Iceland Foods Strategic Plan

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This essay aims to critically evaluate the strategic issues for Iceland and the options facing the organisation through the application of relevant frameworks, theorists and models, which will help identify Iceland’s strengths and weaknesses whilst recognising how the organisation can acquire a competitive advantage.

Iceland Foods Ltd are a supermarket based in the United Kingdom, which emphasises on the sale of frozen produce, including fruits, vegetables and pre-packaged meals. Iceland currently operates over 920 stores, placed in convenient high street and shopping centre locations with a scope for expansion in Europe in the near future. Iceland currently has a 15.9% share of the frozen food market, with their sales for frozen food accounting for 40% and the rest evenly split between chilled food and groceries (Kantar, 2018). Iceland are well known for competing on price and quality, with their growth strategy continuously progressing to make an impact among the big-name supermarkets such as Tesco, Sainsbury’s and Asda. Iceland focuses on delivering consumer products at affordable prices, with the company becoming increasingly more interested in serving higher quality food to maximise their demographic. The emergence of modern-day luxury markets has empowered the up rise of newly established brands to pose threats within the market (Porter’s five forces), thus implementing the importance of composing an effective strategy to ensure competitive advantage (Porter, 1985).

A SWOT analysis is a technique used to understand a company’s strengths and weaknesses whilst identifying the opportunities open to the organisation and threats it may face. For Iceland, the use of SWOT will explore the relationship between the strategic capabilities and the influences of the external environment, which can be analysed to make informed decisions on the future of Iceland and the moves placed against their competitors (Ahmadi, 2016).

SWOT Analysis for Iceland

Analysing Iceland’s process through the implementation of the SWOT analysis tool, current trends of consumer behaviour are favouring the frozen food chain, as consumers are increasingly looking for more affordable, easy to use food which has a longer shelf life which in turn reduces the time process of cooking. Iceland was awarded top frozen retailer by the British Frozen Food federation Awards in 2013 (Iceland, 2018), and have since gone on to win the award up until 2018, where they are still considered to be the market leader in the frozen food sector. Another strength for Iceland is that the company has a substantial distribution network across the company, where stores are placed in low affluence areas, accessible for their target customer base. However, the organisation also holds a powerful online presence, where Iceland is one of the most sufficient and reliable supermarkets for online shopping but also now has a network portfolio of micro-influencers, showcasing Iceland’s affordable products via various forms of social media.

However, one in three Britons believe frozen is inferior to fresh food, with 43% of consumers saying there is nothing that could persuade them to buy more frozen produce (Boyland, 2018). Iceland have been criticised for only addressing one type of customer base, particularly through Iceland’s pricing strategy, where the average price of Iceland’s products is £1, which heavily demotivates consumers out of Iceland’s target bracket, who may be intrigued by the idea of frozen food but not cheaper prices for lower quality products. Iceland also has a weakness in their locational presence globally, with the company finding the penetration of the EU markets increasingly more difficult and domestically, store locations proving insufficient for the strategical impact Iceland wishes to make on the retail market share in the UK, as small high street stores have hindered their opportunity for a major expansion (PESTLE).

An opportunity for Iceland foods arises through capitalising on the changing habits of consumers and their ideologies. There is more interest in the frozen food sector than ever before, with consumers now food prepping on a weekly basis and trying to reduce their carbon footprint. Frozen food offers the ability to maintain its original qualities whilst bulk buying frozen ingredients can offer convenience to the consumer (Lane, 2012). Showcasing how fresh frozen produce can be, through deli-like counters and clearer storage solutions, will diminish the stigma consumers have around Iceland’s products, which will create broader clientele. Additionally, there is an opportunity for Iceland to develop a strong brand image in the EU market, where Iceland could have monopolistic power of being the only supermarket to delivery frozen British commodities in Europe. Juxtaposed to the scope for European success, Iceland also has to factor in a number of threats. Recent economic and political instability with Brexit, has left supermarkets in unfamiliar territory and are unaware of what the future holds for British supermarkets. Additionally, due to change in government policies, specifically those regarding taxation, Iceland may face a financial dip as they are unable to cope with minimum wage upgradation, where salary increments have risen, and the minimum wage has increased by £2 since 2015.

Iceland focuses their products on a niche market of low-priced frozen food which has landed Iceland in hot water, as they have been blamed for only addressing a particular type of consumer base. Chief executive, Malcolm Walker proclaim that ‘stupid, middle-class people believe chilled food is better than frozen’ which initially triggered a marketing campaign to try and remove the prejudice against frozen produce (North, 2017). The Grocer reported on how consumers really felt about frozen produce. 28% of shoppers in the socio-demographic groups of D and E believed that the quality of frozen food is far worse than that of fresh produce, yet the figure is far higher of those who are in grades A and B with 36% believing fresh produce is far superior. The report indicated that there is a relationship between class and attitudes towards the frozen food market, yet also shows that the influence of age is far greater. With consumers aged 16-24, half believed that frozen food was actually inferior to fresh food, compared to those who were over the age of 55, with only 19% agreeing that fresh food is of better quality than frozen.