UK Food and Grocery Retail Markets - Research Proposal Example

Potential entrants in UK's food and grocery retail industry is medium-low because of the huge capital requirements needed to compete with established retailers aside from the tight market competition available in food retailing industry and government support over the local industry players. As published by Gain Report, "UK food and retail grocery market is considered concentrated given that approximately 75% of the total market share is dominated by the four largest supermarket chains" (Vasquez-Nicholson, 2007).

Since the four biggest supermarkets which includes: (1) Tesco (31.3%); (2) Asda/Wal-Mart (16.8%); (3) Sainsbury's (16.3%); and (4) Morrisons (11%) (TNS Data, 2007) has the financial capabilities to purchase food and non-food items by bulk, these giant retailers are able to enjoy competitive advantages of entering into a special business arrangements with its accredited suppliers. As a result, large-scale retailers are able to purchase food and non-food items at a relatively much lower prices as compared to other small- and medium-scale food retailers.

Aside from having a better economies-of-scale as compared with medium- and small-scale retailers, these four largest food retailers have already established a good brand. Since thousands of people are already satisfied with the quality service and competitive prices offered by these large-scale retailers, the strong brand that was established by the large-scale retailers effectively creates customers' loyalty (Chaudhuri & Holbrook, 2001). This makes it difficult to persuade the buyers to shift from one food retailer to another.

Since January 1993, UK government also protects the business interests of the EU competitors1 as compared to other retailers outside the EU members. As a way of protecting the local competitors, EU retailers are made exempted in paying import duty on food and non-food items (Emporiki Bank, 2008; Vasquez-Nicholson, 2007: p. 5). Substitutes and Bargaining Power of BuyersAs of 2007, there as much as 109,134 registered retail store outlets that sells both food and non-food items throughout the United Kingdom (Institute of Grocery Distribution Research, 2007).

Since there is a high threat of substitute in the case of the four largest grocery retailers, buyers are able to enjoy a high bargaining power over the existing food and grocery retailers. Given that a customer becomes unsatisfied with the customer service or the market prices of goods offered in a particular food and grocery retailers, customer can easily choose to purchase his/her needed food and non-food items from other store.Bargaining Power of SuppliersContrary to the bargaining power of buyers, suppliers have low bargaining power over grocery retailers.

Because of the significant improvements on the existing information and communication technology (ICT), purchasers behind food and grocery retailers are able to enjoy the benefit selecting qualified food and non-food suppliers who are willing to offer them low unit prices on their purchased items combined with a good quality service which includes just-in-time delivery process. Aside from the improvements on ICT and other communication-related gadgets, the promotion of globalization effectively remove trade