The five forces analysis for Morrisons - Essay Example

This research will begin with the description of bargaining power of buyers. Buyers have fairly strong bargaining power because they have a vast range of choices.  Prices are highly competitive so buyers can easily switch to other brands without any loss. The cost of switching is particularly low for products that are standardized and offer little differentiating features. Around 94% of the customers have a choice of at least three supermarkets at their disposal within a time frame of 15 minutes.

Suppliers in this sector have fairly weak bargaining power due to strong brand presence of supermarkets. Suppliers fear the risk of losing their contracts with the large supermarkets, including Morrisons. Therefore, it is an easy task for such retailers to lock in suppliers at low costs. Furthermore, the industry is fragmented and retailers find themselves doing the role of middlemen and manage to rack up huge profits. Stores in convenience market may be substitutes; however, ever since the retail stores have diversified into the convenience sector this threat is decreasing.

There has been growing protest towards the use of hormonal or genetically modified products over the last few years. It is estimated that the market for organic foods in U.K is worth £2 billion and is expected to grow in coming years. Hence, convenience stores as well as shops selling organic food may be potential substitutes but this risk is mitigated when large supermarkets buy these out. Morrisons, however, does not have any plan in expanding into this sector. Food experts such as butchers may also be substitutes; however, due to the ease of shopping and greater variety of grocery sector, this threat too is diminishing (Don Edwards & Associates Ltd., 2007). Overall, the threat of substitutes is fairly large for non-food offerings and fairly low for food offerings. 4. Competitive Rivalry Competition remains intense with the top 3 players including Asda, Tesco and Sainsbury’s.

Me-too strategies have been widely adopted, such as that of Asda’s low price range strategy ( (Don Edwards & Associates Ltd., 2007). There is evidence of price wars between the top 4 players. Rivalry in the U.K supermarkets industry remains high although the industry itself is not growing. The U.K supermarkets industry is at the maturity stage of its lifecycle, growing at a rate far less than that of GDP and aggregate spending (Lancaster & Massingham, 2011). Fixed costs of this industry are high which can be potential barriers to entry of new firms (Lancaster & Massingham, 2011).

Barriers to entry are potentially high with small retailers unable to compete. , unlike its three larger rivals Tesco, Asda and Sainsbury's, Morrison’s does not have an internet home shopping business (Zentes et al., 2007). This could put the company on the backburner as e-commerce is an ever-growing business as it gives greater convenience to customers along with a potential to tap international markets. Also it does not have a loyalty card scheme such as Club card which Tesco has uses to track consumer trends and offer lapsing customers discounts (Thompson & Martin, 2010).

Loyalty cards keep the regular customers coming back in that they use it to trace customer’s demographic profile which can go a long way in targeting the right products in advertising. Furthermore, by offering discounts the company has the opportunity to induce repeat purchases from its customers. Furthermore, unlike Tesco, Asda and Sainsbury's, Morrison’s does not have a meaningful non-food offer (Thompson & Martin, 2010) . The company does not have enough diversification at present. Greater variety of products (non-food