The Morrison Company as a Food and Grocery Retailer - Essay Example

MORRISONS Table of contents 0 Introduction………………………………………………………………….3 1 Company history and profile................................................................3 1.2 Industry Analysis..................................................................................4 1.3 Internal analysis....................................................................................6 1.4 External analysis...................................................................................9 2.0 Strategy development......................................................................................10 2.1 Analysis of the existing strategies.......................................................10 2.2 Proposed strategies..............................................................................12 2.3 Strategy implementation......................................................................13 3.0. Conclusion......................................................................................................15 References.............................................................................................................16 1.0 Introduction In today’s ever changing world, effective and smart strategies need to be put in place for any organization or business to succeed. Technological changes, continuous changes in market trends, innovation and globalization have heightened the level of competition in the market calling for the need of re-evaluation of existing business strategies (Desmond 2007). The report will proceed by first looking at the company profile; its history and activities; it will then have a wider analysis of the industry by looking at the competitors, shares, growth and the customers. The report will then analyse Morrison strategies to determine their strengths and weaknesses and conclude by recommending new strategies and ways upon which they can be implemented. 1.1 Company history and profile The Morrison Company is a food and grocery retailer that is based in the United Kingdom. The organization has a large market share in the UK where it has more than 500 stores (Morrisons 2013). The supermarket that is widely known was created in the year 1899 in Bradford by William Morrison who started it as an egg and butter stall. In the year 1958, as noted in the Morrisons website, (n. d), the stalls began to offer self-service and opened up a shop in the town of Bradford. The year 1961 saw the opening of its first supermarket in Bradford that sold groceries and fresh meat. After opening the first supermarket, the company began its expansion process to other areas. This is visible from the year 1978 when it took over the Whelan stores. The company later expanded to Wakefield, England, Wales, Scotland and many more places across the United Kingdom. Hegarty (2014) observes that the organization increased its market shares through the takeover of Safeway and the acquisition of Rathbone in the year 2004 and 2005 respectively. Since then, the supermarket has grown and diversified its food products in order to meet consumer needs. It has adopted technology and innovation by the development of M local stores where customers can easily order for products (Morrisons n.d). The stores have been termed as efficient because they offer products to consumers at low costs and save time because of quick online delivery systems. Its development and expansion is visible because the organization now has its own meat processing unit and manufacturing business. The purpose of the organization is to offer fresh and quality foods and services to its customers that will enhance its expansion and growth (Morrisons 2013). It is committed to meeting customer needs hence the reason for use of technology and innovation. Its commitment to quality and meeting customer needs is supported by the fact that the organization manufactures its own products. This means that consumer tastes and preferences are considered compared to if the supermarket outsourced the manufacturer. The report considers this as a good strategy because the company understands its customer better than any outsourced manufacturer. In regards to the purpose of the company and its behaviour, this report is of the opinion that the organization focuses more on gaining a large market share and selling massively rather than paying attention to the changing consumer tastes and preferences. 1.2 Industry Analysis The supermarket industry in the UK is one of the industries that have developed to support economic growth of the state (Just-food 2014). Morrisons ranks fourth in industry with Tesco leading, Asda the Sainsbury respectively. The industry has five key players, four of them have been mentioned above while the fifth one is Safeway. In order to understand why Morrison uses the strategy it uses, it is critical to know the strategies used in the industry. One of the strategies used includes penetrations. Desmond (2007) describes this strategy as an entry level; strategy used by new organizations in the effort to acquire a share in the market. Most of the companies, as noted by. Grant (2005) use merging and acquisitions in order to penetrate and expand quickly. Another common strategy is the use of convenience stores that allow the customers to easily access the commodities. The industry also uses technology using online deliveries. Diversification in production has also been embraced where consumers are venturing into non-food products such as clothing. The competitive position of the organization calls for the need of change in strategy. Taking the fourth position implies that there are few areas where the company is not doing well. The company stands at the position because it only takes part in food production while other retailers have diversified to non-food products (Johnson & Whittington 2008). The stiff competition in the market forced Morrisons to cut its prices in order to win more customers. Wienclaw (2009) states that the implications of this strategy are that it led to a fall in profits for the company. However, on the other hand, the division of the market and the price wars made the consumers to benefit because they were able to access commodities at cheaper prices. The market has many features of an oligopoly, as stated by Wm Morrisons (2014), there are many barriers to new entrants in the market meaning that only the key players control the position of the market. The consumers have power because it is easier for them to switch between supermarkets in order to get the services that they want. Figure 1: A chart showing food Industry market share in the UK Source: Kantar World Panel (2012) 1.3 Internal analysis The internal analysis of the organization will focus on its operations, activities, resources that support its existence such as finances and its internal relations with the employees. In order to beat the competition and stay ahead, Morrison has structured its internal processes in a unique way. It has embraced technology where it has an online delivery system which enhances fast delivery of goods (Morrisons n.d). Locally, it has distribution stores in many places with fleet and trailers in order to ensure that there is speedy delivery. Its delivery systems make it stand a better position compared to its competitors. The Presswire (2013) describes the organization as one with efficient delivery system that attracts customers to shop from it because it offers convenience. Having an online delivery system is a commendable strategy for attracting and retaining customers because its saves customers’ time and money. Ordering and receiving goods at the comfort of one’s home is attractive because the customer schedule does not get interrupted, creating more reason for loyalty. ` Morrison supports its surrounding communities through a strong corporate social responsibility programme that is given a lot of priority. This programme considers customers as larger stakeholders thereby striving to provide effective welfare for them. The company engages communities through charity partnerships. It has a ‘let’s grow program that puts the community at heart sponsoring various community events and schools. Its publicity is commendable because it uses a variety of media to reach to its audiences; print, television and social media (Sloman, Hind & Garrat 2010). Its advertisements are created in a catchy manner that attracts the attention of its audience. It allows the members to bag pack in the stores-charity. It enhances relationships in schools. It not only participates in charity activities in its home country but it also supports various organizations abroad. In terms of technology, the company has embraced technology to support its aim of creating customer value. The supply chain of Morrisons is vertically integrated. Hegarty 2014) states that the supermarket invested £ 200m in the last three years. It uses technology in its manufacturing process where it has its own plants in several places. The plants allow the supermarkets to produce quality and fresh foods in the way that customers like. Having many distribution channels ranging from local store s to online delivery enhances quick delivery hence promoting freshness which is one the values of the company. This report supports the strategy of manufacturing because it only means that costs will be reduced and waste be minimized. If the products had a different manufacturer, then they probably would not reflect on company’s goals and objectives. Moreover, the process would have been more costly compared to having its own manufacturing plants. The strategy ensures that the company gains more profits from its production processes. Furthermore, it creates consumer loyalty because a customer feels valued when they know that the company went a step further to manufacture the products in the way that they wanted. Another internal analysis comprises the financial state of the organization in the recent few years. According to Morrisons (2013), the property belonging to Morrison is valued at £7.5 billion as at the year 2011.For the past recent years, the official website states that the sales volumes of the company have been growing year by year. The year 2010 saw an increase in net profit margins by 27%. The company reported a total turnover of 4.9% in the year 2014 which translates to 8.9bn. In the year 2013, the company reduced its net debt by £209m as reported in their official website. High net profits imply that the supermarket has good control of expenses and overhead costs. The debt-to-equity ratio of Morrison is strong implying that it can expand its business through borrowing. However, Hegarty (2014) states that the recent ratios are low hence may lead to liquidity issues. Finally, in order to offer value and quality, the company accords value to its employees. The company motivates its employees through promotions, bonuses, competitive rates, career development and employee discounts. Guy (2006).points that a survey taken in its stores showed that 41% of the employees had worked with the company for more than five years. In addition to the motivation schemes, the organization continuously trains its employees through training programs, seminars and workshops. It is the view of this report that training is a motivational element because it gives employees more skills and makes them stand at a higher chance of promotion. Guy (2006) suggests that employees motivation is critical to any organization that wants to succeed because they drive the company through their skills and competencies. 1.4 External analysis External analysis involves evaluation of any process that is performed outside the premises of the organization. It means what is contained in the environment that affects the functioning of the business whether directly or indirectly (Didm & Hulland (2013). It involves competitors, the government, customers and suppliers. Though the company has a large market share in UK, it faces stiff competition from discount stores and supermarkets such as Tesco, Sainsbury and Asda. One of the reasons why it is facing such completion is late entry into the online delivery system. It has become a challenge for company to acquire a large market share on the internet because its competitors had already established themselves online. Another reason why it faces stiff competition is due to lack of smaller convenience stores and limited productivity to food whereas the competitors benefit from non-food products. Consumer trends, tastes and preferences are changing where many consumers are either employed or studying hence do not have time to cook their own food(Grant 2005). However, they are selective to fresh and health foods because they are educated. Preference of fresh food puts Morrisons at an advantage compared to other companies that outsource manufacturers and have slow delivery process. Because of increased consumer awareness, Grant suggests that Morrison takes part in consumer education through magazines and their website. Economically, Morrisons is surrounded by an economy that is healing from a recession. The recession is usually followed by high costs that make companies not to gain a lot of profits. The situation poses a challenge to Morrison calling for the need to find ways of making profits. The UK economy is faced with high costs such as transportation and energy. The costs directly affect an organization because they lead to increased production costs. Figure 2: A graph showing Growth of Morrisons vs. its competitors. 2.0 Strategy development 2.1 Analysis of the existing strategies In order to achieve its goals, Morrison uses the fresh, value and food specialist strategy for everyone (Morrisons 2013). The fresh, value and service forms its corporate strategy. Fresh in that the supermarket manufactures its own products and therefore considers its products to be fresh. Hegarty (2014) highlights that the fast delivery systems enhance its fresh for everyone strategy. Manufacturing its own products is effective because it enables the supermarket to control the quality of its products that can be translated to giving value to the clients. However, this report is of the view that the strategy of fresh and value for everyone is not a realistic one. According to Grant (2005) a business cannot be able to serve every person; it only occupies a niche in the market and serves a segment of the market. The strategy that Morrisons want to give value to everyone is unrealistic because not every person can be able to access its stores and products as well. Its ‘fresh’ strategy cannot stand out because the company produces fuel which is not a fresh product. The organization also states that it is a specialist in food productions. This would translate that it is the only key player in the market. However Lebitt (1960) states that a market has competitors meaning that other companies may be specialists. In order to market its products, the supermarket changed its advertising strategy in the year 2007 to incorporate celebrity advertising. On most occasions, the organization uses children in its advertising campaigns. Desmond (2007) states that it uses this strategy to curb competition because more and more firms are venturing into the production of fresh foods. Using celebrity advertising and use of children in the ads is an effective way of promoting publicity. Grant (2005) supports this by stating that consumers are likely to be convinced if children are used because children are believable compared to adults. Use of celebrities attracts attention because the public always wants to identify themselves with them. It therefore compels the market to buy the products that the celebrities use in order to identify with them. Another strategy it uses is Corporate Social Responsibility aimed at attracting communities and public at large to its stores. Its production of fresh food is efficient because it limits the emulsion of harmful substances to the environment. Supporting the community through funding and charity activities gives value to customers who feel part of the organization and are likely to remain loyal. However, its corporate social program is negatively implicated by the act that the organization still produces fossil fuels that are harmful to the environment. In fact, the production can cause a lot of harm that surpasses its other efforts to keep the environment safe for everyone. Through partners and divisions, the company is able to monitor the activities of the competitors and the market at large (Morrisons n.d). It has units that evaluate plans and advertising campaigns so as to ensure that they stay ahead of competition. This report considers the monitoring technique as a good approach because it makes it easier for the company to identify changing consumer preferences. It also makes it easier for the company to stay ahead of competition because they can be able to tell the activities of the competitors. Monitoring influences performance because it enables the organization to adopt changes in products in order to meet changing consumer needs. However, a unit responsible for analyzing the market should be one that has profound understanding of the market; the consumers, competitors and suppliers. 2.2 Proposed strategies According to Ansoff (1957) an efficient strategy has the capacity of enhancing performance and bringing success to a company. He adds that when strategies are effective and revised according to market trends, then business are able to withstand competition for a long period of time. One of the principal corporate strategies of the Morrisons is freshness, value and service. This report recommends that value and quality of service strategies should be retained because they create customer loyalty, beat competition hence leading to gaining a large market share. However, this report proposes that the company should diversify its products because the markets are changing and it can lag behind if it dwells on food production only. One of the options it has is to include non food products such as clothing into one of its product lines. Morrisons would also consider finding new markets for its products. An expansion abroad is necessary because there are markets that remain untapped unlike the UK market that has become saturated. A strategic expansion to other markets will lead to the company gaining a larger market share. Its cost leadership strategy support expansion because of its economies of scale and efficient resource allocation. Expansion should be considered both on the online businesses and creation of direct stores. Hegarty (2014) suggests that one the reasons why the company faces stiff competition is lack of convenience stores. This paper proposes that the organization should create convenience store that will enable the customers to be able to access the products easily. In addition, the supermarket should come up with online stores consumers can browse for products and order for them without having to travel. Tapping the online markets and local markets will be a good strategy for the organization to increase its market share. The strategy is feasible because it is less costly. It will also enhance the objectives of the organization by quickening the delivery process. The company should also create a market niche that will enable it to penetrate further. It should carry out market segmentation and have units that monitor the trends of the identified markets. Rather than producing goods for its overall target market, the way it does, it should divide markets into sections. This idea receives support from Ansoff (1957) who states that people differ in behaviour and preferences, even identical twins stating that it is not wise to assume that the needs of a certain group of people are similar. Products should then be differentiated and made unique to suit a particular market segment. This strategy is effective because it goes in line with the objectives of the company that aims to create value for the customers. Creation of value can be easily achieved through differentiation. The strategy is attainable because Morrisons has the resources that will enable it carry out market segmentation and product differentiation. The company can also increase profits by focussing on unit productions. 2.3 Strategy implementation The first step to the implementation of any of the above proposed strategies is to have a proper plan and budget at hand. Morrison should have enough resources that will support the new strategies. Doing market research is also critical whether the organization wants to expand or create a market niche (Ansoff 1957). The organization should come up with teams that should be assigned roles such as planning and carrying out the research Creation of convenience stores for the customer will fast require identifying areas that need the convenience stores. The organization could use customer demographics to indentify such locations. Areas that may need convenience stores are those places where consumers are busy and want to save time, probably an area with high working class people. Because every environment has its legal rules, it is necessary to get permission before starting the construction process. Then the company can change its market street model to suit convenience stores in order to ensure that the customer receives quality of service. After the establishment of the convenience stores, the supermarket should revisit its advertising campaign. The campaign should be structured to create awareness of the new stores. The expansion strategy has several ways of implementation. One way it can be implemented is through investing company profits and revenue to building new stores especially in other markets other than the UK. Another way is to establish joint ventures with other big companies such as Iceland. Joint ventures or acquisitions enhance faster penetration into markets because there exist a ready market. It also makes it easier to attract new customers especially if the ventures or acquisitions involve companies that are well known. The company should invest in doing research on the new markets to determine how they want their products. Then it should train its employees so that they can be able to offer quality services to the consumers that will create customer loyalty. The implementation of new product lines requires identifying those products that complement the existing business. This report proposes that food and fashion go together and the company should consider clothing as new products to its supply. Implementation of this strategy requires prospecting for new suppliers who will be able to provide fashion and quality to the organization. Research on the fashion trends is also necessary because it will establish consumer trends. The company will need to invest resources in terms of finances and human. Training and creation of units that will deal with new product lines will be necessary. 3.0 Conclusion From the above analysis, it is clear that Morrison strives to offer value and grow by engaging its internal staff, community and applying appropriate strategies that will lead to success. However, its productivity is termed limited bearing in mind that consumer tastes and preferences keep changing, technology too. The organization should focus on offering other products and consider what complements the supply chain. Through segmentation, differentiation and expansion, the organization will be able to garner profits and beat competition. The company should focus on expanding to emerging markets like India and China. References Ansoff, I., 1957. Strategies of diversification, Harvard Business Review, Vol. 35, no. 5, pp 113 123 Didem, K., & Hulland, J., 2013. Aggressive marketing strategy following equity offerings and value: the role of relative strategic flexibility, Journal of Marketing, vol.77, no.5, pp 57-74 Desmond, J. (2007). Fundamentals of marketing: A critical evaluation. Taylor & Francis Food: company spotlight: Morrison, 2009, Marketwatch, Available on business source complete. Grant, 2005. Contemporary strategy analysis, 5th edn, Wiley & Sons. Guy, C., 2006. Planning for retail development: a critical view of the British experience, Jstor Hegarty,R.,2014. ‘Morrisons prices to be matched with discounters’, Business Media, Vol. 237, no. 8175,p 4 Just food, 2014. 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