Analyzing the Competitive Environment of Greggs Bakery

Greggs bakery, a major British bakery chain, has been significantly impacted by external environmental factors, leading to high levels of competition that pose obstacles to its growth, expansion, and success. To stay ahead, Greggs has adopted a cost leadership strategy, striving for competitive advantage.

Understanding
organisation
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TABLE OF CONTENTS
Introduction .....................................................................................................................................3
External environment analysis and factors affecting business ...................................................3
Competitive environment of bakery industry..............................................................................4
Greggs bakery chosen competitive strategy ...............................................................................4
Stakeholders of Greggs bakery....................................................................................................6
5 Swot analysis of Greggs bakery................................................................................................7
Conclusion ......................................................................................................................................9
References......................................................................................................................................10
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INTRODUCTION
In modern era, understanding the external and internal factors have become very essential
for the growth and success of any organizations. Further they are required to form effective
strategies and action plan after the assessment of internal and external factors. This report is
based on Greggs bakery which is a UK based producer of bakery products. The report
demonstrate external factor that are affecting the organization. Further it reflects the competitive
environment in bakery retail sector. The report also presents SWOT analysis of the organization.
External environment analysis and factors affecting business
Every business organization is affected by some of the factors which are outside the
business (Jaros, 2010). Further these factors affects the sales, profitability, activities and
operations of companies. Some of the key factors are mentioned below as:
 Political factors- The organization is greatly affected by any kind of change in the
political environment of UK. Furthermore, regulations of local authorities has also
affected the operations and activities of the business (Jones, 2010). Employment related
laws has forced Greggs bakery to us fair practices for recruitment and employments.
These practices are related to working hours, working environment and pay scale. On the
other hand, any kind of change in political parties also affects the organization as new
parties bring new budget and tax rates with them.
 Economic factors- Greggs bakery is also affected by the economic conditions prevailing
in the country. The recession has lead to decline in sales and profitability of the
organization as in such situations people were not available with adequate money to
spend on bakery products (Khare, 2013). The increases in rates of VAT and Tax as also
affected the entire pricing policy of the bakery. Other than this, when the price of wheat
rises then the overall cost of productions rises. In such situation the organization is
required to charge high prices which automatically lower down its sales.
 Social factors- The operations and activities of Greggs bakery are also affected by the
changing trend and taste of people in society. Now people are becoming more and more
conscious regrading their life and health. Further they have started to consume more
healthy and nutritional products (Kuipers and et. al., 2014). This has lower down the sales
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of the organization to a great extent. The trend of consuming bakery products such as
bread is declining very fast and it is a major threat.
 Technological factors- Greggs bakery has been affected by the changes and innovations
in technology in a negative aspect. With the increasing use of internet among people,
many businesses have started to sell bakery products online (Noad and Rogers, 2008).
This has lower down the sales and profitability of businesses such as Greggs bakery
which operates via physical stores.
Competitive environment of bakery industry
The competition among businesses that operates in bakery industry is very high. Greggs
bakery has more than 1600 outlets all across the country and it serves sweet pastries, rolls and
sandwiches to people in market (Welcome to our family, 2015). Further it faced main
competition form Tesco and Whitbread Plc. Tesco has the highest market share whereas
Whitbread is Behind Greggs bakery in terms of market share (Paddison and Calderwood, 2007).
Further the company is trying very hard to gain advantage over its major competitors.
Greggs bakery chosen competitive strategy
The bakery industry of UK is highly competitive as there are many large and small
market players which are competing with each other to gain high market share. The competitive
analysis of bakery industry using porter five force model is mentioned below as: Competition among rivalries- In last one decade, the competition among businesses
operating in bakery industry of UK has become very intense. There are various kind of
small bakeries which are established within different localities of the country. The
business compete mainly on the basis of quality, price and product differentiation (Van
de Ven and Sun, 2011). Threat of new entry- The barriers on the new entry of businesses in bakery industry is
very low. One of the main reason why small firms have not problem in entering this
industry is that the capital required to operate is very low (Jaros, 2010). Along with this,
the new businesses are required to establish a good and effective channel of distribution
in order to grow and become successful.
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 Buyers- There are various buyers of bakery products such as individual's, chain of hotels,
supermarkets and grocery stores. Even if the buyers are in large volume, the businesses in
this sector are not able to make adequate revenues and profits. The treason behind this is
that there are many players in the market (Kew and Stredwick, 2005). The power of
buyers is very high in bakery industry of UK which means that the buyers have command
over price and discounts. Suppliers- The suppliers in bakery industry do not have high power and the reason behind
this is that the market of businesses is very well developed. Further most of the time,the
industry is affected by any kind of changes in prices of raw material such as wheat and
sugar (Fernando, 2011). These changes are not because of negotiation of suppliers rather
they are due to change in demand and supply at global level. Substitutes- In recent years there has been various kinds of substitutes developed for
bakery products. Some of the most common substitutes includes rice and breakfast
cereals. In order to discourage people in market to use less of substitutes, the
organizations in bakery industry try to lower down the entire cost of production so that
they can sell products at low prices.
Greggs bakery chosen competitive strategies
The bakery industry has become highly competitive and in order to gain advantage over
other market players, the businesses are required to adopt competitive strategies. There are
various kinds of generic strategies which has been developed by Porter (Ward and
Lewandowska, 2008). Furthermore these strategies allows companies to gain advantage over
their competitors. The strategies are mentioned below as: Cost leadership- As per this strategy, businesses aims to become a low cost producer in
the entire industry. By lowering down the cost, companies are able to sell products and
services at cheaper prices as compared to what there competitors are offering (Li and et.
al., 2010). This encourages people in market to choose products offered by one particular
company over others. Differentiation- According to the strategy of differentiation, businesses try to provide
some unique and different kind of products to people in market. competitive advantage is
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obtained by offering the product which no other market players in the same industry is
offering.
 Focus- In this strategy businesses try to focus on satisfying the need and demand of a
specific market segment (Suppiah, 2011). Rather than trying to satisfy the needs of entire
market businesses look for one particular segment.
Greggs bakery has adopted cost leadership strategy in order to gain competitive
advantage over its rivals. It has implemented new strategy which helps in manufacturing
products at low cost. With the help of this, the company is able to offer bakery products to all its
customers at low prices as compared to its major competitors. The company has not adopted for
the strategy of differentiation or focus because it is very difficult to offer unique products in
market. On the other hand, in the strategy of focus the company was required to offer products to
one particular market segment (Johns, 2006). In case if the taste and trend of such market
changes then the organizations needs to bear additional cost to meet the changing needs.
Therefore, with the help of latest technology and preferring access over raw material, Greggs
bakery has adopted the strategy of cost leadership in order to gain competitive advantage over its
rivals.
Stakeholders of Greggs bakery
Stakeholder is defined as a party or a person which have any sort of direct or indirect
interest in a business. Every organization weather small or large have some internal as well as
external stakeholders. The major stakeholders of Greggs bakery are stated below as: Owners- These are the people who have started Greggs bakery and are responsible for
formulation of strategies and action plans. These are the stakeholders which have high
power and put their best efforts in the satisfaction of Greggs bakery's aim and objectives.
(Paddison and Calderwood, 2007) Managers- The managers are the one which are taking care of its all operations and
activities. Further they act as a medium between owners and employees and have the task
to implement the strategies and policies framed by owners (Noad and Rogers, 2008).
Managers are the people with high power and the organization needs to provide enough
work to these people in order to make them satisfied.
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 Employees- All the workers are also termed as an important internal stakeholders of the
company. In addition to this, it is only because of the hard work and efforts of employees
that the Greggs bakery is able achieve some of its short and long term objectives
(Kuipers and et. al., 2014). These are the people which have less power but are interested
in accomplishment of the aim and objective of organization. Greggs bakery needs to talk
with these people at regular intervals in order to make sure the no issue arises. Suppliers- The suppliers are the external stakeholders of the organization which suppliers
different type of raw material. The organization has always been able to carry out good
relationship with suppliers. The results of this is that Greggs bakery is able to supply
quality products on time to all its customers (About us, 2015). These people also fall
under the category of low power and interested people. Greggs bakery needs to
communicate with these people at regular intervals. Customers- The customers are termed as one of the biggest and the most important
stakeholder of the brand. Further the customer includes hotels chains, grocery stores,
supermarkets and individuals (Hur and et. al., 2008). These stakeholder have high power
but are less interested in activities and operations of the organization.
 Government- Government is also considered as one of the major stakeholders of the
organization. Further Greggs bakery needs to ensure the fact that all the polices and rules
framed by the government are addressed in best possible manner. It fall under the
category of less power and less interested people. The company is required to monitor the
plans and polices framed at regular intervals.
The key players of Greggs bakery are its customers, employees and suppliers. It is
required by the organization to ensure the fact that all its stakeholders are satisfied at regular
intervals and in best possible manner (Sun and Zheng, 2006). For instance the customers wants
best quality of products at reasonable prices. The employees wants adequate opportunities for
growth and development along with better working environment.
5 Swot analysis of Greggs bakery
The model of SWOT analysis is used to identify the major strengths, weakness
opportunities and threats of a particular organization. The model for Greggs bakery is presented
as:
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Strength
 Low cost operator Strong distribution network
Weakness
 Ineffective promotional tools
 Very less number of stores in UK
Opportunities
 Ability to serve and satisfy the need
and demand of different people
 Can open online store
Threats
 Rising cost of production
 Intense competition among the
businesses within industry
Strengths Low cost operator- One of the major strengths of Greggs bakery is that it is a low cost
operator in the industry. With the help of technology and suppliers, the company has been
able to lower down its entire cost of production. The results of this is that it is able to
offers bakery products at low prices as compared to its competitors. This has helped in
getting competitive advantage and has emerged as one of the biggest strength of the
bakery.
 Strong distribution network – The organization has also implemented a strong network of
distribution. Its customers includes hotel chain, supermarkets and various grocery stores.
Thus it is very important for the bakery to make sure that all its products reaches to the
customer on time (Alexopoulos and et. al., 2009). Any kind of delay means that it will
force them to choose the products offered by other bakeries. Greggs bakery has
developed effective distribution networks which has also become its major strengths.
Weakness Ineffective promotional tools- The promotional tools which has been used by the brand
are ineffective and it has proved to be one of its major weakness. It is still relying on old
promotional tools such as word to mouth publicity and it is not effective in modern era.
 Less number of stores- Stores of Greggs bakery are very less in UK and it somewhere or
the other has become weakness of the brand (Hur and et. al., 2008). This has restricted
the market share and customer base of the organization.
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Opportunities Ability to service and satisfy the market demand- Greggs bakery is capable of satisfying
the need and demand of different people in market. It has opportunities to grow and
develop in more effective manner and can increase its total number of stores.
 Online store- With the growing use of internet among people, the company has
opportunity to introduce its retail bakery stores (Van de Ven and Sun, 2011). It will assist
in lowering down the overall cost of production as Greggs bakery wont be required to
bear cost such as rent, electricity and maintenance.
Threats Rising cost of production- The rising cost of production has emerged as one of the
biggest threat of Greggs bakery. Further increasing prices of sugar and wheat has lead to
rise in the entire cost of production.
 Intense competition- The competition among businesses operating in bakery industry of
UK is very intense and it has also become a major threat to the organization (Johns,
2006). High level of competition is creating obstacles in the growth,expansion and
success of Greggs bakery.
CONCLUSION
From the above report it can be concluded that Greggs bakery has been affected by
various external environments to a great extent. Further it can be also concluded that the bakery
industry is highly competitive and it is not easy for organizations to survive. Greggs bakery has
adopted for cost leadership strategy in order to gain competitive advantage.
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REFERENCES
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Ward, S. and Lewandowska, A., 2008. Is the marketing concept always necessary?: The
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Online
About us. 2015. [online]. Available through: <https://www.greggs.co.uk/>. [Accessed on 8th
December 2015].
Welcome to our family. 2015. [online]. Available through:
<http://www.unc.edu/~wfarrell/SOWO%20874/Readings/orgtheoryandbehavior.htm>.
[Accessed on 8th December 2015].
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