The strategy can be described as an action plan made by management specifically for running a business as well as conducting operations (Thompson et al 2014, p.6). According to Segal & Giacobbe (1994, p. 14), the current business environment is experiencing a circular leap of change, dynamic technology that rapidly keeps changing in addition to immense entries of new competitors. Due to this factors, firms are pushed to adapt to essential changes within the business environment which is more chaotic and radical in nature. For a business to survive today’s environment it has to continuously be able to renew its competitive advantage in the market (Mathews 2003, p. 9).
The UK grocery supermarket is dominated by a few firms which are Tesco, ASDA and Sainsbury. The UK supermarket sector is oligopolistic and the strategy. According to a study by Katar world panel, it is the sales in the UK supermarket have been on the rise for the 25 consecutive periods and now its 2.1% high as compared to last year in 2017. The only decline that was recorded was in the year in June 2016 (Uk.kantar.com. 2018, p.1).
According to Economicsonline.co.uk. (2018, p.1) from 2011 to 2015 among the leading grocery retailers in the UK. Tesco had the largest share with 25% in 2011 which was a decrease of 6 percentage point to a 19% share of the grocery retail market by the year 2015. Economicsonline.co.uk. (2018, p.1) further states that previous to the reputation of the discounters, the retail market was dominated by the top four supermarkets which are Tesco, Asda, Sainsbury and Morrisons. It is, however, important to note that the consumer’s behaviour has shifted tremendously as a result of the economic recession as well as an increase in inflation.
Consumers in the United Kingdom are now more attracted to cheaper goods and discounts in the supermarket, this has brought a pricing war-making supermarkets to lower the prices of the goods and also record the highest volumes of sales on food due to the promotion and discount set by the competitors to gain an edge over each other (Seth & Randall 2011, p.12). Khan & Korac (2014,p.17) reiterated that this environment has resulted into an increase in volatility in the grocery market retail and as the consequence of this Aldi in 2017 surpassed Co-operative and emerged as the fifth largest supermarket in the United Kingdom according to Kantar World Panel ( Uk.kantar.com. 2018, p.1).
On the other hand, the supermarket industry in China has been on an annual growth rate of 5.6% and has now reached $196.4 million over the last five years (Kunzmann & Schmid 2009, p.31). The growth has been credited to the government program that established a strong bond with the consumers as well as a national rural retail network in February 2005, this program covers about 70% of all the villages in China in a span of five years. In addition to establishing a rural retail network, the government of China has developed good infrastructure together with the support of local government has played a key part in allowing the supermarket to expand more in the rural areas (Parker 2006, p.51).
However, when the online market Alibaba made a mark in the China market, the entire market players shifted their focus more on internet marketing and this also included the supermarkets. According to Ezrachi & Bernitz (2009, p.48), the stiff competition on the online platform has ensured that only supermarket with adaptable business pattern can survive.
The current situation in China is that supermarket are experiencing hardship due to the increase in stores closure as well as the decrease in the total sales revenue (Economicsonline.co.uk. 2018, p.1). The total sales revenue in 2013 for both the hypermarkets and supermarkets amounted to 473.4 billion RMB and 288.9 RMB respectively. For instance, Wu mart recorded a 12% increase in revenue in half 2015 to 11.7 billion RMB, while there was a drop in the net profit by 19% to 0.25 million RMB. According to Collins et al (2016,p.27), this situation was created by various factors among them being the slow pace of the economic growth, aggressive competition from online platforms as well as a feeble consumer sentiment. On the other hand, many unprofitable stores were forced to be closed to reduce the operation cost (Collins et al (2016,p.28). It is estimated that a total of 178 supermarkets were closed in 2014 and the majority of them being as a result of slim profit, high lease expires as well as poor management.
It is important also to note that one of the major hindrances to the growth of supermarkets in China is high labour cost (Ezrachi & Bernitz 2009, p.54). According to a survey conducted on the same, the labour cost in China amount to more than half of the total operating cost. Considering that the employees in China according to the studies usually bring less profit due to inefficiency, the precise labour expenditure figure as of 2013 accounted for 55.9% of the total cost.
*Qualities of a good supermarket*
· *Navigable Aisles: *the supermarket with more navigable aisles are usually more interesting and pleasant for the customers (Kriel 2015,p. 37). The best view of this is whereby the market isle allows adequate room for the shoppers to buy goods at the stall at the same time there is sufficient room for others to pass without any distraction.
· *Broad Selection of Goods: *in the exclusion of markets that deals with specific dedicated or one item (for example fish) supermarkets offer an incredible variety of commodities as well as variation of goods.it offers a vast collection of vegetables and fruits displayed, other vendors selling clothes others school supplies and other sell furniture. According to Mathews (2003, p.39), this variety is vital as it makes the supermarket be a one-stop shop as it provides the consumer with various options in one roof making giving the supermarket a competitive stature.
· *Multi-Level Vending: *When the supermarket is placed alongside other vendors that engage in a varying level of formalization. The vendors are often grouped alongside each other and this creates an incredible shopping experience for the shoppers giving those more options in regards to the price of good and variety of the products (Ezrachi & Bernitz 2009, p.47).
· *High standard of food safety*: This factor is paramount mostly when it comes to retaining customers. High food standard builds consumer confidence, increases demand for food products both perishable and non-perishable and hence increases the revenue of the business. According to research conducted in Australia 0n 14 million groceries on which supermarket they shop at 58.8% chose the one with the highest standard of food safety (Roy 2018, p.1).
· *Accessibility*: according to Haedicke (2008, p.60). Many consumers prefer the stores that are close to their home, to avoid long drive when they want to short. The closer the supermarket the more convenient the consumer will be and the frequency of going shopping would also increase. The research conducted by Roy (2018, p.1) affirms this as 55.5% of the responded picked close to the home as one of the factors that mattered to them most when selecting a supermarket for shopping
· *Prices:* Due to the slow economic growth rate and the inflation that has been experienced in recent time. The supermarket with the lowest prices attracts more customers. This has resulted in pricing war amongst the competitors in the industry. 52.3 % of the grocery shoppers chose low prices as a factor that mattered to them when opting for a supermarket for shopping (Roy 2018, p.1).
· *Convenient trading hours*: according to Haedicke (2008, p.60) the working hours for supermarket should be customer driven. Most of the supermarket operate 24 hours to ensure all their customers are served regardless of the time they come to the store.
· *Good inventory management: *According to Hitt (2017, p.104), this is a key quality as it plays a core role in ensuring the shelves don’t run out of stocks as it would inconvenient the customers. Good inventory management also contributes to the quality of products and services that are offered to the consumers, it promotes efficiency, minimizes waste of resources and it’s also a key in retaining the customers as everything would be available regardless of the quantity that they wish to purchase (Mathews 2003, p. 67).
According to O’Keeffe & Fearne (2002, p.9), Waitrose Supermarket was established in 1904 and owned by the John Lewis partnership. It runs over137 stores with most of the stores located in the southeast of the United Kingdom with approximately 27,000 staff. The stores are conveniently located and they range from small to medium size. In the year 2002, the turnover rate amounted to £2.17bn (+9.7%) and registered a pretax profit that amounted to £60.1 million.
Segal, & Giacobbe (1994, p.48)stated that the supermarket has employed a differentiation strategy by targeting the high social class with a high quality and unique products of their own. The business has specialized in the sales of fresh food, high-quality wine and delicatessen which are often bought from the special counter and in return giving the company a high-profit margin. Their main agenda is to provide the convenience of a supermarket together with a combined service of the specialist food shop. The typical Waitrose customer has always a description of being wealthy, loves travelling, enjoy fine meals and wine, is more interested in culture and listens to BBC.
With the increasing demand of readymade food, Waitrose has a variety of ready-made meal to the extent coming up with an agreement with Indian meal service provider to supply meal which is ready made to the customers to save the client time and effort (Ebsco 1900, p.15). With the company working so hard to ensure they deliver quality food products to the customers this was a way of building the brand as well as their motive which is to provide food to product customers at a reasonable price. To remain competitively and ensure it sustains its growth in the dynamic UK market Waitrose employs the following strategy:
*Bargaining power of the suppliers:*
This force is a representation of how suppliers can be inclined by major stores because of their power in the market and also the fear of losing out to a larger business like Tesco, (Grant & Birtwistle 2006, p.83). The UK based suppliers are also in threat by the fact that large retailers have got a capability of sourcing for products abroad at cheaper deal therefore to survive the UK market and act at the same level as the key players Waitrose have ensured that they have a good relationship with the supplier and their muscle in the market share has enabled them to be in a position of negotiating with the suppliers ensuring that they get a better deal than their rivals which is vital when it comes to pricing of their products (Hackney et al, 2006, p.63).
*Bargaining power of customers*
The power of the consumer is one of the core factors that enable a business to design and implement new methods and process for the purposes of maximizing their sales. Waitrose has taken note of the fact that price regulation and quality check are among the core features that their customers are usually attracted to.
Waitrose strategy in regard to the consumer buying power is to ensure they stock quality food materials for their clients According to Porter theory the more the goods are standardized the lower the swapping cost and therefore more power is generated to the buyers (Ezrachi & Bernitz 2009, p.71).
*Bargaining power of the competitors*
The grocery environment has led to the significant growth in the market share of large players due to the fact that they have greater size for storage, a better retailer concentration and the application of a wide range of formats which are now part of the major features of the sector (Ezrachi & Bernitz 2009, p.72).
According to Hackney et al (2006, p.63), The retail sector in the UK is at the optimum level, and the market is flat which is difficult to register growth as many businesses are now diversifying into nonfood areas as well as consumers are progressively demanding superior large chain as Tesco. Waitrose has recognized the key to have an edge over competitors is by analyzing the client data and get to know their patterns as well as their needs after which they will strive to meet the client’s need.
*Cost leadership strategy*
This is part of the vital strategy employed by Waitrose. Waitrose usually keeps its prices lower in the market with the aim of attracting more customers and enhancing their buying prowess by making them buy more. According to (Hackney et al, 2006, p.63) the strong relationship that the company has also build with the suppliers enable them to buy in bulk at a lower price making their pricing be more flexible and thus maintaining a low price with a reasonable profit margin. In addition to this Waitrose a special niche (middle-class) they have identified and they put more attention to the quality of the products just as their specific target demands.
Waitrose has employed a differentiation strategy by ensuring their customers are entitled to the highest qualities of the product which is usually a bit expensive even though their customers are usually prepared to pay for it. The company has “high quality” to be their major agenda and their clients are usually happy because they have a feeling of paying for the best and that’s why Waitrose target a specific class of customers.
This is intended for a specific segment of the market for the services as well as the products rather than the whole market or many markets. As a result of focus strategy Waitrose has introduced many small outlets at different places throughout the UK (Grant & Birtwistle 2006, p.83).
*Chinese Supermarket Strategy*
The Chinese market is different from the United Kingdom, however the same strategies employed by Waitrose can be replicated by the Chinese supermarket .first strategy that a Chinese supermarket can use is to identify a special niche (Kriel 2015,p. 19). The supermarket should target a middle-class citizen to enable them to design a proper marketing strategy that is customized for the customers. This strategy would ensure the supermarket open small to medium size store in the area populated by the middle class to make their product be easily accessible by their target customers.
Secondly, the supermarket should guarantee their clients the best quality product. Their strife to offer quality product should override the price. The quality should also be cascaded down from the products to the employees who are professional and efficient together with (Kunzmann & Schmid 2009, p.22).
The supermarket should also have a good business relationship with the suppliers. This will enable the business to negotiate further with the suppliers and getting a quality product at a cheaper price and this will enable them to offer their customer’s incentives like discounts as well as lower prices of goods. A good relationship with the supplier will also ensure their profit margin does not grow thin (Kunzmann & Schmid 2009, p.22).
One of the reasons why Waitrose have been in the industry for long and still stand competition is the fact that they often have enough stock, and proactive approach that ensures the stores does not run out of stock. The Chinese company should study their customers, know there buying the pattern and come up with an effective way of managing stocks. This will be a key to the customer’s retention as they will prove to be reliable and a one-stop market that meets all their customers need (Grant & Birtwistle 2006, p.81).
The grocery industry in the UK has its major dominating competitors; apart from Waitrose, there are ASDA, Tesco, M&S, chains of Somerfield, as well as Sainsbury’s. These competing stores present great barriers for the new and beginners companies attempting to make an entry into the grocery market; all as a result of the economies of scale together with the cost of leadership.
*Suppliers Bargaining Power *
This particular force refers to the supplier’s powers which could substantially face influenced by the key grocery chains; together with the fears of eventually losing a business to the larger businesses. Moreover, the UK based suppliers also face the threat of the growing capabilities of the large retailers eventually sources their firm’s products in from abroad rated at deals which are cheaper. The great stores have the advantage to make negotiations with the suppliers to benefit from better prices in comparison to the smaller food chains. The competitive rivalry creates a force which reduces the profit margin range of the specific supermarket chains suppliers as well as stores.
*Threats of Substitutes*
According to Hitt (2017, p.8) the higher the number of products which are standardized and undifferentiated, the switching cost is lower, and therefore, the higher amount of power is yielded towards the consumers. Nevertheless meeting the consumers’ needs, ensuring lower prices, customizing service, bettering choices, making constant flows within the in-store promotions grows the ability of the large brands such as Tesco to grasp substantial control as well as retain the customer base (Hitt 2017, p.9).
*Bargaining Power of the Competitors*
The environment of the grocery industry has experienced substantial growth in its size as well as market dominance level for the greater players; in terms of store size, rise in retailer concentration, as well as the use in the vast format range that are currently prominent features of the sector in question (Hitt 2017, p.9). Therefore having a significant amount of the customer’s information the key competitors use the information in communicating with their consumers.
In conclusion, the market is nowadays extremely dynamic, that internet marketing has been incorporated into strategies to ensure the supermarkets remain competitive and a preferred place to shop. The current market is extremely concentrated, the new entrants might find it hard to compete with the big players because besides having the financial power, they also have done research and understand the market needs, therefore, they employ a perfect strategy that suits their customers.
COLLINS, E., KEARINS, K., TREGIDGA, H., & BOWDEN, S. (2016). Selling all good: how small new entrants can compete. *The CASE Journal. *12, 374-398.
EBSCO PUBLISHING (FIRM). (1900). *Barnes reports Worldwide Grocery Stores Industry Report*. search.ebscohost.com/direct.asp?db=bth&jid=ESPH&scope=site.
Economicsonline.co.uk. (2018). *Analysis of supermarkets*. [online] Available at www.economicsonline.co.uk/Business_economics/Supermarkets.html [Accessed 30 Jul. 2018].
EZRACHI, A., & BERNITZ, U. (2009). *Private labels, brands, and competition policy: the changing landscape of retail competition*. Oxford, Oxford University Press.
HACKNEY, R., GRANT, K., & BIRTWISTLE, G. (2006). The UK grocery business: towards a sustainable model for virtual markets. *International Journal of Retail & Distribution Management. *34, 354-368.
HAEDICKE, M. A. (2008). *Adapting to a contradiction: competing models of organization in the United States organic foods industry*. [La Jolla], University of California, San Diego. escholarship.org/uc/item/0w7153nr.
HITT, M. A. (2017). *Strategic management: Competitiveness & globalization: concepts and cases*. New York, Cengage Learning.
KHAN, N., & KORAC KAKABADSE, N. (2014). CSR: the co-evolution of grocery multiples in the UK (2005-2010). *Social Responsibility Journal. *10, 137-160.
KRIEL, G. (2015). Convenience now drives retail choices : business – retail supermarkets. *Www.W3.Org/1999/Xhtml>” Xml:Lang=”En”>Farmer’S Weekly. *2015, 40-41.
KUNZMANN, K., & SCHMID, W. A. (2009). *China and Europe: the Implications of the Rise of *China* as a Global Economic Power for Europe*. Taylor & Francis. www.myilibrary.com?id=273348.
MATHEWS, C. (2003). *The grocery industry*.
O’KEEFFE, M., & FEARNE, A. (2002). From commodity marketing to category management: insights from the Waitrose category leadership program in fresh produce. *Supply Chain Management: An International Journal. *7, 296-301.
PARKER, P. M. (2006). *The 2007-2012 world outlook for supermarkets and grocery stores excluding convenience stores*. San Diego, CA, ICON Group. search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&AN=181978 .
PARKER, PHILIP M. (2006). *The 2007-2012 World Outlook for Grocery Stores*. ICON Group. www.myilibrary.com?id=167322.
Roy Morgan. (2018). *What makes a supermarket super?*. [online] Available at www.roymorgan.com/findings/6168-what-makes-a-supermarket-super-201504122309 [Accessed 30 Jul. 2018].
SEGAL, M. N., & GIACOBBE, R. W. (1994). Market Segmentation and Competitive Analysis for Supermarket Retailing. *International Journal of Retail & Distribution Management. *22, 38-48.
SETH, A., & RANDALL, G. (2011). *The grocers: the rise and rise of the supermarket chains*. London, Kogan Page.
THOMPSON, A. A., GAMBLE, J., PETERAF, M. A., & STRICKLAND, A. J. (2014). *Crafting and executing strategy: concepts and readings*.
Uk.kantar.com. (2018). *Kantar – UK grocery market reaches two-year growth milestone*. [online] Available at uk.kantar.com/consumer/shoppers/2018/late-june-grocery-market-share-uk/ [Accessed 30 Jul. 2018].