Conventional Supermarket Chains

Industry Analysis:

A report from Mintel also shows that in the period of September 2013 to December 2013, more than half of the UK household shopped at the discounters (Mintel, 2013).

The conventional supermarket chains stocked 25,000 to 30,000 while Aldi only has around 700 items. The narrower the range of product, the lesser the space needed to display the items. Thus, compare the size of the supermarkets, it is the smallest one while Tesco always focus on some big size store .         

Competitive Rivalry (high):

• Four dominant :Tesco, Sainsburys , Asda, Morrisons
• Due to the price cutters, Aldi, it has fostered the rivalry in the industry as Aldi sell the core grocery items in lower prices to mainly middle-class shoppers  rather than given them discount in some of the items like Tesco and Asda
• need to be innovative to maintain and build market share
• Competitors have responded by refocusing on price and value, especially the added value elements of their services.

Threat of potential new entrance–limited

• grocery market transformed to supermarket-dominated market Ritz, 2005
• Build their brand loyalty (one-stop shopping, operating efficiency, loyalty scheme)
• Set a high barriers in resources and capabilities( large fixed costs and highly developed supply chain, gaining planning authorisation from local government)
•  Asda and Tesco – aggressive operational tactics

Substitutes (low)

• The existing products will not be entirely replaced like food items
• However, new technology may reduce the cost of production
• Smaller chains of convenience stores are emerging like Tesco express
• Organic shops ( green life)

Power of suppliers--low

• Leading supermarkets have a stronger consolidations in negotiating for better promotional prices which small individual chains unable to match
• too valuable as a customer to lose
• While supermarkets offer suppliers volume of sales, unattainably low buying prices are a perpetual complaint
• Low buying price not always result in low retail prices (a great deal of margin is taken by distributors and retailers)

Power of buyers –intermediate

• Consumers are price takers. Buyers can exercise their power to shift to another supermarket in order to get a cheaper price. Even though some leading supermarkets uses loyalty card to retain the customers like Tesco,  Aldi successfully using a low cost strategy with better choices to capture the market share.
• Moreover, customers look at the value created by the supermarkets during the purchasing as well. Nowadays, points system like the club card seems outdated compared to the Waitrose scheme that offers free coffee. 
• However, because of the wide range of grocery to choose from by a number of well-established brands, hence consumers possess bargaining power to a certain extent.
• Furthermore, majority of the consumers are well informed because the information about the consumer groceries are easily available via brochure, World Wide Web like http://www.mysupermarket.co.uk/

Tesco:
Tesco is one of the largest retailers in the world. It is established in the UK in 1919, and has successfully expanded to 12 other countries including China, Czech Republic and India etc. (Tesco, 2013). However, it has failed in the US market. Tesco go under the name Fresh & Easy shops, and set up 199 in the US. However, these stores have never generated any profits. (Geoghegan, 2011) Tesco started to exit the US market orderly in 2013 by handing over more than 150 stores to billionaire Ron Burkle’s Yucaipa Cos and transferring its 5000 employees of Fresh & Easy to new business. (BBC, 2013)