Tesco Plc 5 forces
Porter’s Five Forces
Threat of New Entrants
Grocery market in UK is primary dominate by few big organisation which including Tesco, Asda, Safeway and Sainsbury’s. Nowadays, grocery market has transformed into supermarket business. Customers prefer one stop shopping and supermarket usually provide more selection of products and products quality can be assure. Hence, it is hard and strong barrier for the new organisation to enter the market. New entrants need to have sufficient capital to set up the business, fixed cost to purchase products and developed supply chains. Big organisation likes Tesco invest huge capital to the business to advance their technology for stock control system and checkout system that bring impact to the current competitor and new entrants.
Bargaining Power of Suppliers
The bargaining power of suppliers can be influenced by grocery chains and suppliers are afraid of losing their business to the large supermarket chain. According to Ritz 2005, big supermarket like Tesco will have better negotiating in term of price from suppliers that small grocery shop not able to get. In UK, suppliers are threatened by the large organisations which purchase their products at cheaper deals. Besides that, the forces of competitor have also reduced the profit of the supermarket and suppliers.
Bargaining Power of Customers
Most of the products are standardized and undifferentiated. The switching cost is low which lead buyers have more power to choose and switch from one to another product. In Tesco, Tesco offer loyalty card to customers as a retention strategy and this strategy have significant increase the profitability of the business. To keep satisfy with the needs of customer and retain customer, organisation provide variety of products, ensure low price and offer quality products. To attract customers, supermarkets have expanded their business into new market like banking and pharmacies as well.
Competitive Rivalry
The grocery environment
Threat of New Entrants
Grocery market in UK is primary dominate by few big organisation which including Tesco, Asda, Safeway and Sainsbury’s. Nowadays, grocery market has transformed into supermarket business. Customers prefer one stop shopping and supermarket usually provide more selection of products and products quality can be assure. Hence, it is hard and strong barrier for the new organisation to enter the market. New entrants need to have sufficient capital to set up the business, fixed cost to purchase products and developed supply chains. Big organisation likes Tesco invest huge capital to the business to advance their technology for stock control system and checkout system that bring impact to the current competitor and new entrants.
Bargaining Power of Suppliers
The bargaining power of suppliers can be influenced by grocery chains and suppliers are afraid of losing their business to the large supermarket chain. According to Ritz 2005, big supermarket like Tesco will have better negotiating in term of price from suppliers that small grocery shop not able to get. In UK, suppliers are threatened by the large organisations which purchase their products at cheaper deals. Besides that, the forces of competitor have also reduced the profit of the supermarket and suppliers.
Bargaining Power of Customers
Most of the products are standardized and undifferentiated. The switching cost is low which lead buyers have more power to choose and switch from one to another product. In Tesco, Tesco offer loyalty card to customers as a retention strategy and this strategy have significant increase the profitability of the business. To keep satisfy with the needs of customer and retain customer, organisation provide variety of products, ensure low price and offer quality products. To attract customers, supermarkets have expanded their business into new market like banking and pharmacies as well.
Competitive Rivalry
The grocery environment