Tesco in the industry

  When a company wants to open a new business, it needs to consider about the porters 5 forces: rivalry, threat of substitute products, threat of new entrants, bargaining power of suppliers and bargaining power of customers. 

  Tesco is one the largest supermarket company in the UK.

  The intensity of competitive rivalry of Tesco is extremely high. There are big supermarkets compete with Tesco such as Asda, Sainsbury’s and Waitrose. They are competing over the products and prices.

  There are threats of substitute in the market. In order to minimize the problem, Tesco tries to produce the best quality of products with the best prices for people to maintain the brand image.

  The barrier for new entrants in the grocery market is high. As Tesco is a big company, it has the loyalty of customers; new companies need to have huge capital to invest into their companies. It is hard for new companies to enter the market. In order to compete with Tesco or other big supermarkets such as Sainsbury’s, Asda… new companies should differentiate them with lower prices or high quality of products. This is the reason why Tesco has low threat of new entrants in the industry.

  The bargaining power of buyers is high. Customers can switch to other substitute such as Sainsbury’s if the products and prices do not satisfy them.

  Finally, the bargaining power of suppliers is low. Tesco can dictate the price of suppliers. The suppliers will lose their chance with a large supermarket if they disagree with the price as Tesco set out.