Sainsbury's and Waitrose Uk Supermarkets Porter's 5 Forces Competitive Advantage

The grocery industry has a relatively high market commonality; a lot of grocery stores are somewhat related in terms of technologies used, labor force and the products or services offered in the stores. Differentiation with other competitors is key for survival in this highly competitive industry.

WAITROSE Ltd was found in 1904 by Wallace Wyndham Waite, Arthur Rose and David Taylor when they opened their shop in Acton (Andidas, 2003). In 1937, it was acquired by the John Lewis Partnership and its Self Service was introduced in 1951. From a small business selling grocery products, it has been built up to a network of over 300 shops known for its own historical and the quality of products. The majority of their customers are those who have stable incomes and above due to their uncompetitive price. Their key aims and objectives are to archive improvement in services and gain more profits by open new store and expand their business into the North-West. In addition, Waitrose also wants to archive more targets in the next period of time such as to motivate their staff to provide better services, which can increase levels of customer service, and develop their organic range as well as their relationships with local community In this project. In this essay, the dominant stakeholders and their main interest will be identified as well as the discussion of Waitrose 's detailed analysis.

The threat of entry of the supermarket industry in US is low, which base on the analysis of the three major sources that related to the entry barriers. The first barrier is the economies of scale of the existing large supermarkets. When these incumbents achieved larger volume sales, they can have lower unit costs than new entrants, and it will very difficult for those new entrants to compete with them (Johnson, Whittington, &Scholes 2011). For example, Wal-Mart had invested in innovative procurement, automated distribution centre and bar coding to increase its economies of scale, and these investments created a great barriers for new small retailers to enter into the supermarket industry (Porter 2008). The second barrier is the incumbency advantages, which mean the incumbents established their own strengths that cannot be used by competitors (Porter 2008). For example, the top ten supermarkets in US have accumulated extensive experiences on how to run their businesses more efficiently than new entrants (Johnson, Whittington, &Scholes 2011). The subtle differentiation between the products that sold in supermarkets is the third barrier for new entrants. Because most of the product assortment is same or similar between each supermarket,

The aims of Waitrose are to offer a top quality service and also try have get their customer to be eating organic affordable food by 2012.

This report is about the UK supermarket industry, and analysing the condition of the current market. It will focus on its market structure, barriers to entry and contestable market to analyse if the supermarket industry is an oligopoly market and if it is a contestable market or not.

Driven by consumer demand for lower prices and convenience, supermarkets maintain an increasingly dominant retail position in the UK by using their buying power to coerce suppliers to sell cheaply. A significant majority of suppliers supply their goods to the four big supermarkets, who occupy 75% of the UK grocery market. Anti-supermarket campaigners, such as Tescopoly and Farmers for Action Press report that supermarkets abuse their buying power to squeeze suppliers’ prices to the bare minimum (farming today, 2010). This has caused increasing hardship in the market – for example “Many dairy farmers have left the industry...” and of those left “blame their low prices on the way that four large supermarkets dominate the grocery market”, even taking the hit when the supermarkets engage in price wars (Parliament, 2010). Conversely, supermarkets provide a significant and stable market for the suppliers.

These concepts can be considered when discussing consumer choices offered by Supermarkets which have undoubtedly become a growing part of UK retailing. Tesco alone have 2000 stores in the UK out of its 3700 stores worldwide (Competition Commission, 2008 cited in Allen, 2009, p.73) and a 60% market share of grocery shopping in some towns within the UK (The Guardian, 2007 cited in Allan 2009, p.77).

Analysis of the external environment suggests a fierce rivalry between Trader Joe’s and its competitors. This rivalry is brought on by the high bargaining power of buyers and high threat of new entrants into the market, both of which put pressure on companies to maintain low prices and provide high-quality products.

Kroger and Safeway belong to the supermarket industry. In the supermarket industry, the business environment is quite competitive. Besides the traditional grocers, there are now many different types of retailers all fighting to obtain a share of the food wallet. Customers have a huge selection of where to buy their groceries. Not only do the customers have the choice to pick supermarkets around the neighborhood, they also have the option to shop at alternative retailers, such as national discount chains and warehouse stores. From an operating perspective, supermarkets are a homogenous group, meaning similar to each other. Factors that contribute to the differences among the supermarket are geography and store formats. The supermarket industry is faced with the challenges of maintaining market share and profits while attempting new strategies and store formats in an effort of trying to make the store stand out from the other retailers. Major demographic and consumer lifestyle changes have affected not only how consumers shop but also where they shop. Traditional supermarkets have been in a decline since shoppers now spend less and how frequently they shop in a particular store. While some supermarket operators continue to attempt to cut costs so they can offer reduced everyday prices, they find this to be a tough approach when competing with low cost operators like Wal-Mart and Costco.

ALDI offers goods at low prices with limited substitutions within their stores. Carrying less than 1,500 products total, the stores offer discounted generic brands for their customers. By doing this, this keeps the prices low and also brings increases the overall profitability for the ALDI company. However, ALDI doesn’t have much of a control over the price of substitutions for packaging. This means that the packaging companies set the price for the materials used to package goods for ALDI’s stores. Large grocery stores products serve as competitive substitutions for ALDI. Customers who prefer the taste of well-known brands’ products over generic products may factor that in when deciding where to shop. A customer may be hesitant to try a generic brand at a lower price if they have a particular taste for the branded substitutions. Products can also serve as substitutions when price is a factor. ALDI’s products are at discounted prices and customers who want to spend less on products will take the lower priced product over its more expensive substitution. This works as an advantage for the

This paper examines the published case study Whole Foods Markets, 2005: Will There Be Enough Organic Food to Satisfy the Growing Demand? (Hitt, Ireland and Hoskisson, 2007, p. C534). Although the published study addresses numerous aspects of Whole Foods Market’s business as a leading international retailer of “natural” organic foods, the analysis provided herein is focused on Whole Foods Market’s ability to meet future growth demands. This paper explores Whole Foods Market’s basic internal environment with subsequent application of Porter’s Five Forces Model of Competition followed by a related Strength-Weakness-Opportunities-Threats (SWOT) breakdown…all used to determine critical market success factors and looming challenges

(Tadeo, 2013) Study relating to creating competitive advantage and the benefits of doing so was developed in 1985 by Porter and the notion of consumer loyalty can be linked to the framework in line with creating differentiation throughout the supermarket industry. (Porter, 1985) The ways in which Waitrose achieves competitive advantage through differentiations relays to the targeting of the upper end of the market through high-quality and own branded products. (Andidas,

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)

2.3 THREAT OF SUBSTITUTES Substitutes do not entirely replace existing products but may introduce new technology or reduce the costs of producing the same product (Porter, 1980). Substitutes may limit the profits in an industry by keeping their prices down (Porter, 1980). The threat of substitution is quite high in this industry because consumers are able to substitute to other major retailers, convenience stores, niche product outlets, restaurants, bakeries, butchers and farmers (Coriolis Research, 2004). Supermarkets like Tesco and ASDA have a range of products and services that have close substitutes, effecting price elasticity of demand because the market is sensitive to price (IBISWorld). The demand for a particular brand or retailer will increase or decrease concurrent to the movement of price in comparison to its competition (IBISWorld). The UK supermarkets are always trying to increase the quality of products and services resulting in a constant need to differentiate products and services from competition to make them less price sensitive.

It was a key decision to feature partners in the campaign, which uses them as a point of difference, distinguishing us from our rivals (www.guardian.co.uk ). The targeted customers of their products are richer class. The most important reason that they have loyal customers is because of the quality they provide. The customers of Waitrose believe in the company, such that even if they get the same goods cheaper in other stores (Tesco, Azda) they will still stick to Waitrose. In the product line the fruits and vegetables they put on the market are priced at a premium. “For anyone who enjoys food and can afford to pay a bit extra, it is easy to understand why the chain has built a following”. (www.guardian.co.uk )