Macro and Micro Environmental Analysis of Waitrose Supermarkets

The food retail industry in the United Kingdom is an extremely competitive market. The major players in the industry all have tremendous purchasing power and are constantly fighting to increase market share. Like any other industry though they are affected but factors which are both within their control as well as outside.

In this report we will first be focusing on the macro environment of the UK supermarket industry where we will review external issues such as politics, economy, technological, social/demographic and environmental factors. From this analysis we can gain insight into how supermarkets react to changes that are beyond their control and how they can often turn these changes into business opportunities. The second part of this report will be looking at the supermarket chain Waitrose.

Through this we analyse the micro environment whereby we look at factors such as suppliers, intermediaries, financial, government, the company, customers, employees, competitors, media, and publics. The micro environment is what makes up a company and all aspects must run efficiently and effectively for a business to succeed. Based on the findings of the Waitrose micro environment we are then able to evaluate the companies strengths and weaknesses as well as their opportunities and threats.

Order custom essay Macro and Micro Environmental Analysis of Waitrose Supermarkets with free plagiarism report

450+ experts on 30 subjects Starting from 3 hours delivery

Get Essay Help

Macro Environment

Political The supermarket industry is affected by many varying political factors. New legislation and decisions from Governing bodies that regulate the industry aim to ensure that all business within the sector is conducted fairly and with the economy suppliers and consumers best interest in mind. Most legislation on food standards originates from the European Commission which consolidates legislation across the EU. The Competition Commission, a non departmental governing body, are responsible for investigating mergers, markets and inquiries related to regulated industries under competition law (Competition Commission No Date),.

Competition Law which was introduced in 1998 promotes healthy competition, and bans anticompetitive agreements between firms such as agreements to fix prices or to carve up markets, and it makes it illegal for businesses to abuse a dominant market position (Office of Fair Trading, 2007). In 2009 the Competition Commission issued an amended and improved Grocery Supply Code of Practice (GSCOP) with hopes of providing greater security to suppliers. To help regulate legislation and the GSCOP an independent financial ombudsman was established in 2010 to resolves problems between retailers and suppliers (Sourceuk 2009).

When a supermarket wishes to build or extend a site a ‘competition test’ would be carried out on the retailer and an assessment made to ensure that local shops don’t lose out to the large chain supermarkets domination an entire area (Competition Commission 2009). Price fixing is illegal under the competition act of 1998. When participants on the same side of the market (such as the big 4 in the UK supermarket sector) agree to sell a service, product or commodity at a fixed price it’s the consumers who must pay while retailers and suppliers reap the benefits.

There are extremely heavy penalties for price fixing in the UK You can be fined, disqualified from being a director - or even sent to prison (Business Link No Date). Minimum wage laws will always affect supermarkets as generally many of their staff would be paid minimum wage. Under the National Minimum Wage Act of 1998 all employers must pay their employees a certain amount per hour as set by the UK Government. The main rate of National Minimum Wage which applies to workers aged 22 and over and is currently  5. 80 per but will raise  5. 93 in 2010 (Directgov 2010).

There are many laws in the UK and EU which are designed to protect the environment. However there are two main Acts which were made to consolidate as many issues as possible, these are the Environmental Protection Act 1990 and the Environment Act 1995 (Hartshorne. J,1996). DEFRA is the UK government agency which is responsible for setting legislation and guidance on a number of environmental issues (DEFRA, No Date). Some important legislation which applies to supermarkets include laws on waste and recycling, genetic modification, and Climate Change which are all covered under these acts. Office of Public Sector Information No Date)

The economic situation at any given time will always affect market conditions. As the economy continually fluctuates between periods of economic growth and periods of relative stagnation (also known as an economic cycle) factors such as changes to interest rates, exchange rates, inflation and purchasing power will directly and indirectly affect the supermarket industry (Tutor2u, No Date) In 2008 the UK had entered the recession stage of the economic cycle. Interest rates dropped from 5% to 0. % in an effort to increase consumer spending (Mintel 2009, Market Re-forecasts - Food – UK). And while this would initially appear to be a gain for supermarkets, other factors of the recession such as wide spread unemployment and bankruptcies saw this sector of the market having to revise their marketing strategies in order to weather these changes to the economy (Mintel 2009, Market Re-forecasts - Food – UK). In 2009 trading was down with consumers eating less ready meals and opting for own brand rather than premium products (Mintel 2009, Food Retailing UK – Broader Market Environment).

This is just one of the many changes to consumer purchasing that changed and will continue to change as the economy tries to recover. According to The Office of National Statistics (2010) unemployment dropped by 33000 since then end of 2009 and the economy grew by 0. 1% a possible indication of the UK slowly emerging from the recession (BBC News 2010). However this will be the beginning of a recovery which could take at least another two years. As interest rates still remain at an all time low of 0. % (BBC News 2009) supermarkets will start to see an increase in spending from consumers as their confidence in the market returns (Mintel 2009, Market Re-forecasts - Food – UK). Inflation has only become a recent issue in the UK economy. Rising fuel prices, a few poor harvests and the weakness of the sterling has seen inflation accelerate between 2006 and 2008 (Mintel 2009, Food Retailing UK – Broader Market Environment) (Appendix 1). The implications of this for supermarkets are that it erodes the purchasing power of money which in turn means the price of imported good will rise.

However a positive result of rising inflation, which at times reached over 10% also, meant that food price increases boosted sales value (Mintel 2009, Food Retailing UK – The Market In Context). A trend for customers trading down rather than reducing quantity enables sales value to rise fast enough to cover cost growth (Mintel 2009, Food Retailing UK – Sector Size and Forecast). The recession as a whole has had a very mixed effect on the supermarket industry. At the beginning of the recession in 2008 consumers drastically cut back on purchases from retailers such as Waitrose and Marks and Spencer.

However by December 2009 Waitrose was the fastest growing supermarket chain while Aldi was on the decline. This is believed to be due to more expensive supermarkets introducing own brand products into their stores and selling them at a lower price to their standard products (Keynote 2010, Food Industry – Industry Overview). Social It is essential for supermarkets to understand the current sociocultural environment as any changes will affect their customers’ needs and wants. (Brassington & Pettitt 2006)

According to Mintel (2009) the ageing population will have a negative effect on the supermarket industry with there already being more retired people than children, with this level set to increase . This will affect the industry as older people tend to eat and drink a lot less than their younger counterparts but also treat themselves less as well. This decline in basket size will have long term effects for the industry over time as they are less efficient to service and require more staff (Mintel 2009, Food Retailing - Broader Market Environment)

A worrying trend which has emerged in the last several years has been the increase in obesity among children and adults in the UK with 60% of the UK population being overweight (Office of National Statistics, Health and Social Care, 2010) Poor quality convenience foods, labour-saving technology, increased car use and more people doing sedentary jobs are just some of the reason the country is getting bigger. However despite this increase in obesity the U. K population on a whole is far more health conscious than in previous years (Keynote 2010, Food Industry – Industry Overview).

There has been a trend away from genetically modified foods towards organic foods and an increased the customer desire for healthy alternatives. The government and other health organisations are working with supermarkets and manufacturers to help consumers make healthier choices when shopping. (Keynote 2010, Food Industry – PEST Analysis). According to the National Office for Statistics (2010) The UK population is increasing at an alarming rate with figures showing the population of the United Kingdom to be at 61383000 in 2008.

This is up 0. 7 per cent since mid 2007. Increases in births, decreases in death and a sharp rise in migration to the United Kingdom have all contributed to the change in population (Office of National Statistics, Population Estimates 2010) Statisticians have said that at least 70 per cent of the population rise over the next 20 years will be attributable directly to immigration (Office of National Statistics, Migration 2010). The supermarket industry needs to reflect the needs of the changing population.

With more people with different cultural backgrounds residing in England it is essential that the needs of these new consumers are being met by supermarkets in order to retain market share (Keynote, Food Retailing – UK 2009) The over powering proposition of the “everything under one roof” format has been a major factor in the demise of the small independent grocer, butcher and green grocer in recent times thus replacing the high street as the focal point of community life (IGD 2009, Non-Food Retailing).

Declining meal preparation consequent to demographic changes such as an increasing number of single-person households and working women is forcing UK retailers are to focus on added-value products such as the booming ‘food-to-go" sector (Keynote 2010, Food Industry – PEST Analysis) These demographic changes have also affected consumer work patterns with retailers modifying aspects of the customer shopping experience to accommodate changing lifestyles. Supermarkets are now flexible in opening hours as well as adding extras such as Thursday late night shopping and free parking facilities (Keynote 2010, Food Industry – Industry Overview).

The recession in the UK has changed the population’s attitude towards the foods they purchase. Britons have developed a sophisticated customer preferences and demands for greater choice and comfort in the shopping experience but for lower prices. Supermarket own brand products have been on the incline as their ranges often offer great value for quality products. (Keynote 2010, Food Industry – PEST Analysis). Technological Recent technological advances have enabled supermarkets to provide customers with a quicker, easier and more enjoyable shopping experience.

In recent years we have seen the introduction of online shopping, self check outs, product scanning and forecast technology which has changed the dynamics of how people shop. One of the most influential technological changes to happen to the supermarket industry in the past few years has been the introduction of internet shopping. The online grocery market is currently worth  4,4 billion having doubled in the past 4 years (Mintel 2009 – Online Grocery Retailing) and is set to reach  7. 2 billion buy 2014 according to research industry analyst IDG (Appendix 3).

This is a major new opportunity for retailers and the UK offers a good market for this with the highest percentage of people online across the EU (Just Food 2009). New scanning device designed to be used by shoppers to scan products as they shop and then simply paying at a self serve checkout using the scanned date are a new introduction to the industry. Scales are then used at point of payment to weigh shopping against weight data which is provided when the product is scanned. This ensures much shorter queuing times for customers (Waitrose 2010)

New communication technology such as the introduction of scanners which provide price labels and barcodes for any stock that needs to be reduced has enabled more sophisticated store management. The scanners minimise unsold food as well as check out productivity, which saves time and reduces waste. (Retail Systems 2010) Advances in forecasting software such as that developed by SAS and purchased by Waitrose in 2006 will help forecast demand for product based on the history of the item, casual variables, events and holidays. (SAS 2006)

The introduction of self check outs into supermarkets has bought many advantages to both the supermarket sector and its customers. This technology allows customer to scan barcodes on their won items thus eliminating interaction with supermarket employees. While they are a relatively new concept, having only become wide spread in 2003 they have been accepted as a faster, more efficient and private way to shop. Through self check out systems supermarkets are also able to reduce staff requirements and save money (Goliath 2005)

With the environment becoming an important topic over the last several years it has been essential for supermarkets to meet the demands of both the Government and their customers with regards to addressing environmental issues. This has proved to be both a challenge as well as a business opportunity for the major players in the industry, who strive to try and reposition themselves as leaders in responsible sourcing, sustainability, climate change issues and recycling (Donohue. A 2007). Climate change is one of the greatest challenges facing the world today.

The UK government has a long term plan to reduce emissions by 80% by 2050 (Department of Energy and Climate Change – A Low Carbon UK 2008). The Climate Change Bill and the Committee on Climate Change influence have raised consumer awareness of climate change which put pressure on the supermarket industry to meet their environmental obligations (Department of Energy and Climate Change – Legislation 2008). Many UK supermarkets are now part of a government initiative known as the Waste and Resources Action Programme (WRAP). WRAP works with the food industry is an effort to reduce food and packaging waste.

Retailers who have signed the Courtauld Commitment (a voluntary agreement between companies and WRAP) agree to have absolute wastage reduction by 2010 (WRAP No Date). The Food and Drink Federation (FDF) with its green agenda for food and drink manufactures also play a key role in helping companies reduce emissions and waste as well as cutting the amount of packaging that reaches households (FDF No Date). The Department for Environment, Food and Rural Affairs (Defra) works with the government and consumers in an effort to reduce waste through recycling and composting of household waste (DEFRA No Date).

This has created more consumer awareness and this new found awareness puts pressure on food retailers to meet waste reduction targets . Waitrose currently puts into practice the use of the three R’s (reduce, reuse and recycle) to divert waste away from landfills (Mintel 2008 – Ethical and Green Retailing) Sustainable sourcing has become a very real issue with consumers over the past few years with a demand for supermarkets to ensure that their produce such as fish and meat are from sources that can be replenished.

Another form of sustainable sourcing is for supermarkets to source their produce locally rather than importing from overseas. This has a huge impact on carbon use as well as a significant impact on creating sustainable economies in our local communities (Mintel 2009 - Influence of the Environment on Food Shopping).

Micro Environment

Suppliers Behind its 18,000 different products, Waitrose is supplied by 2500 firms in over 60 countries. The majority of them are small scale and regional producers. Waitrose’s main aim, to offer high quality product, is the base of its plan to source goods from the areas where it trades.

For example, that will show the real taste of British food with its regional variety. Furthermore people will have easy access to buy local food and support its local economy. Regardless of the small or big producers, Waitrose aim to work with decency and respect in long term with its suppliers. It wants to help its suppliers to reach their objectives by ensuring them that it will keep the integrity or quality of the suppliers’ product. For this reason, Waitrose wants its producers to use recognisable and with the best quality ingredients for the food, not a list of chemicals such as stabilisers or preservatives. Waitrose. com. “The Waitrose Small Producers Charter”) To succeed in that approach, the company presented a new Waitrose Locally Produced range, which will aim to offer the best local quality food and great customer service to its customers. The difference between Waitrose and the other UK retailers is the co-ownership of company by its staff, not the public shareholders who only demand for quick and profitable return of their investments. It allows it to make long term growing plans and continuing relationships with its producers in order to face its great customer’s expectations. Waitrose. com. “The Waitrose Small Producers Charter”) In order to prove their support for small local producers, Waitrose teamed up with The Times to create “The Small Producers Awards” in 2001. For example, its first year category winners will receive ? 7,000 in cash, plus access to Waitrose business and marketing expertise. (Waitrose. com. “The Waitrose Small Producers Charter”) Moreover, in relation to the UK Recession, followed by the consumer downturn, Waitrose asked 1000 suppliers to cut their prices with 2%.

The request was addressed mainly to suppliers of branded food and farmers in UK. The managing director Mark Price explained company’s decision with the fall in commodity prices, which makes suppliers’ raw material cheaper. Furthermore he states that the Waitrose’s market growth will lead the suppliers to sustain profit, which they should share with their biggest buyer. Moreover John Lewis Partnership’s decision was forced by the annual report of the company, which unveiled 26% fall in pre-tax profit for 2008 to ? 279. 6m. (Telegraph website, 12/03/09)

Intermediaries By rewarded as the UK’s favourite retailer for 2007 and 2009, Waitrose main aim is to sustain its loyal and respectful relationship with its suppliers and partners. It is the main intermediary of its own branded goods. Furthermore, Waitrose nurture long-term relationships with its suppliers, paying the fair price and helping them to reinvest in their business. It is the most established local sourcing initiatives in its sector. All Waitrose shops have a regional offering, which covers in excess of 465 producers supplying over 1,400 product lines.

In order to ensure its support for UK suppliers and in response to customer feedback, Waitrose has developed new shelf-edge ticketing, which emphasise the county, origin and unique qualities of each product. (JLP annual report 2009) Moreover, Waitrose cooperate with other intermediary companies in order to transfer the produced goods from its supplier to the customers. Its main distributor is the online supermarket delivery company Ocado. It operates mainly in Greater London, covering over 3 million households. Their relationships evolved in 2002 when John Lewis Partnership bought 29% of Ocado’s shares.

In addition, their contract will expire in 2013. Apart from Ocado, Waitrose has established an own online delivery in over 100 stores. (JLP annual report 2009) Financial In difference from the other UK retailers, Waitrose isn’t owned by public shareholders and the City. In stead of cruel shareholders, whose fixed idea is to gain profitable quick returns, Waitrose is a part of John Lewis Partnership, which is owned by its workers. Each year, every partner share company’s profits, which in others retailers go to the shareholders.

This organisational system makes extraordinary commitment and loyalty amongst its labour. Furthermore company could praise itself with partners who worked with it for many years. This system makes its workers to be interested in what they are doing and selling. For that reason the often good remarks of the customers about the customer service are not surprising, because every worker in the local store do in fact own the store. (Waitrose website. “The Waitrose Difference”) Moreover, an interest public fact is that Waitrose holds a Royal Warrant with Her Majesty The Queen.

This means that company is chosen to supply the Royal Family with goods for five years. Moreover, Waitrose held the long-lasting Warrant with Queen Elizabeth The Queen Mother. That is a significant evidence for the great quality that Waitrose has been offering through the years. (Waitrose website. “The Waitrose Difference”) Government As an established responsible and reliable retail company, Waitrose aim to consider and follow government policy. It is in a consistent relationship with any local government, discussing key issues which affect its partners, customers and communities in which it operates.

Furthermore it is an active member of government policy advisory groups, such as Climate Change Leaders Group, British Retail Consortium and Retail Energy Forum. (John Lewis Partnership website, “Engaging our stakeholders”) Moreover, Waitrose cooperate with local authorities during planning and construction of all its new shops. It wants to ensure that its new stores are built responsibly and will operate sustainably in order to diminish its impact on the environment and the local community. (John Lewis Partnership website, “Engaging our stakeholders”)

Lastly, Waitrose and its parent John Lewis Partnership work closely with regulators such as “Environment Agency” and “Health & Safety Executive” to inform that the Partnership do all its best in compliance with the law. In any case of legal issue occur, it respond immediately, and cooperate with the local regulator to resolve the problem as quickly as possible. (John Lewis Partnership No Date, “Engaging our stakeholders”) The Company Waitrose stems from a small grocery shop called ‘Waite. Rose & Taylor’ founded by Wallace Waite, Arthur Rose and David Taylor; the small grocery shop opened for business 1904.

Four years on the founders decided to rebrand the company in 1908 by changing the company name to ‘Waitrose’, which is a combination of two of the founders’ surnames. The Waitrose Company desired changed once again so joined ‘The John Lewis Partnership’ 1937, whereby 160 Waitrose employees became ‘partners ‘or co-owners of the business (Waitrose No Date – The Company). The John Lewis partnership is formed by 70,000 partners (staff) who co-own John Lewis department stores, Waitrose supermarkets, an online and catalogue business (John Lewis Direct-johnlewis. om), a direct service company (Greenbee), three production units and a farm. (The John Lewis Partnership No Date) (John Lewis Partnership CSR Report 2009, Page 5) ‘The Waitrose difference’ Waitrose focuses operation around offering the best quality goods and have adapted their daily producers, to make shopping easier to suit all by offering a distinctive service; such as packing at checkouts, carry to car service and assists to those that required it; it is this that they believe gives them the edge over other supermarkets (Waitrose No Date – The Waitrose Difference)

Waitrose has an exceptional return policy whereby customers will receive their full money back, if they genuinely pursed t a product they didn’t require or a customer is not one hundred percent happy with the product. It is this edge that provides Waitrose with long lasting loyal customers that trust the supermarket they shop in. As well as food products Waitrose offers ‘Branch Extras’ at selected stores; enabling customers to rent wines glasses, beer glasses and fish kettles free of charge as a friendly jester(Waitrose No Date – The Waitrose Difference).

Waitrose commitment to provide outstanding produces and services has been credited with a Royal Warrant from Her Majesty the Queen; Which is a mark of recognition of those that supply goods or services to members of the Royal Family for at least five years(Waitrose No Date – The Waitrose Difference). Employees Waitrose employees are also co-owners and form part of the John Lewis Partnership; the John Lewis Partnership aims to employ exceptional staffs that are dedicated to putting the consumers’ needs first whilst delivering excellent customer service.

The John Lewis Partnership aims to keep the happiness of its employees at the heart of the partnership and uses a blend of five key elements to do this: Work/life balance – employees are encouraged to keep a equal balance of work and play to support this the partnership offers ; flexible hours, career breaks, long leave, a flexible retirement policy . Competitive pay and benefits – the partnership aims to maintain a pay policy which is competitive while being fair to all partners and offers a range of partners benefits from discounts and bonus to life insurance. Filling potential - the partnership gives all their employees the chance to reach their full potential and required all employees to ender go compulsory training. There partnership also allows employees the opportunity for promotion and career development programs. Fair treatment - the partnership treats all its employees fair and provides equal opportunities for all, regardless of age, gender, ethnicity, social background, religion and disability or sexuality. Powered by our Principles (PboP) – these are six principles sets out to inform employees of what is expected from all them; be honest, give respect, recognise others, show enterprise, work together and achieve more (Waitrose No Date – Our Employees) Customers ‘The John Lewis Partnership aims to deal honestly with customers, securing their loyalty and trust by providing outstanding choice, value and service. ’ (John Lewis Partnership CSR Report 2009, pg 4) Waitrose dominates a niche market were its target customers are believed to be affluent with a more flexible disposable income.

They are associated with the middle classes along with high class food and fantastic customer service. Their repeat custom is formed, as the consumer seeks a well established supermarket they can trust and complete their weekly shop in a supermarket that’s driven by high quality fresh food. (Mintel 2009 – Food Retails Waitrose) A loyal Waitrose customer will complete their weekly shop unconditionally every week in there local Waitrose store; however if they need a product unexpectedly they will use a convenient store as a one off it is it nearer in location.

Typical Waitrose customers are considered to be; affluent with a more flexible disposable income, middle to high classes, working professionals and health focused consumers (Mintel 2009 – Food Retails Waitrose). In addition another important factor that adds to ‘the customer’ that shops at Waitrose supermarkets is the location of the stores; as Waitrose stores are based more South/East England and areas that are frequently referred to as ‘posh’, where people are financially comfortable (Mintel 2009 – Food Retails Waitrose).

Waitrose strive to maintain exceptional customer service and are always constantly evaluating their services to unsure they are fulfilling their consumer needs. Waitrose uses a range of formal methods of research and feedback, such as customer surveys, panels, focus groups, online feedback forms and regular mystery shopping to gather sufficient evidence to monitor their customer service and performance necessary action if required (John Lewis Partnership No Date – Customer Service)

Waitrose occupies up to 4% of the UK grocery market, this compares with the largest food retailer in England today is which is Tesco’s who hold a massive 30 % share of the market. In the UK today every ? 1 in every ? 7 of consumer spending is spent in one of Tesco’s stores. Tesco specializes primarily in food and drink with its Value and Finest ranges that we all know well, but it has also become a major player in a range of non-food markets including consumer electrical, clothing, financial services, telecoms, fuel and internet services amongst others.

In 2008, Tesco launched a new ‘Discount Brands’ range, which is geared towards consumers seeking to trade down but not ready to compromise on quality. The new range appears to have halted the drift of customers to Aldi and Lidl. Tesco’s sheer scale means it has been able to lower prices on the back of large volumes. Tesco’s has different types of stores every one of them targeting different consumers, tesco express for example, the smallest one in the range, is designed to be a convenience shop where the costumer can Top-up (Mintel 2009 – Food Retail Tesco).

Other major players are Asda, Sainsburys and Morrisons with Asda taking up to 17% of the market. Asda has a similar range of product to Tesco but opened up the clothing market in supermarkets but presenting its own brand known as George at Asda. Asda, part of Wal-Mart, directs its main focus on price, primarily targeting the lower end of the mass-market although the current climate is increasing demand for discount items from a variety of consumer groups. In terms of consolidated sales, in 2008 the company was the third largest grocer in the UK although when fuel sales are removed Asda moves into second place behind Tesco but above Sainsbury.

What has really set Asda apart from its rivals in the food sector in the UK has been its lack of convenience store activity. While Tesco and Sainsbury’s have attacked the c-store sector very aggressively, Asda has been happy to maintain its larger big-box stores enabling them to maintain a presence out of town. (Mintel 2009 – Food Retail) Waitrose occupies a relatively small but nevertheless very strong portion of the market with its closest supermarket being Marks and Spencer. Both of these supermarkets aim at a quality rather than quantity market with prices generally being higher than the larger supermarkets.

Marks and Spencer holds approximately 3. 9% of the grocery market. The main differences between of the two chains is that Waitrose holds 18% of organic food ranges and sells none Waitrose brand products whilst Marks and Spencer sells just its own made brand. Marks & Spencer is the UK’s leading non-food retailer, but food has long been a part of its heritage. The company trades from a premium positioning, emphasising quality and value. Dry groceries are only a small part of the offer, with the company instead focusing on ready prepared meals, fresh items and foods for special occasions.

The food range is available from specialist Simply Food convenience stores as well as the larger general merchandise outlets. (Mintel 2009 – Food Retail – Marks & Spencer). In the food retail industry we find that there are two different orientated companies, price orientated and customer orientated. Waitrose aims at the customer orientated market and this has generally held them in good stead. The recent recession was a testing time for the company but their strong brand name appears to have weathered the storm and it has successfully retained its position.

Media Waitrose takes its promotion and advertising seriously and has a very organised and wide range of media publicity. On they own website they have options to find press releases and press packs and it is optional to sign up to receive daily updates regarding Waitrose. They have affirmed their commitment by appointing Grand Union as the lead digital agency for Waitrose. The agency will relaunch the brand's website Waitrose. com, as well as produce digital marketing for Waitrose Deliver, the brand's online grocery shopping service.

Waitrose uses television and advertising extensively to promote its products and services and has announced recently that celebrity chefs Delia Smith and Heston Blumenthal will join forces in a collaboration that will see them appear in TV, press and online advertising for the grocer (Waitrose 2009) The company website now provides an option to find all the recipes that have been used on the show. In addition John Lewis, the stores sister brand, has launched a glossy customer magazine, which will be made available in all Waitrose stores, with an initial print run of 500,000.

The launch is backed by an in-store marketing campaign (Mintel 2009 – Food Retail).. Publics The company takes its public and social responsibilities very seriously and its basic philosophy is as follows: “As a responsible retailer, owned beneficially by our employees, we believe that the long-term future of the Partnership is best served by respecting the interests of all our stakeholders: Partners, customers, suppliers and the wider community. We look actively for opportunities to improve the environment and to contribute to the wellbeing of the communities in which we trade. (Waitrose Feb 2010 – Press Centre) In 2008, Waitrose was the first UK food retailer to begin using Anaerobic Digestion (AD), a process which eliminates the need to send waste food to landfill sites. (Waitrose Feb 2010 – Press Centre). Waitrose commits at least 1 per cent of pre-tax profits to charitable and community projects. They are also committed to providing support to overseas disasters through the British Red Cross and are involved in over 100 projects involving 16,000 people in South Africa; rolled out to Ghana and Kenya.

Their target is to increase activities in the field referred to above and to actively encourage participation in Sport and physical exercise in the UK. They have already diverted 50 per cent of their total operational waste food away from landfill and their goal is to divert 95 per cent by 2013. Waitrose is set to launch an environmental initiative inviting customers to suggest eco ideas that it can implement into the business. "Your Green Idea" was launched on 15 March 2010, following a soft launch of the website.

Their own brand line carries over 18000 products including 117 lines in their ‘Perfectly Balanced’ range which promotes a fresh and healthy lifestyle for their customers (Mintel 2009, Food Retail UK – Waitrose). Waitrose differentiates itself strongly from other supermarkets. They have a more defined range of products with focus on high quality food and up-market products.

They are extremely customer orientated and place great emphasis on customer service as one of their unique selling points (Mintel 2009, Food Retail UK – Waitrose). According to a survey by Which Waitrose is the leading supermarket chain in food quality and range. Only ASDA was rated better than Waitrose for value for money (Which 2008) Having owned their own farms for over 70 years Waitrose prides itself on working with its farmers, growers and suppliers directly to ensure that only the highest quality food from the most ethical and environmentally friendly sources reach they consumers.

This is supported by its own inspections and farm assurance schemes (Waitrose No Date – Origin of our Food). Waitrose was the first ever winner of the title Organic Supermarket of the Year and have over 16 awards for wine purchasing and retail. These are just some of the many awards that have been claimed by Waitrose over the past several years (Waitrose Various Dates – Press and Awards). Waitrose also holds a Royal Warrant with Her Majesty the Queen to supply goods to members of the Royal Family (Waitrose No Date – The Waitrose Difference).

Waitrose was the first to introduce self-scanning (Quick Check) in some stores, which demonstrates a willingness to innovate and offer a high service and reducing costs. Recent technological innovations that have been introduced in stores include: printers which provide price labels and barcodes for any stock that needs to be reduced and hand held devices available to shoppers to use as a self scanning system. (Thompson. S 2010). The partnership with John Lewis gives Waitrose tested supplier links and economies of scale. Waitrose would struggle to achieve the success it has today without the help of the partnership.

The partnership also functions as a conglomerate therefore diversifying risk. The association with John Lewis improves Waitrose’s reputation (John Lewis Partnership No Date). Waitrose has a strong culture of co-ownership due to the fact that it’s not owned by shareholders but owned by everyone who works for the partnership. Their staff are generally well motivated because they are partners and profits ultimately come back to them. Various other benefits (such as pension schemes) are what make Waitrose a good employer, with satisfied employees. Waitrose No Date – The Waitrose Difference) Internal Weaknesses The distribution of the Waitrose stores is quite weak, especially in certain areas such as the south west of England, Wales, North-West of England, and Scotland. However their acquisition of 13 Somerfield stores has lead to an expansion of distribution into the North of England and Wales (Chesters. L Property Week 2009) Own labels are the main segment within their product mix. Waitrose is very dependent on this product range with a majority of sales coming from its own brand.

Larger diversification would be helpful to gain better strength in the market (Mintel 2009 – Brands: Are Supermarkets Squeezing Out Brands) Waitrose also has the weakness of only supplying high quality, high price products. This could be seen as a negative factor due to the exclusion of an entire demographic of people in the lower class of the population who could be potential customers. However they have recently made attempts to increase their target demographic through the introduction of an economy range branded as Waitrose Essentials.

This shows they have recognised a potential for expansion and this can lead to further developments in the future (Finch, J March 2009) External Opportunities Further expansions throughout the UK would be useful to raise the importance of the firm, gain market share and, weaken the competitors buying their own branches and improving e-commerce. Also further acquisition of competitor stores such as the Somerfield stores purchased by Waitrose would lead to increased market share (Chesters. L Property Week 2009). Waitrose has an elaborate online shopping facility in place; however, this as well is subject to regional limitation.

Expansion of distribution channels for online shopping facilities would help Waitrose get their products to customers who live outside areas where branches are located. Setting up new partnerships with other companies will grant higher incomes because both companies could be able to buy larger amount of products with cheaper prices. New Partnership could also help Waitrose to diversify into other non-food products other than those that John Lewis already offers. Waitrose has recognised this opportunity (All Business, No Date)

A major part of Waitrose strategy on sales has been built on the sale of premium own brand products. Marks & Spencer, Tesco and Sainsbury’s have identified the sales of premium own brands as a lucrative segment with high margins and all three have a wide selection of premium products in store. Tesco and Sainsbury’s advertise on price which gives the perception of their products still being of a lower quality than those sold at Waitrose (Mintel 2008 - Premium Foods - UK) The recession while perceived to be coming to an end still has the potential to generate many problems for Waitrose.

When interest rate rise this year people will have less disposable income and may start to buy cheaper products and so shifting from Waitrose to other cheaper retailers. This could result in a loss in consumers’ loyalty and this would give direct advantages to competitors (Mintel 2009 – Food Retail) Also due to the weakened sterling there is a possibility that overseas groups could enter the market and increase competition generating the reduction of incomes and market share for each player (Keynote 2010 – Food Industry)

Conclusion

The supermarket industry has gone through some important changes over the past few years. From our analysis of the macro-environment we can see some main issues have affected the food retails sector. Environmental issues are now at the forefront of everything companies do, with consumers not only demanding more for their money but more for the environment as well. Technology has seen the internet open up a whole new way of shopping and while it’s still the early stages there is great promise for the internet as a medium for food purchases. Society is changing in a way that will affect how people shop in years to come.

Now with more people from different cultural backgrounds residing in the UK than ever before supermarkets must act fast to meet the new needs of a changing society. New legislation has stopped many key players in their tracks with plans for expansion as a new financial ombudsman now has the last word on whether a supermarket can expand in a certain location. The recession has had a major impact of the supermarket sector over the past couple of years. It has been the driving influences to a lot of changes which have been occurring in most of the major food retailers. While the supermarket industry is relatively recession proof their customers are not and this has seen consumer trends of trading down and buying less. An analysis of the internal structure of Waitrose shows us a very strong company with high moral grounding and a passion for customer service. They may not have such large market share as the ‘big four’ but they are growing at a rapid pace and with the addition of their new ’Essentials’ range to their portfolio they are preparing to enter a whole new main stream market. They pride themselves on having great relationships with employees and suppliers and are at the forefront of environmental issue such as sustainable ethical sourcing.

Waitrose is a company that is heading in the right direction and while they are not without their weakness’s, distribution being a key factor, they are adept at recognising where improvements can be made and building towards a higher market share.

Don't let plagiarism ruin your grade

Run a free check or have your essay done for you

Check my essay Hire Writer