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In the recognition of the strategic management, the organizations are given the opportunity to review their market performance. In doing so, the assessment and evaluation of their recent strategies are emphasized. Because of the influence of the globalization and the growing numbers of competitors locally and internationally, the attention of the organizational leaders and managers shifted in strategic management. The growth of adopting the process of strategic management resulted from the continuous improvement of the organization as well the heightened competition in their industry that led other companies hard to compete. The introduction of the technological developments and communications also changed the business concepts of the managers and utilizing the strategic management procedures.
This paper aims to investigate the importance of the strategic management and its perspectives particularly on the grocery retail industry. In order to make it possible, there are objectives that need to consider. First is to discuss the range of companies that competes in the industry. Second is to analyze the core competencies or the sources of the competitiveness of the organizations. Third is to explore the range of the strategic management particularly on the resource based view perspective. Through addressing these areas, the organization of the ideas is possible and at the end of the paper, the recommendations can be created to improve the competence.
Grocery Retail Industry
The growing number of competitors is obviously competing for the market share and competitive advantages. With the perspective of the strategic management, it falls heavily in the field of economics which is according to the business economists, the concentration or the topics are associated with the competitiveness of the industries (Cheng & Grimm, 2006). The influence of the early strategic management thought including the marketing, management, and financing are transformed and adopted in order to accommodate the recent changes in the industries such as the improvement in transportation, technological systems, and communication strategies.
Figure 1: Porter's Value Chain
Figure 2: Porter's Activity Systems Map
Based on the figures above, the grocery retailing industry is composed by the generic primary and support types of activities. Hence, the general performance or activities of the companies includes the factors of strategic management such as the industry concentration, diversification, product differentiation, and market power (Cheng & Grimm, 2006). However, in focusing on the activity systems map, the players can recognize the various core competencies. Porter suggested that the companies should understand their core value propositions in order to facilitate the right customer experience strategy.
Here are the core competencies that the companies shares and can be developed as part of their strategies:
(a) Explanatory catalogues, informative displays, and labels - the retail industry recognized the various developments such as the use of catalogues, brochures, organized kiosks, and even online shopping/shipping in order to deliver to the customers their needs as well as their convenience in purchasing their products.
(b) Limited Customer service - because the groceries are made to give the customers the freedom in choosing their products, the interaction of the staffs with the customers is not that necessary, wherein this is associated with the limitation in staffing.
(c) Low manufacturing cost - retail stores are not under the manufacturing industry. The cost that is addressed in this section is the simple manufacturing of the designs, racks, or additional facilities. The strategic management of the companies is unique and different from each other such as setting up the supply management and channels of distribution, inventory management systems, and their marketing strategies (http://www.investopedia.com).
(d) Most items in the inventory - The diversification of the products leads the companies to explore and expand their competencies to reach the various needs of their market. Since the revenues are originated from selling the products, the companies should seek their core competencies. This idea is related to the year-round stocking and can affect the customer impulse in buying.
(e) Sourcing from long-term suppliers - this aspect of activity is supported well-defined supply chain management that can help the companies align with strategies (Müller-Lankenau, Klein, & Wehmeyer 2004).
Strategic Management of the Companies in the Grocery Retailing Industry
In discussing the areas of strategic management, different perspectives emerge like the resource analysis, value chain, and strategic competencies. Because of the growth in the grocery retailing industry, there are changes and certain developments among the companies under the umbrella of this industry. Based on the study of Porter (2001), the companies should have a kind of strategy to achieve the long-term performance in the market and return in the investment. The companies will realize the fruit of their strategies when they gain the economic values at the time when the customers are willing to pay the price even if it exceeds to the original cost of the product or services (Seddon & Lewis, 2003).
The companies that are competing in the grocery retail industry understand the different channels that they can use in their corporate strategies. In highlighting the influence of the globalization as well as the technological revolution, the companies discovered the other ways to deliver their products and service in a more efficient way. For an instance, the distribution channels of the companies found their strategic positions through the online and offline channels. Based on the study of Müller-Lankenau, Klein, & Wehmeyer (2004) the framework in the multi-channel strategies is suitable for the grocery retailing industry because of the classification of the channel integration and channel domination. However, they stressed that "the choice of multi channel strategies depends on central industry characteristics as well as on a company's individual situation". In the discussion of the key characteristics or practices (see activity systems maps, Figure 2), the multi channel strategy framework can be a great source of aligning the corporate objectives with its functions. In addition, the perspectives or the shared core competencies of the companies can be separated or linked with each other in order to enhance their resource competencies.
There are four companies that are recognized with their resource-based view and core competencies. The competencies of each companies is based on the understanding the strategic capability of each in providing the best product or services for their customers.
Overview on Tesco
Tesco is recognized to be the largest player in the UK market and which became the business model of Waitrose in order to match the competition (Danaher, 2010). It is determined that Teso is also leading in terms of the supermarket share. Aside from the offering the products that are tangible for the customers, Tesco also acknowledged the impact of the internet and became the largest online grocer which also gains the advantage as compared to its contemporaries. Tesco's market share in the retail industry in UK is 12.5% and its continuous global operation made it possible for the organization to be an international supermarket chain. As of 2008, Tesco acquired 30% of the grocer market in UK and expanded its activities to clothes, consumer electronics, financial services, internet services, consumer telecoms, and even gas stations.
Tesco proudly introduced their environment friendly products which became the current issues of the global organizations in terms of their responsibility in the environment and the general aspects of CSR. Another competency that they established is the customer focused strategy which is emphasized through the use of club card as part of the loyalty scheme in 1995. Another factor that Tesco introduced their competitiveness is the idea of quality products that are subject at low prices. This is the very same reason on why the Waitrose is attempting to lower their prices even if their market are the middle-class consumers. Due to the effects of the recession that originated in the 2008, the consumers became more aware about the idea of saving and spending. Another competency that Tesco emphasized is the improved labeling which means that the products they sell are competent products and not part of imitation. And lastly, is the self-checkout which helps the customers to pay for the purchase even without the assistance of the employee or staff. This is effective in a large scale stores and the customers that are in a fast lane counters (Coriolis Research, 2004).
Overview of Wal-Mart
Wal-Mart is described to be one of the leading and largest corporations that managed to run chain of stores and warehouses. Wal-Mart provides the thousands of brands under the low cost process that can be the advantage of the organizations. Like the typical organizations, the Wal-Mart also experiences the various challenges such as handling the negative publicity that might affect the overall performance of the organization. These issues are commonly traced in the workforce that tackles the responsibility of the largest employer in UK (Nakra, 2000). However, Wal-Mart maintained and sustained its competitive advantage through recognizing their core competencies.
As promised, Wal-Mart matched the competition and as well as the expectations of the consumers by providing the products that are subject for lower prices. The company gained the benefits in doing this kind of strategy because of the low cost operations. In addition, the market share of the organization increased because of their priority in emphasizing the products that are lower prices. Second identified competencies are the hard-working employees. Although there are traces or effects of the negative publicity regarding to labor, the company maintained the operation through hiring the efficient employees and orienting them with the effective processes. Third is the better use of the technology which is directly connected with their suppliers and partners. And the Just-in-Time (JIT) inventory processes that aims to reduce the managing inventory at the warehouses. This idea promoted to monitor and keep the company updated about their products particularly in the perishables products. In general, the core competencies are the employees, the cost efficient strategies, the relationship of the suppliers, and the use of the technologies (MBA Tutorials, 2010).
Overview on Carrefour
Another leading company that lively play in the competition is Carrefour which acquires most of its revenues is gained through the relationship or their direct contract with the manufacturing companies (Snyder & Duarte, 2003). Although the company is recognized as one of the major player in the grocery retail industry, the company still seeks to improve the performance by consolidating the brands and procedures within the store, integrating the diverse organizations, and acquiring the new markets. The company continuous to evolve as the brand manager and having the steps toward the diversification and anticipates to enhance the market share of the Carrefour and their continuous growth (Business Wire, 2002).
The company's core competency centers on managing the portfolio which is very evident in the expansion project of the organization that shows the globally branded retail formats that at the same time carries a message that target the potential consumers. Another competency is lowering the prices which are the source of strengths of the organization to capture more of the market. This idea is suitable in the food merchandising aspects because of their better supply chain management and vendor relationships. Another is the diversification of the products such as expanding their products through the acquisitions such as the action of the company in becoming the fashion destination. And lastly, is the company expansion that is traced to the action of the organization in expansion in emerging markets such as establishing new stores in Asia where there are potential markets (Business Wire, 2002).
Overview on Waitrose
Another organization that plays actively in the grocery retail industry is the Waitrose. Although, the market is dominated by the major players like Tesco, Wal-Mart, Carrefour, Asda, and Sainsbury, Waitrose maintains its performance in the food and grocery market. The company is boosting its advantage more on food since "it is nerve out of style" and part of the basic needs. Actually, the growth of the consumption of foods increased the ability of the store to gain income. The market concentration of the company is also focused on online shopping (Andidas, 2003).
Using the Ansoff Matrix, the core competencies were identified. First the market penetration of Waitrose is effective because of their action in improving their products and service quality. The market development which involves the entering of new market while employing existing products made it possible for the organization to enter even in the online market. Another is the idea of the continuous product development that can be seen in the ability of the company to introduce non-food products through the partnership of John Lewis. And last is the diversification that can promote the business growth and introduction of the new products (Andidas, 2003).
After reviewing the core competencies of each company, the VRIO/VRINE framework is used to examine if the resource-based competencies adds value to their company and in the entire industry.
Costly to Imitate?
Exploited by Organization?
Temporary competitive Advantage
Sustained Competitive Advantage
Core Competency Model
Based on the core competency model, the companies are sharing the resource competitiveness and capabilities which enables them to compete in the retail industry. This explains the shared core competencies of the companies and in which their unique strategies can be formulated. The competencies that the companies shared are the low-price approach, the efficiency in terms of utilizing the human and technology resources, the relationship with their partners and suppliers, and their market operations such as the adoption of internet to facilitate their service among the online customers. The competencies can be separated, combined or linked which is acquired by the companies and made them known in the market.
Conclusion and Recommendation
Through assessing and evaluating the core competencies of the competencies that plays in the industry, their strategies can be improved. The importance of the strategic management in the modern organization is increase since the last decade because of the various developments. The core competencies of the companies are important factors for the companies to explore their other potentials and gain the competitive advantages. The strategic maps of the activities among thee companies in the grocery retail industry shows that the companies operations are generic and therefore, gives the idea that in order for them to acquire the competitiveness; they must assess their current actions and look for their own resources or strengths. The strategic management activities allow the business managers to gain insights on those strengths in order to gain the full access on the opportunities even in the highly competitive environment.
There are two recommendations that the companies can use in order to maintain the level of competition and allow the other potential players. First is to slow down the expansion strategy that are part of the technique is acquiring large scale of consumers. Instead of expansion, the companies can refine their stores to accommodate the existing and potential consumers in the market. Second is forming some strategic alliance to overcome their weaknesses and improve the services. However, they must assess the impact of merging to each company.