Environmental Factors

Environmental Factors

Starting from 2003, an increase in pressure on large companies and managers in UK may be observed, main motivation of a government is to make them be more aware of their responsibility to society, and act in a way which benefits society overall. For the food retailing the biggest issue is environmental, the main area for them to act in the "socially responsible" way. Therefore by recognizing this drift movement, Tesco developed Corporate Responsibility committee in 2001 in order to fulfill its obligations before society. (6)

In 2003 the UK government has launched a strategy for environmentally friendly consumption and manufacturing in order of cutting waste, reducing expenditure of resources and diminishing environmental damage. One of the legislation was a creating of a tax on highly processed and fatty foods advertising. The so-called 'fat tax' directly affected the Tesco product ranges that have subsequently been adapted, affecting relationships with both suppliers and customers. (9)

Porter's Five Forces

Threat of New Entrants

The grocery market of United Kingdom is crucially dominated by a small number of competitors, among them such brand names as Tesco, Asda, Sainsbury's and Safeway that hold a market share of 70% and small chains of Somerfield, Waitrose and Budgens with a another 10%. Starting from 80th the grocery retailing system has been represented mainly supermarket business. This powerful force had a major impact on the small local, private owned shops, such as grocery, bakers and etc. Therefore in nowadays it can be treated as a huge blockade for the companies who are willing to to enter this market. As an example, two reasons can be stated: necessity of a sufficient capital because of large fixed costs and highly developed supply chains. This is also evident in huge investments done by large chains, such as Tesco, in advanced technology for checkouts and stock control systems that impact new entrants and the existing ones. Other factors can be economies of scale and differentiation (in the provision of products or services with a higher perceived value than the competition) which is highly developed by Tesco and Asda due to their promotional/advertizing activity, aggressive operational moves in product development, and more sophisticated distribution.

Bargaining