Introduction
Penny Market aims to expand its operations within the UK grocery retail market. A bargain superstore with a focus on Germany is called Penny Market. Leibbrand Gruppe founded this supermarket, which now has some locations worldwide. In this case, the bargain retailer plans to launch operations in the United Kingdom, one of the world’s most valuable marketplaces. The Great Britain market is recognized as the fifth-largest market in the world and a highly sophisticated, varied, and developed market in Europe. It also has a few trade restrictions since it gives American exporters a gateway into the European Union. Penny Market seeks to expand its operations in the UK grocery retail market.
Porter’s Five Forces Analysis
This model is predicated on the idea that five elements influence a market’s competitiveness and attractiveness. Porter’s five forces can be used to decide who will profit most from a given corporate condition (Jacob, 2021). This data can be cast off to evaluate the strength of an establishment’s current rivalry situation as well as the power of a role it may aim to embrace in the prospect years.
The Threat of New Entrants
Entry barriers affect the danger presented by new rivals in a market. The supermarket industry faces minimal threat from potential new competitors. Over the past 30 years, the grocery industry’s dominance has altered. The popularity of supermarkets has overtaken that of all other grocers. By building a difficult barrier to entry for new rivals, operational excellence, one-stop shopping, and massive marketing-mix expenditure have contributed to this dominance.
New entrants must acquire significant cash to compete with the established supermarket retailers who dominate the market—Tesco, Asda, and Sainsbury’s in this sector—and their well-developed supply chains. The minimal danger of new entrants is partly a result of the economies of scale and differentiation Tesco and Asda have acquired due to their aggressive operational methods. New technology may be introduced via substitutes, enabling cheaper manufacture of the same goods.
The Threat of Substitutes of Products or Services
The threat of substitutes for food goods is comparatively low in the UK retail market. Consumers must perceptibly spend diet. The alternatives to major supermarkets, such as modest convenience stores, off-licenses, corner shops, and companies selling organic goods, cannot meet the public’s needs. The segment’s demand for a specific product could be reduced by substitution since customers risk moving to alternatives.
Industry Rivalry
Competitors highly threaten the UK grocery business in the marketplace. The main components of distinction affecting supermarket merchants’ competitiveness include advertising, product, and service investment. Additionally, there is no customer switching option, which puts pressure on the industry’s level of competition. Consequently, it is a less profitable segment for already recognized businesses. In response, other companies have strengthened the added value components of their services while focusing on pricing and value.
Bargaining Power of Customers
Vital customers could increase their demand for products and services at the current price while simultaneously cutting costs. However, to prosper, they must be well-organized, limited in number, and cheap to migrate from one adversary to another. Many market analysts assert that when these essentials are considered, client negotiating command in the UK supermarket business is less, making the sector attractive and cost-effective for established firms (Oliver, 2017). Clients may move from one contestant to another because the goods in this market are regularly substitutable. The introduction of Internet services and the average middle-class segment’s substantial usage of digital technology and services have brought about significant developments in recent years.
Bargaining Power of Suppliers
An inadequate number of suppliers in a given segment might exercise more power. Since thousands of domestic and foreign traders meet the supermarkets’ demands, the supplier power could be more substantial in the UK grocery business. Consequently, supermarkets may advance their agreements with dealers to increase their profitability. The ability of the supplier to manage and prevent small stores from gaining an edge in the market by going back on the supply chain can be used as a tactic to get rid of new supermarkets.
PESTLE Analysis
Political
UK politics result in fundamental problems that impact all markets’ industries. One of the biggest problems for UK supermarket retailers is the UK’s separation from other EU countries due to BREXIT (James & Quaglia, 2020). Exiting the EU entails leaving the trade zone, which would affect the industry. Due to the tax, nations importing products into the UK for supermarket retailers would stop selling their goods there. Additionally, BREXIT would raise the price of every purchase made by EU nations.
Economic
Economic considerations impact the UK grocery retail industry due to the weak pound. The UK economy is still recuperating from the monetary catastrophe of the late 2000s, which increased the price of commodities globally and produced a vast credit bottleneck by infiltrating the British banking system (Rafay & Farid, 2019). There has been substantial food price inflation since 2013, even though the economy is still in a recession. Banks are rebounding and stabilizing to the point that society is beginning to trust them again.
Social
The supermarket retail selection and consumer purchasing behaviors are both influenced by tradition. M&S customers are less likely to visit Aldi and Lidl. Online food purchasing has become a common form of shopping due to economic considerations and convenience (Londono & Castano, 2017). Clients who are price cautious and want to save time and currency by having the goods conveyed to their destination or picking up the packed food from a pick-up store are made shopping easier by delivery services and pick-up businesses.
Technological
The impact of innovation on the UK supermarket consumer and, consequently, the sector is significant. Additionally, supermarkets must stay on top of digital trends to offer outstanding customer service, boost customer happiness and loyalty, and increase income. Social broadcasting platforms like Facebook, Instagram, and others allow businesses to advertise for free via corporate accounts (Mogaji et al., 2018).
Additionally, it gives supermarkets a chance to get input that can help merchants’ marketing mix and strategy. Another technological advancement that has recently been introduced to the market for grocery merchants is self-checkout. The customer’s pleasure is increased, and time and money are saved by letting them complete their checkout process. One technical development, loyalty cards, has significantly influenced the whole sector by providing incentives to consumers, who then show their commitment to the store.
Environmental
The most significant element affecting the UK grocery business is the weather. The destruction of fruit, vegetables, and crop harvests can cause problems with the supply of goods to supermarkets while also affecting prices at retail establishments. Conversely, favorable weather will benefit the price since clients would have easier access to the items. On the other side, the weather may impact delivery and supply vehicles. Pricing is influenced by supply and demand.
Legal
The UK government’s rules and guidelines for supermarket retailers significantly impact the market. To conduct business in the UK market and avoid price-fixing, abuse of dominant position, and thwarting anti-competitive behavior by merchants in this area, enterprises must abide by competition law’s rules (Gerber, 2020). Consumer rights also play a role in the UK grocery sector. The Consumer Rights Bill establishes guidelines for what consumers should expect from products they purchase, outlines what to do when those expectations are not satisfied, and specifies when terms and conditions may be deemed unfair. Businesses influencing supermarkets in the UK are required to adhere to the regulations mentioned above.
ANSOFF Strategic Model to Design Appropriate Business Strategy for Penny Company
An organization uses a strategic planning model to take its strategy and develop a plan to put it into practice to enhance operations and more effectively achieve its objectives. They serve as guidelines for expanding one’s business (Brennan et al., 2021). A corporation picks the best action to accomplish its goals by formulating a strategy.
Everyone in the marketing industry wants changes for their company that will improve the system. The owner will then need to achieve economies of scale and have a large sum of money for investors in your business, or you may even need to become well-known for your product brand. For those reasons, a solo proprietor may desire specific changes, such as altering the business’s idea or even their job. A strategic strategy may be used to examine the possibilities available and choose which ideas are ideal for the development and benefit of your organization and your career to turn such ideas into reality (Hijfte, 2020). The Ansoff Matrix Model is a method that may be applied in that regard.
The Ansoff Matrix is presented to show the goods and market choices that are accessible to an organization. According to this strategy, the goods that consumers buy are referred to as items, and the customers themselves serve as the definition of the market. The Ansoff matrix is a helpful framework for examining potential strategies to close the gap between where a business organization might not change its methods and the organization’s goals.
An aid to strategic planning, the Ansoff Matrix offers a framework for developing growth-oriented initiatives. In 1957, Igor Ansoff outlined four growth strategies for expanding an organization using existing or new goods in current or new markets (Chintalapati, 2020). Various risk levels are associated with each firm’s development choice. Market reach, Product improvement, Market Development, and Heterogeneity are the four main growth choices discussed in the Ansoff Matrix, sometimes known as the Product-Market Growth Matrix.
Market Penetration
Utilizing the company’s current products and services in existing markets is the primary goal of the market penetration strategy. In the current market environment, it seeks to enhance its market share. This growth plan uses more aggressive distribution and advertising to boost sales for its current products in its existing markets. The least dangerous growth approach is this one.
By lowering the cost of goods, penny market penetration in the UK may be achieved (Bates et al., 2021). To prevent rivalry from other well-known companies in the UK, such as Tesco Company, Penny’s retail food retailer might lower the pricing of its items. Penny might also step up promotion efforts to help the business stand out from rivals. Minor product modifications might also help to lessen the uniformity of the market development.
The main objective of the Market Development strategy is to exploit its current offerings to enter new geographic areas. Targeting various client categories in the UK and supplying products that have only been offered to consumers to industrial or commercial customers are two ways that the penny retail food shop might implement its expansion plan (Kozáková & Hornáčková, 2021). Additionally, it may be done through marketing to consumers with products that were previously only available to industrial or commercial clients (Burgal, 2022). Lastly, it can be done by looking into new states, regions, or international markets. The Penny organization may implement this approach by possessing a unique technology it can use in the new market. If it raises output, it can also use economies of scale.
Product Development
The product development strategy seeks to increase the organization’s market share by creating new products and services. As part of this expansion strategy, a more excellent range of products must be available to the company’s current markets. Penny may be able to supply these new items by investing in research and development, purchasing production rights for a third party’s product, and redistributing third-party goods under its brand. A joint venture with a different business that needs access to the corporation’s brands or distribution channels will be necessary. This technique will be riskier than market penetration, albeit it might also be riskier than market development.
Diversification
With this strategy, a business presents a new product into an untapped marketplace. Diversification may be categorized into three basic types of diversity techniques. Concentrated/horizontal diversification is the first kind of diversification and refers to introducing a new product into an existing market (Iskenderoglu, 2020). The second tactic, conglomerate diversification, entails a company entering a new market with a completely different product from its present line-up.
The final form of diversification is vertical, which entails going backward or ahead in the value chain by presumptuous ownership over tasks that were earlier vicarious to outside parties like suppliers, OEMs, or merchants. Penny firms can generally examine two forms of diversification: linked and unrelated. There may be opportunities for synergy between the present company and the new product or market in associated diversification (Kim et al., 2022). The modification that is distinct to the prevailing business occurs when there are no potential synergies between the fresh produce or need and the current commercial.
The Ansoff Matrix is an excellent tool for planning a company’s future growth (Ansoff et al., 2018). Market reach is the most common and least risky of the four. Heterogeneity is the most challenging approach since it calls for a company to introduce a new product into an untapped market (Rosyadi, 2022). However, if a company can successfully integrate multiple unrelated industries, it has the benefit of having a well-proportioned produce selection, which reduces the total hazard. In this state, using frameworks like matrix is beneficial.
Force Field Analysis
Force Field Analysis, first presented by Kurt Lewis in the 1940s, is today a well-known business approach for making change-related business choices. Lewis asserts that an organization always has two sets of forces operating on opposing sides: the driving and restraining forces. When the two are in balance, the status quo is preserved. The driving factors must be enhanced, and the restraining powers must be lessened to make a choice or implement change inside the company (Levinas, 2021). In plain English, the Force Field Analysis highlights the advantages and disadvantages of a strategic choice. Creating and carrying a favorite is much simpler once these are understood.
The first issue with the suggested tactics is that competitors are ignored. One of the main problems with the Ansoff Matrix is that competitors need to be considered. This matrix shows the company’s product and market strategy (Hartono, 2022). There are competitors in the real world for every market and development. They are, therefore, essential in determining the effectiveness of a company’s strategy.
The absence of a cost-benefit analysis is the second problem. The cost-benefit examination of several models is not taken into consideration by the Ansoff Matrix (Boardman et al., 2020). Thus, a company considering expanding its clientele or creating new goods must weigh the advantages and disadvantages of each before making a decision.
Predictability difficulty is the third problem. The Ansoff matrix is a direct tool for demarcating business growth plans. Foreseeing how Ansoff matrixes would impact business sales and profits is challenging since it is impossible to predict consumer and market responses with 100% accuracy (Sala, 2020). As a result, all calculations are irrelevant. Consequently, firms should take this into account before drawing conclusions from Ansoff matrices. While these matrices serve as a valuable tool, they must be used with caution.
Strategies for Overcoming the Challenges
The Ansoff Matrix does have significant drawbacks, but there are methods to get around them. The following are some methods for getting around the Ansoff Matrix’s drawbacks. To better understand the competition, start by doing a comprehensive market analysis. Understanding the competition better requires a complete market analysis, enabling businesses to foresee and react to any movements made by their rivals (Smith & Duke, 2020). Additionally, it will help corporations better understand their target markets and permit them to adjust their advertising policies as essential.
Second, before choosing any expansion plan, perform a cost-benefit analysis. The Ansoff Matrix, as already mentioned, does not consider the cost-benefit analysis of different strategies (Rouwendal, 2019). Therefore, before selecting any development plan, businesses must do a cost-benefit examination; this will help them assess if a particular approach is likely to be effective (Astrachan, 2021).
Third, other strategies and tools should be applied in addition to the Ansoff Matrix. The Ansoff Matrix is a valuable tool, but it should not be used blindly. Only use the Ansoff Matrix to launch more investigation and analysis. The Ansoff Matrix and other tools and methodologies should then be used by businesses to make educated growth strategy decisions (Ansoff et al., 2018). They will not be able to create a successful growth plan for their company until after that.
Finally, before executing any growth strategy, be aware of the hazards. The Ansoff Matrix is a helpful tool; however, before implementing any development approach, it is essential to be mindful of the risks. For instance, all calculations may be pointless if you cannot predict client and market reactions with 100 percent accuracy. Thus, before drawing conclusions based on Ansoff matrices, businesses should take this into account.
Conclusion
This research has examined the size of the UK grocery market and how businesses planning investments there are more likely to be impacted. Before starting the process of opening a store in this location, a company growth like Penny Market will have to take into account the market viability of this area. Taking into account the British business climate, it will be beneficial to the supermarket. It is essential to pick the best growth tactics. Improved performance and a competitive edge can be attained through strategic management. Therefore, company strategies in the future will require techniques like SWOT analysis and the Ansoff matrix approach.
A corporation requires a future system; it cannot merely base itself on economic research. Supermarket merchants can meet the demands of the Average Middle-Class Segment customers by overcoming PESTLE issues and circumstances. The Ansoff Matrix is a tool businesses may use to plan their growth approach. However, companies should be alert to the limitations of the Ansoff Matrix. These comprise the difficulties in predicting how Ansoff matrices would affect a business’s sales and profits and the need for a cost-benefit analysis to defend the company’s chosen strategy.
Reference List
Ansoff, H.I. et al. (2018) ‘From strategic planning to Strategic Management,’ Implanting Strategic Management, 20, pp. 41–52. Web.
Ansoff, H.I. et al. (2018) ‘Why make strategy explicit?,’ Implanting Strategic Management, pp. 17–23. Web.
Bates, A. et al. (2021) “The non-discrimination principle for goods,” Blackstone’s Guide to the UK Internal Market Act 2020, 5, pp. 48–66. Web.
Boardman, A.E. et al. (2020) ‘Efficiency without apology: Consideration of the marginal excess tax burden and distributional impacts in benefit–cost analysis,’ Journal of Benefit-Cost Analysis, 11(3), pp. 457–478. Web.
Brennan, J. et al. (2021) “The business of business is business: How businesses serve society,” Business Ethics for Better Behavior, pp. 13–29. Web.
Burgal, V. (2022) “Products for conscious consumers – a general introduction,” Products for Conscious Consumers, 9, pp. 3–13. Web.
Chintalapati, S. (2020) “BankBuddy.ai—Business Expansion and marketing dilemma: A case study to discuss the Ansoff growth matrix concepts combined with business expansion strategies for expanding into emerging markets,” Emerging Economies Cases Journal, 2(1), pp. 44–53. Web.
Gerber, D.J. (2020) ‘Dominant firm unilateral conduct: Monopolization and abuse of dominance,’ Competition Law and Antitrust, 5(45), pp. 65–74. Web.
Hartono, W. (2022) ‘Proposed Marketing Strategy to Fight Market Uncertainty for Indonesia Paper Company,’ International Journal of Current Science Research and Review, 05(05) Web.
Hijfte, S.V. (2020) “Company strategy,” Make Your Organization a Center of Innovation, pp. 15–37. Web.
Iskenderoglu, C. (2020) ‘Product market competition and the value of diversification,’ SSRN Electronic Journal. Web.
Jacob, W. (2021) ‘A case study on Porter’s Five forces model,’ ANVESHAK-International Journal of Management, 10(1), p. 126. Web.
James, S. and Quaglia, L. (2020) ‘Brexit and the future UK–EU relationship,’ The UK and Multi-level Financial Regulation, 5(45), pp. 150–178. Web.
Kim, K. et al. (2022) ‘Related and unrelated product diversification and collaboration strategies: Comparison between the pharmaceutical and Biopharmaceutical Industries,’ Journal of Product Innovation Management, 39(4), pp. 559–580. Web.
Kozáková, J. and Hornáčková, E. (2021) ‘Product line of selected agricultural entity in Slovakia and suggestion for its expansion based on analysis of consumers’ interest in dairy and meat products,’ Potravinarstvo Slovak Journal of Food Sciences, 15, pp. 939–960. Web.
Levinas, S. (2021) ‘To make a change, we must be willing to change,’ Peace Entrepreneurs and Social Entrepreneurship, pp. 143–162. Web.
Londono, J.C. and Castano, R. (2017) ‘Supermarket suggested shopping lists (SSSL), promotions and grocery purchases,’ The International Review of Retail, Distribution and Consumer Research, 27(2), pp. 146–163. Web.
Mogaji, E., Ukpabi, D. and Olaleye, S. (2018) ‘Examining consumer-brand relationships in the UK energy sector A Social Media Perspective.’ Web.
Oliver, S. (2017) ‘Do non -tariff measures make domestic firms more profitable? evidence from the Commercial Banking Sector,’ SSRN Electronic Journal, 5(35), pp. 45–69. Web.
Rafay, A. and Farid, S. (2019) ‘Islamic banking system: A credit channel of monetary policy – evidence from an emerging economy,’ Economic Research-Ekonomska Istraživanja, 32(1), pp. 742–754.: Web.
Rosyadi, R.A. (2022) ‘Proposed marketing strategy to enter methanol market as diversification for National Gas Company,’ International Journal of Current Science Research and Review, 05(09). Web.
Rouwendal, J. (2019) ‘Indirect effects in cost-benefit analysis,’ Journal of Benefit-Cost Analysis, 3(1), pp. 1–27. Web.
Sala, A. (2020) ‘The Japanese consumer finance market and its institutional changes since the 1980s,’ Japanese Political Economy Revisited, 67, pp. 77–100. Web.
Smith, R.L. and Duke, A. (2020) ‘Platform businesses and market definition,’ European Competition Journal, 17(1), pp. 93–117. Web.
Strauss, E. (2022) ‘Great Britain in search of lesser evils,’ Common Sense about the Common Market, 5(35), pp. 128–149. Web.