The Supply Chain and Economics of the UK Food Sector - Annotated Bibliography Example

Analysis of the UK food sector BY YOU YOUR SCHOOL DATA HERE HERE Analysis of the UK food sector Rigby, E. (2009) Thrifty Britain rethinks its shopping habits, Financial Times London. 9 March, 22. This economic-based research article describes the nature of the consumer shopping habit as it relates to product and supermarket brands. The authors describe, from an economic perspective, the variety of products being consumed in large and small volumes with a focus on consumer behaviour related to product value. The article offers insights from the chief executive of Asda in relation to buyer behaviour and the current economic recession that is creating a value-conscious consumer who is shifting their buying methodology in relation to what is considered “cool frugality”, a significant departure from previous non-thrift or ostentatious consumption patterns. This article is relevant as it paints a picture of what is driving consumer attitudes in the midst of ongoing economic slowdowns that impact discretionary income levels in the household. Baker, R. (2009) Brand sector report: love in a cold climate, In-Store London. January, 29. This article focuses on the supply chain and economics of the UK food sector, with a highlight associated with growth in frozen food products and marketing activities with major supermarkets regarding how best to capitalise on changing consumer trends and behaviours. This article supports research on the food sector as it discusses value-consciousness and changes to how consumers prepare meals (i.e. reducing eating-out habits) that is steering significant growth in frozen food sales for in-home family dinners. The article describes how marketers in the food sector are using promotional activity to further drive sales in this product line, thus it has significant strengths in understanding the competitive behaviours of major food retailers. Smith, H. (2006) Store characteristics in retail oligopoly, The Rand Journal of Economics 37(2), 418. This article describes the market structure of the UK food sector, operating in an oligopoly in which there are few larger competitors and significant competitive similarities related to price and promotion. It describes the results of a study conducted with a sample of 114,058 households in Southwest England to determine the methodology of weekly grocery shopping with varying demographics. The results indicated that most consumers, 80 percent, conduct what is referred to as primary shopping in which a one-stop expenditure occurs to procure the entire week’s grocery needs. This article supports research into the driving factors of UK food retailing competitiveness related to buyer behaviour and how supermarkets utilise promotion to gain consumer attention in this one-stop buying philosophy. Pollitt, D. (2010) Hothouse training grows store managers for Sainsbury’s: supermarket chain develops internal talent, Human Resource Management International Digest 18(5), 5-7. This substantive research journal article indicates that in order to successfully compete in this market structure, major food retailers are undertaking a new focus on internal human capital development as a means to gain competitive advantage. Sainsbury’s has developed what is referred to as the Hothouse Programme that offers significant recruitment savings from the HR perspective, thus giving them more capital availability for other important competitive actions. This article is a strength in supporting the UK food sector in relation to how businesses consider human capital development to be a contemporary methodology in order to provide differentiated services and gain market share against major retailers. May, Y., Ding, J. & Hong, W. (2010) Delivering customer value based on service process: the example of Tesco.com, International Business Research 3(2), 131-135. This resource describes the results of many different quantitative studies associated with Tesco and its brand/market reputation. It provides meaningful insights into what is driving Tesco’s competitive strategies and also the attitude of multiple consumer demographics associated with this particular food retailer. The study identified that 67 percent of those surveyed considered Tesco their favourite supermarket, a success associated with Tesco’s intensive segmentation and targeting strategies for advertising promotion. By understanding what is driving competitive advantage at this particular retailer, it can be understood how consumers perceive value and consider what future strategies might serve food retailers as both benchmarks and innovations to satisfy the contemporary food consumer. Bank of England. (2009) Do supermarket prices change from week to week?, Quarterly Bulletin 49(4), 299. This supports further research into the UK food sector from an economics perspective. The Bank of England describes the pricing changes occurring within major food retailers and how this impacts volume of sales. The article indicates that this is one of the most flexible industries for price movements that change very frequently, sometimes as much as 40 percent in a single week, even on the heels of temporary sales promotions and other incentives. This research article is important for inclusion into the UK food sector research effort as it describes how major food retailers attempt to create demand through pricing and that pricing efforts in this sector fit within the economic law of demand associated with price and consumption. Anselmsson, A. & Johansson, U. (2009) Third generation of retailer brands – retailer expectations and consumer response, British Food Journal 11(7), 717-734. This journal resource describes the growth in the private label product brand being offered at major UK food retailers. In an effort to instil a new sense of consumer value and increase revenues, these retailers are promoting new varieties of store label brands that they hope will successfully compete with major products in their stores. The article describes consumer attitudes toward store label brands, linked with their new “cool frugality” that is driving higher revenue growth for store brands over their favourite national or international brands. The article maintains significant strength for supporting further research into this industry as it describes the results of consumer research associated with their perceptions of quality and price and its linkage to their perceptions of major UK food retailer brands. The competitive strategy of these major markets is now including private label offerings as innovation. Quader, S. & Quader, R. (2008) The utilization of e-commerce by traditional supermarkets in the UK through strategic alliances with Internet-based companies, Journal of Services Research 8(1), 177-211. The UK food sector major retailers are changing the internal and external dynamics of their product offerings to include e-commerce in the virtual environment. The article describes the efforts of Asda, Sainsbury’s and Tesco in this area, along with the costs of their implementation and control systems as well as supply chain issues for each major retailer. The article strongly supports research effort into this sector as it illustrates which retailers are experiencing more consumer adoption of e-commerce to their shopping habits and also how it is impacting the competitive capital and brand reputations of major food supermarkets. Laforet, S. (2007) British grocers’ brand extension in financial services, The Journal of Product and Brand Management 16(2), 82-97. In an effort to innovate and remain competitive, many UK food retailers are offering additional in-store services to accompany their product sales focus. This article describes a research study involving a randomized sample of 324 respondents in Sheffield, UK of varying demographics to determine their willingness to utilise additional financial services offered by major retailers such as Tesco. The article is important for research as it describes the nature of brand extensions as a competitive tool in this sector and how the consumer values these services in the short- and long-term related to their perception of quality and competence. Since product offerings are largely homogenous in this sector, the article describes the advantages and difficulties associated with brand extensions as a new competitive tool. Colgate, M. & Lang, B. (2001) Switching barriers in consumer markets: an investigation of the financial services industry, Journal of Consumer Marketing 18(4), 333. This substantive journal resource describes the nature of consumer attitudes associated with the switching costs of choosing a new financial services brand. Switching costs are the psychological and tangible costs of research, including time investment and capital expenditures when they have become dissatisfied with a particular financial service or require new expertise. Since it was identified that financial services brand extensions are occurring with major retailers, this research article is important for research as it describes consumer characteristics associated with switching costs if major retailers are able to secure customer loyalty. The economics of brand extensions have implications through this research source and its investigation into the financial services industry. PESTL analysis of the UK food sector Economic factors The current recession is changing the ostentatious consumption behaviours of consumers, leading to more value consciousness and frugality. In this market structure, consumers have considerable buying power as they have much choice and can easily defect from one brand to another (Porter, 2011). There are high costs to new market entry by future competition, giving major retailers a significant advantage related to non-saturated market presence. Very high costs associated with developing an e-commerce model (Quader & Quader, 2008). Political factors Few import tariffs imposed for international product deliveries. Much support from UK government for food sector retailing; no significant politically-inspired barriers to revenue growth and marketing. Government has minimal involvement in free market business practices, thus few regulations exist. In general, a favourable environment for retail business presence. Technological factors Strategic alliances often required to absorb costs of e-commerce foods delivery and purchasing services. Significant investment in information technology support required for e-business. Advantages with database housing for loyalty and clubcard consumer data for extraction for marketing purposes. The UK supports many integrated software packages for total retailer success in BRP. Legal factors Regulatory presence by the Office of Fair Trading regarding competition (Morrisons, 2011). No other significant legal issues identified in this particular sector. Social factors Mainstream utilisation of Internet services and social media providing new opportunities for sales growth and promotion. Changing household structures leading to altered dining habits with more reliance on frozen foods. Food retailers need to focus on localized product offering strategies (Felsted, 2010). Ostentatious is out – frugality is becoming the new norm related to society peers and consumption behaviours. Competitive Analysis of the UK food sector Figure 1: Consumer belief in Tesco pricing Research identified that a large sample of diverse demographics randomly sampled (67%) found Tesco to be their favourite food retailer (Ma, Ding & Hong, 2010). It was identified that pricing is one of the most significant competitive tools, especially for the price-sensitive buyer seeking value in the current difficult economy. This attitude was related to pricing and also, as one consumer put it, “it’s brilliant that Tesco has more non-food products” (Ma, et al., p.132). The consumer attitude related to pricing was included in the competitive analysis as it pertains to Tesco since this retailer is considered to be a leader, a benchmark, in providing value to diverse UK consumers. Thus, it does not seem that pricing will drive the UK food retailing sector over the next three years, rather it will be brand extensions into other products, non-food, that continue to promote value to the price-sensitive buyers. Since Tesco mimics the activities of other major retailers in this market structure, it should be assumed that pricing is not as much of a return on investment as differentiation through new service and non-food product development. This was illustrated with growth in financial services offering and consumer attitudes toward these additional service provisions. Figure 2: Percent increases in online food delivery per competitor Source: Quader & Quader (2008); Tesco (2011). Tesco, again, shows the largest increase in year-to-year sales volumes for online food purchases over competition, which seems to reflect the sentiment related to Tesco as being a favourite supermarket retailer. Tesco accomplishes revenue of £6m over the internet each week, however the organisation has invested considerable capital into developing the IT infrastructure and supply chain management philosophy needed to drive these sales increases. However, in reference to competitive analysis, it is likely that growth in consumer adoption of e-commerce as a delivery tool for foods will continue to drive more competitive investment into these online technologies and distribution structures. Sainsbury’s has dropped a partnership with IBM and has created an alliance with Computer Sciences to host its shopping online (Quader & Quader). This shows the focus that this particular part of the competitive business has in relation to future strategy over the next three years. The loyalty card is also one method that will likely drive competitive strategy over the next three years. This is supported by the research data on the value conscious consumer and their new frugality becoming mainstream at the social level (Rigby, 2009; Baker, 2009; Bank of England, 2009). Pricing changes so often due to short-term promotions that it cannot be considered the most competitive tool over the next three years, however establishing long-run discounting through clubcards seems to be the trend that most satisfies consumers. “A sense of momentum is essential and programs should always build a relationship” (Emerald Group, 2007: 18). Tesco currently experiences considerable loyalty related to their Clubcard incentive programme which may lead to the 67 percent favouritism achieved by the business. The Clubcard and other competitor data associated with their own incentive programme provides useful market research data to create customised targeted mailings to consumers for relationship-building and ensuring continued loyalty. This current trend will likely continue to gain consumer favouritism so long as the current economic conditions exist in the UK related to the recession. Additional services as part of brand extension will also drive the UK food sector over the next three years. Consumers take much search time in finding their ideal financial services provider and generally do not change brands once they have made a decision based on switching costs (Colgate & Lang, 2001). A study conducted using a sample of 324 respondents with varying demographics were asked whether they would consider utilising financial services with major UK food retailers. The results indicated that consumers were unsure about financial services and the potential competency at these retailers to provide quality services (Laforet, 2007). As these food retailers attempt brand extensions, they will likely develop better advertising on financial services to instil trust and competence in service provision. According to Global Information Inc (2007) the value-driven agenda is being replaced with premiumisation, quality and service marketing as a means to build brand equity. It is likely that the brand extensions will continue into the next three years as competitors in the food sector diversity and differentiate through non-food service provision. The production of newsletters, specialized to target market preferences, will also drive competitive strategies over the next three years. One major retailer produces a newsletter for online delivery to target consumers titled What’s Hot and New in Frozen & Refrigerated Foods (Global Information Inc, 2010). This newsletter is produced to gain more market attention and also plays on the growth in frozen food consumption and changing household eating patterns that rely more on frozen quality products. It is likely, since organisations in this market structure tend to mimic competitive activities to stay competitive, that such publications will drive future competitive promotion. References Emerald Group. (2007) Tesco leads the way in the loyalty program stakes: UK supermarket succeeds where so many others fall foul, Strategic Direction 23(2), 18. Felsted, A. (2010) Tesco finds thriving market and launch pad for China, Financial Times London 11 November 2010, 6. Porter, M. (2011) Porter’s Five Forces in Fitzsimmons, J.A. & Fitzsimmons, M.J. Service Management: Operations, Strategy, Information Technology, 7th ed. McGraw Hill Irwin. Global Information Inc. (2007) UK grocery retailers 2007, The vertical markets research portal (Online) Available at: http://www.the-infoshop.com/report/dc48415-retailers.html Morrisons. (2011) Keeping things simple, Annual Report 2010. (Online) Available at: http://www.morrisons.co.uk/Global/Images/Corporate/Annual%20Report/Morrisons_AnRep10.pdf Tesco. (2011) A business for a new decade, Annual Report 2010. (Online) Available at: http://ar2010.tescoplc.com/~/media/Files/T/Tesco-Annual-Report-2009/Attachments/pdf/tesco-annualreport.pdf Appendix A: Read More