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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 PESTAL 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 PESTLE 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 Northern
Europe (Namely, Sweden). The report will outline how Tesco intends to make such market
diversity and also manage its corporate portfolio. The Ansoff Matrix 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. Measurements and control with contingency plans will also be
discussed.
Company Profile
Tesco runs more than 2,300 supermarkets, hypermarkets, and convenience stores in the UK
(where it is the market leader in food retail), Ireland, Central Europe, and Asia. Its operations
include convenience and gasoline retailing (Tesco Express), small urban stores (Tesco Metro),
hypermarkets (Tesco Extra), and financial services through Tesco Personal Finance. A global
leader in online grocery sales, it owns a 35% stake in US grocery chain Safeway's
GroceryWorks. It is the leading online grocery store and it is now expanding its business with a
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
Strengths. Weaknesses
Opportunities SO WO
globally
Threats ST WT
1.Existing competition
• Tesco has a strong home brand which is becoming known throughout Europe due to
• Tesco could build on the strength of it's brand to join with a leading Swedish
• Tesco is in very good financial health, so could very well afford to pay for expansion
In considering how opportunities could be taken to address the weaknesses, provided that SO
was achieved
• Tesco's growing brand awareness throughout Europe could overcome lack of local
knowledge by using local Swedish general managers to both run the stores, and
• By forming alliances with Swedish clothing manufacturers and by building upon their
knowledge of the local population's sizing and purchasing habits, it can only be a win win
• Existing competition in the Swedish market means that Tesco will need to use their
financial resource to create and sustain a high profile and multi level marketing
campaign to both raise the profile of Tesco within Sweden and introduce the concept of
quality children's clothes at Tesco and to reinforce the message periodically throughout
the years.
A PESTLE analysis of the industry was then undertaken to examine the local, national and global
An assumption was made that most of these (political, economic, social, technical, legal and
environmental) factors would, to some extent apply to the retail industry in Sweden.
POLITICAL - Following the European Integration and Free Trade Agreements, the market has
opened up for British Companies to invest in Eastern Europe. Tesco already has 60 Hypermarket
store in Hungary. Lidl is uncompromisingly fighting to maintain its market share with an
ECONOMIC - the Retail sector is fairly recession proof and also very sensitive to changes in
interest rates. Since the events of September 11th 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 11th. Consumers are optimistic and the retail industry is once again
booming.
SOCIAL - 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).
TECHNICAL - Changes in retailing methods such as the sale of clothes via the Internet is now a
common place in retailing. A paperless operation, the management and administration of the
company are undertaken on IT systems, which are accessed through secure servers; provide
advancement with national companies like Ericsson, Tesco would enjoy the comprehensive
LEGAL - Sweden has National 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.
ENVIRONMENTAL - The renewable source of resources used in production, namely cotton and
wool are environmentally friendly. The threats are in terms of legal consequences for livestock's
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
Existing New
From the Ansoff Matrix above, it will be presumes that Tesco's launch of Baby 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 Tesco will need to consider whether it's existing
products conform to Sweden's criteria to be made from renewable sources, or whether they will
need to form an alliance with a strategic partner, as suggested following the SWOT analysis.
Both capability and market consideration has driven Tesco into the development of new
markets. In today's 'green environment' children's clothing made from 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 marketed as affordable everyday wear whilst the new
range is going to be aimed at the quality high end of the market. Tesco may not be seen as a
It is important for Tesco to decide on the appropriate market segment to target in Sweden as
this will subsequently determine its generic strategy. If it wishes to compete with the low cost
retailers, as it currently does in the UK against the ADSA George brand and Sainsbury's new TUI
range, then it must adopt a cost leadership strategy. Alternatively it will have to look for
differentiation so that it can charge premium prices at the 'luxury' high-end of the market. As
the competitive rivalry in the low cost market is intense, profits relatively low and market entry
costs high, Tesco should enter the high-end market with a differentiation strategy which would
exploit the Swedish criteria for clothes made from renewable sources such as cotton and wool
However, before Tesco decides on its target customers, a market analysis will need to be
undertaken in terms of
• Market shares of all the existing firms in this market and finally
• Segments/ demographics within the market, to identify the profile of the new
customer to ensure the best method of targeting is used and the marketing campaign
Marketing Objective
Customer advocacy (the number of customers who recommend Tesco branded clothing, repeat
business)
Respected company/ brand awareness (the number of community stakeholders who respect
Tesco)
Employee motivation (the number of employees who feel motivated to deliver Tesco's goals)
Tesco must ensure that it sets 'SMART' marketing objectives that are specific to the needs of
Marketing Strategy
Tesco's strategy is clear, with growth being pursued from four areas - the core UK grocery
business, non-food, international expansion and retailing services such as financial services, the
dotcom business and telecommunication packages. Basically, 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 (Johnson, G., Scholes, K., Whittington, R., (2005)). Lidl
is currently "destroying" the market by selling the products below cost price.
Having undertaken the SWOT and PESTEL analysis, Tesco's generic strategy will have to be
differentiation so that a premium price can be charged. It will do this by joining forces with/
forming a strategic alliance with an existing manufacturer of Swedish children's clothes with a
credible reputation for quality clothes at the high end of the Swedish market and by creating a
new 'children clothes brand', not using the current Florence and Fred or Cherokee names. All
clothes will be manufactured from totally sustainable materials and manufactured in Sweden
itself. The new line of childrens clothes will eventually be rolled out through the rest of Europe
and the Swedish and the brand values will mean quality and style .
The marketing strategy will involve analysing the markets, and determining which products to
offer and the exact age range of the children to be suited, considerations relating to sizing,
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' European range of Environmentally friendly clothes which could be
exported throughout Europe, whilst there would be a broader range available for local
customers. However 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 Alliance
partner, purchasing habits of the customers (parents buying for children) and so forth.
Having determined 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 quality and style and so would demand a premium
price. Certainty it must be higher than Cherokee and Florence and Fred, such as the price
differentiation in Marks and Spencer between it's own named brands and Per Una. However,
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