Strategies Employed By Supermarkets Tesco And Sainsburys Marketing Essay

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The retail industry is the last step in the process of getting products to customers efficiently, and should not be confused with the wholesale activities which precede it. The difference between the two is that wholesalers are companies that sell their products to businesses, whereas in retail, the goods are sold directly to the consumer. Wholesale establishments play an important role for retail establishments, as they generally provide retailers with the resources they need to run their business in addition to the goods and products they sell. The retail industry has changed greatly in the last two decades. It used to be comprised of a wealth of small, often family-operated shops, department stores, and shopping malls. Today, however, it is increasingly more common to see people doing their shopping in large mass merchandise stores, specialty stores, or online. (globaledge.msn.edu/industries/background)

Any business that sells goods to individual consumers is retail establishment. Retail establishment are huge industry. There are many kinds of retail establishments such as: Departmental stores, Discount stores, Category killers. The industry has recently seen a rise in the use of Consumer Research Management (CRM) & Radio Frequency Identification (RFID). With CRM, companies can use the data collected about their customers to figure out and suggest other products that might interest them. RFID is being increasingly used to make supply chain management more efficient, since with RFID a company can precisely track their inventory, knowing when more of something is needed as well as how much. This is done by placing a small chip on the packaging of the item itself. Another recent trend is lifestyle retailing, in which stores will sell both apparels and household items of the same style. Self-checkout in large stores is also on the rise, reducing the need for labour. (globaledge.msn.edu/industries/background)

The future of the retail industry looks good overall. The stronger companies will grow stronger, and the less competitive ones will be swallowed up. Department stores can expect turbulence ahead as they suffer a decrease in popularity. (globaledge.msn.edu/industries/background)

This research proposal intends the competitive strategies employed by Sainsbury & Tesco superstores in diverse context. The research proposal also shows how this super stores place their buying, marketing, discounting and promotion strategies at different time scale. Every retail establishment adopts such strategies due to competition & economical aspects.

J Sainsbury plc consists of Sainsbury’s – a chain of 509 supermarkets and 276 convenience stores- and Sainsbury’s Bank. Sainsbury’s supermarket is the UK’s longest standing major food retailing chain, having opened its first store in 1869. The Sainsbury’s brand is built upon a heritage of providing customers with healthy, safe and tasty food. Today it differentiates itself by offering a broad range of great quality products at fair prices with particular emphasis on fresh food, a strong ethical approach to business and continuous leadership and innovation. Products are improved and developed to ensure the company leads in terms of ingredients used and integrity of sourcing. A large Sainsbury’s store offers around 30,000 products and services. 165 stores also operate an internet-based home delivery shopping services.

Sainsbury deliver an ever-improving quality shopping experience to their customer with great products at fair prices. The Values of the Sainsbury’s brand- passion for healthy, safe, fresh and tasty food. They focus on delivering great products at fair prices, a history of innovation and leadership and a strong regard for the social, ethical and environmental effects of our operation – have continued to stand the test of time.

The founder of the Tesco was Mr. Jack Cohen, he began to sell surplus groceries from a stall in the east end of London. His first day’s sale was pound 4 & with profit of pound 1 in the year 1919. The first own-brand product sold by Jack was Tesco tea before the company was called Tesco. The name comes from the initials of TE Stockwell, who was a partner in the firm of tea suppliers, and CO from Jack’s surname (1924). The first Tesco store was opened in Burnt Oak, Edgware, North London (1929). In the year 1932 Tesco stores limited became a private limited company. The first modern food warehouse was introduced by Jack Cohen in the year 1934 after he bought a plot of land at Angel Road, Edmonton North London. Jack introduced new ideas for central stock control. Tesco Store (Holdings) Ltd floats on the stock exchange with a share price of 25p in the year 1947. Tesco takes over a chain of 212 stores in the north of England and adds another 144 stores in 1964 and 1965. Tesco Leicester enters the Guinness Book of records as the largest store in Europe (1961). Tesco introduced green shield stamps in 1963. Tesco reach annual sales at pound 1 billion in the year 1979. Within 3 year in 1982 Tesco exceed annual sale of pound 2 billion & introduced first computerised checkouts. Tesco Stores (Holdings) Ltd becomes Tesco PLC in 1983. Through the ‘Health Eating’ initiative, in 1985 Tesco becomes the first major retailer to emphasise the nutritional value of its own-brand, to customers. Apart from retail Tesco becomes Britain’s biggest independent petrol retailer in 1991. Tesco enters Poland, the Czech Republic and Slovakia; Belfast Metro opens the first Tesco store in Northern Ireland in 1996 & launches 24 hour trading. In 1997 Tesco enters the Republic of Ireland, Taiwan & Thailand (1998), South Korea (1999), Malaysia (2002), Japan & Turkey (2003), China (2004) & last but not least Tesco has entered in United States of America.

Tesco has a well-established and consistent strategy for growth, which has allowed strengthening the core UK business and driving expansion into new markets. The rational of the strategy is to broaden the scope of the business to enable it to deliver strong sustainable, long term growth by following the customer in to large expanding markets at home- such as financial services, non-food and telecoms- and new markets abroad, initially in Central Europe and Asia, and now also in the United States. The strategy to diversify the business was laid down in 1997 and has been the foundation of Tesco’s success in recent years. The new businesses which have been created and developed over the last decade as part of his strategy now have scale, they are competitive and profitable- in fact, the international business alone makes about the same profit as the entire Group did a decade ago. (www.tesco.co.uk)

4. Research Question:

This research examines basic questions like: What is supermarket? What is the role of supermarket, in an economy & social aspects? How government policies affect their strategies? What are the marketing strategies adopted by super market? How do they manage their financial & expansion aspects? How do supermarkets manage their merchandise & product range?

The objective of this research is to evaluate the impact of competitive strategies adopted by super markets i.e. Sainsbury & Tesco in order to increase sales, achieve high sale target & compete with rivals of the same market segment. This research gives an over view about super markets as how they conduct their business strategies; consequently it leads to competition through which customers & organisations are benefited.

6. Literature Review:

The competitive strategies of supermarket in this proposal has been demeanour by scholars such as Porter, Michael E (1985), Peter Jones (2007), Daphne Comfort (2007) and David Hillier (2007). The literature is not conclusive, as more will be reassessed as the research step forward.

Comparing the competitive strategies of these supermarkets would require the steps mentioned by Porter, Michael E in terms of his generic version i.e. A firm’s relative position within its industry concludes whether a firm’s profitability is above or below the industry average. The elemental basis of above average profitability in the long run is sustainable competitive advantage. There are two basic types of competitive advantage a firm can possess: low cost or differentiation. The two basic types of competitive advantage combined with the scope of activities for which a firm seeks to achieve them, lead to three generic strategies for achieving above average performance in an industry: cost leadership, differentiation, and focus. The centre strategy has two variants, cost focus and differentiation focus.

A. Cost Leadership

In cost leadership, a firm sets out to become the low cost producer in its industry. The sources of cost advantage are diverse and depend on the structure of the industry. They may include the pursuit of economies of scale, proprietary technology, preferential access to raw materials and other factors. A low cost producer must find and exploit all sources of cost advantage. If a firm can achieve and sustain overall cost leadership, then it will be an above average performer in its industry, provided it can command prices at or near the industry average. This strategies review by Porter, so the supermarket organization has to make centre point to this factor.

B. Differentiation

In a differentiation strategy a firm seeks to be unique in its industry along some dimensions that are widely valued by buyers. It selects one or more element that many buyers in an industry recognize as important, and uniquely positions itself to meet those needs. It is rewarded for its uniqueness with a premium price. According to the Porter differentiation tactic should be consider by supermarkets, which make there products unique in the market.

The generic strategy of focus rests on the selection of a narrow competitive scope within an industry. The focuser selects a segment or group of segments in the industry and tailors its strategy to serving them to the exclusion of others.

(a) In cost focus a firm seeks a cost advantage in its target segment, while in (b) differentiation focus a firm seeks differentiation in its target segment. Both variants of the focus strategy rest on differences between a focuser’s target segment and other segments in the industry. The target segments must either have buyers with unusual needs or else the production and delivery system that best serves the target segment must differ from that of other industry segments. Cost focus exploits differences in cost behaviour in some segments, while differentiation focus exploits the special needs of buyers in certain segments.

According to authors Peter Jones (2007), Daphne Comfort (2007) and David Hillier (2007) the retailing is large, diverse and dynamic sector in UK and food retail is half part of total retail sector. The survey revealed that Tesco food retailers used Corporate Social Responsibility (CSR) themes to communicate with their customers with in store. The one common general theme stressed, although in altering measure and in different ways, by all the chosen retailers was value for money. In some companies’ stores this was one element within the use of CSR information while in others it was virtually the sole visible element. Price has always been one of the traditional elements within the retail marketing mix but Tesco retailers all stress their commitment to customers and to offering them values for money in the CSR information they post on the internet. Thus, Tesco’s 2004 CSR Review stressed the company’s commitment to offering “unbeatable value” cutting prices and while this is widely reflected in the Tesco store with a variety of banners, posters and shelf edge stickers advertising price reductions and “buy one get one free” offers other CSR issues were also employed in marketing communications within the store.

The authors further reveal that CSR themes were generally much more limited and much less prominent. Thus, while J. Sainsbury’s promoted its “Active Kids” programme, which is designed to promote sport and leisure activities within local schools, marking organic and Fair-trade products and its healthy food range with shelf edge labels, CSR themes were much less prominent. According to the CSR themes the authors Peter Jones, Daphne Comfort and David Hillier have done the survey for food retail of Tesco and Sainsbury. As per his survey Tesco has market share of 24.7% where as Sainsbury have share 14.2%

The personality of this research proposes to use exploratory and qualitative methods of data analysis as there is enough data available in the form books, publish journals and also from electronic media such as internet to have deep knowledge of it. According to Culkin, M and Large, D (2000, pg. 34) Qualitative research not only involves identifying the range of attitudes and behaviour, but also seeks to explore respondent’s view of the world. Further it is open-ended, dynamic and flexible, aimed at giving researcher maximum depth understanding.

However Silverman, D (1993, pg.66) argues that Questionnaires and Interviews are considered two suitable qualitative methods as it enables to obtain an insight into people’s actual experiences and views at the same time. Moreover it provides an indirect information about the subject stated by Cresswell, M (1994, pg. 84). Thus the information was obtained using qualitative methods in the first stage, for this research.

The research will use personal interview technique as a tool to collect data and questionnaires also be use to get the feedback of customers and the industry so as to study the role of competitive strategies of supermarkets (Tesco and Sainsbury).

The research proposes to use exploratory and qualitative methods of data analysis to make it more organization and pull together, data gathered from books and journals under the secondary sources will be analysis using SWOT and test analysis. A SWOT simply stands for: Strengths, Weaknesses, Opportunities, and Threats. Each area forms a box on a grid and you fill in each section to help formulate a marketing strategy (Darrell Zahorsky).