This report has completed a situation analysis on Video on Demand provider Netflix. Through doing so, digital marketing objectives have been constructed. To perform the situation analysis, four primary areas have been explored; the overview of business, the industry, competitors and the target market. Findings suggest that Netflix is a highly successful company based upon both financial success and brand recognition.
With few competitors, Netflix has established a business model which allows them to offer a high quality product at a competitive price. With various revenue streams, the business is profitable and has displayed abilities to adapt to technological change. However, a lingering threat of piracy persists with the potential to adversely affect profitability. This is particularly prevalent as Netflix’s target market has been identified to primarily consist of students, of whom have lower levels of disposable income.
Despite this, Netflix has grown in popularity across both males and females, with users across age ranges. The popularity can be attributed to the variety of content, but also the user’s ability to access it from almost any internet enabled device. Research further highlighted that almost all those living in the UK have a form of internet access. This emphasised the potential Netflix has to grow their brand and product.
Based upon the analysis, the following five objectives have been constructed:
Increase revenue within the UK by 15%, by March 2017 (12 Months)
To Increase Facebook engagement by 20%, by September 2016 (6 Months)
Increase use of Netflix on mobile platforms (smart phones and tablets) by 35% amongst existing users, by September 2016 (6 Months)
Increase traffic to the website by 25%, by March 2017, through paid for and organic means (12 Months)
Increase market share within the UK by 10%, by March 2017 (12 Months)
Marketing Assignment Contents
Overview of Business
Brand, Domain Name and URL
Product and Services
Unique Value Proposition (UVP)
Opportunities & Threats
Key Success Factors
Income & Social Grade
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Strategic management is a technique used by managers to give a firm a long-term direction and involves a systematic analysis of decisions, actions that create a competitive advantage. It involves the analysis of strategic goals, vision, and mission and the internal and external environmental factors in a firm. SWOT is an acronym standing for strengths, weaknesses, opportunities, and threats. SWOT analysis involves the assessment of a firm’s internal strengths, weaknesses and the external opportunities and threats (Henry, 2008). This analysis helps to identify the strengths and capabilities to minimize weaknesses, along with identifying opportunities to overcome threats. In reference to Toyota Company, leading automobile firm, a SWOT analysis on the company’s Strengths, weaknesses, threats and opportunities are as follows.
The Toyota Corporation is a leading automobile manufacturing in the world among other companies such as Ford. It has a strong production process that is effective and efficient in saving costs, this creates a competitive advantage. Cost savings helps to set affordable prices of their products to end users, over the competitors. The firm utilizes resources and eliminates unwanted costs in the production process. This strategy creates a competitive edge for Toyota, by reducing costs and increasing the production capabilities and efficiency
Toyota has strong horizontal integration merge verses the competitors who have vertical integration relationships. Strong relationship with supplier creates a competitive advantage, and it informs of updates or any developing changes (Henry, 2008) Horizontal merge proves to be cost effective, reduce risks and increase benefits. Merging helps to pool together resources of the combining companies, creating a favorable business environment. Synergy is one of the benefits of combining companies, and sharing of resources e.g. distribution channels. Toyota opts for best suppliers in Japan.
Toyota has a strong culture advantage, employees’ devotion in their jobs, performance and desire to improvement. It treats it employees with legitimate sense of respect and loyalty. The Japanese value work differently from competitors for instance the Americans this is reflected in their quality products they offer to the market. Toyota in invests more its employees empowers them to be creative and innovative (Hino, 2012). A strong sense of respect of hierarchal authority enables fast decision-making and implementing Strategic plan.
A weakness is something or a condition that hinders a firm from achieving it objectives. It is a competitive deficiency (Henry, 2008) Toyota offers financial services such as insurance, credit cards. These services report low profits to the firm than other segments. Such financial services can render a competitive edge as well as a deficiency in for firms the financial strength.
Toyota use the just in time system which gives Toyota a competitive advantage, but too much dependency of this system can lead to malfunction if the supplier provision does not meet the requirements of the firm. Failure to meet these requirements affects the products quality in addition, to the manufacturing system.
Toyota capitalizes on the strengths to meet its threat and take advantage of the external opportunities. Toyota has a strong cultural advantage that enhances the organization structure, focuses on teamwork rather than individual efforts. It inspires creativity and innovativeness to employees to improve the quality of its products. Loyalty when dealing with employees and a unfailing sense of respect of the authority. Top managers make decisions, the employees respect their high figures, and this enables quick decision-making. It internal leadership and management helps Toyota to dominate the automobile industry. Toyota depends too much on its suppliers, this leads to a strong reliable relationship with it suppliers (Hino, (2012). Although this could be a weakness but it gives Toyota a competitive advantage over the competitors such as General Motors.
Toyota is a dominating automobile firm, its produces affordable cars and other automobile related products. A SWOT analysis identifies Toyotas strengths, weaknesses, threats and opportunities. Internal analysis involves the assessment of the firm’s internal environment factors such as the organization structure, leadership and management among others. Toyota has a stable structure and principled leadership design (Hino, 2012). The quality of the products and employees loyalty dictates the strengths of the firm. Toyota is loyal to employees and produces quality products.
However, Toyota faces threats such as competition from existing and emerging firm in the automobile industry. It takes advantage of the internal strengths to take advantage of opportunities and minimize threats. Toyota Company has a strong relationship with its suppliers. This helps to fight the upcoming firms and the existing firms in the industry. A complex distribution channel discourages competitor’s efforts. Toyota uses it strengths to take advantage of opportunities, it has high producing capacity at minimum costs. They produce quality and affordable cars in the market (Hino, 2012). They differentiate their products to meet the consumers emerging desires. Toyota has incentives and discount programs that help improve the profitability of its financial services segment.
In Strategic, management SWOT analysis is a continuous process since the environment is changing. Toyota needs inspires its employees to continuously think of strategic changes that enhance improvement in quality of products in the future. It requires strong strategic plans difficult to duplicate, corrective actions to maintainable a competitive position of a leading automobile in the world.
Henry, A. (2008). Understanding strategic management. Oxford: Oxford University Press.
Hino, S. (2012). Inside the mind of Toyota: Management principles for enduring growth. New York, N.Y: Productivity Press.
Pearce, J. A., & Robinson, R. B. (2004). Strategic management: Formulation, implementation, and control. Boston, Mass: McGraw-Hill.
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The term ‘shared value’ was first introduced by Michael Porter and Mark Kramer in an article for the Harvard Business Review (HBR). The aforesaid term essentially means creating value for the business in a way that also creates value for the society by addressing its requirement and challenges to the business entities (Kashani and Miller, 2000). Many business entities including Nespresso have adopted the approach of shared value. Various objectives of adopting the approach of shared value are described below:
This approach is helpful in preventing the potential business risk and ensures that the business is not contributing to unacceptable level of harm to the society and environment. Thus, adopting the approach of shared value is helpful for companies to prevent risk to the external environment (Sirianni, Bitner and Mandel, 2013).
Nespresso Corporate Reputation Management
Developing an image of responsible corporate citizen has become prime objective of the contemporary organization to achieve long term sustainability. A positive corporate image appeals to regulators, investors, customers that is helpful in maintaining dignity of the entity in the market. Thus, shared value approach enables company to develop a positive image in the eyes of its stakeholders.
Another important objective of creating shared value by the businesses is to reduce the consumption of scare resources such as energy, water and other materials. This will not only help company to become responsible citizen but it will also be helpful in reducing cost to the company (Klepper, 1996).
Nespresso has also adopted shared value approach to achieve above described objectives. It is the brand name of Nestle Nespresso S.A. which is an operating unit of Nestle group. At the heart of Nespresso’s success as a brand lay its commitment to exceptional cup quality. Chief Executive Officer (CEO) of Nespresso has already committed the organization with the concept of shared value as an operating principle. Share value approach recognizes societal needs in addition to the conventional economic needs (Nespresso and Alliance, 2003). Furthermore, it also recognizes social harms and weaknesses that frequently create additional internal cost to the company in terms of energy waste, costly accidents and the need for remedial training. It is evident that coffee industry is facing significant social and environmental challenges therefore; companies like Nestle have adopted the shared value approach. The principle of shared value was developed by Harvard professors Michael Porter and Mark Kramer in year 2006. According to this principle, companies do not only have responsibility towards shareholders but for communities also in which they operated from farmers to customers and ultimate consumers.
Nespresso concept was developed on the basis of an espresso extraction system that enables discerning espresso coffee consumers for preparing excellent quality espresso coffee at home. The Nespresso business model is based on a threefold commitment to the unique extraction system that is an innovative and efficient direct to consumer club membership model (Markides and Charitou, 2004). Thus, Nespresso brand has created iconic luxury brand image along with exceptional quality and use of advanced technology. The shared value approach is strategically relevant to the brand because customers were found motivated with the different aspects of brand and product that also includes a group of 16% consumers who define the brand as ‘eco committed’. Customers of this brand believe in liking good things but in a responsible way. Thus, shared value approach has helped company to reel in greater number of customers because they are significantly interested in sustainability program of Nespresso.
Figure 1: Perspectives of value (Source: Porter and Kramer, 2011)
There are various perspectives of shared value which can be discussed in context to Nespresso. The company has its own key drivers of Free Cash Flow and Weighted Average Cost of Capital that can be placed by strategies intended to create shared value. Nespresso offers eco-friendly coffee products in form of outputs which creates societal value. The assessment of the case of Nespresso reveals that the unique features of the Nespresso business model has led exponential growth rate i.e. 30% per annum in recent few couple of years (Lovell, 2014). As a result of this, Nespresso has become Nestlé’s fastest growing businesses as the company has managed to grow at a faster pace. One of the major strategic challenges which are faced by Nespresso is to manage the growth in all areas of its business including human resource, supply chain management and marketing.
Michael Porter and Mark Kramer have addressed the reasons for carrying out sustainability programs by the company. The shared value approach provides that companies are required to identify the connection between activities of a company and activities and needs of the society. This will help company to attract new customers and secure higher level of brand loyalty as customers are inclined towards eco-friendly products and services. Thus, the creating shared value has been adopted by Nestle that uses the framework for creating value for different stakeholder groups including society (Porter and Kramer, 2011). Hence, Nespresso has identified water, rural development and nutrition as main strategic shared values by using the model of Porter and Kramer for shared value. Thus, this coffee brand has identified its own social opportunities with wider society. Nespresso has launched an integrated shared value framework, “Ecolaboration” in order to group together its sustainability efforts in varied areas such as carbon footprint reduction, sustainable coffee farming and spent capsule recycling (Alvarez, Pilbeam and Wilding, 2010). Thus, this business unit of Nestle has used this framework to successfully implement its business strategies and achieve its mission and vision. From the above discussion, it can be said that Porter’s and Kramer’s shared value model has significant strategic relevance to the case of Nespresso.
Critically Evaluating Nespresso’s Positioning
Nespresso’s marketing campaigns seek to convey a brand story that positions Nespresso as ultra-premium coffee brand. The positioning strategy of this coffee brand of Nestle has been discussed in relation to its Product Life Cycle (PLC). In marketing management, Product Life Cycle is an important concept which is used in the development of appropriate strategy. It is essential to have clear understanding of PLC and its stages for discussing positioning strategy of a company in relation to its PLC for achieving sustainability (Matzler, Bailom and Kohler, 2013). Every product goes through four stages in its life including introduction, growth, maturity and decline. The sequence of these stages is known as Product Life Cycle which is used for developing strategy in order to achieve mission and vision by the company. The four stages of Product Life Cycle are explained in brief under the following heads:
This is the most expensive stage in the life cycle of a product because it is launched with heady expenses on advertisement. In addition to this, company is required to spend higher amount for customer testing and research & development activities. Nespresso is a globally managed business which was established in 1986. The product consisted of high quality coffee packed in aluminium capsule in specially designed machines for exclusive use (Staff, 2009). Thus, initial stage of this product demanded higher expenses on research.
It is the second stage which is generally known by a strong growth in sales and profitability of the company. This is because company gets benefit from economies of scale in production. It is helpful for the company to invest more money in various activities related to marketing and product promotion (Anderson and Zeithaml, 1984). Nespresso is one of the fastest growing businesses of Nestle and its many products have passed from this stage.
It is a stage in which product is well established in the market and the aim of the owner of the company becomes to maintain the same market share as in growth stage. Thus, it becomes a competitive time for the company as wise decisions regarding investment in product are required to be taken (Achabou, 2014). In addition to this, significant changes in the products are also made in order to maintain the market share.
This is the last stage of a product’s life cycle as market starts shrinking in this stage. There can be various reasons of shrinkage of market such as entrance of new brand, consumer switching or saturation. In this stage, rather than expending on marketing, companies are recommended to adopt less expensive production methods to make some profit (Matzler, Bailom and Kohler, 2013).
The above discussion on stages of product life cycle provides insightful information regarding strategic relevance of assessment of PLC of a company. Nespresso can also analyze its product life cycle in order to make strategic decisions. The positioning strategy can also be discussed in relation to PLC for sustainability of the brand. This coffee brand has positioned itself as a premium brand which creates high quality coffee products. Furthermore, it has adopted differentiating positioning strategy with an image of exclusivity due to high quality service and extensive customer service. Thus, the company has positioned itself as a high quality luxury brand and created a sense of belongingness to an elite group of customers which justifies the price (Day and Payne, 2014). This positioning strategy may not be appropriate in the introduction stage of its PLC because it requires huge investment on advertising and marketing activities.
The products and services offered by Nespresso are costly as the company targets elite group and additional expenses on marketing will increase overall cost to the company. For any business entity, profitability is the prime concern for achieving sustainability but in introduction stage, this positioning strategy may not be appropriate. Nonetheless, complete cost of marketing is charged by ultimate consumer therefore, it may not be appropriate to associate cost with the sustainability of the company. In the similar fashion, the positioning strategy of the company can also be discussed in context to growth stage (Sheinin, 1998).
Most of the Nespresso’s products are in the growth stage where company earns profit with considerable market share growth. As described above, growth stage in PLC assists company to invest more money in advertisement as company witness strong growth. Positioning of Nespresso as luxury brand can offer even stronger growth and prosperity to the company. In this stage, this positioning strategy can said to be appropriate from the perspective of sustainability of the brand in long run. In this stage of Product Life Cycle, benefits of economies of scale can be achieved by the company therefore; more investment can be made in marketing and advertising activities (Staff, 2009). This would help company to establish itself as a strong and premium brand by investing in campaigns based on the approach of shared value and Corporate Social Responsibility (CSR).
In the similar fashion, positioning strategy has also been critically examined for other stages including maturity and decline. In these two stages, the discussed positioning strategy of the company may not be appropriate because in this stage, customers start switching over other brands and find alternatives. Thus, investment in marketing does not remain workable and therefore, companies need to cut the cost and find the cheaper ways to make some profit (Achabou, 2014). In such a case, Nespresso may not sustain if it continuous to offer those products with premium brand appeal. Nonetheless, new products can be introduced or modifications can be made to retain customers. Thus, from the above discussion, it can be said that positioning strategy is effective and correct from the perspective of sustainability.
Achabou, M. A., 2014. Brand influence on consumer preference for environmental labels. ICT.
Alvarez, G., Pilbeam, C. and Wilding, R., 2010. Nestlé Nespresso AAA sustainable quality program: an investigation into the governance dynamics in a multi-stakeholder supply chain network. Supply Chain Management: An International Journal. 15(2). pp. 165-182.
Anderson, C. R. and Zeithaml, C. P., 1984. Stage of the product life cycle, business strategy, and business performance. Academy of Management journal. 27(1). pp. 5-24.
Day, C. and Payne, D., 2014. God and Devil Terms in Corporate Discourse: Shared Value and the Transformation of CSR. In Academy of Management Proceedings. pp. 53-56.
Kashani, K. and Miller, J., 2000. Innovation and Renovation: The Nespresso Story. IMD, Lausanne, IMD case study.
Klepper, S., 1996. Entry, exit, growth, and innovation over the product life cycle. The American economic review. pp. 562-583.
Markides, C. and Charitou, C. D., 2004. Competing with dual business models: A contingency approach. The academy of Management executive. 18(3). pp. 22-36.
Matzler, K., Bailom, F. and Kohler, T., 2013. Business model innovation: coffee triumphs for Nespresso. Journal of Business Strategy. 34(2). pp. 30-37.
Lovell, N., 2014. Case studies: Nespresso and the coffee brand.
Nespresso, N. and Alliance, R., 2003. Memorandum of Understanding between Nestlé Nespresso and SAN.
Porter, M. E. and Kramer, M. R., 2011. Creating shared value. Harvard business review. 89(1/2). pp. 62-77.
Sheinin, D. A., 1998. Positioning brand extensions: implications for beliefs and attitudes. Journal of Product & Brand Management. 7(2). pp. 137-149.
Sirianni, N. J., Bitner, M. J. and Mandel, N., 2013. Branded service encounters: Strategically aligning employee behavior with the brand positioning. Journal of Marketing. 77(6). pp. 108-123.
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Market Research: Segmentation, Positioning, Targeting and The Marketing Mix
Advertising: TV, Print, Website Banner Adverts and Social Media
Sales Promotions: Special Offers, Discounts and Competitions
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Sales Retention: Attracting, Capturing, Nurturing, Converting, Delivering and Maintaining Customers
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Tesco is a multinational grocery and general merchandize retailer which is based and has its origin in the United Kingdom. The organization is the third largest retailer in the world with a global presence in more than 12 countries. The United Kingdom is the main market for the organization which has been successful because of its brand reputation and image. The organization offers products and services which are according to the customers’ preferences. Tesco has been able to create a dynamic business strategy which is based upon meeting the needs of customer segments. It conducts extensive market analysis as a means of ensuring the highest levels of efficiency and effectiveness (Blythe, 2006). It has a product diversification strategy as it has transformed itself from a food retailer to offer non-food products and services like beauty products, consumer electronics, DVDs, financial and insurance services. Tesco has also been successful because it employs technology for its robust business activities. Tesco.com is one of the highest successful online shopping portals in the United Kingdom. Technology is being used to integrate and streamline business operations and achieve operational excellence. The success of Tesco has been its ability to make accurate forecasts. Tesco needs to pursue an aggressive internationalization strategy by targeting new markets. China is a potential market which can help to achieve its business goals. This proposal will seek to elucidate the importance of penetrating the Chinese market.
Globalization has been a powerful social and economic force which has a profound influence on the business environment of the twenty first century. The creation of a single market has led to the development of numerous opportunities for organizations as they strive to focus on emerging economies (Beamish & Ashford, 2008: p. 76).Moreover, the nature of globalization is such that there is an emphasis on remaining profitable by taking advantage of the opportunities that specific markets offer. Globalization creates intense competition which can lead companies to reduce their costs and improve their products. Organizations under competition have to perform at optimum levels by offering superior products and services. Technological adaptation is another byproduct of this phenomenon as it can help to streamline and automate the key processes. This has further increased competition among international corporations and has allowed them to expand their businesses across the globe. In the supermarket industry, international companies such as Tesco and Walmart are some of the prominent names that have successfully expanded their businesses internationally. These expansions allow organizations to increase their presence in the market, sustain competitive advantage, generate revenues and win loyalties of customers(Blythe, 2006, Beamish & Ashford, 2008, Darwar& Chattopadhay, 2012). Their marketing strategy is based on meeting consumer demands and ensuring that they adapt within the market they operate.
The production and manufacturing capabilities of organizations are enhanced when they take advantage of low labor rates in developing countries. The results are that production costs are reduced while selling products at competitive rates which in turn can increase the market share of the organizations (Darwar& Chattopadhay, 2012, Doyle & Stern, 2006). Organizations seeking to penetrate international markets strive to increase the value of their products and services while striving to reduce the cost base (Cravens & Piercy, 2006: p. 34).The external and internal variables can play a key role in the performance of organizations as they move into international markets. Organizations must be able to have access to technology, labor, capital, logistics, and infrastructure in order to succeed. The goal of conducting business in international markets is essential since any organization that fails to penetrate markets will witness a reduction in its competitive advantages.
The huge size of the international markets means that potential customers are living abroad. Moreover, the failure to penetrate international markets means that organizations will be unable to enhance their customer loyalty and brand recognition. Serving multiple markets in a seamless fashion is important part of success. Empirical studies have sought to identify the critical success factors which enable organizations to penetrate international markets (Haji-Basri, 2012, Levy, 2012). Firstly, organizations are able to select the best market entry mode which is according to their expertise and experience. The market entry mode should be based upon conducting research of the market in an efficient and effective manner. This is important because competitors’ analysis and customers’ behaviors can help the organization in understanding the needs of the market environment.
Secondly, organizations must be willing to leverage their core competencies in such a manner that they are able to reduce costs and improve profits. A global business strategy should be customized in accordance with the conditions of the market. Adaptation to the local market means that the organization is able to create a customized marketing strategy (Doole & Lowe, 2005: p. 76).Thirdly, the organization must be able to implement innovation at multiple levels. This approach is beneficial since it will help the organization to attain strategic competitive success. Finally, it is important for organizations to develop the robust frameworks that can enable them to create flexible, agile, and scalable business structures (Doyle & Stern, 2006: p. 93).The use of multiple strategies is important for success as it will lead to long term innovation that will benefit the entire organization.
Research is defined as the process of investigating new phenomenon and validating existing theories and frameworks. It seeks to understand the theoretical assumptions behind specific studies by challenging them or modifying them. Selecting the appropriate research methodology is important part of the process. Primary research for this report will be carried out through a questionnaire which will be emailed to the business unit managers of Tesco. The benefits of primary research are that it enables the researcher to directly participate in the process. Moreover, the results can be quickly obtained through the questionnaire method. This method can save significant time. Secondary research for this report will be carried out through the systematic analysis of existing studies related to marketing and global business. Specifically, the studies will be selected based upon their relevance, reliability, and authenticity.
Secondary research is beneficial in many ways. Firstly, it helps to reduce time as existing studies can be employed for success. Secondly, it uses the vast literature in order to create a theoretical framework which can be beneficial in answering the research aims and questions of the report. Thirdly, secondary research helps the researcher to have access to resources in an efficient manner which will be used to solve the research problems (Levy, 2012).
Organizational Strategy and Market Characteristics
Empirical studies have found evidence that grocery sales in China are estimated to be around £600 billion in the year 2013 (Zhao, 2014: p. 184). There are 221 cities in the country which will witness an increase in population by the year 2025 (Zhao, 2014: p. 184). Moreover, urban dwellers are the largest customer segments which offer significant market potential for organizations like Tesco. Shopping malls are now popular places for supermarkets. The impressive standards of living among the middle class have enabled Chinese customers to focus on higher quality of life. This creates superior business opportunities for organizations like Tesco that are working in the retail market. Household spending on healthcare, transportation, and telecom services have doubled as compared with the last decade. The indicators prove that the customer segments have disposable incomes that allow discretionary spending. Tesco’s strategy in China can be based upon its key competitive advantages (Tesco PLC, 2014).
Branding and reputation are the key attributes of the organization which helps it to achieve core strategic advantage. Careful branded packaging and promotion can generate excellence value for Chinese customers (Zhao, 2014: p. 184).Supply chain management and logistics in China should be able to respond to the dynamic and complex environment by enabling Tesco’s management to make accurate forecasts. Technology can be used to maintain inventory and assess business transactions. This will help the management to make forecasts about the entire environment through the use of innovation and creativity (Levy, 2012). ICT technologies can help the organization to play a critical role in business strategy formulation. Creating value for customers and offering products that are difficult to emulate can be the core strategies in China provided Tesco is able to understand the dynamics of the market.
Tesco has transformed itself into an international retailer that sells food, clothing, household products, banking services, and others. The traditional market of the company has been the United Kingdom but in the past ten years, it has sought to expand into different international markets. International expansion is considered to be vital for the growth of the company as it helps to diversify income streams and enables it to take the advantages of globalization by using an efficient and effective marketing strategy (Zhao, 2014: p. 184).The competitive strength of Tesco is that it is the third largest international retailer in the world. The growth rate annually has been projected to be around 12% since the past decade. Strong partnerships with suppliers and other partners help the company to offer products and services in different markets. An effective supply chain management system helps the organization to manage its operations in a lean and flexible manner.
The international expansion strategy of the company remains weak as compared with that of its competitors. Product diversification is a weakness because the profitability can be impacted because of bad debt from credit cards. Tesco has inexperience in certain growing markets like smart phones and tablet PCs. New web technologies and IT require investments which can streamline and automate the core processes (Imrie & Dolton, 2014: p. 84).
There are different opportunities for Tesco which can move into various product categories like digital entertainment, smart phones, and tablet PCs. Foreign markets like China, Malaysia, South Korea, and others offer significant business potential for the entire organization. Online shopping can be enhanced as a means of ensuring robust success within a short period of time. Increasing value proposition for existing and new customer segments can be a beneficial strategy by the organization as it can lead to the highest levels of efficiency and effectiveness (Tesco PLC, 2014).
Tesco can face significant threats from local and international competitors. Furthermore, the economic recession has reduced the spending power of customers which means that there can be a reduced profitability for non-food products and services. International expansion is a good option for Tesco but each country has different levels of regulation and laws which must be complied by international organizations in order to achieve critical success within a short period of time (Imrie & Dolton, 2014: p. 84).
The political factors inside any country can be related to taxes, legislation, and country stability. China is a rapidly emerging economy which has pursued investor friendly business policies. There is an increased demand for retailers which can help to create jobs for the local population and improve the local economy. The Chinese government is authoritarian in nature but it has been pragmatic enough to pursue policies which can help it to remain integrated with the overall global markets (Dowling, 2006: p. 91). Political stability in China is relatively high which offers a congenial environment for foreign investment. This is important because it helps to ensure the highest levels of efficiency and effectiveness.
The economic factors are concerned with the costs, profits, and prices that a company must take into consideration while operating in a foreign market. The goal of the company should be to conduct an internal and external analysis which can be used to understand the dynamics of the market. China’s rising middle class enjoys highly disposable incomes which makes them one of the largest customer segments in the world (Ferrell & Hartline, 2007: p. 98).Furthermore, the middle class has awareness and perception regarding foreign brands which is considered to be part of their affluent lifestyle.
Social factors exert a profound influence on the purchasing behaviors of customers. Tesco needs to take into account the social and demographic changes which have taken place in China in order to formulate a robust and dynamic strategy for change (Hooley & Piercy, 2008: p. 123). The goal should be to create efficient and effective approaches which can be used to penetrate the market. Food and non-food items can be introduced in the Chinese market in accordance with the dynamics of the market. Customers in China have high levels of awareness and perception regarding foreign products.
Operating in any market means that companies should be able to focus on operational excellence and competitive advantage. Technology helps to achieve this critical goal with the focus on achieving long term market share. The goals of companies like Tesco should be to make investments in technology which result in efficient business processes and help to provide real time data to the management which can be used in the decision making processes. Outlets should employ technology to reduce waiting time for customers. RFID can be employed for inventory management. Communication systems can be used to link main office with various outlets for making decisions and obtaining real time information (Hooley & Piercy, 2008: p. 123).The use of an integrated strategy can help to accomplish the critical goals within a short period of time.
Tesco is the third largest retailer in the world which has been achieved because of its core competencies. The core competencies of the organization have included the ability to successfully develop a core business model that is flexible and adaptable in accordance with the competitive nature of global markets. Strategy formulation in Tesco is based upon the use of market research which helps to achieve efficiency and effectiveness. A complete internal and external analysis is conducted by the organization in order to achieve its critical targets within a short period of time. Tesco’s strategic growth model seeks to focus on cost and product differentiation as mixed strategies that enable future growth and development. China is an attractive market for internationalization because it will help Tesco to take advantage of the business opportunities. China’s middle class segments have increased with highly disposable incomes. Moreover, Chinese customers are spending on clothes, luxury products, healthcare, and others as part of the drive to improve their quality of life. This helps to ensure the success of the retail market. Tesco can take advantage of the Chinese market by using a systematic and calculated approach. It needs to use its core competencies which can be adapted in accordance with the local market conditions. Moreover, it needs to focus on using its core competencies as a means of ensuring the highest levels of success within a short period of time. Technology can be used to maintain inventory and assess business transactions. This will help the management to make forecasts about the entire environment through the use of innovation and creativity. ICT technologies can help the organization to play a critical role in business strategy formulation. Creating value for customers and offering products that are difficult to emulate can be the core strategies in China provided Tesco is able to understand the dynamics of the market.
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