Musgrave Group Statergy
Musgrave is one of the leading companies in the distribution and sale of food, beverages and drugstore products operating in Ireland, Spain and United Kingdom. In Ireland, Musgrave is the largest grocery distributor. The operations of Musgrave are carried out under the retail establishments of Super Valu, Dicost Dialprix, and Cash & Carry wholesale Dialsur (Musgrave Group Annual Reports, 2011). In the retail division, the business method of Musgrave remains the franchise model and almost all of the supermarkets operated by the company operate as franchisees.
There is a business-to-business division of Musgrave, as well, which focuses on the development of a quality service for the hotel, restaurant and independent food shops. The group currently operates in Ireland more than 445 shopping centers and 186 Supervalu outlets (Musgrave Group, 2012). In England, the group operates under the franchise Budgens Londis controls 2,000 stores throughout the region. The size of the group can be estimated from the fact that sales of the group in 2010 were EUR 4. 6 billion and the group posted a profit before tax of 81 million Euros (Musgrave Group Annual Reports, 2011).
On the other hand, wholesale (carried out under Cash & Carry Dialsur) achieved sales of 91 million Euros in 2010 (Musgrave Group, 2012). The paper evaluates the external and internal environment of Musgrave by utilizing models of strategic management. The impact of the changes in external environment on the competitiveness of Musgrave is also addressed in the paper.
Internal Analysis
The strategic model used for evaluation of the internal environment of Musgrave Group is SWOT analysis. SWOT analysis is one of the most widely used methods of strategic planning which is used to evaluate the factors and phenomena affecting the enterprise (Alkhafaji, 2003). In this section Strengths and Weaknesses of Musgrave will be used for identifying the internal factors that contribute to the organization’s achieving it corporate objectives. Strengths Currently, the major strength of Musgrave is its market leadership in the region in which it operates.
Musgrave is second largest company in grocery retail in Spain and the largest one is Ireland. This market leadership gives the company large financial resources and the strength to take new initiatives. Another key strength of the group is resilience of consumer demand even in tough economic times because it is perceived as most economic supplier of groceries. Even during the global financial crisis of 2007-08, Musgrave Spain sales exhibited a growth of 6. 5% over the previous year (Krafft and Mantrala, 2010).
Majority of cash flow is reinvested in the company giving way to organic growth. Strengths| Market leadership in Ireland and SpainTops the list of the grocery retailLarge financial resources which enables taking new initiativesBrand equity based on customer service and corporate social responsibilityResilience in demand. Stable revenues in tough economic times Cost advantageCustomer loyaltyInnovation in supply chain and procurementHighly developed pricing and distribution mechanism.
Still relatively small as compared to other brandsAllegations regarded cheap and low quality itemsWeak online presence| Customer loyalty is yet strength of the company which is attributed to higher level of customer orientation within the organization. Musgrave is a company dedicated to service and personal attention to clients (Ketzenberg, Metters and Vargas, 2002). Honesty, integrity, consistency and transparency are required to be exhibited in all actions of the people who comprise Musgrave’s team. The culture of Musgrave is a key strength of the company since the culture of the organization is built around dedication and commitment.
Commitment, motivation and high level of responsibility is attached to all the members of the organization, which is partly responsible for making Musgrave a company that continues to grow along with its employees (Musgrave Group, 2012). The culture of the company is designed to develop the potential of people sharing the organization. Linked to the culture of the company are the human resources of the organization which constitutes another major strength of the organization. In addition, human resources of the group are highly trained which enables Musgrave stand out from its competitors (Finne, 2009).
The training plan of the company is based on the principle of continuous improvement and professional program is focused on customer orientation and taking responsibility at all hierarchical levels. Lastly and most importantly, the brand equity of Musgrave’s brands – namely, Super Valu, Dicost and Dialprix is very high within consumer markets built around promise of low price and corporate social responsibility (Ramakrishnan, 2010). Also, it is known that the company responsibly manages its facilities and vehicle fleets in order to minimize the environmental impact of energy consumption and the production of waste and harmful emissions.
Therefore, consumers prefer to buy from Musgrave’s brands over other competing brands in Ireland, United Kingdom and Spain. Weaknesses the dependence of Musgrave only on Ireland, United Kingdom and Spain as the major source of revenue is a major weakness. This implies that the dependence on only three markets as the source of revenue makes the company vulnerable to any form of economic recession in those regions. The size of operations of Musgrave is quite small compared to other international retailers in grocery segment. In recent years, consumers have reported problems with the quality of products at Musgrave’s retail.
Even though online retail has grown steadily at the international level, Musgrave has been considerably weak in this segment. Online sales currently comprises of only a very small segment of the total retail of the business. External Analysis The external analysis of Musgrave Group is carried out through Opportunities and Threats elements of SWOT model. Opportunities A major opportunity for Musgrave Group is to create leadership in non-food retail segment. The multi-format retail of Musgrave Group means that the company has a strong likelihood of increasing its sales and market share in non-food retail segments (Sadler, 2003).
The key is to take advantage of this opportunity by improving its merchandising skills. The global trend is towards growth in non-food retail as compared to food retail (Schirmer, 2007). Pharmacy retail is yet another segment of retail which is forecasted to exhibit extraordinary growth in coming years. Pharmaceutical retail is, therefore, another key opportunity for Musgrave Group. Opportunities | Growing middle income groups in emerging economiesFocus on market niches within existing marketsCreating customized strategy for each market rather than a uniform global strategy.
Strong pressure on prices and strong competition from the discountersRising commodity prices and suppliers erosion of profit margins. Potential economic slowdown| Emerging middle-income groups in developing economies like Indonesia and India represent another major opportunity for Musgrave Group (Ramakrishnan, 2010). A sizeable population is these regions is experiencing growing incomes and is willing to spend this growing income (Hill and Jones, 2010). Rather than using a uniform strategy for its entire business, Musgrave Group can create a separate strategy for each one of its regions to gain sustainable competitive advantage.
Threats Growing competition in United Kingdom’s and Spanish retail market and a likely price war is a major threat for Musgrave Group. Other grocery retailers in UK market which have become highly aggressive in recent years. Another likely economic threat for Musgrave Group is that the unemployment rate in United Kingdom is climbing up and purchasing power of the target market of the retail group is decreasing (Krafft and Mantrala, 2010). Anticipated rise commodity prices in the grocery segment are yet another threat for Musgrave Group.
Company’s Strategic Position
From the above mentioned analysis, meaningful inferences about the strategic position of Musgrave Group can be drawn. The strategic position of Musgrave Group appears to be stable, however, considerable drift can be observed between the changes in external and internal environment of the company. The strategic direction of the business appears to create a distinctive business model that is able to attract new segments. The online retail segment of the business is also significantly lagging and needs to be established so as to contribute a sizeable proportion of sales.
Dialprix and SuperValu appear to be the two star brands of the group. Human resources of Musgrave Group possess expertise in distribution and procurement. Creating the best team is one of the basic principles on which all actions of the managers within the company are inspired. Human resources policies of Musgrave group have been devised with the belief that employees are needed to be leaders in customer service and quality. Musgrave has a long history of making positive contributions to its community through environmental initiatives and looking after the interests of its customers, employees and society above profitability motive.
Musgrave Group recognizes the social and environmental impact generated by its business activities and declares its commitment to monitor, assess and improve its environment.
Conclusion
The paper evaluated the external and internal environment of Musgrave by utilizing models of strategic management. The impact of the changes in external environment on the competitiveness of Musgrave is also addressed in the paper. It is found that Musgrave is one of the leading companies in the distribution and sale of food, beverages and drugstore products operating in Ireland, Spain and United Kingdom.
In addition, it is found that the business method of Musgrave remains the franchise model. The SWOT analysis of Musgrave showed the major strength of Musgrave is its market leadership in Spain and Ireland. The large financial resources and the strength to take new initiatives are found to be the key strengths of the group. Another key strength of the group is resilience of consumer demand even in tough economic times because it is perceived as most economic supplier of groceries. In conclusion, considerable drift can be observed between the changes in external and internal environment of the company.
