Report Of Change In Grocery Business & PESTEL Analysis

RETAIL THEORY
AND PRACTICE

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Key relevant changes in the UK grocery market........................................................................1
Grocery Retail UK:.....................................................................................................................1
PESTEL analysis of UK grocery market:...................................................................................1
Factors of microenvironment that drives the UK grocery market 3
TASK 2............................................................................................................................................5
Strategies and tactics that could be used by the retailer..............................................................5
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................8

INTRODUCTION
The retail industry is one of the highly competitive industries of the UK. This is because in
its some business firms are operating like Tesco, Sainsbury, Lidl and Aldi. All these businesses
are competing with each other on the price. Changes in the business environment greatly
influence the profitability of the business firms. In the present report, changes that happened in
the grocery business are discussed in detail. Along with this, PESTEL analysis is also done by
using which threats and challenges faced by the business firms are identified. In the middle part
of the report, the strategy is formulated by using which company can maintain its growth in the
industry. At the end of the report, conclusion section is prepared.
TASK 1
Key relevant changes in the UK grocery market
Grocery Retail UK:
The UK grocery market is highly diverse, with a broad range of formats, from convenience
stores to hypermarkets, warehouse clubs and online stores. According to Planet Retail's data, the
market is currently led by five grocers (Tesco, Sainsbury, Asda/Walmart, Morrisons and the
Cooperative Group), accounting for almost 55% of grocery retail banner sales, while the
remaining 45% is attributed to hundreds of outlets scattered throughout the country (Clegg,
Kornberger and Pitsis, 2015). Over the years, large players have continued to expand, both
regarding size, product range and services, increasingly taking market share from their smaller
competitors.
The large player of food retail industry in the UK is Tesco. Each retail chain focuses on specific
market segments. Tesco targets the middle market, providing both economy and upscale
products.
PESTEL analysis of UK grocery market:
PESTEL analysis considers six factors which help to the business entity that what are
various changes occurs in the grocery market of UK. The six factors are such as political,
economic, social, technological, environmental and legal factors (Ridley-Duff and Bull, 2015).
In the report, the Tesco company is chosen which is a large or multinational food retailing
company, is headquartered in the UK and has stores in 12 countries across the world. Tesco was
known for selling food and non-food products both.
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1. Political Factors: Political factors influencing the UK grocery industry are issues resulting
from real politics that can have an impact on the entire country. These include tax rates, acts of
legislation and of course, the stability of the country. Very first political factors which impact to
the grocery market is Scotland independent. UK retailers and Tesco have already responded to
this with concern stating that it could lead to issues with supply chain, pension laws and the
added administration costs that would be needed would result in higher prices for consumers.
Another political factor is the possibility of the UK leaving the EU (Blay-Palmer, 2016). This
could have rather a significant impact on the industry since leaving the EU also means leaving
the trade zone. It could also mean an increase in cost when purchasing from other European
countries.
2. Economic Factors: The economic factors influencing the UK supermarket are mostly
resulting from the current economic state of UK. There has been a noticeable food price inflation
throughout 2013. This inflation is outpacing wage growth thus making an effect of the economic
recovery rather unapparent for both the UK grocery market and UK households.
The increase in fuel prices also has an impact on UK grocery market because it keeps
customers from shopping larger out-of-town stores to save on fuel prices (Mertzger, 2014).
Another factor influencing is the high value of real estate held by grocery market retailers and
Tesco food retailer than well. Most UK supermarket chains own two-thirds of their stores as
freeholds, and Wm Morrisons even hold 90%. Numbers show that this leaves major
supermarkets such as Tesco trading below the value of their property.
3. Social Factors: Due to a variety of social changes, trends indicate that customers in the UK
have moved towards bulk shopping and one-stop shopping. One of the factors that fall under the
category general buying habits in tradition. Culture can play a significant role in customers pin
deciding where they do their food shopping (Fetscherin, 2015). Corporate responsibility is an
interesting factor when it comes to the effect it has on consumer behaviour of the market. A
positive CSR image can improve financial performance which would suggest that consumers are
influenced. Online food shopping has also become an increasingly popular way of shopping. The
current economic situation has had a great impact on consumer behaviour regarding shopping
habits. The average shopper's disposable income continues to reduce, putting a lot of pressure on
their household budget.
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