Uk Supermarkets

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Introduction
This report considers the UK Grocery Retailing Industry (hereafter often mentioned as just “the industry”) and is based on the case study attached to the report. It consists of two parts.
The first and the main part seeks to analyse in the light of the environment it operates in. The key industry and market characteristics are identified and, inter alia, PEST and Five Forces frameworks are employed to identify and analyse the key factors affecting the industry from the macro-environment and estimate the pr4sent and the future profit potential of the industry. Finally a summary of the key factors and trends is given alongside with recommendation on entry to the industry by acquiring a medium sized competitor (such as Morrisons). In the second part of the report the generic strategies of Tesco, Asda and Waitrose are compared to one another and differentiation within the industry is discussed.

Industry Analysis
Industry and Market Characteristics
The UK grocery retailing industry is one of the most established industries in UK, which produced sales and profit growth for a great number of years. It could be said to include all UK based companies that are involved in retail sales and distribution of groceries, i.e. food, drinks, cleaning products, toiletries and other small household goods. Although the industry is involved in selling of a whole variety of different products it mainly sells food and therefore could be considered a part or a sub-industry of much larger food industry. Food industry is a major sector of UK economy and comprises farmers, manufacturers, processors, wholesalers and caterers as well as retailers. UK grocery retailing industry has been experiencing growth over the last few years. And although all main members enjoyed the growth, larger stores managed to grow much faster and outperform small stores and specialist food stores (see Table 1). This growth appears to be mainly attributable to the growth in the retail food market where consumers’ expenditure on food increased year on year basis during the years 1996-2000 (see Table 2). UK grocery retailers as opposed to their foreign competitors (such as Carrefour, Ahold, Metro and Aldi) are predominantly domestically located with relatively small interests abroad. Among the few retailers that have some interest abroad are Marks & Spencer, Tesco and Saisbury. Among recent industry developments there are plans to move to Central Europe and Asia by some supermarket chains as well as expansion to Northern Ireland. There are different kinds of players in the UK grocery retail industry, namely, supermarkets, butchers, fishmongers, greengrocers, etc. But by far the most important players are the supermarket chains. They are by far the most popular place for UK consumers to do their grocery shopping (see Figure 1). Therefore it would be fair enough to analyse the UK grocery industry by predominantly looking at supermarkets, after all they are the ones that shape the industry. The grocery retailing industry could be said to be fairly concentrated as just five largest supermarkets, namely, Tesco, Sainsbery, Asda, Safeway and Somerfield (including Kwik Safe) hold around 75% of the whole market (see Figure 2). The fact that larger stores have been growing faster than the smaller ones suggests that concentration has been increasing. This is likely to be due to fierce competition and overcapacity within the industry whereby many small competitors are forced to leave the industry. Big supermarket chains apart from engaging in their core activities of grocery retailing have increasingly got involved in non-core activities such as non-food retailing and financial services whereby they used their valuable customer base to sell new types of product. In this way they appear to enter into new markets to decrease dependency on what seems to be an increasingly saturated grocery retail market.

The grocery retail market, the one, which the UK grocery retail...
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