Analysis of Consumer behaviour in recession: Study of as UK based Company TESCO

Chapter I Introduction The onset of financial crisis resulted from the collapse of two major banks in 2007 namely the Lehman Brothers in USA and the Northern Rock Building Society in UK (Shiller, 2008) along with the simultaneous fall of Bradford & Bingley (B&B) (BBC News 2010). As a consequence it leads to the widespread of financial crisis. But the question here is why it took place to such a large extent even though there exist several financial models that constitute the control of financial risk from the early 1950s (Shiller, 2008). In order to answer the above question, lets look on some of the major reasons for its cause. Any large business house, consumer expenditures or governmental schemes may borrow public money in the form of selling shares. It is the function of large financial institutions, such as banks, to issue or generate credit transactions. A smooth inflow of credit between the borrower and the lender is what establishes ideal market conditions. A credit crunch occurs when there occurs a lack of obtainable credit in the market and the borrowers cannot find adequate finance. Usually such a phenomenon happens when the creditors are unwilling to invest more money or hike up their interest rates to such exorbitant levels that it becomes virtually impossible for the lender to borrow.

The central question, then, is why do the creditors suddenly refuse to invest more money? Actually, far from being an isolated fact, it is a part of a complex chain reaction. The lenders reel under deficit money supply when they fail to realize the interest or even the actual capital they had invested on companies or institutions, which accrued a disastrous amount of losses. Such loss incurring companies cannot return the money they had borrowed from the creditors and have to default payment. However, when the prices begin to fall, even the bank has to sell out at considerably lower prices and suffer huge losses. Consequently, their ability to lend money is severely crippled. In certain cases, the banks are required to raise the level of capital reserves and to comply with this have to restrict lending. Even when banks perceive a risky market, interest rates may shoot up to discourage lending to credit crunch. Purpose of the study In context of marketing, consumer behaviour is a well researched topic and beginning to be of greater importance in the context of buying decisions in recession. In order to improve marketing strategies by retail marketers, gaining an understanding of individuals behaviour and needs is crucial to effectively deal with consumers. Especially in crisis situations individual behaviour differs and leads to panic and market anomalies. Therefore, purpose of this study is to explore the factors driving individual behaviour in times of financial and economic crisis helps in applying the right measures and policies with an informative background. In order to mitigate the aftermath of the crisis, avoid bankruptcies and to enhance recovery, an understanding of individual behaviour appears to be ever more important to the big organizations.

Background of study There is a considerable decrease in the economic growth due to recession that aroused from the failures in the collateralized debt obligation markets which are the sophisticated financial tools (Kambil, 2008). The world has seen such crisis in the past and incorporated different methods as bailout plans. The 1932-53 crises called for reconstruction of Finance Corporation and the trigger was Great depression. The 198995 crises needed Resolution Trust Corporation and the trigger was savings and loan crisis. Here 747 small companies were affected and the cost was $300 billion where the initial cost estimation was $50 billion. In other countries too, like Sweden (1992-96) and Japan (1996), the resolution was in form of Bank Support Authority in Sweden and Resolution and Collection Corporation in Japan and in both the cases, the trigger was fallout from a real estate bubble (Realiy Sandwich 2009). However, it is an interesting aspect in this context to study the behaviour of retail business during these recessions. Case Study Approach

The changes in UK consumer behaviour brought about by the recession are likely to remain in place during and after the economic recovery, a new study has found. A survey reported that 48% of participants believed they were worse off at present than was the case six months ago (data monitor 2010). Datamonitor (2010) proposed that many respondents have moved beyond simply trading down to cheaper products, and are adopting a wide range of strategies in a bid to contain their expenditure levels. The selected case study, Tesco is the UK's biggest supermarket chain, has attempted to reflect the fluctuations in behaviour of

consumers in their routine business activities. This study will facilitate to discover and achieve research objectives. The aims and objectives The aims of this research are listed below: 1. 2. To analyse consumer behaviour during a period of recession To investigate the challenges the retail stores that come across

during recession 3. To determine marketing strategies that are in practice to enable

organisations to cope with recession 4. To make recommendations to the retail stores on how they might

operate in a period of recession 1.6 Research questions The future research will endeavour to determine the most probable solutions to the following research questions: 1. 2. 3. 4. What are the core challenges and practices of consumers in UK retailers during recession? What factors drives consumers buying decisions in recession. What are the most suitable marketing tools during recession used by successful organisations to attract consumers? Does analysing the operation of retail stores will produce significant recommendations to the stores operating in UK? 5. Hypothesis development

The hypothesis was designed in order to best meet the investigative needs of this study and allow a feasible statement in which to conduct primary research methods. It is felt that corporate image and retail stores are important to Consumer behaviour in recession and to asses this, it (retail stores) had to be tested against the notion of 'success' in order to generate a conclusion to the role corporate image and retail stores play within the industry during recession. Being interested in marketing and recession the development of the study was simple. It was formulated to produce an interesting title in which to form the hypothesis (the 'testable statement'), whilst putting a different swing on the marketing aspect, rather than simply just concentrating on it as an entity (Raithel et al, 2010).

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Hypotheses On the basis of above research questions, following hypotheses have been developed: 1. The strategic marketing strategies are important management tools in recession in retail chains of UK. 2. Consumers follow identical practices and face same challenges in recession irrespective of the type of retail business. 3. Price sensitivity and economies of scale become the important elements in buying decisions of consumers in recession.

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Significance of the study

The present research is important for the academic learning and practical applications of the learned concepts for the researcher. The knowledge of consumers buying decisions, the techniques of strategic marketing planning, and retail management practices in actual mega chains of retailers will facilitate the researcher in practical life.

The processes of marketing strategies analyses involve in influencing the buying decisions of consumers have a significant impact on the study outcomes. This research would help academicians, students, and corporate managers to understand the role marketing activities in retail and consumer patterns.. The usefulness and demerits identified in the upcoming chapters will establish the practical implications of the effective strategic marketing. The case study analysis of the a mega retail stores chain Tesco will help managers to understand the mechanism of consume decision-making in recession. Thus this study will provide the basis for further research in this area, and will provide the necessary details of consumer behaviour in recession..

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Scope of the study The present study will emphasise on the extensive use of secondary research

based on material retrieved from free available scholarly journals. The detail case study analysis of UKs largest retail stores chain Tesco is done in the study to analyse practical behaviour of consumers. The data retrieved from company site and other reliable online sources. 1.10 Thesis structure This thesis is divided in many chapters in a sequential order to explore the issue under study. The organisation of the study is as follows: First chapter is the introduction which is used to initiate the topic of research and its proceedings. The contents included in this section are purpose of the study, background, problem statement, research objectives, research questions, hypothesis, studys significance, scope and organisation of the research. The second chapter presents an extensive literature review of the consumer behaviour theories and the implications of the marketing tools in consumers buying

decisions. The literature review in this chapter is composed of journal, books, and case study reference related to the topic. Chapter three is the research methodology which deals with the research approaches, methods, and theoretical approaches to be used in the present research. Ethical considerations, limitations, and resources and planning are the other main components of this section. Chapter four presents the detailed analysis of the selected company and its specific consumer buying situations. Companys history, products, management, and other significant details are included in this section. The consumer behaviour and marketing policies are the vital components of case studies analysis. Chapter five focuses on the case study analysis, research findings, and interpretation of results of hypotheses testing. The research objectives would be achieved and the significance of marketing tools in buying decisions will be analysed in this chapter. Chapter six draws the conclusion and derives the recommendations to the specific analysis of the selected case study of TESCO. Chapter seven is the personal reflection to the present research project and focuses on the researchers learning from the proceedings of this research.