This report will be conducted as follow, first a brief introduction of the analysed industry; the UK supermarket industry with a concise facts about the size of this industry in the UK, then analysing the macro environment of the UK supermarket industry by using the PEST framework that analyses the Political, Economical, Social and Technological factors, which has a direct impact on the UK supermarket industry. After that the micro environment of the UK supermarket industry will be analysed in depth by using the Porters Five Forces framework, which consist of the following aspects; Threat of the new entrants, Bargaining power of suppliers, Bargaining power of buyers, Threat of substitutes and the Existing competitors. Finally, summarising …show more content…
Figure 1: Market value of the UK supermarket industry from 2007 to 2017
The above graph illustrates the importance and the market value growth of the UK supermarket industry for a 10 years period starting from 2007 with 133,6 billion pound until the predicted market value for 2017 with a value of 192,6 billion pound, with a staggering growth percentage of 44,16% throughout the last 10 years.
2. PEST Analysis
2.1. Political
There are many political factors that can affect not only the supermarket industry in the UK but any kind of business in the UK, those issues can be summarised in the following factors:
The possibility of UK leaving the European Union
One of the main recent political factors that will have a big impact on the UK supermarket industry is the possibility of UK leaving the European Union that might becomes a definitive decision after the June 2016 election. This decision might change the entire UK supermarket industry operations because of the big number of goods that have been imported from the European Union with a free tax because of the European Union free zone trade. Therefore, the withdrawal of the UK from the European Union will cause a big rise in the prices of the imported products and materials from the European Union, as a result of the increase of the import tax that was zero when the UK used to follow the European Union regulations. Government regulations and initials
1. The grocery industry is a commoditized industry, which makes it difficult for grocers to sustain through differentiation. Buyer power is high and thus, cost leadership and operational efficiencies are critical. There is fierce competition amongst various grocery stores, with the main players such as Loblaw and A&P holding multi-banner stores in various market segments. Traditional grocery stores also lose some of their market share to drug stores, convenience stores and other retailers who have entered the industry. Threat of substitutes from fast-food and take- away outlets is not as prevalent, since many grocery stores have started stocking ready-to-eat meals and have deli services available for consumers. Competitive
Product offerings by these contenders are similar as Tesco’s to a huge degree. This procedure helps Tesco to ensure its commercial center by expanding competition. A large portion of the contenders of the Tesco have an equivalent or a bigger market share in the store business. By industry investigators, Tesco PLC has a twenty nine per cent of shares the grocery store industry.
This essay will use the Porter’s five forces to analyse the supermarket industry in the US, and I will make a decision on whether the US supermarket industry is attractiveness based on its overall profitability level.
Operating on very thin profit margins, players in the supermarket industry traditionally either focus on a premium segment or follow a discounter strategy at the low end. Premium players address educated and more price elastic consumers who value healthy, natural and organic food; the share of perishable items for these players is normally distinctly higher. Players that focus on a discounter strategy offer a higher share of simple necessity items and value price competitiveness over premium features like healthiness or organic origin. Independently of the focused customer group it is imperative for players in the supermarket industry to be cost efficient and optimize operations
ustralian groceries market was very fragmented during the 19th century and was typically solely operated, region specific and served a very small community. Improvements came about in the 20th century with the development of supermarkets which provided one stop shop for its customers (Deloitte, 2012). The supermarket and grocery sector is a major contributor to the retail turnover of Australia, (Alexander) with revenues in excess of A $ 80 Billion in 2013-2014 contributing to a little over 7% of the economy while the grocery industry alone contributes approximate 20% of that of the supermarket and the grocery sector. The industry also employs well over 280,000 people (Tonkin, 2014).
Barriers will be placed on all new supermarkets entering the sector; this will be from the existing supermarkets. For example Tesco may have cornered the market for certain goods therefore has established a relationship with its supplier so that it will pay a lot less for large volumes of goods whereas the new supermarket will not be able to find cheap, reliable suppliers this gives Tesco's the advantage of economics of scale. A new, small supermarket chain can only buy a relatively small volume of goods, at a higher
The UK supermarket industry is a very competitive and profitable industry. It is made up of four main players with significant share of the market, and then various smaller companies who focus on smaller niches in the market such as the bottom of the market discounters and the top of the line speciality stores. It is an interesting market and this report evaluates the attractiveness of the industry using Porter’s five forces model with an insight into how market nicher Waitrose sustains a competitive advantage. Next this report looks at how major player Sainsbury’s successfully competes against its rivals using differentiation strategies, and analyses current consumer trends and problems can effect this industry.
In the article, "The Supermarket: Prime Real Estate," written by Marion Nestle, a food studies teacher at New York University, informs us on how supermarkets manipulate us into buying their products. We as buyers are unaware of the brilliant tactics supermarkets use in order for us to make impulse buys, yet they want to blame it on us. "There are precise reasons why milk is at the back of the store and the center aisles are so long," (Nestle 497) by doing this you are forced to look at all the products, therefore you'll end up buying something you unplanned on buying in the first place. There are reasons why small packages cost more than the larger packages of food, Nestle states, "If you buy more, you are quite likely to eat more" (Nestle
Tesco was feeling the pressure because they saw a fall in profit since 2008 and were worried that their customers would not return. However as time moved on the economy started to pick up again in 2009. Customers started to spend more and were more comfortable about their current financial situation. However Tesco realised that their customers were not purchasing goods of high price, meaning that customers were likely to purchase readymade meals and organic products. The demand for a product depends on the economic factors such as interest, inflation and local employment levels. Tesco doesn’t have control on the economic factors; however these do have an effect on the business.
The grocery retail industry worldwide has grown in recent years to become one of the most intensely competitive industries due to the continuous amounts of new entrants. A grocery retailer is one that sells food and other general household items. Hypermarkets, supermarkets, discounters and small grocery retailers are all under the grocery retail umbrella. Between 2003 and 2008, the grocery retailing industry accounted for 45% of store-based retail values sales over the world. The figures
Change in demographic has also cause changes in supermarket spending. Change in age and population demographic not only influence the location decision but also influence the variety of products offered between supermarkets. Moreover increase in population growth has also raise the number of supermarkets in Australia.
Porter’s five forces of competition framework can be a valuable tool in analyzing an industry. Porter’s five forces of competition include: competition from substitutes, entrants, rivals, supplier power, and buyer power. We will now analyze the retail grocery industry according to Porter’s five forces. (this is straight out of the Barnes and Noble report I wasn’t sure if we should cite this or not)
The UK supermarket industry resembles an oligopolistic industry, with several characteristics. Oligopolistic markets tend to be characterised by high concentration ratios, barriers to entry and…Since the turn of the century, the industry has been scrutinised by both the Office of Fair Trading and has been referred to the Competition Commission on two occasions. (Seely, 2012)
There are 92,796 grocery stores in the UK and the market value increase by 19.5% in the last 5 years and according to IGD forecast the UK grocery market should reach £203bn by 2019. But what we can see in the figure 1 that from 2009 to 2014 annual grow in the grocery market start decreasing from 4.9% in 2009 to 2.8% in 2014. One of the reason for this is difficult economic conditions which had an effect for consumer spending. Consumers choose to spend less money on food by buying less food or by looking for cheaper places. Retail market is diversified into three main sectors: Hypermarket and superstores which accounts for 42.3% of retail market, convenience stores 21.4% and small supermarkets 20.3% (Figure 3). So about 84% of sales are done in these three sectors. The biggest 4 retail chains in UK are: Tesco which takes 28.7% market share, Asda has 17.3%, Sainsbury’s 16.6% and Morrison’s 11%. (Figure 2) So, if we will sum up 4 biggest retail market chains we will have about ¾ of market share. Finally, a strong characteristic of this sector is competition with price wars and a
Abstract The main purpose of this report is to make references to significant microeconomic models, in order to explain the supply, Demand, Market equilibrium, price discrimination, and Opportunity rate as well as making references to important macroeconomic aims which can be described with some examples such as growth, Inflation, Unemployment, GDP, exchange rates and many more, this two business economic topics are very relevant in today’s market as they represent the real-world meaning of the business area. This report will analyze both parties and evaluate any issues happening to date.