Strategic Management

[pic 2]

Strategic Management[pic 3]

Individual Assignment

1. Question 1

In order to do the industry analysis, I have used following two tools, first is Porter’s five forces and another one is Value curves:

Tool 1: Porter’s Five Forces

Tool 2: Value Curves

We have used following differentiators in order to analyze the supermarket industry:

1. Number of SKUs
2. Private Labels
3. Value per Dollar
4. Convenience
5. Organic & Natural Foods
6. Employee Morale
7. Number of Stores
8. Different Experience

[pic 4]

The market is highly competitive, apart from bargaining power of suppliers, bargaining power of buyers is high, rivalry of competition is high, threat of new entrants is medium and threat of new substitutes is also high. However, the supermarkets in general sell products which are basic commodities in nature and will always be demand, therefore, the key to success is to be differentiator providing difference value proposition for customer, this may include showing financial muscle and opening huge hypermarkets like Walmat or having a niche like Trader Joe’s. Any other supermarket with no differentiation may not survive in the market.

The supermarket makes margin on products it sources from suppliers and customer, traditionally the margins have been thin as the products are general commodities and available in most of the supermarkets. Further, the traditional supermarkets charge to suppliers to slot their products on the shelves.

Trader Joe’s has chosen not to engage in certain practices common to most traditional stores, like Trader Joe introduces 10-15 new products every week, 80% private labels instead of 20%, showcases 4K SKUs only in comparison 50K SKUs. TJ planned supermarkets for the intelligent and educated customer base by selecting locations closer to colleges. TJ shop size ranges between 10-15K only in comparison to typical supermarket of 50K, used bell system instead of announcements, replenishment of shelves during peak periods unlike many other retailers.

Store Managers did not have to adhere strictly to “planogram” developed by the corporate office, they could adapt how and where products were displayed. Good wages to employees with contribution to retirement accounts, employees were trained to be generalist rather than specialist. Stores were having different look & feel with South Seas theme, employee outfitted with Hawaiian shirts, manager to be known as “Captain” with assistant as “First Mate” instead of normal dress code. Marketing through customer newsletter known as “Fearless Flyer” with some radio ads. Everyday low pricing concept with no social media presence, no public information on the company’s strategy, leadership team or financial success, no participation in trade shows, no charge to suppliers to slow their products and paid suppliers promptly unlike other supermarkets.

The downside to the strategy was that the fast moving items like Coca Cola was not available in the store, this may lead to losing potential customers. Since the selection of customer base was very selective, TJ may have lost other opportunities with majority of population. The stores were not fit for “family” shopping and the experience with parking was not good due to the small store being at a very busy area, this leads to customer frustration. No social media presence was also considered negative and many customers were not able to connect with the company, further unknown users started using platform for various initiatives.

The key differentiation of TJ was high quality selected products to selective customers always at low cost.

Trader Joe’s carefully selected following activities in order to achieve higher profit margins:

In order to take advance of the opportunities and counter the threats posed by the various elements of the industry structure, TJ did following: