STRATEGIC MANAGEMENT FOR GROWTH

M.B.A-2ND SEM
11-08-2010
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Table of Contents
INTRODUCTION:.......................................................................................................................................................4
DEMOGRAPHIC TRENDS:.........................................................................................................................................4
Key Figures of the UK Retail Market:.......................................................................................................................5
Main Retail Industries in the UK:.........................................................................................................................5
The Role of Porter’s Five Forces in Retail Industry:..................................................................................................5
PORTER’S FIVE FORCES MODEL:..........................................................................................................................5
MARKS &SPENCERS OVERVIEW:..............................................................................................................................6
Target Market:.....................................................................................................................................................6
PORTER’S FIVE FORCES IDENTIFY THE SOURCE OF COMPETITION IN MARKS &SPENCER’S:..................................6
Bargaining Power of Suppliers:............................................................................................................................7
Bargaining Power of Buyers:................................................................................................................................7
Threat of Entrants (Barrier to Entry):...................................................................................................................7
Threats of Substitutes:.........................................................................................................................................7
Competitive Rivalry:.............................................................................................................................................7
TESCO’S OVERVIEW:................................................................................................................................................7
PORTER’S FIVE FORCES ANALYZE ON TESCO:..........................................................................................................8
Industry Competitors:..........................................................................................................................................8
Bargaining Power of Suppliers:............................................................................................................................8
Bargaining Power of Buyers:................................................................................................................................8
Threats of New Entrants:.....................................................................................................................................9
Threats of Substitutes:.........................................................................................................................................9
ASDA OVERVIEW:.....................................................................................................................................................9
PORTER’S FIVE FORCES ANALYZE ON ASDA:..........................................................................................................10
Competitive Rivalry:...........................................................................................................................................10
Barriers to Entry:................................................................................................................................................10
Threat of Substitutes:.........................................................................................................................................10
Power of Buyer:..................................................................................................................................................11
Supplier Power:..................................................................................................................................................11
SUMMARY:.............................................................................................................................................................11
CONCLUSION:.........................................................................................................................................................11
REFERENCES:..........................................................................................................................................................12
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Assignment of SMBG

Program : M.B.A 2nd Sem

Module : Strategic Marketing For Growth

Student Name : Ravinder Kaur

Student ID :1002053

Tutor : Eric.A.Yeboah

Date of Submission : 11-08-2010

Word Limit : 2000

Words Count : 2009

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INTRODUCTION:

The retail industry is in a general way is very impulsive, fast pace sector. In the economy of
UK it represents as one of the main sector. So as outcome in terms of dealings and over-
turns, it is extremely agonistic and sophisticated industry.

For being ahead in race companies need to be regularly supervise the market, to keep an
eye on new and latest trends on the changing fashion and above all they have to be ready to
keep up with the buyer’s changing tastes according to the fashion and increasing
expectations.

Nowadays, in the era of competition it become very difficult to satisfy the customer needs.
The leniency in the international barriers particularly increases the choice of number and
types of product for the customer. This freedom gives consumer confidence to make number
of choices and retain their brand loyalty towards particular company because preferably
they have number of choices and substitutes of the same product with same quality.
Eventually for be in the race, retailers need to supply the products to the consumers with
innovative and creative features time to time. Companies also need to keep an eye on
demographic changes, for better understanding the consumer behavior.

DEMOGRAPHIC TRENDS:

The following trends shows useful penetration to consumer’s buying behavior:

 Population getting older

 Increasing number of working women
 Increase in spendable income
 Obesity increasing because of inactive lifestyle

These are the some trends companies have to keep in mind while developing the new
product. Companies also have to keep an eye on the needs, wants and tastes of the
customer. Because the success of the product is basically depend on the customer’s attitude
towards the product.
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Key Figures of the UK Retail Market:

In 2004, UK retail sales reached approximately 246 billion (British Retail Consortium). From
then the retail industry generally continues to show positive signs of growth.

Main Retail Industries in the UK:

Currently UK’s main retail industries are Asda, Tesco, Waitrose, Morrison’s, Sainsbury’s and
M&S.

The Role of Porter’s Five Forces in Retail Industry:

The five forces identified by the Porter would impact competition and behavior of
organization in market which has the following factors:

 Competition between existent sellers in market

 Customer’s power employ in market
 Supplier’s impact on sellers
 The possible threats of new entrants in market
 The threat of same product existence in market

PORTER’S FIVE FORCES MODEL:

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Here we will focus on Mark and Spencer, Asda and Tesco the main leading players in retail
industry of UK. The main reason behind the selection of these three is because they have
comparable base of products.

From some last year’s retailers have been facing strained competition from their rival
companies and some of them even lost momentum. For ex: the market share of the Mark
and Spencer dropped down from 11% to 2% (according to annual report 2004) in a dramatic
way.

MARKS &SPENCERS OVERVIEW:

Marks and Spencer’s is one of the Leading Company in retail industry of UK . It has about
300 stores in all over UK and also at international level in 29 countries. M&S has turnover of
8.4 billion pound in 2010 (http://annualreport.marksandspencer.com/).

Target Market:
Mark and Spencer’s deals in the following segments:

Food, Furniture, Clothing and Financial Services .

PORTER’S FIVE FORCES IDENTIFY THE SOURCE OF COMPETITION IN MARKS &SPENCER’S:

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Bargaining Power of Suppliers:

Main suppliers of M&S were from Britain. The Suppliers were reliant and dependent on M&S
because M&S bought all their stock whatever they manufacture. Suppliers Bargaining power
was low when it has turn to buyers. When in late 1990 sales turn down quickly then M&S
have to hire companies on global level to reduce its cost same as its rival companies which
ends in a lower bargaining power of its UK suppliers.

Bargaining Power of Buyers:

Generally bargaining power of customer is quite high. The consumers divide into two groups
one is seeking classical clothes were price sensitive but the other group want style and high
image become fashion sensitive. The rivals of M&S were more attentive to the customer
needs because of it M&S lost its potential consumers. Moreover, consumers of UK were not
ready to pay premium price in support of British Products. M&S misjudge its target market
whereas consumer oriented strategy is needed rather than product oriented strategy .

Threat of Entrants (Barrier to Entry):

M&S faced strained competition in the both ends (Higher and Lower) of the market. Like
Asda and many other companies offer its high quality clothes with its own brand name at
low price which draw attention of the classic customer which were the loyal customers of
M&S. On the other hand the stores like Next, Gap offered clothes of latest fashion which
attract younger customer’s .In food sector Tesco and Sainsbury threaten M&S by offering
their own range of high quality food products.

Threats of Substitutes:
The threat of substitute is very high. After 1990 there are increased number of cloth retailers
who operating with foreign imports. Consumers have option now whether they pay
premium price for a label or they can buy same product with lower price.

Competitive Rivalry:
M&S is working in a very competitive era. The rivals of M&S are more customers oriented
and aware of needs of customer. For ex Next, Asda and Gap in clothing sector where as
Tesco, Sainsbury and Morrison’s are in food sector.

TESCO’S OVERVIEW:
Tesco was founded in 1924 by Sir Jack Cohen in Maldon and nowadays its one of the leading
retailer of the UK. For reaching the ladder of success they continuously formed competitive
strategies in order to attain this.
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PORTER’S FIVE FORCES ANALYZE ON TESCO:

Industry Competitors:
The main factors of this force are considered as concentration, fixed or variable costs,
differentiation, capacity, pricing, behavior and market and company growth. In retail
industry Tesco has large number of competitors like Asda, M&S, Morrison’s and many more.
Retail Industry is spread on a large scale in UK. So retail industry has vast arena, so the
competition intensify as the number of rival companies increased. So it’s necessary for Tesco
to concentrate on strategic management in order to win over their competition.

Bargaining Power of Suppliers:

The threat from suppliers is quite low because often supermarkets decide the price they are
going to pay to the suppliers. In the same way Tesco do. If the suppliers refuse to get agree
on the price what Tesco decide then they have nowhere to go. So in a way suppliers of Tesco
are Tesco dependent.

Bargaining Power of Buyers:

Buyer Power controls the market. The power of buyer sometimes forces companies to cut
the prices down. For ex: If Tesco sale something on high price than other supermarkets than
customer will prefer to go to other supermarket rather than do shopping at Tesco. The
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power of buyers become high when customers have less number than the sellers. So the
Tesco have to concentrate on the needs and interests of the customers if they want to in
race of top retailers in the retail industry of U.K .

Threats of New Entrants:

All the supermarkets like Tesco, Asda and Sainsbury create a considerable barrier to new
entry. In UK retail industry is mature therefore there is no chance for new entrants. In past it
was easy to take entry when the market was in an introductory stage. But now potential
entrants have to face the barriers imposed on them by the existing companies. So it’s harder
for them to compete with the already existing and established chains.

Threats of Substitutes:
The threat of substitute is acceptable in retail industry because nowadays retail industries or
all supermarkets deal with alike products. So the only option they have to switch the cost of
the product as compare to other supermarket. As a result in all supermarkets like Tesco,
Asda, Sainsbury and Morrison’s have relatively same price. The option of substitute is
beneficial for the buyer because in the race of competition companies have to improve the
quality of the product or cut down the price in both scenario consumers will be in gain. So
Tesco has only option to improve the quality of the product and cut down the price of the
product at the same time.

ASDA OVERVIEW:
Associated Dairies and Farm Store Limited is the first name of Asda. It was established in
1949 by Leeds. Asda is the short form of Asquith. It occurred because of the uniting of
Asquith chains and Associated dairies in 1965. Asda is one of the top retailers in retail
market of United Kingdom. It mainly deals with food, clothing, toys and general
merchandise. It has its own mobile network as well known as Asda Mobile.
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PORTER’S FIVE FORCES ANALYZE ON ASDA:

Competitive Rivalry:
Without any doubt retail market is very competitive. Moreover new and existing companies
are trying to merge with each other which are creating more intensified competition. This is
the main reason companies started focus on bit risky strategy of market. Each firm has to
position its product in the market in a way that no other company can substitute it easily.
Asda has to do same with its products.

Barriers to Entry:
The entrants will face lot problems. First of all in retail industry new entrants need to have
heavy investment and it will take long period to get establish themselves in the retail
industry of the UK. Local knowledge only is bit problematic for the retail business. Asda and
might be other retail stores as well having high technology to deal with the problem about
the knowledge of the retail market.

Threat of Substitutes:
Threat of substitute is very low in the modern era of the retail industry. Because nowadays
retail market concentrates on the satisfaction, needs and wants of the customer. Asda also
prefer quality service to customers which cannot be copy by the competitors. In fact the
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major threat is that more than one supermarkets in the same area. So Asda should have to
consider about the factor and will consider all the possibilities to avoid the situation.

Power of Buyer:
The Power of the consumer is high, particularly at the time when competition of product is
very high. At that time it’s the choice of the buyers what they will prefer. Basically
preference of the buyers is depend upon the economical condition, choices and more
importantly quality service provided by the supermarkets. So Asda have to consider this
factor in the marketing strategy of the company.

Supplier Power:
Suppliers are in the average state. These days competition is very tough so it’s great chance
for the suppliers to establish links with different companies for the same product. Asda has
nearly 500 suppliers at a time. For make sure that they do not sale same products to other
companies Asda have to maintain relationship with suppliers and definitely have to earn
their loyalty towards Asda.

SUMMARY:
After examining the five forces how affect the performance of the different companies like
Marks and Spencer, Tesco and Asda it is clear that strategies of the companies must be
intensified and function well. Marketing Strategies need to prefer quality for three main
reasons. First of all, differentiate the product especially at the luxury end. Second is to
response to the crises of the marketing or as remedial marketing. Third and more important
is that competition on the quality of the product is less financially risky than to compete on
the price factor.

CONCLUSION:
Any company in retail market has to understand the needs and nature of competitive
environment of the market for being succeeded. For understanding the competitive
environment of the retail market industry Porter’s five forces plays an important role. During
the implementation of the five forces some issues are particularly important for the
organizations to be successful. The effective analyze of these forces helps companies to
identify the rival’s competition sources, chances of new entrants, the strength and likeliness
of the competitors and recommendations and ideas about the creating barriers against the
unwanted competition.
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REFERENCES:

1. Charles W.L.Hill / Gareth R.Jones (2008 ). Strategic Management (Online).

9th ed. U.S.A: Cengage Learning. p42-43
http://books.google.co.uk/books?
id=CzIK9ELsyYwC&pg=PA42&dq=porter's+five+forces+model&hl=en&ei=_cVhTLTvNt
WX4AbO8-zfCQ&sa=X&oi=book_result&ct=book-
thumbnail&resnum=2&ved=0CDEQ6wEwAQ#v=onepage&q=porter's%20five
%20forces%20model&f=false (06-08-2010)

2. Boone, Kurtz, MacKenzie, Snow (2007). Contemporary Marketing (Online).

2nd ed. Canada: Second Canadian Edition. p56-57
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X4AbO8-zfCQ&sa=X&oi=book_result&ct=book-
thumbnail&resnum=4&ved=0CEAQ6wEwAw#v=onepage&q=porter's%20five
%20forces%20model&f=false (07-08-2010)

3. The British Retail Consortium - www.brc.org.uk

(Accessed 23-07-2010)

4. http://www.321books.co.uk/catalog/tesco/porters-five-forces.htm
(Accessed 25-07-2010)

5. http://www.coursework4you.co.uk/essays-and-dissertations/porter-5-forces.php
(Accessed 26-07-2010)

6. http://ivythesis.typepad.com/term_paper_topics/2009/09/porters-five-force-
model.html
(Accessed 26-07-2010)

7. http://university-essays.tripod.com/porters_5_forces_analysis.html
(Accessed 30-07-2010)

8. http://www.about-asda.com/faq/-
(Accessed 01-08-2010)

9. http://www.businessballs.com/portersfiveforcesdiagram.pdf
(Accessed 02-08-2010)
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10. http://issuu.com/aureliam/docs/tesco_strategic_plan
(Accessed 03-08-2010)

11. http://www.ciao.co.uk/Asda_Group__21557
(Accessed 05-08-2010)

12. http://university-essays.tripod.com/porters_5_forces_analysis.html
(Accesses 06-08-2010)

13. http://www.oxbridgewriters.com/essays/marketing/marks-spencers-corporate-
objectives
(Accessed 07-08-2010)

14. http://www.swot-pest-porter.com/modules/info/index.php?content_id=69
(Accessed 08-08-2010)

15. http://annualreport.marksandspencer.com/)

(Accessed 08-08-2010)