Composition And Functioning Of The Marketing Environment Commerce Essay
These sub-environments have variables. These variables influence the enterprise, people work there and their families. For instance, in the market environment, the enterprise may have a negative influence which can lower the profit and leads to negotiate the pay rates of the labour. This type of competition is encountered in both formal and informal sector of economy.
The Micro-Environment
The micro environment comprises of all the activities which are performed by the particular enterprise. An enterprise usually performs activities which are diverse in nature to be able to function well and to achieve objectives which were set earlier.
For example:
Tesco recruits 2 persons to arrange the flowers and one person to deliver. She has to pay xxxx amount of money as her rent. For the delivery vehicle which she took on lease, she has to pay xxxx amount of money. She buys the flowers with cash. In all these limitations, she has to meet all her requirements to earn her living.
The above example explains how enterprise is influenced by the micro environment. It also explains that most of the activities can be controlled to achieve success.
The Macro-Environment
The enterprise tends to operate in a wider macro environment. In this environment the variables influence the enterprise either directly or indirectly. They also influence the market environment of the enterprise. These variables should be evaluated continually to make sure that threats and opportunities are identified appropriately. For example: during the early nineties, when Iraq was under the expansionist period, there was a rise in the price of the crude oil. This explains us how a variable can have influence on business and especially on people in the country. The following macro-variables could have their effect on the enterprise individually or combined.
The technological environment
The economic environment
The social environment
The natural or physical environment
The institutional/political environment
The international environment
Porter’s five forces
It is based on the concept that any business organization should look for the opportunities and threats in the environment. Competitive strategy is mainly based on the understanding the structures of the industry and the way they tend to change. Five competitive forces have been identified by porter and it is explained that these forces work towards shaping of the industry and market. These forces also identify the level of competition and also the scope for gaining profits of the industry. The business strategy aims to change these forces so that it improves the status of the organization. The five forces model identified by porter supports in the analysis of the other driving forces in any industry. The management then decides how to influence or how to exploit a specific characteristic in the industry by taking into consideration of the information gained from five force analysis.
Product portfolio
The set of different products that an organization produces, ideally balanced so that some products are mature, some are still in their growth stage while others are waiting to be introduced.
Product Portfolio Strategy
Introduction
It is the collection of the business and other products which combine to make up the company. The one that fits the company’s strength is considered as the best portfolio for the business.
The company must be able to:
(1) Analyse the current business portfolio to take the decision about businesses which should receive more investment or less investment, and
(2) Develop growth strategies to add new business and products to the portfolio, and at the same time decides when products and businesses are to be stopped.
Boston Consulting Group
It helps to analyse the portfolio of the product and to inform decision making regarding the strategies of the market.
It has been developed in 1968 by a marketing consultancy and business strategy called as Boston Consulting Group.
It analyses the link between the growth rate, share in the market and flow of the cash.
Products are classified into the following categories
Stars
These are the high growth products or businesses which compete in the market and these are relatively strong to stand in the competition. Most of the times they need high investment inorder to retain their growth in the market. But as the time goes, the growth usually slows down eventually and there is a chance of the relative market becoming as cash cows.
Cash Cows
These are the businesses and products which have low growth and high share in market. They require only minimum investments when compared to other products. They are considered as successful business and are mature in nature. They have to be managed to gain profits continually inorder to produce cash flows required by the company.
Question marks
They have low share in the market and are operated in high growth markets. By this it is explained that they might require good amount of investment inorder to grow the share of market to compete with others who are more powerful. The advantage is that they possess good potential. Most often the management thinks a lot about these question marks that which needs investment and which one needs to be failed and which one needs to be shrinked.
Dogs
Usually the businesses which have low growth markets, and which have low relative share are called with the term “dogs”. They may produce enough cash sometimes but this is done rarely. So the doubt of investing any amount on this product comes into place.
Life cycle of the business
The follwing are the stages from development to withdrawl
Shows the stages that products go through from development to withdrawal from the market
Each product has a different life cycle
revenues earned are determined by PLC
They contribute to the planning of market strategy.
The products help to recognise the needs like when a support is needed, in redesigning, and about the withdrawl etc.
They help in the planning of the development of new products.
Help in the forecast of the money and how to manage the flow of cash.
The Stages of the Product Life Cycle:
Development
Introduction/Launch
Growth
Maturity
Saturation
Decline
Withdrawal
SWOT Analysis
Every organization has to conduct the SWOT analysis as a process of looking at the market environment carefully and to achieve success. With this analysis the strengths, weaknesses, opportunities and threats are identified and suitable measures should be taken in regards to that.
Strengths
These are the positive things which an organization possesses to achieve success. Example: highly skilled management, sufficient capital, trained labour, productive environment, resources.
Weaknesses
These are the negative aspects of the organization which should be looked into. In the micro environment, some of the weaknesses are, lack of capital, short staff, obsolete range of products, inability to adapt to change or taking longer time than usual to sell the products.
Opportunities
The business organization should take advantage of the opportunities. Example when the government reduces the tax, increase in the consumers, location of the business etc.
Threats
These are found in any type of market environment. Example: when the currency falls drastically. If effects the import and export business. These threats could sometimes be opportunity to the competitors.
Task 2
Company profile and marketing approach of Tesco
Tesco has gained its reputation as one of the largest super markets in United Kingdom. It has been dominating the retail sector. The stores have been continuing to expand from 98 to 207. Out of these half of the stores will be located in Asia. Tesco has got excellent strategy in the operation and management team. It has been founded in the year 1924. The first opened store was in Burnt Oak, which is in Edgware. It has come so far a very long way since 79 years and stands as one of the leading retailer of food.
Initially it started as a super market in the US during the 1930 where the customers should carry on with self service. Then later on the management realized that there was a dramatic decrease in the product prices by selling more variety and bigger stock and by employing less staff. This has given rise to starting of important things for the organization. Everything has been broken to pieces at the time of war but Tesco managed to retain its position.
Tesco has now become very familiar for groceries, fresh food, house hold goods and clothing.
The Marketing Mix
This can be described as the group of variables which can be controlled in which there production of response is required in the market. It is comprised of product, place, price and promotion. The entry of Tesco into Chinese market required to change significantly according with the culture of the customers in particular location. Also the organization has to bear in mind about the minimum standards required.
A. Product
Tesco management has set off strategies for product development as soon as they take control of the shop in China. They have done it by marketing the products which exist currently, by export of the products in to different parts of the country. By this the company’s market share and penetration will be boosted up. It should also look into restoration and revision of the models of the products inorder to provide for the Chinese customers what they require. Because of this, there could be a development of the company’s own products which could then be strategically marked in China.
B. Price
Tesco can gain the advantages by enhancement of efficiency in the process, expansion of contact with large supplier who can supply materials at lesser cost. If any other organization which are rival in the country and which do not lower the costs, Tesco can have the advantage of facing the competition.
C. Place
For the achievement of success among its competitors, Tesco should be able to invest huge amounts of money in the places where there is less income. It should get mixed up with people who have similar ideas both in private and public sector like colleges, chambers etc which makes it easy to start new sites in the districts which are disadvantaged economically. If these areas are targeted, the company will be able to gain trust and favour from the Government and also help in employing local people.
D. Promotion
The approach of Tesco should be the way where it constitutes for a strategic plan which is long term and it should concentrate on value for expansion of gaining the faith of the customers. This takes into account of retaining a business which is well built. The company should be able to develop in all the aspects and can start off with shopping online.
The main objective of the marketing mix is to gain customer’s need and satisfaction. Tesco has to recognise the customer’s needs in order to target the country. It should also work towards maintaining healthy relationships by making sure to provide the service and product according to the customer need. It should also aim at providing good customer care.
A Major Strategy Change
In today’s world, especially in the grocery stores and retail business, change has been rapid. The Tesco in the country called Malaysia has been struggling to face the competition, even when sometimes there is decline in the population.
The Tesco in Malaysia has been rationalized in terms of the development economically and chains of food supply. This is mostly explained by the food service customers of major retail business and who try to make business from manufacturers which have better resources, farmers and suppliers. So, it is understood that power is the key factor running the retail industry globally.
The other issue of change which Tesco is facing is the usage of e-commerce. The use of internet nowadays has been drawing people to do more shopping online which suggests that there is more to do by Tesco and its competitors. People have started giving importance to brands and becoming choosy about what they want to buy. Because Tesco stood on the top position in the market, it has won increased number of customers. With this it is understood that if Tesco has to lead the market for next five years time it has to work even harder.
There is a need for Tesco to find out about some points which sets it apart from other companies which also provide with online shopping. In today’s world, time is the only thing which matters for any company to act before its competitor could do something. The increase turnover of the internet and technology has been added to it. In these situations also, Tesco managed to retain its position in brand and the promotion of sales by maintenance of good customer care and gained satisfactory service. It has been proved to be differentiated from the rest of the competitors.
SWOT ANALYSIS
STRENGTHS
WEAKNESSES
1. Immense knowledge about retail industry
2. Well known for being competetant and top management and maintenance
3. Well trained customers.
4. Settled and sufficient financial investment
5. IT returns by use of online shopping
1. Minimum supervision on international market
2. Internet exploitation
OPPORTUNITIES
THREATS
1. Expanding of target market
2. Good market environment with resources
3. Decrease in the small businesses in Malaysia.
1. Restructuring of economy.
2. High competition
3. Regulations of the government
Corporate, Functional and Global Strategy
Tesco has designed a business strategy which is long term to rise the profits. It has got three dimensions. They are
Corporate Strategy
Functional Strategy
Global/International strategy
There are about 16 stores of Tesco across Malaysia. Out of them almost 80% of the profits and sales is through the business. Tesco.com believes in providing first class customer service, which is the key factor behind its success. The main purpose of the Tesco is to earn the loyalty from the customers which last for a lifetime.
This belief has helped the sales to increase by 7.9%. The company has celebrated 5th anniversary and has expanded about 1100 products of range. The business has improved in providing ready meals which has grown to 23% and through this it has been leading the development of the products by promotion of living healthy.
Tesco has undertaken another action to improve its business called as Regeneration. This is similar like taking the help from the government and the community to set up a store. This helps in generating the vacancies in some of the areas. Some of the places where this has been taken place are Kualalumpur, Puchung, Simpang Pulai. The company tries to set up a store where the people need to be employed. The other advantage of this store is that there will be less competition and also there is a chance for the reputation to be increased as the people get employed. This also helps in moving of the commodities nearer to the people.
The main dimension of the Tesco strategy is to provide the quality service to all its customers. It has introduced about five thousand food lines in this year. The other interesting thing about Tesco is that it has brought up the screw cap wines with the label ‘unwind’. This was on the track to earn 5million dollar in this year. Operating self checkouts with the name ‘Grab and Go’ were started in quite a lot of stores. In this the customer will be given a choice to grab from variety of cheese and chicken without queing up. This is even more simple and cheap to carry out the sales.
There was a great progress in this year with the introduction of the Primary Distribution. The products can be taken control starting from the factory until it is distributed. It helps in improvement of efficiency and delivering of the benefits of the cost which they invest in the initiatives of the customers. Tesco has also emphasized in the non-food section. They have started giving offers to meet the customer satisfaction and reach their expectations. With this they are able to get a share of 5% of non food market from Malaysia, and also share in music sales as well.
Tesco has implemented the following elements in order to face the competition from international market.
Flexible approach: to make the market unique and to go ahead with new approach
Active participation locally: to participate actively in local cultures, supplying and the regulations and to be delivered by local staff.
Focus: in order to lead the market and be top on the brand, it usually takes continual effort for very long term.
Being multi format: if the company has single format it could not reach the market completely. Broad spectrum is very essential and the need to take an approach is very important.
Development of capability: to develop the skills and abilities in the processes, people and the systems and to be able to share the skill in the market will always increase the chance of success.
Brand: building up of new brands help in maintaining long term healthy relationships with the customers.
Task 3
Strategic Planning
Tesco has achieved success and has gained reputation as one of the largest company in the Europe. This has always been ready for expansions. The company’s strategy has also influenced countries like Poland, Hungary, Slovakia etc. the company has been attempting to be connected with the other chains of the market and it has been explained with its expansion. There has been increase in the growth of the sales by taking up more stores which is also another plan of the strategy. The increase in the growth of the sales has also reached Asia. They have invested in Asian countries like Korea and Thailand. Gradually the company started its research to expand its market in Malaysia and to emerge in Taiwan.
Tesco exploits the potential of the organizations at slow pace in the Asian and western countries. When there was crisis, Tesco entered the market and it maintained the potential to contribute for the transition of the situation economically. There were mainly two reasons for Tesco to be stable and to get benefits even during the transitional period. First reason is that Tesco possessed the chains of the hypermarket which already exist in the Asian countries. Second reason is that it introduced the middle class to gather increased number of opportunities of shopping in the market.
Benefits
Tesco has the best opportunity to create a market in Malaysia because of two things. Firstly there is an opportunity of using technology which is an advantage. However the application of technology in the market has to face some challenges because of which the Tesco might have to contribute for the structure of even better technology which could be more effective and efficient. Second thing is Malaysia will be able to act on the current economical conditions like recession as the wealth of the country can contribute for the promises and additional revenues and the future income. By adopting of platforms, discovery of price and efficient cost a centralized pattern can be organized, by which the competition can be weighed.
Strategic Marketing Planning
This can be defined as an organization in which there is a plan to respond to the opportunities in the market, external environment and to target the audience. During this planning, the decision must comply with the vision, strengths, resources and the mission available to the organization. Strategic planning happens in the view of corporate planning.
Management of corporate organization comprises of deployment and manipulation of the resources. Also included are the investigations being done about the strengths and weaknesses of the organization to relate with the competitors. It is now understood that the organization is involved as a whole. Apart from these the other important factor to be considered in the planning is strategic positioning.
Strategic positioning can be understood as the process where there is development of a position by the organizations who aim at differentiating the company from rest of the companies within the same sector. This explains that there will be an advantage of competition with its rivals. The company should also consider it as a goal of the organization in order to achieve an advantage which helps them to be on the leading position.
Competition is one of the important factors as it influences the failure or success of any business. It is about the capability of the company to retain its position in the business market which helps the organization to stand among others.
It is important to understand the factors which help in the shaping of the perception of the customers regarding certain services and products. PEST analysis can be implemented to understand the external environment. It is the analysis of Political, Economical, Socio-cultural and Technological factors. These effect the business of the customers as they help to shape the view of the customers and the behavior of the market.
The organization also uses the Five Force designed by Porter and SWOT analysis in understanding of the competition in the market. However SWOT analysis is mostly used tool as it is simple and easy to use. Its main objective is to know the factors which help the company to achieve the goals and also the factors which will hinder the improvement internally and also externally. By this analysis the resources and the capabilities of the company can be matched with the other competitors.
The Five Forces Model of Porter explains that the business is influenced by supplier power, threat of inventing substitute products, barriers from other external factors. This also explains that the business must understand the industry in which they exist. This must be done to design the strategic plan for the business to compete with the competitors in the same sector industry.
It is very important for the company to know the surrounding competitors in the market which allows to state the possible risks even before they happen in the company.
The Case of TESCO and ASDA
When we take the two leading supermarkets, Tesco and Asda, both are competing in the industry. They are both retail food companies just like Sainsburys. Walmart is the owner of Asda which has the largest chain of groceries in the USA. They are mostly known for items at low price which is why most of the people go to ASDA for shopping. When it is expanded in UK, they also brought the strategy of cost leadership, which resulted as the similar success they faced in the USA. But TESCO managed to overtake ASDA last year.
The position of the business is based on the strengths which is further categorized into differentiation and cost advantage. These two strengths when they are applied, it results into three strategies called as differentiation, focus and cost leadership out of which the last strategy plays a vital role in the achievement of success of TESCO over ASDA.
The cost leadership strategy can be explained as that the organization provides products at lesser rate for certain quality item. This strategy can be implemented because of two reasons and can be achieved in two different ways. First method is to sell the products for average price by which the company can gain more profits compared to its rivals. Second method is to sell the products for below average price to gain the market share. It has been proven that a company which can be able to sell low cost products can manage to gain profits for long time. This type of strategy often targets a bigger market.
TESCO was also working under the conditions same as ASDA. In theory the strategy of cost leadership has to work for both of them. When this strategy has been implemented by TESCO, they have proven that theoretically it is correct. In one of the newspapers it has been printed that TESCO managed to increase the market share to 29.1% from 26.8%. There arises a doubt if both the companies were working under similar conditions, how come TESCO overtook ASDA. TESCO is UK based company and being operated for long time when compared with ASDA. This explains that the TESCO has a market which is established even before the entry of ASDA. When ASDA took its entry, they managed to take some of the customers because of the strategy of cost leadership. Because of this reason, TESCO also implemented the cost leadership strategy and managed to get its customers back.