Essay on Recession

Downturns are stressful and typically increase people’s desire for simplicity. (Flatters and Wolcott, 2009, up. 3). Credit crunch has affected consumers massively. Consumers have to think where they need to shop and what they need to look for to avoid struggles during recession. Things Like food, bills, and mortgage have to be prioritize Instead of buying new house, furniture, going on holiday, spending money on social activities or buying trendy clothing. During recession consumers have to make sure that they find the products for the money they pay.

Brand names are getting less important for people as their priorities are different this tough time. Customers are more likely to shop for clothes in supermarket now instead of designer clothing as they have to think about the future living and getting bargains is essential to survive. A lot of consumers changed the way they shop and where they shop. People started looking for bargains and they didn’t care which shops offered them as long as It was the best deal. In other hand, a lot of consumers remained within their favorite shops.

Rust and Cohort, (1993), tied In McCormick (2002,p. 1 1 2) found that loyal shoppers are more likely to ‘forgive’ occasional service failures and the inertia factor within loyalty makes them less likely to switch stores. A lot of people don’t like change and staying loyal is important for them as well as for the company. Conclusion Downturn has influenced consumer in different ways. Consumer had to change their lifestyle and adapt to the changes, but now people think about their future strongly avoiding the struggles created by recession.

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Position Defense Strategy

Implementing the Position Defense strategy by doing the strategic alliance with the Wall-Mart in order to share the information technology system and supply chain management Recommendations The Lobar Companies Limited can use the resource of information technology system, which is Electronic Data Interchange form the Wall-Mart in order to improve the own inventory problem and supply chain management. Vendors can know our sales and in stock levels.

The company can know when food that is stocked in the inventory will be expired; they can eliminate the stale-date food. Vendors will get the constant amount of orders from the company and delivery to our company on time. Hence, the company can provide the fresh food to the customers. After the company provide the fresh food with full shelves to customers, the customers will have positive attitudes toward the company that lead the increasing in Labials brand image.

Moreover, the two companies, Lobar Companies Limited and Wall-Mart Superstores, can also share the transportations to each other. If the Lobar have to delivery the products from the distribution centers to the stores while the unavailable manufacturers’ trucks and own fleets, the company can ask the Wall-Mart Superstores for using their trucks to ship the products. Hence, the company can reduce the opportunity cost of waiting own trucks to ship goods.

Strategic Intent To become the market leader domestically and internationally in the supermarket industry Strategic Mission Lobar Companies Limited is manufacturer and distributor of food, non-food, photo shop, dry cleansing, a bank, medical clinic, women’s-only fitness center, and gas station (some stores) in supermarket industry by providing one-stop shopping estimation with several services to consumers in Canada.

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Food Retail in Europe

INDUSTRY PROFILE Food Retail in Europe Reference Code: 0201-2058 Publication Date: June 2010 www. datamonitor. com Datamonitor USA 245 Fifth Avenue 4th Floor New York, NY 10016 USA t: +1 212 686 7400 f: +1 212 686 2626 e: usinfo@datamonitor. com Datamonitor Europe 119 Farringdon Road London EC1R 3DA United Kingdom t: +44 20 7551 9000 f: +44 20 7675 7500 e: eurinfo@datamonitor. com Datamonitor Middle East and North America Datamonitor PO Box 24893 Dubai, UAE t: +49 69 9754 4517 f: +49 69 9754 4900 e: datamonitormena@ datamonitor. om Datamonitor Asia Pacific Level 46, 2 Park Street Sydney, NSW 2000 Australia t: +61 2 8705 6900 f: +61 2 8705 6901 e: apinfo@datamonitor. com Europe – Food Retail © Datamonitor. This profile is a licensed product and is not to be photocopied 0201 – 2058 – 2009 Page 1 EXECUTIVE SUMMARY EXECUTIVE SUMMARY Market value The European food retail industry grew by 8. 5% in 2009 to reach a value of $1,663. 1 billion. Market value forecast In 2014, the European food retail industry is forecast to have a value of $2,477. billion, an increase of 49% since 2009. Market segmentation I Hypermarkets, supermarkets, and discounters sales proved the most lucrative for the European food retail industry in 2009, with total revenues of $798. 5 billion, equivalent to 48% of the industry’s overall value. Market segmentation II Germany accounts for 14. 1% of the European food retail industry value. Market rivalry The industry is becoming consolidated with large chain supermarkets or hypermarkets wielding more power over smaller specialty, luxury or organic food outlets.

Europe – Food Retail © Datamonitor. This profile is a licensed product and is not to be photocopied 0201 – 2058 – 2009 Page 2 CONTENTS TABLE OF CONTENTS EXECUTIVE SUMMARY MARKET OVERVIEW Market definition Research highlights Market analysis MARKET VALUE MARKET SEGMENTATION I MARKET SEGMENTATION II FIVE FORCES ANALYSIS Summary Buyer power Supplier power New entrants Substitutes Rivalry LEADING COMPANIES Metro AG Carrefour S. A.

Lidl Dienstleistung Tesco PLC MARKET FORECASTS Market value forecast APPENDIX Methodology Industry associations Related Datamonitor research Disclaimer 2 7 7 8 9 10 11 12 13 13 15 17 18 19 20 21 21 25 29 30 34 34 35 35 36 36 37 Europe – Food Retail © Datamonitor. This profile is a licensed product and is not to be photocopied 0201 – 2058 – 2009 Page 3 CONTENTS ABOUT DATAMONITOR Premium Reports Summary Reports Datamonitor consulting 38 38 38 38 Europe – Food Retail © Datamonitor. This profile is a licensed product and is not to be photocopied 201 – 2058 – 2009 Page 4 CONTENTS LIST OF TABLES Table 1: Table 2: Table 3: Table 4: Table 5: Table 6: Table 7: Table 8: Table 9: Table 10: Table 11: Table 12: Table 13: Table 14: Table 15: Table 16: Table 17: Europe food retail industry value: $ billion, 2005–09(e) Europe food retail industry segmentation I:% share, by value, 2009(e) Europe food retail industry segmentation II: % share, by value, 2009(e) Metro AG: key facts Metro AG: key financials ($) Metro AG: key financials (€) Metro AG: key financial ratios Carrefour S.

A. : key facts Carrefour S. A. : key financials ($) Carrefour S. A. : key financials (€) Carrefour S. A. : key financial ratios Lidl Dienstleistung: key facts Tesco PLC: key facts Tesco PLC: key financials ($) Tesco PLC: key financials (? ) Tesco PLC: key financial ratios Europe food retail industry value forecast: $ billion, 2009–14 10 11 12 21 22 22 23 25 27 27 27 29 30 31 31 32 34 Europe – Food Retail Datamonitor. This profile is a licensed product and is not to be photocopied 0201 – 2058 – 2009 Page 5 CONTENTS LIST OF FIGURES Figure 1: Figure 2: Figure 3: Figure 4: Figure 5: Figure 6: Figure 7: Europe food retail industry value: $ billion, 2005–09(e) Europe food retail industry segmentation I:% share, by value, 2009(e) Europe food retail industry segmentation II: % share, by value, 2009(e) Forces driving ompetition in the food retail industry in Europe, 2009 Drivers of buyer power in the food retail industry in Europe, 2009 Drivers of supplier power in the food retail industry in Europe, 2009 Factors influencing the likelihood of new entrants in the food retail industry in Europe, 2009 Factors influencing the threat of substitutes in the food retail industry in Europe, 2009 Drivers of degree of rivalry in the food retail industry in Europe, 2009 Metro AG: revenues & profitability Metro AG: assets & liabilities Carrefour S.

A. : revenues & profitability Carrefour S. A. : assets & liabilities Tesco PLC: revenues & profitability Tesco PLC: assets & liabilities Europe food retail industry value forecast: $ billion, 2009–14 10 11 12 13 15 17 18 19 20 23 24 28 28 32 33 34 Figure 8: Figure 9: Figure 10: Figure 11: Figure 12: Figure 13: Figure 14: Figure 15: Figure 16: Europe – Food Retail © Datamonitor. This profile is a licensed product and is not to be photocopied 0201 – 2058 – 2009 Page 6 MARKET OVERVIEW MARKET OVERVIEW Market definition

The food retail market includes the retail sales of all food products, both packaged and unpackaged, as well as beverages (including retail sales of all alcoholic and non-alcoholic beverages). All on-trade sales of food and beverage are excluded. All currency conversions are calculated at constant average 2009 exchange rates. For the purposes of this report, Europe consists of Western Europe and Eastern Europe. Western Europe comprises Belgium, Denmark, France, Germany, Italy, the Netherlands, Norway, Spain, Sweden, and the United Kingdom. Eastern Europe comprises the Czech Republic, Hungary, Poland, Romania, Russia, and Ukraine.

Europe – Food Retail © Datamonitor. This profile is a licensed product and is not to be photocopied 0201 – 2058 – 2009 Page 7 MARKET OVERVIEW Research highlights The European food retail industry had total revenue of $1,663. 1 billion in 2009, representing a compound annual growth rate (CAGR) of 7. 4% for the period pning 2005-2009. Hypermarkets, supermarkets, and discounters sales proved the most lucrative for the European food retail industry in 2009, with total revenues of $798. 5 billion, equivalent to 48% of the industry’s overall value. The performance of the industry is forecast to accelerate, with an anticipated CAGR of 8. % for the fiveyear period 2009-2014, which is expected to drive the industry to a value of $2,477. 4 billion by the end of 2014. Europe – Food Retail © Datamonitor. This profile is a licensed product and is not to be photocopied 0201 – 2058 – 2009 Page 8 MARKET OVERVIEW Market analysis The European food retail industry has experienced very strong growth in recent years and the forecast is for this to gently accelerate towards 2014. The European food retail industry had total revenue of $1,663. 1 billion in 2009, representing a compound annual growth rate (CAGR) of 7. 4% for the period pning 2005-2009.

In comparison, the German and UK industries grew with CAGRs of 2. 1% and 4. 2% respectively, over the same period, to reach respective values of $234. 8 billion and $186. 1 billion in 2009. Hypermarkets, supermarkets, and discounters sales proved the most lucrative for the European food retail industry in 2009, with total revenues of $798. 5 billion, equivalent to 48% of the industry’s overall value. In comparison, convenience stores and gas stations generated sales of $381. 3 billion in 2009, equating to 22. 9% of the industry’s aggregate revenues. The performance of the industry is forecast to accelerate, with an anticipated CAGR of 8. % for the fiveyear period 2009-2014, which is expected to drive the industry to a value of $2,477. 4 billion by the end of 2014. Comparatively, the German and UK industries will grow with CAGRs of 2. 5% and 3. 4% respectively, over the same period, to reach respective values of $265. 5 billion and $219. 4 billion in 2014. Europe – Food Retail © Datamonitor. This profile is a licensed product and is not to be photocopied 0201 – 2058 – 2009 Page 9 MARKET VALUE MARKET VALUE The European food retail industry grew by 8. 5% in 2009 to reach a value of $1,663. 1 billion.

The compound annual growth rate of the industry in the period 2005–09 was 7. 4%. Table 1: Year 2005 2006 2007 2008 2009(e) CAGR: 2005–09 Source: Datamonitor Europe food retail industry value: $ billion, 2005–09(e) $ billion 1,248. 6 1,321. 6 1,412. 4 1,533. 3 1,663. 1 € billion 897. 9 950. 4 1,015. 8 1,102. 7 1,196. 1 % Growth 5. 8 6. 9 8. 6 8. 5 7. 4% DATAMONITOR Figure 1: Europe food retail industry value: $ billion, 2005–09(e) Source: Datamonitor DATAMONITOR Europe – Food Retail © Datamonitor. This profile is a licensed product and is not to be photocopied 0201 – 2058 – 2009 Page 10 MARKET SEGMENTATION I

MARKET SEGMENTATION I Hypermarket, Supermarket, & Discounters is the largest segment of the food retail industry in Europe, accounting for 48% of the industry’s total value. The convenience stores & gas stations segment accounts for a further 22. 9% of the industry. Table 2: Category Hypermarket, Supermarket, & Discounters Convenience Stores & Gas Stations Food and Drinks Specialists Drug Stores & Health and Beauty Stores Cash & Carries & Warehouse Clubs Other Total Source: Datamonitor Europe food retail industry segmentation I:% share, by value, 2009(e) % Share 48. 0% 22. 9% 14. 9% 3. 4% 1. 4% 9. 4% 100% DATAMONITOR

Figure 2: Europe food retail industry segmentation I:% share, by value, 2009(e) Source: Datamonitor DATAMONITOR Europe – Food Retail © Datamonitor. This profile is a licensed product and is not to be photocopied 0201 – 2058 – 2009 Page 11 MARKET SEGMENTATION II MARKET SEGMENTATION II Germany accounts for 14. 1% of the European food retail industry value. France accounts for a further 13. 5% of the European industry. Table 3: Category Germany France Italy United Kingdom Spain Rest of Europe Total Source: Datamonitor Europe food retail industry segmentation II: % share, by value, 2009(e) % Share 14. % 13. 5% 12. 2% 11. 2% 7. 8% 41. 1% 100% DATAMONITOR Figure 3: Europe food retail industry segmentation II: % share, by value, 2009(e) Source: Datamonitor DATAMONITOR Europe – Food Retail © Datamonitor. This profile is a licensed product and is not to be photocopied 0201 – 2058 – 2009 Page 12 FIVE FORCES ANALYSIS FIVE FORCES ANALYSIS The food retail market will be analyzed taking supermarkets, hypermarkets and specialist retailers as players. The key buyers will be taken as end-consumers, and food manufacturers, farmers, agricultural co-operatives as the key suppliers. Summary

Figure 4: Forces driving competition in the food retail industry in Europe, 2009 Source: Datamonitor DATAMONITOR The industry is becoming consolidated with large chain supermarkets or hypermarkets wielding more power over smaller specialty, luxury or organic food outlets. In our analysis of the global food retail industry, retailers such as supermarkets, hypermarkets, and specialist outlets, will be taken as industry players and end-consumers will be understood as buyers. With a range of different players within the industry, the size and financial strength of each varies accordingly.

With consumers generally facing no substantial switching costs, this buyer mobility forces larger retailers to maintain attractive pricing schemes. Specialist, luxury, or organic retailers do not face the same price sensitivity due to the unique level of product differentiation, yet due to the nature of such products, they exist more as niche markets and are not able to secure a large volume of consumers. Specialist outlets may have no choice but to commit to long term supplier contracts in order to secure a steady supply of quality or specially prepared products.

Whereas, supermarkets and hypermarkets have a higher number of options and can hold looser relationships with a larger number of suppliers. Europe – Food Retail © Datamonitor. This profile is a licensed product and is not to be photocopied 0201 – 2058 – 2009 Page 13 FIVE FORCES ANALYSIS Where branded products attract loyal consumers, the distribution channel for manufacturers is protected and retailers face pressure to stock the popular items. With established supermarkets and hypermarkets present, potential new entrants may struggle to compete with aggressive marketing and pricing policies.

Nonetheless, relatively low entry and exit costs within the industry and the emergence of thriving health and ethical niches offer examples of possible niches in which new entrants may flourish sheltered from direct competition with current players. Food service (takeaways, vendors and restaurants) can be seen as a substitute to food retail products however for the vast majority of people it currently exists as an occasional accompaniment rather than a wholesale alternative. Subsistence farming is a more direct substitute, sometimes replacing standard retail behavior outright, yet it is no longer common.

The absence of switching costs for consumers ensures a competitive climate within the food retail industry. Europe – Food Retail © Datamonitor. This profile is a licensed product and is not to be photocopied 0201 – 2058 – 2009 Page 14 FIVE FORCES ANALYSIS Buyer power Figure 5: Drivers of buyer power in the food retail industry in Europe, 2009 Source: Datamonitor DATAMONITOR Retailers range widely in size with large chain supermarkets or hypermarkets such as Tesco and Metro AG wielding power over smaller specialty, luxury or organic food outlets whose grip on the industry is significant but currently limited.

Accordingly, the financial muscle of industry players differs depending on the type of player. The sheer volume of potential customers in key areas of the food retail industry diminishes the standing of any individual customer. The revenue generated by any particular consumer is minimal, but collectively they represent wider consumer interests and retailers cannot afford to disregard the sensitivities of buyers. Price and convenience are two central concerns however they are not necessarily the principle factors. A rise in health consciousness has driven a growing demand for nutritional quality in food products.

The culture of convenience now faces the challenge of a counter-trend in which a shift back towards fresh, simple or traditionally prepared foods undermines the retail position of frozen foods and similar products. The emergence and development of ethical niches adds further momentum to this movement within the industry. The response of food retailers must accommodate such diverse interests. A number of retailers operate incentive schemes for frequent shoppers and this can help secure customer retention. By discouraging movement across retail outlets, consumer mobility is reduced and, in the long term, buyer power can be weakened.

Although high brand recognition does not automatically translate into consumer loyalty, if it is supported by a product range in which popular food products are central, the retailer can Europe – Food Retail © Datamonitor. This profile is a licensed product and is not to be photocopied 0201 – 2058 – 2009 Page 15 FIVE FORCES ANALYSIS often draw indirectly on the loyalty base that manufacturers have established. Specialty, luxury or organic retailers can, due to the high level of product differentiation, justify price levels that would otherwise be unsustainable yet the limited volume of consumers places restraints on the power of such players.

Buyer power overall is moderate. Europe – Food Retail © Datamonitor. This profile is a licensed product and is not to be photocopied 0201 – 2058 – 2009 Page 16 FIVE FORCES ANALYSIS Supplier power Figure 6: Drivers of supplier power in the food retail industry in Europe, 2009 Source: Datamonitor DATAMONITOR Suppliers to the food retail industry include food manufacturers, farmers, and agricultural co-operatives. In order to ensure stability and offset the dangers of local sourcing problems or price fluctuations, large retail companies often maintain relationships with a wide range of suppliers.

This diffuses dependency, minimizing the risks to retailers and strengthening their standing in relation to their suppliers. Long term contractual obligations are avoided where possible, and switching costs kept to a minimum. With a firm hold on key distribution channels, the leading retailers can dominate negotiations with certain suppliers. This is often difficult for smaller retailers such as specialist, luxury or organic outlets. The limited number of suppliers in niche areas and the centrality of product quality or preparation type limit’s the available range of sourcing options.

With switching costs subsequently higher, the balance of power shifts somewhat from smaller retailers to specialist suppliers. Whilst the need to satisfy consumer demand for popular products bolsters manufacturers, many others face the problem of a high degree of retailer mobility as they switch suppliers in accordance with pricing pressures. The position of many large retail companies has also been strengthened internally with a surge of own brand products sidelining certain suppliers. Suppliers who are able to differentiate their product can wield some power over retailers, should their product be popular with the end consumer.

Supplier power overall is moderate. Europe – Food Retail © Datamonitor. This profile is a licensed product and is not to be photocopied 0201 – 2058 – 2009 Page 17 FIVE FORCES ANALYSIS New entrants Figure 7: Factors influencing the likelihood of new entrants in the food retail industry in Europe, 2009 Source: Datamonitor DATAMONITOR Large-scale, established retailers hold a natural advantage in operating businesses that benefit significantly from economies of scale, employing aggressive pricing schemes that cannot be matched by smaller retailers. Strong branding exercises and fast paced expansion deepen this asymmetry.

Nevertheless, large retailers are not invulnerable to the threat of new entrants. Exit and entry costs within the industry are relatively low, encouraging potential entrants. The rapid growth of health consciousness and a swell of ethical goods form attractive avenues for new entrants seeking to move into a niche area that offers inbuilt protection from pricing pressures and mainstream marketing. Given the presence of many large-scale retailers, and the security of heavy branding, direct head-to-head competition is extremely difficult for new retailers. Strong growth makes the market attractive to prospective new entrants.

Overall, the threat of new entrants is moderate. Europe – Food Retail © Datamonitor. This profile is a licensed product and is not to be photocopied 0201 – 2058 – 2009 Page 18 FIVE FORCES ANALYSIS Substitutes Figure 8: Factors influencing the threat of substitutes in the food retail industry in Europe, 2009 Source: Datamonitor DATAMONITOR The chief alternative to food retail is food service. Supported by strong marketing campaigns in the case of fast food companies, and cultural traditions with respect to sit-down restaurants, both types represent a relevant alternative for many consumers.

However, for the vast majority of people, these accompany food retail rather than replace it. A more direct substitute is found in subsistence agriculture in which individuals or families farm food to provide for their own personal needs. This is no longer common, however, since the emergence of market capitalism and the impact of this substitute on food retail is fractional. Environmental concerns, increasing health consciousness, and fears over political or economic instability may, in the long term, give this substitute a more significant role.

However, it is unlikely to threaten food retailers in the foreseeable future being both labor intensive and often involving considerable start-up capital. The threat from substitutes is weak to moderate. Europe – Food Retail © Datamonitor. This profile is a licensed product and is not to be photocopied 0201 – 2058 – 2009 Page 19 FIVE FORCES ANALYSIS Rivalry Figure 9: Drivers of degree of rivalry in the food retail industry in Europe, 2009 Source: Datamonitor DATAMONITOR Competition is often fierce within the food retail industry.

The lack of substantial switching costs for consumers places pressure on retailers to secure their custom and loyalty. The limited level of differentiation across the basic product range pushes larger retailers into competitive pricing policies. The close similarity of players increases rivalry as they attempt to differentiate themselves through products and price to attract customers. Whilst some companies operate in other industries and can absorb the temporary impact of declining food sales, or high supply prices, for many, ood retail lies at the heart of the business. This basic dependency gives rise to aggressive competition. Rivalry is strong overall. Europe – Food Retail © Datamonitor. This profile is a licensed product and is not to be photocopied 0201 – 2058 – 2009 Page 20 LEADING COMPANIES LEADING COMPANIES Metro AG Table 4: Metro AG: key facts Schluterstrasse 1, 40235 Dusseldorf, DEU 49 211 6886 4252 49 211 6886 2001 www. metrogroup. de December MEOG Frankfurt DATAMONITOR Head office: Telephone: Fax: Website: Financial year-end: Ticker: Stock exchange: Source: company website

Metro Group (Metro) is a German trade and retail company organized into independent sales divisions. The group operates 2,195 outlets with approximately 12,350,000 square meters of selling space. It has a presence in 33 countries in Western Europe, Eastern Europe, Asia and Africa. The company employs around 300,000 people. Metro operates in four business segments: Metro Cash & Carry, Real, Media Markt and Saturn and Galeria Kaufhof. Metro Cash & Carry is engaged in cash and carry wholesaling. Operating under the brands of Metro and Makro, it is the group’s biggest sales division.

Metro Cash & Carry’s assortment of products is aimed at commercial and wholesale customers. It operates 665 stores in 30 countries. Real offers a range of food products and an assortment of non-food items. The selling space of the Real stores ranges from 5,000 to 15,000 square meters, with store assortments including up to 80,000 items. Real is based on a large-format hypermarket concept and operates 333 hypermarkets in Germany and 108 stores in Poland, Romania, Russia, Turkey and the Ukraine. Media Markt and Saturn sell consumer electronics across Europe. Galeria

Kaufhof operates a chain of department stores in Germany and Belgium. The department stores offer modern lifestyle apparels for men and women and are present in shopping areas and downtown centers. Europe – Food Retail © Datamonitor. This profile is a licensed product and is not to be photocopied 0201 – 2058 – 2009 Page 21 LEADING COMPANIES In addition to these divisions, Metro provides real estate management services through its subsidiary, Metro Group Asset Management. The company oversees more than 750 properties totaling eight million square meters of commercial space worldwide.

It also operates more than 70 shopping centers. Key Metrics The company recorded revenues of $91,119 million in the fiscal year ending December 2009, a decrease of 3. 6% compared to fiscal 2008. Its net income was $722 million in fiscal 2009, compared to a net income of $776 million in the preceding year. Table 5: $ million Metro AG: key financials ($) 2005 77,482. 1 902. 4 40,000. 8 32,613. 0 246,875 2006 83,266. 6 1,658. 9 44,702. 2 36,293. 7 263,794 2007 89,461. 3 1,366. 9 47,099. 4 38,048. 6 275,520 2008 94,493. 6 775. 9 47,034. 0 38,941. 3 290,940 2009 91,118. 8 721. 7 46,814. 3 46,814. 286,091 Revenues Net income (loss) Total assets Total liabilities Employees Source: company filings DATAMONITOR Table 6: € million Metro AG: key financials (€) 2005 55,722. 0 649. 0 28,767. 0 23,454. 0 2006 59,882. 0 1,193. 0 32,148. 0 26,101. 0 2007 64,337. 0 983. 0 33,872. 0 27,363. 0 2008 67,956. 0 558. 0 33,825. 0 28,005. 0 2009 65,529. 0 519. 0 33,667. 0 33,667. 0 Revenues Net income (loss) Total assets Total liabilities Source: company filings DATAMONITOR Europe – Food Retail © Datamonitor. This profile is a licensed product and is not to be photocopied 0201 – 2058 – 2009 Page 22

LEADING COMPANIES Table 7: Ratio Metro AG: key financial ratios 2005 1. 2% 4. 2% 1. 5% (0. 2%) 81. 5% 2. 3% $313,851 $3,655 2006 2. 0% 7. 5% 11. 8% 11. 3% 81. 2% 3. 9% $315,650 $6,289 2007 1. 5% 7. 4% 5. 4% 4. 8% 80. 8% 3. 0% $324,700 $4,961 2008 0. 8% 5. 6% (0. 1%) 2. 3% 82. 8% 1. 6% $324,787 $2,667 2009 0. 8% (3. 6%) (0. 5%) 20. 2% 100. 0% 1. 5% $318,496 $2,523 Profit margin Revenue growth Asset growth Liabilities growth Debt/asset ratio Return on assets Revenue per employee Profit per employee Source: company filings DATAMONITOR Figure 10: Metro AG: revenues & profitability

Source: company filings DATAMONITOR Europe – Food Retail © Datamonitor. This profile is a licensed product and is not to be photocopied 0201 – 2058 – 2009 Page 23 LEADING COMPANIES Figure 11: Metro AG: assets & liabilities Source: company filings DATAMONITOR Europe – Food Retail © Datamonitor. This profile is a licensed product and is not to be photocopied 0201 – 2058 – 2009 Page 24 LEADING COMPANIES Carrefour S. A. Table 8: Carrefour S. A. : key facts 26 quai Michele, TSA 20016, 92695 Levallois-Perret Cedex, FRA 33 1 55 63 39 00 www. carrefour. com December CA Paris DATAMONITOR

Head office: Telephone: Website: Financial year-end: Ticker: Stock exchange: Source: company website Carrefour is one of the leading grocery and consumer goods distribution groups in the world. The group operates more than 15,000 stores. Carrefour’s primary grocery formats includes hypermarkets, supermarkets, hard discount and convenience stores. Carrefour primarily organizes its business segments based on geographic presence: France; Europe excluding France; Asia; and Latin America. In addition, the group’s business operation can be segmented on the basis of its store formats (as mentioned in the previous paragraph).

Carrefour is the leading hypermarket retailer in the world. The group operates about 1,302 hypermarket stores across the world, of which 228 hypermarkets are in France, 494 in European countries outside France, 288 in Latin America, and 292 in Asia. In Brazil, the group operates its hypermarket business under the Atacadao brand name; these hypermarkets offer a range of competitively priced companyowned and branded products in both food and non-food categories. In addition, the hypermarkets also offer services like insurance, financial services, home computer support, travel and entertainment reservations and mobile phones.

The group operates approximately 2,919 supermarket stores in 11 countries under the banners Carrefour Express, Carrefour market, GB, GS and Champion. The supermarkets offer a wide selection of mostly food products and some non-food products related to apparel, culture and leisure, and tableware. Carrefour’s hard discount segment, Dia, operates about 6,252 hard discount stores in Spain, France (under Ed and Dia brands), Portugal (under Minipreco brand), Greece, Turkey, Argentina, Brazil and China. The group’s hard discount stores offer a range of food, basic health, and cleaning products at discounted rates. Europe – Food Retail Datamonitor. This profile is a licensed product and is not to be photocopied 0201 – 2058 – 2009 Page 25 LEADING COMPANIES The group’s other activities comprise convenience stores, cash and carry foodservice stores, and ecommerce retail format. Carrefour operates about 4,813 convenience stores and 144 cash and carry stores. Convenience stores are mainly operated by the franchisees under the banners Marche Plus, Shopi, 8 a Huit and Proxi in France; DiperDi in Italy; Carrefour Express and Carrefour GB in Belgium; Carrefour 5 Minut stores in Poland; Carrefour City stores in Spain; and Carrefour Convenient Buy in Thailand.

These stores primarily offer a wide selection of food products; these also offer a range of services such as home delivery, dry cleaning, 48-hour photo development, ticket distribution, photocopying, stamps and newspapers. Cash and carry foodservice stores provide wholesale and retail self-service mainly intended for businesses. Carrefour operates cash and carry foodservice stores under the trade name Promocash. Most of the cash and carry stores are operated by franchisees. In addition to the above mentioned store formats, Carrefour also sells its products through various ecommerce websites.

Carrefour operates an online grocery store, Ooshop, a leading French online supermarket in terms of sales. It allows customers to shop on the Internet, and select from product listings including fresh and frozen items, at the same price as they would pay in Carrefour’s hypermarkets, with the added benefit of home delivery. Carrefour France hypermarket’s non-food website, CarrefourOnline. com, offers products such as leisure products (DVDs, games, software, music, books and more), audio and video, household electrical goods, as well as music downloads and even flower and bicycle delivery.

Carrefour. es, the group’s e-commerce website in Spain, offers both food and non-food products. Key Metrics The company recorded revenues of $119,533 million in the fiscal year ending December 2009, a decrease of 2. 6% compared to fiscal 2008. Its net income was $608 million in fiscal 2009, compared to a net income of $2,140 million in the preceding year. Europe – Food Retail © Datamonitor. This profile is a licensed product and is not to be photocopied 0201 – 2058 – 2009 Page 26 LEADING COMPANIES Table 9: $ million Carrefour S. A. : key financials ($) 2005 116,399. 7 2,199. 8 64,311. 1 51,259. 436,474 2006 121,561. 3 3,381. 2 66,093. 8 48,356. 4 456,295 2007 128,305. 2 3,447. 4 72,212. 0 57,385. 0 490,042 2008 122,678. 1 2,139. 7 72,420. 6 57,191. 7 495,000 2009 119,532. 5 607. 7 71,685. 0 56,229. 5 495,000 Revenues Net income (loss) Total assets Total liabilities Employees Source: company filings DATAMONITOR Table 10: € million Carrefour S. A. : key financials (€) 2005 83,710. 0 1,582. 0 46,250. 0 36,864. 0 2006 87,422. 0 2,431. 6 47,532. 0 34,776. 0 2007 92,272. 0 2,479. 2 51,932. 0 41,269. 0 2008 88,225. 2 1,538. 8 52,082. 0 41,130. 0 2009 85,963. 0 437. 0 51,553. 0 40,438. 0

Revenues Net income (loss) Total assets Total liabilities Source: company filings DATAMONITOR Table 11: Ratio Carrefour S. A. : key financial ratios 2005 1. 9% 2. 8% 9. 4% 7. 5% 79. 7% 3. 6% $266,682 $5,040 2006 2. 8% 4. 4% 2. 8% (5. 7%) 73. 2% 5. 2% $266,409 $7,410 2007 2. 7% 5. 5% 9. 3% 18. 7% 79. 5% 5. 0% $261,825 $7,035 2008 1. 7% (4. 4%) 0. 3% (0. 3%) 79. 0% 3. 0% $247,835 $4,323 2009 0. 5% (2. 6%) (1. 0%) (1. 7%) 78. 4% 0. 8% $241,480 $1,228 Profit margin Revenue growth Asset growth Liabilities growth Debt/asset ratio Return on assets Revenue per employee Profit per employee Source: company filings

DATAMONITOR Europe – Food Retail © Datamonitor. This profile is a licensed product and is not to be photocopied 0201 – 2058 – 2009 Page 27 LEADING COMPANIES Figure 12: Carrefour S. A. : revenues & profitability Source: company filings DATAMONITOR Figure 13: Carrefour S. A. : assets & liabilities Source: company filings DATAMONITOR Europe – Food Retail © Datamonitor. This profile is a licensed product and is not to be photocopied 0201 – 2058 – 2009 Page 28 LEADING COMPANIES Lidl Dienstleistung Table 12: Lidl Dienstleistung: key facts Rotelstrasse 30, 74166 Neckarsulm, DEU 49 732 30 6060 www. idl. de December DATAMONITOR Head office: Telephone: Website: Financial year-end: Source: company website Lidl & Schwarz Stiftung (Lidl) operates a chain of grocery stores. The company primarily operates in Europe. Lidl operates about 6,800 deep-discount department stores and no-frills Lidl supermarkets throughout Europe. In Germany it operates about 3,100 stores. The company offers about 800 different products in its stores mostly under Lidl’s own brand. These include dairy products, frozen foods, sausages, fresh meat and poultry, fruit and veg delivered fresh every day, and a range of breads.

Lidl is also expanding its presence into Denmark, Hungary, Norway, and Slovenia. Key Metrics Financial information for this company is unavailable. Europe – Food Retail © Datamonitor. This profile is a licensed product and is not to be photocopied 0201 – 2058 – 2009 Page 29 LEADING COMPANIES Tesco PLC Table 13: Head office: Telephone: Website: Financial year-end: Ticker: Stock exchange: Source: company website Tesco PLC: key facts New Tesco House, Delamare Road, Cheshunt, Hertfordshire, EN8 9SL, GBR 44 1992 632 222 www. tescoplc. com February TSCO London DATAMONITOR Tesco is a leading food and grocery retailer.

The company operates 4,331 stores in 14 countries worldwide. It operates in the UK, other European countries, the US and Asia. The company operates in a single segment: retail. However, Tesco’s operations can be examined by the store formats operated by it: Express, Metro, Superstore, Extra and Homeplus. The company has over 960 Express stores (up to 3,000 sq ft) offering fresh food at convenient locations. These stores sell a range of up to 7,000 products including fresh produce, wines and spirits and bakery products. The company has over 170 Metro stores (approximately 7,000-15,000 sq ft) in town and city centre locations.

It offers a tailored range of food products including ready-meals and sandwiches. Tesco operates about 450 superstores (approximately 20,000-50,000 sq ft) at which it offers food as well non-food products such as DVDs and books. Tesco’s Homeplus stores (approx. 35,000-50,000 sq ft) are dedicated to non-food including clothing. Tesco has more than 175 Extra stores (approximately 60,000 sq ft and above) which offer a variety of food and non-food product lines ranging from electrical equipment to homewares, clothing, health and beauty, and seasonal items such as garden furniture.

Additionally, about 115 Extra and Homeplus stores have opticians and around 270 of them have pharmacies. In addition to stores, Tesco offers retailing services through its online shopping channels, tesco. com and Tesco Direct. The company also provides broadband internet connections (Tesco broadband) and telecommunications services (Tesco Mobile and Home Phone) through a 50-50 joint venture with O2, a mobile phone company. Tesco also provides financial services through Tesco Personal Finance (TPF) which offers a choice of 28 products ranging from savings accounts and credit cards to car and travel insurance.

All its financial products are also available for online purchase. Europe – Food Retail © Datamonitor. This profile is a licensed product and is not to be photocopied 0201 – 2058 – 2009 Page 30 LEADING COMPANIES Key Metrics The company recorded revenues of $84,676 million in the fiscal year ending February 2009, an increase of 14. 9% compared to fiscal 2008. Its net income was $3,376 million in fiscal 2009, compared to a net income of $3,320 million in the preceding year. Table 14: $ million Tesco PLC: key financials ($) 2005 57,602. 2 3,042. 4 31,811. 6 17,695. 242,980 2006 67,234. 5 3,553. 7 35,167. 3 20,447. 6 273,024 2007 66,461. 4 2,959. 8 38,664. 9 22,188. 6 318,283 2008 73,720. 0 3,319. 9 47,014. 4 28,463. 7 345,737 2009 84,675. 6 3,376. 0 71,779. 5 52,460. 3 364,015 Revenues Net income (loss) Total assets Total liabilities Employees Source: company filings DATAMONITOR Table 15: ? million Tesco PLC: key financials (? ) 2005 36,957. 0 1,952. 0 20,410. 0 11,353. 0 2006 43,137. 0 2,280. 0 22,563. 0 13,119. 0 2007 42,641. 0 1,899. 0 24,807. 0 14,236. 0 2008 47,298. 0 2,130. 0 30,164. 0 18,262. 0 2009 54,327. 0 2,166. 46,053. 0 33,658. 0 Revenues Net income (loss) Total assets Total liabilities Source: company filings DATAMONITOR Europe – Food Retail © Datamonitor. This profile is a licensed product and is not to be photocopied 0201 – 2058 – 2009 Page 31 LEADING COMPANIES Table 16: Ratio Tesco PLC: key financial ratios 2005 5. 3% 10. 1% 10. 9% 6. 4% 55. 6% 10. 1% $237,066 $12,521 2006 5. 3% 16. 7% 10. 5% 15. 6% 58. 1% 10. 6% $246,259 $13,016 2007 4. 5% (1. 1%) 9. 9% 8. 5% 57. 4% 8. 0% $208,812 $9,299 2008 4. 5% 10. 9% 21. 6% 28. 3% 60. 5% 7. 7% $213,226 $9,602 2009 4. % 14. 9% 52. 7% 84. 3% 73. 1% 5. 7% $232,616 $9,274 Profit margin Revenue growth Asset growth Liabilities growth Debt/asset ratio Return on assets Revenue per employee Profit per employee Source: company filings DATAMONITOR Figure 14: Tesco PLC: revenues & profitability Source: company filings DATAMONITOR Europe – Food Retail © Datamonitor. This profile is a licensed product and is not to be photocopied 0201 – 2058 – 2009 Page 32 LEADING COMPANIES Figure 15: Tesco PLC: assets & liabilities Source: company filings DATAMONITOR Europe – Food Retail © Datamonitor.

This profile is a licensed product and is not to be photocopied 0201 – 2058 – 2009 Page 33 MARKET FORECASTS MARKET FORECASTS Market value forecast In 2014, the European food retail industry is forecast to have a value of $2,477. 4 billion, an increase of 49% since 2009. The compound annual growth rate of the industry in the period 2009–14 is predicted to be 8. 3%. Table 17: Year 2009 2010 2011 2012 2013 2014 CAGR: 2009–14 Source: Datamonitor Europe food retail industry value forecast: $ billion, 2009–14 $ billion 1,663. 1 1,811. 4 1,978. 0 2,161. 3 2,359. 7 2,477. € billion 1,196. 1 1,302. 7 1,422. 5 1,554. 3 1,697. 0 1,781. 6 % Growth 8. 5% 8. 9% 9. 2% 9. 3% 9. 2% 5. 0% 8. 3% DATAMONITOR Figure 16: Europe food retail industry value forecast: $ billion, 2009–14 Source: Datamonitor DATAMONITOR Europe – Food Retail © Datamonitor. This profile is a licensed product and is not to be photocopied 0201 – 2058 – 2009 Page 34 APPENDIX APPENDIX Methodology Datamonitor Industry Profiles draw on extensive primary and secondary research, all aggregated, analyzed, cross-checked and presented in a consistent and accessible style.

Review of in-house databases – Created using 250,000+ industry interviews and consumer surveys and supported by analysis from industry experts using highly complex modeling & forecasting tools, Datamonitor’s in-house databases provide the foundation for all related industry profiles Preparatory research – We also maintain extensive in-house databases of news, analyst commentary, company profiles and macroeconomic & demographic information, which enable our researchers to build an accurate market overview Definitions – Market definitions are standardized to allow comparison from country to country.

The parameters of each definition are carefully reviewed at the start of the research process to ensure they match the requirements of both the market and our clients Extensive secondary research activities ensure we are always fully up-to-date with the latest industry events and trends Datamonitor aggregates and analyzes a number of secondary information sources, including: National/Governmental statistics International data (official international sources) National and International trade associations Broker and analyst reports Company Annual Reports Business information libraries and databases

Modeling & forecasting tools – Datamonitor has developed powerful tools that allow quantitative and qualitative data to be combined with related macroeconomic and demographic drivers to create market models and forecasts, which can then be refined according to specific competitive, regulatory and demand-related factors Continuous quality control ensures that our processes and profiles remain focused, accurate and up-to-date Europe – Food Retail © Datamonitor. This profile is a licensed product and is not to be photocopied 0201 – 2058 – 2009 Page 35 APPENDIX Industry associations

Global Food Marketing Institute 655 15th Street, NW, Washington DC, 20005 Tel. : 001 202 452 8444 Fax: 001 202 429 4519 www. fmi. org/ CIES — The Food Business Forum 7, rue de Madrid 75008 Paris FRANCE Tel. : 0033 1 4469 8484 Fax: 0033 1 4469 9939 www. ciesnet. com EuroCommerce Avenue des Nerviens 9-31, B-1040 Brussels, Belgium Tel. : 0032 2 737 0598 Fax: 0032 2 230 0078 www. eurocommerce. be Related Datamonitor research Industry Profile Food Retail in Western Europe Food Retail in Asia-Pacific Food Retail in the US Europe – Food Retail © Datamonitor. This profile is a licensed product and is not to be photocopied 0201 – 2058 – 2009 Page 36

APPENDIX Disclaimer All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, Datamonitor plc. The facts of this report are believed to be correct at the time of publication but cannot be guaranteed. Please note that the findings, conclusions and recommendations that Datamonitor delivers will be based on information gathered in good faith from both primary and secondary sources, whose accuracy we are not always in a position to guarantee.

As such Datamonitor can accept no liability whatever for actions taken based on any information that may subsequently prove to be incorrect. Europe – Food Retail © Datamonitor. This profile is a licensed product and is not to be photocopied 0201 – 2058 – 2009 Page 37 ABOUT DATAMONITOR ABOUT DATAMONITOR The Datamonitor Group is a world-leading provider of premium global business information, delivering independent data, analysis and opinion across the Automotive, Consumer Markets, Energy & Utilities, Financial Services, Logistics & Express, Pharmaceutical & Healthcare, Retail, Technology and Telecoms industries.

Combining our industry knowledge and experience, we assist over 6,000 of the world’s leading companies in making better strategic and operational decisions. Delivered online via our user-friendly web platforms, our market intelligence products and services ensure that you will achieve your desired commercial goals by giving you the insight you need to best respond to your competitive environment. Premium Reports Datamonitor’s premium reports are based on primary research with industry panels and consumers. We gather information on market segmentation, market growth and pricing, competitors and products.

Our experts then interpret this data to produce detailed forecasts and actionable recommendations, helping you create new business opportunities and ideas. Summary Reports Our series of company, industry and country profiles complements our premium products, providing top-level information on 30,000 companies, 3,000 industries and 100 countries. While they do not contain the highly detailed breakdowns found in premium reports, profiles give you the most important qualitative and quantitative summary information you need – including predictions and forecasts.

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Azalea Seafood Gumbo Shoppe in 2004: A Case Analysis

Table of contents

1. What is Azalea’s current strategy and how well is it working?

 a. Provide appropriate strategic and financial analysis to support above response to question by including the following.

 i. Strengths

Azalea Seafood Gumbo Shoppe has a competitive advantage of producing one of the best tasting, high-quality gumbo. The company is based in Mobile, Alabama, where there is a big market for seafoods and seafood-based products.  Being near the Gulf Coast, procuring seafood, (their products’ main ingredients) is also easier.

Another advantage is that they were among the first to start selling readily prepared seafood gumbo. Their thaw-and-heat-and-it’s-ready-to-eat concoction was what separated them from their rivals. The product’s appeal was great because although gumbo is one of the food staples in states near the Gulf Coast, it is hard and tedious to prepare.

Azalea is one few gumbo producers, so the competition, relatively, is not stiff. And although there is indirect competition provided by other supermarket products, Azalea has proven that their product sells. In addition to that, chain buyers are comfortable with their pricing.

ii. Weaknesses

Perhaps Azalea’s greatest weakness is the relatively small size of their company. This factor contributes to their difficulties in finding reliable food brokers. Their size also makes the agreement they go into less secure, as evinced by the losses they accrued when Jitney Jungle filed for bankruptcy and was not able to pay more than $100,000 worth of debt. Whenever they take on a supplier agreement, the risk of huge losses are always there.

With regards to production, Azalea uses a “just in time“ process, which means that the amount they produce is just enough to fill orders from retailers and distributors. Although this keeps the costs low, they are not able keep adequate supplies for walk-in jobbers or buyers. Their quality control, at least in terms of their products’ packaging, also leaves much to be desired. A labeling mistake made by one employee cost them more than  $100,000 in 2000.

iii. Opportunities

Azaleas’ opportunities for growth and expansion are limitless. Every retailer and food establishment in the country can potentially sell or make use of their whole line of products. Retailers are pleased with their products’ taste and are comfortable with their prices; the only thing that prevents Azalea from landing large accounts is their small-scale production capabilities and company size. If they can accommodate a large-scale  distribution agreement, Azalea can potentially become an established brand on a national level.

 Sales in the restaurant industry are projected to increase by about 53% by the year 2010. This rapid growth in  “meals eaten away from home” poses a great opportunity for Azalea to expand and increase its distribution to the food-service sector.

iv. Threats

One of the biggest threats to the company’s growth is its battle for prime shelf space in supermarkets. Profits are significantly affected by product placement, and as such, unfavorable placement means a decrease in sales. Although they have few competitors in the gumbo arena, everything else in the market poses a threat because they can be serve as substitutes to the product. If Azalea’s gumbo isn’t getting good display spots and consumers can’t see them, buyers may just opt to buy other products.

Another kind of threat is the employment of unreliable workers and unsound management practices. One such mistake caused by employee negligence was the recall of more than $100,000 worth of gumbo and the subsequent loss of their distribution to the supermarket involved. This mishap could’ve been prevented if only there was a person in charge of double-checking and ensuring that high levels of quality control standards are always maintained. Read also about N eptune Gourmet Seafood

v. Financial analysis

Azalea’s economic prospects are good. Notwithstanding the losses they incurred in 2000, they have experienced a modest, but steady infusion of growth in terms of revenue. Their sales are also stable ever since the new owners took over the company.

So far, their current accounts with WalMart and its subsidiaries (as well as other large supermarket chains) make up a huge chunk of their net profits. This, however, can still greatly increase if they can get those companies to grant them a nationwide distribution.

The highest return on their investment depends on their ability to increase profits by about 5 to 10 times. This kind of development would also enable them to acquire large provider contracts from the big-time companies and food distributors. The main issue with regards to this increase in capabilities hinges on the company’s willingness to secure and move to a larger facility. This change would require them to borrow capital, but since they company has shown a solid, stable performance since its inception, this would not be a problem.

2. Financial ratios (for 2003)

Return of equity = net profit / equity = $193,625 / $176, 580 = 1.10

This shows how much profit a company generates with the money invested in it. This is useful in comparing their profitability to that of other companies in the industry.

Return on assets = gross profit / balance sheet total = $439, 827 / $193, 625 = 2.27

This reveals how profitable the company’s assets are in terms of generating profits. It shows how many dollars of revenue they can generate for each dollar of assets they have.

Current Ratio = current assets / current liabilities = $89,644 / $100,627 = 0.89

This shows the company’s ability to pay current, short-term obligations. Since the ratio is near the value of 1, it means that they can pay most of their debts at any given time, although they may require a small loan to pay all. A lower ratio would mean that a company may have trouble coming up with liquid assets.

Leverage = long-term debt / total net worth (equity) = $43,644 / $176,580 = 0.25

This shows how assets are financed by the company. A high leverage ratio means that they have large debts. Since Azalea’s leverage ratio is low, they will not have too much problem getting a loans or other forms of financial assistance.

2. What are the 4 most important (prioritize them) key strategic issues facing Azalea, as they look to the future? Discuss them in the following order:

 a. Small Company Size: The Most Important Issue

i. Explain its importance, but do not make recommendations or solutions here!

 In an industry that places importance on company branding and image, Azalea’s corporate image may make them look inadequate and unsophisticated. This may influence the decisions of food brokers and distributors, and greatly factor whether or not they can land big accounts with corporate distributors.

ii. Describe what made you think that this issue was most important

Being located in a small country side building gives the impression that the company only operates on a small-scale—one that isn’t up to par with industry standards. In addition to the image, buyers are also looking at the company’s potential for growth and expansion—and as such, their size would limit them.

iii. Provide examples from the case reading to support assessment.

Both Applebee’s and Cracker and Barrel initially showed interest in Azalea’s products, the latter even went as far as setting up an appointment to work out the contract details. Unfortunately, both were put off by Azalea’s facilities so the deals never materialized. The company’s slowing growth rate also made the owners rethink of the company’s future and prospects.

A larger facility made especially for food processing can also make them USDA certified which will allow them to add new products.

iv. Explain what will happen (and when), if the issue is not addressed.

If  Azalea stays in its current state, they could still grow, but that growth will be somehow limited, and possibly, the time will come where they will not grow at all—and this could lead to stagnation. If a competition with a larger business enters the market, the company may be eclipsed, resulting in loss of profits, and worse, bankruptcy.

b. Inadequate Production Abilities and Capabilities: 2nd Most Important Issue

i. Explain its importance, but do not make recommendations or solutions here!

Having good and adequate production abilities and capabilities are competitive advantages that are crucial for a company’s growth. This includes ensuring that strict quality control measures are being implemented and that supplies are never lacking. The company’s production potential is  one of the  greatest factors that corporate buyers are looking for.

ii. Describe what made you think that this issue was most important

While Azalea is growing at a stable rate, the owners themselves admit that they might not be able to handle large orders. I believe that they have what it takes to take on a nationwide distribution, as well as manage the addition of new product lines. However, this can only be achieved if they have bigger and a more solid foundation for their production processes.

With regards to quality control, a seemingly innocuous mistake can put a significant dent on the company’s finances. Also, products that do not meet buyer expectations of quality would only hurt the company’s name and future prospects.

iii. Provide examples from the case reading to support assessment.

The restaurant industry is expected to grow by more than half within the next five years and as such, this would mean the demand for Azalea’s products would increases as well. As such, they need to expand their production capabilities. One of the owners mentioned that should they be given an order for supplying 100 Sam’s Clubs, it may be beyond their production capabilities.

Another example: a labeling mistake by one of their employees cost them a huge sum of money and caused their buyer, Publix Supermarket to stop ordering from them.

iv. Explain what will happen (and when), if the issue is not addressed.

While the company can continue to grow from $1 million – $1.5 million a year without further investment, there may come a time when they will reach their maximum production capabilities and could grow no more. This is potentially problematic when demands for their products grow beyond their expectations and they are not able to accommodate them. When this happens, potential buyers may be disappointed and will have less faith in the company, resulting to less sales.

c. Unfavorable Product Placement: 3rd Most Important Issue

i. Explain its importance, but do not make recommendations or solutions here!

Product placement in stores have a huge bearing on product sales. As such, a good shelf spot will ensure healthy sales. Although Azalea’s gumbo have few competitors, a host of other goods in the supermarket can pose as substitutes, therefore it’s a imperative that their products are in conspicuous spots.

ii. Describe what made you think that this issue was most important

Although the company sells other seafood-based products, gumbo was by far the best-seller, making up approximately 90 percent of their profits. Since supermarket sales are Azalea’s primary source of revenue, product placement is one of the greatest factors that will determine their profits.

iii. Provide examples from the case reading to support assessment.

They have been given good Price-o-Gram spots (product placement) in WalMart chains and Sam’s Clubs because their product sells, but premium shelf space is not always a guarantee with other retailers. Managers can transfer the products without informing Azalea’s owners and may place them in unfavorable spots.

iv. Explain what will happen (and when), if the issue is not addressed.

Since supermarket managers sometimes move merchandise around, there is a possibility that Azalea’s products will be placed in the far-reaches of the freezer where it cannot easily be seen. Their earning potential will not be maximized and if this goes unchecked, they may end up with a considerable amount of unbought products. And if  supermarkets get an impression that their products do not sell, they may not place orders with them in the future.

d. Difficulty Finding Good Brokers for Product Distribution:

4th Most Important Issue

i. Explain its importance, but do not make recommendations or solutions here!

Because of Azalea’s relatively small scale production capabilities and their limited product range, they were unable to find good food brokers. Food brokers ensure that their products get good product placements in supermarkets, and with the absence of reliable ones, they cannot always expect that their products are getting prime shelf space. In addition to that, food brokers and distributors help establish grocery and food service accounts.

 ii. Describe what made you think that this issue was most important.

Since the restaurant industry is projected to grow by from $421 to $577 billion in 2010 (a 37% increase), getting a wider distribution to the food-service sector (and hitching on the industry’s growth) would conceivably increase revenue.

Favorable product placement translates to better profits, and brokers ensure that Azalea’s products get good spots on supermarket shelves.

iii. Provide examples from the case reading to support assessment.

A good broker got Azalea a good Plan-o-Gram at Winn-Dixie’s. Azalea also hired a full-time sales person in the Mississippi area and that person helps develop new accounts and checks product placements in surrounding supermarkets.

iv. Explain what will happen (and when), if the issue is not addressed.

If the issue is not addressed, the company will lose out on a lot of opportunities, possibly those that can greatly contribute to the growth of their revenue. The product placement issue would also not be addressed as a result of this, and as such, Azalea will be on the losing end.

3. What strategic recommendations (prioritize them just as above), for the four issues described above, would you make to Azalea? Marry these recommendations to the issues above in the same order as follows:

 a. Recommendation 1:

The Most Important Recommendation for the Issue of its Small Company Size

 i. Describe what they should do and how they should implement it.

f the company aims for more growth, the way to achieve this is to move to a bigger building and expand in terms of size, manpower, and management/sales personell. This would mean moving to a new location in a (possibly) more commercial part of town and putting more people managing the “new” company on its pay roll.

ii. Discuss possible alternative solutions and which one you’d select.

An alternative would be to put up shop in a commercial district without necessarily expanding their facility. Here, they can sell shrimp and crawfish when gumbo sales are not that good. While this may increase their revenue, I believe that the increase would not be as large as that of the first recommendation so I would pick the former.

iii. Include Pros and Cons of recommendation.

Investing on the company’s expansion will greatly increase Azalea’s potential to reach bigger revenue goals and allow them to be an acquisition candidate for major food companies and distributors. One possible con is since a huge amount of money is involved, the return of investment may take a while.

iv. Discuss short term and long-term effects.

In the short term, the move and restructuring will disrupt their operations, but production can be stabilized and expenses recouped once they land more corporate contracts. National distribution can now be possible, and they can be established as a big brand.

v. How the solution will be funded.

Azalea’s expansion can be funded by banks, and since they have a good track record, this won’t be a problem. They could also sell some of their assets to get additional funds. Finally, the owners can invest their personal funds in this endeavor, but they must do so with after a thorough consideration of the risks involved.

vi. Compare how this recommended change/solution compares to how they are doing are doingppen if they don’t implement the change.

Although Azalea has already established accounts with major regional distributions, they still cannot get nationwide distribution because of their size. Major food corporations also have reservations about going into a relationship with them because of the perceived “smallness”. If they stay in that current direction, they could still experience growth but it will be limited.

b. Recommendation 2:

The Most Important Recommendation for the Issue of  its Inadequate Production Abilities and Capabilities

i. Describe what they should do and how they should implement it.

Azalea should cut back from doing catering services and focus instead on improving production capabilities. Gumbo sales in supermarkets account for abut 90 percent of their total revenue, and distribution to restaurants, which accounts for 10 percent, is expected to grow in the next couple of years. As such, they should get a bigger production facility. They should also hire quality control inspectors and implement strict quality standards.

ii. Discuss possible alternative solutions and which one you’d select.

Adding to their product selection can also boost their revenue. If they move to a bigger facility, they could get USDA certification and add products that they can sell at a lower price point, translating to bigger, better profits. They could apply this low-cost provider strategy to their advantage by selling items with a lower selling point than their existing products.

If they are not able to acquire a larger facility, they could just stick with their current one and think of ways for improving their production. However, I will choose the first recommendation (i) along with expanding their product range–I believe that investing in a bigger facility will have a better pay-off in the end.

iii. Include Pros and Cons of recommendation.

Moving to a new facility and training for new equipments may slow down production for a while. The additional quality assurance procedures may also lengthen the production process. These, however, are necessary steps for moving up in the business ladder.

iv. Discuss short term and long term effects.

Growth in the first moths may be a little slow due to the (possibly) steep learning-curve, but I expect that production will stabilize in the long run. Azalea can then be considered a brand known for its quality, and as such, consumers may actively seek out their products.

v. How the solution will be funded.

Same as the first issue, the facility and product expansion can be funded by banks, liquidation of certain assets, and personal investment. Wages for the quality inspector(s) can be taken out of existing company funds.

vi. Compare how this recommended change/solution compares to how they are doing it now and what will happen if they don’t implement the change.

Although the company can meet current product orders, they are still being limited by their current facilities with regards to accommodating huge volumes. Stricter quality guidelines would also prevent another mishap (like the incorrect labeling incident) from happening.

c. Recommendation 3:

The Most Important Recommendation for the Issue of Unfavorable Product Placement

i. Describe what they should do and how they should implement it.

The company can hire people whose purpose are to make sure that Azalea’s products take prime shelf spots and that those spots are maintained.. This issue is not mutually exclusive with the other ones—if the company pushes through with their expansion, more food brokers will now be willing to ensure that their products have good product placement.

ii. Discuss possible alternative solutions and which one you’d select.

Azalea can also improve broker/distributor compensation and give other forms of incentives. They could implement this on a product performance basis, meaning, the better the product does in terms of sales, the better will the compensation be for the broker/distributor be. Because of this type of compensation scheme, the brokers may be more inclined to look after their products. I would recommend a combination of the first and second recommendations, since the latter would not really make use of a large amount of money.

iii. Include Pros and Cons of recommendation.

Hiring more people and giving brokers additional compensation can increase operational expenses, but this can be offset by revenues generated through larger sales.

iv. Discuss short term and long term effects.

If supermarkets see that Azalea’s products sell well, they make increase their orders and display the product in even better locations. This translates to better profits in the long run.

v. How the solution will be funded.

Expenses will come from the company’s budget but this can be offset by strong product sales.

vi. Compare how this recommended change/solution compares to how they are  doing it now and what will happen if they don’t implement the change.

Currently, Azalea has no effective way of ensuring that their products have favorable placements for all supermarkets, all the time. If no change is implemented, their profits can be at the mercy of supermarket managers who may or may not give them the optimal shelf spots for consumers buying.

d. Recommendation 4:

The Most Important Recommendation for the Issue of  Finding Good Brokers for Product Distribution

i. Describe what they should do and how they should implement it.

In conjunction with the recommendation for Issue #3, they can give extra incentives for good and reliable brokers. But if Azalea would expand the company, they can already set-up their own brokership of their products and consolidate with other broker/distributor associations.

ii. Discuss possible alternative solutions and which one you’d select.

Instead of looking for brokers for acquiring accounts and order agreements from distributors and retailers, they can instead hire their own personell to do the job for them. However, this may be more costly and finding a person with good contacts might be difficult.

iii. Include Pros and Cons of recommendation.

Giving brokers additional compensation can increase operational expenses, but this can be offset by revenues generated through larger sales.

iv. Discuss short term and long term effects.

Expansion of the restaurant industry is expected to continue for the long haul, as such, a good company-broker relationship will be beneficial for Azalea’s growth.

v. How the solution will be funded.

The compensation for brokers can come out of the company’s existing coffers. Supposing they expand, funds for setting up their brokerage can be included to their loan requirements.

 vi. Compare how this recommended change/solution compares to how they are doing it now and what will happen if they don’t implement the change.

The restaurant business is projected to grow by more that 50% by 2010. Azalea might miss a lot of opportunities if they are not able to take advantage of this industry boom. As such, other providers may exceed them, which may lead to them being overshadowed and making even lesser revenues than before.

Read also Zara’s identification of customer needs can be categorized as which planning and strategic management step

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Strategy Management Wal Mart and K Mart

Strategic Management Assignment 8 1. Do Wal Mart and K Mart exploit any merger and acquisition in recent 5-10 years? Merger &Acquisition| Wal Mart| K Mart| Acquisition| -Bempreco: This company has been acquiesced by Wal mart. Bempreco is a retail chain in northeastern Brazil with 118 units (hypermarkets, supermarkets and mini markets). The acquisition gives Wal-Mart Brazil its first stores in the Northeast market. -Seiyu GK: is a Japanese group of supermarkets, shopping centers, and department stores owned byWal-Mart Stores.

In 2005 Wal-Mart acquired a majority stake in the company which it has since increased to 95% ownership, and 100% ownership in 2008. -OneRiot: US-Wal-Mart Stores Inc acquired OneRiot, a Boulder- based provider of online advertising services, it was on Sep 2011. -Kosmix Corp: US-Wal-Mart Stores Inc acquired Kosmix Corp, a Mountain View-based provider of search engine services, it was Jun 2010. -Netto Foodstore: UK – Asda Group PLC, a unit of Wal-Mart Stores Inc’s Wal- Mart Stores (UK) Ltd subsidiary, acquired Netto Foodstores Ltd, a West Yorkshire-based owner and operator of grocery stores, from Dansk Supermarked A/S. -Wesfarmers: Wesfarmers has continued to transform the size and shape of its business operations through strategic acquisitions and divestments. Steeped in a foundation of retailing since its formation, today Wesfarmers is one of Australia’s leading retailers and diversified industrial companies. From the small farmers co-operative three quarters of a century ago, to the nation’s largest employer with almost 200,000 employees and more than 450,000 shareholders, Wesfarmers remains committed to providing a satisfactory return to shareholders. Merger| -Massmart: is a South African firm that owns local brand such as game, Makro, Builders Warehouse and CBW. It is the third largest distributor of consumer goods in Africa, the largest retailer of general merchandise, liquor and home improvement equipment and wholesaler of basic foods. On Tuesday 31 May 2011 Wal Mart has been merger with company. -Wal-Mart de Mexico: Is a Mexican public corporation, which is 31% owned by the American retail multinational corporation Wal Mart Store.

In December 2009 In December 2009 it was announced that Wal-Mart de Mexico bought 43% of Wal-Mart Centroamerica (Central America unit) from Wal-Mart Stores Inc and 40% from other share holders. | -Sears: Officallly named Sears, Roebuck and Co, is an American chain of department stores. Sears merger with K Mart in early 2005, creating the Sears Holding Corporation. The new corporation announced that it would continue to operate stores under both the Sears and K Mart brans. Around this time, Kmart changed its logo from a red K with the script “mart” inside to a red block letter K with the chain’s name in lowercase letters below it. | Comment:

Regarding this case we know that Wal-Mart has more acqusition and merger than K Mart. Wal-Mart was doing acquisition to open new market share, get more profit. But for K Mart only make acquisition with Sears. Before this acquisition K Mart almost bankrupt, not only have advatages but also acquisition has disadvantages. They was doing horizontal acquisition and merger 2. Why do Wal Mart and K Mart companies exploit such M&A ? Wal-Mart| K-Mart| – Wal-mart wants to get the synergies. The synergies help Wal-mart exploit economies of scale, eliminate duplicated functions, share managerial expertise, and raise larger amounts of capital. Wal-mart usually acquired the company related to the retail industry; it is called ‘Horizontal’ mergers. The reasons for these are a desire for greater market power, allowing Wal-mart to exploit new markets and spread its risks. | – Sears Roebuck and Co merger, there are many identified synergies created: enhanced position in retail market, winning real estate strategy, differentiation of stores through wealth combination of proprietary brands, strength financial position, stronger management team and support from controlling stockholders. | Comment:

Both of these companies may seek an acquisition because it believes its target to be undervalued, and thus a “bargain” a good investment capable of generating a high return for the parent company’s shareholders. Often, such acquisitions are also motivated by the “empire-building desire” of the parent company’s managers. 3. What is the average performance of return for those M&A? Wal-Mart| K-Mart| -With the acquisition, Wal-Mart Brazil will operate 143 units in the country, including 13 Wal-Mart Supercenters, 10 SAM’S CLUBS, two Wal-Mart Todo Dias and the 118 Bompreco hypermarkets, supermarkets and mini markets.

The acquisition gives Wal-Mart Brazil its first stores in the Northeast market. -The acquisiton give Wal-Mart and Massmart it’s first store in South of Africa, Botswana, Ghana, Guatemala, Honduras, Lesotho. | -Those most optimistic look to opportunities to cut redundant administrative expenses, increase buying power and crosssell branded merchandise between Kmart and Sears. -This acquisition is proper management and planning, the acquisition will be beneficial to employees from both companies and to consumers in general. | Comment : Normally if the company doing acquisition and merger, they will get more profit and advantages.

In above we could know that now on Wal-Mart becoming Leader in retailing industry. Wal-Mart has dominant market share in South africa and some africa contries. Compare between Wal-Mart and K Mart, Wal-Mart has better perfomance than K Mart impact of acquisition and merger. 4. Is there any report about problem after those M;A? Why? Wal-Mart| K-Mart| -The external problems are late entry, overlook competitors, destroy small business, joint venture and nationalism, culture different, house brand and price differentiate, suppliers, and government regulations. The internal problems which it still confronts in the operation systems are unique culture and concepts, and human resource management. | -In October 2009, it was reported that Kmart and Martha Stewart Living Omnimedia failed to come to a new agreement. -Kmart and Sears companies had problems with human resources. -There will be also lay-offs which SHC need to manage well. | Comment: As we know that the acqusition and merger has disadvantages, like we already mentions above.

There are two kinds of problems consist of external and internal problems. Like Wal-Mart, K Mart also has problem such as they acqusition in October 2009 with Martha Stewart Living Omnimedia failed. Regarding acquisition and merger, some companies if they want conduct acquisition have to thinking about training of their employee. Because If they do acquisition the management will be cut or mix together in one company that’s mean they have to buid up human resource performance to gain competitive advantages.

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Loblaw Companies Limited: Preparing for Wal-Mart Supercenters

Case 16 1. The grocery industry is a commoditized industry, which makes it difficult for grocers to sustain through differentiation. Buyer power is high and thus, cost leadership and operational efficiencies are critical. There is fierce competition amongst various grocery stores, with the main players such as Loblaw and A&P holding multi-banner stores in various market segments. Traditional grocery stores also lose some of their market share to drug stores, convenience stores and other retailers who have entered the industry.

Threat of substitutes from fast-food and take- away outlets is not as prevalent, since many grocery stores have started stocking ready-to-eat meals and have deli services available for consumers. Competitive pressures are increasing in the industry with the potential entry of Wal-Mart and new delivery methods such as the internet. 2. grocery store industry witnessed a lot of changes. Competitive pressures in the industry are increasing and several new competitors including wal-mart are entering the market.

New methods of delivery such as the interned are making it difficult and challenging for traditional based stores to comply. Customer preferences are diversifying and different demands are increasing. In addition to the price war that strike the markets. The maturity of the industry, characterized by flat demand combined with the growth aspiration of the dominant suppliers makes the industry a competitive battleground. Competitors work toward driving costs down while responding to swiftly changing consumer tastes.

Grocery managers therefore are challenged to provide the marketing mix of tomorrow, emphasizing speed, flexibility, and early identification of trends directed at segmented and rapidly evolving markets. The mass consumer market has been replaced by hundreds of highly diversified mini-markets for which grocery companies have to design custom made solutions. 3. Key Success Factors of the grocery industry include the following: Low cost operations; leading to lower prices Convenient locations and large stores Wide product ranges; good quality Value added services; customer loyalty programs

Cutting-Edge technology, both front-end and back-end Looking at the above factors, there are many opportunities for Canadian grocers to improve on their services such as vertical integration as supplier/distributor, innovative technologies like RFID, and global expansion Loblaw’s unique tangible resource is that they own 63% of their corporate stores real estate properties. As mentioned above, the grocery industry is heavily commoditized and competitive. The Canadian market leader, Loblaw, serves a broad target market and integrates a low cost strategy with product and process differentiation.

Through their multi-banner approach, they leverage their core competencies across multiple businesses. The biggest winner for the company had been the multi format approach. The company also holds about 60% of the real estate where they operate giving the benefit to change. The company refurnish the stores every 5 years when the industry norms are 7 years. 4. SWOT ANALYSIS: Strengths: Strong Market Share Broad Product Portfolio Diversified Store Format Low prices with good quality items at all franchises Great customer service/customers have a say in the company Noticeably friendly workers

Constantly looking for areas of improvement Array of services Canadian unlike foreign competitors like wallmart Weaknesses: Low Online Operations Limited Geographical Presence Opportunities: Rise in Demand for Private Labels Strategic Plans Rising Demand for Organic Products Opening new stores helps them become more competitive The unfortunate economy will create a new wave of customers looking for cheaper prices Threats: Expiry Of Agreement With Labor Union Highly Competitive Market Wal-Mart Business Partnerships Higher prices on certain items makes them less competitive in those areas (electronics and household furniture).

By the above S. W. O. T analysis, one can see that Loblaw’s KSF’s are on track and that they are headed in the right direction to bring them back on top. There is of course still work for Loblaw to do with their pricing, however that will come with time because when the company is doing better, they will be able to lower their prices even more. They are putting up a good fight though! Loblaws prices for certain items were only a mere 10-15 cents higher than that of Wal-Mart which demonstrates that they are climbing the ranks and will eventually pose as a threat to WalMart.

Being pure Canadian company is also a core competency because many people enjoy supporting their country even if it means spending an extra 10-15 cents. These key factors (low prices, better quality products, great customer service, and being Canadian) will help Loblaw rise to the top again. 5. Lederer’s plan to combat the threat of Wal-Mart Supercentre grocery stores turned bad on the company Consolidating its distribution centres, which supposedly made the supply chain more efficient, resulted in the departure of many of the chain’s general merchandise buyers who were unwilling to move.

There were numerous delays and coordination problems as suppliers had trouble shipping their goods to stores on time, and Loblaws was forced to mark it down in order to liquidate excess inventory. Expanding its inventory to general merchandise, supposedly to make a one-stop location like Wal-Mart Supercentres, was considered by many customers to be below the standards of Loblaws. Lederer stopped investing in its convential supermarkets and focused on building its major discount format, the real Canadian superstores. He spent 25 million dollars to motivate old employees to retire early as he turned traditional old stores into superstores. . This is a significant evaluation, because Loblaw is Canada’s largest food distributor, as well as one of the largest private sector employers. Loblaw operates under names such as The Real Canadian Superstore, Fertinos, Provigo, SuperValu, Zehrs, Atlantic Superstore, Loblaws, and Your Independent Grocer. Along with food and household products, Loblaw provides consumers with other services, such as banking, gas stations, pharmacies, photo developing, dry cleaning, and fitness centers. A qualitative and quantitative analysis of Loblaw was conducted through secondary research, using both internal and external sources.

This report focuses on the goods distribution and marketing aspects of Loblaw, by exploring its history, primary products, social responsibilities, and financial position. Ratios of the past and present will be taken into consideration when researching and making recommendations. History Loblaw Companies Limited was incorporated in 1956 and it now employs over 122 000 part-time and full-time employees throughout its 990 branches. As a subsidiary of George Weston Limited, it has supplied the Canadian market with innovative products and services for more than 45 years.

The superstore idea was first introduced to Western Canada in 1979. Loblaw operates in a highly competitive industry, challenged by many other supermarkets, such as Safeway. Organizational Structure The organizational structure of Loblaw Companies Limited is classified according to the functions of each department. Areas of specialization include: auditing, governance and compensation, pensions, environment, health and safety, and executive. Committee and team authority govern this tall, hierarchical organization, where individuals within the several layers report back to their superiors in the chain of command.

Ultimately each senior vice-president reports to the executive vice-president, who in turn reports to the president of the company, who is responsible to the Board of Directors. The Board of Directors itself is divided into five committees, which represent each area of specialization. Social Responsibility Loblaw demonstrates its social responsibilities in the following areas: Environment: Loblaw has various company policies concerning the environment, one of which demands that various operating sectors develop and implement waste reduction.

Reports are given to the environmental committee operated by a sect of board of directors who are not directly employed by Loblaw. Attempting to project an environmentally friendly image, Loblaw announced in 2002, that all of their garden centers would be pesticide free by 2003. Their waste reduction initiative has seen positive results, as was the case in 1999, when it reduced solid waste by 75%, organic waste by 60% and water waste by 38%. Use of underground tanks has been decommissioned; in addition PCB’s and asbestos have been removed from company operatives.

Employees: The philosophy that a company’s success is directly affected by the attitude of the employees, is put into action when Loblaw concentrates on coordinating positive relationships with their employees. Employee benefits include life or health insurance, dental insurance, and a pension plan. A stock option plan and an Employee Share Ownership Plan (ESOP), which are administered through a trust, are also available. This allows employees to make five percent deductions from their regular earnings; Loblaw then contributes 15% of each employee’s contributions to the ESOP plan.

Recruiting, hiring, and training are all done on a store-by-store basis. Loblaw maintains health and safety programs in its stores to address health and workplace safety. This system is also subject to compliance audits. Community: Charities such as Canadian Breast Cancer Foundation, Canadian Cancer Society, President Choice Children’s Charity, Easter Seals, the Canadian Merit Scholarship and many more benefit from Loblaw’s donations. Loblaw has purchased Maple Leaf Gardens, further developing its roots in the city of Toronto. Customers: Loblaw strives to have a good relationship with ts consumers through feedback, quality customer and product services. Programs such as the President’s Choice Financial MasterCard allow consumers to collect points, which are redeemable for goods within the store. Loblaw also attempts to get feedback from consumers through focus groups and surveys. However, Loblaw fails in the area of consumer responsibility by not allowing suppliers to indicate whether or not their products are genetically engineered. The company goes as far as to demand that companies selling genetically engineered goods avoid proclaiming so on their labels.

Investors: Loblaw is working towards being socially responsible to their investors by keeping them informed by releasing online annual reports and mailing them out. The company provides sustainable returns through dividends by reinvesting cash flow into the firm’s real estate and land. 7. loblaws was the largest supermarket chains in Canada. they opened a series of the real Canadian superstores in Ontario, where they expected wallmart to open their first food superstores. These were built as low-cost, one stop shopping destinations.

The real Canadian superstores were as the size of two football fields and sold a combination of groceries and non-food items. Lederer consolidated the the companies distribution centers from 32 to 26 facilities, in order to increase the efficiency of the supply systems. He closed old warehouses and opened new ones in Brampton Ontario. Real Canadian superstore were located along walmart supercenters as if facing at war. Geographically wise they were allocated at same areas and when it comes to goods and commodities, the both handled non food items along with their usual groceries. The war did begin. 8. Galen Weston Jr. as supposed to rescue the company by fixing the broken delivery system. He started by managing a pilot online grocery business in Ontario. Galen along with his team outlined a new business plan. He studied the problems and found out that they have a big delivery problem and that they are still over-priced. He aimed to increase sales and earnings by cutting prices, offering more products, and improving customer service. Galen started working on investors and opening up in idols such as the maple leaf stadium in downtown which he turned into a grocery store as to gain people due to their passion to the hockey team which was a symbol at the ountry. Moreover he succeeded in becoming number one again. 9. Recommendations for Loblaw: A private label: a store like Loblaw’s needs a particular way it can standout the competition. They could approach the strategy of having private labels in store. Cut down on general merchandise: they should reduce low quality goods and focus on selling people groceries with good quality plus they should concentrate on groceries rather than electronics because too much diversity infects being the best at a certain field.

Make the store attractive to the customers eyes: try to beat wal-mart by obtaining a store that is clean, decorated, high ceilings, no open boxes, attractive lighting and displays. Make the stores easy to roam and let commodities that are of the same interest be on a route that customers don’t pass by unwanted goods. Let people say this is the store I want to buy from. Supply chain management: its clear that the supply chains logistics used by Loblaw’s should be changed. Empty shelves phenomena should become extinct because it makes good stores look cheap and unreliable.

Increase marketing: marketing and advertisement should be extreme and excessive especially when change happens, prices differ, and news are there. Promotions should reach customers well enough to gain or even regain their loyalty. People should know that the company recognized their mistakes and problems and solved them out. Downsize: close unprofitable stores, this will reduce payroll and increase the funding to solve damaged issues. Off coarse this is the last measure companies look at but its helpful at the long run.

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An Analysis of Sainsbury’s Supermarkets Ltd and the Effect of the Credit Crunch on Its Performance

This dissertation seeks to examine Sainsbury’s supermarkets plc (Sainsbury’s) as a company and how they can use their established brand to branch out and gain potential growth in the industry, and to explore how they are coping with the recent credit crunch. Sainsbury’s has come a long way from being the market leader to dropping to the third position which it is struggling to maintain. This can be attributed to a series of wrong decisions and lack of foresight leading to their current struggles. They suffered from poor management in the past and this has reflected on their effort to catch up with the industry leaders. In addition, because of the recent credit crunch, banks have cut back on lending to both individuals and firms thereby swaying consumers to demand cheaper products and curb their expenditures.

A question springs to mind: prior to the crisis, supermarkets have passed on rising food prices to consumers but now more than ever prices are low, so why the sudden change in tactics? Small businesses are going under due to lack of finance which hinders them from competing and offering low prices but this loss to society becomes a gain to the big supermarkets. Does this mean that the supermarket industry has less risk than other industries or has the supermarket industry adjusted strategically to cope with the global downturn? 2. Background of the study Sainsbury’s supermarket, a subsidiary of J Sainsbury plc was first opened in 1869 and is one of UK’s most reputable stores.

They own 509 supermarkets and 276 convenience stores around the UK according to their website and are best known for their quality products that are priced fairly. It operates as an oligopoly where only few firms in the industry have majority of the market shares. Historically they have had the advantage of been in the industry a lot longer than its competitors who have now taken over in both performance and market share. Over a consecutive three month period ending in June 2008, Sainsbury’s reported 3. 4% increase in like-for-like sales which exclude fuel. They have recently boosted their ‘basics’ range in order to meet the growing demand and attract new customers.

They have promoted their brand with the help of celebrity chef Jamie Oliver In the current economic climate, the supermarket industry seems not to be affected financially by the lack of global credit but they have had to change their operations strategically to meet the demand of customers in the recent economic downturn. The food industry runs a low risk trade because majority of its products are necessities unlike other industries such as the banking sector who have suffered greatly from the credit crunch e. g. Lehman brothers. Across the continent and the UK, supermarkets have not been adversely affected by the economic crisis. Contrary to the recent events, the supermarket industry has in general employed more staff globally than any other sector. E. g. Asda has pledged to employ 7000 new workers in 2009 (BBC), Tesco also plans to take up 10,000 new workers (Sky News).

Some of the supermarkets are making plans to expand and open new stores in the current economic climate impaired with lack of credit. Companies have had to improve efficiency in order to minimise their cost and to increase profitability.

The Aims of the research project are to:

  • Provide an assessment and summary of Sainsbury’s supermarkets plc: -using financial, operational and business performance analysis to compare them against their competitors.
  • Analyse its position in the industry before and during the credit crunch: – they are currently experiencing increased sales during a recession.
  • Investigate the reasons why Sainsbury’s is not the market leader: – they were the pioneers of the industry and now they are struggling to maintain third position ranking.

Put together recommendations for Sainsbury’s on opportunities available to them that could lead to potential growth and increase customer loyalty:  suggest possible solutions and strategies that could help rebrand and reposition them in the industry.

Personal aims include:

  • Gaining more knowledge and skills in performing research through various techniques.
  • Complete a compulsory component to secure an MSc degree in International Management.

The objectives of the research project are to:

  • Evaluate the supermarket industry.
  • Examine the role of Sainsbury’s in the industry.
  • Establish if there are still market growth opportunities.
  • Accessing the impact of the credit crunch on the industry. Reason behind the recent increase in sales during the credit crunch.
  • The effectiveness of their marketing strategy and its impact on their sales.
  • The role and contributions of operations to Sainsbury’s.

Sainsbury’s has recently been losing customers to discount stores like Aldi and Lidl who offer lower value products at cheap prices and since then the company has rebranded and improved on its financial and operational performance but has still not caught up with the market leader. Their own brand ‘basics’ is a core strength to the business but they seen to be losing the battle of drawing consumers to purchase upscale and premium products from them.

Sainsbury’s grew rapidly after its first store was opened but suffered great losses after the Second World War when turnover fell drastically but the company evolved and grew once again till they experienced a change in management style in 1992. David Sainsbury and his successors made great decision mistakes under their administration including the rejection of branching into non-food retailing amongst others. During this downturn, their competitors grew rapidly. An opportunity that needs s to be explored is the increase in demand for organic products while striving to minimise the threat of their lack of international market exposure. It is important to point out that porters 5 forces has some weakness of been static, lacks guidance on how to define an industry and not forward looking.

With these flaws, it is also considered to be a useful tool in identifying threats to profitability, strategic planning to outperform rivals and helps to identify less competitive segments. A limitation to the report will be the sample size used which will be small compared to the total population and maybe income, age and taste sensitive. The result from the survey will be biased because it will be focused in the south west region of the UK and only few stores will be used.

Methodology and Methods

The research aims will be achieved with a combination of primary and secondary research.  The research method will be reviewing the literature on the supermarket industry with its focus being on Sainsbury’s.

This will be achieved from the use of secondary data collected from textbooks and journals through Royal Holloway university library and other relevant resources including the use of commercial databases and internet search engines. The dissertation will adopt a case study method. This report will use qualitative and quantitative data as sources of primary research. An analysis of original documents will be utilised including carrying out a small sample survey of 30 individuals each for Sainsbury’s and its competitors. This will entail the use of questionnaires with closed questions imputed into Statistical Package for the Social Sciences (SPSS). Telephone and face-to-face interviewing techniques will also be used based on having good and reliable contacts within the companies.

Data will also be gathered from electronic sources, books, journal articles; news achieves and interviews to.  A categorisation approach will be adopted where all data collected are grouped according the topic area best suited for its analysis. This report will examine the financial and operational performance of Sainsbury’s in comparison with its competitors. The use of financial information gathered from secondary research, Sainsbury’s and its competitors (such as audited reports) which are less biased will be used to measure the performance of the business. The financial performance will be evaluated using the following: Ratio analysis, Competitor analysis and Financial statements.

The operational performance will be analysed by studying the following: Distribution networks, Product quality, Pricing strategies, Promotion strategies and Store location. The report will use the 4-stage model theory to rate the position of Sainsbury’s operation. This will determine where they fit into the model and how to further develop other aspects of their processes which could act as a support to gaining competitive advantage. Strategic analysis theory will be used to evaluate the strategic position of Sainsbury’s in the supermarket industry. These theories will include: Swot analysis, Pest analysis, Porter’s five forces and Risk analysis.

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