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Conor Cunningham P4

Task 2
a) You are to write an article, which identifies the competitive factors in the retail
environment a selected organisation faces
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Government Policy to include planning guidance, the Competition Commission
and policies affecting retailers’ costs and ways of working
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Competitors

iii
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Barriers to Entry

v
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It will look at the
competitive factors which Tesco faces
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The retail sector in the UK involves spending by consumers both in shop and online
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In March 2015, UK consumers spent around £34 billion
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The remainder was spent in food stores, on things like fuel
and in market stores
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A report for Parliamentarians showed the relative
strength of the retail industry, which is now
growing faster than the economy as a whole and
which contributed £151 billion to the UK economic
output in 2012 - 16% of the whole
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3 million people in 2012 (2
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9% of the population
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Conor Cunningham P4

Some interesting dates in the history of retail include;
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1568 – The Royal Exchange shopping gallery was opened
1883 – The first cash register is invented by James Ritty
1929 – The very first supermarkets in America were established
1950 – The start of shopping malls, where stores made their way into
1970 – Credit cards were invented
1974 – Barcodes were created
1994 – Online shopping is born
2000 – Online shipping is growing
2010 – Growth of E-Commerce means it starts to dominate
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Shops are now
moving from the high street to online
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Now, with a boom in e-commerce, a
significant number of stores have closed and have moved online
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Customers would’ve visited stores
with little or no knowledge on products
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Many competitive factors have influenced companies like Tesco to improve their
business operations and this article will investigate those factors
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Since then, it has grown to become the third largest retailer in the
world in terms of profitability
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It has around 7,000 stores and nearly 600,000 employees, nearly
half of those staff are in the UK
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Currently, there are more han 27 million Tesco Clubcard
holders outside of the UK which goes to show how fast it is growing internationally
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02 billion every week!
Tesco doesn’t just sell groceries
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Some of these include;
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Groceries
Eye testing
Insurance

Conor Cunningham P4

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Fuel
Clothing

The next part of this report will explore the competitive factors in relation to Tesco
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The retail industry is a
diverse and fierce market which has a lot of competition
within it
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Tescos success over its competitors has come from
successful integration of their mobile brand delivery with
the in-store retail design, presentation, payment and buying
experience
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Tescos scale allows the firm to operate more efficiently than competitors, and its convenient
locations and loyalty programme should continue to drive traffic towards the business
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4% of the retail market, nearly a 10% more share than one of their biggest
competitors, Sainsbury’s with a market share of 16
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They have over 3,500 stores and a very
successful website which has allowed them to dominate the retail industry better than any of
their competitors
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Tesco have to beat their competitors in a number of areas to secure sales and grow their
profits
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Customers are
constantly looking for products at a cheap price and due to Tescos size, the company can
benefit from economies of scale and sell products at the lowest price possible, attracting
thousands of more customers than competitors such as ASDA and Sainsbury’s
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Tescos main competition Sainsbury was the UK's biggest grocer until
1995, but was recently relegated to third position behind Tesco and Asda
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Tesco
will have to face this competitive factor and may react in ways such as;
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Lowering prices
Offering discount
Increasing variety of products and services

Conor Cunningham P4

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Improving customer service
More advertising
Cleaner stores
Greater assortments

Tesco are an international company which is extremely successful today and having
competition is a good thing as it creates a healthy, competitive industry and pushes Tesco to
develop and improve the ways in which they operate
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Since the company first used the
trading name of Tesco in the mid-1920s, the business has expanded into different formats,
different markets and different sectors
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Tesco Key target market is the public
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Their success depends on people, the people who shop with them
and the people who work with them
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Marketing strategies have
helped Tesco maintain their market proposition
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Tesco offer value proposition to their customers
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To
remain competitive, Tesco try and offer their customers the
best possible value on the products and services they have to
offer
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It could be argued that they
have done this more effectively than ASDA and Sainsbury’s
which has allowed them to be more competitive and
ultimately successful
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Some of these were;
• No one tries harder for customers
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• Be energetic, be innovative and be first for customers
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• Treat people how we like to be treated

Conor Cunningham P4

Tesco studied that price can be one of the important factors which could bring customers to
them
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Tesco made sure that no one could beat
them in price
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On Tesco Value, we promise customers that our prices won't be beaten"
(Tesco 1999)
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As for most other companies, did not realise the importance of Tesco using the club
cards
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Tesco gave club cards to frequent shopping customers
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Tesco stored all the information about customer in the customer's
club card
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This is just another
example of a way in which Tesco has improved their market proposition and increased their
competitiveness while increasing their customer base at the same time
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Since it was founded, Tesco has had to overcome many barriers to enter and explore different
markets
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If we look at the company record, it is evident that Tesco have crossed barriers
successfully as they have dominated many different markets over the past number of years
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Due to Tesco being such a large organisation,
they benefit from economies of scale and can afford to lower prices, something smaller
stores may not be able to compete with
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Further than this, Tesco could buy over
a company completely
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Advertising; As a way of competing, Tesco may advertise products and services
extensively which can deter new firms entering the market
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Conor Cunningham P4

However, smaller firms may not have the capital to advertise as extensively and will
struggle to break this barrier to compete with a company such as Tesco
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This creates loyalty and “locks in” existing customers
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It may also
keep customers with Tesco and pull them away from competitors such as ASDA
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Tesco have successfully broken down barriers to enter the
different markets they now dominate and this is clear as they were the most profitable retailer
in 2015
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For example, healthy and safety issues and this has helped Tesco
improve the business operations
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For example, the introduction of fizzy drinks tax will cause Tesco to increase their
prices
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Social changes
There is a huge increase in demand for online buying and delivery of perishable and non
perishable items
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Retailers need to be aware of the changes in social factors such as household factors
and demographics so that they can ensure they have products and services to meet the
demands of their different customers
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Household
structures have also changed, for example there are more one parent families which are more
price conscious, meaning Tesco will have to offer more value for money in the products and
services which they provide
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New
technologies Tesco have introduced are hand held scanners which some customers enjoy about
shopping with Tesco and this has helped them increase their customer base and has driven
sales upwards which contributes to increased profits for the company
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Creating new retailing concepts will attract new customers to shop with Tesco and this gives
them a chance to retain these customers
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Tesco will
want to be the first business to develop new retailing concepts as this will help them compete
in a tough industry and help them become the most successful in that industry
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Increase in sales online
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For example, parcels being delivered has helped the
post offices greatly as people do not send letters as much as they used to
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Apps that will compare the same product in different stores
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Apps like go compare are designed to help the customer get the best
deal possible
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3
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E
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in bridal shop as they may see dress and say I want that, they don’t have
to come to the shop to communicate
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Electronic facilitating computers that allow building images to support overall outfits
before buying
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This saves the customer time greatly as they don’t have to try on item to see if it fits
them
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Points checker – allows customers to self check points accrued on cards and when they
ear so many points it gives them a discount which will please the customer
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Electronic systems that invite customers to enter level of service received and this is
good for the business as people can see what other people said about the business
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Less cash and more debit/credit card usage as there is more and more people shopping
so they will use card and people will also prefer to use card in the shops when going
about as they might not like carrying cash about
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This
competitive factor has allowed Tesco to explore a greater range of customers as they appear to
have the newest retail concepts and customers like to try new experiences
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However, as competition is fierce,
companies such as ASDA will be closely watching Tesco’s operations and will soon adapt these
retailing concepts to their organisation as a way of keeping up with Tesco
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It is conventionally measured as the percent rate
of increase in real gross domestic product, or real GDP
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Recession has dominated the headlines with regards to retail from 2008
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com
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Spending including household disposable income,
credit, population and demographic behaviour have all had negative impacts on retail
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With the recession, the buyer has sought cheaper avenues
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New products and services
The consumer is always looking for something new or the latest item
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For example, Tesco has ventured into computers, banking, insurance and
eye-testing
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Legislation has and will continue to impact on retail
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Development of shopping for mobile population
Airports, train stations, bus stations and ships have been identified as huge opportunistic
locations for the sale of retail items
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Dublin airport has recently undergone renovation with the addition of Boots, Accessorise and
Butlers Coffee and the service of shop and collect facility - due to not being allowed to carry
more than 100grams after check-in
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Sources of Competitive Advantage
Location; The location of a store is very important
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This will allow Tesco to reach a large

Conor Cunningham P4

number of customers and subsequently increase sales and profits, allowing Tesco to become
more competitive
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Having customer loyalty will help attract new customers and retain
existing ones
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This is a
major competitive advantage as customers will shop with a company who respects them and
offers them the most
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Committed employees; Committed employees will result in
the work being done to a higher standard and a more
efficiently run store
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Tesco take
pride in their committed employees delivering an excellent
service and this is another way in which the company
remains competitive
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When Tesco lower their prices, they are taking customers away from other
businesses and this helps Tesco become more competitive as their sales increase and they
increase their overall market share
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As
Tesco advertise, they are making their products known to more people so they are increasing
the knowledge of their brand as well as improving their corporate image, helping them increase
competitiveness
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For example, legal implications
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For example, the Competition Commission will prevent them buying over other
public companies as this will be unhealthy for competition in the market
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Stores in an area of high unemployment will not be able to
charge high prices for goods as majority of customers will not be able to afford these products
and it will cause the store to close
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Major competitors
such as ASDA and Sainsbury’s will be trying their best to win over customers by offering new
products and promotions for example
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Conclusion

Conor Cunningham P4

Tesco face many competitive factors in the retail environment
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Over the past number of years, Tesco have come out on top as the leading retailer in the UK
and a contribution to this is the successfulness of Tesco in adapting competitive factors in to
their daily operations which have attracted new customers, retained existing ones, increased
sales, profits and have allowed Tesco to be the most competitive in the market, having the
largest market share in the entire industry
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Appendices
https://www
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com/articles/five-ways-retail-has-changed-and-how-businessescan-adapt
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morningstar
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uk/uk/news/125668/tesco-at-risk-from-competitors
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retailgazette
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uk/blog/2013/07/00403-tesco-beats-sainsburys-in-tea-war
http://www
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com/Jobs-in-our-Office/Business-Area/Marketing
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co
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