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University of Westminster

Westminster Business School

  Module code and title: BKEY 402 Business context

REPORT

The Problem Question

ave su!ermar"ets #ecome too #i$ to the extent that they are dama$in$com!etition% and does the dominance of the #i$ four su!ermar"ets in the$rocery mar"et mean that there is an increased ris" of consumers $ettin$ a!oor deal& 

Student 'ame: ussein Siam

Students name and ():

ussein Siam W*+,0-,*

.lad /andichi

Saa 1aru3*+4-2+

Kim#erley Bour"e 3*+-5645 

Word 7ount: *++

 

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Introduction

background8fter the Second World War% the 9rst selfservice food sho! in the UnitedKin$dom 3as o!ened #y the coo!erative movement in *645% 3ith *0 selfservice sho!s% the 9rst sho! 3as o!ened in Streatham% South ;ondon< =hefour lar$est su!ermar"ets in the UK are 8S)8% =esco% Sains#ury>s andMorrisons ?o!ened in *646% *6*6% *,6% and *66 res!ectively@< By 20*+ have su!ermar"ets #ecome too #i$ to the extent that they are dama$in$com!etition% and does the dominance of the #i$ four su!ermar"ets in the$rocery mar"et mean that there is an increased ris" of consumers $ettin$ a!oor deal&

*<* Oligopoly and monopoly

4A

,2A

-4A

2006

nline Su!ermar"et7onvenience Stores

 =he research com!leted #y the retailconsultancy% .erdict% !oints that UK consumers did ,2<2 !er cent of theirsho!!in$ in a traditional su!ermar"et 9ve years a$o< (n 20*+% the 9$ure hasdro!!ed to +5<* !er cent% eCuatin$ to a num#er of tens of #illions of !ounds<7alculatin$ on 3ee"ly sho!!in$% analysts are estimatin$ that the 4 $iants% =esco% 8sda% Sains#ury>s and Morrisons are losin$ - #illion !ounds 3orth of3ee"ly sho!!in$<

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+5A,A-5A

20*4

Su!ermar"et nline

7onvenience stores

 =he chief economist at (D)% thefood and $rocery research com!any% 1ames Walton% is callin$ the!henomenon re!ertoire sho!!in$F #ecause the chan$in$ in the ha#itual3ay of #uyin$% after the 9nancial crash% the colla!se of 'orthern Goc" #ein$in to! of the reasons 3hy the ha#it of a #i$ 3ee"ly sho! fell out of favor<cial 9$ures sho3 that the !etrol !rice rise has determined !eo!le to drive65* million miles fe3er on a Cuarterly #asis com!ared 3ith + years a$o<

8nother reason 3hich states that there is a need felt #y consumers tochan$e their #ehavior is the result of the lo3er income !eo!le are havin$ forthe last + years as a result of the credit crisis and decreased salaries 3hichcreate a desire for a #ar$ain% says Walton<

 =his need coincided 3ith the rise and continuous success of su!ermar"ets3hich has #een around for a cou!le of decades and im!roved the Cuality of!roducts and num#er of items they are stoc"in$< 8ldi% ;idl% and even/oundland H all oIered dramatically chea!er deals on a small num#er of$oods< =his is a !erfect exam!le that the 4 $iants are not dominatin$ themar"et to the extent that they are dama$in$ com!etition<

(n res!onse to the situation% 3hen consumers cannot aIord to 3aste money#y thro3in$ the ex!ired food to the #in% the u!ermar"ets li"e ;idl and 8ldi areada!tin$ fast to their needs #y oIerin$ them one of the easiest 3ays andthat is to sho! small and sho! often at a local store< =he $overnment a$encycalled Wra!% states that the amount of food !eo!le are thro3in$ a3ay hasfallen #y 2* !er cent over the !ast seven years<

8s mentioned !reviously the four most dominant $rocery stores in themar"et are =esco% Sains#ury>s% 8S)8 and MorrisonsJ accountin$ for around54<*A of the total mar"et ?as sho3n in the !ie chart adacent@< (t has #ecome

clear over the last fe3 years the share 3hich these four su!ermar"et havehas $radually decreased and is set to follo3 this trend in future years< =his is!artly due to sales sli$htly decreasin$% #ut lar$ely due to the rise andex!ansion of smaller stores such as 8ldi and ;idl<

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7urrently% it is 3idely sus!ected that the four lar$est su!ermar"ets are3or"in$ to$ether to sti!ulate similar !ricin$ of their $oods< =his su!!orts theidea that consumers are not $ettin$ the #est deal !ossi#le for their $rocerysho!!in$< (t has also #een !roven that the !rice of mil" and cheese have#een increased at the same rate #y all these stores< Mar" /rice% themana$in$ director of Waitrose ex!ressed concern a#out the destination ofthe !ro9ts caused #y the !rice rise< e stated My issue is 3hether these!rice rises 3ent to farmers H 3hich is 3here they should have #een $oin$ Hor 3hether they 3ent into the !oc"ets of the #i$ su!ermar"ets< 8nd if it>s!roved to ha!!en 3ith mil"% is it also ha!!enin$ 3ith corna"es or anythin$else&F (t is clear that this is therefore dama$in$ !otential com!etition<

1.2 Expansion

7ustomer sales of the four L$iant> su!ermar"ets have $enerally decreased onavera$e #y around *A in the *2 3ee" !eriod to the 4th 1anuary 20*+<7onversely% #oth 8ldi and ;idl ex!erienced a si$ni9cant rise in sales of their$oods ?22<,0A and *+<*0A res!ectively@< =hus it is evident that the storesare ex!andin$ at a ra!id rate< 8lthou$h this is !ositive for #oth these 9rms% itmay cause !ro#lems for the four main su!ermar"ets and !otentially for themar"et as a 3hole< 7urrently the mar"et is of an oli$o!oly structure 3ith a

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fe3 9rms com!etin$ in the mar"et% ho3ever if this trend continues themar"et structure is set to chan$e into mono!olistic com!etition<

With reference to thedia$ram a#ove% relatin$

#ac" to the scenario thisis li"ely to causecom!etition in the foursu!ermar"ets for the!roduct rather than the!rice of $oods< =hiscould !otentially seeindividual !ro9ts foreach 9rm decrease< =hecontinuin$ ex!ansion of 8ldi and ;idl ?in !articularly 8ldi@% 3ill eventually see the com!anies $ain alar$er share of the total mar"et thus they 3ill #ecome increasin$ly dominant<When the mar"et chan$es from an oli$o!oly to a mono!olistic com!etitionstructure% it is li"ely that more ne3 9rms 3ill enter the mar"et due its lo3#arriers to entry< 8$ain% this 3ill also contri#ute to a rise in com!etition3ithin the mar"et as there 3ill #e more 9rms ?3ho are more 3illin$ to lo3er!rices than current leadin$ com!anies@<

1. !upplier

8 su!!lier is the !erson that is the source for $oods and services< food

su!!liers have a code of !ractice called LSodexos> 3hich sets out theminimum food and safety standards for food < =he code lays do3n $eneral

and electrical reCuirements as to #e standards reCuired for method of

!roduction% environment standards reCuired 3hich is 3hen food is !roduced%

and micro#iolo$ical standards reCuired for s!eci9c !roducts< moreover% all

food su!!liers 3ill #e su#ect to a !eriodic audit% reCuirement to underta"e a

due dili$ence Cuestionnaire or mi$ht #e as"ed to !rovide !roof of

certi9cation to reco$nise food safety and Cuality standards? Sodexo@< (t is "ey

that there is a clear assessment trail and su!!lier tracea#ility system in

!lace so that in$redients% includin$ fully or !artly !re!ared items% es!ecially

hi$h ris" foods% can #e traced #ac" to !lace of ori$in< =he su!!liers must #e

a#le to sho3 this !rocedure to Sodexo< =he recei!t of $ood Cuality%

hy$ienically !re!ared foods and in$redients is essential to food safety< =hus%

su!!liers must #e tested and a!!roved in a systematic 3ay< o3ever% the

freCuency and ty!e of assessment shall #e #ased on ris"< 8t some sta$e

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ho3ever a visit 3ill #e reCuired% ta"in$ into account !ast !erformance% level

of ris" associated 3ith the food su!!lied and the res!onse received< 8ll non

conformances identi9ed must #e follo3ed u! 3ith the su!!lier and suita#ly

closed out? Sodexo@<  urthermore% on arrival% all food and !ac"a$in$ must #e

tested for si$ns of dama$e% infestation and com!liance 3ith the order and

a$reed s!eci9cation< With strict re$ulations !roducts such as chilled or froNen

materials must #e chec"ed for com!liance 3ith a$reed delivery

tem!eratures< =hese tem!eratures must #e com!liant 3ith the relevant UK O

(reland le$al reCuirements? Sodexo@< Lurther visual% analytical% !hysical and

or$anole!tic tests should #e carried out as reCuired% de!endent u!on the

!roduct s!eci9cation> ? Sodexo@< =he Gesults is normally recorded in a format

to ena#le full tracea#ility< for exam!le meat Meat must #e reared%

trans!orted for slau$hter% #e slau$htered% and !rocessed accordin$ torelevant le$islation< 3ith all this $ood care of food and Cuality !rices of

!roducts at su!ermar"ets has #ecome a de#ate the four main su!ermar"ets<

 =eco and the other main su!ermar"et are very com!etitive 3ith the !rices of

their !roducts< as a results this determines 3hether you $et hi$her !riced

food or lo3er< in the !ast fe3 years in the !a!ers it has #een recorded that

8ldi 3hich is not one of the main four has !ut !ressure on other

su!ermar"ets due to havin$ #as"ets of essentials u! to -0A chea!er than

other rivals?Sayid@<  rom a doNen free ran$e e$$s for P*<5+ com!ared 3ith

P2<5+ at Sains#ury>s and 4+! for a +00$ !ac" of !asta costin$ 6! at =esco

to a 2<+"$ #a$ of !otatoes for P*<+6 com!ared 3ith P*<5+ at Morrisons% 8ldi

hammered the #i$ $uns on !rice<(ts #as"et includin$ #i$ #rands li"e errero

Gocher chocolates and Mr Muscle ven 7leaner alon$ 3ith essentials li"e

$ammon stea"s% cheese slices% tomatoes% sou! and our came to P42<*+

3hile Sains#ury>s 3as the most ex!ensive at P,0<*+<8 sda fared the #est out

of Qthe Bi$ ourQ 3ith a total of P+0<**% =esco>s till recei!t as P+-<65 and

Morrisons 3as P+4<26<

1." #arketing

8dvertisin$ is a tool that the #i$ four use to com!ete< Mar"etin$ tools such as

SW= or /ES=E;% can hel! enhance the #i$ four mar"et shares throu$h

advertisin$< strate$ic mar"etin$ is necessary for the the #i$ four to stay alive

in the current com!etitive mar"et< ?Wernerfelt% *64@

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Mar"etin$ mixed is a res!ected tool used #y the #i$ four to analyNe and

understand the mar"et F =he 4!>s a mixture of the !roduct% !romotion% !rice%

and distri#ution are very essential in mar"etin$< =he aim of the mar"etin$

mix is to de9ne an ima$e for the service or !roduct 8ccordin$ to Wernerfelt%

?*66+@ mar"etin$ mix is the set of mar"etin$ a!!roaches that the com!any

a!!lies to follo3 its mar"etin$ $oals in the tar$et mar"etF?Gust% Moorman

and )ic"son% 2002@<

Re$erences%arry Wallo!< 20*+< o3 3e fell out of love 3ith the #i$ 3ee"ly su!ermar"etsho!< R';('E 8vaila#leat:htt!:TT333<tele$ra!h<co<u"Tne3sTearthTa$ricultureTsu!ermar"etsT***0**To33efelloutoflove3iththe#i$3ee"lysu!ermar"etsho!<html<R8ccessed *, )ecem#er *+<

Go#ert Schen"< 20*+< =he =heory of e3 Sellers< R';('E 8vaila#le at:htt!:TTin$rimayne<comTeconTMono!olyTli$o!oly<html<

University of Surrey< 20*+< =he Gise of the Su!ermar"et in Britain< R';('E

8vaila#le at: htt!:TT#usinessschool<exeter<ac<u"TresearchTconsumerlandsca!esTsho!!in$Trise<html<

Kantar World !anel DB Mar"et Share% *2 Wee"s to 04 1anuary 20*+ ?A@?20*+@% 8vaila#le from htt!:TTu"<#usinessinsider<comT"antarchristmas20*+su!ermar"etsharedata20*+* R8ccessed on *,th )ecem#er 20*+

Kantar World /anel DB =otal =ill Goll% *2 3ee"s to 04 1anuary 20*+ ?A@?20*+@% 8vaila#le from htt!:TTu"<#usinessinsider<comT"antarchristmas20*+su!ermar"etsharedata20*+* R8ccessed on *,th )ecem#er 20*+

arry Wallo!% 2005 8vaila#le from:htt!:TT333<tele$ra!h<co<u"Tne3sTu"ne3sT*+,-,,-TUKsu!ermar"ets9xedmil"andcheese!rices<html 

Sayid% Gu"i< V8 /rice 7om!arison By =rade Ma$aNine =he Drocer ound =he8ldi Bas"et Was P* 7hea!er =han Sains#uryQs% P*2 ;ess =han Morrisons 8ndP**<2 7hea!er =han =esco 8ldi /uts /rice /ressure n Givals With Bas"et fEssentials U! =o -0A 7hea!erV< m irror  < '<!<% 20*+< We#< * )ec< 20*+<

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Sodexo%< VSodexo uality f ;ife ServicesV< '<!<% 20*+< We#< * )ec< 20*+<

Wernerfelt% Bir$er< ?*64@< 8 resource#ased vie3 of the 9rm<F Strate$icMana$ement 1ournal< + ?8!ril1une@:*5**0<

Gust% G<=<% Moorman% 7< and )ic"son% /<G< ?2002@% Dettin$ return on Cuality:revenue ex!ansion% cost reduction% or #oth&F% 1ournal of Mar"etin$% .ol< ,,'o< 4% !< 5<

Wernerfelt% Bir$er< ?*66+@< Lthe resource#ased vie3 of the 9rm: =en yearsafter<> Strate$ic Mana$ement 1ournal< *, ?March@: *5**54<