Environmental Analysis of Supermarket Industry in the UK

Abstract：The UK supermarket industry has changed its characteristics over the last twenty years and has developed as a distinctive system of retailing in the UK. Based on the secondary research， the four key issues from external business environment such as planning regulation， value added tax， lifestyle change and technology innovation have been examined and the competitive intensity within the industry has been analyzed as well with high barrier for new entrants， low bargaining power of suppliers， medium power of customers， medium threat of substitutes and intense competition. The four largest companies have been dominated the industry with their own distinctive strengths. Furthermore， industry trends in the next five years were predicted at the end of this paper in order to contribute to the scenario planning.

Keywords：Business environment；Supermarket；Retailing

Introduction

With the society and economy development， supermarket industry has dramatically changed in the UK during the last two decades. A number of factors from internal and external business environment have resulted in a new market structure and some distinctive phenomenon in the UK supermarket industry.

A supermarket is defined as a self-service grocery store providing a wide range of products and services such as food， beverage， clothing， household products， mobile phone and insurance， generally with a space of more than 15，000 square feet （Encyclopedia Britannica， 2009）. According to Griffiths1 （2009）， there are currently eight large grocery retailers in the UK， which are Tesco with 31% market share in 2008， ASDA （16.5%）， the Co-operative （4.3%）， Morrison （11.5%）， Sainsbury’s （16%）， Waitrose （3.8%）， etc. These sets of firms account for an important proportion of food sales such as baked goods， dairy products， meat and also have increase in the sale of non-food product lines covering OTC pharmaceuticals， clothing， electrical products， music and insurance. Generally， supermarkets use a common fascia with a franchise mode， membership agreement or alternatively or they may be directly owned by the symbol groups. They are aiming at the shoppers in the UK covering men， women and kids who require different items from different sectors such as food sector and non-food sectors.

Aims and Objectives

This report examines the external environment and competitive intensity of supermarket industry in the UK based on the secondary data. The competitive advantages and characteristics of the three leading companies in the UK such as Tesco， Sainsbury’s and Asda would be analyzed as well. In particular， the future of the industry in five years can be covered for the scenario plan to some extent combining with the environment scanning.

External Environmental Analysis

Planning Regulations

In 2000， the department of the Environment， Transport and the Regions （DETR） stated：

‘The government remains firmly committed to the objectives of PPG6 （Planning Policy Guidance No.6） which seeds to sustain and enhance the vitality and viability of our existing city， town， district and local centers and to make them the focus for retail investment’.

Value Added Tax

In times of recession， government had implemented value added tax with 15% from December 2008 to January 2010 in order to boost consumer spending but after Jan. 2010， VAT had returned to 17.5%. However， the new coalition government， in its June 2010 budget， announced an ‘unavoidable’ rise in VAT to 20% from January 2011 （Capstick， 2010）. According to BBC news1 （2010）， Tesco has been accused of raising prices of certain items ahead of tax rise. Thus， thousands of products will have increased in price， which would put further pressure on cash-strapped consumers. Consumers would probably buy more own label products instead of branded ones and common food instead of organic food due to the increasing price of items in supermarkets.

Modern Life Style

With industries and technologies development in modern society， women are increasingly required in the workplace， which lead to the society life change. According to Capstick （2010）， the busy lifestyles and demands on the leisure time for most shoppers would contribute to the convenience of one-stop supermarket in the UK. Supermarkets can provide free parking and competitive price for convenience. As for the one-stop shop， most things can be found under one roof. Therefore， retail sectors can be widely developed such as clothes， households， financial service and pharmaceutical products. The opening hours are long with shift workers.

Online shopping is another aspect because of lifestyle change， which meets the requirements for some people who prefer shopping at home， especially for those with short of time. There is a new idea about online shopping developed by Tesco as an example. According to Guardian news （2010）， Tesco has tried to provide the first drive-through supermarket service in August， 2010， which is aimed at customers who want convenience online shopping but cannot afford the time to stay in for their groceries to be delivery. The service can be ordered online and the goods can be collected in two-hour slot.

Technology Application

Conclusion

Overall， supermarket industry remains strong in the UK with a high growth rate. The key issues such as regulation permission， increasing value added tax， modern lifestyle change and technology innovation could affect the whole industry to some extent. After the turbulent years， the supermarket industry in the UK has become relatively stable， simple but dynamic nowadays. The industry has been growing with high barrier to new entrants， low power of suppliers， medium power of customer， neutral threat of substitutes and intense competition. The big four companies have dominated within the industry with their unique advantages. Furthermore， during a period of 2015-2020， non-food lines for one–stop stores could be deeply required with an expanding market. Online delivery could continue to highlight and upgrading technological systems could be invested for a long term strategy.

References

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作者簡介：

李田（1985-），女， 漢族， 四川溫江人，碩士研究生，就職于西安外國語大學商學院，研究方向為國際商務。