Strategic Management of The Krogers Co - Assignment Example

?Strategic Management Table of Contents Table of Contents 2 Introduction 3 SWOT Analysis 4 PESTLE Analysis 5 Reference 11 Introduction Strategic management is the process to evaluate the vision, mission and values of a company. In this study one of the leading US based retailer company The Kroger’s Co have been taken into account to perform the strategic planning. The Kroger Co. is one of the largest nation’s grocery retailer’s with sales of $82.2 billion in the financial year of 2010; headquarter in Cincinnati, Ohio founded about 125 years ago. The company spans over many states with a variety of store formats including grocery and convenience stores, multi-department stores and also mall jewelry stores. Its manufacturing division has 42 food plants and it operates in over 750 stores directly or through subsidiaries (Kroger, 2011). Vision, Mission & Values of Kroger The Kroger Co., one of the leaders in the retail industry has a strong vision and mission statement with people being the first priority in its business. The vision statement of the company should be ‘It’s all for the people’. The company’s main focus is serving the customer, the people of the society with different types of supports for the community. The core value for the firm is to do business with honesty and telling the truth to the associates and customers. With its integration of a mix cultured people in the workplace the company respect the values and opinions off all its employees (Kroger, 2011). To be the leader in the retail industry with its variety of services The Kroger Co. is also involved in social community activities because they believe that it’s the people for whom they work so they must respect and care for the community. Every year the company invests on hundreds of communities for various social causes for the betterment of the society. In the past 3 years the total investment is around $8 million in the areas of education, diversity, community needs, women’s health and fight against hunger campaigns. Kroger understands its importance as it is also beneficial for the business process. Kroger being one of the leaders who wants to be the top ranked retailer needs to be in the mind of the people with the positive impacts from its social activities served towards the community (Kroger-a, 2011, p.2). Internal and External Analysis SWOT Analysis SWOT is the acronym for the internal Strength and Weakness for the company and the external Opportunities and the Threats from other firms. Through this technique the company understands its situation in the market and its possible opportunities and the threats from the market. The company’s main aim is to maximize the strength and opportunities while minimizing the weakness and the threats. Kroger with about 2486 supermarket and multi-departmental stores over 31 states has a strong position in the US market. It mainly concentrates in the grocery and the food retailing sector. With its attractive location and variety of products and competing price, Kroger holds a strong market position. But the company faces intense competition from player in the retail market like Wal-Mart Stores, The Home Depot and Costco Companies. On the other hand the consolidation in the food market segment has a big competition in the US retail chain market and affects the market share and profit margin. Food contamination is another issue which can harm a brands image. Expansion of the company in different sectors like the finance market is a great opportunity for the firm. The personal finance brand of Kroger helps the people to avail an easy way to buy through grocery banking. As a threat the slowing economy and the higher level of inflation affecting the food industry as it increases the transport cost and thus affecting the price of food. Cost sensitive customers may shift to low cost food products which will affect the profit margin. Figure 1: SWOT Analysis (Source: Author’s creation) PESTLE Analysis Pestle analysis is the tool to understand the market scenario and the external environment of the firm. PESTLE stands for Political, Economic, Social, Technological, Legal and Environmental factors which affect a business process. Political The political stability was shaken by the recession during the year 2008-2009 at US. Due to the inflation occurred during the year the price of various commodities increases a lot which affects the profit margin of the firm. Economic The economic environment of US market was in a very good position before the event of 11th September, 2001. Then after the recession period in the year 2008 the economic climate of the country was very low with dramatic slow growth rate in every sectors in the industry, increase in the fuel cost thus in turn increase the cost of food also. Social The social lifestyles of the people are changing every day. The increase in income also increases the demand for new sophisticated products. People now prefer to get all types of products under one roof which leads to a great demand of the retailing stores. Technological US being technologically very strong every sector in the industry has great support from this. With new transport system, easy money transfer system, online transaction, online shopping are some great features which can attract customers to Kroger. Legal The legislative branch consists of Senate and House of Representatives to serve for two year terms. Environment US being the 3rd largest country compared to the world have a large area of expansion with temperate climate and essential facilities are available. But there are some records of natural hazards at United States which acts as a barrier for some industries. Porter’s 5 Forces Model Porter’s five force model developed by Michael E. Porter in 1979 is used to determine the competition of the market and the attractiveness of any product or services into a target market. There are five forces which are needed to be analyzed by any firm to determine its position in the market. These five forces are the New Entrants into a particular segment in the market, the customers bargaining power, suppliers bargaining power, the substitute in the market and the competitors in the market. Figure 2: Porter's Five Forces Model (Source: Hill & Jones, 2009, p.43) Threat of new Entrants In US market it’s easy to enter the market with its growth but due to its strong competition in the market it’s very difficult for any new entrants to survive in the market. Kroger being already a leader in the market has very little threats from the new entrants. Bargaining Power of Customers The bargaining powers of the customer at US are not very strong with respect to other countries but there is no switching cost for the customers in the US market. Bargaining Power of Suppliers Since there are large number of suppliers in the US market the suppliers bargaining power is very less for the retailing market. Threat of Substitutes The substitute in the US market varies from low to high according to the location. The departmental stores and the Merchandising stores act as the substitutes for Kroger’s. Rivalry among Existing Players The main competition for the Kroger’s in US retailing market is the competitors like the leading Wall-Mart, Costco, and Home Depot etc. Kroger need to develop a very strong distribution and price strategy in order to compete with the leading names in the industry. Implementation and evaluation of Strategy For a sustainable growth and leading the market the company should look closely to its distribution system and reduce the cost of transportation in order to reduce the cost of food and be the leader. The pricing policy of the competitor is one of the major reasons for its top rank in the market. The ‘Neighbor to Neighbor’ approach of the Kroger is needed to be more taken care of so that it gives a strong impact on the mind of the customer. Helping the different communities will make the customers more loyal and more familiar with the products and the company. Thus investing in community will in turn be more beneficial in future for the company for its sustainable growth. Along with this the company can also adopt an expansion strategy internationally to flourishing market like India. The company should also implement latest technologies to reduce the cost of production and operation within the organization. For a proper evaluation the company should adopt the balanced scorecard method to analyze the different departments of the company. Each department will be given scores according to their performance and that will reflect the areas of improvement for Kroger. The use of balanced scorecard would not only help the firm to evaluate its financial strategies but to also analyze the non financial aspects. This would help in framing proper remedial measures so as to meet the challenges of the business environment and would also serve as a feedback mechanism for the organization. Figure 3: Balanced Score Card (Source: Hubbard, 2004, p.127) Conclusion Kroger is already amongst the leader in the US retailing market. With its vast diversity in the product range the company merges with several other companies to expand in different sectors also. To be the top ranked retailing company the Kroger has a very strong competition like Wall-Mart and Costco. To be as the market leader and its sustainable growth the company adopted several strategies like helping the community with its different charitable programs for the society. Kroger believes to be with the people and work for the people which give a very strong positive impact of its presence on the mind of the customer and be loyal to the company. Reference Hill, C., Jones, G., (2009), Strategic Management Theory: An Integrated Approach. Cengage Learning. Hubbard, E., (2004), The diversity scorecard: evaluating the impact of diversity on organizational performance. Butterworth-Heinemann. Kroger, (2011), Kroger's Corporate Home on the Web. [Online]. Available at: http://www.thekrogerco.com/index.htm . [Accessed on April 14, 2011]. Kroger-a, (2011), The Kroger Co. Foundation. [Pdf]. Available at: http://www.thekrogerco.com/documents/KrogerFoundationReportFINALJune7.pdf . [Accessed on April 14, 2011]. Kroger, (2011), Values. [Online]. Available at: http://www.kroger.com/company_information/careers/Pages/values.aspx . [Accessed on April 14, 2011]. Read More