Detailed Industry Analysis Report: UK Supermarket Sector

This report provides a comprehensive analysis of the UK supermarket industry, focusing on key aspects such as environmental factors, industry analysis, and the identification of opportunities and threats. The introduction highlights the oligopolistic nature of the market, dominated by major players like Tesco, Sainsbury's, and ASDA, and sets the stage for an in-depth examination using PESTLE and Porter's Five Forces models. The environmental analysis delves into political, economic, social, technological, legal, and environmental factors influencing the sector. The report identifies critical issues faced by the industry, including infrastructure challenges, customer preferences, brand value, labor shifts, technological advancements, real estate considerations, and financial constraints. The industry analysis, using Porter's Five Forces, assesses the bargaining power of suppliers and buyers, the threat of new entrants and substitutes, and the intensity of rivalry among competitors. The report concludes by summarizing the opportunities and threats derived from the analyses, providing a holistic view of the UK supermarket industry's current state and future prospects.

Industry Analysis
Report

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1. ENVIRONMENTAL ANALYSIS..............................................................................................1
Analysis of the external environment of the chosen industry using appropriate strategy......1
Identification of set of issues for this industry.......................................................................4
Explain the reason of the issues..............................................................................................7
2. INDUSTRY ANALYSIS............................................................................................................7
3. OPPORTUNITIES AND THREATS DERIVING FROM ANALYSES...................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
UK super market has been rapidly increasing and dominated by a few firms, which are led by
few firms such as Tesco, Sainsbury and ASDA. Generally, Super market sector is the
oligopolistic market and the pricing strategy of supermarkets.
Present study is on Supermarket industry that will be presenting some essential elements
and factors of supermarket or grocery stores. Study will be presenting same models to evaluate
the actual growth of industry with the help of PESTLE and Porters five forces model.
Further, it also presents opportunity and threats from the internal analysis method. In
order to provides in depth knowledge of the study in the context of supermarket industry. They
also discuss some issues and factors that affect the business organization. Furthermore, it relates
to the business environment that affect the other competitors and company organizations.
MAIN BODY
1. ENVIRONMENTAL ANALYSIS
Analysis of the external environment of the chosen industry using appropriate strategy
As per the research, UK grocery market has total value £184.5 billion in June 2017. This
rate has been increasing from 2016 by 0.3 percent. In supermarket industry sales achieved the
target of sales about 3,000-25000 square feet broad range of grocery products and services. In
terms of determining UK has 87,141 supermarket store (Global Information Network, 2017).
Environmental analysis is a strategic tool. It is a process to identify external and internal
elements that can affect the business organizational activities and performance level. Analysis of
the market will represent ups and downs and opportunities for specific industry. There are
providing some factors and driver sources that affect the retail industry of UK by following some
sections.
Political
The political activities run by the government affect to running businesses and industries
also sales and purchase of the retail products in any specific market. The government and
politicians’ effect from its exercises, power on the retailing sector. Besides, the government
controls the supply chain of retailing products1. Supermarket industry has facing many ups and
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downs by alteration of government regulations and modification in business policies. Political
emerging factors are Monetary Policies, Consumer Protection Act, Employment Laws, Interest
Rates, Tax Policies, and Contract Enforcement Laws. These laws and changes policy affect the
industry directly. All over the factors given a large impact on the development of supermarket
industry.
Economical
In terms of economic factors, if country’s economic conditions are strong and stable then
the flow of business will be going smooth and with ease. In the context of retail sector, company
has to depend on the economic conditions of the country to stable their own position. Strict
decision making by the government on supply of retail products through economic structure of a
country will h face great effects on the supply of goods and services2. Supermarket industry gets
affected by some policies such as foreign exchange, economic recession, buying habits of
consumers etc. lack of economic stability and growth will impact negatively on the super market
industry.
Social
Social factors are highly influenced by changes in demands and needs. Society is highly
dynamic and informational in terms of choices. Besides, due to changes in habits and fashion
trends, supermarket industry goes with some fluctuation. Social factor has directly affected
changes in needs of society depends on the latest brands and high quality brand. There are
different norms and policies of income distribution, age distribution and rates of population
growth leaves direct effect on this business3. Due to high educational environment and social
aware people growth, leisure, career attitudes would get affect the thinking of society and make
changes in demands accordingly. These are the social factors and challenges faced by retail
industry growth. Social factors are given both positive and negative impact on the overall
supermarket industry in terms of changing customer needs and demands.
Bernstein, S. and et.al., 2016
2 . Beske and and Seuring, 2014
3 Hosken, D. and Tenn, S., 2016
2

Technological
Technology and advance services have given new growth and sphere to supermarket
industry. Technological factors has influenced new services and growth to the industry4. This
also impacts buying and selling process. Technological factor can affect the consumers buying
method or would enhance the opportunities for businesses. Technological factors are given new
positive and fast forwards strategies and growth in terms of making low performance making
target goals.
Legal
Legal factors are the another factor of external environment that affect industry by
changing in plans and policies and saved it from manipulation and other smuggling of products.
Government has introduced many acts and implications for checking illegal trafficking of retail
industry products. In spite of that, retail industry necessary to adopt all consumer as well as
employment acts to make environment ethical and effective5. This industry has focused on the
environmental regulations in order to make sure the positive and clean environment. Legal
factors impacts on the supermarket industry through interference of government changing
policies.
Environmental
Environmental factors are always affects the industry stability that creates challenges in
terms making the profit revenue. Government imposing different acts and laws to make
environment safe and secure. Supermarket industry should follow the most effective strategy for
overall growth to handle the environmental nature6. Environmental changes such as changing in
trend, unemployment issues will gives adverse impact on the supermarket industry growth.
4 Calvo-Porral Faíña Medín and Montes-Solla, 2016
5 Ellickson, 2016
6 Jarvis and Williams, 2017
3

Identification of set of issues for this industry
Challenges with infrastructure and logistics
Infrastructure relates to the supermarket location, areas and the background where they
exist. For companies and organization requires setting their location at preferred place of the
customer. Due to non-efficient distribution channel, it is very difficult to handle and can result in
huge losses. This is the first issues face by the retail sector. Threats it is the threat of the
company to renovate the infrastructure store for attracting large number of customers.
Customer preferences
4
Illustration 1: PESTLE Model
(Source: Global Information Network, 2017)

It is another challenge for the growth of retail industry to make a good impression in front
of their customers. Retail industries or companies require introducing new technologies7.
Moreover, it brings new effective changes and fast forward moving industry. Consumer
needs to access different products overall, it brings new opportunities and threats according to
customer’s demands. Customer preference can be the big issues for the industry which lead high
sales loss to the particular industry. For that, company requires to take the better decision making
growth in terms of attracting their customers.
Brand
Brand is the tool that helps to promote the product and services of the company. Having
low brand value is another major issue faced by the retail industry. It is today's competitive retail
environment that requires the best productive products. It is the challenge and issues facing by
the industry structure. Industry should require adopting the most challenging and advancing
technologies to make the brand awareness.
Labor and workforce shifts
This is another big issue facing by retail industry, which is related to rimming problems
of the workers. This might affect the overall, industry due to changes in employment law. Labor
law is another major effectual and long lasting trenchant process that affects business growth and
effective challenges. Retail industry has been modified with new technology or high demand and
is eclipsing traditional buyers. This is the legal implications related issues that might be create
full. Brings it tells about the matter that affect the overall industry.
Technology
It is another challenge that plays very important role in retailing. Interactive apps, chat.
Overall, it brings new challenging and long lasting effective performance level8. Technology is
the most effective factor that affect the business in both positive and negative manner. Along
with that, technology also might become problem or issue for the industry if they are not aware
of them.
Real Estate
A real state is the likely continue to be an albatross for some retailers and an opportunity
for others. Real strategies are the most necessary and important for online retailers who need to
7 Hosken and Tenn, 2016
8 Waterlander and et.al., 2016
5

analyze labor markets or online markets, which require long lasting effectiveness and effective
leading skills. Online retailers collect data of customers from data analytic to understand its
customer base. This becomes an opportunity for the retail industry to get their customer’s
attraction9. Effective challenges growth and long lasting
Capital, finance, reform and growth
It is another issue faced by different retailers. Supermarket industry would always
contribute good economic growth and low unemployment, higher wages and lower taxes. On the
other side, due to changes in rates or policies, they would impact the profit margins of the
company.
Changes in demands
This is the most challenging issue that has been faced by the industry by customer hand.
On the other side, it becomes a threat for retailers of competitors. For that industry needs to
adopt some strategic planning to get over from the issue10.
9 Klemick, Kopits and Wolverton, 2017
10 Perera, 2016
6

Future uncertainty
Supermarket industry sector is highly unstable and unpredictable. This causes high future
uncertainty risks. This might cause less effective growth and challenges for industrialists.
High Competition.
This issue is the most common issue that became a threat for this sector and creates high
competition and variety of products. This is an opportunity for customers to select from huge
variety of products.
Explain the reason of the issues.
According to data of 2 July 2018, UK super market stores are facing some issues related
to technology or supply issues that may trigger and meat shortage and processing industry warns.
These issues are related to the logistic department11. There are many other issues facing by the
company. That affect the business growth and market actual situation. On the basis of above
given facts. It has been concluded that supermarket industry of UK has suffered from some
issues such as shortage of goods and services, heavy competition and labor shortage.
2. INDUSTRY ANALYSIS
Porter’s five forces
Bargaining power of suppliers (High)
Suppliers are playing a dominant role in the grocery industry and regulate all businesses.
Suppliers dominate the supermarket industry by set their own pricing and policies. In this sector,
Suppliers set prices on their own basis and makes the proper effective process.
Bargaining power of buyers (High)
Customers have high power in supermarket industry. In recession or financial crisis,
consumers would always shift towards low priced range products. This creates heavy loss to
supermarket industry12.
Threat of new entrants (Moderate)
11
. Pires and Trindade, 2018
12 . Hosken, Olson and Smith, 2016
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UK supermarket has been always in the middle of contentious subjects concerning
corporation, global rivalry and in price concern. It is more likely to get effective growth market
challenges. Supermarket industry is a huge investment market venture. New company or
superstore requires having high financial support for survive. Supermarket is the large growing
and highly competitive in nature due to big supermarket companies such as Tesco, Asda and
Sainsburry etc. so overall, it makes the good impact on the nature in order to meet the needs of
the organization. Besides, company also requires investing high investment in infrastructure,
location scale and customer products. This is the reason supermarket industry involves moderate
risk of new entrants.
Threat of substitutes (High)
Supermarket industry provides high range of products and services offering bakeries,
delicatessens, wine and spirits, banks, florists, clothing, pharmacies, books etc. number of
products has been provided in this study. Besides, it also helps to get the best effective process.
Due to number of multinational supermarket stores each competitor are thinks to invent or
provides number of different product and services to the customers. This is the reason of high
threat of substitution of products.
Rivalry among competitors (High)
Intensity of competitors’ rivalry in food and grocery industry is extremely high. Such as
Tesco, Asda, Morison, Sainsburry's13. Etc. these all are the big brands of supermarket nad having
high customer range of satisfaction. Apart from that, it has also many small and medium scale
supermarket stores that are situated in all over UK market. Supermarket have existing high
competition between top supermarket stores. Each organization wants to take one step more
further to get the customer attraction. To raise the competition level within the industry company
takes the new initiatives and growth to make perfect completion withing rival firms.
On the basis of this five forces model industry can easily identify the competitive
advantage and growth for the industry and company development.
3. OPPORTUNITIES AND THREATS DERIVING FROM ANALYSES
Opportunities
 On the basis of above analysis, UK
Threats
 From the above discussion, it has been
13 Remnant and Adams, 2015
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supermarket has an opportunity to grow
business at technological level and
social level14.
 They can easily identify consumer data
from data analytic
 They have an opportunity to offer
online shopping and offer home
delivery services to more areas.
 It has opportunity for joint ventures
under which local company will help in
improve the sales and profit by helping
other company to introduce new raw
materials15.
identified that due to instability of
economic market retail industry facing
economic recessions and credit
crunche16.
 Due to high variety of substitute goods
and services industry facing high
competition in the market.
 Due to labor timing issues and wages
related dissatisfaction lead the
employees' shortage in the industry.
CONCLUSION
From the basis of above discussion, it has been seen that industry analysis of the
supermarket has given a wide image of the situation about current supermarket stores that faces
many issues related to its value of assets, indigestion, shortage of goods etc. Besides, study also
concluded some models to analyze internal or external analysis with the help of PESTLE, SWOT
and Porter's five forces.
14 Sawalha, Karampour and Rogstam, 2015
15 Waterlander and et.al., 2016
16 Turolla, 2016
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REFERENCES
Books and Journals
Bernstein, S. and et.al., 2016. Private equity and industry performance. Management Science.
63(4). pp.1198-1213.
Beske, P., Land, A. and Seuring, S., 2014. Sustainable supply chain management practices and
dynamic capabilities in the food industry: A critical analysis of the literature. International
Journal of Production Economics. 152. pp.131-143.
Calvo-Porral, C., Faíña Medín, J. A. and Montes-Solla, P., 2016. Relational, Functional benefits
and customer value in large retailing: A cross-format comparative analysis. Journal of
International Food & Agribusiness Marketing. 28(2). pp.132-148.
Ellickson, P. B., 2016. 15 the evolution of the supermarket industry: from a&P to
Walmart1. Handbook on the Economics of Retailing and Distribution. p.368.
Hosken, D. and Tenn, S., 2016. 11 Horizontal merger analysis in retail markets. Handbook on
the Economics of Retailing and Distribution. p.250.
Hosken, D. S., Olson, L. M. and Smith, L. K., 2016. Can entry or exit event studies inform
horizontal merger analysis? Evidence from grocery retailing. Economic Inquiry. 54(1).
pp.342-360.
Jarvis, J. E. and Williams, I. A., 2017. A Case Study Exploration of Strategies to Improve First-
Line Supervisor Problem-Solving Abilities in the Retail Supermarket
Industry. International Journal of Applied Management and Technology. 16(1). p.6.
Klemick, H., Kopits, E. and Wolverton, A., 2017. Potential Barriers to Improving Energy
Efficiency in Commercial Buildings: The Case of Supermarket Refrigeration 1. Journal of
Benefit-Cost Analysis. 8(1). pp.115-145.
Perera, D., 2016. Business Development Proposal. Organic fruit Drinks for STR Supermarket.
Pires, T. and Trindade, A., 2018. Ex-post Evaluation of Mergers in the Supermarket
Industry. Review of Industrial Organization. 52(3). pp.473-496.
Remnant, J. and Adams, J., 2015. The nutritional content and cost of supermarket ready-meals.
Cross-sectional analysis. Appetite. 92. pp.36-42.
Sawalha, S., Karampour, M. and Rogstam, J., 2015. Field measurements of supermarket
refrigeration systems. Part I: Analysis of CO2 trans-critical refrigeration systems. Applied
Thermal Engineering. 87. pp.633-647.
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