1. Threat of new entrants The UK grocery market is dominated by the three big players Tesco, Sainsbury’s and ASDA, of which Tesco has the most market share (29,9%). Although the grocery environment is highly competitive it was possible for the discounter ALDI and LIDL to enter the market as new entrants. Based on the fact that they are one of the key players in Germany, they were able to invest high capital in the UK. Nowadays ALDI achieved a growth of about 10% compared to the following year.
Nevertheless the total market share of ALDI is 3,5% which clearly shows that it is relatively hard to enter the grocery environment and it is only possible to do so up top or down bottom. 2. Intensity of rivalry among competitors Generally it can be said that there is a small market growth and the three big players fight for gaining new market shares, while ASDA (+ 0,4%) and Sainsbury’s (+ 0,6%) increased their market share Tesco (- 0,6%) lost some to his competitors.
This is due to the fact that all supermarkets have similar products.
Tesco tries to overcome his competitors by launching home brand products in a wide price range to meet their customers’ needs. Overall it can be said that there is a comparatively big rivalry amongst the existing competitors. Chart1Chart2 3. Power of buyers The main intention of buyers is to seek for the lowest price available. This means regarding to the buyers as customers they should have a high buyers power when there are many substitute products available, this is especially the case with the three big players, which allows customers to easily switch between the different supermarkets.
It can be said that one main issue for Customers is to seek for the supermarket easiest to access. Tesco successfully pursues the strategy of owning shops nearly on every street corner in Edinburgh, which makes it hard for customers not to buy groceries at Tesco. Basically means that that the buyers power is comparatively low. Chart3 Tesco Sainsbury’s 4. Bargaining power of suppliers In general it can be said that the power of suppliers is higher the more distinctive the product they sell is.
Compared to the products Tesco sells is the suppliers power comparatively low. Due to the fact that Tesco as the 14th largest company in the UK they have a high impact on the pricing of their suppliers and can therefore demand a low pricing, which is also based on how easily they can switch their suppliers. 5. Threat of substitutes Substitutes enable Customer to switch products and can therefore lead to a decrease in demand. This is especially a big threat due to the fact that the society changed in a way where everyone got busier and wants to buy products online.
Especially the grocery market was excluded from this change for a long time. Tesco was one of the first supermarkets who recognized the market gap and not only offered online shopping but also offered to buy a whole meal with one mouse click. Therefore Tesco reacted on a possibility of substitution. Sources: Chart1: http://www. bbc. co. uk/news/business-16817254 (accessed 11th March 2013) Chart2: http://www. guardian. co. uk/business/2011/aug/16/supermarkets-market-share-kantar (accessed 11th March 2013) http://www. rishtimes. com/business/sectors/retail-and-services/aldi-increases-market-share-by-29-5-1. 1254710 (accessed 11th March 2013) http://www. kantarworldpanel. com/en/Press-Releases/Grocery-Market-Share-UK-ALDI-Marches-On-with-10-more-shoppers-than-a-year-ago (accessed 10th March 2013) http://www. thisismoney. co. uk/money/markets/article-2188548/Budget-supermarkets-Aldi-Lidl. html (accessed 09th March 2013) http://www. bbc. co. uk/news/business-16817254 (accessed 11th March 2013)
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