Business

The profitability of the UK Supermarket industry is a product of several different industry factors which will be analysed using the Porters Five Forces model. Each of these will be considered in turn. The first four all feed into the ultimate fifth force of competitive rivalry.

Threat of Entry
The threat of entry in the UK supermarket industry is relatively low increasing the profitability levels for those within the industry. High capital requirements in terms of buildings and infrastructure for logistics and distribution make it hard for new competitors to enter the market.

Threat of Substitutes
Substitution options are also relatively low which means that UK supermarkets do not suffer considerable price pressure. One of the main selling points for the UK supermarket is that it allows consumers to do all food shopping in one place. Certain aspects of the shop such as meat can be substituted for example at the butchers, but the ultimate one stop convenience is not subject to substitution.

Power of Buyers
Although there are a high number of consumers, buyers are able to swap their choice of supermarket very readily. Based on this the UK supermarket industry is in a constant position of trying to gain and maintain its customer base.

Power of Suppliers
UK supermarkets have, in most cases got several supplier options giving the a high level of power. Certain key items however may be subject to pressure from suppliers and allow certain supermarkets to maintain a competitive edge over others.

Competitive Rivalry
The UK supermarket industry is relatively mature and there are high fixed costs meaning that it is a highly competitive market that is very price sensitive. It is not however, as price sensitive as other countries allowing for a higher profitability level.