UK Supermarket Sector: A PESTEL and SWOT Analysis

This report examines the UK supermarket sector, analyzing its internal and external factors. It utilizes the PESTEL model to identify the positive and negative impacts of the macro environment on the retail sector. Additionally, a SWOT/TOWS analysis is conducted on a UK supermarket to identify its strengths and weaknesses, and the Five Forces model is used to assess the competitive landscape. The report explores how internal strengths and weaknesses interrelate with external macro factors, highlighting the importance of understanding both internal and external influences for business success.

Table of Contents
Introduction.................................................................................................................................................3
Section 1......................................................................................................................................................4
1) Different types of organisations..........................................................................................................4
2) Size and scope of the organisations.....................................................................................................5
3) Organisation structures and functions.................................................................................................5
Part 2 – The UK Supermarket sector...........................................................................................................8
a) Using PESTEL model, identify the positive and negative impacts the macro environment has upon
the UK retail sector..................................................................................................................................8
b) Conduct internal (SWOT/TOWS analysis) and external (Five forces model) analysis of a UK
Supermarket to identify its strengths and weaknesses.............................................................................9
c) Explain how strengths and weaknesses interrelate with external macro factors................................10
Conclusion.................................................................................................................................................12
References.................................................................................................................................................13
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Introduction
A successful business is dependent on the multiple internal and external factors. For example, for
finance resources, businesses depend on financial institutions. For social norms acceptance, it
depends on the society. For market conditions, it depends on the market. For the sale of products
and services, it depends on consumers. For natural resources, it depends on nature. For Legal
support, it depends on the government institutions etc. All these factors when combined together
form a Business Environment. Thus it can be said that Businesses operate in an environment, not
in a vacuum. These business environment factors are dynamic in nature and not stand still.
Customer’s demands keep changing; hence businesses need to be innovative in their products to
survive in the market. They need to aware of the business environment and adapt the changes
easily. Section 1 of this assignment will brief the different types of organisations, their scope,
purpose, profits, growth, complexities, and objectives. Section 2 will brief the Positive and
negative impacts, strength and weaknesses of the UK Supermarket retail businesses.
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Section 1
1) Different types of organisations.
Suppliers, Consumers, competitors, media, government, economic conditions, market conditions,
financiers, technologies, trends etc are forces that influence the business and its environment. All
these forces are crucial for running a successful business. These factors act differently in
different types of organisations. Three main divisions of Business Organisations which will be
discussed below are -Private/Profit Organisations, Non-Profit Organisations and Non-
Governmental organisations.
[M1]Private/Profit Organisations - According to Craig and Campbell (2012), the main
objective of these organisations is to earn huge profits and revenues for their company. These
organisations are controlled by private individuals and groups. These companies focus on
offering products and services to consumers and generate huge profits that are further distributed
to the owners, employees, stakeholders and business growth. These organisations depend on
their earned revenue and credit arrangements to finances their business operations. Sole
Proprietors, Partnerships, Small and medium-sized businesses, MNCs, Trade Unions,
Professional Associations etc. are few examples of Private sector organisations. For example,
Established in 1976 by Anwar Pervez, Bestway Group is leading independent food wholesale
group of UK. It employs over 33,000 employees currently. It also operates in Pakistan, apart
from the UK. Sales are targeted to be £3.34bn in 2016 (Knowledge Hub, 2017).
Non-Profit Organisations - According to Rouse (2016), The Purpose of non-profit
organisations is to not earn profits, instead, these organisations dedicate their time to work for a
cause. These organisations are used for charity, religious groups, environment awareness,
advocacy etc. NPOs have both volunteers and paid employees. These organisations use their
expenses to fulfil their purpose and not distribute it to the people and employees. These
organisations are highly dependent on charity and donations to conduct their operations which is
quite challenging.
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For example, Treetops Hospice Care of UK provides nursing and emotional support to people
affected by illness, death etc. These services are free of cost. But they need to raise £3 million
per year from charity, fundraising events, donations to run its operations (Best Companies,
2018).
Non-Government Organisations can be called as those organisations which depend on
government for funding but the government doesn’t interfere with their operations. Most of the
NGO’s are referred as non-government organisations. These associations serve the social and
political causes and give them a positive direction. World Bank has classified NGOs into two
sets - one work for the development and is called Operational NGO’s and another who promotes
a specific cause is called Advocacy NGO’s (Margaret, 2016).
For example, Citizen Advice is a UK NGO whose purpose is to give advice to people facing
issues in practicing policies. Citizen Advice makes them aware of their responsibilities and right
(Citizens Advice, 2018).
2) Size and scope of the organisations.
Micro Businesses are the organisations who employees a very less number of employees and
doesn’t have a high volume of sales. These are small-scale organisations that run privately in
sole proprietorship or partnership. The employee strength is not more than 50 personnel within a
year. These organisations face a lot of competition with other businesses (Richards, 2018).
Medium Scale Businesses are also small-sized entities that are defined in terms of their
investment size. These organisations bridge the gap between the small and large enterprises
which require equipment, capital, and employees. Revenue generation of these businesses is
approximately £50m every year. Employee strength is approximately 250 employees per
organisation (Marquis, 2017).
Large Scale Organisations have a large number of employees in their organisation with high
sales and revenue i.e. more than £100m. These organisations operate within and outside national
boundaries. Large scale organisations export and import goods and services from other nations in
order to increase their market size and profits.
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3) Organisation structures and functions
Needs and requirements of organisations vary from different organisational structures. These
structures are responsible for conducting businesses operations smoothly and define goals for the
businesses. No structure is wrong or right, it is the size and need of the organisation that designs
its structure.
Functional Structures are the most common structures that group its employees according to
their similar or specialized set of skills. These structures are successful in organisations that are
stable and less inclined towards dynamism (Davoren, 2018).
[D1] The main strength of functional structures lies in specialization where employees are
grouped as per their skills and help them to specialize in their particular field, thus ensuring high
productivity and efficiency of work. But apart from these benefits, one major disadvantage is that
this structure doesn’t focus on the teamwork which makes it difficult to expand the businesses.
Since decisions are made by the top authorities, low-level employees need to wait for long to
work towards the decision (Joseph, 2015).
[M2] in these structures, authority to take decisions flow from top level to Lower level, which
means that only the top level management has the right to make decisions. The one major
advantage of this structure is that unity of command is seen in the organisation with clarity in
decisions and maintains the decorum.
Divisional Structures gives the ability to segregate the organisation businesses into semi-
autonomous groups. These structures are well known for a large organisation, where each group
are managed by its members and are focussing on narrow aspects of the organisation products.
[D2] The major strength of such structures is that it focuses upon single product/service with its
own leadership structures supporting their objectives. One weakness of such structures is that
since it has multiple divisions, politics may undermine each other. For example, Microsoft
Business Software Divisions has developed the Social Connector in Microsoft Office Outlook
2010. They couldn’t integrate SharePoint and Windows live until Social Connector interferes the
MySpace and Linkedln.
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Matrix Structures have a friendly atmosphere within the company and unity can be seen among
various teams or departments.
[D2] Such structures are suited for small organisations where leadership is offered to employees
which further motivate them to work. The disadvantage is that it may create confusion among the
people (Johnson, 2015).
Varied functions are interlinked to each other in an organisation. For example, Human Resource
management team is responsible to recruit employees for various teams, Marketing and Sales
team is responsible to promote and sell the team product in the market, Research and
Development team innovate new technology and help teams to work with them, Finance and
accounts teams look after the financial transactions of the company and much more.
It is very important for the organisations to strategise their plan to market their product. For
example, Best Way group follow multiple strategies to market their product. They share
delicious photos of the food they offer to customers, they bring in loyalty programs, take reviews
from customers and accept them, they keep themselves and their menu updated on social media
and other sites etc. All these functions are carried by the best way group to promote their brand.
Even NGOs like Citizen Advice promote themselves to market their program and raise funds.
[D2] The finance function is very crucial for any organisation because this function calculates
the expenses, income, profits, and losses of any organisation. Thus, it further helps in managing
the resources efficiently to recover the losses and gain high profits. The Human Resource
function is responsible to recruit employees for its organisation teams. It is the human resources
which makes the organisation effective and efficient. All of these functions are correlated to each
other, where the absence of any function may lead to failure of an organisation (Boutelle, 2002).
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Part 2 – The UK Supermarket sector
a) Using PESTEL model, identify the positive and negative impacts the macro environment
has upon the UK retail sector.
Since the business environment is dynamic in nature, it easily gets affected by the micro and
macro business environments. To understand these factors, PESTEL analysis is discussed below
-
[M3] Political Factors - the UK is a politically stable country as compared to other nations, thus
its retail supermarket is also quite stable in political terms, though they have to follow various
norms and regulations. High Competition and political issues like BREXIT has affected the UK
economy at large. In today scenario, most of the goods sold by these supermarkets are either
imported or exported from European countries. After the BREXIT, trade relations will suffer at
large, thus affecting the businesses of these retail supermarkets (Craig & Campbell, 2012).
Economic Factors - After the political issue of BREXIT, a log of dynamic changes have been
seen in the economic conditions of the United Kingdom. Prices have been fluctuated at large,
affecting the businesses of the Retail Supermarket. The trade relations between the UK and
European countries are highly impacting the UK economy, which further affects the supermarket
sales in the UK.
Social Factors: the motive of each business and its environments to work directly and indirectly
for the betterment of the society. They conduct the activities within the social boundaries. The
retail Supermarket needs a large number of employees, thus have benefited the society by a large
number of employment opportunities for the people. But the BREXIT issue and other political/
economic factors have made these retail markets to reduce their employees and not open vast
employment jobs. These employees were directly dependent on retail stores for their living. The
UK needs to work towards this issue and help the society to rebuild and prosper.
Technological Factors: In this tech-savvy world, where people are highly dependent on the
internet, they prefer shopping online within the comfort of their homes. They even like to shop
groceries, vegetables online. This has benefited the retail market by not opening physical stores
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which need high infrastructures and increase their operational cost. Few supermarkets are only
available online and give doorstep delivery to people at same cost. These supermarkets have
even got their application developed, to make people order through their phones from anywhere
anytime (Scheer, 2012).
Environmental Factors: Since environment/nature is a boon to any country, it is the duty of
every business organisation to form an eco-friendly environment. Retail markets can use paper
bags instead of plastic bags. This will save the environment in one way. They should also follow
the rules and regulations by the government whose purpose is to save the environment (Werbach
& Hunter, 2012).
Legal Factors: For the health and safety of the company employees, organisations need to
design and follow the rules and regulations designed by the government and company.
Organisations should ensure that they are not selling the expired items since they can harm the
customers.
b) Conduct internal (SWOT/TOWS analysis) and external (Five forces model) analysis of a
UK Supermarket to identify its strengths and weaknesses.
There are multiple capabilities of an organisation which helps them to give competition to other
competitors and survive in the market. The purpose of these organisations is to not have only
capabilities to increase their revenues and profit but also helps the society and economy grow by
their contribution to economic and societal development. SWOT analysis of UK Supermarket
store will give a clear picture of their strength, weaknesses of a UK Supermarket.
[M4] Strength: The apparel segment in the UK is booming at a high pace because the apparent
organisations like Tesco, Lidli, Sansbury are giving tough competition to each other to survive in
the market. These organisations play with their prices and quality in a way that they make the
customers feel satisfied, and make their purchase worth for money. At the end of the season,
these retailers put their items on sale - first to sell their dead stock of the season, second it makes
the customers happy. These sale purchases attract a large number of customers and make it a talk
of the town. These Retailers do a thorough research before bringing new products, they
understand the needs and demands of the customers, the quality they expect and then design and
display the products to satisfy the customers, and increase sales. These retailers also focus on
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maintaining the fresh stock and putting the dead stock on sale. This approach of theirs, satisfy the
booth segments of their customers. For instance, Tesco has launched more than nine thousand
products in clothing segment to attract customers. They have also spread their stores across the
UK to cater a large number of customers (Smith, 2016).
Weakness: When the retailers go deep into multiple sorts of products that they may lose their
originality and quality. Without much knowledge about a particular segment, they pitch in those
segments in which they do not have expertise. This leads to degrading their brand and fame
among customers. For example, Tesco is a large company with varied products like foods,
books, apparels, furniture, finance, petrol etc. Tesco has faced bad debt from its credit cards and
insurance claims (Ruddick, 2014). Another weakness faced by Tesco is that without having
knowledge of web and technology, they launched their own smartphones and tablets, this
adverse their sales widely.
Opportunities: Let's consider the opportunities TESCO can have. They can expand their digital
entertainment market, with their 80% finance in Blinkbox (Hall, 2011). They can offer their
tablet and smartphones to intersect the investment in international markets like South Korea,
Malaysia, Thailand, and China. Tesco can also offer their product online because these days’
customers prefer to shop their favourite brands within the comfort of their home through internet
services.
Threats: Rise in competition and establishment of a large number of brands, the UK
supermarket has been affected at large. They need to have strong marketing policies to prove
customers that they are better than the others. For example, According to Stevenson (2014), at
present Tesco is on the top of UK Grocery retail sector, which is constantly facing tough
competition with other brands like Lidli, Aldi etc. One major threat faced by Tesco is the
takeover of Asda by the wal-mart company. This can give a very tough competition to Tesco
since Walmart has skills, funds, and resources to compete.
c) Explain how strengths and weaknesses interrelate with external macro factors.
No organisation steps forwards without a predefined objective and goals which needs to achieve
in a particular period of time. Proper strategies and plan are designed towards the fulfilment of
these objectives. But no matter how smooth the business function is getting performed, few
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complexities arise because of the micro and macro factors which hinder the growth and functions
of the company. Thus they fail to fulfil their objectives on time. Thus, macro and micro factors
should not be ignored during the functioning of an organisation. For example, Technology factor
can be the biggest strength of UK Super retail market or any other organisation because today
technology plays a very crucial role in development and growth of the company. Political factor
or economic crisis can result in the downgrade of a company, in other words, they are a threat to
any organisation. Technology being an internal factor and Politics/economy being an external
factor has both affected the company directly or indirectly. Thus, organisations need to be very
careful with all the macro and micro factors.
[D2] Thus it can be said that both strength and weaknesses of the internal and external factors are
essential for the development of any organisation. Thus, the company needs to identify its
strength and weaknesses on time and work towards them for the betterment of society and for the
company itself. For example, if UK Supermarket retail sector fails to bridge the gap between the
demand and supply of their products to customers, they will face a negative impact on their
brand, and in no time their competitors will go ahead of them. Therefore, the company must
always work towards improving its weaknesses and give more strength to their strengths.
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Conclusion
Thus from the above report, it can be concluded, that there are multiple factors within the
business environment like finance, technology, taxation, human resources etc which aggregate
together to form a business environment. For any successful business, it is important to work on
these factors and build a positive working environment. The companies should also focus to
work on eco-friendly methods so that for their benefit they do not harm the nature. Organisations
have different structures and different purposes. In the above report, we have classified
organisations into three major divisions- private or profit organisations, nonprofits organisations,
and non-government organisations. These organisations are further divided on the basis of their
size and scope of businesses. Some are small-scale or micro organisations, some are medium
sized and rest are large organisations. These organisations design their own operating structures.
Some organisations work under the principle of functional structure, some work on divisional
structures and some on matrix structures. These structures operate differently and make decisions
differently. Each structure has its own strength and weaknesses. It is the organisation which
needs to determine which structure is the best for them. In the second part, the discussion has
been made on the scope of UK Retail markets. How political, economic, social, technology, legal
factors affect the UK retail markets. We have also discussed the strength, weakness, threats, and
opportunities of these retail markets. Thus, organisations need to be well aware of the internal
and external factors and work towards improving their weaknesses to survive in the market.
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