Market Shares of the Leading Supermarket Food Retailers in the UK (%) 1997

Market Shares of the Leading Supermarket Food Retailers in the UK (%) 1997

Company Market Share No of storesTesco 15.2 586J Sainsbury 12.6 378Safeway 7.8 490ASDA 7.2 213Somerfield/Kwik Save 6.2 1481Marks & Spencer 3.1 311William Morrisons 2.3 81Iceland Group 1.7 766Waitrose 1.6 115Co-op 1.3 273Others 41.0 4969Total 100.0 9663

Shop numbers 1971 and 1989 compared

1971 1989 Change(%)

Single-outlet retailers 338,210 215,736 -36

Small multiple retailers 83,966 67,760 -19

Large multiple retailers 87,642 66,520 -24

Total 509,818 350,016 -31

Food Retailers 1990

OutletNumbers

T/O MarketShare

Single-outlet retailers 59,238 8,100 16.8%

Small multiple retailers 14,333 3,319 6.9%

Large multiple retailers 11,514 36,752 76.3%

Total 85,085 48,171 100%

Mixed retail businesses 1990

OutletNumbers

T/O MarketShare

Single-outlet retailers 2.299 3.026 12.5%

Small multiple retailers 1,490 1,601 6.6%

Large multiple retailers 7,663 19,659 80.9%

Total 56,993 12,749 100%

Less than 80% of sales or 50% in the case of food retailing or hire and repair fall into the main broad kinds of business.

Retail Distribution of Organic ProductsShare by Value % 1994 1996 % change

£m % £m % 1994-96Grocery multiples 75 62 120 60 +60.0Direct sales/delivery/farmgate sales 19 16 40 20 +110.5Independents 16 13 24 12 +50.0Health/wholefood shops 5 4 8 4 +60.0Market stalls 6 5 8 4 +33.3Total 121 100 200 100 +65.3

L de Chernatony, M McDonald, 1992, Creating Powerful Brands, 2nd Ed. Butterworth-Heinemann

Decline of Independents

• Broad economic and social change (inflation, recession, buying behaviour)

• Competition from multiples and Co-operatives• Increased operating costs• Lack of capital for investment• Availability of supplies of goods (price, quantity, delivery,

etc.)• Urban renewal• Age of entrepreneur • Poor locations• Inflexible management attitudes

J A Dawson (1983) Independent retailing in Britain: dinosaur or chameleon? Retail and

Distribution Management vol. 11 (3) 29-32

Co-operative Movement

In 1844, 28 working men collected £28 and used it to open a shop in Toad Lane, Rochdale, Lancs.

Key Principles• Voluntary and open membership.• Democratic control.• Share capital should only receive a strictly limited

rate of interest.• Surplus should be distributed to members in

proportion to their purchases from their society.

Co-operatives’ shares of European grocery markets, 1985 (%)

Country %West Germany 9France 8United Kingdom 8Belgium 1Netherlands 1Austria 21Switzerland 40Sweden 28Norway 24Spain 3Italy 5

Results of large UK retailers for year ending 1992 (£m)

Turnover TradingProfit

Dividend Retentions Capitalexpenditure

Sainsbury 9,202 668 154 269 766Tesco 7,596 503 122 264 852Marks &Spencer

5,706 680 195 171 305

Argyll 5,039 331 108 154 442Asda 4,904 180 47 -475 238Boots 3,656 403 126 106 173Kingfisher 3,389 232 63 77 82J. Lewis 2,280 100 30 35 108Kwik Save 1,910 99 23 45 105Storehouse 1,180 10 21 -14 47Co-operatives 7,089 176 40 36 221

Decline of Co-operatives in UK

• 1950’s UK Co-ops accounted for – 12% of all retail sales– 20% of grocery sales

• By 1991 t/o fell by 65% profits fell by 81% (using 1957 prices)

What went wrong

• Abolition of RPM, allowed price competition, which in turn reduced profits.

Decline of Co-operatives in UK

• Insufficient funds to fund developments.• Co-ops not quoted on stock market

– limited access to funds.

• Co-ops not single entity – in 1957 - 936 societies– in 1991 - 68 societies

• Structure does not allow decisions to be made in the same way as plcs.

Environmental factors favouring multiples

• Access to funds via stockmarket and/or banks.

• Self-funding developments due to cash turnaround.

• Changes in 1970’s favouring out-of-town retailing.

• Changes in 1980’s favouring even bigger out-of-town developments.

Developing Core Retailing Strategy

• Steps in Gaining Strategic Marketing Advantage

Analyse the strategic situation

Determine competitive advantage

Specify strategic objectives

Steps in Gaining Strategic Marketing Advantage

Identify and evaluate strategic options

Select strategy for implementation

Evaluate performance

Analyse the situation

The organisation

The market structure

The industry structure (Porter’s 5 Forces model)

The environmental forces PEST, SWOT

Sources of Retail Competitive Advantage

Location Layout Merchandising Pricing Promotion Services Organisation and Personnel

Determine Competitive Advantage

Market Development Market Domination Differential Advantage Market Selectivity No Advantage

• Strategic Objectives for Retailers

• In terms of market position

Increase sales

Increase market share

Regain lost position

• In terms of performance

Market capitalisation

Profit margins

Profit contribution

Return on Assets

Sales per sq. metre per person

Strategic Objectives for Retailers

• In terms of market position

Increase sales Increase market share Regain lost position

Strategic Objectives for Retailers

• In terms of performance

Market capitalisation Profit margins Profit contribution Return on Assets Sales per sq. metre per person

Measurements for Effectiveness

• Overall effectiveness

Market Share Total sales volume/value Sales per employee Profit margins

• For effectiveness of promotion/sales effort

Net profit margin

Promotional costs as % of sales

Selling/Distribution costs

Measurements for Effectiveness

• For effectiveness of promotion/sales effort

Net profit margin Promotional costs as % of sales Selling/Distribution costs

Identifying Strategic Alternatives and Selecting Retail Strategy

New product development Market testing Market repositioning Productivity improvements Organisational design Exploiting special advantage Acquisition/Merger/Strategic alliance Divest

Lower Cost DifferentiationBroadTarget 1. Cost Leadership 2. Differentiation

NarrowTarget 3A. Cost Focus 3B. Differentiation

Focus

Competitive Advantage

Com

peti

tive

Edg

e

Porter,1980 Competitive Strategy The Free Press

Strategies of Differentiation

• Price Differentiation

• Image Differentiation

• Support Differentiation

• Quality Differentiation

Mintzberg & Quinn 1996, The Strategy Process, Concepts, Contexts and Cases 3rd Ed. Prentice Hall, p89

The Strategy Clock: Bowman’s competitive strategy options

The Value Chain - possible sources of differentiation and cost control

Ansoff’s product-mission matrix Ansoff 1988

Which Direction?

Linear growth Neil Glass, 1996, Chaos, Non-Linear Systems and Day-to-Day Management,European Management Journal

Chaos View of Growth Neil Glass, 1996, Chaos, Non-Linear Systems and Day-to-Day Management,European Management Journal

Example Sainsbury’s April11 1999 reducing jobs to cut costs

Example Sainsbury’s 1999 and John Cleese

Example Tesco April14 1999 taking on 3,000 staff for ‘One-in-Front’

Criteria for Core Competences

There are 3 criteria to test Core Competences

• Value for money for customers.

• Better than competitors.

• Difficult to imitate.