Threat of new entrants There are barriers to entry such as economies of scale and government regulations. Existing companies that can diversify into supermarkets are a threat. Virtual supermarkets such as Amazon Pantry have less barriers to entry - mobile defence tactics could be used such as an improvement to delivery times. Apps and services that connect producers with consumers are becoming increasing popular partly due to being more ethical. The big four can retain customers by increasing the amount of money dairy farmers earn per litre of milk.
Market attractiveness of 'the big four' supermarkets Industry Rivalry Competition within the big four supermarkets with Tesco as the market leader. Sainsbury's, Asda and Morrisons are market followers. Aldi and Lidl's market share is increasing through their use of offensive marketing tactics. Market nichers such as Waitrose and M&S food are more likely to be competiton in a strong economy or around christmas. Virtual supermarkets such as Amazon and Ocado are putting pressure on brick and mortar supermarkets to offer a faster and more technologically advanced online delivery service.
Bargaining power of suppliers Suppliers such as farmers do not have very much bargaining power as their products are readily available elsewhere. Organisation such as Unilever have a large bargaining power over the big four supermarkets as they supply products that are harder to replace. Brexit could lead to further arguments over price between supermarkets and suppliers. 'Shrinkflation' is a way for suppliers to increase the price of a product by changing its size. Stocking too many of these products may lead to a bad reputation for supermarkets. To lower the bargaining power of suppliers outside the UK the big four could increase their UK suppliers and benefit from the publicity of offering 'British' products in a fortress defence.
Figure 2: (Farmdrop, 2017).
Bargaining power of buyers Ethical shopping is a buyer hot button that is growing in momentum along with ethical shopping campaigns and websites ranking the ethics of supermarkets. The big four supermarkets do not place very high in these statistics. As ethical shopping grows in value as seen in figure three, the big four supermarkets should not only become more ethical but also promote that fact. To increase the loyalty of their customers through position/ fortress defence, the big four could develop unique strategies for its different market segment. Figure 3: (Ethical Consumer, 2016).
Figure 1: Adapted from: (Kantar, 2017).
Expanding and promoting own brand ranges would also lower the bargaining power of suppliers - a promotion on own brand yeast extract may deter a price increase on marmite.
Threat of substitutes
The switching cost for supermarkets is low meaning that the big four supermarkets need to make switching harder by increasing the value of loyalty schemes. As seen in figure four, 82.4% of consumers are more likely to shop at stores with a loyalty program. Accessibility is a large factor of why customers shop at a certain store. The big four could introduce student shuttle busses to create ease of access. Online technology also increases accessibility therefore the big four should invest in their future to stay ahead of other supermarkets. Aldi and Lidl use offensive strategies such as cheap copy-cat brands. Counter offensive defence could mean that the big four promote items you can not buy in other supermarkets.
Figure 4: Adapted from: (Graham, 2014).
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