Conflict Between Lobby Groups and UK Retailer Report (Assessment)

Introduction

In the recent past, there has been the emergence of lobby groups in different countries. The objective of these groups is to influence the decisions made by the government. The lobby group’s agents present their concerns related to special matters of interest to the relevant administrators. In the recent past, there has been increased conflict between lobbyists and UK retailers. This is due to their rampant increase in power, level of profits, and hence their significance over the suppliers. The objective of this report is to illustrate the main sources of conflict between the lobbyists and the UK retailers.

Lobby groups

There are various lobby groups that are concerned with the operation of the large retailers in the UK such as Tescopoly, Oxfam, and Friends of Earth. Tescopoly is a lobby group that is concerned with raising concern about the impact of increased supermarket power while Friends of the Earth is concerned with environmental matters.

Increase in power

One of the areas where there has been much conflict between the UK retailers and the lobby groups is with regard to their increase in power. This has negatively affected the suppliers. This is mainly in relation to their buyer power leading to their increase in bargaining power relative to their suppliers. This is mainly evident in the UK retail industry. According to Tescopoly, Tesco a food retail firm in the UK has in the recent past acquired 30% control of the grocery market in the UK (Tescopoly 2009). Instead of utilizing this bargaining power positively, these firms have continued to exploit the suppliers (Paul 2005).

This is despite the formulation and implementation of the Supermarket Code of Practice. The aim of the code was to instill a desirable code of operation within the retail market. That is it was intended to establish a good relationship between the suppliers and the major retail firms. In the recent past, a survey of the major retail chains in the UK market, that is the Asda, Tesco, Safeway, and Sainsbury showed that these firms did not follow the Code of Practice. This has resulted in the deterioration of the firm’s behavior to their suppliers.

Labor standards of the suppliers

In order for firms to succeed, there is a need for the management to develop a strategy aimed at ensuring that all the individuals involved in the supply chain are satisfied. Amongst those involved are the suppliers. One of the ways in which this can be ensured is by upholding the labor standards that are set by the government.

Due to their increase in power, most of the retail firms are not withholding the labor standard which is affecting the suppliers (Tesco accused of delaying supplier’s probe 2005). This is due to the fact that they are the most influential within the supply chain globally. This has made these firms force their suppliers to deliver supplies to them. For instance; according to Oxfam, these firms use a retail model aimed at ensuring fast delivery and at a cheap price of the freshest products. This means that most of the suppliers to these retail firms do not have any say in making their decisions with regard to supplying their products.

According to the lobby group, women are the ones who are hardest hit by this practice. The women are forced to work for long hours and at a faster rate. According to Oxfam, these suppliers do not have job security. This has resulted in Tesco squeezing the margin level of its farmer suppliers (Food retailers slammed for trading practices 2004).

These retailers claim that it is the suppliers who have the responsibility to withhold their standards. In the real sense, the lobby groups are concerned about the retail strategies that are applied by these firms in buying their products from the suppliers which makes the suppliers unable to meet these standards.

Effect on the prices

In the retail business, there must be a pricing strategy that the firm uses to determine the price of its products (Berman & Thelen 2004).

Amongst the factors to be considered is the cost of the goods obtained. Due to their influence on the suppliers, the lobby groups are obtaining products from the suppliers at a low price and end up making huge gains. According to the lobbyists; it is evident that these retail firms are using their dominance in the market to put pressure on the suppliers. This is through driving down the costs incurred down to the supply chain (Pleshoko, Larry, Nickerson & Singe & 2008). The objective of this is so that these firms can gain more in terms of profit margin. For instance, according to a report by Tescopoly, Tesco has in the recent past made a profit of over 3 billion pounds (Tescopoly 2009). This shows that the firm is involved in some practices that are a detriment to the suppliers. This is manifested by these firms formulating strategies that ensure fast delivery by the suppliers. For instance, through the incorporation of the just-in-time strategy, the suppliers are forced to deliver at a low price (Morshett, Swoboda, and Schramm 2009). This is manifested by Oxfam’s claim that UK retailers such as Tesco, Wal-Mart, and Taco Bell must change the manner in which they deal with the producers in terms of negotiating the terms of delivery and also prices.

According to Morshett et al, their increase in power has an effect on the quality of the food products supplier to them (2009). This has raised concern amongst the lobby groups. This is mainly with regard to the safety of the products. For instance, according to a report by Friends of Earth, it is pressuring the retail supermarkets to consider the health of young children. This is done by removing all the residues of the products that they consume. This is due to the fact that there is a risk of these children being affected by the pesticides used on the products which may have an adverse effect especially in the early years (Retailers must reduce pesticides levels in babies and children’s foods 2009).

Despite the pressure, these firms are not acting on their promises. For instance, Sainsbury Supermarket has in the recent past been convincing customers through adverts that it is addressing the issue of pesticide while research on its fruits and other vegetable products proved to contain a large percentage of pesticide remains.

Effect of retail firms on climate

Retail firms should incorporate the concept of social responsibility. This will help them gain a competitive edge since consumers will note their involvement in finding a solution to social problems. This is due to the fact that the retail firms have in one way or another contributed to climate changes. This means that their operation has resulted in a negative effect on the climate through pollution.

The retail firms should help in the reduction of environmental pollution that is resulting in climate change. According to a survey that was conducted by YouGov, it was evident that the UK retail firms have social responsibility being the last priority in their operation (Helen 2007). The survey reported that it is only 14% of retail firms have put in place a strategy to respond to corporate social responsibility.

Conclusion

The growth in the UK retail firms has resulted in an increase in powers of these firms significantly. The net effect is that the suppliers have been negatively affected. This has resulted in various lobby groups such as Oxfam and Friends of Earth raising their concern over the operation of these retail firms resulting in a conflict especially with regard to the food retailing firms.

The suppliers have been affected by the fact that these retail firms have an effect on the supply chain. This results from their large-scale economies of operation since they are global firms. The suppliers have been affected denying them of their rights in relation to decisions related to the supply chain. For instance, the retail pricing strategy is influenced by these firms since they acquire the products from the suppliers at a low cost. They also drive down the cost to the suppliers who are lower in the supply chain.

These firms also have an effect on the labor standards of the suppliers especially the farmers whereby women are the most affected. This is another area where conflict arises between these firms and the lobby groups. This is through the strategies that they have formulated that are aimed at ensuring fast and just in time delivery of the products. This forces the farmers to work at a high rate while the returns that they receive are minimal.

There is a conflict that arises due to the safety of these firm’s products especially the fruits. This is due to the fact that these products have been proved to have pesticides that can affect the health of consumers, especially children. Despite constant pressure by lobby groups to ensure that these retail firms’ products are safe, they have not heeded.

References

Books

1. Burt S. & Limmack R. 2003 ‘The operating performance of companies involved in acquisitions in the U.K. retailing sector,’ 1977–1992 Advances in Mergers and Acquisitions, 2:147-176. University of Stirling: Stirling.
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