Question

Are Tesco right to dig their heels in and say no to the Unilever price increase?

Answer

Unilever have recently requested that many of the retailers they supply accept a price increase (believed to be 10%) to compensate for the lower value of the Pound against the Euro and Dollar (Vandevelde, Daneshkhu and McClean, 2016).

Unilever’s rationale is that the goods are often imported and so are originally produced and sold based on Euro or Dollar pricing, effectively allowing the UK retailers to buy more for less money.

Tesco have refused to comply and are now no longer having their inventories resupplied by Unilever. This has drawn great public attention, and is a risk to Tesco as it can no longer sell brands such as Pot Noodle, Ben and Jerry’s and Marmite.

Notably, many of the products that would be affected by the price rise are actually produced in the UK, such as Marmite, and thus this negates the effect of the Pounds decreased value.

Increased prices for retailers would most likely lead to higher prices for consumers as the retailers opt to pass on the cost rather than shrink margins. In this way Tesco is seen as protecting its customers.

The action taken by Tesco may well be mirrored by other retailers seeking to gain a strong negotiating position. In this case Unilever may well be forced to relent, as alternative brands could take advantage to grow market share.

As such the action taken by Tesco may well prove to be a good negotiating strategy.

At the time of writing (before market closing times) both Unilever and Tesco share prices have fallen, but at 3.2% versus 2.2%, respectively, Unilever are faring worse (Google, 2016).

Whether the Pounds fall will be short term or sustained will affect the impact and severity of this issue. At present the pound is widely considered to be undervalued, as the UK’s GDP has not fallen and it still offers good investment opportunities (Adinolfi, 2016).

Accurate as at 13/10/16.

References

Adinolfi, J. 2016, The pound is already undervalued — so how much weaker can it get? (online), Market Watch, available: [http://www.marketwatch.com/story/the-pound-is-already-undervalued-so-how-much-weaker-can-it-get-2016-10-03], accessed: 13/10/16

Google, 2016, Google Finance, available: [https://www.google.co.uk/finance?q=AMS:UNA]; [https://www.google.co.uk/finance?q=LON:TSCO], accessed: 13/10/16

Vandevelde, M. Daneshkhu, S. and McClean, P. 2016, Tesco pulls products over plunging pound (online), Financial Times, available: [https://www.ft.com/content/58560c1e-909a-11e6-8df8-d3778b55a923], accessed: 13/10/16

Question

What is Business Intelligence (BI)? How can business intelligence provide a competitive advantage?

Answer

Business Intelligence is the term given to the gathering and analysis of information by a business.
This is usually information external to a business, such as customers, markets or competitors – but it can also apply to internal information.

With advances in computer technology allowing faster processing and data storage for lower costs business intelligence has been a growing function within modern organisations. Data can be gathered in huge volumes using a variety of technological methods, such as point-of-sale records, online account/behaviour records or data mining from social media.

The huge volume of data available through these methods has led to the term ‘big data’ being used. Proponents claim that big data can provide a revolution in how businesses interact with customers and markets. Big data, used well, can lead to insights that allow organisations to predict demand more accurately and also to offer more personalised services and promotions to customers.

A prime example of the use of BI and big data is one of the earliest users of these approaches – Tesco. The Tesco Clubcard allowed the retailer to gather information on customer purchase habits so they could track and predict demand at individual and aggregate levels. This allowed them to make better decision in stocking products and changing product ranges to match seasonal demand, they could also offer personalised promotional offers based on products customers frequently bought.

Tesco have built upon this in their online retail offering, where they can track consumer behaviour and purchasing and recommend items based on predicted individual tastes. This approach is used by many online retailers.

Being able to predict demand more accurately offers competitive advantage through providing a better service and avoiding wastage on unwanted stock. It also allows customers to be stratified based on consumption patterns and better promotional offers created.

References

Question

What factors make it difficult to brand fruits?

Answer

Marketing is used to promote the sale of most goods. However, when it comes to the sale of fresh foods, such as fruit and vegetables, branding can be very difficult, a factor which impacts on marketing decisions. To understand why it is difficult to brand fresh food, the concept of the brand will be briefly considered and applied to fresh food.
There is no singular definition of a brand, however, most theorists agree a brand has a distinct identity, and it linked to one, or several products or services, often supported by a logo (de Chernatony and Riley, 1998). Marketing may focus on the brand rather than the product, as this will allow a brand personality to be created, to differentiate the product from competing goods, supporting differentiation based on ideas and assumptions rather than product characteristics (Keel and Nataraajan, 2012). In the book ‘No Logo’ it is argued branding serves to limit consumer choice (Klien, 2005).

The problem with fresh food, such as fruit, is the homogeneous nature of the product; the same stores may sell the same type of products from the same suppliers, which do not benefit from differentiation. They are all interchangeable and it is difficult to create separate identities, as there is not even unique packaging that can be used. Tesco recently introduced a branding attempt, with the use of fiction farm names to create brands, such as Boswell Farms for meat, and Willow Farms for chicken (Levitt, 2016). However, this has been controversial, as the brand does not represent a unique product, and has been widely criticised (Levitt, 2016). This shows the problem with fresh food, as the product characteristics and public perception of the product are not aligned with brand requirements, making it difficult for firms to brand fresh food.

References

de Chernatony, L., and Riley, F.D., 1998. Defining A ‘Brand’: Beyond The Literature With Experts’ Interpretations. Journal of Marketing Management, 14(5), pp.417–443.

Keel, A., and Nataraajan, R., 2012. Celebrity Endorsements and Beyond: New Avenues for Celebrity Branding. Psychology & Marketing, 29(9), pp.690–703.

Klien, N., 2005. No Logo! Munich: Goldmann Wilhelm GmbH.

Levitt, T., 2016. Tesco’s fictional farms: a marketing strategy past its sell-by date? The Guardian. [online] Available at: .

Question

What are the effects of the business environment on Sainsbury’s ?

Answer

Sainsbury’s is recognised as one of the UK’s largest supermarket retailers, occasionally referred to as one of the ‘big four’ of Tesco, Sainsbury’s, Asda, and Morrisons (Clarke et al., 2012). Collectively these four UK retailers hold approximately 70% of the UK grocery retail market, with Sainsbury’s themselves holding some 16% (Kantor, 2016). The UK grocery retail market is fiercely competitive (Free, 2008), and current economic, social and political circumstances are serving to increase levels of competition and particularly price sensitivity amongst consumers.
Since the recession of 2007/2008, Clarke et al., (2012) report that grocery consumers have become increasingly price sensitive, leading firms such as Sainsbury’s to focus particularly on cost reduction and value for money in their product ranges. Their traditional customer base is middle-income families with moderate levels of income (Hackney et al., 2006), and now Sainsbury’s face threat from both discount retailers, such as Aldi and Lidl, who have seen exponential growth in the face of changing consumer habits, as well as their traditional rivals such as Tesco and Asda and who have also acted to reduce their prices.

Now in the wake of ‘Brexit’, Sainsbury’s face additional external threat from the rising costs of importing food and raw ingredient costs as the value of the pound weakens (Rodionova, 2016). This is likely to have quite considerable implications for consumer purchasing, as consumers trade down to lower value brands. Furthermore, major suppliers of many grocery items are likely to pass on their own price rises, meaning that Sainsbury’s will have to work hard to either absorb costs or decide whether to pass price rises on to consumers. The level of competition and narrow profit margins in the grocery sector mean that times look difficult for UK grocery retailers such as Sainsbury in the immediate future.

References

Clarke, I., Kirkup, M., and Oppewal, H., (2012) Consumer satisfaction with local retail diversity in the UK: effects of supermarket access, brand variety, and social deprivation. Environment and Planning A, 44(8), 1896-1911.

Free, C., (2008) Walking the talk? Supply chain accounting and trust among UK supermarkets and suppliers. Accounting, Organizations and Society, 33(6), 629-662.

Hackney, R., Grant, K., and Birtwistle, G., (2006) The UK grocery business: towards a sustainable model for virtual markets. International Journal of Retail & Distribution Management, 34(4/5), 354-368.

Kantor (2016) UK Grocery Market Share [online] available at http://www.kantarworldpanel.com/en/grocery-market-share/great-britain Retrieved 3rd Nov 2016.

Rodionova, Z., (22nd Sep 2016) Brexit: Supermarkets set to shrink packets and use cheaper ingredients due to pound weakness, says Bank of England [online] available at http://www.independent.co.uk/news/business/news/brexit-supermarkets-set-to-shrink-packets-and-use-cheaper-ingredients-due-to-pound-weakness-says-a7322731.html Retrieved 3rd Nov 2016.

Question

What is branding?

Answer

The definition of branding equates to the marketing practice of creating a name, symbol or design that identifies and differentiates a product or service from other products or services. Branding aims to establish a significant and differentiated presence within a market that attracts and retains loyal customers, thus maintaining a steady flow of revenue, if implemented successfully. A brand also aims to tell the customer what they can expect to see within a company’s products and services. The foundation of the brand is usually a logo, which can furthermore be presented into an organisations website, packaging and promotional materials. These are effective ways to communicate a brand to a large audience.

Different examples of brands include Rolls Royce, Marks & Spencer, Tesco, Kraft, Nike and Lidl.

References

Question

With Saudi Arabia planning an economic transformation in line with the ‘Saudi Vision 2030’, suggest one European Company that may have an ample opportunity to break into the Saudi market.

Answer

The ‘Saudi Vision 2030’ is a King and Government led initiative that expresses a strong and successful vision for the future of the country. One of the pillars for this initiative is turning the country into a powerhouse of global investment, with another pillar being the optimisation of the location of the country to turn it into a global hub that connects Asia, Europe and Africa (Vision 2030, 2016). With this in mind, the country aims to increase the foreign direct investment levels in the country, and thus European firms may view the country as an attractive market to break in to.

Cosmote is the leading provider of telecommunications in Greece, serving 15 million customers, and with a large number of shops across Greece, also provides consumers with the latest handsets and mobile technology (Cosmote, 2016). Cosmote is owned by OTEGLOBE, and in April 2016, the opening of the Asia Africa Europe -1 (AAE-1) subsea cable system meant that Cosmote could provide connections via the 25,000 km cable line, which provides connections throughout the Middle East, including Saudi Arabia (OTEGLOBE, 2016).

This suggests that given the already existing connection line, as well as the contention of Saudi Vision 2030 to open markets to foreign investors, Saudi Arabia can be a possible market for Cosmote subsidiaries. This is further highlighted by the fact that the consumers of Saudi Arabia are currently boycotting Saudi telecommunications firms due to high prices and poor service, causing huge losses to service providers in the country; thus indicating that consumers in the country would readily switch to a firm such as Cosmote which may offer cheaper or more reliable services (Arabian Business, 2016). Finally, one of the offerings of Saudi Vision 2030 is a shake-up of the telecommunications industry in the country to increase competition. These factors indicate that at present, the market conditions in Saudi Arabia hold the potential for success if Cosmote invest.

References

Arabian Business. (2016) ‘Saudi telcos boycotted over high prices, bad service.’ [Online] 5th October [Accessed on 9 October 2016] http://www.arabianbusiness.com/saudi-telcos-boycotted-over-high-prices-bad-service-647823.html#.V_ls5PArLIV

Cosmote. (2016) ‘Business.’ [Online] [Accessed on 9 September 2016] https://www.cosmote.gr/mobile/cosmoportal/page/H01/section/Business/loc/en_US

OTEGLOBE. (2016) ‘AAE-1 Network.’ [Online] [Accessed on 9 October 2016] http://www.oteglobe.gr/en/aae-1-network

Vision 2030. (2016) ‘Thriving Economy Open for Business.’ [Online] [Accessed on 9 October 2016] http://vision2030.gov.sa/en/node/7

Question

With Saudi Arabia planning an economic transformation in line with the ‘Saudi Vision 2030’, Suggest one European Company that may have an ample opportunity to break into the Saudi market.

Answer

The ‘Saudi Vision 2030’ is a King and Government led initiative that expresses a strong and successful vision for the future of the country. One of the pillars for this initiative is turning the country into a powerhouse of global investment, with another pillar being the optimisation of the location of the country to turn it into a global hub that connects Asia, Europe and Africa (Vision 2030, 2016). With this in mind, the country aims to increase the foreign direct investment levels in the country, and thus European firms may view the country as an attractive market to break in to.
Cosmote is the leading provider of telecommunications in Greece, serving 15 million customers, and with a large number of shops across Greece, also provides consumers with the latest handsets and mobile technology (Cosmote, 2016). Cosmote is owned by OTEGLOBE, and in April 2016, the opening of the Asia Africa Europe -1 (AAE-1) subsea cable system meant that Cosmote could provide connections via the 25,000 km cable line, which provides connections throughout the Middle East, including Saudi Arabia (OTEGLOBE, 2016).
This suggests that given the already existing connection line, as well as the contention of Saudi Vision 2030 to open markets to foreign investors, Saudi Arabia can be a possible market for Cosmote subsidiaries. This is further highlighted by the fact that the consumers of Saudi Arabia are currently boycotting Saudi telecommunications firms due to high prices and poor service, causing huge losses to service providers in the country; thus indicating that consumers in the country would readily switch to a firm such as Cosmote which may offer cheaper or more reliable services (Arabian Business, 2016). Finally, one of the offerings of Saudi Vision 2030 is a shake-up of the telecommunications industry in the country to increase competition. These factors indicate that at present, the market conditions in Saudi Arabia hold the potential for success if Cosmote invest.

References

Arabian Business. (2016) ‘Saudi telcos boycotted over high prices, bad service.’ [Online] 5th October [Accessed on 9 October 2016] http://www.arabianbusiness.com/saudi-telcos-boycotted-over-high-prices-bad-service-647823.html#.V_ls5PArLIV

Cosmote. (2016) ‘Business.’ [Online] [Accessed on 9 September 2016] https://www.cosmote.gr/mobile/cosmoportal/page/H01/section/Business/loc/en_US

OTEGLOBE. (2016) ‘AAE-1 Network.’ [Online] [Accessed on 9 October 2016] http://www.oteglobe.gr/en/aae-1-network

Vision 2030. (2016) ‘Thriving Economy Open for Business.’ [Online] [Accessed on 9 October 2016] http://vision2030.gov.sa/en/node/7