LONDON COLLEGE OF BUSINESS

STRATEGY DEVELOPMENT IN THE GLOBAL FOOD RETAIL SUPERMARKET INDUSTRY

SUBJECT

Business Strategy
ORGANIZATION

PREPARED BY
Student 1 2 3 4 5

Question 01

GLOBALIZATION IN FOOD RETAIL INDUSTRY

The Retail food industry has been dominant in the latter half of 20 th century all around the globe. In last 2 decades many supermarkets and grocery retail stores emerged and captured the market. It is not very hard to find the reason behind the success and popularity of the retail food chains. These food markets allowed the consumers to find all the necessary consumables under one roof. As the income level of the consumers rose and the need of new products emerged, these supermarkets expanded their range of products and this helped to increase the popularity of the super markets among the consumers. People prefer to go to super markets rather to buy the individual items from different stores. The major reason behind this has been mentioned earlier, but another reason it that people find this the way of entertainment. Families go for outing on weekends and they shop the whole weeks or months consumables and also spend some time together and hang around. The introduction of bar code technology allowed the leading stores to several items with the prices of each one of them. Moreover, it also helped to manage the inventory level of every product. There is no doubt that technology helped this concept of supermarket to expand. Without the help of technology it was not possible to handle huge range of products and their prices along with the inventory level integrated with customers demand. It is quite obvious that with the passage of time the demand of the customers and their priorities has been changed. Now the super markets and retail stores have to be innovative to keep the customers attracted towards them. For this different offers are required to be offered by the stores. This intense competition pushed the major food chains into the globalization mode.

STRATEGIC ALLIANCES
Two parties set the agreed goals among themselves and form a strategic alliance. By this both companies meet their targets by using the expertise of each other. Both the partners may share their resources, products, machinery, findings, knowledge etc to achieve the agreed set of goals. Strategic Alliance is very necessary for the big grocery or retail stores these days. There are lots of companies and the demand of their products is enormous among the consumers. The big retail stores need to have the strategic alliances with the companies to enhance the sales and to attract the consumers. Different offers are given to the consumers which include discount offers, free after sales services etc.

WAL-MART
Wal-Mart stores Inc, which is also a name as WALMART is an American based public company that is associated in running a largest chain of departmental stores across the globe. According to a report of Fortune Global 500 published in 2008, Wal-Mart has its position as the largest revenue generation corporation in the world. Wal-Mart operates with different names in different countries, for instance it works in Mexico under the name of Walmex,in United Kingdome it is named as Asda, in Japan it operates as Seiyu, and as in India it works as Best Price.

Wal-Mart is the biggest retail food chain of the world they are under several strategic alliances with different multination organizations. Following are some of the examples of Wal-Mart Strategic alliances with different companies: Stanley Works Stanley Works is the supplier of door systems, tools and related hardware of professional and domestic use. Wal-Mart has done a strategic alliance with Stanley works under which the largest retail chain offers the Stanley tools to the consumers with discounted prices. This enhances the sale of both the partners as consumers purchases the products more form Wal-Mart outlets and ultimately increases the sale of the products. SAS Institute SAS institute is the leader in the business intelligence software. In the year 2002 WalMart obtained the ability of the use software and services of SAS for the coming two years to fulfill the needs of business. After that Wal-Mart and SAS Institute are moving together in a value exchange relationship by the combination of the industry expertise of Wal-Mart and the SASs business intelligence. In this way this strategic alliance increases the value for both the parties.

MERGERS AND ACQUISITIONS

A Merger is the term which refers to the absorption of one firm by another, that means the firm that is acquiring the other one will retain its name and its identity, and it will acquire all of the assets and liabilities of the other firm that is acquired. The acquired firm then eliminates its existence as a separate business entity. So a new firm is created and both the firm will start working with the new name and the old entities will terminate their legal existence. Following are some types of Mergers. Horizontal: Horizontal Merger takes place between two firms which are engaged in the same line of business. (For example: Daimler-Benz and Chrysler, Hewlett-Packard and Compaq) Vertical: Vertical Merger involves companies which are at different stages of production (For Example: America Online and Time Warner) Conglomerate: Conglomerate Merger involves those companies that are in unrelated lines of businesses (For Example: AT&T and NCR)

BARGAINING POWER OF SUPPLIER AND BUYER

Buyer Power reflects the intensity of dominance of the suppliers of any organization. In case of Wal-Mart bargaining power of suppliers is less because Wal-Mart is a very big customer of all the suppliers. Wal-Mart buys huge amount of inventory from its suppliers and they have the power to bargain as it is a big brand name and one of the major client of the entire

suppliers. It is not wrong to say that companies who supplies different items to Wal-Mart, live and die for the orders of Wal-Mart. On the other hand buyer power of the customer of Wal-Mart is also less. There is no doubt that Wal-Marts serves its customers in the best possible ways and ensures their slogan i.e. Saving Money, Living Better. But Wal-Mart is a huge brand name and due to this there is very less in fact no chance of bargaining because the customers will not move anywhere else to purchase. The prices are already discounted and it is quite possible that consumers may not find better price other than Wal-Mart stores. Buyer power has about 55% of the five forces model that Wal-Mart uses. Buyer power would also include their employees, in treating them with the respect, giving them support and having an open door policy, you create happy employees which transfers to happy customers. Supplier power as there is a high amount of choices to be taken in and they do bring in a lot supplies. As for a threat of a substitute product, it is high because there are alternative products for sale that can replace another item. As for a threat of a new entrant, Wal-Mart seems to be the Leader in low cost sales so it will not be easy for a new business to come in and challenge Wal-Marts' ways. Supplier Power estimated percentage would be about 35, while, this percentage appears to be low, in the grand scheme of things is allows Wal-Mart to ensure that their suppliers come from a diverse group that achieves and maintains their high standards of delivering great quality services and products.

THREAT OF NEW ENTRANTS AND SUBSTITUTES

Threats of Substitute products and threats of new entrants average around 3%, simply because with Wal-Mart focusing on ensuring that their customers are happy and that their suppliers are delivering quality products at a low cost, they would ensure that they remain ahead of their competitors and in doing so, it would make it difficult for new entrants and the competition to match their prices. In order to reduce buyer and supplier power, they would have to put a greater emphasis on the threat of substitute products. They would have to look at what are the better and cheaper alternatives on the market and tap into that resource. Threats of new entry to create entry barriers, they would have to increase market research on what customers are actually purchasing and ensure that they are able to deliver, and become the only person offering that product at a price the customers and afford. Switching costs are easy, once customers realize they are no longer getting value for their money, they would go seek products elsewhere.

Question 02 WAL-MART MARKETING STRATEGIES

Wal-Marts marketing strategies are one of the most effective strategies across the world. The focus of the Wal-Marts advertisement is all about lowering prices and it remained true. The advertisement of Wal-Mart truly reflects what actually happens in the stores. And this is why the trust level of the customers is maintained with Wal-Mart right from the beginning. Moreover the Wal-Mart marketing programs are very simple and easy to understand. They are not complicated and the message is conveyed with an ease to the customers.

WAL-MART OPERATIONAL STRATEGIES

Wal-Mart owns an excellent operational strategy that continually finds the ways to lower the prices and make sure the delivery of products to the customers without any hassle and inconvenience. This service excellence is provided by taking following steps: Cost has been reduced by building strong relationship with suppliers, controlling energy consumption by monitoring lights, heat, A/C etc from their main offices. The inventory is being managed properly and efficiently. There are no more stock outs as the inventory level is being maintained through efficient inventory tool. Both variable and fixed cost has been reduced by Wal-Mart. This definitely improved the customers experience with Wal-Mart. Wal-Mart also added the IT systems which also facilitated the operational strategy. WalMart is one of the leading organizations that use IT systems very effectively. That is the reason of their success. They are using their own private satellite networks and also with the suppliers they are in line through EDI systems. Wal-Mart also added some convenience to the customers by having the outlets available 24/7, where customers can get anything at any point of time. Wal-Mart is also blowing operational cost by using RFID tags in stores to reduce the labor requirements. It is obvious that product range of Wal-Mart will increase due to the efficient use of these systems.

Question 03

MCKINSEYS 7S FRAMEWORK
Mckinseys 7S Model was created in the early 1980s by a consulting company named McKinsey and Company. After that it has been very popular and being used by many practitioners and consulting companies to analyze the performance of different organizations. This model was tested on 70 large organizations in 1980s. This model consists of seven variables and all starts with letter S. It is obvious from the figure below, that these variables in Mckinseys framework are interdependent to each other. By focusing on one area will not be the way to success, to get the success all these variables are required to be focused on. There are seven variables in the Mckinseys framework. We will discuss these variables in detail and will relate the actions taken by the current CEO of Wal-Mart to improve the performance of the organization.

DESCRIPTION OF 7 SS
Strategy The changes in the external environment of an organization effect the organization in positive as well as negative ways. Strategy is the plan of action which is adapted by an organization to anticipate or to respond to those changes in external environment. Strategy is planned, well thought and practically rehearsed. In this three facts are analyzed i.e. the current position of the organization, the target position of the organization in a particular

time period and the plan to get that position or place. So Strategy is basically as design that transforms the organization from the current position to a new place along with the objectives. Structure It is required for every business to be run in an organized form which is generally known as organizational structure. There are several ways in which organizations are structured, and these structures are dependent on their culture and aims/objectives. It is generally said that structures of the organization tells that how the company operates and performs. Traditionally, the business structures were developed in the form of departments that included the hierarchy of the employees. The management layers controls the operations and each is answerable to the upper layer of management. There is no doubt that these structures are still widely used in much organization, but a recent trend has been seen in the multinational organizations where teams of specialists do the specific task or work rather than fixed departments. This idea is to increase the flexibility and empowers the employees. Systems In todays world of advanced technology, every organization is dependent on some systems and internal processes to run their daily operations. For instance an organization may have a unique recruitment system. These processes are followed strictly and are designed to get the maximum output and effective results. Traditionally organizations were dependent on the approvals of the top management for any particular decisions. But now a day there is a trend to develop the systematic ways to resolve certain issues to become more customer oriented and ensuring quality services. If we analyze the business of Wal-Mart then we can easily understand that the organization has strength in all of these 3 hardest Ss. And that is the reason of the success of Wal-Mart. Style/Culture Every organization has its own unique style of doing business and unique culture. It includes the values, norms, believes which are not developed by anyone these are developed with the passage of time and employees adapts these values and norms and practices and become the part of organization. It majorly includes the relationship between the managers and subordinates. The traditional culture in the organization was of military style where strict adherence of rules and regulations is considered. The gap between the managers and sub ordinates was necessary to be maintained. But in the past few years this culture has been changed in the organizations. Now more corporative and friendly behavior is encourages between the managers and subordinates. This helps freedom of speech and increase employee motivation. Staff People (employees) of the organization are the one who make the real difference in the success of failure of the organization. The importance of human resource is enormous in the organization. Therefore the huge multinational organizations like Microsoft, Wal-Mart, IBM etc are very focused on the selection of staff. As they know that the intelligent and capable people make the difference and that is why these organizations are at the top of the business world today.

Shared Values There are some common basic ideas and guiding concepts which are the basis of the business. These are shared by all the members of organization. These are the common values which keep the employees of the organization motivated towards common objectives and goals of organization. In 1984, Doug began his career with the company as a summer associate in a Wal-Mart Distribution Center. In 1990, while pursuing his MBA, he rejoined the company in a Tulsa, Okla., Wal-Mart store. Most of Doug's 19-year career has been in merchandising in the WalMart U.S. division, primarily in food, apparel and general merchandise. He has also held various merchandising positions at Sam's Club and Wal-Mart International in addition to holding leadership roles in all three operating segments of the company.

Question 04

BCG Matrix
The Boston Consulting Group introduced the BCG Matrix in the early 1970s. In this evaluation tool the companys units or different products can be placed in to four different ranges. These ranges are based on the product life cycle theory. Business Units or products are ranked in a scattered graph on the basis of market share and growth rates. Wal-Mart has different brands under its umbrella and each has its own market share and growth rate. Being the worlds market leader each brand has it own life cycle and it depends on the target market and customer behavior towards these products. Below we will discuss the products of Wal-Mart and their position in BCG Matrix four categories.

CASH COWS
Cash cows are those products which have very huge market share in a slow growing industry. These products generate cash excessively and there is no doubt in that every organization wants these types of products as much as possible. In these products investment is not too big but the outcome is very positive. Following are some of the major brands of Wal-Mart that can be categorized as cash cows. Sam's Choice was introduces in the market as Sam's American Choice in the year 1991. This brand is named after the founder of Wal-Mart. Sams Choice is considered as the premium retail brand of Wal-Mart and the prices are very competitive with the other standard national brands. Great value is another major brand of Wal-Mart and it was launched in 1993. All the products offered under the umbrella of great value are one of the top brands that are used widely among the consumers. This is also considers as cash cow. Another brand of Wal-Mart named as Equate is also categorized as Cash Cows. Ol Roy is another major and mostly used brand across the world. This brand is a dog food that is used by many pet owners for their pets.

DOGS
These types of products are generally low growing products in the industry. Their market share is not very much and these products typically break even by generating cash which is enough to maintain market share. These products usually support the other business products after the breakeven so company might have to keep such products in market to support the other products of the same company. But form accounting point of view it is thought such product should be cut off as they do not generate enough cash. Party decoration items and accessories like candles and hats are sold under the brand name Best Occasions. Color Place is the brand used for paint.

QUESTION MARKS
Question Marks are also considered a problem child. These types of products consume cash at very fast speed. They have low market share as compared to cash cows but they can be cash cows in future and can also be at the position of dog. In such case the investment can

be paid back or can be lost. So such products are carefully analyzed and a very measureable decision should be taken to invest on question marks. Following are some of the brands which can be categorized as question marks. Wal-Mart provides clothing for mens work under the brand name Jesse James. NOBO which is the abbreviation of No Boundaries is a line of apparel that is for young college students and teenagers. Mens basic clothing like shirts, pants, undergarments, socks, and some other accessories are sold under brand name Puritan. Simply basic is another brand that is used for the health and beauty items. Now this brand name is used mostly for womens sleepwear. Womens clothing, jewelry and footwear are sold under White Stag umbrella.

STARS
Stars are those units which have usually very huge market share in fast growing industry and a continuous investment is being done on such products. There are chances the Stars become Cash Cows in future when growth of these products become slow. Following brands can be categories as Stars. Athletic and exercise equipments like weights are very popular items that are sold by Wal-Mart under the brand name Golds Gym. Items like Christmas trees, decorations etc are sold as Holiday Time.

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Question 05

PRODUCT LIFE CYCLE

Product life cycle is not different from a biological life cycle. For Instance a seed is planted, it starts to grow up and then it shoots out the leaves and the roots starts to expand and then it becomes adult. After a long period of time the adult plant begins to shrink and then die out. Similarly the product life cycle has the same stages. It starts with the introduction of product then gets in to growth stage then it becomes mature and then after a certain time period it goes in to declining stage. Theoretically the product is launched in to the market then it starts getting its customer base, eventually the market for that product stabilizes and then after a period of time that product is overtaken by another product and then it goes in to decline stage. However, there are chances the some product may fail in the introductory stage or the maturity time period can be extended by aggressive marketing.

Introduction
A new product is introduced in the market and is promoted through marketing campaigns and also the market awareness is created. If the product does not have any competitors or very few competitors then skimming pricing strategy is used. In this case the product is available only in few channels. This creates the demand of that product.

Growth
Under this stage the product get popularity and gains some market share. Effective strategies and strategic alliances are done to promote the product and to increase the market share. Aggressive marketing and advertisement is done to build the brand name.

Maturity
The products that manage to survive the initial two stages of product life cycle; they spend long time on maturity phase. This is because they are backed by effective marketing and brand awareness campaigns. Sales growth of such product decreases and then stabilizes at a point of time. In this stage price wars and intense competition occurs among the same type of products. Promotions are required to remain the market leader with the fact that profit margins become low as compared to growth stage.

Decline
After the maturity stage there is the last stage in the product life cycle i.e. declining stage. After the saturation in the market the product goes toward decline stage. New innovative products come in the market and the consumers starts shifting towards the new products.

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REFERENCES
Lynch, R. (2005) "Corporate Strategy" (4th edition), Prentice Hall, UK. Management and Economics, Vol. 24 (3), pp.237251. Purcell, J. and Boxal, P. (2003) "Strategy and Human Resource Management (Management, Work and Organisations)", Palgrave Macmillan, UK. Strategic Alliance, (citied on 20 March 2010) http://en.wikipedia.org/wiki/Strategic_alliance WAL-MART, (cited on 20 March 2010) http://en.wikipedia.org/wiki/Wal-Mart#Incorporation_and_growth Stanley Works and Wal-Mart Strategic Alliance, (cited on 02 March 2010) http://walmartstores.com/pressroom/news/4230.aspx SAD and Wal-Mart Strategic Alliance http://goliath.ecnext.com/coms2/gi_0199-1420648/SAS-Signs-New-Strategic-Alliance.html (cited on 10 March 2010) Mergers and Acquisitions http://www.scribd.com/doc/11432420/Mergers-Acquisitions-Business-Strategy Wal-Mart Stores, Inc. M&A Summary http://www.alacrastore.com/mergers-acquisitions/Wal_Mart_Stores_Inc-1017877 McKinsey 7S Framework http://university-essays.tripod.com/mckinsey_7s_framework.html Biography, C. Douglas McMillon http://investors.walmartstores.com/phoenix.zhtml?c=112761&p=irol-govBio&ID=93428 BCG Matrix http://www.netmba.com/strategy/matrix/bcg/ BCG Matrix http://en.wikipedia.org/wiki/Growth-share_matrix List of Wal-Mart Brands http://en.wikipedia.org/wiki/List_of_Wal-Mart_brands Product Life Cycle Stages http://marketingteacher.com/Lessons/lesson_plc.htm

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Wal-Mart Marketing- Case Study http://www.echeat.com/essay.php?t=27556 Wal-Mart Marketing http://www.marketingprofs.com/ea/qst_question.asp?qstid=1497

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