Over the last few decades the UK grocery market has become a supermarket-dominated business (Ritz 2005, p 22-23). The dominance of the groups in terms of supply chain efficiency, ubiquitous stores and huge product range make entry of new players in the market difficult.
Asda's positioning strategy is to be UK's cheapest supermarket grocer. The economic slow down has suddenly made a cheaper supermarket a more attractive proposition to the consumers. Morrison began as a butter and egg merchant, and went on to be a leading supermarket chain. It was by taking over the Safeway chain that Morrison began to make its large-scale presence. In fact, Morrison was forced to sell more than 50 stores it took over to avoid local monopolies. Some of the stores were also sold off because it did not fit in with the group's large format identity. Sainsbury group has a history of more than 150 years. Good quality at reasonable prices was the hallmark of the group from its first store. During the course of years, Sainsbury found itself sandwiched on one side by the cheap stores and on the other side by the up market stores like Waitrose. Tesco cornered the status of being termed the first superstore. The supermarkets grew when RPM (Resale Price Maintenance) was abolished, thereby giving the option of more discounts to the customers. Lower prices are the key strategy for the supermarket groups. All four groups own superstores, have lower prices or reasonable prices as a strategy and are perceived as one strategic unit by customers as well as in the Industry.
b. Analyse the microenvironment that these companies must operate within.
Strategic Analysis of the UK supermarket industry
UK retail industry is a supermarket-dominated business. Smaller players exist in the periphery of the business. The supermarkets control the suppliers. Cheaper products that are provided by developing countries also threaten the suppliers. The supplier margins have consistently eroded with the power of the big four. Though food remains the main focus on the big chains, as customer spend more time in the stores, the non-food portfolio that they hold also become profitable. The supermarkets have diversified to add products like clothing, electronic goods, mobile phones and even banking products and legal assistance. The consumer movement has also ensured that the supermarkets focus on remaining green. This is true in case of a reluctance to use Genetically Modified food to carbon labeling of electronic goods. The supermarket chains are also experimenting with alternate store formats to target different type of customers. Continuous innovation and fast response to market conditions are a given in the industry.
THE PESTEL Analysis:
Political factors affecting the Industry: The political climate that could influence include policy decisions, EU, Euro, taxation policies etc. A couple of issues that could alter the political pressure on the supermarkets include pressure from the farming community which claim that they are getting squeezed by the bargaining power of the supermarkets and as the weakest link in the chain they