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Introduction
The food industry is one of the greatest economic contributors in the United Kingdom. The vast technological knowledge in the nation has enhanced the operations within the food delivery industry. Today, people can order food through the online platform and monitor the preparation and the delivery of the same (Roy 2009). The delivery of food to people in the comfort of their offices or homes comes handy in the current world.
The companies within the food industry face various challenges and opportunities. The food industry in the UK is undifferentiated; therefore, organizations in the industry face similar situations (Bourlakis, Vlachos & Zeimpekis 2011). The aim of this paper is to analyze the key internal and external drivers that influence the food delivery industry in the United Kingdom.
Buyer Power
The power of buyers within the food delivery industry in the UK is considerable. The consumers are quite knowledgeable, thus giving them the power to control the industry. Additionally, the concerns for a healthy diet has made consumer quite selective and careful with the kind of foods they partake. Wide ranges of companies that offer similar products flood the industry. As such, consumers can switch from one company to another without encountering any risks.
The technical expertise in the nation allows small business owners to make profits and achieve stability in the industry with ease. The availability of a variety of choices grants the customer the bargaining power over the sellers. Customers are also price sensitive (Spedding, 2009). The availability of information via the internet and the print media makes consumers quite knowledgeable. Organizations must trend carefully in a knowledgeable society to meet the changing consumer needs.
As a result, companies keep their prices low to attract buyers and achieve reasonable productivity. Online cooking lessons encourage consumers to cook at home. As such, companies must maintain their prices at a reasonable value to avoid giving consumers reasons to eat homemade foods (Dornfeld & Linke 2012). Consumer bargaining power helps balance the industry by determining the pricing of goods and services. Additionally, the buyer power limits extravagant acts from insatiable business executives, thus maintaining the integrity of the industry.
Threat of Entry
The threat of entry is one of the drivers of the food industry in the United Kingdom. The threat of entry is moderate in the industry because of the many challenges that affect new entrants. Investing in the food industry requires high financial stability because of the external forces affecting the industry. The United Kingdom relies on imports for food supply. Therefore, food delivery companies must have a substantial amount of money to acquire the right products from around the world.
The changes in climate and the food security issues around the world make it even harder to venture into the food industry (Dornfield et al. 2012). Businesses incur high fixed costs in the food industry than in other industries. Another barrier to entry in the market is the loyalty to existing brands. People know companies that produce suitable food products for their health needs. Therefore, it becomes hard for a new entrant to gain recognition and affect the market balance of the existing firms. However, the lack of economies of scale in the industry makes it possible for small organizations to profit (Handfield & McCormack 2008).
The rapid growth of the new entrants poses a competitive danger to the existing brands. Customers are price-sensitive, and it makes the threat of entry quite substantial in the food delivery industry. As a result, companies have become quite responsible in their production to ensure that the products suit the changing needs of consumers. Additionally, companies price their products fairly because of the high levels of competition in the industry (Spedding 2009).
Substitutes and Compliments
Substitution is a great driver of the food industry in the United Kingdom. The industry faces the threat of substitution from home-cooked food. People are more comfortable eating at home following the rising concerns of health diet around the world. Additionally, the idea of family developments has created a need for people to have homemade meals more often. On the other hand, the products in the food delivery industry are not differentiated.
As such, consumers can get similar products from many outlets, thus raising the threat of substitution (Roy 2009). The similarity in food production and the buying power of consumers forces the companies in the industry to price their products within the same range. The pricing technique ensures that consumers can get food products and services from a wide range of facilities without incurring extra costs. The threat of substitution is a great market controller in all industries (Hill & Jones, 2010). Additionally, the threat forces companies to become more innovative and committed to serving the public. The food production industry is a rather sensitive industry; therefore, the threat of substitution helps to regulate the behaviour of investors within the industry for the common good.
The Supplier Power
The United Kingdom food industry faces moderate supplier power. The large companies experience low supplier bargaining power because they can negotiate product prices with the suppliers. A few large corporations that suppress the progress of small institutions dominate the supply chain. Consequently, smaller institutions cannot negotiate product prices like the major companies in the industry do. The imbalance in the power of suppliers in the industry affects the competitive nature of the industry.
The big corporations in the food delivery industry can lower their prices considerably and remain profitable (Nee, song & Ong 2013). On the other hand, the smaller companies in the industry must maintain high prices on their products to cover the supply costs. As a result, the large business corporations cripple the small corporations, thus keeping the balance of power on the upper side.
Economic Drivers
The shifting nature of the economic power around the world affects the stability of the food delivery industry significantly. Food delivery companies thrive in a stable economy because people have money to spend on outdoor food services. On the other hand, during a recession period, people focus on discretionary spending. The economy of the United Kingdom keeps shifting around the year (Nee et al. 2013).
Additionally, the dependence on food product importation makes the nation vulnerable to external economic problems. The declining agriculture around the world as well affects the economic stability of the food industry and in turn the food delivery companies. The shifts in economic conditions affect the pricing and the profitability levels of the companies within the industry (Passos & Ribeiro 2010).
For instance, during a recession period, large companies invest in advertising and other marketing techniques to draw consumers back to their businesses. Small companies lack the financial power to invest in high-level marketing techniques; therefore, they experience negative returns during the recession period. The large corporations lower their prices during poor economic conditions, thus attracting consumers back to their companies. In contrast, lowering prices for small companies is detrimental and affects the profitability levels of the companies negatively (Roy 2009). However, the UK does not face such extreme economic downside; therefore, the economic drivers do not pose such a great danger to the industry.
Regulation Drivers
The food delivery industry in the UK does not face many political and government regulations. However, the health regulations affect the companies in the industry a great deal. The rising concerns about health issues arising from poor diets have made restaurants and other food companies to invest in high-tech products. As such, companies tend to price their products higher than normal because of the high costs of production.
The production and distribution of food products require the high financial ability on the part of the company (Hill & Jones 2010). The healthy requirements have made it impossible for small companies to thrive in the industry, thus raising the profitability levels of existing brands. Other than the health regulations, the industry has managed to sleep away from other governmental regulations because of its nature of operations. Companies in the food industry receive minimal interference from the government in the pricing of their products (Roy 2009). The pricing of the products is determined by the consumers’ willingness and the entrepreneurial power to produce the desired products.
Technology
Technology has had significant impacts on every sector of life in the current world. Technological advancements benefit the food delivery industry a great deal. Today, small business owners in the food delivery industry do not have to lease expensive buildings to carry out their activities. People only need the kitchen space from which they can run the rest of their activities. Additionally, most companies in the United Kingdom have shifted to home deliveries (Hill & Jones, 2010).
The customers can order and monitor the progress of the food preparation via the internet, thus improving service delivery. The customer feedback system has also benefited from technological developments. Customers can comment on the quality of services via the internet. However, the availability of online transactions allows customers to access a wide range of service providers (Spedding, 2009).
The competition over the internet is quite intense in comparison with the real world. Therefore, companies must invest more in marketing techniques to keep their market share and control competition. Additionally, regardless of the many expenses of online transactions, companies must maintain low prices because customers have many options from which to choose.
Social-Cultural Drivers
The changing demographics and multicultural nature of the United Kingdom has a significant impact on the food delivery industry. The increased travel and the interaction between different cultures require companies within the industry to offer a wide range of products. Additionally, the media encourages people to indulge in different types of foods. The value system of the society is changing, and so is the wealth status of people (Roy, 2009). The middle-class people are becoming more stable, thus raising the demand for outdoor produced foods. Therefore, companies must adapt to the new social requirements for sustainable development.
Reference List
Bourlakis, M, Vlachos, I & Zeimpekis, V 2011, Intelligent agri-food chains and networks, Wiley-Blackwell, Chichester, West Sussex Ames, Iowa.
Dornfeld, D & Linke, B 2012, Leveraging technology for a sustainable world proceeding of the 19th CIRP Conference on Life Cycle Engineering, University of California at Berkeley, Berkeley, USA, and May 23-25, 2012, Springer, Heidelberg New York.
Handfield, R & McCormack, K 2008, Supply chain risk management, minimizing disruptions in global sourcing, Auerbach Publications, New York.
Hill, C & Jones, G 2010, Strategic management theory: an integrated approach, South-Western/Cengage Learning, Mason, OH.
Nee, A, Song, B & Ong, A 2013, Re-engineering, manufacturing for sustainability Proceedings of the 20th CIRP International Conference on Life Cycle Engineering, Singapore 17-19 April, 2013, Springer, Singapore, New York.
Passos, M & Ribeiro, C 2010, Innovation in food engineering new techniques and products, CRC Press, Boca Raton, FL.
Roy, D 2009, Strategic foresight and Porter’s five forces: towards a synthesis, GRIN, München.
Spedding, L 2009, The due diligence handbook corporate governance, risk management and business planning, CIMA, Amsterdam Boston London.
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