Business Organisation and Policy: UK Food Retail Market - Assignment Example

 BUSINESS ORGANIZATION & POLICY UK Food Retail Market Contents Introduction 3 Analysis of the Retail food sector 3 Main supermarket chains in the UK grocery market 5 1. Tesco 5 2. ASDA 6 3. Sainsbury’s 7 4. Morrison’s 7 5. Co-op 8 Critical analysis of stakeholder groups 9 Conclusion: 11 References 12 Introduction The retail food sector market in UK is facing a lot of challenges in the recent years. The retail stores and the consumer groups and stakeholders are facing a very fierce competition with time. The intensity of the competition, the high inflation rates on all the products and services in the country, the effects of globalization are all making the circumstances more competitive and it is making a thick line in between those that are becoming successful in their strategies and those that are not. The business operating procedures between the suppliers and the retailers are getting more complex with time. This is due to the fact that the main superstore chains have started to produce their own brand of products at fairly reasonable prices than those of the other branded products in that same category. Suppliers are struggling with the retailers and trying to find out alternative means of reaching to the consumers so that they can also maintain their necessary profit level which is needed to survive in the market. Analysis of the Retail food sector The UK growing market concentration in the food sector has become a major area of concern for the producers and the consumer groups as the main superstore store retail chains are the sources for the consumers to buy all their grocery stuff (UK Grocery Retailing 2010).s For the retailers of UK, the area of growth value for the stores is expected to remain slow, as there is a lot of competition on price pressures and the presence of other successful retailers in the market. This has forced the retailers to apply various strategies of differentiation so that they can have a larger share on the market. The differentiation strategies are applied based on the target market each superstore chain caters to (Food Retail Market is increasingly in demand in UK 2010). There are mainly 6 major superstore chain outlets that are dominating the retail market food sector of UK. Organic sales of about 82% are mainly accounted by these chains of supermarket in UK. The success rate of the supermarket chains have been quite high in the retail sector and this has caused the gradual erosion of food retailers that are operating on an independent basis, the health stores and the farm food stores are eroding, and all these are losing their market share (Burts and Sparks 2003) In some circumstances, the organic products are gaining wide popularity and for these special types of customers the value of sales for the smaller market share holders have shown increase. The superstore chains are dependent on the imports of the raw materials for organic products and also for products that are horticultural. This situation tends to increase the value of those retailers who actually import all these raw materials and then supply them to the businesses who require these materials for their organic products. The import cost is usually high and it is feasible for the retail outlets to buy out the materials from these small retail outlets whose basic business is in the import of such products. In UK the number of organic café’s and the organic restaurants are mostly limited, they are not functioning with a lot of outlets present. Majority of these types of organic outlets are situated in London. Since the use of organic products have increased, the superstore chains have started selling more of these products and now consumers find it more easy to visit these retail outlets and buy out all of their grocery in just one shop instead of moving around to a number of different outlets for various types of products. Main supermarket chains in the UK grocery market 1. Tesco Tesco is regarded as retail chain of general merchandising of international grocery in the UK and it has been the UK retail chain market leader for many years. Tesco retail outlet was founded in the year 1919 in London. Tesco has the prestige of being the largest supermarket chain in UK and it also is the 3rd largest retailer chain on the global basis, and this has been given based on their revenue which Tesco has earned. On basis of profit they are the 2nd largest retailer on the global level. The group sales for Tesco in the year 2008 were ₤59.4 billion ($95.1 billion) in the year 2008 which was an increase from the previous year of about 11.1%. Tesco has the ability to lead the industry to change and this is the ultimate reason for its success. Tesco has positioned itself to keep low prices in its stores and this is a very competitive move to make, with this positioning it is able to cater to all the market segments residing in UK. The main customers for Tesco are mostly middle income class. 2. ASDA ASDA has the 2nd rank in the category of being a large supermarket chain in UK. ASDA stores were founded in 1949 under the title of Associated Dairies & Farm Stores Limited in the city of Leeds. In 1999 it became a subsidiary of the world’s largest retailer Wal-Mart. ASDA competes on price on a very large basis and its target market is basically the lower class. Its tag line is “Every day low price”. The price strategy of having low prices and the support of the giant retailer Wal-Mart contributes majorly on ASDA’s success. 3. Sainsbury’s Sainsbury’s supermarket chain has the ranking of being no. 3 in the UK market. The founder of this supermarket chain is John James Sainsbury and his wife Mary Ann; it came into being in the year 1869 in London. Its market position is extremely strong in London and also in the South east of UK. Sainsbury’s have identified their factors on which they want to grow and have been growing. They are having competitive prices, having more space to open up their stores, having more customers, increasing the types and ranges of food category, and managing the property actively. 4. Morrison’s Morrison has the fourth position in the UK retail supermarket chains. It was founded in 1899 by William Morris, and durig its inception stage it had strated with a stall of egg and butter in the market of Rawson in England. The strategy of this company is to provide customer service that cannot be outclassed by anyone and provide a shopping ambience which the customer should enjoy and remember. The target market for this retail chain outlet is the mid-lower end class of customers. Morrison focuses on being a food specialist and provides fresh food for everyone. 5. Co-op The London Co-op superstore chain was established in the year 1970 by a group of people who were highly concerned by a the natural food’s high cost in the health food outlets that were present in the country locally (The London Co-op store 2010). The store has a policy of being non-profit and it’s owned by different members numbering up to 25, and the store possesses co-operatively earned food which is natural. They say that they strive to provide their suppliers with organic products that are natural and healthy and are provided to the consumers on reasonably good prices (The London Co-op store 2010). Co-op superstore highly values their social and economic responsibilities and they respect the community in which they are living and always want to benefit the citizens of the country by their products and services. 6. Waitrose Waitrose is on no. 6 in the supermarket chains in UK. Waitrose is the formation of the leading store chain department and the worker co-operative John Lewis. Waitrose store is different as it doesn’t target the low class buyers but offers its products to the upper middle class. The stores of Waitrose are medium sized and are located in areas where purchasing power is high for customers. Critical analysis of stakeholder groups The stakeholder groups are strongly impacted by the situation of the superstore chains. Some of the products present in these stores are strongly dependent on the timely supply from the stakeholders of the retail stores. The issue becomes more critical if the interest of the consumer is not in line with those of the stakeholders. Minor and major, both types of complexities tend to arise. The interest of the consumer basically designs the strategy of the supermarket. They are planned according to what consumers are interested in and what the demands of the consumer are. One of the main stakeholders of for the retail chain outlets is the farmers who supply the farm related products to the superstore chains. Mostly it may be observed that there may be a perceived misalignment with the prices of the farm gate and those of the retail store prices. Supermarkets tend to earn more prices from the farmers by charging prices from them highly under different elements such as listing fees, shelf space fees, etc. These prices are then not charged from the consumers. The consumers are offered the product on reasonable prices. This shows that the retailers earn most of their profits from the stakeholders and allow leverage for the consumers. This tactic is deemed as being unfair by the farmers as they charged too much for their products and all the profits are earned by the retailers of the superstores rather than the profits being earned by everyone. There are relationships that are associative in nature and that tend to show a high level of collaboration between the retailers and the suppliers be it farmers, manufacturers of food or the suppliers that produce food freshly (Wrigley and Lowe 2002). Having dedicated supply chains are extremely important for the retailers so that their business keeps running smoothly. Any mishaps or delays from the suppliers or stakeholders will tend to cause problems for the retailers. Also farmers have highlighted the issue on the latest technologies that are adopted by the superstores for the fast running of their business. Those types of technologies that cause the consumers to be pushed away from the product like for example the genetic modification are reacted upon quickly by the retailers so that no problems or issues arise in the minds of the consumers. Those practices that push away the suppliers away are not reacted upon quickly by the retailers. This is a problem which the farmers are usually facing while they deal with retail superstore chains. Packer integrators and processors also need to give on time deliveries to the superstores. The superstores or the retailers tend to have little control over the trading relationships between the farmers and the different intermediaries of the superstore chains. Offers can be exploited as the competing suppliers as they may reduce their prices to a minimum which would lead to devious behaviors by the supermarket buyers. Buyers may never show any loyalty to any particular store, they will always go for those stores from where they will get their products in reasonable prices. Apprehension of many suppliers has been found out with the main retailers that are present in the country (Dobson 2002). The superstores have a new strategy of producing their own products by the brand name of the store. This may eventually tend to eradicate the market of all those products which have a small market share and all those suppliers which are producing those products. Conclusion: It can be observed in the report that the six main superstore retail chains are becoming very successful in their respective business and they have taken hold of almost the entire food retail market of the country. Small retailers and other businesses dealing with food retail are gradually losing their market share to these big retail stores who with the help of various strategies and tactics have built strong grounds in the industry of food retail. Competition is getting stronger with time and suppliers and other stakeholders are facing too much competition with the successful strategies of the superstore chains. These big retail chains are only dependent on a very few supplier deliveries that are dealing with the import of the products, otherwise a major portion of the business is being manufactured and produced by the retail stores themselves. References Burt, S.L. and L. Sparks (2003) ‘Power and competition in the UK grocery market’, British Journal of Management, 14 (3), 237–254. Dawson, J., (2000), ‘Retailing at century end: some challenges for management and research’. International Review of Retail, Distribution and Consumer Research. April, p 119-148. Dobson, P.W. (2002) Retailer Buyer Power in European Markets: Lessons from Grocery Supply, Loughborough University Business School Research Series. Retail Market is increasingly in demand in UK (2010), Available at: http://www.streetdirectory.com/food_editorials/meals/food/food_retail_market_is_increasingly_in_demand_in_uk.html, Accessed on 28th June 2010. The London Co-op store 2010 Available at: http://londonfoodcoop.org/about-the-co-op/our-mission-and-values/, Accessed on 28th June 2010. UK Grocery Retailing | Grocery sector size, structure, and value sheet (2010), Available at: http://www.igd.com/index.asp?id=1&fid=1&sid=7&tid=26&folid=0&cid=94#2, Accessed on 28th June 2010. Wrigley, N. and M.S. Lowe (2002) Reading Retail: A Geographical Perspective on Retailing and Consumption Spaces. New York, Arnold: London and Oxford University Press. Read More