Analysis of UK Supermarket Industry: PESTLE and Porter's Five Forces

This report provides a comprehensive analysis of the UK supermarket industry. It begins with an introduction that explains the importance of industry analysis in understanding the current business environment and gaining a competitive advantage. The main body of the report utilizes PESTLE analysis to examine the political, economic, social, technological, legal, and environmental factors affecting the industry, with specific focus on the impact of Brexit, unemployment, changing consumer behaviors such as the rise of online shopping and health consciousness. The report also applies Porter's Five Forces model to assess the bargaining power of suppliers and consumers, the threat of substitute products and new entrants, and competitive rivalry. The conclusion summarizes the key findings, highlighting the challenges and opportunities facing the UK supermarket industry and suggesting the adoption of digital technologies and online services as key strategies for future sustainability. The report references several academic sources to support its analysis.

INDUSTRY ANALYSIS

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Environmental analysis of industry by using PESTLE as strategy tool......................................3
Porter 5 forces analysis...............................................................................................................6
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................8

INTRODUCTION
Industry analysis is a function of business, provide information about current business
environment, it helps to comprehend different economic pieces of marketplace and how these
may be utilized to gain competitive advantages. The current report is based on supermarket
industry, UK. PESTLE analysis and porter's five force model will be defined in this study in
context of chosen sector.
MAIN BODY
Environmental analysis of industry by using PESTLE as strategy tool
Political factor-
Political instability and stability, changes in tax as well as trade policies are considered as
political factor, that affect every sector or industry in the world. The profitability and revenue of
UK supermarket industry get affected by government policies. The possibility of UK leaving
European union, is an example of political factor that directly impact on UK supermarket
sector, it put negative effect upon sector since leaving EU also mean leaving trade zone (Garg,
2019). All the nations currently importing products to UK to be sold in supermarkets could
become more reluctant to sell their goods in nation due to tariff. It is one of the most essential
problem for this industry that directly impact on productivity and profit margin negatively.
Another political issues is possibility of Scotland becoming independent, it can lead to
problem with supply chain, added administrator costs and pension law that can be required
would outcome in higher prices for target market. Independence of this nation can increase
prices that impact on supermarket industry profit margin, it loss in profit for them.
Economic factor-
The unemployment rate of UK impact on supermarket industry, while considering at the
most recent period there is a little drip in 2009 reflecting effects of global financial crisis on
employment in nation (Vidal, 2016). However, it also reflects gradual recovery of UK economy
with employment rate rising again up to 72.1 percent, just one percent short of extreme
percentage every reached. So it can be said that unemployment rate impact on UK supermarket
industry because it directly influences consumer spending and buying behaviour. Economic
situation after Brexit arise unemployment rate which in turn affects customers purchasing and
spending nature which then has an affect supermarket sector. It considered as another issue faced
by this industry after Brexit. This issue lead as threat for industry at short term period.

Social factor -
This factor that have impact on supermarket industry of UK are either a outcome of affect
economic situation has had on consumers' behaviour, changes in human lifestyles & health
concern or normal purchasing habits of customers. In recent time, consumers prefer to purchase
health products and avoid junk food that affect health and make them ill. Utilization of organic
food are now in trend that impact on supermarkets supply chain and inventory management
(Moya, Parker and Sakrabani, 2019). The attitude of people towards health are change now, they
prefer to eat healthy food items instead of fat consistence because it increases obesity that affect
longer period. It is one of the major issue that put pressure on supermarket industry to change
supply of goods according to the needs of market, that consume a lot of money and time as well.
Another social factor is online food shopping as new trend that become increasingly
popular way of purchasing. Increased fuel prices are influencing shoppers to extent that they
either like to go shopping at general store more than big out-of-town supermarket or go shopping
online through online delivery from local stores. It impacts negatively on supermarket industry
of UK, their consumers prefer to purchase products online as it decreases sales of this sector
which is considered as another major problem.
Technological factor-
Technological factor impact on UK supermarket industry positively, it influences on
them mainly outcome from innovation and need for supermarkets to keep up with advanced
technologies to cater the best and most recent services for their consumers and to increase client
satisfaction. Technology advancement lead as an opportunity for this sector because it helps to
increase their profit margin and productivity level rather than before (Chisoro-Dube, das Nair,
and Landani, 2019). By using digital technologies' industry can provide online delivery services
to number of clients that help to build strong relationship with customers for long period.
Legal factor-
There are many legal factors impact supermarket industry of UK such as laws and
regulations related to employment given and governed by the government, in which this sector
need to abide by. Labour law and Equality act 2010 are particularly a big issue for retailers or
supermarket sector who have to maintain low prices to remain competitive (Seck, 2018). For
example, supermarket sector had so many tussles with laws over labour related problems that
impact on its business. According to changes in employment laws and acts supermarket feel

pressure, as they also need to make changes in existing employment structures and policies in
order to sustain for longer. So it can lead as an opportunity for this industry because by
complying with all the legal factors relevant for them they can gain competitive benefits and
build positive image in marketplace. Competition law established by Fair trading office is
another legal factors that impact supermarket industry positively, as it help through cater
guidelines that sector need to comply with, it allows them to gain competitive benefits not in
ineffective manner.
Environmental factor-
The concern of government and consumers in all around the world towards
environmental sustainability lead as opportunity for supermarket industry (Evangelista,
Santoro and Thomas, 2018). This sector feel pressure from side of local and national authorities,
to reduce their carbon foot print and take step a head sustainable environment because it helps to
keep environment safe and reduce air, water and land pollution.
In additional, environment factors that impact on supermarket industry of UK largely
stem from weather. It influences negatively on harvest and growth of crops, vegetables and
fruits or possibly destroy them. It leads to problems with supply chain which in return would
influence pricing in supermarket sector, making these items more expensive for customers.
Explanation of two specific issues chosen among list of above-
Online food shopping (consumer behaviour)-
This problem is important for supermarket industry, as it can be considered as key driver
of change, because the behaviour and attitude of consumers put pressure on this sector to make
further changes in businesses in order to sustain for longer and retain consumers with them.
When the attitude of customer get change, they avoid most of the things or activities that
consume time and efforts such as go for shopping from supermarket which require time to chose
products among numerous one. It impacts on supermarket sector as they would not provide
online shopping services to customers, it drives them towards using advanced technologies that
change overall business procedure in better way.
Unemployment rate-
The reason behind selecting this most essential issue is that unemployment rate in UK are
going to have deep impact on supermarket sector. It considers as key driver of change because it

put high pressure on this industry to hire local people among talent pool who are able to increase
productivity and profitability of supermarket sector.
Porter 5 forces analysis
Bargaining power of suppliers-
The degree of this force is moderate, because supermarket sector have number of
supplier available in market who are able to supply raw materials and other items according to
demand without increasing cost (D'Agostino, 2018). Large size of individual suppliers low down
the bargaining power of suppliers that impact positively on supermarket industry and contribute
to run their supply chain effectively.
Bargaining power of consumers-
The bargaining power of buyers is high in impacting supermarket industry of UK, it is
very easy for people to move to other retailers to low switching costs. Consumers hold power to
put pressure on supermarket sector for reducing prices on each product, it impacts negatively on
profitability of supermarket businesses, but beneficial in term of retaining customers for longer.
Threat of substitutes products or services-
The presence of substitute products impact negatively on supermarket industry as it
posses high threat for them. Substitutes products that are classified as natural and organic gain
attention of consumers in recent time, that impact on buying behaviour of people, and they avoid
purchasing food and vegetables from supermarkets which not classified under this category.
Threat of new entrants-
The threat of new entrants is high because retailer can enter into UK supermarket sector
easily by complying with suitable regulatory and legal requirements. They can compete with
existing supermarket with advanced technologies and innovative ideas. Its is also easy to operate
in this sector, new entrants have great opportunities of success and growth because they can
easily attract number of people away from supermarkets, which impact negatively.
Competitive rivalry among existing companies-
The degree of this force is moderate because existing supermarkets in industry compete
with each other with same products or services, that increase overall profitability of sector.
CONCLUSION
From above analysis it has been concluded that supermarket industry in UK faced above
issues due to political, social, environmental, legal and economic factors that impact on its

businesses growth and sales. To sustain for longer, supermarket industry suggested adopting
digital technologies in its business structure, they must provide online services to customers.

REFERENCES
Books and Journals
Chisoro-Dube, S., das Nair, R. and Landani, N., 2019. TECHNOLOGICAL DEVELOPMENTS
IN SOUTH AFRICA’S FRUIT INDUSTRY AND IMPLICATIONS FOR MARKET
ACCESS & PARTICIPATION.
D'Agostino, J.L., 2018. The Impact of E-commerce on Brands: An Analysis of Amazon and a
Plan for the Future(Doctoral dissertation, University of Oregon).
Evangelista, P., Santoro, L. and Thomas, A., 2018. Environmental sustainability in third-party
logistics service providers: A systematic literature review from 2000–
2016. Sustainability. 10(5). p.1627.
Garg, S., 2019. Implications of Brexit on the Businesses in the United Arab Emirates. Ct.
Uncourt. 6. p.31.
Moya, B., Parker, A. and Sakrabani, R., 2019. Challenges to the use of fertilisers derived from
human excreta: The case of vegetable exports from Kenya to Europe and influence of
certification systems. Food Policy. 85. pp.72-78.
Seck, S.L., 2018. Transnational Labour Law and the Environment: Beyond the Bounded
Autonomous Worker. Canadian Journal of Law & Society/La Revue Canadienne Droit
et Société. 33(2). pp.137-157.
Vidal, M.S., 2016. Small shops for sale! The effects of big-box openings on grocery stores (No.
2016/12).