This research paper presents an analysis of UK's supermarket industry using the STEEPLE model. The paper offers good insight on how to apply the STEEPLE model in analyzing the external business environment

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THE UK SUPERMARKET INDUSTRY
By
SAMUEL GIBBS

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The UK Supermarket Sector
Introduction
The supermarket is one of the main economic sectors in the United Kingdom. This paper
presents a STEEPLE analysis on this sector with an aim of establishing its current status. The
analysis reveals that the UK supermarket sector has encountered uncertainties, in the recent
past, caused by declining consumer spending, globalization, growth of online shopping, slowed
economic growth, negative balance of payment, high inflation and unemployment and
development of a stringent regulatory environment.
STEEPLE Analysis
Social
The social environment encompasses lifestyle and demographic factors that are likely to
affect the performance of the industry. Decline is consumer spending power is one of social
factors that have had a major impact on the UK supermarket industry. Performance of
supermarkets is highly dependent on consumer’s income and willingness to buy. High rate of
inflation and unemployment has reduced the spending power of UK consumers. Consequently,
consumers are spending less on supermarket products. In January 2014, Morrison Supermarket
issued a profit warning sighting the declining spending power of consumer as one of the chief
causes for the decline in the supermarkets profits (Butler, 2014). Globalization is another social
factor that has influenced the UK supermarket industry. Globalization is a phenomenon where
world societies become increasingly interdependent and unified (Hanley, 2011). Globalization
has affected the UK supermarket industry both directly and indirectly. Globalization has exposed
UK supermarket to competition from foreign multinational such as Asdas. Globalization has also
affected employment rate, cost of living, equality and inclusion within the UK society. This has
an indirect impact on supermarkets.

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UK Inflation Rate
Source: Office of National Statistics
Technological
Online shopping is one of the technological factors that have made a momentous impact
on the UK Supermarket industry. Statistics indicate a substantial increase in online transaction
within the industry. According to Butler (2014), online shopping accounted for over 15% of UK
grocery sales in the month of December 2013. This percentage translates to revenues worth
£900 million. Online sales have been driven by advancement of technologies such as smart
phones, tablet computers, which customer use to buy from any location. Online shopping has
led to an introduction of new business models such as convenience stores, delivery service and
virtual pure plays (Yousept & Li, 2004)
Economical
Demand for supermarket products has gone down due to inflation. According to Bulter
(2014) food inflation stood at 2.5% in the month of December 2013. Consequently, customers
purchased few food products in order to save money. Morrison and Tesco recorded declines in
sales of food products. High prices of petrol have also encouraged online shopping. Customers
have shifted to online shopping in order to save money from the purchase of petrol. Morrison

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main store recorded a decline of 5.6% while its convenient stores have recorded significant
growth in sales. There is a positive outlook for the industry as, in 2013, the country recorded the
lowest unemployment rate in five years. The market structure of the UK supermarket industry is
that of monopolistic competition. The industry comprises of numerous competitors with distinct
brands and services. Competition in the industry is fierce. The market is dominated by five
major players; Tesco, Safeway, Morrison, Asda, and Sainsbury. The five players control 72.5%
of the market share (Seely, 2012).
Environmental
This element is concerned with how environmental issues affect the performance of
supermarket. Environmental consciousness is one of the factors that have affected the
operations of supermarket. The UK population has become very conscious of the environment
and environmental issues (Moncure & Burbach, 2013). This consciousness has been brought
about by high levels of education and concerns generated by environmental issues such as
global warming. Consequently, consumers are exerting pressure of business organization to act
responsibly towards the environment. This implies that supermarkets have to incur additional
cost in making their systems and process environmentally responsive, maintain a favorable
image among customers. Some supermarkets have gone a step further and are using

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environment issue to create a competitive advantage. These firms are investing in technologies
and systems that protect the environment in order to establish a favorable position within the
market.
Environmental laws and regulations are also significant factors in the supermarket
industry. Environmental phenomena such as global warming have elicited concern from
governments and other regulatory authorities. This concerned has resulted in the establishment
of stringent environmental laws and regulations. Consequently, supermarkets are incurring high
costs in trying to ensure that they comply with laws and regulations.
Political
The political element of the framework is concerned with how political regimes within the
country affect the performance of the supermarket industry. Legislations are the most significant
political factors that affect supermarket industry. In the recent past, the government has enacted
various legislations that have an impact on supermarkets. Grocery Codes Adjudicator Act 2013
is one such legislation. The Grocery Codes Adjudicator Act 2013 was established to control the
interaction between supermarkets and suppliers (The UK Government, 2013). It seeks to
ensure that large supermarkets do not abuse their power over suppliers. The UK government is
also planning to introduce legislation for curbing price wars among supermarkets (O’Brien,
2013)
The political environment can also affect supermarkets indirectly by influencing the
social and economic environment (Deloitte, 2012). The political environment has a significant
influence on economic policies such as government spending and taxation, and social policies
within the country. This implies that the political environment has the potential of influencing
social and economic factors that affect supermarkets.
Legal
The legal environment comprises of laws and legal matters that have the capability of
affecting the operations of supermarkets. There are numerous laws that affect supermarkets

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including antitrust laws, capital market laws, environmental laws, labor laws, and food and
safety laws among others. Supermarkets have to comply with these laws in order to avoid
adverse consequences such as fines, deregistration, imprisonment of staff, and many others.
Ethics
Ethics refer to behaviors that acceptable within a given society. Unlike laws that are
founded on legislations and statutes, ethical principles are founded on societal values, norms
and beliefs (Fox & Vorley, 2004). Supermarkets have an obligation to adhere to the ethical
principles of societies in which they operate. Food wastage is one of the ethical issues that have
confronted supermarkets in the recent past (Smithers, 2013). Supermarkets have been
subjected to increased pressure in order to reduce food wastage.
Unhealthy food is another ethical issue that has confronted supermarket. Supermarkets
have faced significant criticism for promoting the consumption of unhealthy foods through
advertisements (Burns, 2012). Today, supermarkets are under pressure to reduce consumption
of junk foods. Recently, Morrison supermarket had to substitute sweets with fruits at the exit
points of the supermarket’s stores.
Linkages and Evaluation
There are significant linkages between the STEEPLE factors. For instance, consumers’
spending power, which is a social factor, is influenced by the economic and political
environment. Similarly, economic factors such as inflation and unemployment rates are
influenced by political factors such as monetary policies and development policies. The political
environment also has a significant influence over the legal issues that affect the supermarket
sector. The main significant factors affecting the supermarket industry are political and
economic factors. These factors can be considered critical because they have a substantial
effect on operations of supermarkets and other STEEPLE factors. The political and economic
factors influence legal issues such as taxation, social issues such as income trends,
environmental issues such as environmental laws, and many other factors.

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How Human Resource in the Supermarket Industry has been influenced by
Environmental Contexts
Human resource management refers to activities involved in the recruitment, hiring,
compensation and development of employees. It is an important facilitating function in all
organization. This section describes how human resource management practices within the
supermarket sector have been influenced by the environment forces within the sector.
Example 1: Strategic HRM at Tesco
Strategic human resource management (SHRM) is one of the practices that have been
motivated by the environmental forces operating in the supermarket industry. As the STEEPLE
analysis reveals, supermarkets are operating in a high level of uncertainties due to high
inflation, high unemployment rates, globalization, low economic growth, and declining spending
power of consumers. Consequently, organizations have to established ways of entrenching their
position within the declining market and competing against fierce rivals. Supermarkets are under
pressure to reduce cost and enhance their appeal, in the market. SHRM is one of the
approaches that supermarket are using to reduce cost and enhance their position in the market.
SHRM is a concept that focuses on using the organization human resource in realizing
the firm’s strategic goals (Caliskan, 2010). This concept seeks to use the organization’s human
resource to create a competitive edge. The SHRM concept is founded on the belief that
employees can be a significant and sustainable source competitive advantage (Shaikh, 2012).
This is because human resource strategies make it difficult for other organization to replicate as
they involve the interaction complex elements such as organizational cultures and values.
Supermarkets are now using their human resources to develop specific competencies that help
them to compete. Tesco is one such supermarket.
Tesco is among the largest and oldest supermarkets in the United Kingdom. The
organization is largest private employer in the UK (Wilton, 2010). In Tesco, the human resource
is considered the most valuable asset of the organization. Tesco believes that the success of

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the organization depend on the people they work with and the people who shop on the
organization (Wilton, 2010). This statement reveals the central role given to human resource
within the organization. Tesco has invested a lot of resource in training and development of
employees. Tesco believes that the best way of getting the highest return on investment made
on employees is through training (Gulyaz, 2011). Tesco has placed a significant emphasis on
training and managing the development of its employees. Tesco has developed a number of
training programs for its operational employees including; introduction training; first serve
training; hygiene training, and multi skill training (Gulyaz, 2011). The organization has also
developed training programs for managers including core skills; the emotional cycle change
program; team building; manning resistance; plan-do-review program; coaching and feedback,
and many others.
Another initiative by Tesco in order to ensure that they develop an effective workforce is
providing competitive pay and benefit packages (Wilton, 2010). Wages and benefits are
extrinsic motivational factors for employees (Nohria, Groysberg, & Lee, 2008). Tesco offers a
number of benefits including paternity and maternity leaves, shift swaps, job shares, and career
breaks. The firm has share ownership scheme that has shared out £220, in March 2013. These
benefits and reward factors enable the organization to attract and retain the best talent. Tesco
has also developed various initiatives for empowering their employees. Developing mechanisms
through which employees can share their views with the management team is one of these
initiatives (Tesco Corporation, 2011). This initiative has enabled Tesco to enhance
innovativeness by harnessing diverse views of employees. It has also enhanced level of
employee motivation by developing a sense of ownership among employees. When employees
are given an opportunity to make a significant contribution towards the organization, they tend to
cultivate a strong feeling of ownership and belonging. Tesco has also established a relationship
of partnership with the employees’ union in order to make optimal use of the human resource
(Wilkinson, 2010). Many organizations are often unable to make optimal use of their employees

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because they adopt an adversarial relationship with unions. Consequently, these organizations
are engaged in regular conflicts with employees, which have a significant impact on productivity.
Example 2: Downsizing at Waitrose
Another human resource practice that has been influenced by the environmental context
is downsizing. Downsizing refers to deliberate actions by the organization to reduce the scale of
its operation in order to improve effectiveness and efficiency (Ritchner & Ahlstron, 2006). UK
supermarkets are opting to shift from large scale supermarket store to small scale local stores.
This trend is motivated by rapid expansion of online shopping within the UK market. According
to Bartholomeusz (2014), the growth of online shopping in the UK has stunned players within
the retail industry. Retailers are now focusing on developing IT platforms and delivery channels
associated with the online business model. This model favors the establishment of convenient
stores as opposed to mega supermarket. One of the supermarkets that have been affected
significantly by this trend is Waitrose.
According to Finch (2008), Waitrose was planning to downsize its operations by
establishing new half-size stores in market towns. The new stores would concentrate on
providing fresh food. Witrose move is intended to improve the organization efficiency in
delivering services to online shoppers. However, the move has a significant impact on the
organization’s human resource. It implies that the organization has to develop a lean and highly
fragmented workforce.
Conclusion
The supermarket sector is a critical component of the UK economy. The sector provides
employments to millions of people and makes significant contributions to the economy. This
paper has analyzed the current status of the UK supermarket status using the STEEPLE
framework. The analysis revealed the UK supermarkets are operating in high levels of
uncertainty brought about by diminishing spending power of consumers, globalization, growth of
online shopping, high inflation and unemployment, increased environment awareness and

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regulation, as well as, a stringent regulatory environment. This environment factors have led to
the development of various human resource practices including strategic human resource
management and downsizing.

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