliers: The final stakeholder I shall talk about is the suppliers of Tesco. They will want to get paid on time, and a fair amount. They will also look for repeat orders and a constant amount of revenue being generated. The relationship with suppliers works in either direction. They help your business and you help theirs. The suppliers will want to make sure that they not being ripped off because Tesco will be almost inevitably the bigger business and the bigger controller of the prices because they have less to loose. Conflicts could arise when Tesco are not willing to pay enough money to the suppliers, or where the suppliers are demanding too much for a product. It is a fine balance between the two. If you look at the milk prices, the big companies where only willing to give tiny amounts of money to the farmers, and hence much of Britain’s milk now comes from abroad because the companies where not prepared to pay a fair sum of money for the milk and drove the farmers out of business.

External factors

Economic factors: To all businesses economic factors because it goes a long way to deciding the level of demand of a product, the cost of a product to make, and a reasonable selling price of the product. Tesco will be no different the state of the economy and the impacts of the economy will have a huge bearing on Tesco’s profit and tactics. To a company like Tesco it is crucial to be careful; especially being a market leader and having the biggest market share will mean that its decisions will have a bigger effect on the public. They have to be competitive but reasonable, and ensure that the circumstances meant that it loses its market share. There are a variety of economic factors that Tesco will have to assess and that will influence their decisions which include:

Demand: Demand is important to any business. If there is no demand for a product, people will not buy it and you will not make any profit, and most likely go bankrupt. It is imperative that any business produces a product in which there is a demand for, otherwise the business will go bankrupt. There are couple of things that set demand of a product, which are:

• Do customers want the product? Obviously if there is no need or gap in the market for a product people will not demanded. It is pointless producing a product that no one wants to buy in the first place. It is therefore important that you produce a product, that in the economic climate people are willing to buy. For instance most people in a recession will be less inclined to by premium products, so Tesco may want to look at expanding their ‘value’ range. There are two main ways to enter a market. Firstly you can join one, for instance Tesco have in the past entered the insurance market. Alternatively you can create one. You can create a revolutionary, unique product that people will actually want to buy.
• Price: In a recession this is even more important. The general consensus if that if price goes up, demand goes down. It is therefore crucial that you offer a reasonable price that will attract customers, but also ensure that the product is viable selling it at a given price with given level of customers. The idea is that you either sell at a high level of profit, but expect fewer customers or a lower level profit but more customers. It is important to balance this correctly to ensure you achieve maximum overall profit. The prices are generally set by a business or its competitors which the business will have to try and match.
• Competition: Entering an already exiting profitable market may sound appealing; however you have to bear in mind the existing completion. Tesco will be very aware of this and will want to try and make sure that they get the most demand for all their products. They will be able to beat competition by offering the best product, or a product at the best price. For example a war between Tesco and ASDA has been going on recently, each saying that their prices are better. However they are in different. ASDA offers better prices on branded goods; whereas Tesco have an overall better price for a whole basket. It means that customers may shop around each for the overall cheapest shop.
• Trade cycle: The place in a trade cycle will have a huge influence in customer confidence and ultimately demand. In a recession people will be less prepared to buy luxury, expensive products whereas in an economic boom they will be more inclined to buy these products.

It is vitally important that Tesco study all of these factors that affect demand to ensure that at any time economically they achieve the highest feasible level of demand to ensure the best possible level of profit.  

Inflation: Inflation is very important to a business. It increases uncertainty in the market if it is not at a good level. Inflation is best around 2-3%, much higher and currency would become worth less. This can eventually lead to hyperinflation where inflation becomes very high and money is almost worthless (look at Zimbabwe a year ago). Having inflation too high makes goods more expensive to buy, which reduces the demand for the products. It also increases wage demands of the staff, when goods are going up, they want more money to buy the products, and generally wages will go up in conjunction with the level of inflation.

Deflation may sound appealing, the truth is, that is not, deflation can lead to people waiting to buy things, with the anticipation that it drops lower. This could result in very little activity in the retail market and eventually lead to a deflationary spiral where deflation goes out of control and products are in effect worth nothing which leads to production in stopping (take the great depression as an example). Inflation is measured by the Consumer Price Index (CPI) and Retail Price Index (RPI). Currently these values are a bit on the high side; however this is due to it being very low, and even negative before, this means that prices are, generally increasing. Tesco will have to take this into account when trying to decide prices of their goods. Also suppliers may increase their costs because of it, and staff may demand higher wages which will mean Tesco will have to increase their prices to cover their costs.

Unemployment: With the level of unemployment in the UK being 7.8% at the moment compared to nearer 3% just 2 years ago it means that fewer people have a sustainable, regular income which essentialy pushes spending down. Essentially it means, perhaps obviously the greater number of people out of work, the lower the number of people who can afford to buy your product there is, and hence the overall target market shrinks. Tesco will have to study this for two resons; firstly they will have to re evaluate their products to make sure they are priced at a level that people are willing to pay, and think about the ranges that people will want to currently buy (value). Tesco can benefit fro the low levels of employment, because it means more people are availabke for their jobs mening that they have a greater choice of workers.

Exchange rate: For Tesco the exchange rate will have a big influence on the business, simply because they import some of their goods. With the pound being week, products sourced abroad are becoming more expensive to buy. Tesco will have to consider this when buying and sourcing products. For Tesco because they are an importer a weak pound is bad, however for exporter it is good because it makes their products cheaper abroad, increasing demand for them. If the costs of their products are more to buy, they will have to sell them for more money, reducing demand for that product, decreasing their overall profit. Tesco will have to analyse this to ensure that they are not paying over the odds for the products and they try to minimise the selling price of the goods.

Interest rate: – For a company like Tesco who generate huge amounts of revenue each year, the interest rate could make quite a substantial amount of their profit. At the moment interest rates, as well as mortgage repayments are very low. This means in effect that it is better to be a net borrower (someone who is currently repaying a mortgage) than a net saver (someone who has lots of money in the bank in savings) because savings are making very little, and repaying is cheap. This may mean that Tesco may want to invest their savings into redevelopment because it is currently doing very little in a bank, they may also want to borrow money from banks to redevelop or invest in something because it is currently very cheap. With high interest you want to have money in the bank because you will earn a lot of money from the banks for keeping it in there, it is then seems pointless taking it out to expand and develop the business. Now is the best time to do this because their money is not earning them anything at the moment.

Legal constraints: As with any person a business has to comply with certain rules and regulations. These will be set out by the governments. However sometimes business decide to take them further and actually self-regulate themselves. There are a variety of laws in which Tesco must comply by, which include:

Data protection act: The data protection act was an act set out in 1998 to protect people from people from having personal, private data being given to the wrong people. The act applies mainly to businesses that possess personal information of its customers. Tesco will collect a variety of information for a variety of different reasons; such as the club card. The main points of the law are:

• Data may only be used for the specific purposes for which it was collected. – This essentially sets out that the data in which a business collects may only be used for that purpose. For instance if Tesco collects information for the club card they cannot use it for sending customers promotional material unless it is clearly stated in the form in which the customer fills in to gain the club card.
• Data must not be disclosed to other parties without the consent of the individual. – This sets out that the data cannot be given to other people; it must remain in the business in which it was consented to be in. For instance Tesco could not give this data to any other company such as a rival or even a division of their business, such as their mobile division.
• Individuals have a right of access to the information held about them. – The persons of whom the data is may be accessed by that person at any time. It may be altered or withdrawn at any time by that person. If a customer wishes to withdraw from the club card scheme and wish to withdraw the information held about them Tesco must therefore remove it within a given time period.
• Personal information may be kept for no longer than is necessary and must be kept up to date. – This means that the information must not be held after the amount of time it is needed for. For instance if a customer withdraws from the club card scheme there is no reason for Tesco to have the data, it therefore must be deleted from the system. Also Tesco must periodically check that information is correct

There are a few other rules but the ones above cover the majority. Tesco must comply with these rules to make sure that they do not break the law and to avoid being punished.

Trade description act: This act governs prevents companies misleading customers on what products they are buying. In Tesco’s case this is very important. They must clearly show what is in the products and what they are. The main points of the act are that the products must be of a fair, good quality and the product that is sold must be sold in the way that it was advertised as. It cannot differ from the product that is being advertised. For instance Tesco cannot say that a particular product is some milk chocolate when it is actually dark chocolate. If Tesco breaks this law they can land a heavy punishment.

Consumer protection act: This act is designed to protect customers from unfair trade. They are designed to enable fair competition and enable truthful information in the market. Essentially it is designed to prevent business that practice unfair selling techniques from gaining an advantage. The laws protect the customer’s interest. For instance two companies cannot agree in principle to raise the price of a particular product that people need to drive up their profits. The government can also ask, at any time for Tesco to disclose information about a product to ensure that they are not violating this law.

Sale of goods act: This act governs how each and every product must be up to and match a satisfactory level of quality. Goods can only achieve if it is of quality that a reasonable person would expect of the product in question taking into account the price and description of the product. The seller of the product is held accountable for the product in this scenario, not the manufacturer. For instance if Cadbury sold a batch of chocolate that was made in the incorrect way and as a result the quality and integrity of the chocolate had suffered then Tesco would be held accountable for the fault. The customer may demand damages for the product from the company for up to six years after the sale. Tesco therefore must measure and check the quality of the products to ensure they do not violate this law, and must pay the correct damages if there is a problem with the product.

Supply of goods and services act: The sale of goods and services act was set out in 1982 and is designed to ensure that products meet a good standard of quality. It also measures the quality of the ingredients or materials that are in a product. If a product has no fixed price or time period (e.g. building works) the service must be completed in a reasonable amount of time at a reasonable price. For instance Tesco must provide products that use ingredients that are of reasonable quality and if customers pay online the goods must be delivered in a reasonable time.

Employment act: The employment act is designed to help with employment and sets out rules to ensure that employment and contracts are fair and reasonable. The employment act 2002 is a very much generalised act. It governs all sorts of things regarding employment. This includes work, parents, workplace etc. All of the areas the act covers are listed below:

1.  – Monitors the level of paternity leave given.

2.  – Monitors level of maternity leave offered.

3.  – Helps settle disputes in employment.

4.  – Other pieces of legislation regarding employment.

The act covers a large number of things that prevent discrimination in the workplace. It prevents discrimination regarding paternity and maternity leave as well as governing it. It also helps resolve disputes etc. In a way it is a foundation law for many of the other acts which are based around employment. Tesco must abide by these laws and make sure that they offer fair contracts that are fair and reasonable otherwise they could face huge sanctions.

Overall: As I am sure you can see, a lot of the laws are fairly ambiguous, they cross over somewhat. This is to ensure that every aspect of protection to the public is there whether in employment or purchasing goods. Either way Tesco must comply by these laws, because breaking them could lead to huge problems directly through fines and indirectly through loss of trade due to a bad company image.

Competition: Every business has some kind of competition. It is almost unheard of to have a one hundred percent market share. It is one factor that a huge bearing on any companies profits and success. To succeed in business you need to make sure that your rivals are not. The supermarket business is one of the most competitive in the company so they have try and beat competition in numerous ways.

Tesco’s competitors: Tesco have many competitors in the market. All of which offer different products. For instance competitors like Waitrose and M&S offer higher quality products, aimed at people with higher incomes compared to competitors such as LIDL or ALDI which offer more budget alternatives. Tesco have tried to dominate the whole market by offering budget, regular and premium ranges to try and control the whole market. However other rivals such as Sainsbury’s; ASDA and Morrison’s have followed suit allowing them to  dominate the market between them and in turn driving other companies down who offer more niche shopping, because they now offer those products that the other businesses offered. Tesco have tried in a variety of ways to get the biggest and keep the biggest market share which include:

Price: One thing that definitely will attract customers is a lower price. This is why Tesco have tried to, as much as possible lower and cut their prices over their competitor. They feel that by keeping as close to or being cheaper than their customer is an important step to achieving the best possible market share. Tesco have launched a big advertising campaign documenting this. Visit  for more information. However there has been a conflict between the supermarkets with each of them arguing they are cheaper in different ways, which seems to make the whole campaign somewhat pointless and flawed. However they clearly think it’s working, because they seem to be continuing with it.

Land grabs: Back a while go now, Tesco came up with a devious way of keeping competition away from where they were setting up or had stores. They went around buying pieces of land which would be ideal spots for competitors to set up shops. This would essentially prevent the competition being there, allowing them to dominate the market. However this violates certain regulations and enquiries through watchdogs were launched after data emerged of the supermarkets dominating in certain areas, meaning that fair competition was not being met. Tesco faced huge scrutiny and were nearly forced to sell its land bank division (this controls the land they own.)

Products: What attracts customers to shop? The simple answer is the products. If they are not there, no one is going to shop, which won’t give you the cutting edge over your competitors. Tesco try in a variety of ways to improve the products it sells and in turn the reason for customers shopping there. Tesco launched new varieties of products including a value range and a premium range to try and attract customers to shop there. In fact overall Tesco introduced 8,000 new products last year. All of this is to try and offer the best range and quality of products to try and attract customers to shop there. They will also try and offer all the things someone wants, such as them having butchers and fishmongers in store. Offering the best service is one sure fire way to bring in customers over rivals, and Tesco clearly take that on board.

Club card (discounts): In the 1960’s the founder of Tesco Jack Cohen invested in something called green shield stamps. These were loyalty stamps that were given out to shoppers when they bought something. They would then be exchanged for a variety of ‘gifts’. These were incredibly successful for Tesco, and was one of the main reasons that helped Tesco get to where it is now. After these were taken out of the business Tesco followed the same idea and introduced a club card. This is something that offers customers ‘points’ for shopping and buying things in store. It follows largely the same idea. The more you spend the more you are rewarded. This entices customers to shop at Tesco’s because you get things or money of for it. The reality is though that the points are only really worth about 1% of money off. However the whole idea makes people think it is worth it, and has since helped Tesco keep loyal customers. They also sometimes offer special promotions were you can get double club card points on certain items, enticing people to buy it when they don’t necessarily need it.

Expansion: Expanding into new markets, offering new products or services helps with the growth and success of a business. Tesco have done this in a couple of ways:

• Store expansion – Tesco have been opening a variety of new stores, from small stores in high streets to giant mega stores selling everything from vegetables to dishwashers. This variety of stores offers customers a huge amount of shopping. They can buy pretty much everything from Tesco’s and can get the things they need frequently at relative convenience that a normal local shop would normally provide.
• Number of stores – Tesco has been opening more and more stores in a variety of locations over the past years. In fact they now have well over 3,500 stores worldwide. Having more stores increases the availability to the public, and ultimately increases your target market. Having more stores than a competitor is a huge advantage because it gives you a greater target market. Tesco have done this in dramatic fashion lately having more than nearly all of their worldwide rivals.
• Different product markets – Tesco have recently been offering new services for a variety of things. They now offer, as well as the supermarkets, things like mobile phone services, insurance, finance and even music downloads. Expanding like this offers customers even more reason to use the business and more things to buy from them. This again in turn increases their profits over competitors, but also gives them new ones in new markets.

Community projects: This largely improves their corporate image which makes customers approve the business more and want to shop there. Las year Tesco gave over £50 million to charities and projects. Donating of this amount cannot be given by other competitors because they do not generate enough revenue. This puts up Tesco’s cooperate image up, and makes their rivals look worse. This in turn leads to more people shopping at Tesco, and not at their rival companies.

Giving customers what they want: Giving customers what they want will inevitably attract shoppers to them and away from rivals. That is why Tesco try to offer ranges suited to everyone. These include premium, Value, Healthy, Low fat and organic etc. Offering the products that customers want is imperative to any businesses success, and that is why they study customer opinion and nationwide issues to offer the correct products for everyone.

Online shopping: Tesco was one of the first companies in the world to offer online shopping in 1996. They pioneered the idea offering customers a new, revolutionary, simple way of shopping. Being the first to offer this was crucial because they snapped up the original trade. Tesco were the first of the food retailers to make the idea profitable showing their commitment to provide the service, losing money for ten years because of it. But eventually they have made it profitable. This provides revenue where others are losing money on the service giving them yet another way of generating revenue.

Customer service: Tesco pride themselves on their customer service. It is one of the core elements of the business. They want to try and provide the best customer service of any supermarket to try and gain customers. Shoppers will always wanted to be treated well, and having the best customer service of anyone is one sure fire way to make shoppers walk through your doors. Tesco invest a lot of money to make shopping at their stores as hassle free as possible and this in turn brings in more customers because of it; optimally driving them away from competitors.

As you can see Tesco offers multiple reasons to shop at their stores over their competitors, and that is why that in the end the customers do shop at their stores over shopping at their competitors. Today, because of the reasons above Tesco has become the third largest food retailer on the planet making it increasingly difficult for its competitors to catch up.

Part B

Marketing activities: In this section I shall analyze Tesco marketing techniques and strategies. I shall carry this analysis through studying their marketing mix, market research, enterprising skills, teams and their activities. I shall also analyze how this affects their aims and objectives within the business.

Primary/Secondary research: Primary and secondary research are two ways in which to collect data.

Primary is research in which you, another person, or a business may carry out to gather data on a specific topic or event. The advantage to primary research is that you can tailor the questionnaire, the test, or whichever way you are carrying out the research to ask the specific things you want. The data should, almost certainly be reliable and suit your cause. Furthermore the data in question should be more accurate; you know where the data has come from, and who asked it. There are however disadvantages to carrying out primary research; the main disadvantage being the increased expenditure that you incur over secondary research. It can also take a fairly long time to compose, gather and process the data and research you achieve and carry out.

Secondary research is research that you gather information from research that has already been carried out (it is second hand); this information can be gathered from a variety of sources including the internet books and published research analysis etc. The research incurs the exact opposite pros and cons to primary research. Although it is very quick and inexpensive to carry out, the information you get may not be useful to the application you want it for, you can also not guarantee its reliability, it could have just been made up. Often a combination of both types a research is used to avoid huge cost, but also keeping a fairly high level of usefulness and reliability.  

Mass/Niche market: Within the retail sector there are a variety of companies and products that cater for most peoples “wants and needs”. Not everyone has the same taste is a very important statement to think about in business. A company like Tesco will want to try and meet all of its customers’ desires; this is not only to improve customer satisfaction, but also increase its profits. Products fall in to different categories, mass and niche:

Mass: As the heading suggests a mass market is a one which there is a high level of demand and sales, to a lot of people. These types of products come under this category when most people or at least a high percentage of people want and buy them. Some products like this that Tesco will sell will be things like apples, bread and milk. Most people (at least in the U.K.) want them on a fairly regular basis. These products will take up a fairly large space, and they may not make much profit on a single item, but will make up for that by selling a large volume. Look at the amount of bread in the picture on the right. There is a huge amount of it; most people buy it (Mass market.)

Niche: Niche products are at the opposite end of the spectrum. A lot fewer people want them. The level of demand and sales is greatly reduced. These products are wanted by a small portion of people, they may have to go out of their way to find them, because if they are niche they will not be widely available; if there were 1,000 companies selling a product that there was only a demand to sell 3,000 items a year between them, most if not all would go bust due to the lack of sales. However you can get areas were “niche” products may become “mass”, for instance in certain parts of London the amount of Indians, European, or Asian may be more than the amount “British”. The products that different ethnicities buy are hugely different making the norm in these parts completely different to other “normal” areas. Usually though “niche” products are hard to come by, and are not widely available customers can be willing to pay over the odds for them, just because they want to have them, and if they don’t they can’t. With mass products, if a customer finds prices too expensive at a certain shop, they may be able to go down the road and pick the same thing up for less money, meaning they will buy it there and the business selling the more expensive one will lose money. With niche products you have more control over price, because your price is not controlled, to a degree by your competitors. These elements make the price of the niche products often be a lot, and the selling space being small, because the business will not sell a lot, they don’t need to stock much. Such products Tesco may sell include products that are aimed at ethnic minorities such as certain spices or plants/vegetables (On the right is Tesco’s Indian range.) Other products include special dietary requirement food such as gluten free.  

The marketing mix: The marketing mix is the main things that affect and make up a company’s marketing strategy. These are commonly referred to as the four p’s; these being product, price, place and promotion. These are highly important to a business because they decide how a company goes about deciding on the correct development and mainly marketing of a product.

Product: The word product covers more things than just a product you can see on a shelf. It covers a wide spectrum of things including services such as insurance and finance, cars and houses and many more. All of these things have been designed with a view to sell.

What does the product need? The product is often perceived to be the most important element to the marketing mix. Without a good strong product the odds of you finding a good level of success are finite. The features that a product needs to have to be successful can be seen as fairly general, just the actual characteristics of those features change. First and foremost the product must appeal to the people who are going to buy it. It may be required to perform certain necessary tasks, be aesthetically pleasing or be efficient and easy to use. Without the elements a consumer wants the product will simply fail at the first hurdle – it will not sell. Some such features that products may require are:

• Fashionable – Certain products may be required to be modern and follow current trends. Clothing documents this well; people want to be dressing in clothes that are current and look good, not old ones that do not.
• Safe – Safety is paramount to most products. Not only will people not want to buy them (look at what has happened to Toyota since the issue with the brakes, sales of their cars has plummeted.) But also they may well be violating laws and may face fines or could be sued by customers.
• Reliable – People want products with longevity, certainly when they are expensive. If someone buys a car they don’t want it braking down after two years and face a fortune in repair work, they will become very dissatisfied and the overall corporate image will go down. On many ‘expensive’, certainly mechanical products warranties are put on products in case they to go wrong, giving customers reassurance and faith that the product will be reliable, otherwise the business will be spending fortunes on replacing the products if they are unreliable, which they may not be able to afford.
• Durable – Some people need to have robust products that aren’t going to break easily. Certainly products that may come under largess forces and frequent drops etc. For instance if a bike broke when going into a pothole the customer would not be satisfied because the product should be able to cope with that eventuality.
• Convenient – It’s no use having a product that takes ages to set up or use or even access. You want to have the ability to use it quickly in the situation that you need it. A camera will need to load quickly and be easy to transport otherwise you will not get the picture you may have wanted – nature doesn’t stand still.

In Tesco’s case they will need to consider all of these things when designing and creating new products. Different products will require different aspects to be met in different ways. However their main selling items are food stuffs, for these products they will need to consider certain desires of their customers as well as other factors that may affect the level of sales in certain areas. In a sense food can be fashionable – look at the launch of Organic ranges – these were because everyone seemed to want them – they are fashionable. Tesco will have to ensure their products are safe to avoid being sued or facing fines and a downfall in their corporate image. Some products will be bought frequently by lots of people, Tesco will need to try and ensure that the products look and taste the same all of the time (reliable) to keep people buying it; however if the product loses trade they may wish to redevelop it to meet demand. Tesco’s customers will want to be able to easily use the products for the need it suits. For instance the size – is it too big, not big enough? Is the product easy to find and open? Tesco will need to ensure their products are convenient to use or people won’t buy them.

In a nutshell Tesco’s customers will want good quality products that can be used easily and suit their needs. They will want products that agree with the customer’s feelings and ethical issues. It is very important to consider PEST factors when thinking about new products to ensure they will sell.

Product life cycle: The activities which a business undertakes when marketing and selling a product span a very wide range, from the initial design and the possible success of a product, right the way down to the marketing that we see on television, on the radio or on the internet. All of these advertisement’s would have been thought out, discussed and scrutinized right back to the products inception. Without sufficient marketing and research a product has practically no chance of being successful.  

All products have a shelf life, for some that is not very long, such as some music artists or products relating to special, one off events (such as the London Olympics.) Some other products have longevity, such as most food items (take Cadbury’s chocolate, which has been highly successful for over one hundred years, and looks set to continue with that success for a few years to come yet.

• Introduction/Development – Marketing essentially decides whether a new product will be introduced or not. The business has to consider a variety of factors before deciding to introduce it, such as, will there be a demand, how competitive the market is, will consumers be willing to pay a sufficient price etc. Once the product has been introduced they will research the market to help them decide on the look, specification, packaging and much more so they can achieve the best product. Once this is done they will usually finance an advertising campaign to raise awareness of the product, and entice people to buy it. Tesco has a very large advertising campaign with frequent advertisements of their products, offers and sales etc. to try and raise awareness of them, and hopefully draw more sales. For Tesco they will run their own advertising campaigns for their own products, but for branded goods they will have to give enough exposure to make sure they succeed as well. Advertising is not always up to the manufacturer, but the business that sells the product as well.
• Growth – The next stage of a products lifestyle is the growth of the product. If there is sufficient demand for a product, sales should start to increase. Sometimes there is an initial ‘boom’ of product sales when the product is very ‘hyped-up’. Take Apple’s i-Phone for example, sales started very high and gradually dipped, so in a sense it didn’t really have a growth stage. But for most products they tend to start lower and gradually increase (growth). In the growth stage more people become aware of the product through advertising, and people talking about it. Companies may decide to introduce newer versions of products to help sales grow again.
• Maturity – The next stage is the maturity of a product where sales reach a steady level. Many products that Tesco sell (i.e. food products) will stay at this stage for an elongated period of time, due to a certain level of demand being constantly there. At this point the product should be making a fair profit. Companies will continue to advertise the product to ensure people are still aware of it, and try and keep that level of demand.
• Decline – After a certain period of time a product’s sales will eventually decline. A business may try to pick the sales up again through advertising or introducing newer versions or variations, or reducing the price. However it will get to a point where the product becomes no longer profitable and will withdraw the product.

Tesco will have to consider and analyze this process when introducing a new product to ensure that it will be successful and hopefully achieve high sales for a long time. If Tesco cannot foresee a high level of profit for a long time they may decide against introducing the product. Equally they will have to decide when and if to stop selling a product if ales fall too much. Getting this correct is crucial because otherwise you could be looking at huge losses.  

Examples of Tesco’s product introduction: Tesco have introduced many products in their history, some which have tasted since the business’ inception, some which have exploited a temporary demand and some which are seasonal. All of the products they have will have been introduced having taken out careful analysis of the current market demand trends and future considerations. Below are a few examples documenting this.

Organic: A while ago Tesco, following increased demand from consumers introduced an “Organic” range. This was introduced at a time where the economy was stable and customer expenditure was high. People at the time were becoming increasingly more aware of the use of chemicals on products. It was, in a way caused by slight exaggerations and exploiting in the market. Some of the chemicals were reported to be dangerous and possibly damaging the foods’ integrity. Either way because of the reports people wanted to have food that was free from the chemicals. Tesco obliged this and, along with other introduced their “Organic” range which was free from these chemicals. Because of the process of mass producing the organic products was trickier the price of the goods in question was increased. People at the time were willing to pay it, however since then the economy has entered recession and customers are less willing to spend the extra money on organic products. To begin with the products rapidly grew in sales, reached maturity, and now are entering the decline stage. However in the future, when the economy improves they may reach a new growth. Either way, to date, Tesco have introduced 1,200 “Organic” products to try and satisfy the demand for them. The “Organic” range is a prime example of the “fashion” side, people liked to be seen buying them to be looking like they opposed “harmful” chemicals. The introduction of this range has helped Tesco meet its KPI for their customers “I can get what I want” and helps them with another KPI “To maximise sales” so not only does introducing the organic range satisfy Tesco’s customers but helps Tesco too.

Fair-Trade: Tesco have also introduced the “fair-Trade” range. This range offers the farmers of the ingredients of the products a better price. The price of the goods to buy is increased because you are essentially paying more for the farmers to grow your product. Over the past few years food, and general product manufacturing, especially in foreign countries has had heavily scrutinized and has increased exposure. Knowing this information people want to support farmers and pay them a fair and reasonable range. Tesco has used this change in consumer ethics and introduced the new range that offers consumers the option to buy fair-Trade products. These products are essentially “fashionable” at the moment and that is part of the reason for their success. Tesco have analyzed customer demand and exploited people’s views and offer them “What they want”. In the wake of a recession “fashionable” item sales have “slumped”, and as a result fair-trade products are less in demand than they were, and therefore fair-trade products are in the decline stage, however when the economy picks up again the sales of fair-trade products may well increase again.

Free from: Tesco’s free from range is a range of products that are suited to people who have specific dietary requirements, such as allergies etc. The range doesn’t contain specific ingredients that people with allergies suffer. I know, being a nut allergy sufferer I how difficult it can be to find certain products that don’t, and can guarantee not to contain any nuts. For instance some pesto contains nuts, whereas others don’t, having a range that saves you having to check ingredients all the time wasting countless time. I by no means have the worst allergy. There are some allergens that seem to be in most products, finding products without them can be really hard. That is what this range aims to conquer. Allergies such as wheat or gluten can be really hard to overcome, having products freely available helps vastly customers with these allergies enabling them to get “What they want” and also attracting the people with the allergies to the store increasing Tesco’s market and increasing customer satisfaction. Increasing customer satisfaction also helps “Earn lifetime loyalty”, another element of Tesco’s steering wheel. The key to these products is that they are “safe” and “reliable” to consumers who would otherwise struggle to find these important criteria. The most important thing to an allergy suffer is that they are “safe” when eating the product, and Tesco have met this demand for safety from consumers with allergy sufferers. This product will always have a target market, and the products will always appeal to them, if not for anything else, it is their only choice, and hence this product will have a fairly long stay in the maturity stage.

Delicatessen: I have no idea when Tesco opened up their delicatessen but it has definitely got customers into the store and buying more from the shop. Back a while ago a lot more people did their shopping at butchers, grocery shops, and delicatessen’s. However seeing a way to make money, Tesco, along with its competitors introduced these facilities into their shops. This enables customers to get everything they want at Tesco’s, removing the need for local shops and amenities. What this has done for Tesco has meant that people are doing more of their shopping at their stores and spending more money, helping Tesco “maximize sales”. Having a delicatessen, butcher and fishmonger, as well as a supermarket all in one place is incredibly “convenient” to a customer, meeting one of a product’s main needs and hence explains the success of the idea. This range is one that has longevity, people will always want bread, cheese and meat, it is a fairly steady commodity, and will probably stay in the maturity stage for a fairly long time.

Value: Another range that Tesco have introduced is the value range. This was actually introduced a while ago. However in the recession it has had a big boost in sales, another growth stage. This is mainly in part to people being more cautious about the money they spend. Over the past years before the recession the value range was no-where near as popular because more people could afford the more expensive branded and premium ranges, but since the recession has hit, the number of these people has decreased. Tesco has in a sense had to re-introduce the range to remind people that the range is still available, which has clearly worked due to the level of sales they have achieved. This range does have a degree of the price element of the marketing mix (explained later). However offering the product has given customers “What they want”, something inexpensive and “reliable”.

Generally: As you can see all of the ranges mentioned above, were introduced to meet a specific demand or offer customers a different selection. All of them are designed to primarily meet one of the products needs to be successful. All customers will demand different things. Some may want fashionable items, some may want convenience and so on, but the big factor is that all of them exploit at least one thing and they all offer customers “what they want”. So long as there is a sufficient range of products to meet all of the different demands Tesco should be fairly successful. Often when one product’s sales fall, another’s will pick up. For example in the recession the sale of ‘Value’ goods increased and more expensive good’s sales fell. Usually there is an external factor that will push a product into decline, whether it is the state of the economy, the public image or the relevance and superiority of the product against its competitors falls.

Price: The price is essential in determining the success or failure of a product. If it is too high, it won’t sell; if it is too low, the business will not make sufficient revenue to cover their costs meaning they are losing money.

The three C’s: The factors that determine the price as a product can be defined by the three C’s; Cost (to produce); Competition and Customer value. All of them have an influence on how much you can realistically sell the product for; otherwise you put yourself at risk of not recovering the costs to produce the product; or not selling enough products to make sufficient revenue to make a profit.

Cost: This is probably the biggest defining factor that affects a products price. The cost that something is to produce includes things like the ingredients or materials, the labour and machinery costs as well as the transportation costs etc. If you don’t cover all of these you will be making a loss. The idea is to produce a product for as little money without reducing the quality, and selling the product for the optimum price, not so low as little profit is made, but not too high that sales will be very low. In Tesco’s case they will have products that are more expensive to produce, and others that are cheaper. For instance their value range will probably cost less than their premium ranges to produce, because they are made in bulk, reducing the average labour, machinery, and most likely the ingredients price due to bulk buying. Furthermore the ingredients in the premium range will be better quality, and more expensive to buy in the first place. This is essentially why premium products are more expensive, their production cost, and their demand (is usually) lower.  

Competition: Competition is another defining factor on product price. Although Tesco will have to consider their own profit, they have to try and persuade customers to buy their products. One of the biggest and best ways of attracting customers is through having lower prices. There are other way such as offers (see promotion section) and through loss leaders (see below); however when Tesco are considering price they will have to consider their rivals. For instance if all of ASDA’s products were cheaper, and of the same, or better quality, the odds are that customers would shop at ASDA instead of Tesco’s to save money. This issue is ever more important when, such as now the economy is performing poorly. To alert people of this Tesco have done countless advertising campaigns showing were, and how they are cheaper (see  for more information.)

Customer value: Customer value is essentially what the customer is willing to pay for a product. Every customer wants to feel they are getting good value for money. It is essential for any product to be good value for money (in a customer’s opinion) otherwise it will fail. Different products will be worth a different amount to different people. For instance a designer dress will be worth more to a woman than a man, and it being designer will make it worth more in the customer’s eyes. A lot of the products Tesco sell will not be worth a lot to customers, a lot of them are very standard and boring – people will not want to pay over the odds for these products. Whereas ‘special’ products will be worth more to a customer, things like Christmas, or other seasonal products and birthday things may be worth more, because they are one off. Newer products can also command a higher price because they are desirable, and usually modern. People want to have the most modern items, and the most fashionable items. It is one of the things that defines the success of a product. Items that are in demand can be very expensive to buy, compared with waiting a period of time. Look at the PlayStation 3, when it was introduced its retail price was in excess of £400,, whereas now, three years later it is around the £250 mark. A high initial price will exploit the demand of some people to be the first to have the product. The businesses will make a lot of profit on these items, which helps the cover the initial manufacturing and design costs. Tesco don’t really have any products like this. Theirs are mainly standard, everyday products, but they still have to consider what a customer is willing to pay.

Competitive nature of supermarkets: It is well documented that the supermarket industry is one of the most competitive. This is because it is one of the biggest markets worldwide. Having a dominant share in the Supermarket industry puts a business in a very strong position. Because of this Supermarkets will do anything to get ahead of their rivals and gain the majority share. A lot of this is controlled by price and value. For instance just look at all of the advertising campaigns the major supermarkets use, they are constantly showing ways in which they are cheaper. Being the cheapest supermarket goes a long way to being the number one Supermarket. Customers take price very much to heart, they will often want to go to cheapest one to get the best value. Because of this people will go to many lengths to saves money, they will always want to know who the cheapest is. This is documented by the success of online price comparison sites. The competitiveness of Supermarkets is a good example of how competitors control price.

Loss leaders: Loss leaders are products that a company will actually sell at a loss. The idea behind it is that if something is very cheap to buy, a customer will be very much attracted to go and buy it. One such example of this is alcohol, frequently do Tesco, and other Supermarket chains sell alcoholic drinks for less than they buy them for. What this does is that it attracts customers into the store; other, local small businesses cannot afford to be making a loss on anything so they have to sell it for a much greater price. Because of this consumers will want to buy the alcohol at Tesco, to get it for a much reduced price. The idea of loss leaders work in the way that they get people into the store, when in theory they are going to look at other things, and buy other things. Tesco would expect to cover their losses with the sale of other goods, often through ‘impulse buys’.

Examples of Pricing in Tesco’s:

Price reduction over time: On the right is a graph showing how Tesco’s prices fell, from 2000-2005. This shows just how competitive price is. Tesco have had to drop their prices to match their rivals and keep their dominant share. This reduction in price hasa vertainly not affected their profits though, they are still making more and moore money each year. This will be mainly caused by competitors and Tesco trying to win the “price war” of the Supermarkets. Clearly back in 2000 people were still willing to pay as much as they did, because Tesco were still selling large volumes of products. This sudden price fall could be in part to Wall-Mart being introduced in the U.K. around this time through ASDA, and their ethos being very much of selling large volumes very cheaply.

Price match: Tesco have also set up a price match service where people can check Tesco’s prices against rival supermarkets. The idea of this is to show customers that are one of the cheapest Supermarkets for consumers. All you do is go on their website, type in the product into a box, and the prices of all the main Supermarkets will come up. Tesco aims to match its rivals on nearly all products to attract customers and win the price war. In the above screenshot is a list of Coffee prices. Asda are the blue, Tesco the red. As you can see Tesco at least matches on everything. Having consistantly low prices is the first step to attracting customers. This documents just how much of an affect the prices of rivals have on Tesco’s prices. Tesco does not want to be more expensive than its rivals, and has had to reduce its prices in conjunction with rivals to ensure that its customers are satisfied with the price of the product, because after all this is what customers are most often interested in.

Customer views: The following statements were taken from Tesco’s website:

• "I'm aware that Tesco often compares prices of competitors so this gives me confidence to buy"
• I get value for money at Tesco which is more important than cheap"
• "The store feels a bit more upmarket somehow [following the Refresh] – there's a good balance of products and prices to suit everyone."
• "I am very pleased with Tesco. It sells high quality food at good prices." 
• "I think Tesco have moved more upmarket, but they still give good value for money"

As you can tell from the above comments customers opinion on prices at Tesco are pretty good, they feel they’re getting good value for money and the quality they are getting for their money. Having satisfied customers is key, and with products that everyone buys and need, having the lowest prices is probably the best way to attract and please customers which they seem to be doing well. This is an example of how important it is to have good customer value, Tesco seem to have, and at the moment they are selling plenty of products making substantial profits. It shows how much of an affect customer value on price because one of Tesco’s primary aims is to keep customers satisfied, at the moment they seem to be doing this fairly well.

Organic price slump: “Tesco has cut the price of organic produce as customer demand slows in response to the credit crunch”. This was an article taken from . Tesco were practically forced to do this, there was simply no longer the demand for Organic products; they had gone out of fashion. Tesco’s customers were unwilling to pay the extra money for the Organic products, the customer value of the range had fallen so Tesco had to “cut organic lines by an average of 15% to 20%”. When Organic products were introduced they were worth a lot more to customers because they had a greater disposable income. Now, because of a decrease in customer value the prices of organic products are a lot more similar to ordinary products. For example: “A two pack of organic mixed peppers is £1.42 compared to the standard version at £1.36, two organic avocados cost £1.58 compared to the standard £1.44”. This article really demonstrates how much customer value affects prices.

Bio ethanol – Increase in corn price: About two years ago in America, the country started to convert some of its Maize for producing ethanol. The country tried to make less damaging fuels using the Maize. As a result, America, one of the world’s biggest exporters of Maize had less of it to export because some of it was being used for the ethanol. This meant that the Maize commanded a higher selling price. As a result some of the products cost more produce because their ingredients cost increased, likewise with the retail price of branded goods containing Maize. The result of this was that Tesco had to increase the price because the price of the “materials” increased and the cost to produce the products increased, and hence the prices of the goods they sold had to be increased. This is a good example of how the price it costs Tesco to produce their products increases the selling price.

   

Place: The third P of the marketing mix is place. In the marketing mix the place element is the place where the customer can buy the product. The place essentially means distribution, this covers a range of processes to ensure that a customer can get their goods from the place they would expect, and most importantly conveniently.

Channels of distribution:

Above are the common channels of distribution. They show how a product gets from being made to the consumer. There are different to the distribution, not all are use dependent on which distribution channel is used.

Producer: The producer of a product is the business that manufactures raw materials into products. There can even be a stage before this – for instance where does a producer get the raw materials from. Some businesses would get them themselves, others will huy them. There is always a producer in a channel of distribution; otherwise the product would not be made.

Wholesaler: The wholesaler is someone or a business that buys vast quantities of a product at a reduced rate (because they are buying in bulk). They then distribute the products to the retailers for a profit. A large business that buys in bulk will not necessarily need a wholesaler because they can buy in bulk straight from the manufacturer.

Retailer: Tesco’s is a retailer, this is a business that sells the products in a shop, or online. They are the ones who display all of the products, and who a customer comes to. Most shopping is done through retailers.

Customer: A distribution table wouldn’t work without a customer; in fact business itself wouldn’t work without customers. These are the people who buy the products, and who businesses (usually) gain revenue from.

Traditional: A traditional channel of distribution consists of a producer, a wholesaler, a retailer and a customer. The traditional method is often still used by smaller companies, where they do not need vast amounts of certain products. For instance it would be no use if a local shop and 30,000 bottles of coke, they would never be able to sell it. For a small retailer they need a wholesaler too buy goods from, this is usually cheaper than buying small amounts from the producer. There are many examples of this, any local shop, run by a single or small group with only a few outlets.

Modern: A modern channel of distribution is one that does not have a wholesaler; it “cuts out the middle man”. These modern channels of distribution, are usually used by big corporations and retailers, much like Tesco. Because they are so large, and sell so many products, they need very large quantities, often the quantity that the wholesaler will buy. This means that they can act as their own wholesaler, they can get large reductions in price for buying in bulk, like the wholesaler does. This means that they can sell the same products as small, individual businesses but for much less, and hence why large corporations are putting smaller ones out of business – their products are much less money. A company like Tesco will have distribution centres where all of the producers deliver their products to (this in a sense acts as the wholesaler). The company will then distribute the products to the outlets and stores that need them, possibly by smaller regional distribution centres. The advantage to the consumers of this method is that products are often cheaper; however the system is often only available to large retailers. Examples of modern distribution channels will include Tesco’s, WH-smiths, John Lewis and most other large retailers.

Direct: The direct distribution channel is where the producer of a product will sell directly to consumers. The advantage of this is that the retailer does not have to make a profit from the sale. This means that either the producer can make a large profit, or offer the customer a reduced price compared to the prices they pay in most shops. This method is often done online, or through the telephone. Most producers of products do not have their own outlet or shops (with a few exceptions, notably car manufacturers). Most companies that use this kind of distribution channel will use it in conjunction with at least one of the other two. For example ‘Apple’ – They sell their computers in retailers around the world, such as PC-World or Vodafone shops. They do also though sell their products online and through their own shops. In their own shops they sell the products they make themselves, they do not sell to a wholesaler or middle man. The advantage is that it is easier to know exactly what they sell, and in some cases can be cheaper. This method has become increasingly common since the internet has become widely available – you don’t need expensive shops to sell from.

Location & outlets: This is key to the success of any product, a business needs to decide where they are going to sell their products from, which retailer they are going to stock there products in, and where the product will have sufficient demand. For instance producers of chocolate will want to sell their products where people would expect to buy them from, you never see chocolate in shoe shops; yet you see it in most supermarkets, newsagents and garages. With products like chocolate a lot of their sales come from impulse, the producers want them to be situated in a place where people will see them and be tempted, hence they are nearly always by the checkouts in Supermarket.

Other products, you, the customer has to find; you know that you want or are going to buy it, you will not be buying on impulse. These products are usually more expensive and not bought often. They are, because of this, not stocked everywhere because there is not the amount of demand and volume of sales. For instance when people buy cars, they have to go to certain areas that sell them, often special business parks. Products that are ‘exclusive’ also follow this same strategy because they sell fewer products at a higher price, which not everyone can afford.

Types of Tesco stores: Tesco sell products that are typically in demand in most places, and because of this are located in a large number of places, in town centre’s, retail parks and so on, because everywhere has a different amount of space available. To accommodate this Tesco has created different types of stores to try and ensure they can sell the products in most places:

• Extra: A Tesco extra is a ‘very large Tesco’, above 60,000 square foot actually. Tesco extra is defined as a “one stop store” whereby the customer should be able to do all of their shopping there, without the need to stop of somewhere else. Because they are so large not everywhere can accommodate them, so they are limited to large open spaces such as business parks. They have proved pretty successful, with more than 175 extra stores having been opened to date. With these stores customers usually have to travel to them because they cannot be located in conveniently near to residential areas, due to lack of space. They have also sell a much wider range of products than the other stores, such as kitchen and home ware.
• Superstores: The superstores are the oldest store format which began opening in the 1970s. They take on a more traditional supermarket format selling products you would expect to find in them. They are typically 20,000 to 50,000 square foot and there are currently around 450 stores nationwide. The stores primarily sell food products, but also a few non-food items such as CD’s, DVD’s and books. Again you will still have to travel outside of particularly dense urban areas. They sell pretty much all people’s food needs.
• Metro: Tesco metro is a store that is around about 7,000 to 15,000 square foot. The idea of the metro store was to bring Tesco to the customer, in convenient town and city locations. Because shop floor space is at a premium in towns and cities the shop sizes are not as large. They settle more for the convenience as opposed to ‘one stop shopping’. They offer are more tailored range, often suited to providing quick lunches for people at work. They sell mainly food products that suit the need of local customers.
• Express: The express is the smallest (under 3,000 square foot) and the most common Tesco outlet with nearly 1,000 nationwide. They offer a much smaller range of products catering as a local village shop. They are much like a local village shop catering for the local community products. They sell essential, fresh products that people frequently need and want. The express store is very much based around convenience as opposed to range, with them being very close to customers.

As explained above there are a variety of different Tesco stores which cover most people’s needs. What these different stores have done is offered customers convenience and range, and managed to target most people making it easy to shop at Tesco and also allowing you to get all of what you want by travelling a bit further.

Online: Selling products online has become particularly popular in the past few years. Many companies do it, and it is especially popular amongst producers who do not have stores or shops to sell from. Tesco do this as well, they have one of the most successful online stores amongst the supermarkets in the UK. Shopping online poses advantages to both the business and the customers. From a business’s point of view it negates the need for expensive shops to sell the products from, meaning they can gain more profit by reducing their fixed costs or they can reduce the price and sell a higher volume. From a customer’s point of view they can do the shopping from their own home, meaning they don’t have to spend time and money travelling to stores. However there is a disadvantage in the fact that customers cannot see what they are buying.

Targeting the correct market: Certain businesses target different people; some are designed for more wealthy people and others less so. Others target themselves at specific groups of people and some only appeal to people who live in a certain area. For instance a LIDL would want to locate itself somewhere that was perhaps less well of, compare this to marks and spencer’s food, they would want to locate their stores where the disposable income was a bit higher because their products are a bit more expensive.

With Tesco’s metro and express stores this can be very important when deciding what to stock. Because they have a smaller floor space, they need to try and sell the products that will sell well in certain areas. For instance somewhere that has a smaller wealth will not necessarily be able to afford their ‘finest’ range, so it may not sell, whereas they may sell a lot of ‘value’ product; it is all about tailoring the business to suit local demand and situation.

Promotion: The final P in the marketing mix is promotion. This is a variety of marketing to raise customer awareness of a product, with the intention to persuade them to buy the product. The right amount of promotion is imperative to the success of a product, too much and the business will lose money, too little and consumer awareness may not be high enough to sell enough of the product. There is a variety of ways to promote a product, which include the following:

Advertising: This promotion is very visible in modern times. Businesses pay for an advert in a certain form of media including the television, radio, newspapers and the internet. A lot of advertising is very expensive but can be seen by a lot of people and be very influential in persuading customers to buy the product. Advertising be informative whereby it tells facts about the product, this can increase customer awareness of a product. On the other hand there is persuasive advertising whereby the advert try’s to persuade people that their product is better than everything else. This advertising happens a lot in particularly competitive markets. In Tesco’s case they advertise both the products they sell, or put their name at the end of an advert advertising a product (such as DVD’s); or they advertise the business itself and its core values and overall image and products. Tesco use both persuasive and informative advertising in a variety of ways to try and persuade customers to either buy a product from them, or simply shop at their stores in general.

Further examples: Tesco carry out many forms of advertising in a variety of ways:

• Slogans: Tesco’s slogans have been an influential piece of advertising for Tesco for years. How often do you hear ‘every little helps’, and what is the first thing you think of when you hear it. These slogans have appeared in print advertising, online and TV in which famous celebrities have read it, making people always think of Tesco. Having strong, recognizable slogans helps a business in a great way, because it is something that will stay in the customers mind, being a constant advertisement.
• Money supermarket: Tesco recently launched an advertising campaign using the price comparison site moneysupermarket.com. In these advertisements they try to portray how their products are cheaper than their rivals, it is persuasive advertising. The idea behind it is to appeal to target to fact that customers, certainly in a bad economy want to save money.
• Club card: Tesco frequently use their club card in advertising. They will often offer extra club card points on certain item, or on certain days. Having extra points on certain items entices people to buy items they wouldn’t necessarily. These adverts on often broadcast on T.V. and is one of their main advertising campaigns.  

Sales promotion: A sales promotion is one in which the business offers a financial incentive for the consumer to buy a product. There are lots of ways that sales promotion occurs (listed below). It is probably one of the biggest ways to get people to bu a product. In Tesco’s case, they may offer customers money off certain products in store, but situate them in places where the customer may see other things they want, with the intention that they will sell more products. Types of sales promotion includes:

• Coupons, money refunds and frequent user incentives: In this situation a company may give customers money off their next shop if they spend a certain amount, or off a certain product. This type of advertising helps get customers into the store. In Tesco’s case they may give them to club card holders, and give money off items they buy fairly infrequently, but di buy occasionally, this gets people re-familiarized with products, and may help boost future sales. Furthermore coupons may only be able to be used if a customer spends a certain amount, which would cover the cost of the money off. All of this type of advertising and offer gets people buying ‘extra’ things, which boosts sales and profits, but also benefits the customer. Tesco are using this technique in the USA to try and retain customers, and get more customers in their stores.
• Club card: Tesco has a club card that anyone can have. People who shop at Tesco can get money of when they shop at Tesco through receiving rewards an ‘points’ for spending money at Tesco’s. It provides a reason for customers to stay ‘loyalty’ and always shop at Tesco, to save money on their shopping. Offering loyalty cards, makes it much easier to retain customers.  
• Price-off: You will frequently see price-off offers, it is one of the best ways to entice customers to buy a product, if there is money off it, and customers will conceive it to be better value for money which is very important to the sale of goods. Price-off offers will sometimes be the only reason customers will try a product. It may to too expensive otherwise; this is why new products often have money off, or ones that are trying to be re-introduced. Price-off promotion has been used even more often in the recession, because otherwise people don’t buy products.
• Free samples: Another way to get customers interested in products is through free samples. Everyone is willing to try things they don’t have to pay for. Offering free samples can get lots of people trying the product in question. If the product and selling price are good, people may well start to buy it, whereas before they may not have tried it, and not bought it at all.
• Competitions: Another way of increasing sales is through competitions. Often a business will offer free products or money off for entering competitions, and usually the prize will be worthwhile to. Often you may have to buy a [product to enter the competition, which will get people buying it. For instance companies like Coca-Cola and O2, have offered entry into prize draws, with the chance of winning prizes when you buy coke, or top-up your mobile phone. Tesco themselves don’t often organize the competitions, but the products they sell may have them, increasing the sale of that particular product making both Tesco, and the producer more profit, through increased demand. 

As explained there are loads of different types of sales promotion, each with the same idea, to get people buying the product. Tesco uses offers to get people into the store, and hope they buy other things as well.

Merchandising: Merchandising is all about how, and more importantly where products are displayed in a shop. Tesco pioneered this research to ensure that the products they are selling are in the right place to maximize the sales levels. Product placement is a word you will frequently here in the retail market.

• High/Low: Displaying goods at certain heights is key to people seeing them. Items that are at eye level will be seen more visibly by consumers, and they are therefore more likely to buy it – simply because they have seen it and it caught their attention. Products that people will always want will often be displayed in places where customers will have to look for them. This gets people walking around the store looking at other things, and hopefully buying them. For instance things like spaghetti may be lower than eye level, because it sells well, and customers who want it will try and find it, and therefore look at other products whilst looking for the one they want. On the contrary items that people do not buy so frequently, such as vermicelli may be placed in the middle of the pasta section, so people see it first, and may think about buying it instead. Products that in the middle of shelves will often be there to try and make you see it, you may not need it, and hopefully you will buy it. Popular products will be high or low; out of the way because Tesco will know you will want it and therefore find it. Furthermore a business may put certain products aimed at children lower down on shelves, so it is in their eye line, and the company hope that the kids will see it, and ask their parents for it, and the parents will oblige.
• Changing display: Ever found yourself asking why retailers change their display. The reason being is that if they change something you know, you will instinctively go to a certain point looking for a product. If you go to that point and the product you want is not there, you would have seen something else, and maybe something you do not see often. This will raise awareness products, because you are seeing more. As with placement on a shelf, changing a display gets people looking and walking around Tesco, and seeing more items, and after all, the more you see, the more you are likely you are to buy.
• Point-of-sale: Products at the point of sale are very important. They are the best place for ‘impulse’ buys. They are frequently inexpensive, and ‘treat’ based goods such as chocolate. Tesco has studied this kind of behaviour a lot to try and ensure that they have the correct products at the point of sale, that will generate the most profit. The idea behind it, is that as you are waiting in a queue you will see these products and may add them to your basket. If the goods were really expensive, fewer people would wish to by them on impulse. The same circumstance would happen if they were too niche, or really boring. Having something that appeals to everyone, and is in everyone’s price range is important because a higher vclume of people will buy the product, and revenue will therfore be higher. Tesco will make a huge amount of revenue from ‘impulse’ buys, so having products located in a place where the impulse will be strongest is very important.

As explained there products placement is incredibly important to any retailer, because the better the place of a product, the more people will see and buy it, equally the more obscure the place of a popular product is, the more people will see other things. Product placement will help with the promotion hugely with any product.

Public relations: How people view a company is incredibly important to the success of a business. People may decide not to shop at a certain retailer, or buy a particular product if they think the company image is bad, or they disagree with a company’s ethics or morale’s. Companies promote their products through improving public relations by doing charity work, sponsoring a good cause or providing things to certain groups.

• Computers for schools: Tesco have run a scheme for the past few years whereby they provide schools with computer in return for people shopping at their stores. In exchange for every £10 a customer spends they will receive one voucher, which schools can redeem computers with. When a parent or whoever goes into school and the spend £29.50, they may well decide to spend an extra 50p to get another voucher. This not only boosts Tesco’s sales, but because they are offering schools facilities their overall corporate image goes up, and more people because of this will decide to shop at Tesco.
• Sponsorships: Sponsoring certain events that are considered to be beneficial to the local area or country as it maybe, is a really good way of raising a company’s profile. Tesco sponsor a variety of events, giving vital funding to the events and allowing them to take place. This pleases people; they don’t want local festivals or sporting events being cancelled due to a lack of funding. Supporting these events not only raises the company’s image, but it also acts as a form of advertising, offering two real advantages.  For instance Tesco sponsors the race for life. They offer money to help organize the event, as well as to the charity itself (cancer research). This gives a great company image to Tesco because fighting cancer is very close to people’s hearts, some have even lost relatives. Having this sponsorship will definitely increase the company’s image, and promote the business through the advertising around the course and on numbers etc.
• Charity work/donations: Each year Tesco makes considerable charitable donations; in fact one of Tesco’s main KPI’s is to donate at least 1% of pretax profits to charity. Donating money is definitely one way to improve a business public image. It makes the company look good, and having a good image is one vital element to a business’s success. Tesco this year have donated considerable sums of money to Haiti to help with the aftermath of the earthquake, this definitely has improved the way people view Tesco, if they donate to worthwhile causes, consumers will think that shopping at Tesco will lead to more charitable donations which they approve of, leading to Tesco having more customers and generating more profits. Smaller businesses cannot afford these donations, so they do not make them, and therefore they look worse than Tesco, and hence they lose customers and Tesco’s gain them.

As explained above there are many ways improving customer relations which not only offer Tesco a better corporate image, leading to more customers, but also at times advertises the business itself. It is a really important part of promotion that offers two advantages, improving the image, and advertising.

Promotion is a vital element to any business, without it people wouldn’t know th business, nor would they know of its products. Without this knowledge a customer would have know reason to shop at Tesco, and without this investment a lot less revenue would be made, it is imperative that a business invests the right amount of money to advertising, not too little so that they are not getting the message to everyone and not too much that they are wasting money.  

Market research: Any business will carry out market research; it is the only way that they will survive. They will want to find out what customers think of their products, service and other aspects of their business, to help them improve their business and improve customer satisfaction to help them retain a high level of customers. They do this mainly through, simply asking their customers and staff for feedback.

Feedback form: On Tesco’s website they have a form that anyone can fill in expressing particular issues, or offer suggestions for improvement in specific areas. Customers simply fill it in and it will be sent to Tesco to read and analyze, and hopefully use as information to help them improve the business in a certain or variety of ways. This form will help Tesco analyze how customers feel about the business itself, and will allow them to try and improve it.

Customer question time: Tesco’s customer question time (CQT) gives a chance for the customers to express their feelings and suggestions to Tesco. The meetings are held in the stores themselves around the country. They allow the local community to express their own feelings to the staff and managers of their local store. This makes the feedback much more tailored to each store; every community has different preferences and needs from their store. If you compare this to the feedback form, it is a lot more tailored to the local store itself, opposed to a more generalized viewpoint in the feedback form. Tesco also hold specific CQT’s on specific issues such as the environment and communities, allowing more in depth discussion and analysis on specific areas. Last year over 12,000 people attended these meetings, showing how popular and important it is to people to express their views, and shows the amount of information Tesco can draw from these meetings.

These meetings can tell Tesco a lot of things about what consumers want from their stores. The stores are often of vital importance to local communities in providing an essential service. To improve customer satisfaction and selling volume they need to ensure that they are providing the correct products and service to each and every community they are located in. Having this information can allow each store to provide the correct service and products, to maximize their sales, so there is an obvious advantage for Tesco as well as the customers of these meetings. They are an easy, inexpensive and most importantly reliable and useful piece of research that can go a long way to improving the business locally, and as a whole.

Questionnaire: Another way in which a business can gain very useful information through primary research is through questionnaires. These give the answers that Tesco actually want, and not just random comments that people want to make at the CQT’s and customer feedback forms. This is very important because it makes it very easy to represent the data in the useful manner that can show useful, general statistics and information that should, in theory allow them to improve. You can gain a lot of information on topics that you want, very quickly through the use of questionnaires because they can be printed in mass, for a fairly low cost and easily distributed throughout the company, to every store around the country with relative ease; and at the end of it you have a large amount of useful and accurate data, that should allow you to get a general feel as to where the business is in terms of its rivals, as well as the performance and customer feel. This should allow Tesco to carry out useful and correct analysis and make key decisions that will help the business continue to succeed.

As you have already read, carrying out questionnaires can potentially tell Tesco a lot of useful information about its customers and rivals, allowing the business to make informed strategic decisions that will ultimately provide a better service and hopefully a boost in sales.

I have carried out my own questionnaire from the perspective of Tesco which I shall analyze in the next few pages. I have asked questions which I feel that Tesco would ask themselves to help them find out about consumers habits and opinions. On the next page is a copy of the questionnaire I used. You can see a few example questionnaires at the back of the coursework.

Analysis: I did a sample size of 25 people. I felt that any fewer would be too small, and I felt that this would give be a fairly accurate representation without doing hundreds of questionnaires. Anyway below are the questions listed in numerical order, each have been analyzed and represented in one way or another. All are listed apart from the first, which told me the gender; I incorporated this in the representation.

1. How old is the person who primarily does the shopping?

As you can see the results show that the primary age for shoppers tends to be between 31 and 45. I would make the assumption that this is because people who are under 18, their parents do the shopping, whereas other generations they do it themselves. This shows that Tesco should concentrate on this age generation, perhaps analyzing the best place to advertise for this group, because they seem to be the primary target.

2. Who, in your household primarily does the shopping?        

As you can see the chart and table clearly shows that females and mothers do most of the shopping. This is perhaps still somewhat due to the old status within a family. However Tesco will want to try and grab the attention of the female sex.

3. How many people in the household?

As you can see the majority of people in a household are either two (i.e. a couple) or 4 or (i.e. a family). This means that Tesco have got to try and appeal to both familys

and couples because they are both fairly large groups.

4. How often do you do a primary shop?

As you can see the frequency of shopping does vary. However this is probably due to the size of the household, and location of supermarkets; some people may shop more at local stores, and only do a supermarket shop every month. I think the case is, is that most people shop when they need to, and buy pretty much the same thing.

5. Which supermarket(s) do you usually use?

As you can tell from the chart, most people shop at Tesco’s at some point, and it has the most people shopping at its stores. They will want to keep it this way and keep the dominant market share, with ASDA close behind.

6. What makes you shop at a supermarket? Mark 1-3 (Here I have given 1st  3 points, 2nd 2points and 3rd 3 points)  

As you can see there are a variety of very important things to shoppers, all of which are fairly important. Tesco will have to consider this when launching new products and opening new stores.

7. Which of the following do you purchase at supermarkets?

As you can see in the chart people buy a variety of things from supermarkets; obviously food being the main one. But it clearly represents that most things can sell at supermarkets, meaning that adding new things could be an option; it also shows how Tesco should continue to provide all the products they currently offer, because people still buy them.

8. Which of the following do you normally buy?

As you can see in the chart, it shows that similar people buy value, branded and own branded products; also a similar number of people buy organic, fair trade and free-Range products. It shows how Tesco should probably keep the groups together because it indicates that the same people buy into the groups. This is also shown in the questionnaires themselves.

9. How important is a loyalty card?

 

As you can see the importance of a store loyalty card peaks around the five mark, with another increase at the ten mark. This indicates that there are two levels. One where people want one, but may not always use it, and one where it is essential. Tesco may want to use this to try and attract the people who find it essential by offering a better deal than their rivals.

10. Do you use internet shopping facilities?

As you can tell the majority of people still do no use internet shopping facilities, clearly indicating there it is still a market to be developed and exploited.

11. Which supermarket do you conceive to be best value for money?

As the data represents Tesco’s is by no means the best value for money according to the people we surveyed. ASDA, LIDL and ALDI are ahead and Tesco may want to try and change this buy reducing price or increasing quality because this, as shown earlier is a key reason why people shop at certain supermarkets.

12. If you do shop at Tesco’s, why do you decide to shop their rather than other stores?

As you can see the reasons that people shop at Tesco’s is that they offer a good range and are conveniently situated.

13. If you shop at Tesco’s; how do you rate Tesco’s customer service?

As you can see most people consider Tesco’s customer service to be average to very good, with no one finding it poor.

Analysis: The results of the questionnaire have given many interesting and useful results that could potentially help Tesco to improve the services they offer and try to appeal to more people; it also documents how well the business is currently performing against its rivals at the moment.

For instance, the first question “Which supermarket(s) do you usually use?” documented that most people (80%) shop at Tesco at some point. This is quite a high number documenting that they clearly get enough people through their doors. This perhaps indicates that Tesco are not, for whatever reason satisfying everyone who comes to their stores. The reasons that people shop at Tesco’s show that most people shop their because of their convenience and range, something that ties in with being the biggest retailer in the country. This shows that Tesco have clear areas that they can improve on to keep ahead, because by the look of it the main reason they seem to be the most successful retailer is that they are simply the biggest  one, and offer the widest range. I think the case is, is that they can possibly try and expand into a slightly more unique experience if they want to try and attract new customers, because at the moment they seem to be at their optimum with their current set-up. What I have gathered suggests they don’t really offer anything different, very mainstream. However being the top of that market is a very strong position to be in, because that is the most lucrative one. By the seams of it they seem to be doing most things correctly to achieve maximum profits; being the dominant force in a non-niche market.

One of Tesco’s main aims is to provide a great customer shopping experience. In the last question I asked “How do you rate Tesco’s customer service”; the results clearly proved that they are achieving this aim to a veer high degree, with no one saying it was poor or awful; moreover the majority said that it was very good, which clearly documents how well they are going about achieving this objective,

One other question I asked was “Which supermarket do you conceive to be best value for money?”, most people didn’t say Tesco but said, what are conceived to be the “budget” supermarkets, being ASDA, LIDL and ALDI. Interestingly these are all run by foreign businesses or are primarily based in foreign countries. ALDI and LIDL are both based in Germany and ASDA is run by Wal-Mart in America. I think the fact that foreign ideology about value for money is successful over here. If Tesco want to try and improve their value for money, they should perhaps take on board some of the techniques and ideas that the other supermarkets put into practice. Furthermore Tesco are currently trying to expand into Europe and notably, America which thus far has not been that successful. If they want to be successful abroad, they need to ensure that they meet the customer demands and preferences in foreign countries. I good way about going about this is to study successful businesses in those countries, such as ASDA, ALDI and LIDL.

Overall I think that the survey documented a lot about why Tesco are currently successful and how they need to go about improving the business to stay ahead in a very competitive market. I think it is also interesting seeing how businesses abroad differ than over here, showing the differences in customer differences. I do think that Tesco should take on board these differences when considering expanding abroad.

         

Enterprise skills: Enterprise skills are what qualities, characteristics and skills that business managers, owners or entrepreneurs possess. There are five main areas of these skills (explained below), which are essential for success within business. It is essential for a manager to use the available resources and use their skills to make critical, strategic, important decisions.

Self-confidence and motivation: Enterprising people’s self-confidence and motivation can be expressed as three main points: have attributes whereby

• They are clear about their goals: Being clear about targets is imperative in business. Without goals, you have nothing to aim for and measure your success. Trying to meet goals is one of the most important things to any executive, often bonuses will be offered as a motivator. Every business has goals, and all of them want to meet them as best as possible. Tesco’s goals are defined primarily by their steering wheel and their KPI’s (explained earlier), and these will help them measure where they are, and what they need to do to reach them.
• They are self-starters: Being a self-starter is important, without it many businesses would not be set up, and many influential ideas would not be put into practice. To start a business you need to have sufficient self-confidence and determination to “take the plunge”, without this original confidence in owners and managers many really successful businesses would not be set up. What if Jack Cohen had not had the self-confidence to start Tesco?
• They can push themselves to achieve their goals: Pushing yourself is a very important attribute to a business manager. Products are not always successful to begin with, it is self-determination on a managers part that makes a product successful, they do not need other people to give them confidence, they believe in their own abilities. Look at Dragons Den, some people go in with completely bizarre ideas, like a glove to wear when driving in foreign countries, which is just a glove, or a duvet with a line down it to separate couples. To most of the public (and the dragons) some of the ideas seem completely pointless and stupid, but the entrepreneurs in question still have the desire and determination to be successful.

Examples:

• Strong belief in their brand: Tesco have one of the most strong and well-known brands in Britain, having this is a great platform to launch from. With this in mind Tesco have launched many of their own branded products- they believe that with their brand they will be successful. Not everyone believes Tesco is the best company in the world, but Tesco does – they believe that the brand itself will attract customers. Tesco has used this belief to expand into new markets such as furniture, home wear and clothing. Their name may not be associated with the products in question, but the managers believe that the brand image itself will attract customers, and since Tesco started selling these products they have been successful. Tesco has also used their brand to launch into new markets and countries…  
• Growth & expansion into new markets: In recent past Tesco have set up variations of their English stores in foreign countries. To do this you have to have tremendous self-confidence, different countries want different things from a supermarket. Furthermore the brand may not be as well known in these other countries. Often when expanding abroad, when a business starts abroad it is not very successful. One notable country that Tesco expanded into was America, where the world’s biggest retailer and supermarket operates, Wal-Mart, trying to break a monopoly like this will be incredibly hard, so many people shop at Wal-Mart and respect its brand; people are often not willing to change. In the first year of operating in the USA Tesco were not very successful, but they have still continually contributed significant resources into the operations there, showing their ability to push themselves to meet their goals. Tesco have tried expanding to increase sales, they have also had to manage their investment (both one of their aims) in the US to ensure that they are as efficient as possible.
• Low prices: Tesco believe that they will attract customers through low prices. They have launched a series of advertising campaigns, showing the price against their main competitors. If low prices fail to attract customers, they will not sell enough products to make sufficient profits. The higher the price, the more profit per unit you make, and the fewer you have to sell. With higher prices Tesco need to sell more products to make the same profits. This idea is risky, because if they lose too many customers they will have to increase prices, deterring yet more customers and entering into a viscous circle. Tesco have the confidence that reducing prices will make the customers think the prices are good. And Tesco feel that this should lead to a growth in sales.

In all of the above cases they require a lot of dedication and perseverance to succeed as well as having a great deal of belief as well as being motivated and be prepared to push themselves to succeed.

Risk taking: Risk taking is another very important aspect and attribute to have in business management. Taking the correct risks will decide whether or  not a business will succeed. If a manager takes a risk to enter a particular market which they can make a lot of money from, and they do the success of the business will greatly improve, on the other hand the business could lose lots of money, possibly causing it to go bankrupt. Taking the correct, informed risks in business is imperative in business to make the most amount of money, without losing it again because of a stupid decision.

Examples:

• Expanding: Over the past few years Tesco have been expanding into many different markets, and more riskily into different cultures. Expanding into different cultures is incredibly risky because the people have completely different wants, needs and desires. A lot of investment and research has to be carried out before trying to develop a business in a different country. For instance setting up a business that we have here in Britain in Africa would more than likely fail, simply because they do not have the same culture, standard of living and resources we have. For instance many could not have a computer because they do not have electricity. Tesco have expanded into countries where the culture and desires for products are very different. Setting up a Tesco like the ones we have here would fail. Tesco have undertaken much research to ensure they are successful. They have poured lots of money into the expansion, so if it fails they will lose a lot of money, hence the risk of it. However if it is successful they have a massive market in which to further expand into making them yet more money.
• Online shopping: Tesco were one of the very first companies in Britain, and even the world to set up an online shopping service. At the time this was very risky. There was no way of assessing how successful it would be, it was completely new. Furthermore they had to invest lots of money into the expansion, which could easily have been lost. Tesco did not know how people would react to online shopping, would people use it? They had to revolutionize their website, set up new staff to monitor the online shopping orders and buy more vans to transport the goods to people’s homes. This risk was very large but it has had some very good results, firstly they made it profitable, and secondly it negates some of the need for more stores to meet demand.
• New/Seasonal products: Tesco launched over 8,000 new products last year. These products all had sufficient costs (see marketing mix) in which to put on the shelves. Tesco have and do invest lots of money into researching what people want and how they want it. These products incur sufficient risk because of customers’ fluctuating demand and desires, as well as the costs to produce of the products. Launching new products is very risky because you cannot predict demand for it, or the price people will be willing to pay. Tesco’s do carry out sufficient research to ensure they “get it right first time”. Furthermore Tesco sell lots of seasonal products throughout the year at certain periods in the year. The risk with these products is when you have to order them (nearly a year before the event). This means Tesco’s has to predict customer demand a year early, which is near impossible, and if they get it wrong, they could lose money because they did not order enough stock (this could also reduce customer satisfaction because they cannot “get what they want”.) They can also lose money because they order too much, and do not sell it.

As explained Tesco carries out many risks year round to increase profits, so far it seems to have worked. Tesco invests lots of money into these new areas and products and have to carry out lots of research and have a lot of confidence before undertaking the risks, because the potential for failure is overwhelming. Sir Terry Leahy seems to have got this balance just about right, because since he has been at the head of Tesco, most of their products and expansion has led to growth, giving him an incredibly important enterprising skill.

Identifying and exploiting marketing opportunities: Managers needs to be able to see gaps in the market and other opportunities to meet customer needs and desires. It is vitally important that a manager can see gaps in markets (or developing ones) and develop products that people may want that are not currently available. Finding these markets and creating products can lead to very high levels of revenue and profits.

• Optician/Chemist: Over their history Tesco has gradually introduced services into their stores that you would normally have to go elsewhere to find. For example they introduced a bakery, fishmongers and butchers into most of their stores. This exploits peoples’ urge and need for convenience, by bringing all of these necessary things to people in one easy and convenient way, saving people time and money. Tesco has continued to see this idea, and exploit the gaps in the market further by introducing opticians and chemists into their stores. This essentially means that people can have their eye appointment and buy medicines at a place that they know, rather than having to go to a specialist which may be hard, time consuming and expensive to find and use. In modern times convenience is everything, people are doing a lot more with their time, more people are working, often both partners in a household, which means they have less time to do things like shop. Tesco used this idea and set up these services which offered people convenience and has in return brought them more profits.
• Online shopping: As explained earlier Tesco have set up online shopping. Once again this offer people convenience; they can shop from their own home, saving them time, and money on fuel. When Tesco set up their online shopping service none of the major British supermarkets had done it before, it was an entirely new idea. Seeing this idea has been very important for Tesco. It has been very successful; developing it early has helped make it the best of all of their rivals. The online world has grown rapidly and has been very profitable for Tesco, seeing this opportunity early on has been a lucrative investment.

Identifying new markets is a great way of making money, when you can launch products people don’t know are available, they may well want them. For instance when the, modern mobile phone was launched lots of people bought it because it was new. Tesco need to continue to exploit new markets if they want to continue growing profits.    

Ability to innovate: Firstly it is important to understand what innovating is; it is not the same as inventing, innovating is finding new uses or improving a product, not creating a new one altogether. Being innovative with products is crucial with products which change and update frequently. For instance look at how mobile phones progressed over the last decade. They went from phones to having texting functionality, to colour screens, then cameras were introduced, internet browsing, touch screens and so on. All these ideas have been innovative, someone has thought about what a phone could have and they have introduced it.

• Finance: Tesco have been innovative in their core UK business, setting up new services for customers in and out of their stores. One of these notable introductions was their financial services. Tesco were innovative here because they used their vast resources, which very few companies have to offer the public insurance cover and other banking services. Because of the vast amount of money needed to set up a bank (to give out loans and overdrafts etc.) very few businesses can set up banks, meaning that their main rivals are the banks currently; in operation. Furthermore Tesco already has clubcard members which give them details of people; this can enable them to offer certain bonuses on banking with Tesco as well as the actual ease of marketing. This idea of exploiting its own resources was very innovative of Tesco because it can offer people rewards on shopping at Tesco (which a lot of people do) as well as entering a very profitable market.
• Expansion: As previously mentioned Tesco have been expanding around the world. They have researched a great deal and noticed that certain places don’t have the access to the kinds of products that we have over here in Britain. They thought that the people might want these types of products delivered in a different way. They innovated and changed their business idea and transformed it overseas. They have done this in Asia where they sell products on more of a market style, which suits the people’s culture. Moreover they also expanded into America through their ‘Fresh and Easy’ stores. These stores offer Americans something which they don’t get very much of from the likes of Wal-Mart provides – Fresh produce for cooking. A lot of Americans don’t cook anywhere as near as much as people in the U.K do. More than 50% have five or less cooked meals a week, and in fact figures show that Americans eat out for one in four of their meals, and spend almost than half of their food budget on dining out. Tesco tried to offer Americans a change in the way they eat, much like people in Britain have – cooking most evenings and not eating out nearly as much. Over here it has been very successful and Tesco have tried to innovate the idea and explore a new possible market.

Innovation is a very good attribute to have. It allows you to ensure your product is better than others that are available and also gives you a greater chance of large profits. Tesco have innovated very well over the years giving them greater power and profits, as well as making their customers more loyal by giving them more reasons to shop at Tesco’s as opposed to their rivals.

Ability to build teams and inspire: You cannot succeed in business alone, if you want to be successful you need a good group of motivated people to help you get where you want to be. Obviously managers need to be able to think for themselves and make the important decisions in business. Managers need to have subordinates and people around them who are dedicated and happy what they are doing to make the business as productive as possible. Having an unhappy workforce can lead to strikes, higher wages and a loss of productivity. It is imperative for the owner of a business to have good people skills. Take Richard Branson for example, he is a highly successful entrepreneur and has very good people skills – people want to work for him, look at Virgin Atlantic, the Cabin crew at British airways average nearly £30,000 compared to Virgin’s £14,000 a year. Having a good ability to build teams and motivate them can save huge costs and vastly increase productivity.

• TWIST: Since Sir Terry Leahy took control of Tesco he has introduced an idea called TWIST which stands for Tesco week in store together. This where managers have to spend a five day period each year in store “learning by doing”. What the week aims to do is to reinforce Tesco’s values as well improve the knowledge customers have of the store which should help with the management and help the managers better understand their subordinates and the desires of customers. Furthermore the system shows managers doing the work that the rest of the staff do, which increases respect.

All of the team building a manager sets out for staff to complete is in aid of increasing the productivity of the business. Tesco has to go about this in a detailed and rigorous way which is explained more in the next section…

Other staff:  It is not just managers who require enterprise skills. Businesses will look to hire the people who demonstrate these types of skills in interviews, the people who demonstrate these skills will also often be the ones who progress the quickest through an organization.

Many different types of roles will require different enterprising skills, for instance advertising executives will require self confidence in the campaign they are launching as well as being prepared to take risks with expensive ones. It is important to demonstrate these skills throughout business and also to use the different skills when required, because the best way to get promoted is through promoted within your business and demonstrating these skills stands you in very good stead, Sir Terry Leahy obviously demonstrated them to get where he is today, he didn’t just walk into his current job.

Teams:  Being in teams is a very common and effective way of working. It allows you to support one another, use everyone’s ideas and work efficiently. A team of people has a variety of features such as a shared sense of purpose whereby they all are trying to achieve the same thing; a collective consciousness which means they think and work as one entity, they are not all out for themselves; interdependence, this means that each member needs one another If they are to succeed themselves or as a group; interaction, they all need to have respect for each other and have equality between them; collective action, they all need to be united together and take action together. A team has to function well together and all be united if they are able to adapt and resist pressure as well as learn.

Components: Making a team work requires a variety of components to work. If people don’t like each other they will not be productive, or if they don’t have a wide range of attributes between them they will not be able to cover every aspect needed in business. Every team needs a leader, without one a team can lose purpose, desire and motivation. The team leader plays a hugely important role in a team. The team leader has got be discipline the people within the team, but also command respect, as well as be liked by his or her team members, otherwise they will not work well under them, making them a bad team leader, putting their reputation and job at risk.

Membership: Each member of a team has different roles within a business; these are usually defined by their personal characteristics and skills. An effective team needs a wide range of skills and characteristics, meaning it needs a wide range of people within it. Most people find that they will usually have a particular role in a team and often it is the case that it is hard to change this, so if a team is put together without the necessary people it may well fail because the people cannot adapt easily to fill the vacant “positions” s it were within that team. Spotting the characteristics that a person has is imperative to constructing an effective team. It is a manager’s job to find these people and put them in the correct role, not just stick a group of people together and expect them to work well together. It is also important to know people’s characteristics when assessing a team’s dynamic if it isn’t working well. You may find you have too many people who are too similar to each other. The different roles within a team are often put across as a jigsaw that needs fitting together (above).

Dr Meredith Belbin: Dr Meredith Belbin described the roles within a team that were essential for success. These describe the letters in the jigsaw above, and they are:

Each of the roles above are incredibly important within a team. As you can see there are a variety of different skills that each person has. This can lead to strong bonds with one another, but also struggles with some relationships. Some of the roles do overlap, and all of them cover the other weaknesses. The role can be split up into three main groups:

• Active – Shaper, implementer and completer/Finisher: This group of people is the people who do the tasks well. They turn the ideas into actions, deliver on time and have the ability to transform and change ideas if necessary. They create the product.
• People roles – Co-ordinator, team worker, and resource investigator: These are the people who are good communicators with people. They get on well with colleagues, customers and suppliers and find out information. They develop, find a place to sell the product as well as market it.
• Thinking roles – Plant, monitor/evaluator and specialist: As the role suggests the people in these roles are the ones who come up with the ideas and think things through. They create and think of the product. 

When Tesco are creating teams in the business they will need to consider these three different roles. Any product needs someone to think of new products or ideas to put in place, as well as someone to find out who can sell it, or want to buy it as well as holding the group together. Finally they will need someone to design it. If the team is not productive or is not functioning wrong there may too many people of a certain role in the business, compromising the way the other roles are working. If a team is not flexible it may well fail because it cannot cope with unforeseen circumstances or new situations. The team leader will have to find the right people for each role as well as delegate efficiently to ensure the group works well.

Leadership: Every team needs a leader; it may be an assigned leader, or someone who takes on the responsibilities within the group. It I very important for the team leader, whoever they be to be flexible, because it is imperative to get the team right, a task which can sometimes require lots of thought and hard work. If members clash or the group as a whole is not working efficiently, it is the team leaders’ responsibility to sort the problem out, and take corrective action.

It is important that a team leader commands respect, and tailors his or hers’ management style to suit the cause in the best way, there is no correct way of leadership all round, very team requires a different style of management. A leader may well need to change the way they lead throughout the time they are team leader, to make sure that it is the best way for everyone on the group, and the task in which they are trying to complete. At times a leader may need to be forceful, at other times laid back and let the whole team get involved, at others they may need to get actively involved with the project in a large way.

Fred Fiedler’s theory of leadership effectiveness: Fred Fiedler was one of the leading physiologists in the 20th century. In 1967 he came up with and introduced the contingency modelling of leadership theory in which it identifies two styles of leaders:

• Relationship-motivated leaders: These leaders enjoy having a strong relationship with their team members and centre their management to the people in their team, not on their, or the teams’ tasks. The members of the team may well prefer this method because they may feel less pressured and have a more enjoyable time completing tasks, the business itself may not be so happy with this style because it may result in the team not being 100% productive, all of the time.
• Task motivated leaders: The other type of leader summarized is one such that they are motivated by getting the task finished on time, not having such a strong relationship with their team. They put the job on hand first. The business itself will probably prefer this method, because they will conceive the workforce being more productive under this style, whereas the team may get bored more easily, because they may be constantly made to work, they may well also fall to stress.

As explained earlier, no style of management is the most effective 100% of the time, a balance throughout is required, such that you meet deadlines, and your team is also happy and has respect for you. The style that a leader will adopt primarily is decided by three factors.

• The quality of the relationship between the leader and the team: If the team does not like the leader, clearly no relationship can be made, and there is hence no motivation to have one, so the leader is more likely to adopt a task motivated style. However if the relationship is bad the leader may look to improve it through a more relationship-motivated style of management.
• How clear and structured the team task is: If the task is structured well and easy to follow and get correct, a leader may look to have a more relationship based style because not all of the time has to be spent working on the project. However if the task is tricky to follow, the manager may look to take up a task motivated style to try and get the task completed.
• How much power the team leader has: If the team leader has no, or little power or authority over the team, he or she will have to adopt a style whereby they put all the efforts into getting the task done, because otherwise it would not get done at all. On the other hand if the manager has enough power and authority if things get out of hand they can easily get the task back on track, because of this they may  have a relationship favorable relationship instead. 

Fiedler, after his studies concluded that in extreme situations, such that all of the factors were favorable or unfavorable, a task oriented style was chosen, this is to either get the task done, or because the team has enough respect that you do not need to try and earn it. When in intermediate situations a people orientated style was preferred, this is probably because they know the task is, and can do it, but the respect is not so high that they will just get on with it, and also the problems aren’t so bad if 100% of the attention is on the task, and they will fail.

Examples at Tesco: Within Tesco there are many different teams throughout the business, all in different areas of the store or the management etc. Below are a few examples documenting this.

Local Teams (Bakery, butcher etc.): In most of Tesco’s main stores they have a bakery and butcher team. Each of them has various team members, and all have a team leader. The leader of the bakery or butcher will be held accountable if things go wrong and they make the important decisions on a day to day basis. The team will also have other members that complete different roles. These may well change from day to day. For example one day someone may make and knead the bread, and the next they sell it, or bake it. Within the bakery there may well be specialists, there may only be certain people who can make certain fresh products, i.e. a certain type of cake. Other members may decide on the products to be baked (thinking roles), others may make them (active roles), and other may sell the products, or try and increase awareness of them in the store, by using the tannoy system etc. (people roles). As you can see in the Tesco bakery there are many different skills, and roles that need to be completed. Within the bakery most of the Belbin roles will be completed, maybe not by the same people consistently. There will be a manager, who makes the ultimate decision, and they will have to adjust their style to help cope with demand, they themselves will probably get actively involved in one of the ‘hands on roles.’ The team leader will also delegate specific roles to each member of staff within their bakery team to ensure that the demand is met, and that the bakery completes the job it is supposed to.   

Team Tesco: Tesco conceive the group to be a whole team as one single entity, not split up into smaller teams such as the bakery. In this team you can essentially count the leader to be Sir Terry Leahy, with him having many different team members each with different roles to complete. Sir Terry’s job is to essentially monitor the wholes businesses performance on a day to day business and ensure it is being as successful. You can see Sir Terry to be the leader of many teams. Such as the financial board, the management team, the global/abroad team. He has team leaders for all of these groups, but he is the team leader of all of the people I the second level of the hierarchy, then there team is the 3rd etc. This can give a feel as one whole team, because each level reports to the next. Overall the way the whole team is run give all staff a sense of connection to each other, despite them maybe being in different departments. This way gives an overall sense of purpose, and ambition, as well as the local, smaller team ambition; overall it can act as quite a good motivator. It is important that everyone feels as though they belong, and feel like a member of a team and this idea, and the way in which the business structure works enables this to happen.

Tesco TWIST: As mentioned earlier Tesco has a scheme entitled Tesco Week In Store Together (TWIST). In this initiative the management staff spends time working in the store, getting to know the stores itself, the staff and the customers. It is a great team building exercise because it gives a change for the management to interact with the rest of the staff, which is beneficial for both parties, giving the staff a chance to express their ideas and feelings, and the management a chance to get to know hiw staff feel and what they do giving them a better chance of empathizing. The week is primarily set at effective teams, and leaders that are higher up in the hierarchy, so a whole team can partake in the exercise providing the whole team time to bond. It could just be the manager, or team leader however who takes part in the exercise, and they will be doing the jobs their team primarily does, giving them chance to assess their jobs and think of improvements. Overall the system gives managers a much needed brake from their normal job, and gives them vital time to interact and take on board peoples opinions, which can help them improve their own team, and the business as a whole.

There are many examples of teams within Tesco, each of them are required to complete different tasks. All of them partake in company activities, and work and act as a whole group or team, making a very close knit community. Team building activities are also set out with the ambition of improving the relationships and understanding of how the business works. It hopes new achieve new found respect and productivity amongst the teams and leaders within the business.

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