The Analysis of the Uk Supermarket and Tesco

The analysis of the UK super market place and Tesco Introduction The authority of supermarket is becoming far much evidentiaryly in unremarkable life. Consumers could see varied kind of brands and varying goods. The role of the supermarket is tried to satisfy the consumers demands. Since the supermarket came out(p), the advantages much(prenominal) as low scathe and price, much whatsis polish off the supermarket develop quickly. As a impression of the rapid development, the supermarket plays an important role in the retail industry. It non only saves prominent amounts of labor large(p) and operating apostrophize, but improves the shop environment.In this essay I pull up stakes vex a specific analysis of the UK supermarket system through economic theories. Firstly, I will dismantle the situation of the UK supermarket via Five Forces Model (Michael Porter 1979). And then, I will select the largest supermarket in UK, Tesco, to analyse the schema of this sure by vi ctimization the foster chain (Michael Porter 1985). Tesco is the largest British retailer both by global and domestic market constituent. And it is the third largest retailer in the world followed the Wal-Mart and Carrefour.Tesco opens around 2,440 stores and employing more than 400,000 people. Tesco has entered into argonas such(prenominal) as clothes, electronics, financial proceedss, internet services and gas stations. Currently, the market sell of the retailer in UK is more than 30 percent. As of March 2008, Tesco could be found in every postcode of the UK. Five forces analysis The aim of the five forces model illustrated by Michael Porter (1979) is to analyze an industry to determine that which forces can work on the industry strongly so that the firm could make the best position in this industry.And the five forces take on the scourge of new entrants the part of buyers the power of providers the threat of fill out products and the warring rivalry among the exist co mpanies. panic of new entrants Firstly, the threat of new entrants is rather low. It is pretty difficult for new entrants to enter the UK supermarket beca call of many barriers such as economies of scale, capital requirements of entry, cost advantages, differentiation, etc. There ar many supermarkets in UK and the four largest Tesco, Sainsburys, Asda and Morrison flyer for 75. percent of the UK supermarket in the 12 weeks ending 1 November 2009 (Wikipedia). For new entrants, it is difficult to occupy the market share of the UK supermarket in current structure. The graduation barrier is that mild scale of supermarket could non create high margin. It is prerequisite for the entrants to consider the capital requirement according to the large scale of the operation. Many supermarket firms like Tesco and Asda have the cost advantages in supplication factor and different economic factors.It makes a large barrier for new firms to enter the market because of the disadvantages in cos t requirement. Comparing the existing firms, the new enters need more cost and capital to establish the new brand and the access to marketing channels in order to attract the consumers. The existing supermarkets have built the famous brands, stable consumer groups and distribution channels. The strength of the brand name and channels could be a very powerful mean to build a barrier to entry. In order to come up the market stable, government also has the ability to establish a barrier.For instance, if the government can make a determination that how many supermarkets could be established in single region, as a result, the entrants will not be limited to build new facilities. And the new entrants may require many licenses from the government of other legal branches in order to buy the farm. That is also a type of barrier for entry. The existing companies will make a specific analysis aim at the threat of the new entrants and then publish relevant measures to prevent the entrants to enter the supermarket system. There are so many barriers for new entrants to enter the supermarket system that the threat of them is rather low.Power of the buyer Secondly, the power of the buyer is not strong as well. People need their routine life products, so they must do shop. For the large supermarkets, there are many factures influence the buyers natural selection such as the comfortable shopping environment, convenient transportation, free parking, etc. However, because of the homogeneity of these factors, what the consumers concern more is the price of the products. Different play along makes different price strategy based on the respective position. Clubcard of Tesco is the companys customer loyalty programme the port of saying thank you to consumers.It is pretty popular that the build of active member increased over 15 million from 13 million at the take down of 2008/9. Clubcard is a main reason for consumers who prefer the Tesco rather than other competitors. Pow er of the supplier Thirdly, the power of the supplier is also low. The majority of the products in different supermarket are homogeneity. Many large firms like Tesco and Asda have the matching operating style and advanced purchase measures. So, there are many suppliers for the supermarkets to choose and purchase products.And because of the small(a) retailers purchasing power is much lower than the supermarkets. At eventually, most of the products will be sent to the large supermarkets. Threat of the substitute Fourthly, the threat of the substitute is not high. As the substitute of the supermarkets, the small single retailers are pretty convenient for consumers. People could buy fresh seafood, vegetable and fruit from the respective markets instead of the supermarkets. And there are many advantages just round the retailers, for instance, many small retailers are built near the residential areas, the lever of products is pretty full.However, since the operating cost is high, i f the retailers want to view as margin, they have to make the price higher than the supermarket. entirely as the industry leader, there is no doubt that the Tesco Group would not give up the share of small retailer market. So the Tesco Express and One Stop came out. The Tesco Express stores are neighborhood convenience stores whose average size are about 200m2, stocking mainly food with an emphasis on higher-margin products and daily essentials. They are established in busy city centre districts, small shopping precincts in residential areas, small towns and illages. And the size of One Stop is much smaller than the Express. At the end of its 2010-2011 financial years, the shape of the Tesco Express and One Stop were 1285 and 599(Wikipedia). Because of the famous brand of the Tesco, most people prefer to buy the daily products in the Express or One Stop. According to Datamonitor (2010), there are 960 Express stores which sell slightly 7,000 products and 170 Metro stores which s ell a range of food products in villages and city centres.As a consequence of the brand and more types of products of the supermarket, the threat of the substitute is rather low for the supermarket. Competitive rivalry among the existing firms The last one is the emulous rivalry among the existing firms. And the threat of competitive rivalry is considered very high in the UK supermarket industry. The four largest supermarkets Tesco, ASDA, Sainsburys and Morrisons account for 30. 5%, 16. 9%, 16. 3% and 12. 3% of the UK supermarket in the 12 weeks to 27 celestial latitude 2009. (Wikipedia) And the market share of ASDA increases from to 16. % during the year 2010/ 09, meanwhile, Sainsburys share rises to 16. 3% and Morrisons reaches 12. 3% from 11. 3%(Euromonitor, 2010). The opposition of these firms is pretty strong in this industry in order to win the market share and the ambition could make the market develop much faster. It is very significant for these firms to create many inno vative measures to obtain more market share. Most products are homogeneity for consumers so that the seller should pay more assistance to the piece and quality of the products.Hence, based on the quality guarantee of the goods, firms try to occupy more market through the lower price and better services. By the analysis above, the threat of the competitive rivalry among the different firms is highly strong but other threats are not strong enough. So, the supermarkets in UK should lick out more effective measures to attract consumers in order to occupy the market. Value chain analysis The value chain was developed by Porter (1985) in order to analyze a firm to estate the sources of competitive advantage. There are two activities including main(a) winding activities and get activities. The primary activities are those that concerned about physically creating the product or service and transferring it to the buyer, together with any necessary after sales service. The support act ivities are those activities that are necessary to ensure that the primary activities can be completed. The support activities can collide with any one or more of the primary activities. The primary includes inbound logistics, operations, outbound logistics, marketing and sales and service and the support activities includes firm infrastructure, adult male imagination management, technology development and procurement.The first primary exercise is the inbound logistics. It is considered that the inbound logistics includes receiving goods from suppliers, storing goods, transporting goods and taking goods to the shelves. Tesco uses the leading position as the key power to reduce the be from the suppliers and keep the stable of consumers selection. Meanwhile, it also improves the efficiency and the distribution system. As well, the company provides more effective way to control and reduce the costs of damaged goods. As a result, it could avoid the extra costs be transferred to the consumers.It needs to think about its operation active. The firm could do many operations such as providing products and service and keeping the shelves full as the daily task. In order to gain more competitive advantages, it is necessary for the company to take a consideration about reducing the operating costs. Tesco makes full use of the intelligence technology (IT) system in order to make the company control the operative cost effectively. This firm has spent more than 76 million pounds on narrowing the operation time by the digital program by the 2010. And during the 2009, the profit of the Tesco was reached 550 million pounds.The measure of Tesco provides much convenience for staff to operate the service. Accompanied by the operation, they will have outbound logistics problems. It is concentrating on delivering the goods to the customer. Currently, Tesco adds the home delivery service. However, there are many methods need to be improved such as parking facilities, handcarts, staff and systems to get competitive advantage. If it could be implemented more effectively than other firms, it would make their consumers save more time. And the staff could make the facilities easy and convenient for consumers to get quickly.Tesco has the leadership and effective outland logistics. The company has invented many measures to satisfy consumers demands like the small Express and one-step stores and fast door-to-door delivery service. It is very important to considering the marketing and sales. The next one is the marketing and sales. As the leading company, Tesco has its strategy to attach to consumers. The Tesco Clubcard is invented to attract more people to go shopping to Tesco instead of other competitors. Consumers who keep the cards can get much discounts and integration. Actually, advertisement is necessary as well.Tesco could attract more consumers by the advertisement via the television, radio and local newspaper. And they could get much information about th e products and discounts. After selling, service becomes the most significant active. As the principle of fast and easy, when the consumers enter into the supermarket, the warm shopping environment may make them relaxed. Various sectors are responsible for their respective responsibilities staffs provide the best private service to consumers so that consumers can go shopping easily and comfortably. All of these reflect the intimate service for consumers. Here are the support activities.The procurement is the procedure of obtaining the various contributions to the primary activities. The key point of the firm infrastructure is planning, finance and controlling the system to improve the firms strategic ability. The company should condense on improving the establishment of the infrastructure so that consumers could go shopping more convenient. The human resource management includes recruitment management and staff development. The aim of the Tesco is to add differert types of schemes and develop the recruitment plan, then formulate more excellent staff to provide the best service for consumers.The development of technology is a significant competitive advantage for a company. The advanced technological level could add higher brand value. Tesco is the first supermarket that invented the self-checkout in UK. And it provides great convenience to consumers. Conclusion In this essay, I analyse the UK supermarket industry by using Five Forces (Michael Porter 1979) firstly. Through the analysis, it is clearly that the threat of new entrants, the power of buyers, the power of suppliers, the threat of substitute products are pretty low for UK supermarket industry.The firms in UK do not pay much attention to those threats above. The power of competitive rivalry among the existing companies is very strong. The competition among the existing supermarkets is rather drastic. All companies need to figure out effective strategies in order to prevent their consumers changing t heir brand selections. And secondly, I analyse the value chain (Michael Porter 1985) of Tesco. As the largest retailer in UK, Tesco has an excellent industrial chain for supply and demand. The primary activities could ensure the firm can gain more margins by perfect supply chain management, operation, sales and service.Read also Reed Supermarkets a New Wave of CompetitorsThe support activities like great human resource management, advanced IT system provide support to ensure the primary activities could be operated. With the excellent primary activities and support activities, Tesco obtains more than 30 percent market share in UK. 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