West Point Market

Introduction

The West Point Market was founded in 1936 by 3 partners, John Seiler, Harry Anderson, and Harold Dwight Vernon in Akron, Ohio. With an investment of $ 500.000 each and their special knowledge and skills, they founded the originally named Point Market with a width of 3000 square feet which was known as a neighbourhood meat market which also sold cheese.

The first expansion took place in 1941 when the market moved its location more westwards and therefore was renamed West Point Market. Here it expanded to its double size. From 1941 to 1960 the market image was changed and converted into a "quality food store" which was addressed to high income shoppers who wanted to buy premium brands and high quality meat.

In 1960, the son of Harold Dwight Vernon, Russ Vernon entered the business at the age of 22 and recognized the increasing market demand for fine wine, imported cheeses and speciality foods. This was something that only view retailers in the major metropolitan areas offered. Seeing the possibility of higher mark-ups for gourmet products and a resulting higher net profit margin, he targeted to reposition the market as an "upscale gourmet food store" offering its clients an "exciting shopping experience". As he became sole shareholder and president in 1978 he had the power to change the strategic direction which resulted in a restructuring of the market into a gourmet merchandise luxury market.

Due to the existing highly competitive market in Akron respective low-price appeals of conventional supermarket chains such as Acme/Click, Giant Eagle and AppleÒ's, Russ Vernon was aware that he would not go for price competition but for higher service at a premium price by offering a greater variety of specialty products and provide gourmet-to-go food. The only existing competitor in this sector would be "Bisson" which offered quality products and kosher food. Russ' strategy therefore was to offer clients only the best quality, with an extraordinary service due to skilled and friendly personnel in a relaxing atmosphere where shopping becomes an exciting experience. Moreover, he wanted to build customer loyalty to make them price insensitive in order to reduce the competition power.

In 1980 the store was expanded to 13.800 square feet and new special departments were added such as "The Movable Feast" which can be compared to a catering service and had an extraordinary success with even national recognition when Russ was awarded with the Silver Spoon Award from the National Association for the Specialty Food trade. Moreover West Point became the premier place in Akron to shop for party food.

Russ increased customer loyalty by sending newsletters to its clients informing them about news, events, features about wines and cheese, recipes and promoting special price reductions on products.

In 1986, West Point Market had gained a reputation throughout the Akron area as a specialty food store with annual sales of $ 5,4 million and this in an area where various markets were competing. This could be achieved as West Point Market did not enter in direct competition as it did not opt for low prices but for innovation and diversification by offering quality products at a premium price.

The question now is, if West Point Market should expand even more? As Russ bought the property next door to West Point Market the possibility was given to expand to 25.000 square feet. An expansion could offer high opportunities as to increase return, but it also brings high risks as new investments would have to be done. Costs for an expansion are estimated $ 2 million which would have to be financed through a bank loan with a 10 % interest rate. The existing sales revenues would not be sufficient to cover the costs, which in result would have to increase revenue in order to cover the financial costs and the increasing operational costs, higher energy costs, greater inventory carrying costs and additional costs for repairs and maintenance.

In this analysis we examine when an expansion is recommendable and under which factors and we propose ideas for improvement and innovation.

P.E.S.T.-Analysis

Political Analysis

* Federal presidential representative democratic republic

* USA has a stable political system which attracts investors and offers a good basis for businesses

* There are many laws and many food regulations concerning quality and hygiene issues

* Existing laws for importing goods- important for West Point Market as they import a lot of goods from Europe

Economical Analysis

* The USA has the largest national economy in the world with a GDP of 13,3 trillion dollars in 2006. It is the word's foremost economic power.

* Corporations and other private firms make the majority

* Low social safety net

* Word's greatest debtor with 70 % of GDP

* GDP per capita of $ 43.768 in 2006

* Inflation 2,7 %

* Unemployment 4,4 %

Social Analysis

* Spending mentality

* Normally families with dual income

Hectic and busy lifestyle with little time for cooking

Technological Analysis

* Highly developed technical standard - highly advanced cash machine systems and accounting software

* Online-shopping is common

S.W.O.T.-Analysis

Strengths Weaknesses

* Family business of Vernons- lead with heart and soul

* Expertise since 1936

* Russ Vernon learned job from the bottom up

* Good reputation: Got awards like the Silver Spoon award for Specialty Food Trade

* Close customer relationship and to employees- familiar atmosphere

* Work in a niche market- no direct competition. Offer innovative, special gourmet food