The UK Supermarket Sector (Coursework Sample)

THE UK SUPERMARKET SECTOR
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The UK Supermarket Sector
Part A: Challenges faced by UK Supermarket Industry
Overview of the industry
UK’s supermarket industry deals with the sale of fast-moving consumer goods (FMCG). Companies operating under the UK supermarket sector engage in several businesses consisting of grocery stores and small markets (Barth et al. 2017, p. 1618). However, the supermarket sector generally trades as retail industries in the UK. The goods sold in the supermarket sector are not typically grown or produced by companies involved in the businesses; the goods are supplied from diversified angles in the large retail industry. According to Borden et al. (2017, 917), Tesco public limited company, Aldi stores, Asda stores limited, Morrison supermarkets, and Sainsbury public limited companies includes UK’s largest companies with the biggest market shares in the supermarket sector. Beitzen-Heineke et al. (2017, p.1537) highlight that the supermarket sector has grown gradually over the past five years with the increased demand for the online supply of commodities in the UK. However, the outbreak of coronaviruses impacted the face of UK retail industries with the enactment of tight lockdown rules and regulations. The measures containing COVID-19 in the UK affected the operations of activities in the UK retail industry and all the companies registered under the supermarket sector (Lloyd 2017, p.17). Intense competitive pressure, the changing customer behaviors, the complexity of the supply chain, financing issues, and internal operational activities include some of the challenges facing the UK supermarket sector from the onset of the COVID-19 outbreak.
Businesses Problems
Intense competition
The competitive environment in the UK supermarket industry is a key challenge to starting or growing companies in the region. UK supermarket sector has become increasingly competitive in the past few years. Despite being an oligopoly, the industry faces intense competitive pressure from the dominating organizations and rising companies in the market mix (Borden et al. 2017, p. 913). The growing strength of Aldi and Lidl public limited companies in the oligopoly business environment has shaken the retail industry market. The costs of goods in the UK supermarket sector have been affected by the intense pressure from market controllers. Young et al. (2017, p. 198) demonstrate that the value of commodities in supermarkets has been affected by the interests of organizations in lowering the costs of commodities to achieve good purchasing powers. Secondly, the intense pressure in the business environment exposes UK supermarket companies to associate with lower profit margins. Less competition means high-profit margins; however, the industry faces challenges of attaining maximum profits based on the increased supply of similar commodities in the supermarket industry.
The increased competition in the UK supermarket industry affects the competitive advantages previously enjoyed by domain industries. Even though the competition is healthy in the business environments, organizations that have invested much in branding faces losses with the resources invested in the branding of products and services. The creativities of developing unique brands have been affected in the UK supermarket industry with the highly spiked business environment. For instance, Tesco has the largest market shares (29%) and is closely followed by Asda and Sainsbury with 17% and 16% market shares in the competitive retail business environment (Guo and Wang 2017, p. 324). Morrison on the other hand has acquired 11% market shares leaving Co-op with 6% and Waitrose, Aldi, Lidl, and Iceland with 5% market shares each. Other growing businesses in the retail industry share the remaining five percent; meaning the levels of competition in the UK supermarket is intensified. Growth of the market shares is problematic based on the data presented on the current ownership of available market shares. Organizations registered under UK supermarkets concentrate on the development of competitive advantages over potential threats in the retail industry. Instead, the energy is not converted in the improvement of good qualities and services released to the market.
The increased competition in the UK supermarket industry prevents companies from creating social, economic, and environmentally sustainable features in the running of businesses. The focus remains on developing more opportunities for gaining profits and increasing the portfolio of companies.
Financial issues
The outbreak of coronavirus in the world has affected financial flow in the supply chain management of most organizations. The UK supermarket sector like many organizations faces financial strains in addressing the economic gap created by the strict governmental measures incorporated in controlling the community spread of the virus. Farquhar (2017, p. 32) highlights that most shelves are empty in supermarkets not because organizations lack enough resources to run their businesses but because there is no enough flow of cash in the retail business. Moreover, Wood et al. (2017, p. 54) argue that empty shelves don't mean a shortage of food and supplies in the UK supermarket sector. The supply chain needs increased demand to maximize the flow of cash in the competitive market mix. Similarly, the UK supermarket industry needs a sufficient flow of money in all contributors of productivity in the retail industry to stabilize the flow of activities in the business. If everyone buys food fairly from the UK supermarket industry, the flow of finance in the retail business would increase unlike currently observed.
The decreased value of the eurozone in the stock market exchange. Investors in the UK supermarket sector invest a lot of money in converting Euros in the world market stock exchange. Despite the increased volumes of the sale in the UK retail industry over the past few months, the value of Eurozone has fallen with the outbreak of coronavirus in the world. The financial struggles linked to the UK supermarket industry originate from the constrained economic growth; the government needs taxes; on the other hand, business operations have been derailed due to the outbreak of COVID-19. It is difficult to balance between organizational sustenance and the uplifting of the falling economy.
Besides, the UK supermarket sector is facing problems accessing loan markets. Before, the outbreak of the COVID-19 pandemic, organizations operating under UK supermarkets had existing loans. Refinancing the loans in the unmoving economy became problematic with control of economic activities within and across the UK.
Changing Customer Behaviors
The UK has been hit with changing customer behaviors. Companies operating in the retail industry have to keep pace with the changing customer behavior. The physical purchase of commodities from stores increased the interaction of UK supermarket retailers with their customers. However, the change to online shopping minimized the communication of retailers and consumers. UK supermarket sector spends more time identifying their customers, mobilizing targeted audience, and evaluating prospects and matrices in the market mix to understand customer behaviors (Nevo and Van den Bergh 2017, p. 27). Maximizing profit and improving organizational images demands retail businesses master customer behaviors. Nevertheless, the current behaviors of consumers in the UK supermarket sector complicate the customer identity.
Module component business environment analysis
The modularity principle stresses that business should be built on loosely coupled and cohesive components. The purpose and defined functions of businesses originate from the cohesive component of business analysis in any sector of operations. In this scenario, the UK supermarket sector sells a range of groceries including raw foods, vegetables, and fruits. Additionally, the UK supermarket companies engage in the sale of canned goods, alcohol, cleaning products, canned products, and small business products. However, the company does not include non-affiliated independent stores, off-licenses, and greengrocers in the green businesses. Tesco and Sainsbury for instance, have invested in-home delivery infrastructure and online platform-driven businesses. The online business preferences of the two companies were oriented by the rising demands in the e-commerce industry. The second element of the modularity principle concentrates on the interdependence of businesses; as such, loosely coupled components of businesses define the minimized interdependencies between domain and interdepartmental sectors.
Components of businesses in the UK supermarket should depend on the interfaces of the provider components and not their implementations. Filimonau and Gherbin (2017, p.1186) hold that understanding the business environment associated with the UK supermarket sector requires the implementation of PESTEL and Porter’s five forces analysis methods among the biggest companies associated with the retail business. Assessment of the UK supermarket business environment aims at the exploration of influencing factors of production and the competitive threats associated with such environments. The external environments of the UK supermarket sector contribute to the understanding of the industry’s operations of given business periods. First, the political influence revolving around the independence of Scotland affects the legislation of pension law, supply chain management, and monitoring o...