U.K. Retail Industry Trends and Facts - Research Paper Example

? Competitive position of Tesco in U.K. Contents Contents 2 4 Introduction 5 Background of the Study 5 Problem Definition 5 Literature Review 6 Methodology 6 Findings and Discussions 7 U.K. retail industry trends and facts 7 Market Share Analysis 7 Revenue Analysis 7 Customer Experience 8 Online Sales 8 External Environment Analysis 8 Political 8 Economic 8 Social 8 Technological 8 SWOT Analysis 9 Conclusion and Recommendation 9 References 10 Appendices 12 Abstract Retail is one of the most sectors in the world and the U.K. retail market is the third largest retail market in the world. The biggest retailer of U.K. happens to be Tesco PLC. The present study has been conducted to analyze the competitive position of Tesco in U.K. which is also the country of origin. The present study of great significance keeping the internationalization plans of Tesco in mind; because in order to gain competitive advantage in the global market Tesco must have a strong base at home. Introduction Background of the Study The term retail means to break the bulk. The rise in consumer demand, consumption pattern and also the desire among the customers to get products conveniently under one roof has made retailing one of the most booming sectors in the world. The focal point of discussion is the U.K. retail market and the leader of the U.K. retail market called Tesco. U.K. retail market has been chosen because in the third largest retailer in the world and makes a contribution of 8% to the GDP and provides employment to over 400,000 people. Tesco founded by Jack Cohen in 1919, is the third largest retailer in the world and the largest one in U.K. As on 2012 the total revenue of the company was ?64.539 billion (Kotler, 2001, p. 25). Problem Definition The presence of retailers such as Asada, Morrisons, and Sainsbury’s has made the U.K. retail market very competitive. However, in order to ensure global success Tesco has to maintain competitive advantage in the country of origin. Hence, the main problem definition of the study is to analyze the competitive position of Tesco in U.K. retail market. During the course of the study appropriate secondary research has been supplemented by analytical tools such PEST and SWOT. Also based on the overall analysis recommendations have been provided. Literature Review Competitive position of accompany can be defined as the position of a company that can allow it to gain competitive advantage over the competitors. Some of the parameters based on which competitive position can be measured are market share, revenue, brand awareness, etc (Kolb, 2008, p. 92). In order to analyze the competitive position it is important to understand the internal and external environment. One of the best ways to analyze the external environment is to assess the macro environmental factors such as Political, Economic, Social and Technological factors; known as PEST. One of way of analyzing the internal environmental factors is to conduct a SWOT analysis. In case of SWOT Strengths and Weaknesses are internal, whereas Opportunities and Threats are external (Henry, 2008, p. 89; Brown, 2009, p.63). To conduct the analysis relevant data are required. Secondary data is something that has already been collected by other sources. As compared to primary data secondary data can be collected within lesser amount of time spending lesser amount of money. Most preferred medium of collecting secondary data today happens to be internet (Churchill, 2009, p.211). Methodology An ideal methodology provides a much required foundation to a researcher right from the starting of the choice of topic till making the final recommendations. In this case the main motivation of the choice of the topic was the contribution of Retail to service sector and the overall economy of U.K. As it can be seen that the nature of the study is exploratory in nature; hence in order to explore the topic and reach the final conclusions secondary research has been chosen so that relevant and appropriate data can be collected within the stipulated time in a cost effective fashion. The secondary data sources include research papers similar to the topic chosen, industry publications and books. Preferred medium to collect the data happens to be internet for the sake of convenience. The data collected through secondary research has been analyzed by using strategic and analytical tools such as PEST analysis and SWOT analysis. Findings and Discussions U.K. retail industry trends and facts In 2012 the U.K. retail expenditure showed the third lowest growth rate in the last forty years. One of the main reasons for such a dip has been the economic recession. Retail growth since 2008 has been 1.1%. (Figure 1) Food was the largest driver of growth during the recession. Increase in consumption pattern along with inflation lead to food in gaining a much larger share in retail expenditure. In 2012 the figure reached 45%. Noon food was the biggest looser of the economic downturn as customer spending on non food shrunk by ?9.5bn. (Figure 2) The life style of the consumers has become a lot more complex and hence the consumers are starting to prefer to stay in house and shop through the digital medium. (Figure 3) Market Share Analysis Tesco is the market leader in the retail industry of U K. (Figure 4) Revenue Analysis Revenue generated by Tesco is a lot more than the competitors. (Figure 5) Customer Experience As per research and analysis conducted by marketing Sciences the customer rating of overall shopping experiences is very good. (Figure 6) Online Sales Online Sales of Tesco has also witnessed a steady rise from the previous year. (Figure 7) External Environment Analysis Political The political condition of U.K. is very much stable. The political leaders of the country have welcomed business related investment making the country business friendly. Economic U.K. is one of the largest economies in the world. However the country along with EU nations had to go feel the wrath of the economic downturn. It has also decreased the disposable income of the people. Social A paradigm of shift is visible in the consumer behaviour of U.K. People are looking to focus on savings rather than spending due to the dip in the disposable income. People have a lot more health and environment conscious. Instead of going to the shopping malls people are starting to prefer to stay in house and shop over the digital medium (Burgemeister, 2003, p. 192). Technological U.K. has embraced the rise in technology. The retail sector in particular is looking to make all the departments technology enabled. Due to the change in consumer behaviour and rise of the digital medium, companies are looking to focus a lot more on the marketing through digital medium (website, social media and mobile). SWOT Analysis Strengths Increase in market share Brand Value Increasingly strong presence in digital medium Weaknesses Over dependency on U.K. Market Debt reduction Opportunities Internationalization Health and beauty Non food retailing Rise of digital medium Threats Economic Downturn. Presence of strong competitors. Change in consumer behaviour Conclusion and Recommendation From the above analysis it can be easily seen that the competitive position of Tesco in U.K. retail market is quite good. Despite the presence of strong competitors like Sainsbury’s, Asda, Morrisons Tesco has been able to maintain steady growth in market share and sales. Also the brand value of the company in U.K. is quite impressive. Add to that the steady growth in the online sales of the company also happens to be a welcoming sign. However there are a few course of concern such as the over reliance on U.K. market along with the changing consumer behaviour. To combat such concerns following recommendations have been provided. Although Tesco is the third largest retailer in the world; it is an open secret that majority of the sales of the company comes from U.K. Tesco entered USA but the performance of the fresh and easy stores was not up to the mark. Hence while focusing on the theme of internationalization; the main hot spots of the country should be emerging economies like India and China. Also the retail markets and the economies of these countries are emerging and relatively untapped hence it would provide a lot more opportunity for growth to Tesco than the matured economies of U.K or USA. In order to counter the concern of changing consumer behaviour Tesco should focus on positioning itself as green and healthy brand. Product packaging along with promotional campaigns can help the cause. Also the company should focus on continuing the good work on digital space. Use of social media for customer service and engagement along with SEO techniques to improve web traffic and online sales should be the objective of the company. Such strategies are of great importance considering the change in the customer behaviour and increase in the number of tablets and smart phones users are concerned. References Henry, A. 2008. Understanding Strategic Management. Oxford University Press: UK. Kolb, B. 2008. Marketing Research: A Practical Approach. Sage: UK. Brown, L. 2009. Marketing and Distribution Research. Ronald Press Company: US. Kotler, P. 2001. Marketing Management. Prentice Hall: UK. Burgemeister, S. 2003. Market analysis. GRIN Verlag: DE. Churchill, G. 2009. Marketing Research. Cengage Learning: UK. Appendices Figure 1: UK retail expenditure year-on-year growth (%) Figure 2: UK retail expenditure value (?bn) Figure 3Typical Day for 21st century customer Figure 4: U.K. Retail Market Share Break-up Figure 5: Revenue analysis Figure 6: Customer rating of overall shopping Figure 7: Increase in online sales Read More