Sainsbury's and Waitrose Uk Supermarkets Porter's 5 Forces Competitive Advantage

2781 Words May 18th, 2009 12 Pages
INTRODUCTION

The UK supermarket industry is a very competitive and profitable industry. It is made up of four main players with significant share of the market, and then various smaller companies who focus on smaller niches in the market such as the bottom of the market discounters and the top of the line speciality stores. It is an interesting market and this report evaluates the attractiveness of the industry using Porter’s five forces model with an insight into how market nicher Waitrose sustains a competitive advantage. Next this report looks at how major player Sainsbury’s successfully competes against its rivals using differentiation strategies, and analyses current consumer trends and problems can effect this industry.

UK
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Bargaining Power of Suppliers

Due to the large size of the market leading supermarkets, their buying power is huge and they demand a huge quantity of quality goods from suppliers. This gives suppliers relatively little bargaining power with the supermarkets. Generally supermarkets are the price makers, and have the power to negotiate prices and product quality weakening supplier power. Waitrose has dramatically reduced the number of fruit suppliers to have one key supplier for each major category, aiming to build strong long-term relationships with suppliers and reduce costs. This strengthens supplier power as Waitrose relies on them for quality produce.

From Porter’s five forces analysis it can be determined that the supermarket industry is both highly profitable and attractive. The threat of new entrants to the market is low, barriers of entry are high, decreasing the likelihood of potential competitors crowding the market. The industry has invested in building strong brand image, customer loyalty programs and improving online internet sales, presenting great opportunity for future growth.

An analysis of environmental factors effecting the UK supermarket industry reveals there is a lot of emphasis placed on the role of big companies in reducing carbon footprints and increasing energy efficiency. Food retailers are also being shaped by the overriding consumers ethical concerns, on issues

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