- Published: November 25, 2021
- Updated: November 25, 2021
- Language: English
- Downloads: 50
Theresearch aims analyses the company Morrisons through PESTEL analysis, Porter’sfive forces analysis, VRIN analysis, value chain analysis and core competences. PESTEL analysis reveals weak pound and low consumer spending, social factors reflect ageingpopulation and new trends in the lifecycle, technological factors reveal online and internet shopping preferences, self-scanning system use and new forms ofpayments. Environment factors suggest high awareness among the customers andneed to reduce carbon footprints. Legal factors suggest followings of certainrules and regulations. These factors thatmay impact Morrisons reveal that they have strategies in place to cope withBREXIT impact and threat of entry for the groceryindustry is low and threats of substitutes are high. Bargaining power ofbuyer is high but for suppliers it is low.
VRIN analysis reflects companyability to process food products well and benefits of inimitability. Morrisonshas the largest food supplier position and has a loyal customer base. The company has the ability to expand into wholesale market. The company plan to revitalise Safeway demonstrates the creation of wide range of fresh food products. Consumer spending though is a concern for the company because consumers preferto shop wisely.
The aging population also demands the company to add newproducts and services. Findings reveal that company should promote onlineshopping modes and payment system. For the environment dimension, Morrisonsneeds to reduce the carbon footprint continuously.
Porter five forces analysisplaces Morrison in a favourable place in the marketexcept for competitive rivalry and highbargaining power of customers. As Morrisons is placed fourth in the retailindustry, competitive rivalry to a large extent is offset. VRIN analysisreveals company has fastest delivery speed and good PR and well-practised corporate social responsibility.
Ithas excellent human resource and infrastructural system. Introduction MorrisonsPLC is the fourth largest company in the grocery retail sector in the UK and it is analysed to know the relativestrengths and weaknesses for suggestions in improvement in performance. The report consists of PESTEL analysis, fiveforces analysis, VRIN analysis, and other analyses to identify opportunitiesand threats for Morrison. MorrisonCompany has been having a strong presence in UK market with around 500 stores. It has a well-established deliverysystem. The company supplies grocery andfood products with good quality.
Company market sales grew by 1. 7 percent andtotal revenue increased to 1. 2 percent (BBC, 2017). ExternalAnalysis The current business environment whichaffects the UK food retailing industry is made up of both the macro environmentand micro environment. The macroenvironment is the most general layer of the business environment that is madeup of general environmental factors that impact all the supermarkets operatingin the UK rather than just Morrisons. Many macro-levelfactors directly impact both Morrisons Plc as well as its rivals.
The startingpoint for analysing macro-level influences is the PESTEL framework which can beused to identify how present and future trends in the political, economic, social, technological, environmental and legal areas will affect an industryand individual firms (Johnson, Scholes and Whittington, 2009). PESTELAnalysis POLITICAL ECONOMICAL SOCIAL TECHNILOGICAL ECOLOGICAL LEGAL BREXIT. Weak pound.
Aging population. Self-Scanning Systems. Environmentally conscious consumer. Food Production Policy. Consumer spending. Lifestyle trends. Internet and online shopping. Carbon footprint.
Labour movement. Chip & Pin, Contactless and Apple Pay. Trade Terms.
PoliticalFactors BREXIT – This will impact greatly on all businesses within the United Kingdom (UK). The UK has been a member of the European Union (EU) since 1973. Therefore, existing business structures and procedures have been formed due to decades of membership (Retailanalysis. igd. com, 2016). Food Production Policy – Taking full advantage of food production throughout Europe was an aim of the EU from the beginning, as a result the Common Agricultural Policy (CAP) and Common Fisheries Policy (CFP) were developed and introduced (Nielsen Brandbank UK, 2017). Labour movement – The preservation of the status of current EU workers within the UK will be of immense importance to the grocery sector (Carroll, 2017). Trade Terms – In 2015, 71% of UK grocery imports were from the EU.
Given the scale of UK’s food trading, terms of trade will be a significant factor in determining long-term outcomes for the grocery retail sector and the consumer (Retailanalysis. igd. com, 2016). EconomicFactors Weak pound – In the aftermath of the Brexit vote in 2016, the pound sterling fell to its lowest in 31 years against the U. S. dollar (Retail Think Tank, 2017). Consumer spending – The uncertainty surrounding the UK’s position in Europe will undoubtedly influence consumer spending, as it did in the aftermath of the 2008 financial crisis (Carroll, 2017).
SocialFactors The social factors aspect of PESTELAnalysis help the business organisationto understand the lifestyle trend of the nation, consumers attitudes andopinions about products and services, consumers buying patterns, culture, ethical issues, fashion trends as well as major events and influences that can impact the public(Schirmer, 2011). · Aging population – Demographicchanges are a major social factor that grocery retailers like Morrisons need toobserve and react to.· Lifestyle trends – People wantto know where and how what they buy from the supermarket are produced. TechnologicalFactors · Internet andonline shopping- British shoppers buy more food online thanconsumers anywhere else in the world – claiming that title for the second yearin a row (Uk.
kantar. com, 2017). · Self-Scanning Systems – These systems currently have a positiveeffect on the industry by allowing customers to scan items themselves to avoidlong queuing times while reducing the quantityof staff needed. · Chip & Pin, Contactless and Apple Pay – This is aform of technology incorporated by the grocery industry to speed up the amountof time it takes for a customer to pay, allowing more sales per register overthe course of a working day, while also being convenient for the payingcustomer(Euromonitor International Blog, 2017).
EnvironmentalFactors · Environmentally conscious consumer – Recenttrends that are influencing UK food retail industry include the rise ofethically and environmentally conscious consumers who continually demand firmsto adopt practices such as paper packaging and use of recycled materials(Mintel, 2014).· Carbon footprint -The Climate Change Act 2008 wasthe foundation for the UK’s approach to tackling and responding to climatechange. The Act also establishes the framework to deliver on these requirements(Committee on Climate Change, 2017). Morrisons reduced its carbon emissions by 12. 8% over the past threeyears (Morrisons, 2017). Legal Factors · Workplace Pension Legislation -Brought into force in 2014, the new workplacepension legislation requires deduction of pension contributors from a company’sfull-time workers. (Mintel, 2017).
· Local Planning Permission – Lookingat the legal aspects of the grocery retail industry, one of the main legalproblems is that it faces legal implications such as obtaining local permissionto open a store. Supermarkets, such as Morrisons do this by working with thelocal government agencies to offer employment opportunities, environmental andhealth standards (BBC News, 2017). (For a more detailed PESTEL analysis pleasesee appendix 1) Porters ‘ FiveForces’ AnalysisUsing the ‘ Five Forces’ framework canlead to the identification of attractiveness within a certain industry orsector. The five forces used are the threatof entry; the threat of substitutes; the power of suppliers; the power ofbuyers; and the extent of competitive rivalry within the industry.
Wherever any of the forces are high the lessattractive an industry is to compete in (Johnson, Scholes and Whittington, 2009).· Threat of entry(LOW) – The supermarket retailing industry ishighly competitive as it has four major players, which are Tesco, Asda, Morrisons and Sainsbury’s. Asda and Tesco are the leading players due to theirfinancial strengths and cost efficiencies. · Threat of substitutes (LOW) – Althoughthere is almost six times the amount of convenience retailers than supermarketsin the UK, the threat of substitution is still relatively low. This is a resultof customers seeking low priced, quality goods and being able to find these requirementsmore so in supermarkets than the slightly higher priced conveniencealternatives.
· Bargaining power of buyers (HIGH) -Clients and customers are the Buyers ofMorrison’s. Their bargaining power is very high due to the availability ofseveral alternatives, this is goodopportunity for Morrison’s because buyers will purchase products in high volumeand substitutes are always available for Morrison’s buyers. · Bargaining power of suppliers (LOW) – “ Thekey players in the UK food industry are dominated, led and controlled byretailers to a large extent” (Howe, 2008 as cited in Robson et al, 2001, p39). · Competitive rivalry (HIGH) – There is a relentless battle between firmscompeting in the grocery retail industry, to gain customer share. For a more detailed analysis see appendix 2.
InternalAnalysisVRIN Analysis · Value: Value is created bysourcing and processing most of the fresh food through the manufacturing unitsof Morrisons. It is the only supermarket in the UKto provide all lamb, beef and pork through only British sources (The Times, 2017). The firm has even banned Danish and New Zealand products from itsshelves. · Rarity: Morrisons is thelargest food supplier with vertical integration in the UK. To ensure superior quality and freshness of meat, Morrisons isclose to its suppliers such as Shorthorn.
This is a major advantage forMorrisons since its competitors are not as quality conscious. · Inimitability: Morrisons uses aunique customer patronizing style. As discussed earlier, by banning fake farmproducts entirely from its shelves, it has set an inimitable standard of socialresponsibility and patriotism. · Non-substitutability: Due to the highquality of its own brands, Morrisons has become non-substitutable to its brandloyal customers. Value ChainAnalysisValue chain analysis (VCA) is used toidentify potential sources of economic advantageby suggesting how company’s core competencies can be combined with the external competitive environment tofocus optimum resource allocation (Reese et al., n.
d.). For Morrisons VCA please see appendix 3. Core Competencies Core competency recognises that competition between businesses isa race to succeed who will be the upcoming successful business. Prahaladand Hamel stated that there are three factors that need to be considered whenthe competition is high as a businessneed to ensure that they remain at the top oftheir competitors. For Morrisonscore competences see appendix 4. TOWSMatrix Refer toappendix 5 for SWOT Analysis. Strengths (S) Weaknesses (W) Opportunities SO Strategies WO Strategies · Morrisons’ efficient supply chain and distribution network is a strength that can turn the opportunity of increased demand for UK produced goods, into a strength also.
As they are the most vertically integrated out of the ‘ big 4’ supermarkets, once the EU leave is official Morrisons will have an advantage over competitors. · Online retail could potentially become an opportunity for Morrisons rather than a threat, if they cease the prospect available. Many people are moving to online shopping for convenience and it is an ever-growing market.
By using their high customer focus and observing what customers request, an opportunity to gain knowledge and improve their online services is available. Since they sold many lower performing stores, Morrisons also has the capital available to invest into their online retail services. Threats ST Strategies WT Strategies · Morrisons can use their strength of skilled labour & high customer focus to minimise the threat of food production policy changes. As they already prepare over half of fresh food themselves, mainly instore by skilled workers, Morrisons can continue and expand on this in order to prevent the threat being severe. · Morrisons previously had a lack of focused direction, this aided its threat of price competition. As they tried unsuccessfully to compete directly with Aldi and Lidl they lost customers as it was uncertain where and what Morrisons target audience and objectives were. However, since David Potts became CBE, he has successfully steered Morrisons in a positive direction.
Balancing their price competition issues and directing a focused agenda. Conclusions/Recommendations This report concludes that Morrisonsneeds to improve its services and products affordability by continuous effortstowards finding cheaper sources of supply that donot compromise with quality. The companyalso need to ensure that threats of competitorsand substitute products should be mitigated. It has to exploit its strengthssuch as improving the delivery system, offering more varieties of food products and promoting sustainable developmentinitiatives (Stubbs, , 2008). Morrison needs to ensure that its environmentaldevelopment initiatives and reduction in carbon footprintsmust yield good results (Perry, Klemeš, & Bulatov, 2008) and for this purpose, it is recommendedthat company should continue its focus towards environmental management. Utilizingtheir main strength of having the most vertically integrated supply chainwithin the grocery retail sector, is paramount, as the uncertainty of BREXITaffects the whole of the industry.