The grocery industry in the United Kingdom has been dominated in the last ten years by large chain Supermarkets. There has been a fight for supremacy between the likes of J. Sainsbury, Tesco, Marks and Spencer, Asda, and further south, Waitrose. Around ten years ago, Sainsbury's used to have the top spot but their loyal shoppers started turning their heads towards Tesco and better value for money later on in the nineties.
I will analyse the United Kingdom's grocery industry, involving a P.E.S.T. analysis, which is a way of evaluating different parts of a business. (Political, Economical, Social, and Technological.)
The government can basically decide how a business is run; by all the laws and safety acts it can impose. Nowadays there is so much legislation, businesses don't have much say in what happens and there is not much leeway between similar companies. Supermarkets are told more or less everything; from what they stock, to how they stock it, how it is sold, who is allowed to sell it etc. The Government has to regulate prices too, because it has been known in the past for companies to price fix, which means that they have a monopoly on the market, but they share it with another company, charging the exact same price, so they get an equal profit share. This prevents any new companies from entering the market and taking a percentage of their market share. The supermarkets dominating the British market would be classed as an oligopoly because there are four or five major players, dominating the market. But this is the way that the government prefers; they will not allow any merging or taking over. We know this because Tesco has tried to buy out Asda in the past. This would give Tesco too much of the market and the business would rapidly overtake all of the contenders. Officially, a firm has to have more than twenty five percent of the market to be classed as a monopoly, but even if by taking over Asda, Tesco still didn't have twenty five percent, the Government felt it would give them too much of the share. Massive companies like Tesco can then start dropping the price of their goods, because if they sell enough, they will still make a profit because they will be stealing the market from rival stores that can't afford to drop the price. This happened in November of 2000, and the Government had to tell them to put the price back up to keep the market going consistently. A good example is the price of meat. Just six years ago, in 1996, the farmer was happy with the price meat sold to supermarkets was fetching, but now, in 2003, the Government is facing pressure from declining agriculture industry to increase prices to save the British farming industry, otherwise, it faces a total collapse, with the British public buying their meat from abroad. We seem to be the only country in the world that don't support our own industries, by buying British. Some of the acts implemented by the Government include:
Sale of goods act (1979)
Food safety act (1990)
Health and Safety at work act (1974)
The minimum wage
There are many factors that affect the business and sales of the United Kingdom's grocery industry, such as the exchange rate, inflation, interest rates and unemployment. Over the last five years, more than 650 new grocery stores have opened, across the country. They vastly range in size, the smallest being just three hundred square feet and the larger, getting up to twenty five thousand square feet. There have been five major new companies that have entered the UK's market in the last ten years. These include Wal-Mart, the world's largest retailer, and Aldi, the sixth largest in Europe. This makes the competition incredibly strong, with stores in constant battles over price. Stores have recently started to expand overseas, with Sainsbury's opening stores in Egypt; and Asda bought out sixty Gateway stores in 1994. One of the latest crazes to hit UK...
Bibliography: Corporate Strategy 3rd Edition – Richard Lynch
Business Studies 2nd edition – Hall, Jones, Raffo
Brooks and Weatherston – 2000
The Strategy Process – H. Mintzberg, J. B. Quinn, S. Ghosal
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