The UK Food Retail Sector - Essay Example

? The UK food retail sector BY YOU YOUR SCHOOL INFO HERE HERE The UK food retail sector Annotated bibliography Ibeh, K., Ibrahim, e. & Panayides, P. (2006) International market success among smaller agri-food companies: some case study evidence, International Journal of Entrepreneurial Behaviour and Research 12(2), p.85. This scholarly journal resource describes the oligopoly market structure that supermarkets operate in and a variety of competitive activities they engage in for advantage. Though the article focuses largely on smaller food companies, this particular resource provides insights into the marketing function for food companies related to positioning, differentiation, and consumer attitudes in the UK. The market power of the suppliers as it relates to supermarkets is also described to gain perspective on how supplier power impacts strategic intention for the food sector. Aziz, N. & Yasin, N.M. (2004) The influence of market orientation on marketing competency and the effect of internet marketing integration, Asia Pacific Journal of Marketing and Logistics 16(2), p.3 (Online) Available from: www.emerald.com. This resource describes the consumer-driven need for technology in the service encounter and its competitive advantages in multiple industries. It does not necessarily focus on the food sector, however it describes consumer values related to the traditional in-store face-to-face interaction as businesses revolutionize their service, product and delivery functions using technology as an interface. This journal is substantive as it describes how market-oriented businesses are able to reach new geographic market segments through technology provision. Narver, J.C., Slater, S.F. & Titje, B. (1998) Creating a market orientation, Journal of Market Focused Management 2(1), pp.241-255. This scholarly journal provides information about creating a market-oriented business that is committed to providing superior customer value. In order to successfully service customers in a retail environment, the organisation must be structured with the customer in mind and take appropriate action to differentiate market position based on research intelligence related to customer values and attitudes. Supermarkets are market-oriented and this article describes the three structural components to creating a market-based value orientation for competitive advantage. Narver, J.C. & Slater, S.F. (1990) The effect of a market orientation on business profitability, Journal of Marketing 54(5) pp.20-35. A substantive journal resource that also describes the methodology behind delivering superior value to customers by attaining a market orientation. The article has strengths to support the changes occurring in the UK food sector as it describes how to disseminate information relating to customers and competition and what actions to take to ensure manifestation of total customer value. The authors link knowledge with business processes to describe market orientation and their potential effects on industry profitability with the customer always the focus of business changes. Smith, N. (2009) Vertical focus food retail: delivering the goods, New Media Age London. 28 May, p.17. A substantive and popular media source that focuses specifically on food retailing and the competitive activities of Tesco, Sainsbury’s and Asda as they operate in this oligopoly. The article maintains strengths to support knowledge regarding the food sector by describing the unique differentiation strategies of the supermarkets that either build or remove market share against competition. There is a specific focus on pricing strategies for the major food retailers related to consumer sentiment and the current economic recession in the UK. Whitelock, N. (2003) Tesco’s new recruits see the big picture, Training & Management Development Methods 17(1) pp.801-804. This scholarly resource focuses specifically on Tesco in order to understand how it develops internal management and employee talent to assist in creating a market orientation. The article supports knowledge regarding the overall Tesco strategy related to finance, operations, and marketing strategies and its linkage with building human capital through development in order to better service diverse customers. The learning tools utilised internally provide insight into what drives learning at Tesco from a service perspective and to gain knowledge of their cultural competitive tools. Rubin, R. & Joy, J.N. (2005) Where are the airlines headed? Implications of airline industry structure and change for consumers, The Journal of Consumer Affairs 39(1), p.2. (Online) Available at: www.emerald.com This scholarly source describes the elements of an oligopolistic market structure and how firms develop their marketing strategies, operational structures, and price competitiveness. Though this resource does not focus on food retailing, it is necessary to understand the driving forces that shape oligopolistic market structures since most food retailers operate under these premises. By understanding what drives competitive behaviour in the oligopoly, this resource can help better assist in gaining perspective on supplier trends and profit-building efforts in this market design. Donnelly, A. (2008) Supermarkets extend battle to mobile offers, Marketing London. 27 August, p.2. This popular resource focuses on Asda and Tesco related to their mobile services that have changed the dimensions of face-to-face interventions as part of their competitive strategies. The authors focus on the issues related to consumers that cause them to defect to other food retailing brands and the current state of consumer sentiment as it relates to price flexibility or inflexibility. The linkages to Asda and Tesco strategy for mobile marketing and mobile service are important for understanding competitive strategies in this industry with a contemporary focus. Marks & Spencer. (2010) Annual report and financial statements, p.26 (Online) Available at: http://annualreport.marksandspencer.com/downloads/M&S_AR10.pdf This is a substantive source that provides data directly from the governance systems at Marks & Spencer, which is currently competing in the food retailing sector. Specifically, one area of the annual report focuses on promotion and innovation as competitive tools that tend to improve consumer confidence in the M&S brand and its line of products. Understanding the promotion and innovation activities at a major competitor in the food sector illustrates its market orientation to assist in knowledge development about modern food retailer strategies. Vitorovich, L. & Carolan, M. (2009) Earnings: UK grocer Morrison sees solid growth, Wall Street Journal, New York. 22 July, p.B6. (Online) Available at: www.wallstreetjournal.com. This is a popular resource that has strengths for research knowledge as it is a newspaper targeted specifically at business investment and profitability in many different industries. This article describes Morrison’s supermarket and the activities that have been taking market share away from Sainsbury, Asda and Tesco. Knowledge is provided on the specific food offerings that improve its competitive position as it compares to other major oligopolistic competitors. The article also further supports knowledge on the current state of consumer price flexibility. Analysis of food retail sector Competitive analysis One of the most innovative and competitive activities being undertaken by major food retailers in this oligopoly is the development of mobile/Internet purchasing and food delivery. In an oligopoly, there is often immediate mimicking of competitive strategies as they vie for market share and gain customer brand loyalty (Boyes & Melvin 2007). Figure 1 illustrates the growth in mobile food delivery services by major competitors in 2009. Figure 1: 2009 Growth, in percentages, in mobile food delivery services by competitor Source: Smith (2009) Delivering the goods, New Media Age, 28 May. M&S. (2010) Annual report. http://annualreport.marksandspencer.com/downloads/M&S_AR10.pdf The mobile delivery service is one element of competitiveness in the oligopoly that characterizes how these businesses maintain a market orientation and innovation in service delivery and product offerings. Other innovations included by these firms are fresh product offerings, the development of loyalty cards for incentive marketing, and ongoing heavy pricing differentiation (Smith, 2009; Jones, 2008; Morrison’s, 2007). There are only approximately six different major competitors in this industry and each hold approximately 10-18 percent market share respectively. Figure 2: PESTL analysis of UK food retailing PESTL political The UK legislature provides opportunities and business support tools. Little government-imposed risk associated with import/export. No regulatory presence for internet marketing and content in UK Green regulations from UK officials impact strategy in HVAC systems and other greenhouse gas emissions for refrigeration economic Price sensitive consumers due to recession High cost of competitor market entry leading to oligopolistic structure UK favourable tax code High supplier power on market according to Michael Porter (2010). Quality distribution network in UK for food retailing social Sentiment growing for traditionalist advertising in foods (Bugge 2011). Value conscious consumers Many variety seekers in this market structure Heavy consumer buying power according to Michael Porter (2010) Changing dining habits due to recession leading to more home cooking technological High consumer adoption of internet delivery services “Green machines” required to reduce carbon emissions in refrigeration High maturity rate of technology Research did not uncover any meaningful legal issues to consider, only that two major competitors, M&S and Morrison’s, have teams that identify legal matters and audit for control. Findings and analysis Based on the research findings, the supplier and consumer controls in the external market drive the majority of the business innovations and competitive marketing that occurs with each major UK food retailer. Where these businesses once used face-to-face concepts for customer service and satisfaction, they are now turning toward technology as part of the changing social demographic in this country. Social media has become more mainstream and so has subscribership to Internet services and consumers are demanding more convenience related to their food purchases. This change in social attitude has significant impact on how the business structures its capital investments and also how they provide goods and services through technology. The recession also shapes the market-orientation of major food retailers in the UK, which has led to more value-conscious and price-sensitive buyers. Since companies in the oligopoly must mimic many of the competitive actions, there are always pricing wars that occur on products that continue to increase and then subsequently decrease market share with major competitors such as Asda and Tesco. Price will shape the future of UK retailing until the recessionary environment has changed and become more stable. Pricing is one of the most significant competitive tools uncovered in the research. The demands of customers and their significant buying power and willingness to defect based on price or perceptions of quality will also determine the shape of the food retailing environment over the next three years. In response, Marks & Spencer has committed itself to renewing its total food range by 25 percent every year and it is likely, since this is a necessary trend in the oligopoly, that competition will adopt this same renewal strategy in relation to supply and distribution. The interdependency in this market structure between major players determines the shape of the food retail service as it relates to procurement as well as pricing and technology innovations for better service and convenience. It was also discovered that there are high fixed costs in this environment which must be offset by higher consumer revenues. Cost leadership tactics and leaner supply chain philosophy will likely drive the UK food sector over the next three years as businesses try to reduce some of their fixed costs, such as labour and associated production costs in-house. Reducing marginal costs whilst still maintaining market orientation will be the trend for UK food retailing; always with a focus on customer needs fulfilment. References Boyes, W. & Melvin, M. (2007) Economics, 6th ed. Houghton Mifflin Company. Bugge, A. B. (2011). Sociology of Food: Cooking as Identity Work (Online) Available at: 2011 http://www.um.es.ESA/papers/St3_22.pdf Jones, Steve. (2008) Consumer buying behaviour (Online) Available at: http://www.articlesbase.com/branding-articles/consumer-buying-behaviour-681623.html Marks & Spencer. (2010) Annual report and financial statements, p.26 (Online) Available at: http://annualreport.marksandspencer.com/downloads/M&S_AR10.pdf Morrisons. (2007) Annual report (Online) Available at: www.morrisons.co.uk Porter, M. (2011) Porter’s Five Forces: a model for industry analysis. (Online) Available at: http://www.quickmba.com/strategy/porter.shtml Smith, N. (2009) Vertical focus food retail: delivering the goods, New Media Age, London. 28 May, p.17. APPENDIX: Reflective review Read More