The Strategies Employed by Morrisons Supermarkets - Essay Example

? Morrisons Supermarkets CW1 -Summary Morrison Supermarket is presently UK’s fourth biggest retail super market. The company has around 425 stores throughout the country. It has been facing tough competition from number of competitors like Tesco, Sainsbury’s and Asda. The SWOT analysis of Morrison Supermarket reveals the actual forces it is facing both internally as well as externally. If the strengths of the company are considered, it can be seen that it has a strong presence in Northern part of United Kingdom with rapidly expanding manufacturing capabilities. It also has a long standing management team to support such expansion. The level of service it gives to the customers is also high. The internal weakness of the company is that it is dependent on the market of UK. It is also uncertain over the long term acquisitions it has undertaken. It has a lower quality of Safeway estate. Their business model is very labour intensive. The external opportunities which the company now faces are the diversification of its business into new market. It has generated synergies through Safeway merger. Another opportunity facing the company is their expansion through online medium. It has decided to increase operations online. The Morrison faces many threats from its surrounding environments like Price wars. It is quite possible for its main competitors to engage in price wars. The UK grocery industry is undergoing a change and the company also need to adapt to the change. Hence if the company can’t take advantage of this position it will lose out in the market. Next the macroeconomic forces affect the company. Political forces which affect the company are changes in government policies like taxation polices. Any change of it will minimise the profit margins for the company in such competitive environment. The economic forces which affect them are their local suppliers of the products like meat etc. which keeps control over the quality of the food. Another advantage which the company have is that it helps to keep the prices in check. Morrison has launched a way of recognising a colleague’s job profile by giving National Qualified Certificate. This is their way of changing the lifestyle of the employees. They have also launched a campaign aimed “Let’s Grow” which provides free gardening equipment to the local schools so that a healthy social balance in the society can be maintained. The IT infrastructure of Safeway was down-graded and hence it needs to improve on it. Morrison faces legal risk with respect to the government policies regarding pollution control. It is a limited liability company and hence has to follow the legal way of doing business according to the companies Act. The company also has to take care of the environmental aspects like using long-life reusable bags instead of the free non –degradable plastic bags. As far as the financial performance of the company is concerned the revenues has increased by over 7 percent in 2011 while the gross profit has increased by around 6% in 2011. The operating profits have increased by around 7.60% in 2011 which is more than the increase in is gross profit. Hence the company has been able to decrease the operating costs. CW2 Executive Summary In United Kingdom the supermarket chain store is on rise. In this report we will take a look at one such supermarket store named Morrison Supermarket. We will take a look at the marketing strategies of the company which it used employed in their normal course of business. Being a grocery store it has to continuously change its marketing strategy to keep in line with the other competitors. We will also look at the different models like BCG and Ansoff and analyse the ways used to employ their marketing strategies. Lastly we will take a look at the other strategies the company can employ to further increase their business growth. Contents Executive Summary 4 Contents 5 Introduction 6 Analysis and Critical evaluation of Morrison’s Supermarkets 6 Analysis of Strategic Direction of Morrison’s Supermarkets 8 BCG Matrix of Morrison’s Supermarket 8 Ansoff Matrix 10 Critical Evaluation of Morrison’s Supermarkets’ Strategy 12 Conclusion and Recommendation 12 References 14 Introduction Morrison Supermarket plc is a supermarket chain store in United Kingdom. It is currently the fourth largest supermarket store in the world. It is headquartered in Bradford, West Yorkshire, England. It was founded by William Morrison in 1899 as an egg and butter stall in the Rawson Market. It was mainly focussed its business on north of England, with 425 stores across the United Kingdom. As of August 2013 the market share of Morrison’s was 11.3%. It is the smallest of the “Big Four” supermarkets behind Tesco, Sainsbury’s and Asda. The company is usually referred to as Morrison’s and is a part of FSTE 100 index. In this report we will critically analyse the market strategy of Morrison’s and what should be done to improve the market position of the company. Analysis and Critical evaluation of Morrison’s Supermarkets The main strategy of Morrison’s is focussing on their customers’ needs to get more customers for their business. For this they use try to use different strategies like focusing on selling fresh food items like fresh fruits and vegetables (Barney, Jay, 1991, pp. 99-120). The company has their own fresh food factory to cater to the customer’s needs. They are now aiming to sell all sorts of packaged food items like pies, pizzas, sausages, cooked meats, bacon as well as cheese. Morrison’s is procuring meats products directly from the butchers. This makes the customers feel as if they are buying fresh meat from the butcher itself. This kind of strategy is helping them to acquire new customers. The company call such strategy as “Food Specialist” strategy for everyone. Their main concern is about the freshness they bring to the customers and the money they earn (Bharadwaj, Sundar, Varardarajan and Fahy, 1993, pp. 83-99). The considerably earn the money by giving a great value to the customers at low price and also sometimes at a promotional cost. Their core competency is that they produce fresh food within the store or in their manufacturing facilities. Thy have their own distribution network to deliver those fresh foods to their stores. They basically build on their historical strengths that they have which is offering great value to the customers through fresh food. They are now also trying to open new stores in the local towns and shopping centres. The competitive advantage of Morison is its ability to provide the products to the customers at a privileged price. They have achieved this competitive advantage through the surpassing the integration of system of deliveries (Brodie, Coviello, Brookes and Little, 1997, pp. 383-406). The underlying culture of the company is “client at first”. Their aim is to grant the demands of the customers and make them encounter a pleasant experience at their stores. They have a good united internal system where in house manufacturing, marketing and logistics activities happen. Selling Information systems is well united with the new systems of product or concept development. But they also suffer from few defects. They don’t have any well-developed network of information technology which many of its competitors have like Tesco. Their management style is focused on generation of profit, creation and expansion of their shareholders. Though this time around they have faced difficulty in profit growth where their net income fell 6.23 %, but in all the previous year’s their net income have increased from 2009 to 2012. The Dividend per share has also been increasing from 2009 to 2013. Sir Ken Morrison’s role of leadership has influenced the productivity of the employees to a huge extent. With the acquisition of Safeways, they have made increased their market share in this sector (Steinman, Christine, Deshpande and Farley, 2000, pp. 109-119). The company also gives importance to the recruitment of the employees with proper skill set. They have a transparent appraisal programmes to motivate the employees. Their training and development programmes suffer from a few problems. They lack a sophisticated training and development programme which targets the bottom level staff. It hinders them from developing well-rounded skills which is required in today’s scenario. Another important part of their strategy is the integration of the staff when the acquired Safeways. The core competency of Morrison’s is its ability to provide value to the customers for the money they spent (Tantong, Karande, Nair and Singhapakdi, 2010, pp. 155-170). Morrison has many operations which make sits structure complex. But they have accepted the fact that the need to have managers with various responsibilities so that they can run different stores and house brands at the same time. Analysis of Strategic Direction of Morrison’s Supermarkets Morrison’s supermarket has adopted many strategies in reaching to its number four spot of world’s Supermarket. It has achieved this through a lot of clearly identified methods. BCG Matrix of Morrison’s Supermarket Star Star represents the portion of business which has high market share and high growth prospect. High growth business competes at a level where they have a competitive advantage as compared to its competitors. To achieve this normally heavy investment are required for this to exist. Morrison’s Supermarket does not fall in this category (Slater and Narver, 1994, pp. 46-55). Question Mark It represents that part of business which has low market share and high business growth rate. Such kind of businesses requires high investment with a high potential to grow. Management needs to make some growth strategies like acquiring Safeways. Morrison is now looking to make their presence online for its future growth. With the structural changes which are taking place in the UK grocery market they now are looking to drive their growth principally through their convenience and online channel (Vorhies and Morgan, 2005, pp. 80-94). For this require light investment as compared to developing the supermarket space. Morrison’s have forecasted that through this expansion plan their online food delivery size will increase by a factor of 40%. Using the best logistics and technology support available and using their unique manufacturing capability and craft skills, they now deliver a differentiated value for their right customers. Cash Cows For this segment the business growth is low with relatively high market share. Generally for this segment little investment is required. Good leadership and strategies are required for the business to move from cash cows to Star. Their central leadership had to bear responsibilities including strategy, finance, IT and online. The leadership had supervised the IT infrastructure of the whole group which was found lacking when Morrison’s store base expanded after it acquired Safeway in 2004. It helped Morrison move from being a regional player to a national strategy. The central leadership indicated that it would not use couponing, heavy discounting and will focus only on offering value in store (Weerawardena, O’Cass and Julian, 2006, pp. 37-45). But later they were forced to re-evaluate their strategy and they were force to use vouchers as a promotional tool across ten stores in north-east of England. It re launched their label lines, through improving their image as a retailer supplying fresh products and focusing on convenience in delivering their products. They have started to add premium products in their stores (Winter, 2003, pp. 991-995). Dogs This category of business has unattractive market growth rate and low market share. Such kinds of business generate profit to reach breakeven point. Morrison doesn’t fall in this category (Barney, 1991, pp. 99-120). Ansoff Matrix Figure 1: Ansoff's Matrix for Morrisons Morrison has recently developed its Product Development Strategy. Morrison has noticed the fact that more customers are now getting accustomed to buying products online. The total online market share in UK is around ? 70 billion and is growing at the rate of 16%, while the online grocery market is growing at 19%. They took the first step towards the online food market by acquiring a minor stake in Fresh Direct which is a leading online retailer in UK. It helped them gain expertise in the online domain. Morrison made its first delivery in London, where there is a significant affluent customer with high market penetration (Chan, Ngai and Ellis, 1998, pp. 119-139). The Market development strategy of Morrison is less risky and involves attracting new types of consumers for present produce of its business. It can come from either new channels of distribution or from new geographic areas. The market penetration strategy of Morrison is to gain more usage of its products from the existing customers. Morrison can expand organically in the United Kingdom by building more stress across the UK (Vorhies and Morgan, 2005, pp. 80-94). They also can penetrate the market by acquisition of a competitor like Safeways. They also acquired stake in Direct Fresh. The riskiest strategy for Morrison is diversification. Through this company will develop new products catering to new market. For example they can go for selling non-food items in their stores (Kohli and Jaworski, 1990, pp. 1-18). Critical Evaluation of Morrison’s Supermarkets’ Strategy In Scholes, Johnson and Whittington terms of acceptability, feasibility and sustainability strategy, the low cost strategy is more feasible for Morrison. But this strategy may not be sustainable for too long as it can easily be intimated by their competitors. This strategy may or may not be acceptable by all the employees and shareholders of the company (Hunt and Morgan, 1995, pp. 1-15). Another option for the company is to adopt a differentiation strategy which would be sustainable as it is difficult to imitate. But it may not be acceptable to all as it would entail additional cost to the company. Another way may be to pursue the new market penetration strategy using their existing products to enter into new markets. This may be acceptable because it is less risky than new market strategy (Hooley, Greenley, Fahy, and Cadogan, 2001, pp. 1-15). Conclusion and Recommendation As seen that the strategy employed by Morrison has been successful. They have entered into online retail store, which they expect will increase their revenue. They have slowly eliminated major defects in their business model like IT infrastructure. Morrision can go for Acquisition strategy which involves purchasing companies in the same line of business so that they can become a global player. At the same time they should be more receptive to their local customers through the use of local expertise which entails low cost as compared to a green field project. They can also use Franchising strategy, though it may result in sharing a portion of the company’s profit. 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Winter, S.G. 2003. “Understanding dynamic capabilities”, Strategic Management Journal, Vol. 24(1), pp. 991-995. Read More