The credit crunch has brought about a price slashing war in the food sector of superstores. Tesco has already reduced £400 million from its cost of goods this year in an attempt to retain its customers who are going to cheaper stores. The aggregate demand is lowering and prices have to be reduced which is affecting profits directly. Also, unemployment is adding to the problem of low disposable incomes and a further reduction in sales. Tesco chief recently asked the Bank of England to cut interest rates to restore consumer confidence. Thus the overall economic scenario predicts reduced spending, cheaper alternative goods and lower demand which mean lower profits for the industry.Tesco’s food miles ethics were questioned when it was found shipping Scottish meat into Essex for processing and then shipping it back which adds to pollution due to such transport. Also, Tesco’s suppliers in Bangladesh have been accused of employing child labour, workers are underpaid and pressed to produce at minimum rates even though Tesco has signed Ethical Trading Initiatives.The consumers have become more technology-based. They prefer being online than watching TV or going out to shop. They would rather shop online. With a lot of cultural mixing and immigrants from different regions, the demand for products keeps changing and requires the firm to keep a close tab on the changing consumer needs. The American strategist Michael porter categories five completive forces in the environment of a firm .these can be used to determine the overall potential profitability of an industry for the existing or potential player in the market.