The UK supermarket industry is the fastest growing sector of the UK economy that has made a great contribution to its economic development. Currently, the supermarket industry employs more than 1.1 million people and contributes more than 8% to the UK GDP (Euromonitor International, 2010). In every business environment, macro analysis is important to identify the factors that can hamper operations of organisation's progress in the industry. STEEPLE (Social, Technological, Environmental, Economic, Political, Legal and Ethical) analysis is amongst the most effective tools that are used to monitor changes taking place in the environment of the business (Brown, 2007; Griffith & Harmgart, 2008); the analysis is done to identify all important factors that can have a significant impact on any organisation operating in the UK supermarket industry.
Li (2008) and Vasquez-Nicholson (2011) emphasized that Morrison PLC is a dominant brand in the UK supermarket industry as it derives its competitive edge by doing STEEPLE analysis frequently. It has successfully achieved its target market size by exploiting all strengths and availing opportunities present in its external environment.
STEEPLE Analysis of UK Supermarket
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Every market is significantly impacted by both micro and macro environmental factors, but macro environmental factors have more influence on operational activities of a business (Jarett, 2012). Each factor of STEEPLE analysis with its relation to the UK supermarket industry is discussed below:
The current trends of consumers in the UK market depict that they are moving from one stop shopping to a bulk buying mode as there are various social changes happening in the country. Supermarkets have availability of various non-food items which are usually on sale in the market. There have been demographic changes because there is an increase in old people, the number of female workers is increasing, and there is a significant reduction in homemade meals (Davis and Relly, 2009).
There is more emphasis on the private label share of every business mix, efficiency in supply chain, and improvements in operational activities so that the overall cost of business is reduced. Most of the retail giants in UK are now shifting to local suppliers for their purchases and stock requirements (Vasquez-Nicholson, 2011; Waterman, 2007). In addition, consumers' demand of products and services has changed because of their social conditioning along with their beliefs and attitudes (Lyan, 2007).
Technological developments have enhanced the service level of supermarkets in UK as they have benefitted both consumers and companies. With the help of technological gadgets, products are available quickly, personalized services are offered to customers and shopping has become convenient (Akter, 2012). The major systems that have enhanced UK supermarkets' functioning are Electronic Point of Sale, Efficient Consumer Response, Electronic scanners and Electronic Funds Transfer System; these systems have assisted in efficient distribution and merchandizing activities so that requirements of each company are effectively communicated on time to the supplier (Grugulis, Bozkurt and Clegg, 2010).
All organisations have to show that they engage in environment friendly activities; there is increased pressure on various managers and companies for acknowledging their social responsibility and they are required to behave in a beneficial way for the society (Smith, 2004). In the UK supermarket industry, the main issue at hand is that food retailers have to demonstrate that they conduct their operations in ways that are beneficial for the society as a whole and that is why every leading supermarket has taken initiatives to show their Corporate Social Responsibility promise.
Even the UK government has launched a strategy for consumption in a sustainable manner and made mandatory changes in production methods to cut down waste, reduce resource consumption that produces harmful gases or particles which can cause pollution, and minimize damage to the environment (Trail, 2006).
The main factors to be studied in economic analysis are demands, costs, prices, profits, inflation, unemployment, interest rates and fluctuation in exchange rates along with various micro economic factors such as labour availability, product market, competitive structure and nature of competition. Considering the UK economy's performance in 2012, its GDP growth rate is 1%, CPI rate is 2.2 %, unemployment rate is 7.9% and the current balance of payments is account deficit of GBP 2.8 billion (Trading Economics, 2012).
Micro Economic Analysis
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Since international businesses of these supermarkets are growing, they are likely to get affected by reduction in the demand of UK food market and there is an increased exposure to risk of market concentration. There is immense pressure on existing companies to make sure that every factor is well studied so that all resources are effectively utilized.
The Product Market
All supermarkets have been developed with providing one stop buying facility and they have provided a wide range of options to the customers. Nowadays, people are looking for healthy and nutritious food so that they remain fit and healthy; the demand of organic foods has increased and customers are looking for easy access to these food items. The supermarkets are now placing these food items in their outlets to respond to their customer demands.
The Labour Market
As the number of supermarkets is increasing in UK, there is a huge requirement for workforce that can provide services to customers with perfection. Since skills required for performing necessary tasks are of a lower level, people with minimum education can easily find a job in this market. The labour availability is high as people have many jobs available in this field. Also, the demand of products is increasing, so supermarkets have added huge variations in each category.
In UK, the supermarket industry is believed to be an oligopoly market, which is highly competitive; there are four main firms in this industry, i.e. Tesco, Asda, Sainsbury and Morrison, which have more than 75% of the overall market share (Jarett, 2012). The pricing is almost the same, so customers are able to buy the products they need within their affordable range.
Nature of Competition
The nature of competition is getting intensified: the number of competitors is increasing because other companies are entering this field, such as Waitrose, Marks & Spencer and many more (Seely, 2012).
Political and Legal Analysis
The political parties in UK are taking aggressive steps to protect the small shops and stores in the country so that their business does not close down; they have imposed many restrictions on the supermarkets so that a fair and competitive environment is created in the grocery industry. The Office of Fair Trading and the Competition Commission are the two main bodies that ensure that supermarkets do not create monopoly and offer fair prices to the customers.
Recently, the government has relaxed UK Sunday Trading Laws for benefits of the employees and introduced a new style of food labelling so that shoppers in the supermarket can make healthy choices. Since obesity is the primary issue in the UK population, there is a growing trend of organic and healthy food and various initiatives are being taken by the government to create awareness of eating healthy and nutritious food. The government has also passed the laws for reducing the usage of single carrier plastic bags so that the environment is protected from any kind of pollution.
In the UK supermarket industry, each company has to ensure that its business operations are conducted in accordance with the ethical standards. The sector is assumed by law to be observing ethical behaviour and conduct business practices in accordance with corporate governance. Every organisation has to ensure that it conducts its practices with integrity, transparency, accountability and honesty (Nicholls and Opal, 2005).
Linkage of STEEPLE Analysis with Morrison PLC
STEEPLE analysis plays an important role in identifying all important factors that are impacting Morrison PLC, but the most important factors are social, economic and legal ones. The social factors are of utmost importance because every company exists to serve its customers; it is important to understand their changing trends so that products and services are modified accordingly. Likewise, analysis of economic factors gives an idea of economic condition along with spending power of customers; with the help of these factors, it can decide on its operational activities and further expansion plans. Since legislation is a mandatory part of every business environment, Morrison will have to ensure that it follows all rules and regulations to ensure compliance with the legislative framework; in case any rule is broken, a heavy penalty will be charged, which can be costly for the company. Hence, these three factors are the most important areas of concern for Morrison PLC.
Importance of Human Resource Management in Supermarkets
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HRM is an integral part of every business organisation, and it is important for them to have a highly skilled and motivated workforce that will assist them in achieving their desired goals and move successfully ahead in the industry (Torrington, Hall and Taylor, 2008). Following are the two examples of importance of HRM in the UK supermarket industry:
Tesco is among the largest supermarkets of UK that employs more than 326,000 people and has been earning a consistent stream of revenue in the last couple of years (Euromonitor International, 2010). The company has done a competitive analysis to improve the ways in which interaction is done with customers. In order to enhance its position in the supermarket industry of UK, it has used concepts of welfare management, continuous improvement and Customer Relationship Management (CRM) along with well designed HRM strategies. The employees are treated as champions and are even rewarded for their extraordinary achievements; they are involved in decision making process as well.
All of these interactive initiatives enhanced employee's satisfaction level, motivation and productivity along with acceptance to change and have high morale for work. In order to ensure that Tesco provides a favourable working environment to its employees, it has properly implemented all important laws that will ensure employees are given their rights. For instance, they are given competent compensation packages, working environment is conducive, preventive measures are taken to provide healthy and a safe environment, and equal job opportunities and various other benefits are given (Freeman, 2009).
In order to ensure that everyone is given the best employment opportunities, it is important for Tesco to conduct market analysis on an ongoing basis. It seeks help from marketing agencies that evaluate environment and ensure that they design competent compensation packages. By focusing on efficient development of its workforce, Tesco has been able to gain a competitive edge in the market. The satisfaction surveys of employees have shown that they are satisfied with their working environment and they will remain loyal to the company forever. With the help of a participative management culture, Tesco has been able to identify its weak areas and has successfully made the required changes so that overall performance of the company improves (Grugulis, Bozkurt and Clegg, 2010).
When Sainsbury's noticed that its sales were declining and it was unable to achieve its target market share, it decided to do its competitive analysis, which meant doing both internal and external analysis. The main problem highlighted in the analysis was that it lacked a competent and loyal workforce and there was misalignment between the organisation strategy and the company's overall strategy. There was a lot of miscommunication in the organisation as employees had lack of clarity about their jobs and how they were supposed to make contribution in the company. Overall, its HR department was not functioning smoothly as the right workforce was not employed at that time (Fox and Vorley 2004; Li, 2008).
The foremost thing that was required was to change the culture of the organisation and it was made possible by receiving top management support. The code of conduct along with HR policies and regulations were distributed to employees so that they were aware of new rules and regulations that they had to abide by; job descriptions were changed to match demands of every position. Sainsbury's even did a market survey to identify HR structures of its competitors and also compensation packages that should be offered to employees.
After planning of HRM, it was implemented properly and monitored at small intervals to check its progress; six months later, Sainsbury's observed an upward trend in its sales figures, along with an improved satisfaction level of employees. The company made changes in its recruitment and selection, training and developments, compensation and benefits and performance appraisal processes so that everything in HRM was well-integrated.
In order to be competitive in today's supermarket industry, companies have to make sure that they do analysis of their internal and external environments on an ongoing basis so that they have the latest information about things that are happening in their surroundings. Although STEEPLE analysis is important for identifying the factors which have a tendency of influencing the working environment of supermarkets, equally important are their workforces as they are the ones who are in direct interaction with customers.
The main factor affecting the supermarket industry of UK is the workforce as it is important for the supermarkets to employ people who are well-skilled and efficient in helping the companies in achieving their corporate objectives. Since the number of employees in this sector is increasing, there are more chances that the employment level increases and spending power of people is enhanced. Another important factor that needs to be addressed is the growing concern for a healthy lifestyle and food; the consumers are now shifting to organic food. Therefore, the supermarkets have to ensure that they have a specific range of products that are demanded by customers, so that they can ensure that they maintain their position in the market.