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Formulating an International Marketing Strategy

This report outlines an international marketing strategy for its market entry into Sweden with a range of baby wear. It would be useful to say that have already been trading in Sweden for x many number of years and already had y number of stores operating in the country. The SWOT and P ST!" analysis show that Tesco currently has the resource capabilities to successfully enter the baby wear market and are capable of implementing a market development strategy building on the success of its Tesco stores in the country. The report recommends that Tesco target the high#end market segment with a differentiation strategy. Introduction This report will assist in the understanding and the formulation of an international marketing strategy for Tesco Plc. The report will use P ST" and SWOT analysis to provide an insight into Tesco$s current market situation and will provide a valuable source of help in enabling the management team to make the correct strategic choices in terms of corporate and international strategy relating to the launch of designer baby wear %infant & toddler clothes' into (orthern urope %(amely) Sweden'. The report will outline how Tesco intends to make such market diversity and also manage its corporate portfolio. The !nsoff *atrix will be used to consider market entry models. The final part of this report will provide an activity plan for Tesco along with a profit and loss account. *easurements and control with contingency plans will also be discussed. +ompany Profile Tesco runs more than ,)-.. supermarkets) hypermarkets) and convenience stores in the /0 %where it is the market leader in food retail') Ireland) +entral urope) and !sia. Its operations include convenience and gasoline retailing %Tesco xpress') small urban stores %Tesco *etro') hypermarkets %Tesco xtra') and financial services through Tesco Personal 1inance. ! global leader in online grocery sales) it owns a -23 stake in /S grocery chain Safeway$s 4roceryWorks. It is the leading online grocery store and it is now expanding its business with a T5 channel and a 6retail based education institution. SWOT and P ST" !nalysis of Tesco Plc
A Swot analysis giving an overview of the key internal and external factors pertinent to Tesco, was undertaken, appendix 1, and from this key strengths, weaknesses, opportunities and threats were noted. These were now further refined

Strengths. 1. Brand awareness Opportunities

Weaknesses 1. Lack of local knowledge

2.Strong financial situation 2. 'Foreign Brand SO WO

1. Brand awareness growing globally 2. nno!ation and alliances "hreats 1.#$isting co%petition 2.&igh 'o%petition for custo%ers and resources n considering using strengths to %ake the %ost of opportunities (SO)

S"

W"

"esco has a strong ho%e brand which is beco%ing known throughout #urope due to e$isting e$pansion progra%%e "esco could build on the strength of it's brand to *oin with a leading Swedish %anufacturer of children's clothing and *ointly there could be pro%otional opportunities for both "esco and the Swedish co%pany concerned. "esco is in !ery good financial health+ so could !ery well afford to pay for e$pansion plans incorporating %arketing progra%%es.

n considering how opportunities could be taken to address the weaknesses+ pro!ided that SO was achie!ed

"esco's growing brand awareness throughout #urope could o!erco%e lack of local knowledge by using local Swedish general %anagers to both run the stores+ and reco%%end location+ and by ensuring their in!ol!e%ent in local %arketing initiati!es. By for%ing alliances with Swedish clothing %anufacturers and by building upon their knowledge of the local population's si,ing and purchasing habits+ it can only be a win win situation for the co%panies concerned.

n re!iewing the key threats and applying the strengths

#$isting co%petition in the Swedish %arket %eans that "esco will need to use their financial resource to create and sustain a high profile and %ulti le!el %arketing ca%paign to both raise the profile of "esco within Sweden and introduce the concept of -uality children's clothes at "esco and to reinforce the %essage periodically throughout the years.

xternal nvironment # P ST" !nalysis

! P STL# analysis of the industry was then undertaken to examine the local) national and global influences of political) economic) social and technological factors to understand opportunities and threats well. .n assu%ption was %ade that %ost of these %political) economic) social) technical) legal and environmental' factors would+ to some extent apply to the retail industry in Sweden. PO"ITI+!" # 1ollowing the uropean Integration and 1ree Trade !greements) the market has opened up for 7ritish +ompanies to invest in astern urope. Tesco already has 8. 9ypermarket store in 9ungary. "idl is uncompromisingly fighting to maintain its market share with an aggressive pricing strategy. +O(O*I+ # the :etail sector is fairly recession proof and also very sensitive to changes in interest rates. Since the events of September ;;th the world economies have suffered heavily) stocks plummeted and prices are at all time lows. The world economy is however) now on the up post September ;;th. +onsumers are optimistic and the retail industry is once again booming. SO+I!" # changes in consumer taste and lifestyle represent both opportunities and threats for the industry. Opportunities in terms of new market and consumers) however) there are added threats in terms of alternative established Swedish national retailers %foreign company bias'. T +9(I+!" # +hanges in retailing methods such as the sale of clothes via the Internet is now a common place in retailing. ! paperless operation) the management and administration of the company are undertaken on IT systems) which are accessed through secure servers< provide flexibility in the running of the business. !s Sweden is at the forefront of technological advancement with national companies like ricsson) Tesco would en=oy the comprehensive logistic and distribution channels already in place. " 4!" # Sweden has (ational legislation for health and safety both in terms of consumer rights and also in terms of production of own natural renewable resources for making clothes. (5I:O(* (T!" # The renewable source of resources used in production) namely cotton and wool are environmentally friendly. The threats are in terms of legal conse>uences for livestock$s in terms of health and safety. *arket ntry Strategy and Target +ustomers We can use !nsoff$s product?market matrix to identify directions for Tesco$s strategic development. This matrix offers directions for strategic option available to Tesco in terms of products and market coverage) taking into account its strategic capability and also expectation of stakeholders Products xisting (ew

*arkets

xisting Protect?build +onsolidation *arket penetration (ew *arket development (ew segments (ew territories (ew users With new capabilities 7eyond current expectations

Product development With existing capabilities With new capabilities 7eyond current expectations @iversification With existing capabilities With new capabilities 7eyond current expectations

SourceA Bohnson) 4.) Scholes) 0.) Whittington) :.) %,..2' Fro% the !nsoff *atrix abo!e+ it will be presu%es that Tesco$s launch of 7aby wear in Sweden will involve a market development strategy. Tesco already sells children's clothing %existing product' but Sweden will be a new market and "esco will need to consider whether it's e$isting products confor% to Sweden's criteria to be %ade fro% renewable sources+ or whether they will need to for% an alliance with a strategic partner+ as suggested following the SWO" analysis. 7oth capability and market consideration has driven Tesco into the development of new markets. n today's 'green en!iron%ent' children's clothing %ade fro% renewable sources is a new slant on a product that can be exploited in other market segments and countries. Tesco may encounter some difficulties around creditability and expectations for the clothes they currently supply through their stores are %arketed as affordable e!eryday wear whilst the new range is going to be ai%ed at the -uality high end of the %arket. Tesco may not be seen as a credible $mainstream$ supplier of -uality clothing. t is i%portant for Tesco to decide on the appropriate market segment to target in Sweden as this will subse>uently determine its generic strategy. If it wishes to co%pete with the low cost retailers) as it currently does in the /0 against the .1S. 2eorge brand and Sainsbury's new "/ range+ then it must adopt a cost leadership strategy. .lternati!ely it will have to look for differentiation so that it can charge premium prices at the 'lu$ury' high#end of the market. !s the competitive rivalry in the low cost market is intense) profits relati!ely low and %arket entry costs high+ Tesco should enter the high#end market with a differentiation strategy which would e$ploit the Swedish criteria for clothes %ade fro% renewable sources such as cotton and wool and e%phasising the en!iron%entally friendly approach. 9owever) before Tesco decides on its target customers) a market analysis will need to be undertaken in terms of

The siCe of the baby and infant clothing market in Sweden *arket shares of all the existing firms in this market and finally Segments? de%ographics within the market) to identify the profile of the new custo%er to ensure the best %ethod of targeting is used and the %arketing ca%paign appropriate to address their needs.

*arketing Ob=ective Profitability) in terms of operating margin %a ;.3 target' Swedish *arket share %a ,.3 target' +ustomer advocacy %the number of customers who recommend Tesco branded clothing) repeat business' :espected company? brand awareness %the number of community stakeholders who respect Tesco' mployee motivation %the number of employees who feel motivated to deliver Tesco$s goals' Tesco must ensure that it sets $S*!:T$ marketing ob=ectives that are specific to the needs of the audience+ measurable) attainable) relevant ) time limited) *arketing Strategy Tesco$s strategy is clear) with growth being pursued from four areas # the core /0 grocery business) non#food) international expansion and retailing services such as financial services) the dotcom business and telecommunication packages. 7asically) Tesco is using its strong stable core to keep the business ticking over while it forges new riskier areas of growth. Pushing further into non#food in the next phase %Bohnson) 4.) Scholes) 0.) Whittington) :.) %,..2''. "idl is currently 6destroying6 the market by selling the products below cost price. &a!ing undertaken the SWO" and 3#S"#L analysis+ Tesco$s generic strategy will have to be differentiation so that a premium price can be charged. t will do this by *oining forces with4 for%ing a strategic alliance with an e$isting %anufacturer of Swedish children's clothes with a credible reputation for -uality clothes at the high end of the Swedish %arket and by creating a new 'children clothes brand'+ not using the current Florence and Fred or 'herokee na%es. .ll clothes will be %anufactured fro% totally sustainable %aterials and %anufactured in Sweden itself. "he new line of childrens clothes will e!entually be rolled out through the rest of #urope and the Swedish and the brand !alues will %ean -uality and style . "he marketing strategy will involve analysing the markets) and deter%ining which products to offer and the exact age range of the children to be suited) considerations relating to siCing) fashion) seasons and so on will need to be made) as well as the appropriateness of each garment for export to other Tesco shops in neighbouring countries. Tesco may well decide that there will

be a $core$ uropean range of nvironmentally friendly clothes which could be exported throughout urope) whilst there would be a broader range available for local customers. 9owever before any decisions are made) a detailed market research activity will need to be undertaken to test the concept of the new range) the intended pricing parameters) attitudes towards Tesco as a retail outlet and attitudes towards the new Swedish !lliance partner) purchasing habits of the customers %parents buying for children' and so forth. &a!ing deter%ined the clothing (product) specifications+ the strategy is implemented through marketing tactics) which involve detailed decisions about factors such as the price and the way the product is distributed. With regard to price) consideration must be given that the new Swedish range is to be synonymous with >uality and style and so would demand a premium price. +ertainty it must be higher than +herokee and 1lorence and 1red) such as the price differentiation in *arks and Spencer between it$s own named brands and Per /na. 9owever) consideration would also need to be given to the fact that the reality is that it is distributed throughout a chain store) so a premium price charged within a Tesco outlet cannot demand the same price as a bouti>ue. So Tesco must decide on its model of entry into the Swedish %arket (place) in terms of) own stores) Internet selling or =oint venture with an existing national retailer. Sweden is a huge country and the population is spread over a wide geographical area. It is likely that Tesco will need to cover as many methods of distribution as possible.

Tesco promotes the concept that you can buy whatever you like in =ust one shop at it$s retail stores and so must offer this to ensure consistency of global message. The P ST " analysis showed that the Swedish people were technologically advanced and so the internet shopping option could prove popular) for both busy people and those who live in the remote areas of the country. In addition) the road and transport infrastructure is good) ensuring that the delivery side of the business would not let them down. Other outlets should also be considered) especially as they will be using an alliance partner to design and promote the new range. This partner must already have outlets that they use for their own ranges and there ought to be a possibility of Tesco using these outlets for their new clothing range too and visa versa. In fact the partners relationship is of strategic importance to each other. Warehousing and distribution techni>ues are automated) using the IT technology dlectronic @ata Interchange % @I' and it would be recommended that Tesco form another alliance with a logistics? distribution company to get their goods to both the stores and their customers on time.

9aving decided to enter the high end childrens clothing market it is important that such an entry be supported by a high profile $burst$ marketing campaign. Whilst the promotional side will be expensive) the SWOT emphasised Tesco$s financial security. Such a campaign would consisting of

T5 and radio advertising repeated at regular intervals throughout the day !dvertisements placed in both national and local papers *edia P:. Tesco talking about their commitments to working together with Swedish people for Swedish people) supplemented with press releases *edia P: # The alliance partner issuing press releases and talking on both national and regional T5? radio about the benefit of Tesco using his company and the benefit to Sweden in creating thousands of new =obs Political P: # The introduction of an environmentally friendly range based on Sweden$s strict policy will raise the profile of Sweden amongst urope as a leader of environmentally friendly policies and that the /0 is encouraging such political emphasis on $green$ emphasis during the recent election campaigns. 7illboard campaigns Internet ads and viral $contagion$ campaigns @irect marketing to known customers%i.e if loyalty cards in place' !nd so on

Profit & "oss account Profit and "oss !ccount +ontinuing Operations !c>uisitions ,..D m ;-F %;,;' ;E %F' F

Sales Operating expenses Operating profit "oss on disposal of fix assets Profit on ordinary activity before D)8;D interest and tax (et interest payable Profit on ordinary activity before tax Tax on profit on ordinary activities Profit on ordinary activity after tax *inority interest Profit for the financial year

,..D m --)D;E %,E)E.D' D)8;D

,..D m --)22G %,E)F,2' D)8-, D)8-, %,,-' D)D.F %DFE' -)F;; %,' -)F.F

@ividends :etained profit for financial year arning per share *easurement & +ontrols

%2;8' -)-F;2

Tesco must also have in place both financial and strategic controls. 1inancial controls are in terms of profit targets) capital bids and performance appraisal. Strategic controls in terms of overall strategic balance) agreed business plan) optional services and infrastructure and any short#term constraints such as human resources. +ontingency Plan The contingency plan must be in place to ensure that if the product fails having made large capital investments in new store) Tesco must have other products within its portfolio) which it can launch. :eferences and bibliography httpA??www.forbes.com Bohnson) 4.) Scholes) 0.) Whittington) :.) %,..2' xploring +orporate Strategy Text and +ases) Gth dition) 1T Prentice 9all httpA??www.hoovers.com?nike?##I@HH;D,2D##?free#co#factsheet.xhtml !++! Paper -.2 Strategic 7usiness Planning and @evelopment %,..;' The 1inancial Training +ompany *. . Porter) +ompetitive !dvantageA +reating and Sustaining Superior Performance) 1ree Press) ;FE2 Beannet) B.) 9ennessey) @.9) 4lobal *arketing Strategies) 8th dition) 9oughton *ifflin !ppendix ;

ST: (4T9S

OPPO:T/(ITI S @evelop brand awareness globally (ew *arkets *arket shift to globalisation I T

( @iverse ranges of products T Open ,D hours a day Strong +ash 1low Position

: Increase turnover and trading profits 9ealth awareness growth #4* crops : ( Strong 7alance Sheet ! "eading Supermarket +hain " 7rand !wareness 9uman resources Online Shopping +apabilities to turn resources into advantages W !0( SS S Perception of low >uality #%Tesco value brands' "ack of local knowledge of customers and culture 1oreign brand Innovation & !lliances "ow cost brand growth @iversification (on#food # offers untapped new markets with higher margins ( ! "

T9: !TS (ew & existing competition 5olatility in Price of raw materials conomic recession *arket shift to globalisation Takeover bids 1ar# ast low cost brands xtremely high competition for customers and resources

http://www.tesco.com/talkingtesco/ http://www.bbc.co.uk/news/business-14473931