Introduction
The current paper is concerned with both theoretical and practical issues of market research. It consists of three parts. The first part is aimed at investigating the roles that both strategic and tactical marketing play in obtaining a sustainable competitive advantage in the market by an organization. Definitions of the key notions are provided, a theoretical analysis of the issue is supplied, and several retailers are considered as examples.
The second part is concerned with the business environment which exists in Canada in its relation to retail supermarkets. Both internal and external analysis of the issue is proposed. Finally, the third part of the paper addresses a theoretical issue, namely, Porter’s model of generic strategy analysis. The drawbacks of this model are considered, and the origins of these limitations are explained; at the same time, the advantages which can be obtained by employing this model for analysis are also considered.
The Role of Strategic and Tactical Marketing is Gaining and Using a Sustainable Competitive Advantage
Critical Analysis of the Role of Marketing
Marketing is one of the key components of any business activity. On the whole, marketing involves the research of the market and the development of methods aimed at promoting and selling products by identifying, forecasting, and satisfying the desires of the clients. West, Ford, and Ibrahim (2015, p. 7) point out that some of the main components of marketing include “the famous 5 Ps,” namely, “developing the Product (good or service), Pricing it, Placing it in the market, Promotion, and dealing with people who influence the buying of it.”
It is also important to differentiate between strategic and tactical marketing; the former is aimed at the creation of a long-term strategy which would allow a company to gain a sustainable competitive advantage and thus to survive and develop over a long period, whereas the latter has as its goal obtaining profits in the nearest future.
It is also important to define the notion of a (sustainable) competitive advantage. A competitive advantage is a circumstance that allows a business to occupy a position in the market which is better than that of its competitors, for instance, by providing a product or service at a lower price or in a manner that is more favored by customers. A sustainable advantage is a competitive advantage that cannot be easily copied by rivals and is, therefore, lasting (“Competitive Advantage” n.d.).
Therefore, it is clear that strategic marketing is critical for a company to obtain a sustainable competitive advantage in the market (West, Ford & Ibrahim 2015). It is the analysis of the market and of the desires and needs of the customers that allows a company to identify its existing or potential strengths and find a way to use them to gain an advantage. Strategic marketing also involves the development of the product, it’s pricing, and placement in the market, therefore creating a niche for the business in the market. This niche will define the competitive advantage that the organization has, and the degree of sustainability of this advantage.
On the other hand, tactical marketing, while being aimed at the creation of profits in the nearest future, develops methods that allow the firm to turn its competitive advantages into profits. In other words, when a company has a certain advantage, a strength that potentially permits its products to win the hearts of customers, tactical marketing develops ways to promote the product and to deal with people, to show the clients that these products are what they desire.
Therefore, it is possible to conclude that both strategic and tactical marketing is paramount if a company is to gain and use a sustainable competitive advantage. In short, it might be possible to state that strategic marketing is needed for such an advantage to emerge, whereas tactical marketing is required for this advantage to be utilized (West, Ford & Ibrahim 2015).
Examples
Tesco
Tesco PLC is an international retailer of groceries and general goods which is based in the United Kingdom and operates in some European and Asian countries. Having been founded in 1919, the company has existed for almost a century. However, the strategic principles that are utilized by the company today were introduced in 1997, when the leadership of the company decided that it is time to expand its core business and diversify the products which are sold in its stores.
Therefore, the business has significantly increased the range of merchandise that can be found on the shelves of Tesco supermarkets (Ryle 2013), and the wide assortment of the products that can be found in these shops has become one of the corporation’s competitive advantages.
It was combined with another principle, namely, the low pricing of products. Together with superb service as well as availability, the management of this chain of stores decided to make the products that are sold as affordable as possible, which became a long-term strategy of this company. Together with proper promoting strategies, these principles allowed Tesco to develop and grow over almost two decades.
However, it is known that nowadays the amount of sales in British supermarkets has dropped significantly (Ruddick 2016). Because of this, Tesco is forced to introduce personnel cuts over several following years, even though compulsory redundancies are not planned – the company considers simply not replacing the employees who quit on their own. (Ruddick 2016). And yet, despite the general decrease in the number of sales, Tesco, in certain cases, was able to raise its sales in the UK; for instance, over the six weeks preceding January 9, 2016, Tesco experienced an increase of 1.3% in its sales (Hobbs 2016).
This happened, in particular, as a result of concentrating on store and colleague improvements (Hobbs 2016). Therefore, it is possible to state that this tactical decision permitted Tesco to utilize its existing advantages (the wide assortment of products in particular) to increase its profits.
Starbucks
Starbucks Corporation is an American-based international enterprise that owns a chain of coffeehouses. The organization was founded in 1971, and since that time, it has become one of the most well-known coffee retailers in the world. Over many years, the company used the strategy of providing its clients with products and services of the finest quality, but at the cost which was greater than the price of similar products offered by its competitors (Husain, Khan & Mirza 2014).
The adherence to this strategy decreased at some point in the first half of the 2000s when the company started to expand rapidly, opening a large number of new stores; the quality of service was not a priority at the time. However, the financial crisis in the U.S. in 2007-2008 caused a major loss of profit for the company, for the customers opted to buy from rivals who offered cheaper products; the organization was forced to close nearly 600 shops in 2008, and another 300 shops in 2009 (Husain, Khan & Mirza 2014).
As a response to this, the company’s CEO H. Schultz decided to return to the enterprise’s original strategy of providing the best quality and service for relatively high prices (Starbucks Corporation 2009). The company used a tactical marketing move of promoting its products via social networks; it also addressed the issue of people by launching a survey asking clients about which improvements in product range and customer service they would like to see in Starbucks stores (Husain, Khan & Mirza 2014).
This allowed the enterprise to win the hearts of its clients and ensure customer loyalty. Even though the U.S. and the whole world was suffering from the financial crisis, Starbucks increased their profits by March 2010 to a level which was greater than the highest level of profits preceding the drop in 2008 (“Starbucks Net Income (TTM)” 2016).
Therefore, both strategic and tactical marketing played a major role in Starbucks’ revival after the hit which was taken due to the financial crisis. Focusing on the policy of the finest quality of products and services, that is, using the sustainable competitive advantage which the organization had had for a long time before the crisis, won the loyalty of new clients, and the methods employed to win this loyalty were supplied by tactical marketing decision of how to communicate with people and promote the company’s existing products.
Analysis of the Business Environment for Supermarket Retailers in Canada
The Canadian supermarket retail sector plays a crucial role in the country’s retail market. In 2011, the retail sector generated more than $450 billion in retail sales and employed about 13% of the country’s workforce. Despite witnessing a decline in demand, especially during the 2009 recession, the sales figures in the sector expanded by 17.2 percent during the period lasting from 2006 to 2012. Even at its lowest period during 2009, the sector still accounted for 6.2 of the country’s gross domestic product, which was an increase of slightly over 0.2% compared to 2001.
The sales gains in the years after the recession can be described as constantly increasing. In 2011, for example, a rise of 4.0% took place over 12 months (Belisle 2011).
Canada’s economic backbone is comprised of small businesses. As of the second half of 2012, these small enterprises accounted for more than 89% of companies that operated within the country. These businesses also contributed nearly 31% to the country’s GDP and gave work to more than 5.1 million residents of Canada; these people comprise nearly 47% of the employees working in the private sector. The retail sector accounts for the largest segment of Canadian small enterprises with around 147,000 firms employing more than 790,000 people. Even though there exist numerous small firms in this country, 120 largest retailers are responsible for nearly three-fourths of all the sales each year (Gomez, Isakov & Semansky 2015).
External Analysis
The external environment for supermarket retailers in Canada can be analyzed by employing the PEST analysis (i.e., by considering political, economic, social, and technological factors).
Political
Canada is a parliamentary democracy that has a federal system of government; the political system has multiple parties in it. Simultaneously, the head of the state is the Canadian Monarch (currently Queen Elizabeth II, who is also the Queen of the UK, New Zealand, and Australia). The country has strong democratic traditions. Simultaneously, the country tends to follow the model of the free market. On the whole, this allows companies to freely conduct business activities without the need to avoid threats that may come from political instability or totalitarian governments.
Economical
Canada is a highly developed country; it is, in fact, one of the world’s wealthiest countries. Its economy includes a large percentage of organizations that belong to the service sector. Approximately 70% of the gross domestic product of the country is generated by this sector, and nearly 75% of the population are employed in it. As has been previously stressed, nearly 13% of the country residents work in the retail sector (Belisle 2011). It is also important to stress that Canada is a major exporter of commodities.
The fact that retailers are such a considerable part of the country’s economy means that there exists strong competition among the representatives of this sector. Besides, this competition is made even stiffer because there exist limitations of space that can be used by malls, which reduces the number of shopping centers or malls that can be built in a particular area (Belisle 2011).
Social
As has already been noted, Canada is one of the world’s wealthiest nations. There exists economic disparity among the residents of the country; the top 20% of the families living in Canada gain nearly 40% of the total income, whereas the bottom 20% get roughly 5% of the income. The social inequality in this country is, however, lower than in many other countries, including the U.S. Nearly half of the country’s residents can be considered the members of the middle class (Belisle 2011).
The fact that this country is rather wealthy and that a large percentage of the population belongs to the middle class might be stated to provide a beneficent environment for supermarket retailers, for individuals who are members of the middle class are rather likely to be frequent customers of such stores. This is corroborated by the fact that the retail sector employs a considerable percent of the country’s workforce.
Technological
Canada is a highly developed country; this also pertains to the technological aspect of development. The Internet is rather common among the country’s population, which provides retailers with an opportunity to sell their goods online, as well as to utilize online advertisements and contact their clients via channels such as social media (Belisle 2011).
Internal Analysis
The Canadian retail sector continues to change and evolve. The most common trend is that retailers grow beyond their normal distribution channels (for instance, by employing Internet technologies) to better serve their clients in an increasingly competitive economic environment. Supermarkets have always been a common feature of the country’s retail environment since its inception (Belisle 2011).
Also, Canadian supermarkets gain more profit per square foot of space than supermarkets in the neighboring U.S. (Gomez, Isakov & Semansky 2015). Since 2005, when matching output figures were shown by the U.S. malls, the Canadian malls outperformed their U.S. counterparts. By 2012, supermarkets in Canada gained 600 USD annually in sales per square foot, whereas American ones had only nearly 400 USD (Gomez, Isakov & Semansky 2015).
Canada’s Toronto-based York Dale Mall draws the highest average retail sales per square foot in the Country at more than 1,250 USD per square foot. It also ranks second in retail sales per square foot in the whole of North America with only Las Vegas’ Caesars Palace beating it (Belisle 2011).
Canadian supermarkets have incorporated new forms of enterprises to respond to the shifts that are seen in consumer behavior and the macroeconomic environment. To keep up with the increasingly fragmented customer demographics, the retail sector players are quickly embracing several distribution streams and reconsidering the traditional models to offer their customer base with a variety of methods to purchase their services or products. Furthermore, it is reported by Price Water House Coopers that consumers are not shifting their purchases from one channel to the other but simply embracing multiple channel retail outlets, thus ending up spending more with the retailers (Gomez, Isakov & Semansky 2015).
E-commerce increases as a result of improvements in consumer technologies, as well as of the fact that the Internet becomes common, especially among the middle class. Despite this global trend, retailers in Canada are still lagging behind their U.S. counterparts when it comes to e-commerce capabilities (Gomez, Isakov & Semansky 2015). This has made the Canadian online retail environment to be regarded as a largely missed opportunity.
Some of the factors that may be credited with such a lag include a lack of access to resources that can be used to fund new technological improvements, limited investment costs needed for revamping the obsolete technological platforms, as well as concerns about consumer privacy. Nevertheless, the potential e-commerce market is vast in the country; the proportion of the population that was connected to the Internet in 2010 was 80%. Smartphone penetration reached the 100% mark by 2014 (Gomez, Isakov & Semansky 2015), which provides a good environment for future implementation of online sales (Roberts & Zahay 2012).
The Value and Limitations of Porter’s Generic Strategies
While Porter’s five forces model has its upsides, there are still some considerations that one should keep in mind when using these models to examine the supermarket retail sector. This is because this model was created in an economic environment that was significantly different from the one that modern retail supermarkets find themselves in nowadays. The difference between these environments is especially pronounced when it comes to the rate of change that players in the industry experience, as well as the unpredictable market structures which emerge. Also, technological changes occur regularly, and their effect is instantly noticeable, which can cause unforeseen market disruptions (Eldring 2009).
Very few market structures have managed to remain static. The prospect of other entrants, easy access to venture capital, entry barriers as well as supply chain relationships may get altered to such a degree that a company’s business model requires a radical review to be implemented if the competitiveness of the supermarket chain is to be maintained. Technological improvements have also considerably reduced the conventional time between a product’s initial conception and its eventual maturity (Eldring 2009).
In the absence of regular updates, any knowledge that has been gained from utilizing Porter’s model may quickly be rendered obsolete since it was only conceived to give a snapshot of a changing market. The model is not designed to provide the management with useful information on how best to develop and incorporate preventive actions. However, it does provide viable suggestions as to where any threats to a supermarket chain are likely to originate from through an examination of substitutes.
Sometimes, the dynamics of retail supermarkets make it difficult to accurately define their targeted market. For such defining to be meaningful, it ought to be done at a product level. The model faces significant difficulties when it comes to integrating the complexities of the modern markets with the product group organizations (Eldring 2009). If an organization narrowly defines its targeted segment to fit into Porter’s model, it runs the risk of overlooking crucial elements such as legislation and the ongoing interactions between buyers and sellers.
Modern organizations ought to be aware of and fully understand the implications of corporate ethics, as well as the lasting effects of government legislation. In this regard, Porter’s model is unable to take into account the significant implications of strategic alliances as one of the effective methods of responding to current opportunities. However, despite these drawbacks, Porter’s model still has a role to play in guiding management when assessing the current market environment.
Reference List
Belisle, D 2011, Retail nation: department stores and the making of modern Canada, University of British Columbia Press, Vancouver, Canada.
Competitive Advantage. n.d. Web.
Eldring, J 2009, Porter’s (1980) generic strategies, performance and risk: an empirical investigation with German data, Diplomica Verlag, Hamburg, Germany.
Gomez, R, Isakov, A., & Semansky, M 2015, Small business and the city: transformative potential of small-scale entrepreneurship. Web.
Hobbs, T 2016, ‘Is marketing aiding the ‘resurgence’ of the big four supermarkets?,’ Marketing Week. Web.
Husain, S, Khan, F, & Mirza, W 2014, Brewing innovation. Web.
Roberts, M L & Zahay, D L 2012, Internet marketing: integrating online and offline strategies, South-Western Cengage Learning, Mason, OH.
Ruddick, G 2016, ‘Tesco considering cutting store staff by 39,000 over three years,’ The Guardian. Web.
Ryle, S 2013, The making of Tesco: a story of British shopping, Bantam Press, London, UK.
Starbucks Corporation 2009, Fiscal 2009 annual report. Web.
Starbucks Net Income (TTM) 2016. Web.
West, D, Ford, J & Ibrahim, E 2015, Strategic marketing: creating competitive advantage, 3rd edn, Oxford University Press, Oxford, UK.