UK Supermarket Price War Analysis

This assignment delves into the effects of a price war within the UK supermarket sector. It requires respondents to evaluate the advantages and disadvantages for customers stemming from competitive pricing. Furthermore, it probes the impact on organizations, including sales, profits, supplier relationships, employee compensation, and training programs. Participants are also asked to assess the competitive landscape, brand loyalty, customer demographics, product differentiation, and the overall sustainability of businesses amidst price wars.

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An analysis of Price war among UK supermarkets and its impact on business practices and customer
loyalty.
Dissertation submitted in partial fulfilment
for the award of Msc Marketing
at the University of Ulster, London

DECLARATION
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I hereby declare that, with effect from the date on which this dissertation is deposited in the
library or other department / school / faculty of the University of Ulster, I permit the
dissertation to be copied in whole or in parts without reference to myself, in the
understanding that such authority applies to single copies made for studying purposes and
which are not published. An additional condition is that the acknowledgement is credited to
the actual source.
This restriction does not apply to the copying or publication of the title, abstract or
introduction to this dissertation. It is a condition that anyone who consults this dissertation
must recognize that the copyright rests with the author and no quotation from the
dissertation or information derived from it may be published unless the source is properly
acknowledged.
Signed ............................................................
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Date :
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ACKNOWLEDGEMENT
I would like to thank all those individuals who have supported me in conducting the present
research and arrive at a valid conclusion. First of all, I would like to thank my supervisor for
giving me an opportunity to carry out the present research. Apart from this, I am thankful to
my friends and family members who have supported me at the time of data collection and
analysis as without their support it was not possible to carry out the entire research and
accomplish its aim.
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ABSTRACT
Price wars are the facts of the today’s retail industries. The main purpose behind
carrying out the present research is to analyze the impact of existing price war among the
retail supermarket industry of the UK . This paper will seek to understand on how the the
discount retailers like Aldi and Lidl have initiated price war and how it has effected the giant
retailers like Asda and Tesco business operations. The report focuses on conducting the
research through the medium of primary and secondary research. It was assessed that there
has been a huge shift in the industry, a change in the customer’s mind and developments in
the market, which has basically led to increase/decrease in the sale of the few specific brands
in the UK supermarket industry.
It was further noticed that the entry of few German based discounted retailers, such
as Lidl and Aldi has also exaggerated the whole supermarket industry of the nation and
affected Tesco and ASDA. So, the present study investigates regarding in terms of how sales,
profits and other associated segments of ASDA and Tesco has been affected due to these
factors and how it have effected the customers buying behaviour or loyalty. For the purpose
of carrying out the present study, the data have been collected from the managers of Tesco
and Asda through purposive sampling method. Apart from this, the quantitative technique of
data analysis has been used to depict the results of the study.
It was concluded post study that there are the few areas like employees, suppliers,
customers, sales, profits and market share, which has been adversely affected due to the
situation of price wars. Also, it was suggested that Asda and Tesco should work and make
efforts to create innovative products and services and for sustaining well in the highly
competitive marketplace to retain the loyal customers. Improving the price image without
doing much harm to th product quality and services and focusing on savings for customers
will help in sustainable profit and to fight the ongoing price war.
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Table of Contents
ACKNOWLEDGEMENT 3
Chapter 1- Introduction 6
1.1 Background of the study 7
1.2 Rationale of the study 9
1.3 Research Aim, objectives and questions 11
1.4 Potential significance & Importance of the study 11
1.5 Analysis and framework 12
1.6 Structure of the dissertation 13
Chapter 2- Literature review 15
2.1 Concept of price wars 15
2.2 Importance of Customer Loyalty 17
2.3 Managing Customer Relationship 20
2.4 Impact of price wars on customer loyalty 21
2.5 The concept of retail marketing mix 23
2.6 Impact of German discount retailer on Asda and Tesco 24
2.7 Analyzing retailer pricing strategy 25
2.8 Impact of price wars on staff 26
2.9 Impact of price wars on customers spending 27
2.10 The future of discount retailers 28
2.11 Industry Analysis & Industry Trends 29
Chapter 3 Research Methodology 31
3.1 Introduction 31
3.2 Research design 31
3.3 Research Philosophy: 32
3.4 Research Approach 33
3.5 Data Collection 34
3.6 Data Analysis 35
3.7 Sampling 36
Chapter 4-Data analysis 37
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4.1 Introduction 37
4.2 Data analysis of Asda 37
4.3 Data analysis: Tesco 56
Chapter 5- Conclusion and recommendation 65
5.1 Conclusion 65
5.2 Limitation of the study 68
5.3 Recommendations 69
References 72
Books and Journals 72
Online 74
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List of Figures:
Figure 1 Existing level of competition in the UK supermarket industry.................................40
Figure 2: Effect on Loyalty of Customers.................................................................................41
Figure 3: Factors affected competition....................................................................................41
Figure 4: Effect on Price Behavior of Food Retailers.............................................................42
Figure 5: Price Strategy Adopted by Different Retailers.........................................................42
Figure 6: Result of Price War on Employee’s Turnover..........................................................43
Figure 7 : Challenges in terms of increasing rate of customer loyalty....................................43
Figure 8 Result of price war and effect on the customers........................................................44
Figure 9 Effect of price war on the sales, margin and subsequent profit.................................44
Figure 10 : Impact of German’s Retailers on Competition......................................................45
Figure 11: Effect on UK’s Retail Segment..............................................................................45
Figure 12 Existing level of competition in the UK supermarket industry is assessed by
TESCO employees...................................................................................................................49
Figure 13: Effect on Loyalty of Customers...............................................................................49
Figure 14: Factors affected competition..................................................................................50
Figure 15: Effect on Price Behavior of Food Retailers...........................................................51
Figure 16 : Challenges in terms of increasing rate of customer loyalty..................................52
Figure 17 Result of price war and effect on the customers......................................................52
Figure 18 Effect of price war on the sales, margin and subsequent profit...............................53
Figure 19 : Impact of German’s Retailers on Competition......................................................54
Figure 20: Effect on UK’s Retail Segment..............................................................................55
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Chapter 1- Introduction
1.1 Background of the study
The competition amongst the businesses operating in retail supermarket in the UK has
become furious nowadays. There are many small and big market players which are trying
their level best to grab the highest market share. The companies are trying to attain brand
value by the way of developing and employing the aggressive marketing strategies for
attracting the customers and gaining the advantage over other market players (O'Hara, 2014).
The use of modern marketing tools and techniques has improved the retailer’s vision for the
supermarkets with an aim to enhance the awareness among people in the market.
But in the last few years, it was noticed that high or intense competition is a big threat
to any organization which holds a direct impact on key 4P’s of the marketing mix, such as
product, price, place and promotion. It can be evidently seen that there was a requirement by
the supermarket retailer’s operating in the UK to lay strong emphasis on the quality of
products and services which they delivered. Nevertheless, it can be argued that in situations
where the satisfactory products are not offered, there are opportunities where a business may
start facing problems associated with customer retention and low market share.
It is important by the supermarket retailers to adopt an adequate pricing strategy while
carrying out their operations. Low prices can help in attracting more customers, whereas the
high prices will emphasize clearly on the premium quality of products and services delivered.
The issue here is related to what kind of pricing strategy should be obtained to gain higher
market share and advantage over the market players. In order to take care of the overall cost
of operations, supermarket retailers have established their own manufacturing units. It can be
said that, up to a certain extent, it has helped the retailers to enhance their existing profits.
There was a time, when the UK's retail supermarket was mostly dominated by the players
such as Tesco and Asda.
Nowadays, these brands are facing intense competition from German based discounted
retailers which are Aldi and Lidl. It is also noticed that during the initial stage, the price war
was existing between market players such as Tesco, Asda, Morrisons and Sainsbury’s.
Moreover, the problem here is not linked to attracting customers towards the store, but the
main issue is to encourage the customers to spend their money and purchase products/
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services (Ruddick, 2015). In the last few years, German discount retailers such as Lidl and
Aldi has emerged as the biggest competitors of UK based supermarket retailer (Dentor,
2016). The reason why customers are getting more attracted towards these stores is
considered as their discounted pricing strategy.
In the UK, a price war has been developed wherein all the businesses in retailer supermarket
are competing with each other on the basis of their pricing strategy. Brands such as Asda and
Tesco have reduced their prices in order to sustain in the market and compete with players
such as Lidl and Aldi. This was considered as a very good news for the people especially who
fall under the category of LIG (low income group), but it has resulted in creating several
kinds of issues for the retailer on the other hand. For illustration, brands are required to offer
products and services at low prices by reducing their cost of operations. This has created
challenges in carrying out the smooth flow of operations along with attaining the high growth
rate (Clinton, 2015).
In the last few years, brands such as Tesco and Asda has witnessed fall in existing market
share and sales because of intense competition from Lidl and Aldi (Quinn, 2015). In addition
to this, German based supermarkets have also expanded their operations and activities in the
last few years. This has resulted in creation of prices wars where businesses are competing
with each other to gain high market share on the basis of pricing strategy.
The stellar concert of the discount chains is encouraging major UK supermarkets to
encounter it out on the price front of late, while the consumers remain confused about the
validity and, at times, the sincerity of promotional tactics. The country’s supermarket retailer
was trying to optimize their promotional strategies for eventually driving their profit
(McShane, 2016)
It was noticed that the Britian supermarket has considered this as the foremost and the most
lowest sales drop in the last 20 years in the food prices. The aggressive price war has slashed
the amount customers spend on the groceries and affected the customer loyalty. Though, they
have faced and suffer from a decline in the UK grocery sales by value. There are forged price
wars, and this was considered as a biggest price war for the customers. It was also noticed
that the principal grocers were “losing the market share hand over fist”. The whole big
chains have pledged to spend billions of pounds for cutting prices in an effort for stemming
the growth of German discounters Aldi and Lidl. The decline in food price inflation has also
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contributed to the retrenchment. The decline in sales in grocery market has become a big
concern for the retailers as they were gearing up for the upcoming year.
In fact, The fight for the biggest share of sales has ignited a price war, which reflects an usual
basket of the daily goods such as milk, bread and vegetables, which was now costing 0.4%
less than it was in the time last year. This was a very bad news for the retailers, but good
news for the shoppers as the price depreciation was projected to be continued in the year
2015 as well. A research carried by Goldman Sachs also reflected that 20% of the UK
supermarket space were superfluous to the necessities following the rise of discounters
including Aldi and Lidl, the ruin of the weekly shop and the increase in online grocery
shopping (Euro Monitor, 2017).
The UK grocery market shown worth £150.8billion for the calendar year 2010 which have
shown an increase of 3.1% in the year 2009. The stores in the UK are split into four
categories, such as Convenience Stores, Traditional Retail, Hypermarkets or supermarkets
and online channel. The UK's four biggest retailers (Asda, Sainsbury's, Tesco and Morrison's)
were holding over 70% of the grocery market (Kanter, 2016). This situation has made the
market situation in an oligopolistic market in nature. The Oligopoly market situation occurs
when a few firms allocated a huge percentage of the industry. Given that, the market is
indomitable by the key 4 players, they are likely to struggle on the cost and non- price
activities whereby either being interdependent or dependent on price and output. This may
create obstacles to the entry which in turn may affect the miniature players in the market by
reducing the range of shops such as professional stores or sovereign small grocery shops.
1.2 Rationale of the study
It can be stated that at the time of formulating pricing strategy or while deciding the prices of
products and services, there are a large number of factors which needs to be taken into
consideration. This includes cost of operations, product’s quality, market demand, customer
buying behaviour and level of competition existing within the marketplace. Any kind of
changes in prices of products and services has a direct impact on the sales, profits and market
share of a particular business enterprise. The main reason behind carrying out the present
research is to identify how price war prevailing among UK supermarket or retail industry has
affected companies such as Asda and Tesco (Fairtrade UK, 2014)
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It has been observed during the study that the sales of Asda and Tesco has dropped down
drastically, but at the same time Lidl and Aldi's sales have been improved drastically. This
means that the German based supermarkets are forcing these brands to lower down the prices
of their products and services in order to attract more customers and stay competitive in the
marketplace. The present research study explores the impact of price wars on brands like
Tesco and Asda in the UK.
With the key issues written above, the focus on the UK food retail sector and specially of the
loyalty programs tends to formulate a good rationale for the project. This may probably lead
to fascinating insights to the collision of the loyalty programs on the consumer perceptions in
a better aggressive sector. This reflects that each advertising initiative would create a big
impact on the performance of the businesses.
For this purpose, the researcher is required to carry out in-depth investigation and analysis of
the varied pricing strategies which has been adopted by different supermarket retailers
operating in the UK. Another key rationale behind carrying out the present research is that till
now very few studies have been carried out on the price wars among retail supermarkets in
the UK. There are certain studies done specifically on the price wars, but they don’t normally
put a strong emphasis on the impact of the wars basically on the overall operations of
supermarket retailers in the country and what factors have led to the creation of such situation
in the UK (Gunnarssona, 2015)
Another key reason for carrying this project is that it doesn’t seem that anybody has done
critical research on the specific topic and outcome occurred due to this situation. In terms of
gaining the detailed information on the subject, the review of associated literature on this
issue has facilitated premature indications, which was resultant as the outcome of the project.
Also, literature review has helped in collecting the relevant contribution’s of the information
made by the scholar, so that the existing knowledge in the subject matter can be obtained and
analysis can be done in an effective manner. Due to the reason of limitation in the research
work, it was noticed that directly handling the issue of loyalty card programs, such as club
cards was not included in the report to assess the effect of the price war on the customer
loyalty (Watson, et al., 2015)
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Thus, the overall reason behind carrying out the study is to research in detail to assess the key
reasons and key impact, including a few recommendations to the retailers in the industry
which can be used if in case the same situation occurs again.
1.3 Research Aim, objectives and questions
The aim of the study is to “Analyze the impact of price wars among the supermarket retailers:
Tesco and Asda”. The study had the following objectives to accomplish to carry out the
study:
 To analyse the impact of “Germany discount retailers on Tesco and Asda” .
 Identify and analyze the retailer’s pricing strategy. To investigate the impact of price wars on customer loyalty. To analyse the effect of price war on employees.
1.4 Potential significance & Importance of the study
The present research was carried out study on academic and organizational level. If we see
on an academic level, the study is important because it will give a clear idea about the fact
that how the prices has affected the activities and operation of any business enterprise. This
research can be used by other scholars in order to conduct studies related to the current topic
under investigation. It will support in enhancing the existing knowledge of the scholars so
that it becomes more clear and aware about the significant impact of price wars. The
researcher has identified a gap between the previous carried out the researches and on the
basis of that, the present study has been conducted to fill those gaps and to help in devising
better outcome of the research. Basically, it has been noticed that the earlier researches
carried out on price wars were basically linked with price competition (Beaumont et al.,
1978), buying behavior and strategies which can be used for getting competitive advantage
over other market players. The present research will support organization to identify what
kind of impact price wars may have on an entire business practices and operations. Thus, it
will help the businesses in formulating the best possible and most effective strategies related
to the prices to satisfy customers.
1.5 Structure of the dissertation
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Every researcher is required to develop a suitable structure which can provide the reader a
detail information or direction regarding how the entire research is being conducted. The
structure followed for the dissertation is listed below as:
Chapter 1- Introduction: It is the first and foremost chapter of every dissertation, which
gives the empirical and clear idea about the topic under investigation. This chapter is
important, because it supports for developing the interest of readers in a particular study. The
chapter includes various areas such as overview, rationale, aim, objective and significance of
the work carried out.
Chapter 2- Literature review: This chapter is important because its supports in developing
the appropriate knowledge about the topic which is taken under investigation. Here, the work
of another researcher is presented in order to acquire in- depth knowledge about the topic.
The critical analysis of the work of other scholars is also carried out in this section.
Chapter 3- Research methodologies: The chapter of research methodologies basically
consists of tools and techniques which are basically adopted by the researcher to collect the
data and obtain appropriate findings accordingly. The use of suitable research techniques also
supports in arriving at valid conclusions.
Chapter 4- Data analysis: It can be termed as one of the most important chapters of research
as it highlights the evaluation of raw data with the help of various tools and techniques. It can
be stated that the quality of data analysis has a direct impact on the overall findings of a study
carried out.
Chapter 5- Conclusion and Recommendation: It is the final chapter of dissertation in which
a suitable conclusion is being derived on the basis of entire study, analysis and research
carried out. On the basis of conclusion, there are some recommendations which are provided
to businesses such as Asda and Tesco.
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Chapter 2- Literature review
Introduction
The literature review is significant chapter of the research. It plays a very important
role in acquiring the secondary research and in-depth knowledge about the particular topic
which can be selected for the investigation. The chapter is also important because it supports
in accomplishing the aim and objectives of research by getting aware of the views and
opinions of other scholars. Here, analysis of existing literature is carried out in order to attain
the desired outcomes. This section also explores the impact caused due to the price wars in
the UK supermarket among on the loyalty of customers. It basically highlights the
information or opinion of different scholars, professionals or management philosophers
regarding a specific topic.
2.1 Concept of price wars
Metzger (2014) found that in the recent years, the price competition among retailers has
become vivid. The retail industry has witnessed obsessions of customers as well as
organizations towards the battle for lower prices. These have triggered not only long lasting
price wars, but also have a dramatic impact on the major market players. Pepe et al. (2011)
stated that a price war is a state or situation which is characterized by the market players
struggling to cut down the prices of goods and services. This indicates the efforts made by the
organizations to offer lower prices to the customers so as to win them. The authors found that
when the prices are lowered by a competitor, the others also follow the same path to match
the price cut. When the prices are further reduced, there takes place another round of
reductions which can threatens to reshape the landscape of sumermarkets (Felsted, 2014).
Grewal et al., (2010), found out that there are various reasons behind price wars. Product
differentiation is one of the reasons behind price wars. There are some products which are
considered as merely commodities. In such situations, price becomes the main competing
factor. Another reason is penetration pricing. There are many organizations that deliver their
customers with similar products and services. Different set of strategies are adopted in order
to make sure that more and more customers are attracted. A new entrant in the industry
adopts penetration pricing strategy to get established in the marketplace. According to
Haddock-Millar and Rigby, (2015) process optimization is a factor that results in price wars.
Along with this, predatory pricing also leads to this situation. It can be analyzed that in the
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retail industry, when a competitor targets a particular product, they sell its alternative at lower
prices. This is done in order to gain market share. Smith (2010) asserted that there are various
levels of distribution channel in which a price war can emerge. Hence, these may impact the
firms as well as the customers in different ways.
As per the views of Yoo and Lee (2011), price wars are good for consumers in the short run
as they get advantage of the lower prices. However, it can be critically analyzed that it is not
advantageous for the companies in the industry. This is because the profit margins of these
firms are reduced due to lower prices, which acts as a threat to their survival. But, Shah,
Kumar and Kim (2014) argue that price wars can be beneficial for the dominant firms in the
industry in the medium or long term. However, it can be critically evaluated that price wars
cannot benefit the firms unless the company that initiates them has cost advantage. As per the
views of Sullivan and Gouldson (2012) price wars result in unsustainable prices.
The objective of the study was targeted to assess the importance of the cards issued by the
supermarkets have a link or relation with the customer loyalty programs. The study also aims
to analyze how the loyalty cards can compare with the other factors which retailers may
adopt to increase the loyalty among customers. This could be applied to increase the
supermarket loyalty.
The other purpose behind the study is to assess how the UK retail supermarket customers can
create a behavior or attitude base loyalty in the mind/nature of the customers who are
basically holding loyalty memberships of the different store in the supermarket (Neville,
2014). There are various other factors, like age dimension within the UK, which had created a
major discrepancy affect on the UK retail supermarket loyalty, thus it is important for the
retailers in the UK to launch and offer various schemes basically for the aim to maintain their
old customers by using various advertising and marketing medium. In this modern world,
firms make sure that they understand the taste and preference of customers. Majority of
people prefer to make use of services that are being delivered to them low cost but at high
quality. Different people have diverse set of perception over price and this can be determined
as an important factor that affects the buying behaviour of customers.
The customer loyalty and maintaining customer have turned into the most essential and
important factor for UK retail supermarkets. This could have been done to sustain the hyper-
competitive retail market created by big giants, such as Tesco, Sainsburys and Asda, which
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they have an approach to the customer’s withholding in a different way and encompass the
success in a different way (Sutton, 2016).
The company Tesco being the first in initiating and running their clubcard scheme has
planned to start loyalty schemes during the situation of price war. The Loyalty programs were
created as a medium to grow in the adverse situation and to basically help the customer’s in
the retail segment of the UK where the other giants were trying to attract though reduced
price strategy for sustaining their customers. The loyalty scheme is basically a marketing
strategy which is extensively being adopted by every second supermarket retailer in the
industry though everybody holds a different agenda behind the execution.
On the whole, the UK Supermarket is basically responsible for 12% of the total expenditure
spent on the food and retail sector. In terms of the Customer Loyalty, it is evident noticed that
it should be strongly used to maintain the old customer’s and generate new leads. This can be
done by introducing new loyalty card/program for the older customers. It is essential to
understand that these programs can help in reducing a bit in the situation of leveraging high
costs. The loyalty programs can act as a key marketing and branding strategy of the major
supermarket chains such as Asda, Sainsburys and Tesco. This will act as a strong tool in the
Marketing Mix concept, which may necessitate the philosophy that the firms should be able
to assess the consumer needs in adverse condition and then make any decisions for satisfying
those needs.
2.2 Importance of Customer Loyalty
According to Kursunluoglu (2014), customer loyalty has been significant for years to gain
sustainable competitive advantage and differentation from the rival companies. Loyalty is
defined as a commitment, the loyal customers doesn’t only spent more on each visit, but also
focus on the strategies to attract new customers. The consistent and repetitive purchases are
the main indicators of customer loyalty which may be generated form the behavioural and
attitudinal aspect. There are certain set of expectations that customers have before their make
purchases. However, when all these expectations are satisfied, then services users become
loyal towards the product or towards the organization.
As per the Rocket Marketing Group, the key concept of the loyalty for the retail supermarkets
is targeted to maintain the customers who are truthful and not only just to promote the repeat
business for the customers by presenting the members with restricted savings, but also
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generated an entirely tied bond which is stronger than the average customer (Behringer &
Filistrucchi, 2011)
The report also highlights the importance and how does Asda may robustly into the picture of
maintaining the customers. It has also been highlighted about the Asda's new customer
loyalty program which endorsed the customers to get extra indulged into the business which
didn't encompass any club cards. It also highlighted about how the Tesco and Sainsburys can
be created customer retention programs and how they have launched loyalty programs to
promote their supermarkets.
Reicheld and Scisser (1990) established that a customer's productivity may enhance with the
extent of they spend with an organization. Because of these factors, like customer base are
increasing widely and are required to buy products in bigger quantities. The author stated
about how the product or service offering can change the customer’s mind and pursue them
to stay loyal with the brand. The report also include focus on the cycle how the customer
turned to be more experienced and how the demands are reduced because of the cost
reduction. The author has tried to highlight the positive word of mouth helps in increasing the
brand image in the market and a concept on how the new customers can be attracted towards
the brand by offering introductory prices and how such strategies can help in maintaining the
long term customers by paying the regular prices. It also includes the emphasis on how a
brand can propagate and convince the customer’s willing to pay high prices for the same
services available in the market at reduced prices (Chan, 2016).
As we know that the prices has a direct correlation with the trust with the supermarket.
Therefore, it was evidently clear that how the loyal long-term customers should be considered
essential to maintain as the key assets for the organization especially in the situation of the
price war.
In the UK retail food supermarkets, due to the price war there was a situation where the
loyalty schemes are becoming powerful technique for enhancing loyalty while acquiring the
customer information’s and data. With the help of loyalty card people tent to make purchases
as for each of the purchases made, there are points that earned and for those point is makes
the purchases made get discounted. It was also mentioned that how the retailers look for
winning and keeping the loyalty of their customers while maintaining the same goodwill and
an insignificant margin of the preference with an incremental shift in buying behavior of the
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customer’s. To assess and carry out the importance, the author highlighted few points to
measure the impact.
2.2.1Behavior of Customers
The key factor or element in the study is to analyze the customer’s needs, make changes in
the product or service offering. Thus, the strategy to devise and maintain a behavioral pattern
is very important to preserve the loyal customers. It is also important to analyze the linkage
association between contentment with the UK retail chain and customer loyalty. The author
suggested to start and basically promote various reward/loyalty programs so that at least it’s
easy for the retailer to preserve and uphold the old customer’s in the situation of the crisis
(Wallace, 2016).
The importance of Rewards is explained in detail how the store can able to maintain the
loyalty of the customers. So, they suggested the marketing mix strategies of these
Supermarkets buying behavior which plays an important role. The retailer should understand
and comprehend the solution accordingly.
 Why the consumers influence the purchases which they make and what are the factors
which affect the brand loyalty?
 What factors may influence the consumer purchase at a specific supermarket and how
do the loyalty programs may affect the same?
 The changing purchasing trends in the society based on the challenging discount
strategies of the consumer prepared in the wake of the recession.
The aim of the marketing strategies by the supermarkets is required to understand how it can
help in analyzing the buyer’s reactions to the firm’s marketing strategy which puts a great
impact on the firm’s success. So, post the research it was concluded that only those
Supermarket retailers can able to survive in the situation of the price war, who basically
strategies competitively and aim to deliver the right “marketing mix”, which is aimed at
creating a strategy for the benefit of the customers by emphasizing on their perception and
behavior.
There are theories that are helpful to make sure that behavior of customers can be
raised in positive manner. In this context, it includes Motivation need theory. This is type of
theory that covers all the essential needs which when fulfilled, customers behavior have
positive preferences. In this context, it includes needs like physiological, love, esteem, safety
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and self-actualization. All these are helpful to consider and understand the basic requirement
of customers and the make changes in the type of strategies that are being adopted by firm
with an aim to develop positive perception towards the purchases that are being made.
▪ Positive Impact on customer perception
The second important factor for the retailer’s is to understand the customer’s perception and
develop the loyalty among the existing consumers. Definitely, it was important that the
loyalty cards basically help in creating a close interface between the retailers and consumers
via loyalty card programs. The importance of such programs has been discussed in detail and
able to facilitate a well- balance to various other initiatives which may lead to increase the
consumer’s loyalty for the retailers, like providing excellent customer service. So, it was said
that merely offering the loyalty programs may not only assist in facilitating a fine return on
the investment made on the initiatives made by the company, but may also assist in
devising/enhancing the store traffic and developing the discrimination among the firms using
loyalty programs effectively with the one who doesn’t run such programs.
It was also mentioned that the potential positive impact of loyalty programs should be
assessed based on the concepts defined by Pfeifer et al (2005) in their research report carried
on the customer lifetime value, customer productivity, and attainment expenditure to grab the
wallets of consumers.
The journal was able to highlight well on the excellent work in recounting the concepts and
bringing the clarity towards the understanding of how the impact of such loyalty programs
can be analyzed. But, the main issue found in the journal is that it didn’t focus ahead of
defining the concepts and requirements of the retailer’s except understanding the behavior the
consumers of the organizations.
2.3 Managing Customer Relationship
Another research journal report, which was focused on the key importance of the customer
relationship management is by Ashton (2005) which basically focuses on the trends which
may impact the business organizations. The impact of the customer relationship management
was explained and considered as the key factor which has been identified for creating the
positive impact on the performance of organizations. The approach and the efforts of the
researcher are proved creditable in order to develop and build the arguments which may
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support the development of the organization's competitive advantages, inclusive of the
customer capital and ways to enhance it.
The key limitation of the research journal report's results is the possible general applicability
of the findings given the limited examples supporting the arguments espoused by the
researcher.
While direct research has been limited on loyalty programs for the food retail sector, there
has been ‘reported' success by utilizing the loyalty programs in marketing initiatives. This has
led a large number of businesses, not only in the food retail sector and not only in the UK, to
begin their own loyalty programs which have helped to increase in the consumers visiting
stores, and increasing the business turnover (Werb, 2007). It has remained to be noticed
whether the positive impact has occurred because of running the loyalty program to the
existing customer to gain their confidence. Developing relationship is possible when firm
have proper analysis of the need and requirement of customers and accordingly they make
changes in their services or product with the help of which the rate of customers satisfaction
can be raised.
There was one more theory which states that by running such consumer loyalty programs not
only help in improving the relationship drivers of the retailer’s commitment, but also follows
the principles related to commitment-
Thus, the crux of the journal states that it is the major duty of the retailer to develop such a
framework which should uphold all the factors for delivering an economic offering, but also
include the resource benefits for the consumers to increase the experience of commitment
done for the customer’s. The loyalty programs basically endorse the benefits which consumer
may get by buying the product from that specific brand. Nevertheless, the research indicates a
level to improve the relationship accessed through company CRM.`
2.4 Impact of price wars on customer loyalty
As per the view of Pepe et al. (2011) customer loyalty can be defined as the situation where a
customer buys products and services of a particular brand irrespective of what other players
in the market are offering. The highest rate of customer loyalty has a direct impact on long
term sales and profitability of any business enterprise. It can be stated that the retail
supermarket industry in the UK is getting more and more intense along with the passage of
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time. Further, intense competition has resulted in creation of price wars which is a big threat
to all the supermarket stores operating in the country.
Nowadays, customers are considered as the king of the market and if they are not satisfied,
businesses cannot sustain in the long run. Greenslade and Parker (2012) have explained that
improving and increasing customer loyalty have become one of the most crucial elements of
organizations activities and operations. The strong marketing strategies are developed and
efforts are placed by companies to make the customer loyal towards them. The reason why
customer loyalty has become so important is that it helps in long term success and growth of
firms. For example, when customers are loyal towards a product or services due to it price
and if there are changes in the price which is normally increased in the price, then the loyalty
that customers have gets reduced and they will make analyses of the similar product that will
enable to raise the satisfaction level and previously given price.
However, Dawson (2013) has argued that now price wars has resulted in creating several
kinds of obstacles in increasing the rate of customer loyalty. It can be stated that with the help
of price wars, many supermarket retailers in the country are offering products and services at
low prices in order to attract loyal customers of other brands. In the present scenario, what
customers actually want is that quality products and services are delivered to them at
convenient prices. This means firms have started to lose their loyal customers because other
market players are offering almost same services and products at much cheaper rate (Martos-
Partal and González-Benito, 2011). It has been a trend that customers are attracted towards
companies which offer quality products at convenient prices. Companies such as Aldi and
Lidl are offering different type of supermarket products and services to customers. This has
resulted in attracting even the loyal customers of Tesco and Asda towards products of Lidl
and Aldi. Therefore, it can be stated that price wars are having a direct impact on business
operations in the UK supermarket industry.
2.4.1 Factors for changing the customer shopping habits
In the modern era, customers are considered as king of any market and businesses are
required to offer products and services as per their needs. According to the viewpoint of
Oliver (2014) high rate of customer satisfaction has become very essential for the growth and
success of any organization. While carrying their operations, it is essential to identify
customer demand and then deliver products according to the same. It can be stated that
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shopping habits of customer changes due to a variety of reasons such as culture, social and
personal. Thus, it is required by business enterprise to take care of all the major factors which
results in changing the buying behavior of people in the market. Liu-Thompkins and Tam
(2013) has explained that culture can be termed as one of the basic and most important
elements which results in defining behaviour and wants of an individual. The culture under
which a person is born and brought up has a significant impact on their buying behaviour.
Further, quality of the product is also important aspect that affects the customers buying
behaviour. At a particular price when the quality that is delivered to customers is not proper
when compared with same product that is sold at same price but with high quality will be
more preferred by customers.
However, Shah et al. (2014) has argued that internal or psychological factors can be termed
as the main reason behind customer buying habit. In order to sustain in the long run, it is
required by companies to become aware of the key factors which can result in influencing
buying behavior of people in the market. Sometimes it is the internal need or desire of a
person which encourages him/her to buy a particular product or service. On the other hand,
sometimes people buy a product, because it may be referred by their family or friends. Thus,
it can be stated that there are several factors which are responsible for changing customer
shopping habits.
2.5 The concept of retail marketing mix
Nowadays, the development of appropriate marketing mix has become very essential for long
term growth and success of a business entity. Furthermore, the mix consists of four key
elements which are product, price, place and promotion. It is required by organizations to
focus on all the above mentioned elements. As per the view of Yu et al. (2014) retail
businesses need to make sure that they are delivering quality products and services to their
customers. Further, changes in products and services at regular intervals are required to meet
ever changing needs of customers in a market place. Thus, it can be stated that retailers need
to focus on delivering products and services which are being demanded by customers. Prices
of products can be termed as another important factors which affects the behavior of people
in the market in terms of buying.
By adopting a low price strategy, supermarket retailers are able to attract customers, whereas
the use of premium pricing strategy only helps in attracting individuals which belongs to the
elite or higher income group. Therefore, most of the retailer opts for a low price strategy with
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an objective to attract customers and gain higher market share. In the modern era, the place
from where good and services are being distributed has also started playing an important role
in the success and growth of the organization.
In order to attract customers, market players such as Asda, Tesco has started delivering their
products with the help of both online and offline channels (Lewis, 2013). The above
mentioned brands has established retailer stores in different locations in the UK and they are
offering products through online stores. The result of this is that it has made it more
convenient for customers to buy products, services and this has contributed in overall
development of these brands. Promotion can be considered as the last element of the
marketing mix which lays emphasis on creating awareness among customers.
At present, retail supermarkets in the country have adopted for both online and offline tools
of marketing and promotion. Here, advertisement is carried out on channels such as
newspapers and televisions. Apart from this, promotional events are also being carried out by
brand such as Asda, Lidl, Sainsbury, Tesco in order to create awareness about their products
and services among people in the market. In the last few years, the internet has emerged as
one of the biggest and most potential platform to sell and market services or products (Pierce
and Alexander, 2013). Therefore, businesses have gone digital for promotion of their
products and services on social media and various websites. This has helped companies to
carry out cost effective marketing and increase sales of their products.
2.6 Impact of German discount retailer on Asda and Tesco
It can be stated that the pricing strategy and operations of German based discounted retailers
are having a direct impact on the UK based supermarkets such as Tesco and Asda. This has
resulted in creating a sense of satisfaction among UK customers as they are now getting
quality products at comparatively low prices (Fernie, 2013). According to Shadbolt (2015) a
significant rise in market share of Aldi and Lidl has been observed, whereas the market share
of brands like Tesco, Asda and Morrisons has fallen. Aldi and Lidl witnessed growth rate of
17.3% and 16% respectively, whereas Tesco, Asda and Morrisons has been observed 1.4%,
2.9% and 1.4% drop in their existing sales (Shadbolt, 2015). The German based retailers are
growing with a very good pace and at the same time UK based supermarkets are now finding
it very complicated to attract customers and retain them for the long run.
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As per the view of Elms et.al. (2010) German based retailers are able to capture the higher
market share because they are selling products at comparatively low prices. Further, their low
price strategy is the one which attracting customers to stay no more loyal to a particular
brand. On the contrary of this, has argued that using a low price strategy for the long run can
be a huge mistake for retailers and it can result in creating several kinds of issues to a
business. In order to carry out operations with such kind of strategy, organizations are
constantly required to place efforts to lower down the cost of operations.
Apart from this, if other market players also drop 3-tier prices, then it becomes very
complicated for a business to sustain in the marketplace. Insufficient profit margin can be
termed as another major drawback of using a low price strategy (Thompson and et.al. 2012).
It can be expressed that Aldi and Lidl has affected market share, customer base, sales and
profits of Asda and Tesco. These brands have started facing problems in attracting more and
more customers, whereas German based supermarket retailers are growing with very good
pace and has developed plans for the future expansion. Brands such Aldi is planning to open
1000 outlets in the country in order to maintain its existing growth.
As it has been already discussed that carrying out business operations with low price strategy
is not an easy task and there are large efforts which needs to be placed by Lidl and Aldi.
However, it can be argued that these German based supermarket retailers are able to lower
down their cost by the souring large volume of 2500 products (Sullivan and Gouldson, 2012).
Purchasing in bulk to help these brands to reduce operational cost and give intense
competition to market players like Tesco and Asda. Gandhi (2016) explained that Aldi and
Lidl are looking forward to build more stores than the UK based supermarket retailer. Here,
the interesting fact about Tesco is that the total number of stores closed is bigger than the
total number of stores opened. This clearly highlights the present situation through which
Tesco is going. The key reason behind those closures was that they were not performing or
providing the brand with desired outcomes (Gouldson and Sullivan, 2013). Further, such
situations forced the brands to take the decision regrading closure of many non-profitable
supermarket stores.
2.7 Analyzing retailer pricing strategy
Prices can be termed as the monetary value of any commodity, product or service. Further,
prices are considered as one of the most important and crucial elements of a firm's marketing
mix. As per the view of Stelder (2012), the success of products and services depends on its
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prices to a great extent. Generally, organizations use moderate or competitive pricing strategy
in order to sustain in market place. There was a time when Tesco was the leading market
player in the retail supermarket industry in the UK. Earlier it was attracting customers with
the help of two major strategies which were aggressive promotion and club-card loyalty
program (Cleeren et al., 2010). However, Grewal et.al. (2011) has asserted that in the last few
years due to the emergence of Aldi and Lidl, the brand has been forced to lower down its
prices. At present Tesco has involved strategy of “The Big Price Drop” which includes
cutting down price of 3000 food products every day by almost 30%.
The present pricing strategy has somewhat helped Tesco to sustain in highly competitive
market place. On the other side of this, its major competitor which is Asda is currently
operating with the price guarantee scheme. According to this strategy, the supermarket
retailer guarantees that the price of all its products and services will be 10% lower than what
other major market players or its rivals are offering. It has been analyzed that Asda and Tesco
have always been direct competitors of each other, but now they are facing the high degree of
competition from German based retailers which are Aldi and Lidl (Dasu and Tong, 2010). It
can be also stated that Aldi and Lidl are providing quality products and services and
attracting customers to a great extent. They are also offering products such as organic food,
baked goods, special soups, fresh meat which supports in getting advantage over existing UK
based supermarket retailers. As per the analysis made, it can be determined that the people
generally prefer to make use of services or products that are being provided to them at low
price but with high quality when firm from which customers make their purchases does not
satisfy their requirement, then they shift on to other comany that deliver similar products or
services.
The concept which has been applied here by German based retailers is associated with low
price strategy or discounted price strategy. Here, higher quantities of products and services
are being offered at relatively low prices to attract more and more customers. Grewal and
et.al. (2010) has asserted that in order to stay competitive in the market place, it is required by
businesses to take care of their overall cost of operations and take measures to lower down
the same.
2.8 Impact of price wars on staff
In the modern era, employees are considered as the most valuable and important assets of an
organization. It can be stated that two businesses can have the same kind of technological and
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financial resources, but what separates one organization from another is their human
resources. Therefore, it is required by firms or companies to focus on growth and
development of their employees in order to sustain in a highly competitive market (Yoo and
Lee, 2011). In situations of price wars, staff members or human resource of an organization is
greatly affected.
The concept of such wars clearly lays emphasis on offering products and services at prices
which are relatively cheaper than that of competitors. This restricts a firm to increase its
profit margin and carry out smooth flow of operations. Apart from this, prices wars also
lower down capacity of a firm to pay better salaries and incentives to their respective
employees. For example, the price war among UK supermarket retailers has affected the
growth and development of employees to a greater extent.
Yan (2010) also stated that today firms are required to lay emphasis on their workers in order
to carry out smooth flow of operations. For this purpose, training and development sessions
should be organized to make staff members more productive by enhancing their skill set and
knowledge base. However, Dan et al., (2012) has argued that carrying out employee training
is not an easy task for companies as it requires lots of human, financial and technological
resources to be invested. Situations such as price wars directly results in lowering down the
rate of training sessions conducted in an organization. This creates a sense of dissatisfaction
among workers and also affect their morale level to a great extent. On the other side of this,
supermarket retailers such as Asda and Tesco are not able to provide their employees
satisfactory monetary incentives (Dasu and Tong, 2010). Thus, it can be stated that morale,
motivational level and earnings of workers in the UK supermarket retail industry has been
affected by the price wars existing in the country. To sell a product, it is important for the
employees have proper information for the services and products that are being sold. With
this respect, when the price of the products is not favourable, then it becomes difficult for the
staff member to convince customers purchase the product.
Another major issue found was related to employees, which has been caused by price wars is
of retention. For any company, it is very important to retain its staff members along with
retaining customers. In the context of supermarket retailers, it can be expressed that here
employees are important because they come in direct contact with customers (Pepe, Abratt
and Dion, 2011). Further, they interact with customers, understand their needs and then
deliver satisfactory products or services according to the same. The price war has resulted in
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increasing the rate of employee turnover, which can be considered as another major threat to
supermarket retailers in the country. Grewal and et.al. (2011) has explained that people
working in the UK supermarket industry are now switching to other sectors because they are
not able to find adequate or expected growth in the industry.
2.9 Impact of price wars on customers spending
As per the view point of Smith (2010) ultimately it is the customer in the industry who has
been benefited from the price war prevailing in the UK supermarket retail industry. There
was a time when Tesco was leading player in the market as people in the market were having
few alternatives or options available with them (Greenslade and Parker, 2012). Along with
the passage of time, things have changed to a great extent and has affected dominance of
many market players such as Tesco and Asda. Further, entry of German based discounted
retailers has affected sales and profits of UK based supermarkets in a negative sense and has
provided several kinds of benefits to people in the country.
It can be said that the power of customers has increased to a great extent and this means that
customers has power to drive away the prices. Nowadays, products and services are being
offered by supermarket retailers at comparatively low prices and this is ultimately benefiting
the customers (Baltas et al., 2010). By spending low amount on buying desired products and
services, the savings of people in the market have increased to a great extent. Now, customers
are not required to pay high amount to any retailer because the same products are offered by
other brands at low prices. However, Hyman et al. (2010) has argued that low prices not
always guarantee that it will help in attracting more and more customers. According to the
model of customer buying behavior or decision making, people in the market buy a product
in order to satisfy their need and demand which they have identified. Thus, pricing strategy
and marketing is of no use if the products and services which has been offered by a particular
business enterprise are not able to meet customer demand. There is certain amount of price
that is determined by customers in order to make their purchases but When price of a product
increases, then it becomes difficult for them to spend over it. With them respect, it is
important for the firm to understand factors of customers buying behaviour before price of
the product or services are raised.
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Thus, it has been analyzed by the researcher that the price war has resulted in increasing
customers, saving as they are not required to spend much to buy products and services of
their need and demand.
2.10 The future of discount retailers
According to the viewpoint of Thompson et. al. (2012) at present the market or industry of
supermarket retail has become highly intense. Further, it has become very complicated for
market players such as Tesco and Asda to maintain their existing market share. This means
that the future of these supermarkets retailers is a big threat. On the other side of this, market
players such as Aldi and Lidl are growing with a very good pace and their future seems to be
very bright. According to Sullivan and Gouldson (2012), the German based discounted
retailers have entered the UK supermarket industry with the best strategy to penetrate the
market. The low price strategy has helped these brands to attract more and more customers
and gain higher market share.
However, Piercy and Alexander (2013) also argued that it is not necessary that the selected
strategy should always work in the long run. In the future, brands such as Asda and Tesco
will come up with new strategies and innovations which can prove to be a big threat to
discount retailers. Apart from this, operating with a low cost is not always easy as there are
various issues and challenges which needs to be faced by a business enterprise. For example,
organizations are required to carry out procurement of raw material and other related things at
a very low cost. Businesses cannot spend a large amount of resources in the growth and
development of workers as it will enhance operational cost.
The future of above mentioned discounted retailers is very bright, but they cannot offer the
same kind of products and services for a long time. They will be required to make changes in
products and services as per the demand of customers or people in the market. Other than
this, it can be also stated that at the time of carrying out their operations, German based
discounted retailers need to carry out competitor analysis at frequent intervals. Martos-Partal
and González-Benito (2011) has asserted that at present low price strategy is providing
several kinds of benefits to German based discount retailers, but it is not necessary that this
kind of dominance will sustain in the long run. In the future, the existing market players will
definitely come up with new strategies and innovation in their products. This will result in
creating several kinds of obstacles in growth and success of them. One of the best ways to
sustain a long run for these market players is for carrying out market researcher’s is required
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to understand customer need and demand. By focusing upon changing customer needs and
then delivering products according to the same with help discounted retailers to sustain in the
long run (Sullivan and Gouldson, 2012). Apart from this, effective marketing will need to be
carried out by these brands to attract customers and maintain their existing market share. It
can be also stated the retail supermarket industry in the UK get more intense in the future.
2.11 Industry Analysis & Industry Trends
The supermarkets industry has undergone radical change over the past five years. The
lingering effects of the economic downturn, extensive changes in consumer shopping habits
and the aggressive expansion of the discount supermarkets Aldi and Lidl have shaken up the
industry considerably. In March 2014, Tesco and Morrisons sparked a price war by
announcing large price cuts on numerous items. Asda and Sainsbury's followed suit,
announcing similar cuts to prices over the rest of the year. This price war was primarily
designed to stall the advance of discount supermarkets, which have benefited from rising
market shares in recent years.
New entrants to the Supermarkets industry face significant hurdles. Foremost among these is
the substantial outlay required to build a new store and to fill it with sufficient stock.
Locating a suitable site for a new store is also challenging, unless an existing store has
recently shut and the space is available. The sheer size established, annual capital costs are
low, meaning that competitors face a more favorable cost environment. These lower costs are
responsible for another major barrier: the industry is very mature with well-established large
players who can afford, and are willing to, price their competition out of the market if
feasible of most supermarkets makes their store space unsuitable for most other stores.
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Chapter 3 Research Methodology
3.1 Introduction
In common parlance, research is referred as searching for ideas and knowledge and it can also
be regarded as a systematic and scientific search for relevant information on a specific subject
matter. Thus, it is called as an art of scientific investigation which includes several tools and
methods to reach towards the objective of the study. In the present study, several techniques
have been applied for analyzing the feasibility of research work. Research is not only
integrated with the process of data collection; but it involves various other phenomena to
generate and produce new ideas and knowledge (Saunders et. al. 2009). Therefore, it can be
said that research methodology is a systematic way to evaluate the research problem. Prior to
applying any method and technique in the research study, it is essential for the researcher to
know the criteria through which certain techniques and procedures can be utilized for
research work. In the below mentioned section, detailed information regarding applied
philosophies and approaches have been mentioned.
3.2 Research Philosophy:
In simpler terms, the philosophy of any research can be defined as the values and beliefs
which support in the process such as data collection and analysis. Furthermore, this section
helps the researchers to obtain the best possible and desired outcomes of the study. The use of
appropriate research philosophy also assists in determining the right tools and techniques
which can be used for carrying out analysis of data (Saunders et. al. 2009). Therefore, it is
required by every researcher to be very careful at the time of selecting appropriate research
philosophy for conducting a study. The concept of research philosophies can be categorized
into two different categories which are positivism and interpretivism.
Further, on the basis of aim and objective of a research, an appropriate philosophy has been
used by the researcher. For the purpose of conducting the present research, positivism
research philosophy has been used by the researcher. Here, the use of above mentioned
philosophy has supported the scholar in getting more generalized results has been gathered by
researcher on. It can be considered as the overall strategy which is used by researcher to carry
out a research and attain all its objectives. In this context, all the objectives that are
identifying the impact of German discount retailers on Tesco and ASDA, impact of price
wars on customer loyalty, etc. will be covered in an effective manner. Research approach is
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divided into two main ways which are inductive and deductive (Crowther and Lancaster,
2012). For the purpose of conducting present inductive approach research which has
supported in carrying out literature review first and on the basis of same, the hypothesis have
been developed to carry out data analysis topic analyzing the impact of the price war on the
supermarket retailers: Tesco and ASDA. It can be also expressed that the use of the
interpretivism philosophy would have resulted in providing more specific results which were
not required in the context of the present research. Thus, the use of positivism research
philosophy has supported in getting desired and most reliable outcomes.
3.3 Research Approach
Research approach is a substantial tool which is applied in the research study for the purpose
of conducting it in a systematic manner. The Deductive approach starts with a social theory in
which researcher finds the data compiling and then the test is implied within the data. The
approach moves from a general level to more specific levels and it is also the one which is
associated with scientific investigation (Singh, 2010). It is considered as one of the most
integral part of the study and selection of right approach leads to favorable outcomes.
Generally, the relevance of hypothesis is regarded as one of the main distinctive points
between two approaches inductive and deductive one. It is totally based on observations
which are being taken. Two types of approaches being present named inductive and
deductive depends on the nature of research. Basically, the deductive approach supports in
testing the validity of assumptions in hand and inductive one contributes to an emergence of
new theories.
Deductive approach is based on the assumption that the premises are true and on the basis of
same conclusion must also be true. Results in this type of approach moves from general to
specific. As per the case, all the objectives will be explained in general form and then they
will be specifically covers in order to achieve the current research objectives. Further, the
data collected in this type of approach are used for evaluating propositions and the overall
hypothesis developed are linked with existing theory in the research. Theory verification
takes place in deductive approach and this makes applicability of this approach effective. On
the other hand, inductive approach is based on the logic that the premises are being used to
develop testable conclusion and the overall results in this type of approach moves from
specific to general. Data collected is employed to explore fact, finding themes and they are
being located in the conceptual framework(Crowther and Lancaster, 2012). Generation of
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theory takes place in this type of approach and due to this reason this approach is considered
to be much more valid.
Considering the nature of the present research focus is on analyzing the impact of the price
war on the supermarket retailers where two companies have been chosen named Tesco and
Asda. The entire research being carried out is based on two firms and the overall influence of
price wars has been identified. Therefore, for conducting this research in effective manner
inductive approach has been employed where an entire study has been carried out from point
view of Tesco and Asda. This approach is appropriate from point view of present research as
specifically Asda and Tesco have been chosen as the two firms.
On the basis of results, it is possible to provide recommendations to other firms in general
and findings are applicable to the entire retail sector. On the other hand, the main reason
behind not selecting deductive approach is that research is not carried out in general form and
it is based on some specific companies. Due to this reason this approach is not applicable for
the present study. Applicability of inductive approach has supported in conducting a literature
review in proper manner and on the basis of same hypothesis has been developed.
3.4 Research Startegy
Research strategy is a plan for conducting the research which guides a researcher in planning
and monitoring the study in order to achieve the objectives (Saunders et al., 2012). Research
design can be determined as a process which enables to develop a systematic plan or
technique which enables to shape up the research (Saunders et. al. 2012). It enables to
identify the reliability of aim of the research. Moreover, it provides a solid base in conducting
the research. It enables to expand the understanding and knowledge related to the topic. There
are mainly four different types which are descriptive, correlation, semi-experimental and
reviews. Among all these descriptive research will be conducted. This will be helpful in
identifying the main issue of research and conducting the research in an effective manner
(Kothari, 2011). There are different set of elements which are involved in the research and
this will be helpful in determining different aspects. Present research is over understanding
the impact of a price war on supermarket retailers.
There are different organizations which provide similar products and services. It becomes
difficult to achieve the goals through until firms make use of strategies to be different from
the other and to achieve their goals and objectives. In order to collect the data managers are
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selected as they are the one who know the actual strategies which are used by the
organization. In this context, managers of both Tesco and ASDA are considered and they will
be provided with questionnaire in which all the relevant questions will be included with the
help of which strategies used by both organizations in relation to price will be determined.
Pricing can be determined as a one of the main factors through which firm aims at attracting
customers. The technique has proved to be helpful in identifying hidden aspect of subject
matter. With this respect, there are two different types of methods through which data are
analyzed. In this context, it includes qualitative and quantitative methods. In accordance with
the aim qualitative method was selected as it enables to know the individual perception of
managers towards the strategies which are implemented in their product that also by ASDA
and Tesco. In order to know the perception of managers, qualitative research is effective for
the researcher to conduct the study in a proper manner.
As per the case, at Tesco and ASDA, there are many departments and each of the
departments have different set of managers who are responsible to make sure that all the
business operations are conducted properly. When all departments work together with their
goals and objectives are achieved. In this current study, managers are helpful enough to know
the different type of strategies which are taken by the firm so that cost can be reduced. From
different research it is found that customers prefer to buy the product which are provided to
them at high quality and that also at low price. In order to reduce the cost, it is important that
the cost which is incurred in develop each unit of product can be reduced. However,
descriptive study has enabled the researcher to know the strategies and perception of each
manager working at ASDA and Tesco.
3.5 Data Collection methods
The most crucial part of the research methodology is data collection. With the help of data
collection, appropriate information related to the subject matter can be acquired and through
this, feasibility of the research topic can be identified. The categories of data collection can
be segregated into two types such as primary and secondary and both seem to be useful for
the research study (Bruce, 2009). According to the intended problem of the research, suitable
data should be collected. In the present study, primary and secondary both the methods have
been utilized for enhancing the efficiency of the research work. Primary data have been used
for the purpose of collecting fresh and relevant information which is not used in any of the
research before. The survey has been conducted in which questionnaire is being provided to
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the participants consists of open ended and close ended questions. Through this technique,
adequate data have been collected for the study, which is unused from all prospects.
Apart from this, under secondary source, data has been collected through books, journals,
articles and online web pages. This is regarded the traditional method of data collection,
which helps the researcher to enhance the value of the research study. Books, journals have
been reviewed according to the subject matter and through this, proper information related to
the subject matter is also ascertained. Secondary data basically include published data
because it is based on academic research and government reports; hence this is the reason it is
being selected for the present study. With the help of secondary source, previously researched
materials are being identified. Thus, according to that loopholes can be identified in the
present work. Another aspect through which data can be collected is Quantitative and
Qualitative. With the help of Qualitative method, relevant information is being collected
through survey where in questionnaire is being given to each and every participant.
However, on the other hand, a researcher has also used Quantitative method, wherein the data
are being collected by using a questionnaire whereas in open ended and close ended questions
are formulated. According to the aims and objectives of the study, a questionnaire has been
formed and according to that data is being collected for the present study. In order to get
more accurate data, a Likert type questionnaire has been used.
3.6 Data Analysis
After collecting the data, the researchers turn to the task of analyzing the data through
appropriate tools and techniques. It is termed as the process of evaluating data through using
analytical and logical reasoning to examine each and every component of the available data.
According to the views of the author, data analysis is the process of data evaluation applying
statistical techniques systematically to describe and evaluate the data (Franklin, 2012). An
essential component of ensuring data reliability is the accurate and appropriate analysis of the
findings of the research. The categories of data analysis can be segregated into two types such
as qualitative and quantitative.
Both the techniques are useful for showing the responses of participants in proper manner.
Qualitative methods are part of survey methodology which includes interviews, observation
and survey to derive meanings of the phenomenon (Kothari, 2011). Thus, it is called as the
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process in which researcher moves from the raw data which is being collected as a major part
of the research study. It also provides explanation, understanding and interpretation of the
phenomenon which is studied in the research report. The main aim of applying qualitative
tool is to examine the meaningful and symbolic content of the data. Thematic analysis is one
part of qualitative tools in which several themes are required to be constructed so as to
describe the subject matter in an effective manner. Each any every questions that will be
asked are analysed with the help of thematics and this will help to make sure that current
research that is being conducted is determined to come up with appropriate outcome.
However, the other category of data analysis is Quantitative method in which researcher can
apply several statistical tools for analyzing the facts and findings. In the present study, the
research has been made use of Quantitative method in which SPSS has been utilized. As per
the method, data have been evaluated with the help of numerical techniques. Therefore, it is
clear that data has been presented through multiple ways using graphs, histograms, pie charts
and tables. This is yet another method through which data are presentably evaluated in the
research work. This is also useful in analyzing data through the two variables. The research
has also used mean, mode, median, percentile, regression and correlation.
3.7 Sampling
It is considered as one of the most important part of any research as it lays emphasis
on selecting an appropriate sample for gathering reliable and accurate primary information. It
can be also stated that a researcher is required to be very careful at the time of selecting the
appropriate sample as the effectiveness of study also relies on the sample and sampling
method selected. The concept of sampling is broadly divided into two main categories which
are non-probabilistic and probabilistic (Crowther and Lancaster, 2012). Furthermore, on the
basis of aim and research objectives appropriate sampling method can be selected by a
researcher. In order to carry out investigation on analyzing the impact of the price war on the
supermarket retailers: Tesco and Asda, purposive sampling, which is a part of non-
probabilistic sampling method had taken into consideration. This is helpful enough to select
the few of the sample from large population with the help of which appropriate outcome can
be determined.
The rationale behind using the above mentioned sampling method is that the researcher has
approached the sample with a purpose to gather information on the impact of price wars.
Further, managers of Tesco and Asda are here selected as a sample. In order to collect
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primary information, the questionnaire was developed on the basis of the aim and objective
of the present study. Apart from this, 10 managers of Asda and 10 managers of Tesco has
been selected as the sample size. The main reason behind selecting managers is that they have
provided more reliable, accurate information regarding what kind of impact does price war is
having on supermarket retailers such as Tesco and Asda.
3.8 Research credibility
Golafshani (2003) states that credibility is about collecting data which is error free
and unbias. The researchers need to be assured that the data collected is reliable when the
date is collected from the source who have no control over (Walliman, 2011). In order to
check the reliability, quick assessment can be done by checking of reputation of the
organizations, comparison of the data with the research done by well known organizations. In
this study managers were selected as they are responsible and can give reliable and accurate
information about the impact of price war. The questionnaire were developed on the basic of
the aim and objectives. To achieve the credibility, the questions were refined to the point
where the questions were simple and easy to understand. Gill and Johnson (2010) states that
it is very significant to design the questionnaire in proper way to get rid of unreliable and
invalid data collection.
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Chapter 4- Findings and analysis
4.1 Introduction
The chapter of data analysis is considered as very significant part of any dissertation.
Various tools and techniques are used in this section in order to evaluate raw data collected
from various sources and gaining the relevant information. For conducting research on the
impact of the price war on supermarket retailers Tesco and Asda, both qualitative and
quantitative techniques of data analysis have been used. The data collected has been
presented using various tables. The researcher has also used statistical tool such as SPSS with
an objective to achieve desired outcomes and arrive at a valid conclusion.
4.2 Data analysis of Asda & Tesco
1. How would you rate the existing level of competition in the UK supermarket
industry?
ASDA
40%
TESCO
20%
Aldi
25%
Lidl
15%
Existing Level of Competition
Figure 1 Existing level of competition in the UK supermarket industry
On the basis of above chart, it is clear that level of competition has been increasing
from all the retail entities of UK and at the same time it is changing market scenario on
higher extent. Thus, in this respect 40% is marked for Asda, 25% is marked for Aldi, 20% is
marked for Tesco and remaining 15% is marked for Lidl. Therefore, in this respect it can be
said that existing level of competition is high because of presence of these entities.
During the survey while the information was collected, it has been found by the
researcher that the existing levels of competition among UK supermarket industry have
become highly intense.
In fact, in the survey, it was explained by ASDA managers that earlier they used to
face very tough competition from the other market players such as Tesco and Sainsbury but
gradually the situation has been improved. Further, they explained that the entry of German
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based discounted supermarket retailer has made the level of competition more intense in the
last few years.
2. Loyalty has become very essential for growth and success of your company or
not?
It has been found by the researcher that at the time of carrying out its operations, Asda
focuses on developing customer loyalty. Nowadays, the company has started to face several
kinds of issues or challenges regarding increasing the rate of customer loyalty. The managers
also explained that customers are no longer interested in remaining loyal because the German
based discounted retailers are providing the same kind of products and services at discounted
rates. On the basis of below diagram, it can be said that customer loyalty is more important
for the business entity since it aids in managing every business activity. From the figure, it is
clear that 44% effect is imposed on customers because of high pricing and 56% is imposed
because of everyday low pricing.
every-day-
low-pricing
56%
high-low
pricing
44%
Effect on Loyalty of customers
every-day-low-pricing
high-low pricing
Figure 2: Effect on Loyalty of Customers
3. What are the factors which results in changing customers shopping habits
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The brand
25%
Appealing Look
20%
Attractive
Product/Service
Features
5%
Reasonabl
e Price
25%
Effective Quality
10%
Combo Offers
15%
Resultant Factors which affect competition
Figure 3: Factors affected competition
According to the above diagram, it is evident that reasonable price and the brand
value are the major factors that affect competition. This has been agreed by 25% participants
each. Further, 20% said that appealing look is the chief factor that impedes competition and it
also encourages major number of customers. 15% marked for combo offers and remaining
10% marked for effective quality. Thus, it is clerar that these factors are responsible in
changing preferences of customers.
4. How would you rate the pricing strategy of German based discounted retailers?
56%
44%
Effect on Price behaviour of Food Retailers
every-day-low-pricing high-low pricing
Figure 4: Effect on Price Behavior of Food Retailers
In this respect, 56% marked for everyday low pricing and 44% marked for high low
pricing. Thus, it is clear both these dimensions have direct impact on foof retailers. Thus,
these factors are considered while framing the pricing strategy.
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It was found during the survey that the analysis of food pricing strategies in the UK
was basically based on the scanner-data evidence. The analysis basically implicit that the
pricing behavior of food retailers is featured by the Every-day-low-pricing (EDLP) strategy
by the discounters and the High-low pricing (HiLo) strategy is related to their their major
competitors. The key elements of the pricing policies are considered or assumed as a mere
signal of the firms’ market power: continual price discounts for the major food brands,
recurrent changes of loss leaders, the leading role of the psychosomatic pricing, and a
powerful price inflexibility for all the other foods which are not associated with any such
discount or holds an offer.
5. What kind of pricing strategy has been adopted by the organization to sustain in a
high degree of competition?
High Margin and
High Turnover eg. a
convenience food
store
Low Margin and
High Turnover eg. a
discount store
Low Margin Low
Turnover i.e .a dying
business
High Margin Low
Turnover eg. an up
market specialty
store.
40
10
30
20
Price Strategy Adopted by Different Retailers
Figure 5: Price Strategy Adopted by Different Retailers
It was noticed during the survey that the highest share was of the retailers are those who has
adopted or targeted High Margin and High Turnover kind of Strategy, while the second
largest share was held by the retailers who believes in Low Margin and low Turnover
category, rest 20% is upheld by High Margin Low Turnover and 10% by Low Margin and
High Turnover.
6. Price war resulted in increasing the rate of employee turnover
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The Cost of Training and On-
Boarding
25%
Advertising Costs
15%Lowered Engagement
35%
Productivity of New Hires
10%
Impact on Morale & The Gossip
Machine
15%
Result of Price War on Employees
Turnover
Figure 6: Result of Price War on Employee’s Turnover
In terms of impact, it is analysed that 35% have lower engagement in organizational
matters, 25% impact is seen on the cost and training on board, 15% is on advertisemt cost,
15% is on impact on employee morale and rewaming 10% impact is observed on new
recruitmennts.
During the survey, there was a study to assess the impact of Price war on Employee turnover,
and it was found that most of the population believes that it has lead to Lowered or reduced
engagement followed by the cost of Training was adversely affected. The other impact was
that it has affected badly on the motivation/morale of the employees. Apart from these key
are effects, the other dominant factors are high advertising costs and a reduction in
productivity of new people.
7. Have your organization face challenges in increasing the rate of customer loyalty?
yes
79%
no
21%
Facing Challenges in Increasing rate of customer
loyalty
Figure 7 : Challenges in terms of increasing rate of customer loyalty
It was noticed and found during the survey that 79% of people believes that they are
facing challenges in terms of customer loyalty. Rest 21% doesn’t believe in this. Thus, it is
cleat that organixation is facing challenges in increasing the customer loyalty aspects. At the
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same time, it can also be said that customer loyalty is an important aspect that needs to be
considered as that has a direct impact on business’s success and profitability aspects.
8. Do you think that the price war has resulted in providing benefits to customers in terms
of savings?
62%
38%
Result of Price War on Customer
Savings
Yes
Maybe
Figure 8 Result of price war and effect on the customers
During the research, when the researcher was trying to assess the quantum of savings on the
customer’s due to the entry of German Discount Retailer. It was found that 62% believes that
it has impacted and the rest 38% of people shows that they are not certain regarding the
apprehension or about the answer.
9. Do you believe that the recent price war has affected the sales and profit?
Highly affected
62%
Maybe
38%
Affect of the price war on sales and
profit
Figure 9 Effect of price war on the sales, margin and subsequent profit.
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It was noticed that 62% of people believe that the price war has affected adversely on the
overall margin of the company and 38% of the people was not sure that the price war has
actually effected in monetary terms or not.
There were no people who have not responded in a negative ways.
10. Do you think that the German discount retailer such as Aldi and Lidl are giving
tough competition to the brand?
40%
24%
36%
Highly Effected Maybe No
Figure 10 : Impact of German’s Retailers on Competition
It was also assessed with the managers that does the German based retailers are giving
competition to brand or not. So, the results declare that 40% of the population said that it has
highly affected and given a tough/intense competition, while the 36% doesn’t believe the
same and a few of them, i.e. 24% said that though the industry is overall impacted but doesn’t
created or given a tough competition. Therefore, in this context it can be said that competition
has been increasing because of existing retail organizations and that is also influencing the
level of customer purchase decisions.
11. Is there any kind of price war existing between businesses in retail supermarket in
the UK?
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89%
11%
Effect on the retail industry
Yes No
Figure 11: Effect on UK’s Retail Segment
The result of this question reflected that the majority of the people/sample population, i.e.
89% believes that there is a huge and adverse effect on the whole segment or retail industry
due to these price fluctuations. Though, some argue on the other hand that the price war had
benefited for a few retailers as well.
12. How do you rank the degree of price war within the retail supermarket in the UK on
the scale?
70
20
10
high intense price war
brand loyalty is declining
positive relationship between price war and competitive entry
It has been analyzed by the researcher that there is a high intense price war, which
existing in the UK supermarket, this was found or believed by the majority (70%) of the
sample population. Further, the data collected from managers of Asda clearly highlighted that
the firm character has become very important for long term success of the company. 20% The
managers also explained that the existing level of brand loyalty is declining because of the
price war.
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Along with this, 10% of people believe that there is positive relationship between price war
and competitive entry. This means that increasing price war has made it more complicated for
a new firm to enter the UK supermarket industry. The regression highlighted that price firm
character and price war share a negative relationship with each other.
13. How would you rate the existing level of competition in the UK supermarket
industry
From the information collected, it has been found by the researcher that existing levels of
competition among UK supermarket industry have become highly intense by 70% of the
targeted population. The managers of Asda explained that earlier they use of face very tough
competition from market players such as Tesco and Sainsbury. Further, they explained that
the entry of German based discounted supermarket retailer has made the level of competition
more intense.
14. Do you think that Loyalty has become very essential for the growth and success of
the company?
It has been found by the researcher that at the time of carrying out the retail operations, Asda
focuses on developing the customer loyalty. Nowadays, the company has started to face
several kinds of issues or challenges regarding the increasing rate of customer loyalty. 70%
of the managers stated and believed that the customers are no longer interested in remaining
loyal because the German based discounted retailers are providing the same kind of products
and services at discounted rates
15. What does the pricing strategy of German based discounted retailers reflect?
It has been evaluated by the researcher that the pricing strategy which has been adopted by
German based retailers is highly effective. 88% of the managers of Asda felt that Aldi and
Lidl has entered the market with the low prices strategies and this was one of the most
attracting points of the customer’s. Further, they have also explained that the pricing strategy
is effective because it has helped the retailers to acquire market share and customer base.
Also, it was noticed by the rest 12% that there are several other factors which has resulted in
changing shopping habits and buying behavior of people in the market. The information
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collected during the survey are culture, social, price and personal are some common factors
which results in changing customers shopping habits.
16. Do you think that the price war has forced the retailer organization to lower down its
cost of operations?
In terms of impact, it was assessed by the researcher that price war has forced the Asda to
lower down its entire cost of operations. The main reason behind this lowering down is that
the cost of operations is to offer product and services at a low price and sustain in the highly
competitive marketplace. The managers also explained it has become very important for them
to cut down operational cost in order to survive in highly competitive market place.
17. Does German discount retailer such as Aldi and Lidl are giving tough competition to
your brand?
From the information collected, it has been found by the researcher that Aldi and Lidl has
started giving intense competition to Asda. In the last few years, the brand has witnessed
several adverse challenges in attracting customers and retaining them for a long run with their
brand. The managers also implicit that the competition has become so intense that Asda's
market share is constantly declining. At present, the supermarket retailer is using aggressive
marketing strategy for better communicating with the customer’s about its products and
attract them.
18. Does the organization are facing obstacles in paying monetary incentives and higher
salaries to the employees due to price war?
It was found that Asda is facing issues in providing salaries and other related monetary
benefits to the customers. At the time of collecting data from managers of Asda, the
researcher realized that it may have happened due to lower sales and subsequently the paying
capacity of the company has restricted to a great extent. The impact of this has lead to
situation of dissatisfaction among the staff members and their overall productivity has also
degraded to a great extent.
19. Price war has lower down the rate of training and development programs carried out
for employees
Another major impact of price war can be seen on training and development of workers. At
the time of collecting data, managers of Asda stated that the organization understands the
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significance of training program, but they are not able to provide frequent training programs.
This is because of lower profits, which has restricted the brand to invest a large amount of
financial resources in overall growth and development of workers.
Data Analysis Tesco
1. How would you rate the existing level of competition in the UK supermarket industry
During the survey with Tesco employees, the information related to existing levels of
competition among UK supermarket industry was assessed.
They also believe that their managers used to face intense competition from the other market
player Sainsbury, but they feel that their services stand better in comparison to other market
players. The result of the survey in this regard is being shown below:
Figure 12 Existing level of competition in the UK supermarket industry is assessed by TESCO employees.
2. Loyalty has become very essential for growth and success of your company or not?
It has been noticed that during market transformation, TESCO has worked hard on branding
and improving customer relationship. But, they claimed that the good thing was Tesco have
been able to successfully manage themselves in the market dynamics and competition. The
employees mentioned that also explained that they have great schemes.
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Figure 13: Effect on Loyalty of Customers
3. What are the factors which results in changing customers shopping habits
Figure 14: Factors affected competition
4. How would you rate the pricing strategy of German based discounted retailers?
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It was analyzed while carrying out survey that the analysis of food pricing strategies in the
UK was generally on the basis of the scanner-data evidence. It was also noticed that the
company TESCO was following High-low pricing (HiLo) strategy to face the competition.
The results are shown as under:
.
Figure 15: Effect on Price Behavior of Food Retailers
5. What kind of pricing strategy has been adopted by the organization to sustain in a
high degree of competition?
It was analyzed in the research that the companies like Tesco and Sainsbury, those
who holds the largest market share (55%) are generally followed by High Margin and High
Turnover kind of Strategy. On the other hand, the second share(30%) was covered by the
retailers who believes in Low Margin and low Turnover category, the smallest share was
upheld by by High Margin-Low Turnover and Low Margin-High Turnover as 8% and 7%
respectively..
6. Price war resulted in increasing the rate of employee turnover
During the study, it was noticed that the impact of the price has affected largely and
adversely on the cost of Training of employees. The other impact was noticed on motivation
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and morale of the employees. Apart from these, there are few other factors effects such as
increase in advertising costs and a decrease in productivity of new people.
7. Have your organization face challenges in increasing the rate of customer loyalty?
Figure 16 : Challenges in terms of increasing rate of customer loyalty
It was seen that 81% of people firmly believe that they are not facing challenges in terms of
customer loyalty and remaining 19% doesn’t believe in this.
8. Do you think that the price war has resulted in providing benefits to customers in
terms of savings?
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Figure 17 Result of price war and effect on the customers
It was also noticed that when the researcher is trying to analyze the quantum of the
savings on the customer’s due to the entry of German Discount Retaile, then it was realized
that 42% believes that it has impacted, but 58% revealed that they are not certain regarding
the apprehension or about the answer.
9. Do you believe that the recent price war has affected the sales and profit?
Figure 18 Effect of price war on the sales, margin and subsequent profit.
It was found during the survey that 72% of people believe that the price war has not affected
badly on the overall margin of the company, but the remaining 28% firmly believe that it has
effected in monetary terms or not.
10. Do you think that the German discount retailer such as Aldi and Lidl are giving tough
competition to the brand?
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Figure 19 : Impact of German’s Retailers on Competition
It was also noticed that the managers of Tesco believed that the German based
retailers are not giving any competition to the brand or not. Thus, the results showed that 60%
of the population mentioned that it has been highly affected and created a tough competition.
On the other hand, the 20% doesn’t believe in the same and the rest 20% mentioned that
though the industry is overall impacted but doesn’t create any kiosk/panic for their
organization.
11. Is there any kind of price war existing between businesses in retail supermarket in the
UK?
Figure 20: Effect on UK’s Retail Segment
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The result of this question reflected that the majority of the population, i.e. 94%
believes that there is a big effect because of price fluctuations. The rest doesn’t agree on the
same. Price war exist in the retail market because of the presence of several business entities
in the same market place. This is also enhancing the level of substitute products.
12. How do you rank the degree of price war within the retail supermarket in the UK on
the scale?
It has been arrived after carrying out research that there is a big pawn because of the
price war occurred in the UK supermarket. The same has been revealed by 76% of the
people.
While, 20% of people believe that there is a positive relationship between the price
war and competitive entry of big German giants.
13. How would you rate the existing level of competition in the UK supermarket
industry
From the survey carried out, it was realized that the existing levels of the competition
among the UK supermarket industry had affected around 90% of the targeted population. The
managers of Tesco firmly believes that earlier they have devised in advance regarding the
strategy in case of international competition.
14. Do you think that Loyalty has become very essential for the growth and success
of the company?
It has realized that the company has focus on improving the customer relationship through
various loyalty programs so as to sustain in the market and retain their old customer base.
15. What does the pricing strategy of German based discounted retailers reflect?
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82
18
low pricing strategy of Big gaints other factors
It has been noticed that the pricing strategy which is being adopted by German based
retailers is extremely efficient. 82% of the managers believe that the big giants such as
Sainsbury, Aldi and Lidl has entered into the market with a low price strategy framework.
This was the one of reason which helped to increase the customer base.
One more thing has been analyzed that 18% of the people believed that there are
several other factors which has led to change drastically in shopping behavior of the mass in
the market. The factors which mainly affect are. cultural, social, economical and few other
personal choices.
16. Do you think that the price war has forced the retailer organization to lower
down its cost of operations?
In terms of impact, it was analyzed during by the researcher that price war has lead
Tesco to improve efficiency and productivity levels in the organization. This was done to
make sure and stay sustainable in the market/industry.
17. Does German discount retailer such as Aldi and Lidl are giving tough competition to
your brand?
From the information collected, it has been revealed that the researchers such as Aldi and
Lidl has initiated a tough competition initially, but the brand has been able to stand well and
able to retain their customer’s. The managers also embedded that the competition has become
so tough that the Asda's market share is regularly decreasing.
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18. Does the organization are facing obstacles in paying monetary incentives and higher
salaries to the employees due to price war?
It was realized that Asda is facing so many problems in facilitating the compensation and
remuneration benefit to the customers. During the researcher, it was realized that it may have
happened because of a drop in sales and also, the paying capacity of the company has been
limited to a larger great extent. The impact of this has transformed to a situation of discontent
in the staff members and also, affected the productivity levels.
19. Price war has lower down the rate of training and development programs carried out
for employees
Another big impact of the price war is being spent on training and development of the
employees. But, later on it was analyzed that the training program is the main part, thus they
have developed a strong curriculum for this. The company has included this in policy that
they will certainly be investing in overall growth and development of labor every year.
Aggregate Correlation Results
Coeffecient Study
Coefficientsa
Model Unstandardized
Coefficients
Standardized
Coefficients
t Sig.
B Std. Error Beta
1 (Constant) 1.461 .686 2.130 .279
Is there any kind of
price war existing
between businesses in
retail supermarket of
the UK
-.760 .071 -.689 -10.760 .059
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Firm's character is
important for long term
sustainability in the
highly competitive
market
-.907 .200 -.706 -4.533 .138
Are you offering
products which differ
from other market
players
1.079 .189 .957 5.718 .110
Your organization's
customers are sensitive
about prices
.228 .121 .184 1.883 .311
What kind of customer
do you attract the most -1.572 .113 -1.225 -13.931 .046
What is existing level
of your organization's
brand loyalty
.900 .088 .763 10.187 .062
Your organization has
gained good reputation
in the marketplace
.208 .118 .201 1.758 .329
Competitive entry is a
threat to your retail
organization
1.283 .135 1.029 9.508 .067
a. Dependent Variable: Rank the degree of price war within the retail supermarket of UK on
following scale
From the above mentioned table, it has been analyzed by the researcher that there is very
intense price war existing in the UK supermarket. Further, the data collected from managers
of Asda clearly highlight that firm character has become very important for long term success
of the company. The managers also explained that the existing level of brand loyalty is
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declining because of the price war. Along with this, it can be also stated that there is a
positive relationship between price war and competitive entry. This means that increasing
price war has made it more complicated for a new firm to enter the UK supermarket industry.
The above mentioned regression highlights that price firm character and price war share a
negative relationship with each other.
Correlation
Correlations
Rank the degree of
price war within
the retail
supermarket of UK
on following scale
Price war resulted in
increasing the rate of
employee turnover
Rank the degree of
price war within the
retail supermarket of
UK on following scale
Pearson
Correlation 1 .448
Sig. (2-tailed) .194
N 10 10
Price war resulted in
increasing the rate of
employee turnover
Pearson
Correlation .448 1
Sig. (2-tailed) .194
N 10 10
.
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Chapter 5- Conclusion and recommendation
5.1 Conclusion
From the above carried out study, it can be concluded that the degree of price war,
which is existing in the UK supermarket is getting more and more intense along with the
passage of time. It can be inferred that there are a large number of factors which can be held
responsible for the changing buying behavior of people in the market. At the time of carrying
out their operations, it is required by a business enterprise to make sure that all those factors
are well taken care of. The present study explored factors such as price, culture, social and
personal responsibility for changing the buying behavior of customers. The information
collected also highlights the fact companies cannot sustain in the long run if they are not
aware about the key factors which results in changing customer buying behavior. Apart from
this, it can be also concluded that development of appropriate marketing mix is also essential
for businesses in order to sustain in a highly competitive market place. The marketing mix of
an organization consists of four major P's which are product, price, place and promotion.
It can be stated that at the time of carrying out their operations, it is required by
retailers to take care of all the above mentioned factors. The recent price war has affected
business practices and operations of UK supermarket retailers to a great extent. It has also
created several kinds of obstacles in increasing sales and profitability of the businesses. It can
be concluded that the recent price has forced UK retailers to carry out some modifications in
their existing price wars, for example, at the present the retailers are using a low price
strategy with an objective to attract more and more customers. Earlier, the businesses in this
sector were using moderate and high price strategy in order to carry out smooth flow of
operations and activities.
Price is regarded as the most important factor that influences the purchase decision of
customers and it also drives them to purchase new products and services from the market
place. Similarly, huge differences in the prices brings more challenges and constraints in the
market place. However, in the study it is also analysed that alterations in prices gives more
options to the customers and at the same time, it also aids enhances the level of substitute
products in the market place.
However, the entry of German based discounted retailer such as Aldi and Lidl forced
UK based retailers to carry out changes in existing prices related strategy. Now, a low price
strategy has been adopted by most of the retailer to attract customer and sustain in highly
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competitive market place. The store visit is increasing in the discount retailers because of the
consumers enhanced sensitivity to price image (Heerde et al. , 2008) .
The rate of promotional activities carried out has been degraded in order to lower down the
cost of operations. In terms of distribution it can be stated that now both online and offline
channels of distribution has been adopted by the UK based retailers.
From the above conducted study, it can be also concluded that employees and their earnings
has been affected by price wars in the UK supermarket industry. In the modern era,
employees are considered as one of the most important or crucial aspect of any business
enterprise and thus, it is required by companies to focus upon the same. In the last few years,
the price in the UK supermarket industry has affected Tesco and Asda so badly that their rate
of employee turnover has increased to a great extent.
At present, these brands are not able to focus on training and development of their workers.
In addition to this, reduction has also been done in existing salaries and monetary benefits
which are offered to workers. This has created high dissatisfaction among workers and also
increased the rate of employee turnover. It can be concluded that employees and their
respective earnings has affected in a negative sense and in order to sustain in the long run,
Tesco and Asda will be required to develop effective strategies to deal with the same. Right
now very less focus is laid on areas such as training and development. This has created
several kinds of obstacles in personal growth and development of people working in the
organization. ACCORDING TO Heerde et al. (2008), due to lack of research and
development in resources, may harm the product quality and may hurt the consumers.
Price wars seems to have great impact on customer loyalty as unfortunate changes in
prices impacts the mind-set of customers and at the same time it also brings more changes in
the market scenario. In terms of effect of price wars, it can be said that, employees have to
focus on various things so that they can meet the needs and demands of customers.
In the present scenario, customer loyalty is very essential for long term growth of any
organization. Further, a loyal customer can offer company with several kinds of benefits such
as increasing sales and profits. It can be stated that competitive advantage is the thing for
which UK based retail supermarket are looking after. It can be defined as the situation in
which customers stay loyal to a particular company and purchase its products and services
irrespective of what other market players are offering. For this purpose companies now trying
hard to retain customers and make them loyal.
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The reason behind the fact that why customer loyalty is important is that such kind of
customers are considered as more profitable to any organization. Apart from this, they also
help firms to gain competitive advantage over other market players which are operating in the
industry. Now, the recent price war has created issues in enhancing the degree of customer
loyalty for brands such as Tesco and Asda. At present, the customers of these companies are
no more interested in staying loyal as the German based discount retailer are offering
products at low prices. From the above carried out report, it can be also concluded that
customers nowadays have become very sensitive to prices and this characteristic has affected
the overall operations and profits of the UK based supermarket retailers. Thus, there are
several areas which have been affected by the current price war, which is prevailing within
the country. However, it can be inferred that ultimate customers are the one which are getting
positively affected by price war. Now they are not required to spend a very large amount of
money to buy product and service. They are now available with a wide variety of options
available with them and in the last few years the prices of products has also lowed down to a
great extent. On the other hand, because of price war people in the market are able to save
more money as they are required to invest very less amount in buying desired products.
Currently German based supermarket retailers are growing in the UK with a very good pace
and they have also developed aggressive strategies for growth and expansion in the country.
On the other side of this, companies such as Tesco and Asda are finding it very difficult to
attract customers and maintain their existing market share. Sales, profits, customer base and
market share of the UK based supermarket retailer are constantly declining. This means these
brands will need to come up with a very aggressive or innovative business strategy to sustain
in the market and retain their existing customers.
On the basis of above study, it is analysed that German retailers have a direct impact
on UK retailers and this is also increasing competition at the same time. It is also analysed
that competition is allowing the business to develop the categories of products and the same
time, it also aids in meeting changing requirements of customers. As per the discussion, it can
be said that when number of entities operate business in a same market place, they have to
undergo with numerous challenges which might also impact the business services and
sustainability. In this respect, it is analysed that price is the main factor that drives the
customers to engage in any specific purchase.
As far as a genuine research diagnoses come, it covers conducting analysis on the major four
segments in the scope of operations, which are:
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 Customer issues such as price sensitivity and the customer segments which may come
out if the prices get change;
 Company issues, such as the organization’s cost structure, capacity building and
strategic positioning in the market;
 Competitor issues, like the competitor’s offering prices, their capability and the
strategic positioning; along with the contributor issues. This sort of analysis also
covers analysis of the other troupes in the industry whose self-centeredeness or the
service offering profile which may affect the outcome of the price war.
The diagram below shows the same which implicates the assessment of the battleground
The companies are required to step back and assess the four areas carefully often realized that
they really hold various alternatives such as to defuse the divergence, battling it out on
various fronts or receding. Thus, the analysis has assessed the whole strategic shift and its
dimension outcome in the industry caused due to the price war. As the research was carried
out, it was also being considered regarding how the companies have positioned them
successfully. The price wars are becoming more frequent as the managers may be liable to
view the price change as a simple, rapid, and reversible action.
In order to come out of the situation, it was found that the retailers has already personalized
their direct communications. This has basically worked as an opportunity for customizing
their service offering and serving the best in comparison to the competitors. It was proved
that whosoever supermarket retailer has stand actively and smartly by tailoring their services
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at the same prices, but portrayed well has been able to successfully deliver an observation of
good value and retaining the customer base.
Asda and Tesco's relationship with suppliers is also affected by the price war and now this
has also become a very big for the above mentioned brands. Presently, suppliers are being
offered and paid with very less amount of money for products which they are delivered. This
means it has become very complicated for them to get adequate or fair prices of all the
services and products which they have delivered to UK based supermarket retailer. The
impact of this can be seen in the relationship which exists between suppliers and retailers. It
is also possible that in future, suppliers may not deliver products and services on time and
this will have an impact on the overall brand image of Asda and Tesco. It can be concluded
that there are certain strategies which has been developed by the above mentioned brands.
However, these strategies are not being able to provide expected or desired outcomes. Now,
UK based retailers can come up with products which are innovative and different from
German based discounted retailers, such Lidl and Aldi. At the time of developing any kind of
new strategy, Asda and Tesco also need to focus upon their respective employees and
suppliers. This will directly contribute to long term growth and success of the same.
5.2 Recommendations
As per the findings, it can be stated that there are many organizations which provide similar
products and services. In this context, companies make use of a different set of strategies with
the help of which customers are attracted. However, one of the main strategy which are used
by organizations are providing their products at low price. Price plays a vital role in
identifying the changing the customer’s perception and in influencing them to buy the
product. As per the findings, following are the recommendation made in order to reduce the
price war as follows:
Government interference: The economy of the country will get affected if the price of the
products is reduced. In this context, the government should get involved in the pricing
strategies which are used by the organizations. This will enable to have equal opportunity and
competition among all retails. When any company reduces its price of a product when
compared to price in which another firm sells their products, then customers prefer to buy the
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product which is provided at low cost. With government interference, price war can be
reduced at high extent.
Competitive pricing: Pricing plays vital role in changing the customer”s perception towards
buying the product. Competitive pricing is a type of pricing in which organization will charge
the price which other firms are charging for the product. This will enable to have and fair and
equal competition. When goods are sold at similar prices, then customers will prefer to buy
the product and this will be helpful in creating a fair competition. However, the only
difference which can be made is by providing customers with high quality products. When a
product is sold by all the organizations at the same price, then the firm should focus on
providing their products at high quality. This will enable to develop high competition and this
way price war can be reduced.
Mutual concern: Managers of different organizations should have concern with each other
and set up a price for the product. When there will be mutual concern, then the firm will be
able to reduce the price war and this will be helpful in attracting customers. Managers should
not be too encouraged to slash the price in order to bring more visitors in the store and their
brands .Managers should not tends to view price cuts as an easy, quick, and reversible action.
As per the research conducted, it is clear that pricing plays a vital role in influencing
customer’s perception towards the product. Service users tend to purchase the product which
is provided to them at low prices. However, Tesco and ASDA should consider that this will
enable to achieve their goals and objectives. However, the only difference which can be made
in this context is by making sure that the good are provided in a better quality. In case when
the price is low, then people do not mainly go for quality, but when the product is provided at
the same price, then quality highly matters. In this respect, it is important to make sure that
products are provided in a high quality when price are kept low.
Tesco and ASDA should make sure that the materials by which products should be of low
cost, then firm can deliver their products at low cost. Anyhow, when the price of the product
is reduced, then the quality is highly affected as organization starts making use of low quality
materials. Tesco and ASDA are the highest shareholders they should always maintain the
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quality of products. In this context, managers of cited firms should have interaction with
suppliers and should explain that short term profit will not be helpful other than developing a
strong relationship. With strong relationship, management can develop trust and confidence
among the customer’s mind and this will help the organization to make loyal customers.
ASDA and Tesco should make use of low pricing strategy, but not in the stake of low quality.
By providing the products at low price the goodwill of the organization will get reduced and
the trust and confidence which they have developed will get affected negatively. With this
respect, frequent meeting should be conducted with suppliers, so that they make sure that
products are delivered at high quality.
By following these strategies the price war can be reduced. Further, Tesco and ASDA should
maintain their standards and make sure that products are provided with the high quality. Price
plays a vital role in attracting customers, but cited firms should not provide their best at a low
price if it affects the quality.
5.3 Limitation of the study
The research is assumed to be limited initially due to the limitation of time.
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Appendix
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QUESTIONNAIRE
Name ___________________
Gender
 Male
 Female
Age
 Below 30
 31-40
 41-50
 Above 50
1. How would you rate existing level of competition in UK supermarket industry
 Highly low
 Low
 Moderate
 Highly intense
 Somewhat intense
2. Customer loyalty has become very essential for growth and success of your company?
 Strongly disagree
 Disagree
 Neutral
 Agree
 Strongly agree
3. What are the factors which results in changing customers shopping habits
 Culture
 Social factors
 Personal factors
 Prices
 All the above
4. What are the key areas which has been affected by price wars among UK supermarket retailers
__________________________________________________________________________________________
________________________________________________________________
5. How would you rate the pricing strategy of German based discounted retailers
 Completely Ineffective
 Somewhat Ineffective
 Moderate
 Somewhat effective
 Highly effective
6. What kind of pricing strategy has been adopted by the organization to sustain in high degree of competition?
 Low
 Competitive
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 High
7. Has Price war resulted in increasing the rate of employee turnover?
 Strongly disagree
 Disagree
 Neutral
 Agree
 Strongly agree
8. Your organization facing challenges in increasing the rate of customer loyalty?
 Strongly disagree
 Disagree
 Neutral
 Agree
 Strongly agree
9. Do you think that the price war has resulted in providing benefits to customers in terms of savings?
 Strongly disagree
 Disagree
 Neutral
 Agree
 Strongly agree
10. The recent price war has affected sales and profits of your organization.
 Strongly disagree
 Disagree
 Neutral
 Agree
 Strongly agree
11. German discount retailer such as Aldi and Lidl are giving tough competition to your brand.
 Strongly disagree
 Disagree
 Neutral
 Agree
 Strongly agree
12. The slashing prices in market has negatively affected the organization’s relationships with suppliers to a
great extent.
 Strongly disagree
 Disagree
 Neutral
 Agree
 Strongly agree
13. Price war has forced your organization to lower down its cost of operation.
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 Strongly disagree
 Disagree
 Neutral
 Agree
 Strongly agree
14. The organization is facing obstacles in paying monetary incentives and higher salaries to employees due to
price war.
 Strongly disagree
 Disagree
 Neutral
 Agree
 Strongly agree
15. Price war has lower down the rate of training and development programs carried out for employees.
 Strongly disagree
 Disagree
 Neutral
 Agree
 Strongly agree
16. What is the marketing mix which your company is present using?
__________________________________________________________________________________________
________________________________________________________________
17. Competitive entry is a threat to your retail organization?
 Strongly disagree
 Disagree
 Neutral
 Agree
 Strongly agree
18. Your organization has gained good reputation in the marketplace?
 Strongly disagree
 Disagree
 Neutral
 Agree
 Strongly agree
19. What is existing level of your organization's brand loyalty?
 Very low
 Low
 Moderate
 High
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 Very high
20. What kind of customer do you attract the most?
 Higher income
 Middle Income
 Lower income
 All the above
21. Your organization's customers sensitive about prices
 Strongly disagree
 Disagree
 Neutral
 Agree
 Strongly agree
22. Are you offering products which differ from other market players?
 Strongly disagree
 Disagree
 Neutral
 Agree
 Strongly agree
23. Your organization is over competing with existing market players
 Strongly disagree
 Disagree
 Neutral
 Agree
 Strongly agree
24. Firm's character is important for long term sustainability in the highly competitive market?
 Strongly disagree
 Disagree
 Neutral
 Agree
 Strongly agree
25. Is there any kind of price war existing between businesses in retail supermarket of UK?
 Strongly disagree
 Disagree
 Neutral
 Agree
 Strongly agree
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