Case Study 4. Tesco.Com Uses the Internet to Support Itsdiversification Strategy

Based on the case study and your own research on competitors, summarise the strategicapproaches which have helped Tesco.com achieve success online.

The strategic decisions covered in this chapter provide a useful framework for summarising thestrategic approaches adopted by Tesco.com.

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Decision 1: Market and product development strategies

. Tesco has used the Internet to extend itsmarket into new product markets such as financial services, white goods and DVD rental. Whilethese are promoted through the store, the web provides a wider choice of products, more detailedinformation about products and a method of purchase. The Internet can also support entry intonew geographical markets.

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Decision 2: Business and revenue model strategies

. New revenue sources are available throughextending the product range online as explained above, but also with new digital revenue streamssuch as those for music downloads and e-Diets. Tesco also supports advertising on its site of related product such as financial services.

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Decision 3: Target market strategy.

Tesco.com has a broad market of customer types, so it is lessrelevant for them to use online to selectively target these with communications. However, thearticle explains how Tesco has used the web and e-mail channel to target more closely throughtargeting different lifecycle groups – these are customers who are grouped according to their levelof adoption of online service. Tesco also uses the web to target specific requirements such as dietsand financial services through search engine marketing.

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Decision 4: Positioning and differentiation strategy (including the marketing mix).

Tesco offerssome unique online promotions and lower online prices for selected products such as financialservices, which could attract a percentage discount when purchased online. It appears not to usethe service elements of the mix for positioning beyond the slogan ‘You Shop, We Drop’. Butattention has been paid to improving the...