The Development of the Uk Supermarket Industry and Its Impact on the Stakeholders

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Business Organisation and Policy:
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The development of the UK supermarket industry and its impact on the stakeholders -------------------------------------------------

Contents:
Introduction………………………………………………………................... 3

A. The development of the retail food industry ...………………………… 4-6 * B. Implications for the three key stakeholders…………………………....… 7 1) Customers…………………………………………….… 8 Employees……………………………………………… 9 Shareholders…………………………………………… 10

III Conclusion…………………………………………….…………………….…... 11

Bibliography……………………………………………………………………….…….12,13

Introduction

In a recent research carried out by the TNS Worldpanel it was reported that the top six supermarket chains sold nearly 90% of all food bought in the United Kingdom at the end of 2009. This report will identify and highlight how the growing concentration in the retail food sector has impacted the three stakeholder groups (customers, employees and shareholders) and what has caused this situation. Using various research methods from textbooks, journals, articles and internet the top six supermarket chains will be analysed to discover how they have developed such power within the industry. Academic models and theories will be used to relate the strategies the supermarkets have used and the implications of this on the key stakeholders.

The main or top six supermarkets that will be looked at are Tesco, Asda, Sainsbury’s, Morrisons, Co-op and Waitrose. Although there are other companies in the retail food sector such as M&S and Iceland they will not be relevant in this report as they represent a small percentage of the market share.

A) The development of the retail food industry
In trying to understand how 90% of all food in the UK is sold by the top six supermarkets it is important to establish how they managed to reach such a position and how they are able to maintain it. The current UK food retailing market can be considered as an oligopoly as there are only a few dominant firms in the industry. The barriers to entry are also high and similar to the barriers you would find in a monopoly (Sloman & Hinde, 2007). There have also been investigations by the Office of Fair Trading (OFT) with regards to price fixing of dairy products also known as a cartel. This allegedly took place in 2003 by the major supermarkets such as Asda, Tesco, Morrison’s and Sainsbury’s which, indicates the power of these companies and highlights the increasing barriers to entry for any new organization wishing to enter the industry. Combined with decades of experience the companies managed to overcome the threats of new and foreign organizations from entering the industry and are now in competition with one another. The barriers to entry represent one aspect that a company may look at when analysing itself against its competitors. Porter’s five forces indicate four other areas an organisation should look at to establish the key areas in which to improve and remain ahead of its competitors. These are the bargaining powers of customers and suppliers and the threat of substitutes which will be discussed further in the report (Sloman & Hinde, 2007). To reach the positions of power that the various supermarkets are currently in, they have undergone major strategic changes to maximise profits, reduce costs and increase efficiency. Prior to 2002 it was assumed that the food retail industry was in the maturity stage of the product life cycle (Cole, 2004). Supermarkets such as Sainsbury’s and Asda who were predominant at the time assumed that competition was at its peak and the supermarkets were content in their positions. This assumption was quickly diminished when Tesco acquired T&S in...
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