Pricing Competition In British Retail Sector

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Pricing Competition in British Retail Sector

Table of Contents





Literature Review5

The Role of Competition7

The Forces of Retail Competition9

Research Methodology10

Research Method11



Research Strategy13

Literature Selection Criteria13

Search Technique13

Keywords Used14

Theoretical Framework14

Gantt Chart14




Pricing Competition in British Retail Sector



This paper presents a proposal on the topic of relationship between UK retailers and their suppliers in the overall context of competition in the retail trades. With the emergence of enabling internet technologies and increased competition between UK supermarkets has led Tesco and ASDA to develop grocery operations online. The objective of this paper is to evaluate and present best practice strategies employed by major retail organisations concerning these deployments. ASDA avoided head on competition with Tesco nationwide because to do so would have required enormous investment in depots fated to operate below break-even, thereby compounding losses. This provided Tesco with the opportunity to acquire market share cheaply.


The aim of this paper is to be able to arrive at conclusions regarding the efficiency and welfare outcomes of this competition, and thus to allow us to assess whether or not the community as a whole benefits from the system of retailing which we have in the UK at the present time.


The objectives of this paper is to:

Highlight the importance of price competition for British retail stores.

To address the factors that drive this pricing competition

To devise strategies catering to the needs of British retail stores in this age of globalised competition


Consolidation is regarded as a driver for price competition in the UK grocery market, as economies of scale and efficient distribution allow aggressive pricing strategies based on the supply of petrol in the UK (Office of Fair Trading, 1998). This is evidenced by the strategies of the major retailers, which all place “value” equations at the core of their respective competitive strategies (IGD, 2004).

Literature Review

Of the two leading UK supermarket operators, Tesco has proved to be the most successful in implementing its internet strategy, with achieving online sales of £577 million and profits of £12 million during 2003/04 (New Media Age, 2004). It is important to note of course that this profit has been achieved after sustaining high start-up costs. Tesco's online success is especially significant because it has been achieved initially using a store-based operating model, as opposed to the warehouse-based model, which was the perceived wisdom of the time.

The literature surrounding online grocery development tends to focus on the notion that the internet is a powerful enabling technology (Porter, 2001). This is predominately a classical systems view of online grocery originating from a dominant technological perspective. The classical systems perspective suggests that current E-Grocery models, used to achieve commercial success, are firmly rooted in application of the technology to achieve a first mover advantage. Subsequently, constant technological innovation is required to sustain a competitive advantage. Much of the literature to date (Porter, 2001; Amit and Zott, 2001; Turban and King, 2003) has at its ideological base the concept that firms think they can function externally and independently to the system (environment) that they ...
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