Analysis of Food Industry in the UK - Case Study Example

Analysis of Food Industry in UK Contents Introduction 4 Sector to focus upon 4 PESTEL Analysis 4 Political Analysis 5 Economical factors 5 Social Factors 5 Technological Factors 5 Environmental factors 6 Legal factors 6 Key issues related with PESTEL 6 Political 6 Regulation trends 6 Tax and trade controls 7 Economical issues 7 National Income 7 Social Issues 7 Population growth and demographics 7 Consumer attitudes 7 Technological issues 7 Impact of new technologies 7 Cost reduction 8 Environmental issues 8 Environmental regulations 8 Legal issues 8 Consumer protection 8 Regulatory bodies 8 Porter’s Five Forces Model 8 Rivalry (Medium) 9 Barriers to entry (High) 9 Bargaining Power of Suppliers (High) 9 Bargaining power of customers (medium) 10 Threat of substitute products and services (medium) 10 Conclusion 10 References 11 Introduction The food industry is a collective measure of diversified business processes, which supply food energy that is consumed by population of a specific region or country. The UK in this regard has a highly extensive food industry. UK employs more than 500,000 people and has a turnover of more than $100 billion. According to the statistics, it is the largest manufacturing sector within the UK and comprises of 15% of the manufacturing sector within the country. The food industry has grown consistently in the last few years across the UK and it contributes a lot to a huge extent to the economy of UK. Sector to focus upon The sector which will be focused upon in this sector will be the retail grocery sector in the UK. Grocery plays a very important part for the daily household of any nation and is perceived as a cornerstone for any nation. The sector and its importance to the UK will be analyzed in detail as follows: PESTEL Analysis The political, economic, social, technological, environmental and legal factors play a very important role in development of a business (Peng, 2007).This can be true with regard to food industry of UK. It can further be elaborated as follows: Political Analysis According to Bogan (2000), governmental laws and regulations strongly affect the manner in which a sector is able to operate and it affects the business strategy of all the interconnected stakeholders. The government of UK has emphasized a lot on the health and safety of its citizens and the branding of the term “Genetically Modified” (GM) food has become extremely vital since its invention in 2004. The core motive behind the GM labeling has been to ensure that the ingredients within the food are healthy for the consumer. Economical factors Over the past few years, people in developed countries such as UK have become highly conscious about their health and have started adopting healthy eating lifestyle. The variation in lifestyle of the people of UK has to be taken into consideration. That’s the reason why they spend on healthy “grocery” food items rather than fast food (Gray, 2001). Social Factors Social factors play a very important role for a specific sector to thrive and they include several crucial matters such as demographics, culture, tradition and trends (Goldstein, 2007). Also, religious and cultural aspects have to be taken into consideration. For instance, in Hindus do not eat beef, Muslims forbid eating pork, Russians love Vodka with food etc. All these crucial factors have to be taken into consideration (Vishny, 2009). Technological Factors Over the past few years, Technology has made huge strides with leaps and bounds and has benefitted each sector to a great extent (Phillips, 2010).The food industry of UK has also benefitted from such development. Adding to the fact is in store media, intelligent shelves, and electronic advertising displays etc are of the innovations in the food sector. According to Nissanoff (2006), the internet has played a huge role in this regard. The advent of smart phones and tablets has benefitted consumers as well as retailers in the food sector. This in turn makes services and products more personalized and shopping way more convenient for consumers (Turban, 2009). Environmental factors According to Mudd, G. (2010), environmental sustainability is highly important for citizens of a country. The government of UK intends to start a new strategy for sustainable development and production for eliminating waste and reducing consumption of resources and minimizing environmental damage. New implications have been placed on modifying the agricultural techniques which are needed to grow food items and they have been certainly been environmentally friendly. Legal factors Since the last few decades, the legal authorities in the UK have placed huge emphasis on the hygienic and health factors which are related with food. Due to this reason, the retail grocery sector gives more and more emphasis on service quality rather than merely stating that customer will not get any service in their homes to differentiate it (Nair, 2009). Key issues related with PESTEL Political Regulation trends The grocery sector has been closely scrutinized in the UK on a consistent basis by the government, specifically with the advent of the GM food. Tax and trade controls UK food industry has been greatly affected by the introduction of Goods & Service Tax (GST) which has also resulted in changes of prices in the grocery sector and the prices of other food items has therefore remained unchanged. Economical issues National Income Due to the fact a large amount of people in the UK are financially secured and are able to afford the most expensive of food items and eat at expensive food outlet such as fast food restaurant, they do want a good value for their money and as a result have higher expectations from the food sector Social Issues Population growth and demographics The government of UK does focus on such important factors which are directly affected to the health and well-being of the economy. Population, for instance, population will play a vital role in cities that are densely populated and will have substantial demand for variety of food items Consumer attitudes Consumers have great expectations from the retail grocery of the UK and according to many research and reports are satisfied with it. Technological issues Impact of new technologies The advent of latest technologies has been highly positive for the food sector of the UK. Not only restaurants and fast food chains have benefitted from this but even retail stores and superstores which sell grocery items have benefitted due to an increase in frozen and ready to cook foods, which a few years back was unheard of. Cost reduction One of the greatest benefits technology provides to a sector, specifically the food sector, is a huge reduction in product manufacturing and labor costs. Environmental issues Environmental regulations Huge emphasis has been made on providing healthy and hygienic food to the citizens of the UK, which is essential for the sustainability of the country Legal issues Consumer protection The legal authorities have been highly concerned about the sensitive issues such as health and safety of local public and interlinked with it are other legislative regulations which are strictly monitored in regions where the grocery sector is spread. Regulatory bodies Though highly transparent and honest in their proceedings, the regulatory bodies in the UK have tried to create a win-win situation for all the stakeholders related to the grocery sector (i.e. retailers as well as consumers) Porter’s Five Forces Model A further analysis of the food industry of the UK can be evaluated with the implementation of Porter’s five forces model (Porter, 2008). This will help to shed light on some of the most important business issues, which surround a particular business. They are as follows: Rivalry (Medium) Although the food sector is a highly profitable and lucrative sector but the retailers and traders who are operating in this sector are under immense pressure to perform with consistency so that they can outperform their rivals on a consistent basis (Shimizu, 2009). Due to this reason, not only the retailers but also the restaurant owners have been able to maintain a high level of quality in food over the years and have performed well in the food sector. Barriers to entry (High) It is a matter of fact that sectors, which are able to generate high profits, are targets of new entrants (Hemmingway, 2009). The same can be said of the UK food sector. Rules and regulations in UK have certain barriers to entry. It is difficult for new entrants in the UK to gain consistent profits and perform well at every stage because there consumer loyalty is very low and it is very difficult to make goodwill in the food sector due to huge amount of competitors involved. Barriers to entry in the food industry are high. Bargaining Power of Suppliers (High) Food makers and traders depend a lot on suppliers of food items who offer good quality food products at a moderate cost (Solis, 2011). Due to this reason, supplier power is high in the UK food market. The legislations in UK support the rights of employees as well as self-employed people and have set a minimum rate for suppliers, which are mandatory to be paid to them. This aspect raises the importance of the suppliers and it makes them an integral part of the business chain in the UK. Bargaining power of customers (medium) It is evident that food is the primary source of survival for living beings in this world and this has resulted in a relatively weak buying power for the consumers the in food industry. Consumers crave for quality rather than quantity (Brassington, 2006).However, the government has certain strict rules and regulations, which protect the rights of the consumers, and they guarantee that the consumers are able to get the food at prices, which are at least modest and fair. Due to this reason, the buyer power is medium in the UK food sector. Threat of substitute products and services (medium) Threat of substitute products in the food market is relatively low for food items. Food is the necessity of humans and it is impossible to survive without it. However, there are substitutes to almost each food item but they act more like a complimentary item such as ready-to-eat meals, frozen foods, fast food etc. Food service is at relatively modest price in the UK and the main purpose of food complies with substitutes because the convenience factor is directly implicit in this regard (Koh, Fichman, & Kraut, 2012). Conclusion The above study has certainly proved that the food industry is highly pivotal to the economy of the UK and has constantly played a huge role in its growth and development. The economy of UK faces a stiff challenge to fulfill the needs of its citizens in the food sector and has to certainly maintain its level of consistency by analyzing the trends in this sector on a regular basis. The government, along with the traders and the retailers operating in this sector has to constantly assess the changing trends in this sector and have to analyze whether they can make a strategy that will be beneficial in the long run. References Brassington, E. 2006. Principles of Marketing. England: Pearson Education Limited. Bogan, C. 2000. Benchmarking for Best Practices: Winning through Innovative Adaptation. New York: McGraw-Hill. Gray, H. 2001. Thirty years of social accounting, auditing and reporting: what (if anything) have we learned. The international journal of business in society, 10, pp.9-15. Goldstein, D. 2007. What is Customer Segmentation? New York : Mind of Marketing. Hemmingway, A. 2009. Personal values as a catalyst for corporate social entrepreneurship. Journal of business ethics, 5, pp.233-49. Koh, T.K., Fichman, M. & Kraut, R.E. 2012. Trust Across Borders: Buyer-Supplier Trust in Global Business to Business E-Commerce. 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