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1. Intro to company & product or service chosen for evaluation.
The company I have chosen is Tesco PLC and service provided by them which is Tesco Mobiles established in May 2003. Service mentioned above is a mobile virtual network operator. The type of the company is private and owned by Tesco Mobile Services Ltd in 45%, Tesco Mobile Communications Ltd by another 45% and O2 Communications Ltd by 10%. Products provided by the company are mobile telecommunications. Another important point I would like to consider is that Tesco’s mobile services run on the O2 network in the United Kingdom.
2. Explanation of the marketing strategy used to market the product/service.
Tesco Mobiles concern based its strategy on Ansoff’s Matrix diagram attached below and the one used by them is market penetration. Strategy used currently by Tesco Mobile Company is definitely less risky than it used to be at the beginning as the diversification which is less predictable, expect more work and more time.
One of the reasons why that is a market penetration is that they established the company in 2003 so currently they are already 12 years in a business environment. Market penetration is mainly defined as an activity of growing the market share of a present product. Tesco Mobiles is perfect example for a market penetration as they are providing already existing product on the existing market. It used to be diversification for Tesco at the beginning because the concern is mainly recognized by groceries not electronic accessories but currently as it already exists for so long we can define it as a market penetration. However Tesco Mobiles is currently using market penetration to measure the amount of adoption or sales of a service or product which is associated to the total theoretical market for that service or product.
3. Explanation of TWO risks of the marketing strategy.
So far market penetration strategy seems like safe way to keep the sale of the product and make profit on it. However this strategy does not work for all of the products provided by the company. Market penetration focuses on the low prices at the same point to increase market share and demand for a product. When demand for the product increase then concern can save money on production costs per unit by making a greater amount of the product. There are missed opportunities when the company provides good quality, luxury products when in a market same products with less quality are already provided as a cheap purchase. At the end of the day even when the company decrease the price of the luxury product and raise it step by step later on customer probably may go elsewhere when for them seems the same product is cheaper. Second point of the risky way of a market penetration I would like to consider is poor company image. When company focuses on the market penetration of one product it can hurt or decrease sale of the other products provided by them. If company which is providing high quality product will focus on a cheap sale in a market penetration then image and reputation of the luxury producer can without any doubt suffer.
4. Analyse of FOUR advantages of the marketing strategy.
There are absolutely more advantages than disadvantages found in a market penetration. Firstly as the product will attempt to the already existing market as already existing product the result of this may be quick adoption and diffusion of the product in the market. Another point worthy to consider is discourage competitors. When for example Tesco provides existing product into existing market that Sainsbury’s got already it may interest the customers and bring them back to Tesco by the more attractive price or look of a product. Third advantage presented by the market penetration is high product turnover.
In the situation when there is high product turnover in terms of fast sales retailers are forced to order more from the suppliers which at the same time give more profit to the suppliers. To conclude advantages of the market penetration the last point likely to provide is raising profitability. Market penetration is mainly know and defined as the way of selling current services and product to already existing target market which makes it profitable and least risky through all of the Ansoff’s Matrix strategies. 5. Critical analysis of two other strategies that won’t be useful for the product/service and why?
Two other strategies that I would like to mention and use them as the ones I will not provide are diversification and product development. Diversification is a strategy which enter new industry or market and that is the most risky strategy for the business. There are several disadvantages of diversification. As the diversification does not provide that much protection while investing money into something new people does not always feel confident to actually purchase the product before someone else will recommend it.
However if the company will experience any loses while performing diversification during the market consolidation then in result some business units might be subsidized. Another strategy that in my own opinion will not be useful is product development which brings new product to existing market. In case of this strategy company might experience and sometimes is very likely to have product failure. As the product is ‘’first-time’’ mover in a new market and obviously people same like in case of diversification might not feel confident to purchase the product. However company must be concerned of target audience for their new product which has no experience in sale yet.