This report outlines an international marketing strategy for its market entry into Sweden with a

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

TV channel and a "retail based education institution.

SWOT and PESTLE Analysis of Tesco Plc

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

threats were noted. These were now further refined

Strengths. Weaknesses

1. Brand awareness 1. Lack of local knowledge

 2.Strong financial situation 2. 'Foreign Brand

Opportunities SO WO

1. Brand awareness growing

globally

2. Innovation and alliances

Threats ST WT

1.Existing competition

2.High Competition for

customers and resources

In considering using strengths to make the most of opportunities (SO)

• Tesco has a strong home brand which is becoming known throughout Europe due to

existing expansion programme

• Tesco could build on the strength of it's brand to join with a leading Swedish

manufacturer of children's clothing and jointly there could be promotional opportunities

for both Tesco and the Swedish company concerned.

• Tesco is in very good financial health, so could very well afford to pay for expansion

plans incorporating marketing programmes.

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

recommend location, and by ensuring their involvement in local marketing initiatives.

• 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

situation for the companies concerned.

In reviewing the key threats and applying the strengths

• 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.

External Environment - PESTLE Analysis

A PESTLE analysis of the industry was then undertaken to examine the local, national and global

influences of political, economic, social and technological factors to understand opportunities

and threats well.

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

aggressive pricing strategy.

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

flexibility in the running of the business. As Sweden is at the forefront of technological

advancement with national companies like Ericsson, Tesco would enjoy the comprehensive

logistic and distribution channels already in place.

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

in terms of health and safety.

Market Entry Strategy and Target Customers

We can use Ansoff's product/market matrix to identify directions for Tesco's strategic

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

Markets Existing Protect/build Product development

Consolidation With existing capabilities

Market penetration With new capabilities

Beyond current expectations

New Market development Diversification

New segments With existing capabilities

New territories With new capabilities

New users Beyond current expectations

With new capabilities

Beyond current expectations

Source: Johnson, G., Scholes, K., Whittington, R., (2005)

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

credible 'mainstream' supplier of quality clothing.

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

and emphasising the environmentally friendly approach.

However, before Tesco decides on its target customers, a market analysis will need to be

undertaken in terms of

• The size of the baby and infant clothing market in Sweden

• 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

appropriate to address their needs.

Marketing Objective

Profitability, in terms of operating margin (a 10% target)

Swedish Market share (a 20% target)

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

the audience, measurable, attainable, relevant , time limited,

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

same price as a boutique.