Analyse the management aspects of competition and performance in the supermarket industry, based on the case study given in the attachment.What role have the competitive strategies of supermarkets had in their success? In evaluating the sources of sustainable competitive advantage, which seem most important: market positioning, high levels of market power, or high levels of internal efficiency?Taking into consideration the four current dominant supermarket chains in the UK; Tesco, Asda, Sainsbury’s and Morrisions, whilst acknowledging the slightly smaller popular grocery retailers such as Waitrose and Marks and Spencer an analysis of their comparative individual strategic framework is not dissimilar in many ways.Certainly in terms of the top four providers they have increased their market share through relentless buy up of smaller local convenience stores and chains, in addition to undercutting local suppliers, making them more cost effective.This has resulted in the retail food industry becoming an Oligopoly market, where only a few firms dominate the market by way of high levels of branding, brand loyalty, stable prices and a strong interdependence between the leading stores in relation to their own strategic movements. The emphasis is on advertising campaigns and tough barriers for any new competitors to overcome. They are all benefitting considerably by their economies of sale.[1]Tesco controls over 30% of the overall British grocery market. A market position which provides it with the strength and confidence to succeed against its rival competitors.Not only is positioning integral to the strategic success of the supermarket giants. It was Wal-Mart’s massive buying power which ultimately enabled Asda to become the second highest retailer in the market, usurping Sainsbury’s in 2003 from its number two spot. Another key area of its successes however grew out of its ability to offer a range of non-food items, such as clothing and kitchen ware. By expanding and diversifying its products in this way it was able to increase its overall market power. In 2002 Asda’s Chief Executive Tony DeNuzio confirmed, “two thousand lines have been sourced jointly with Wal-Mart and these delivered prices unheard of in the UK market.”[2]Similarly Sainsbury’s business success came under threat several years ago when its market position was threatened and eventually commandeered by Asda. It needed to increase its competitive advantage quickly and one of the main ways it achieved this was by expanding and improving its own internal communications systems. Following the decline in sales and competitive defeat to Asda it responded by initiating the Making Sainsbury’s Great Again strategy. A significant four year recovery plan which included terminating the outsourced contracting of its IT infrastructure to the company Accenture. It shifted instead to the development of its own in-house IT systems saving the company millions of pounds.[3] This internal efficiency was further enhanced in 2006 when Sainsbury’s introduced new schemes such as ‘Try Something New Today’ which became their motto for both customers and employees with a new emphasis on training and development and colleague communication. The supermarket chain also introduced a comprehensive monthly employee survey, called Talkback providing them with an indication of the level of staff satisfaction and quality of overall service being provided to the customers. During the same year Sainsbury’s launched an apprenticeship scheme for qualifying its in-house bakers, together with a leadership scheme for its branch and regional managers, designed to improve the level of quality of its management team, in addition to empowering its own staff. A combination of new stores, new lines and internal enhancement enabled Sainsbury’s to increase their profits significantly over the last few years. In 2008 these have been confirmed as £488 million, before tax. A rise of £108 million compared to 2007. And an overwhelming profit increase of £380 million for Sainsbury’s since 2006.[4]All of the factors relating to market position, market power and internal efficiency can determine the strategic effectiveness of a successful supermarket giant in terms of how they inter-relate and require shifting or reviewing depending on the situation and motivation for change.What have been the marketing strategies of supermarkets? Evaluate these strategies.Marketing Strategies appear to be progressing away from the traditional 4Ps of Product, Place, Price and Promotion as Marketing is beginning to become more about the relationship of the public to the organization itself. Markets are now so competitive that more innovative ways of attracting customers is becoming key to remaining successful. Perhaps one of the best examples of a successful marketing strategy in order to maintain its existing customer focus, in addition to gaining more direct information about them as individuals, is through Tesco’s Clubcard scheme. This scheme has enabled Tesco to create a retail strategy, to determine their customers and which market these customers fit into as well as what they are looking for from a supermarket.[5]Similarly its computers for school voucher scheme turned shopping into a means of providing equipment for schools, maintained loyalty amongst families with children, raising their profile as a community conscious organization.Asda’s marketing strategy has always focused heavily on value. In 2006 it developed a new £45 million marketing strategy which killed off their “always low prices” slogan. A whole new approach to marketing its products now fell under the umbrella of “more for you for less”, This was a result of Asda’s market share decreasing to 16.7% and a recognition of Sainsbury’s recovery success. Asda also wanted to accentuate the quality and freshness of its food and drink, as the low price concept had begun to have less and less impact on its customers. It invested an enormous £45 million advertising campaign using celebrities and even abandoned the familiar reassuring ‘Asda Price’ jingle. [6] In 2007, still reeling from the repercussions of its multi-million takeover bid of Safeway Superstores Morrison’s decided to revamp its image and market itself in a completely new way. It changed its logo and introduced the new strapline “The food specialist for everyone.” In a similar way to Asda, Morrison’s made the decision to move away from the budget concept and value of lower costing food towards an angle that emphasized the quality of its products; where they came from and how they were packaged and presented. [7] This immediately followed a particularly controversial period for Morrison’s who were the first stock exchange company to post their results after the charity Christian Aid announced it would actively expose and campaign against industries that were seen to be abusing the environment.[8]It therefore becomes fairly apparent from these few recent examples that many of the major supermarkets are focusing their marketing strategies around the current political climate of the country, alongside the ever fluctuating expectations of its consumers.Comparatively the supermarket chain Waitrose has consistently delivered a reputation for stocking quality products, that are fair trade and organic. With the contentious strapline ‘honestly priced’ Waitrose focuses specifically on food and drink and has not diversified its products in line with the other major supermarkets. It has a very different socio-economic demographic for its market and their approach differs from other supermarkets in that they are all about brand loyalty. It has an account card like many other stores but chooses not to promote it. Rewards include concert tickets or selected food items, again emphasizing its overall different audience. The same audience who utilisie the John Lewis brand, the controlling arm of the supermarket. And most importantly of all the Waitrose profits are ploughed directly back into the pockets of its employees, maintaining a holistic enterprise with a fair, honest and high profile image.To what extent should supermarkets take into account ethics and corporate social responsibility when designing their competitive strategies and their relationship with suppliers? Do these responsibilities extend to protecting local communities and convenience stores? How should environmental questions be accounted for?By way of suppliers it is fair to assume from the media attention received that UK farmers are often seen to be suffering the effects of the considerable pressures put upon them to deliver high quality for lower prices, in addition to smaller grocers who find it continuously difficult to compete against the costs implemented by the supermarkets. The long-term impacts of battles between grocers and now non-food retail companies in the wake of the growth in expansion of supermarkets in new product areas, indicates that local based shopping facilities could decline further in future years.In response to the seemingly unending expansion and development of supermarkets across the UK, with smaller convenience stores moving into small towns and villages the Office of Fair Trading, (OFT) published the findings of an investigation into Britain’s four largest supermarkets, Tesco, Asda, Sainsbury’s and Morrisons. Primarily based on how they treated suppliers. The report discovered no issues with the relationship overall and the conclusion was positive.However, since these outcomes were made public there remains an ongoing observation of practices by supermarkets nationally and an increasing profile with regard to the social and environmental responsibilities these hugely powerful, profit hungry enterprises have become in recent years.Corporate Social Responsibility or CSR has become of significant importance to supermarkets, with some responding at higher levels than others. Marks and Spencer have introduced a five year ‘eco’ strategy aiming to proactively tackle issues including climate change, waste reduction and ethical trading. And Sainsbury’s Active Kids initiative, allowing the 80% of all UK registered schools to redeem vouchers for sports equipment. Donating a generous £7 million of their own profits towards the campaign. [9]However this does not take into account the lack of co-operation by the larger supermarkets to help prevent cheap alcohol binge drinking. Frank Soodeen the Communications Director for Alcohol Concern stated earlier this year that ‘Supermarkets have a responsibility to price alcohol realistically…This is not an ordinary product and continuing to cynically market it below cost in order to increase footfall increases the risk to the public health…In the current climate of social and environmental awareness, a tough policy for corporate social responsibility (CSR) is worth its weight in gold.’ [10]Asda has since become the first supermarket to remove all of its super strength canned beers and lagers. In addition it has taken forward a new proof of age scheme titled ‘Challenge 25’. Customers who purchase alcohol must now produce some form of identification if they appear to look younger than twenty five.Furthermore the Federation of Small Businesses claims around 2,000 independent retailers go out of business each year. Supermarkets selling items with no mark-up are subsequently pushing all other smaller independent traders out of business as they simply cannot compete.Fair trade is an ongoing concern, with cheap labour in foreign countries enabling the retail trade to adopt low cost prices through exploitation. Earlier this year Martin Hearson from the campaigns organization Labour Behind The Label was quoted as reiterating ‘In theory, all the main supermarkets are committed to this but in practice, we have seen very little ethics to live up to the promise to pay workers a living wage’[11]It is abundantly apparent that supermarkets play a significant role in CSR issues and have a responsibility to maintain a level of standards across a number of areas that impact on both local communities and larger global matters.Tesco recently published their own Corporate Social Responsibility policy, which can be found on their website accompanied by the following statement ‘Our Corporate Social Responsibility policy objective is to earn the trust of our customers by acting responsibly in the communities we serve. We recognise our impact on society at all levels and work to maximise the benefits we bring.Customers are at the heart of everything we do. CSR is good for our business and good for the communities where we operate. By building goodwill and trust with our customers, we can earn their lifetime loyalty, which is our core purpose.’[12]To what extent is it inevitable that local convenience stores will decline? Are there feasible strategic or marketing responses available to them?The University of Southampton having been carrying out research around the reaction of consumers to the take over and demise of the local convenience store. The impact on communities who had recently been party to the addition of a Tesco Express in their local town or village within four different geographical areas of Hampshire were analysed over a period of one year providing the following conclusionsMany citizens moved away from travelling to the distant out of town supermarkets, preferring to use not only the local Tesco Express, but other local shops as well. The return of out of town shoppers brought about by the inclusion of a smaller Tesco actually encouraged the concentration of increased local shopping trends, rather than having a detrimental effect on the community.In response to the findings the research team leader Professor Wrigley commented “It is clear that the introduction of the Tesco Express format to these communities helped bring about a major re-localisation of top-up shopping – away from distant superstores towards local shops. If consumers can access the same quality of fresh food and product ranges locally as they do in larger supermarkets, then increasingly it seems they will divert their top-up shopping back into their local neighborhood. This may have potential benefits for other traders, but more interestingly has considerable significance in changing the way we shop – with more people walking and cycling to stores.’[13]This conclusive positive influence of supermarket chain presence in local environments is reflected less positively in a topical piece of correspondence from The Executive Chairman for the Association of Convenience Stores to the Inquiry Secretary of the Groceries Market Investigation Competition Commission in 2007.The letter documents an investigative outcome of Costcutter stores nationwide. Whereas the commission had found there to be no decline in the general consumer use of Costcutters. The outcomes of the evidence provided by the Association of Convenience stores details a very different picture altogether, noting ‘The case: IGD I William Reed reports a decline of 5000 stores between the years of 2000 to 2006, and the decline of independents added to symbol group independents has declined by 4,611 stores in the same time period.’The correspondence goes on to claim that a significant number of independent retailers are closing regularly across the country. And those that have remained successful have been subjected to takeover bids by Tesco or Sainsbury’s. An example of one Tesco store opening in a market town in Yorkshire, demonstrated that the existing Costcutter nearby received a turnover of a 50% decrease.[14]Although it is clear that supermarkets are not able to meet all grocery shopping needs as more local convenience stores fall into decline, less choice will be available to the consumer. In addition minority groups and those unable to access large super stores out of town, who would ordinarily have completed their shopping locally are now being forced into taking the cheaper option the presence of a smaller convenience Tesco Metro or Sainsbury’s central provides, making the audience for independent and convenience retailers even narrower.How might suppliers respond to the pressure they face?Suppliers are consistently left with fewer choices in terms of providing produce at an economic level consistent with continued growth resulting from the lack of profit made impossible from value Supermarket trading. Not only are they reduced to having to cut their costs, but they are under pressure in other areas like having to accept longer payment plans and cut prices sometimes even further by having to contribute to special supermarket promotional activity. [15]One of the options remaining is for suppliers to consider moving their industries abroad or carrying out more overseas trading. Alternatively by changing their products to meet the demanding needs of consumers to be greener, more organic and free range and finding new ways in which production costs can be consequently reduced in the process to impart better profits would be advantageous. Adapting to new methods of meeting the demands of the supermarkets are a continued necessity for suppliers to survive in the current market.Some suppliers may end up trading overseas, with the supermarkets forced to then buy the same product abroad at a higher cost, but with the profits going back into the pockets of the supplier. This will have a consequent knock-on effect to how all global supply and demand is met in the future.Alternatively the creation of Stockless centres through an enhanced supermarket internet home delivery service would enable goods to transfer directly from the supplier to the consumer door-to-door with no over-head costs. This would help reduce any transportation or logistic costs or financial implications incurred by the suppliers.Some supermarkets are now co-operating at a much more intensive level with their suppliers by recruiting specialists employed to work directly as a point of liaison to collaborate with the supplier in specific matters relating to the quality of the product they are providing, as well as financial advice and support with storage, refrigeration and logistical problems. [16]There is perhaps potential then to increase this level of support and develop a closer working relationship between retailer and supplier in order that both are satisfied.BibliographyEbrahimi, H, 14 May 2006, Financial Daily Mail article ‘Britain’s top competition watchdog has said it is ready to see small suppliers squeezed out of business by powerful supermarkets so long as savings are passed on to consumers’Gummesson, E (1999) Total Relationship Marketing: From the 4Ps – Product, Price, Promotion, Place – of Traditional Marketing Management to the 30Rs – the Thirty Relationships – of the New Marketing Paradigm: Butterworth-HeinemannJuniper.T, April 24, 2006 ‘A not so super market’, Guardian NewspaperKnights, D, and Wilmott, H (2000) The Reengineering Revolution? : Critical Studies of Corporate Change: SageKnights, M (2005) ‘Sainsbury’s calls time on IT outsourcing contract’, Computing magazineUniversity of Southamption press release, 03 November 2005, ‘Consumers Respond to transformation in UK Convenience Store Sector’, ref 05/191Letter from Colin Graves to Tim Oyler, 23 November 2007 http://www.competition-commission.org.uk/inquiries/ref2006/grocery/pdf/responses_prov_findings_main_party_costcutter.pdf, Date accessed 12/09/08(2002) ‘Asda fuelled by Wal-Mart power – Food Retailing’, Eurofood article7 March, 2006, ‘Asda plans marketing revamp’, Yorkshire Regional Development Agency articlewww.retail-vision.co.ukhttp://www.j-sainsbury.com/ar06/overview/groupperformance.shtml/ Chairman’s statement (2008)http://www.j-sainsbury.com/ar08/chairman/index.shtml, Date accessed 10/09/081Footnotes[1] Juniper.T, April 24, 2006 ‘A not so super market’, Guardian Newspaper[2] (2002) ‘Asda fuelled by Wal-Mart power – Food Retailing’, Eurofood article[3] Knights,M (2005) ‘Sainsbury’s calls time on IT outsourcing contract’, Computing magazine[4] http://www.j-sainsbury.com/ar06/overview/groupperformance.shtml/ Chairman’s statement (2008) http://www.j-sainsbury.com/ar08/chairman/index.shtml, Date accessed 10/09/08[5] www.retail-vision.co.uk[6] 7 March, 2006, ‘Asda plans marketing revamp’, Yorkshire Regional Development Agency article[7] Johnson, B (2007) ‘Morrisons has sterling strategy’, Advertising Marketing article[8] Johnson, B (2007) ‘Morrisons has sterling strategy’, Advertising Marketing article[9] http://www.j-sainsbury.co.uk/files/reports/cr2005/index.asp?pageid=90[10] Gough,V, 04 July 2008, Article from mycustomer.com, http://www.mycustomer.com/cgi-bin/item.cgi?id=133794&u=pnd&m=phnd, Date accessed13/09/08[11] Gough,V, 04 July 2008, Article from mycustomer.com, http://www.mycustomer.com/cgi-bin/item.cgi?id=133794&u=pnd&m=phnd, Date accessed13/09/08[12] http://www.tesco.ie/csr/index.html, Date accessed 13/09/08[13] University of Southamption press release, 03 November 2005, ‘Consumers Respond to transformation in UK Convinience Store Sector’, ref 05/191[14] Letter from Colin Graves to Tim Oyler, 23 November 2007 http://www.competition-commission.org.uk/inquiries/ref2006/grocery/pdf/responses_prov_findings_main_party_costcutter.pdf, Date accessed 12/09/08[15] Ebrahimi,H, 14 May 2006, Financial Daily Mail article ‘Britain’s top competition watchdog has said it is ready to see small suppliers squeezed out of business by powerful supermarkets so long as savings are passed on to consumers’[16] Knights, D, and Wilmott, H (2000) The Reengineering Revolution?: Critical Studies of Corporate Change : SageGet Help With Your EssayIf you need assistance with writing your essay, our professional essay writing service is here to help!Find out more