SWOT, PESTEL and five forces analysis

SWOT, PESTEL and five forces analysis2. IntroductionThe supermart manufacturing is fierce in terms of its contentions. There atomic number 18 four main firms that put on dominant mart share but still have the aim to become the market leader and want to be large and better for their customers and potential customers.3. MethodologyIn order to conduct my research I used a material body of sources which included economical and contemporary books, additional journals were also used to gain more(prenominal) specific and up-to-date information. The internet was also a valuable source collectable to its nature and variety of widely available information.4. PEST ModelThe Pest model eachows us to see what compounds have happened in the industry and how this roll in the hay affect competition. It allows us to score the not so important compared to what is vital in the industry. For any firm in this industry it is important to piss value for its customers, so therefore an arrang ement of the customer is vital.To create value, a firm would have to create a form of understanding and a relationship with its suppliers. Also for a firm in this organisation an in depth understanding and monitoring of its competitors is essential in order to be a profitable company and have first promoter advantage. This supermarket industry includes the customers, the suppliers and the competition.An understanding of the pest model allows us to discover comprehensive potential opportunities and threats in the future. I.e. global warming may not be an inconvenience straight but can be in the next hundred grades this could reflect raw materials for food.4.2 PoliticalThere is a low direct of unemployment this due to the recession this affects the demand of good being bought as consumers have less disposable income. However, food is a commodity and will unceasingly be demanded sue to its nature.E.g. the wrong of stock in supermarkets has dropped in last few years with the inte ntion of boosting demand. Its level of custom has also fallen.There are now restrictions on sullying land or buying out another supermarket chain making it more difficult for supermarkets to expand.4.3 EconomicalBarriers to entryE.g. Over 5 years it has been reported that 700 hundred supermarket stores have inauguration ranging from size of its to 3,000 to 25,000 square feet. In comparison to this it is going to be hard for smaller supermarket chains to break into this industry due to it competitors. Only 5 newborn supermarket stores have opened in last 5 years.As a result of the recession, supermarket chains have to cut back on the demands of the customer. This could include customers looking atCostPricesProfitsOverall price is very competitive in this industry.There is also a change in the way consumers shop supermarket chains such as Tesco have addressed this by giving incentives such as a club pester in order to gain brand loyalty and repeat custom.Larger supermarket chain s are quick to eliminate competitors. E.g. Sainsburys had bought out star Market and thence opened stores across Egypt.4.4 SocialSupermarkets are continually monitoring changing consumer trends and shopping patterns such asWho is buying the product?When they buy the product?How they buy their products?Which products are they buying?Monitoring these trends and understanding then can create competition in order to be the first to develop products and services that get changing patterns.E.g. in the UK,75% of customers shop twice a week and seven still shop at different chains. This pattern by UK shoppers is kn admit as Bulk Shopping or One Stop Shopping.Even though the recession has cut back the number of jobs available, supermarkets still employ a handsome number of people. This could be due to their flexibility in working times such as part time. E.g. Sainsburys employs around 150,000 people in the UK alone. Also there will always be demand for commodities content that supermarket s have some level of safety. Some supermarkets use this as a marketing technique, for example Asda aims to create over 7,500 jobs in 2011 (Tue, 16 Nov 2010 (www.supermarketnew.co.uk))There is also change in demand regarding taste total foods are now much more communal in supermarkets due to greater alertness of global warming, fairtrade and many other issues. E.g. there could be health concerns surrounding British beef with BSE.4.5 Technological engineering science has become beneficial to customers in supermarkets. With self checkout tills, shopping has become much easier and more convenient for consumers for shoppers. They are also easy to use meaning that all consumers can take advantage of this new technology. Personalized shopping is also being introduced which again makes shopping easier and more convenient. E.g. Waitrose allows you shop with your own ropeway gun.With the technology available and the number of companies supplying it, explosion is the word for it, said Tim M. Hammonds, senior vice president of the Food Marketing Institute in Washington. around every store is doing at least one experiment.Tesco are reported to have spent 25 billion in 2005 setting up their on-line shopping website this also helps chains looking at consumer buying habits. Tesco.com is the worlds biggest online supermarket and this year the group had sales of over 577 million, an increase of 29% on last year4.6 EnvironmentCutting waste fruit and vegetables have less packaging.Fresh and seasonal produce of a high qualityIntroduction to constitutive(a) fertilizer foods, governments have supported farmers to convert and grow only organic foods.4.7 LegalLaw legislationsHealth and Safety5. Swot AnalysisThe SWOT analysis shows the strengths, Weakness, opportunities and threats in the supermarket industry.5.1 Strengths corporate cultureThe supermarket industry is one of the biggest and profitableSupermarkets are a necessity people will always need food therefore the demand i s always high in relation to other industries.Customers have different tastes supermarkets have a wide variety of goods and services making it kindredly that a consumer can purchase all of their necessities in one place.Having different stores allowing access to the mass market.Customer Experiences e.g. in store cafes and facilities.Giving Incentives Loyalty cards and point reductions on foods.Image this encourages brand loyalty and can keep an environmentalist reputation.5.2 WeaknessRecession has impacted on supermarkets giving better price reductions and deals undercutting competitors to retain market share. Low-cost supermarkets such as Aldi, Netto and Lidl have taken consumers due their much lower prices.Smaller supermarkets may have to fold due to recession and a very highly competitive market.Low employee efficiency and high labour turnover.5.3 OpportunitiesMarket leadership in a highly demanded segments i.e. the growth in organic and natural foods this will establish high ec onomies of scaleMerging or acquisitions gaining market share E.g. Morrisons takeover of Safeways.Working with foreign countries help supermarkets break into a new market. Such as Latin America, South East China and South Africa.5.4 ThreatsChanges in Government RegulationsRecession impacts the economic changes. I.e. Has and impact on customers expending patterns.6. Portors five forcesPorters five forces of competition identify structural variables influencing competition and profitability in the supermarket industry.6.1 Threats of EntryThe supermarket industry is dominated by some big competitor chains such as Tesco, Asda, Sainsburys and Morrisons and smaller chains such as Somerfiels, One Stop etc. Bigger Chain competitors have focused more on operation and efficiency and productivity (allowing a wider variety of foods or products, better services etc). This force has left very small and traditional shops like butchers, bakers trailing very far behind. This has do it very hard for new companies to enter the supermarket industry. I.e. it is hard for a new business to raise capital because of the life-size fixed costs and its in a very much developed market with chains like Tesco have self check out points and their own stock control system. Where as Asda focus on operational tactics, like product development, better promotional activities and concentrating on better distribution.6.2 Bargaining Power of supplierBecause the industry is fierce and is growing to be influenced by the likes of Tesco and Asda they can transact better promotional prices in comparison to smaller chains have a fear of losing business. They benefit from purchasing economies of scale. Suppliers are under threat because big food chains can negotiate better deals abroad. There needs to be an effective relationship with the supplier and its seller, this makes for a better profit margin.6.3 Bargaining Power of BuyersTo meet customer needs there are many things, weighty prices, wider and better choices, countless promotional activities, consistently bettering customer service. E.g. Tesco club card is most successful to date and has added to Tescos profitability. Supermarket chains have become more aware of consumer needs and by expanding in new markets banking, pharmacies and clothing. There is also a push on ethical products as consumers have become increasingly aware, they are now available in most big supermarkets.6.4 Threat of SubstitutesThere is a threat that consumers can switch from one supermarket to another, this can be due to consumers being influenced highly on price, better service or quality. In relation to this bigger chains are buying out smaller chains, and opening them strategically in small towns or cities. E.g. Morrisons tookover Safeway as a method of quick expansion.6.5 Bargaining Power of CompetitorsThe supermarket industry has grown dramatically in size mainly due to bigger chains and continuous growth. This has opened up bigger and better ret ail concentration, new formats and better customer service. E.g. Tesco retain and gain relationship with customers with databases allowing them to see what the consumers have purchased. Companies need to be innovative to keep up with the consumer behaviour such as refocusing on pricing and its values.6.6 rivalrous RivalryBecause the industry is dominated by bigger supermarket chains, there is a constant battle for better prices or better reductions. This results to high price wars to all competitors.Supermarket chains focus on quality and value for the customer in return they could attract new customers of different segments of the market.By bigger chains pass much more on advertising including celebrity endorsement, E.g. Jamie Oliver being the face of Sainsburys and Heston Blumenthal and Delia Smith for Waitrose it becomes much harder for smaller chains to compete.By giving customer price incentives such as Buy-One-Get-One-Free (BOGOF) this again allows supermarkets to retain an d maintain customer satisfaction. Loyalty cards are also good example of this.7. Conclusion7.1 Smaller supermarket vs. bigger supermarketsThe emergence of a number of smaller grocery stores has increased in the past 12 months.A number of smaller supermarkets have been grasped by large competitors.Morrisons purchase of 39 Somerfields after Co-Ops disposal programme, led Morrisons to further increase market share in the south east and in the London.Sainsburys followed Morrisons vision, breaking into new areas, opening 22 store acquisitions in the north. The stores average from 17,000 square feet.Waitrose reached beyond the South east, opening 14 new stores, averaging between 5,000 square feet under its literal store size.A recent newspaper headline stated Asda goes shopping at Netto in 778m takeover deal (27.05.10, London evening standard) showing bigger supermarkets being able to takeover much smaller chains.7.2 Strategies AvailableDuring the recession, it is apparent that value fo r money is most important to the customer. There is little room to negotiate prices as the market is very competitive and each supermarket wants to retain market share.Food Retailers can look into trends and new technologies to differentiate from the competitors, i.e. smarter shopping carts and better change of stores.Supermarkets are looking into convenience for the shopper. Smaller stores such as Tescos Express fill the gap between the bigger and smaller stores they stock ready made meals and supply the basic foods. The sales maybe smaller but they retain market share and overall the business in going to profit.Organic foods are becoming a strong strategy to pull in new customers. There is a distinctive line between luxurious and affordable prices. The organic Market is worth 340 million annually, this figure has doubled in the last 2 years. Supermarkets have recognised the potential and responded with their own range of organic produce.Tescos has market lead and Sainsburys are p lanning a huge launch of its own organic range as is evident from the newspaper headline below.Tesco turns itself into a discolour giant(The Sunday TimesMay 31, 2009)Asda will also be taking advantage, a spokeswoman for Asda says Organic food is definitely something that can be marketed to the masses. passim our stores we have a suggestion box programme called Tuned In. More organics is the number one suggestion.A sales increase from 3.1% to 5.4% in sales. And have increased their organic range from 250 to 400 items with cutting prices.Supermarkets may not be able to persuade shoppers from its competitors directly but convenience of better food products may impart them naturally.