The UK Food Retailing Sector - Essay Example

Running head: A COMPETITOR AND PESTEL ANALYSIS OF THE UK FOOD RETAILING SECTOR A competitor and PESTEL analysis of the UK food retailing sector Insert Name Insert Course Title Insert Instructor’s Name 21st November 2011 Task 1 Balchin, A. 1994. Part-time workers in the multiple retail sector: small change from employment protection legislation? Employee Relations, Vol. 16 Issue 7, pp.43-57. The publisher of the journal is Emerald Group Publishing Limited. Balchin, who is a researcher based at the University of Leicester aims at exposing the reasons as to why employees considers part-time working and the costs associated. The paper has scholarly perspectives. This research paper is practical and essential in creating awareness to the employees on the importance of trade unions and their legal entitlements which are vital components of PESTEL analysis. Benjamin, G.2003. Early Warning: Using Competitive Intelligence to Anticipate Market Shifts, Control Risk, and Create Powerful Strategies. London: AMACOM. The book was published by AMACOM in 2003. Gilad, who is the president of the academy of competitive Intelligence, holds a PhD in economics. In his book, which is a scholarly source he emphasis that companies should emulate competitive intelligence, strategic planning and management action in order to have an effective early warning system. The book is relevant and practical especially to the enterprises managers who aim at excelling in the 21st century. Byars, L. 1991 Strategic Management, Formulation and Implementation – Concepts and Cases, New York: HarperCollins. Byars who is also an expert in the field of strategic management, has embarked on providing appropriate scholarly acceptable information that covers various techniques of formulating and implementing management principles. These include proper organizational structure and adoption of adequate measures in planning and controlling of companies resources. Clarke, I., Bennison, D and Guy, C. 1994. The Dynamics of UK Grocery Retailing at the Local Scale, International Journal of Retail & Distribution Management, Vol. 22 Issue 6, pp.11-20. The journal is written by academicians to analyze the growth of the UK grocery retailers and their strategic objectives. This makes it to be a scholarly source. Clarke Ian and Bennison are senior lecturers in the department of Retailing and Marketing at the University of Manchester Metropolitan while Clifford is a senior lecturer based in Cardiff University of Wales in the department of City and Regional Planning. The authors give candid information to the students on the effects of changes in formats by the competitors in the UK food retail sector. Flavián, C., Haberberg, A and Polo Y. 2002. Food retailing strategies in the European Union. A comparative analysis in the UK and Spain, Journal of Retailing & Consumer Services, Vol. 9 Issue 3, pp.125-138. The journal is popular in giving a clear analysis of the competition that exist in the UK groceries food retailers. The authors who are market researchers, highlights the market share of the UK major supermarkets that include Tesco, Asda, Sainsbury and Morrisons. The journal is an important source for this paper that seeks to undertake competition as well as PESTEL analysis Felix, O and Joel, W. 2007. The Speed of New Ideas: Trust, Innovations and the Diffusion of New Products. New York: Macmillan Publishers. This working paper is sensational in nature since it tries to seek the reaction of suppliers if customers are hesitant to try products from other suppliers. Basically, the book analyses the implication of trust on the buying behavior of consumers. The authors, who are renowned market researchers, explored the relationship that exists between the decision to purchase new products and the level of trust. Feng Zhu and Marco, I. 2007.Dynamics of Platform Competition: Exploring the role of Installed Base, Platform Quality and Consumer Expectations. London: Free Press. This working paper is scholarly source that entails the procedure through which companies can follow in order to establish a model that monitor the development of platform success. The authors depicts that technology adopted by companies plays a vital role of producing products that meets consumer expectations. This paper is helpful for students who aim at doing research on market efficiency and market structures adopted by companies in the long-run. Graiser, A and Scott, T. 2004. Understanding the Dynamics of the Supermarket Sector, The Secured Lender, Vol. 60 Issue 6, November/December, pp.10-14. This is a scholarly based journal that was published by Ivory Research Ltd. The source is appropriate in that it helps students to understand the groceries sector in UK. In particular, the journal depicts the market analysis of Tesco. In order to ensure proper understanding of the competitive edge of Tesco, the authors discuss the SWOT analysis of the company, Porters Five Forces as well as PESTEL analysis. More information is available at http://www.scribd.com/doc/61952370/Tesco-plc. John, Q. 2009. Marketing After the Recession. Harvard: Free Press. This is a scholarly working paper that was developed by John Quelch, a market researcher. Due to the recent economic down turn that affected the world, John Quelch argues that marketers must come up with proper plans and policies in order to reach their consumers whose purchasing power has been adversely affected by the economic recession. The paper is useful for marketing students who are focused at examining the effects of recession on the consumer buying behavior in UK and other countries. John, J and Carolyn, M. 2003. The Managers Guide to Competitive Intelligence. London: Sage. This book gives guidance to competitive intelligence (CI) managers to determine what works best for their companies and to understand the circumstances that surround them. The book is relevant since it covers large area of CI that is not covered by majority of books and journals. It offers appropriate sources to analyze competition existing within UK supermarkets. Task 2 Intensive growth that has been experienced in the UK food retail sector has been triggered by the high demand of quality products from the customers as well as political, economic, social, technological, environmental and legal factors. In their efforts to acquire a large market segment and achieve sustainable profits, the UK major supermarkets that include Tesco, Asda, Sainsbury and Morrisons have emulated different marketing strategies. UK government has adopted various political and economic measures in order to control the operation of food retail business and avoid the occurrence on monopoly that cause adverse consequences on the consumer. One of the major initiatives that were emulated by the government in 2007 was the Competition Commission (Clarke et al, 1994). The objective of the commission was to prevent large supermarkets from establishing more stores in particular areas in their efforts putting at bay their competitors. Even though the move was favorable to Asda, Sainsbury and Morrisons, Tesco criticized it by questioning its cost-benefit analysis. UK government has also embarked on creating conducive environment that propels the spirit of innovation that has resulted to product diversification and improved product quality. For instance, each of the main competitors has embarked on production of a unique product in order to attain a competitive edge. The economic recession that UK experienced just like other countries in the world, negatively affected the consumer purchasing power due to low level of disposable income. In order to curb the level of unemployment in UK, the government reduced the interest rates leading to more domestic borrowing thus increasing the level of investment (Flavián et al, 2002). Even though the recession caused reduction on demand for luxuries, it was advantageous to the groceries shops since most consumers ceased to eat outside their homes and increased their demand for groceries products. The social factors have also played a major role in the growth of groceries food sector in UK. Young people tend to consume more groceries as compared to old people. This has resulted to the production of more products that target young consumers. The increased demand for organic food products has also been a major booster of the supermarkets revenue. The technology development in UK particularly in the use of internet to make purchases is widely applied by UK supermarkets. As depicted by Guy (1996) the adoption of technology is an essential marketing tool that prevents consumers from switching to other companies. The government has also adopted fiscal policies that include increasing the VAT by 20% and reduction of its expenditure with an aim of financing the budget deficit (Graiser and Scott, 2004). It is imperative to note that such policies will affect the current prices of both food products and non food products. In order to understand the extent to which the UK major supermarkets have been influenced by internal and external policies, PESTEL model can be used. This model that encompasses political, economic, social, technological and legal policies is useful in understanding the strategies that have been emulated by the firms in a sector that is characterized by fierce competition (Roger, 1996). The supermarkets have also taken various initiatives in order to expand their sources of finance as well as market segment. Due to the diversified information that covers the four stores and the limitation of the paper in terms of the number of words, the table below depicts the competitive analysis and the application of PESTEL factors by the four stores. Aspect of analysis TESCO ASDA SAINSBURY MORRISON Market share (%) 30.6% 16.6% 16.3% 11.1% Revenue (£) £60.93 billion £639 million £19,964 million £16,480 million Number of stores 5,380 523 872 455 Products Retail foods, fuel, banking, mobile phones, film production and electronics. Retail foods, toys, general merchandise and mobile telephone services Groceries, banking and property. Groceries and consumer products including wines Locations/Distribution 5,380 523 555 455 Political factors Removal of trade barriers resulted to establishment of 18 new stores in China Removal of trade barriers led to expansion in Europe Globalization barriers led to expansion in Europe Removal of trade barriers led to expansion in Europe and other regions Economic factors Reduction of interest rate resulted to more investment, increased disposable income and high demand for products Low interest rates led to more employment and more demand for products Increment of VAT led to higher prices Increment of VAT led to higher prices for groceries products Social factors High demand for organic food caused high demand for Tesco products High demand for organic food caused high demand Young consumers high demand for online services Old aged consumer demand is low as compared to young consumers Technological factors Use of internet increases sales and revenue online business Asda Direct to sell electrical products Sainsburys Online selling system can be used by 75% of UK residents Does not offer online services. It has purchased 10% stake in Fresh Direct, A UK based online grocer Environment Use of recycling bags and mobile and carbon foot print data top grocery store in CRC Energy Efficiency Scheme Use of recycling bags, FSC-certified corrugated pack Recyclopedia, a labeling design advocate recycling habits. Legal Low Pay Commission Report caused 15% wage increment leading to higher costs of operations Low Pay Commission Report caused 15% wage increment leading to higher costs of operations Selling of expired products has caused legal procedures Increment of employees salaries leading to higher costs of operations Table 1: Competitive and PESTEL analysis of the Four biggest supermarket in UK. Source: (Guy, 1996). In the next three years, there are various factors that will shape the direction of UK food retail sector as discussed by the section below. 1.0 Distribution and location The removal of trade barriers by countries in order to be inline with the policies of World Trade Organization (WTO) is one of the key aspects that will lead to the expansion of UK supermarkets in many countries within Europe and outside. As a result of the expansion, the sector will be characterized by stiff competition as the companies aim at expanding their current market share. 2.0Product rebranding and diversification The domination of Tesco in the UK food retail sector is an aspect that will propel other companies to emulate brand rebranding in order to counter attack Tesco marketing strategies. As a result of the stiff competition among the companies in the UK food retail sector, product diversification for example mobile phone services will be adopted by most companies (Porter, 1985). 3.0 E-marketing In order to expand their customer base and improve customer loyalty, UK supermarkets will highly utilize social media such as face book and twitter in their marketing strategies. This will ultimately lead to more sales and high profits for the companies. 4.0 High prices Even though the UK supermarkets will emulate every possible measure to attract more customers, prices are deemed to increase as a result of increased fuel prices in the world market. To avoid loss of customers, most companies will improve the quality of their products in addition to expanding corporate social responsibilities as an avenue of appreciating their consumers. Reflective review as an appendix 1. In my efforts to effectively organize for this course work, I keenly evaluated the aspects that an organization should adopt in order to have a change in the management. In addition, I noted that external factors such as economics, environment and social aspects have an impact on the operations of firms. For instance, lowering UK interest rates resulted to a higher demand for Tesco products. 2. One of the difficulties I encountered is to cover all the implications of the PESTEL on each of the four UK companies within a word limit of 1000 words. I overcame this problem by using a table that depicts the most important effects of the PESTEL factors on each of the four companies 3. Despite the limitation in terms of the number of words, I used appropriate and current references that can be traced. I also made efforts to cover the learning outcomes as outlined by this unit. In line with the academic requirements, I used well referenced Harvard style in order to provide a research that is business focused. 4. From the course I have learned that proper management of information is vital especially when analyzing the implication of model such as PESTEL on the performance of companies. This is due to the large amount of information that is covered by the model. Similarly, I learned on the importance of diagrammatic representation of information. For example by the use of tables in comparing the various strategies adopted by companies within the same industry. 5. If given another opportunity to redo the course work, I would narrow my research to include Tesco and ASDA since they are major players in UK food retail sector that have significant implications on the entire industry. I would also undertake research in various financial aspects and investment portfolio that have resulted to an increment of revenue and profits for Tesco and ASDA. This means that I will need a minimum of 3000 words to write the whole paper. References Clarke, I., Bennison, D and Guy, C. 1994. The Dynamics of UK Grocery Retailing at the Local Scale. International Journal of Retail & Distribution Management, Vol. 22 Issue 6, pp.11-20. Flavián C., Haberberg A. and Polo Y. 2002. Food retailing strategies in the European Union. A comparative analysis in the UK and Spain. Journal of Retailing & Consumer Services, Vol. 9 Issue 3, pp.125-138. Graiser A. and Scott T. 2004. Understanding the Dynamics of the Supermarket Sector. The Secured Lender, Vol. 60 Issue 6, November/December, pp.10-14. Guy C. 1996. Grocery store saturation in the UK - the continuing debate, International. Journal of Retail & Distribution Management, Vol. 24 Issue 6, pp.3-10. Porter, M. 1985. Competitive Advantage. New York: Free Press. Roger, B. 1996. Corporate Strategy and Business Planning. Pitman Publishing, London. Read More