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COMPETITIVE FORCES
Tesco PLC is the market leader in the UK food and grocery sector. The grocery sector in the UK is one of the most competitive sectors in retailing. A few companies that trade nationally through larger supermarkets and superstores lead the market. The larger supermarket chains such as Tesco's Sainsbury's, Asda nd Safeway (who have recently merged with Morrison's for an estimated £2.9 billion) have considerable buying power and influence on the food market as a whole, due to their retail supremacy. Due to this, the number of companies in the superstore market is fairly small. There are few regional companies and the smaller operators tend to compete in the market from smaller premises. Such operators are often classified as specialist foods stores or convenience retailers, which are not in direct competition to the supermarket chains.
The UK grocery market was valued at an estimated £103.4bn in 2001. (Source: Keynote) The food market is one of the most recession-proof in the economy. During the last recession spending on food maintained as other sectors suffered, as consumers seen food as an affordable necessity.
The core business of supermarkets is food sales and expenditure on food in the UK has been growing every year for over a decade. The increase in travel and cookery media has gone some way towards educating consumers in food and encouraging them to be more experimental. The supermarkets and food suppliers have observed this and have provided an extensive range of convenience foods, which take less time to prepare. This added value can then be retailed at a premium.
In order to carry out a structural analysis of the sector, Michael Porter's Five Forces Model wil ...