Strategic Management and Marketing: Morrisons Supermarket - Essay Example

Strategic management and marketing: Analysis of Morrison’s supermarket BY YOU YOUR ACADEMIC ORGANISATION HERE HERE HERE Strategic management and marketing: Analysis of Morrison’s supermarket External environment Morrison’s supermarket, despite its recent growth, is within a marketplace which is saturated with heavy level of competition. Competitors include Tesco, Asda and many other smaller competitors which, in turn, creates the necessity for many different marketing differentiation strategies. Using the PEST diagram for analysis, Morrison’s operates in a market environment where commerce is actively promoted by governmental leadership. The UK is a market-driven society and the role of business is to enhance general society and is often supported by legislation which favors the role of business and commercial trade relationships. There are no significant political risks to the business in the market where it operates today. Economically, a risk to the business is the growing global recession which is causing noticeable shifts in consumer behaviour. Donnelly (2008) offers that supermarket consumers are becoming more aware of pricing when making product decisions which is not as noticeable during economic periods which are more stable. Therefore, they are defecting from their favourite brands in favour of some cheaper product alternatives. This has also created competitive actions which are referred to as the current “supermarket price war” that is spilling out into different sales markets (Donnelly, 2008, p.2). If consumer spending is down in the supermarket industry, this is a risk to Morrison’s and should be considered as part of marketing strategy. If consumers are price conscious, and pricing is being used competitively across the spectrum of competition in this market, then the business must consider using unique marketing differentiation strategies to stand out from competition. Morrison’s could focus more on the consumer and their personal value systems or using brand associations to steer consumer attention away from pricing issues. The current economic environment, however, has not impacted Morrison’s business as they recently posted an 8.2 percent increase in sales and experienced a market share jump of 11.6 percent in less than one year during the same time period (Mortimer, 2009; Vitorovich and Carolan, 2009). However, the consumer-related economic environment must always be a consideration for Morrison’s when assessing marketing strategies. Socially, this same price-focused consumer is now finding thrifty shopping to be acceptable and are turning from their favourite products because their peers will find this acceptable also. This is a social trend where value and low price are the focus of acceptable foods shopping. Technologically, the marketplace is experiencing the growth of online supermarket sales from competitors such as Asda, Sainsbury’s and Tesco. This growth is measured at 35 percent since 2008 (Braithwaite and Urry, 2008). There is no research evidence showing that Morrison’s is currently active in the online sales environment. This represents a threat to the company in terms of whether the company, if driven by higher online competitor sales, must enter this growing market to stay profitable. If consumers are also being driven toward this for social reasons, such as fulfilling expectations for convenience, this new method of performing business would alter Morrison’s existing supply chain strategies or any other number of operational factors. This online sales growth in supermarket foods points toward a new market trend which should be evaluated closely by Morrison’s. Using the SWOT Analysis template as a tool for analysis, the company’s strengths lie in its ability to be flexible in conducting business. For example, Morrison’s chief executive described competitor Tesco as “the world’s best retailer” (Braithwaite and Urry, 2008, p.22). Even recognizing the high level of competitive power stemming from Tesco, Morrison’s realizes that this only poses a challenge and seems to make the business more focused on using differentiation through marketing in order to succeed. Full-year net profit for 2008 saw a doubling of profit from the previous year for Morrison’s, therefore its strength in flexible business strategy is supported by high sales volumes for innovative and competitive marketing. The company’s weakness lies in its failure to react quickly when competition, such as the enormous Tesco, makes a marketing blunder or fails to meet with marketing expectations. Benady (2009) offers that a recent strategy for Tesco involved the development of a discounted food sub-brand that confused a very viable pricing strategy which Tesco had traditionally been using. This could have represented an opportunity for Morrison’s to take advantage of the negative consumer sentiment by creating promotional materials which herald the perceived dangers of budget brand shopping or some other move to further drive customers away from Tesco. Rapid strategic response to outperform competition needs evaluation. Opportunities for this market lie in promotion and differentiation by focusing consumers on non-pricing aspects of the Morrison’s shopping experience. Test studies conducted by Morrison’s to measure consumer sentiment in supermarket shopping during a difficult economic period is one method to understand buyer intentions and then use marketing promotion to try to create a connection with consumer lifestyle and Morrison’s. The threats to this business have already been identified: less consumption due to consumer economic concerns and the high volumes of competition in this marketplace. Using Porter’s Five Forces as a tool for analysis, Morrison’s routinely faces the threat of substitutes in this market environment because of the high volume of competition and for emerging, smaller grocers. With buyers already identified as being price-driven and willing to abandon their favourite products to meet with budget, they are willing to substitute. Supplier power does not seem to be a concern for Morrison’s due to the existing distribution and logistics infrastructures which already exist in many competitor supply chains. The volume of purchases coming from Morrison’s will likely drive supplier relationships and supplier willingness to adjust their own best practice to meet Morrison’s demands. Tesco likely has more influence in driving supplier behaviour than this supermarket. Consumers today are price sensitive but also brand aware, both described as external threats to the business (quickmba.com, 2009). This is yet another reason why Morrison’s must consider brand positioning in order to differentiate the company in the minds of consumers. This consumer trend toward brand abandonment should always be considered by the company. Fortunately for Morrison’s, any barriers to new market entry in the UK do not pose significant opportunity for business disruption. Culture comparison - Safeway acquisition There were external cultural issues which occurred after the acquisition of Safeway, which involved perceptions of citizens in different regions of the country and how they negatively impacted brand image for Morrison’s (In-Store, 2006). However, it is the internal culture which should be examined as this is often the foundation on which human resources strategy, as part of marketing, is developed. Johnson and Scholes (1992) provide a framework known as the Cultural Web which offers six paradigms which need to be considered for a healthy organizational culture. In relation to stories, Safeway seems to understand that public and consumer sentiment is something which directly impacts business opportunities. Branding strategies generally involve creating a positive consumer sentiment and much of this is linked to how the consumer perceives the brand as being relevant to their lifestyles. Black (2008) identifies that Morrison’s has recently had considerable success by improving its product range. These successes are communicated across Morrison’s business culture, unifying employees to be excited about the company and its future direction. Growth in sales revenue along with a better market position shows that Morrison’s is ambitious and can bring about positive change by telling a positive story and promoting unified goals and goal-attainment. The Morrison’s chief executive consistently points out that Morrison’s does have weaknesses against competition, but that the business is pushing to close these gaps. This likely builds a great deal of trust in the company leadership as an ethical company that recognizes its limitations and is prepared to grow. These are some of the rituals and symbols which occur in Morrison’s which reinforce the company’s focus on a business turnaround that that it’s leadership is very much involved with success and learning. The Safeway acquisition gave the business many new opportunities for changing their marketing strategies, to differentiate the brand, and also learn about different buyer demographics. There are implications in the Morrison’s case study that some Safeway locations catered to the less-affluent customer. By understanding multiple demographics and their lifestyles, Morrison’s can better cater to their unique needs and values. By showing diversity in business the company’s culture seems much better organised for future success. Black (2008) believes that Morrison’s positive culture has led to better performance in ex-Safeway stores and the company is managing to win over new shoppers. All of these changes can be compared to Morrison’s earlier culture which has less efficient control systems and no clear direction for strategic direction. These aspects likely dragged down staff motivational levels and did not meet with expected levels of job performance due to concerns over perceptions of business stability. The improvements to the Morrison’s culture are built on business successes and outperforming competition whilst remaining dedicated to the more human resource focused strategies. The external citizen sentiment about Morrison’s also created problems with the company culture prior to the acquisition of Safeway. Media coverage of Morrison’s during this period was slanted and painted the picture of the supermarket as being unable to understand the troubles with Safeway and could never expect a turnaround using their current level of leadership and strategic expertise. This was identified in the case study provided. External media coverage of the business can give employees negative perceptions about job security in the event of Morrison’s failure of operating Safeway after the acquisition. The acquisition seemed to be covered as too high of a risk to manage successfully. However, after several years of trying to revamp these failing Safeway stores, Morrison’s managed to build sales successes. This had the media covering Morrison’s in a different light as a success story with a strong management team, therefore the likely benefit to employees was perceptions of higher job security and a more stable organisational culture. Specific employee sentiment about the two different cultures prior to and after acquisition of Safeway could not be identified through research. This would be an interesting marketing study as a benchmark for how best to handle employees and their needs during an acquisition when faced with brand reputation problems and extensive negative media coverage which paints the organisation as being unable to handle a new business model. Morrison’s does not maintain an employee population who believes its them versus us, rather the leadership promotes the employee as a valuable resource to attaining company goals. This would inspire the employee’s sense of belonging under many different psychological models (Wagner, 2008; Morris and Maisto, 2005; Weiten and Lloyd, 2005). When an employee feels that they belong as part of a culture and are recognised for their talents as professionals, this inspires a more positive view of the business and creates higher levels of job performance. Areas to gain value in business operations Improvements in governance is one area to gain value as strategy is strongly linked to operational focus. Morrison’s has been actively trying to fill key senior leadership roles looking for governance improvements (PensionsWeek, 2006). By selecting the right fit for senior level jobs, areas of marketing and strategic operations cost reductions (or similar aspects) have more experience and knowledge. The right strategy for Morrison’s starts at the top levels of the business hierarchy. Tesco, Morrison’s largest competitor, recently shut down its in-store television network which was a marketing concept that was originally launched to “revolutionise retail marketing” (Johnson, 2009, p.3). However, after five years, no measurable improvements to how business is conducted via this network or increases in consumer sales associated with this network were achieved. Today, there is a growing trend in consumer use of touch screen technologies at supermarkets and many other retail chains in order to provide recipes or other consumer related information. In the UK, consumers clock the highest user times on these machines over any other developed country (Chain Store Age, 2003). If consumers are willing to use touch screen technologies, Morrison’s can add value to their brand by installing these rather inexpensive touch screen computer systems and use promotion to show how modern Morrison’s is in comparison to Tesco and their failed attempt at a television network in-store. This new operational strategy would give opportunities for dual branding strategies, such as short-term alliances with product manufacturers, to provide consumers with recipe options or discount incentives for using the technology. This could provide Morrison’s with a better overall consumer sentiment about the brand, especially since they are not competing in the growing online sales market, and give them a more modern appeal to the technologically-minded consumer. Declines in consumer sales in organic foods by a margin of 29 percent since last year (Thomas, 2009), coupled with their recent trend toward abandoning favourite brands in favour of lower pricing, gives another operational opportunity for Morrison’s: A focus on Morrison’s as a whole customer experience. Marketing promotion is one of the main success factors in differentiating the company from competition and with the use of psychographic research, this can be accomplished at Morrison’s. Rather than trying to gain back organic customers, who are also being pinched by the economic climate, a more mass market-focused campaign to illustrate Morrison’s people-focused organisation could be a quality operational improvement. It is even identified that “suppliers need Morrison’s to succeed. It (Morrison’s) is seen as a straight-talking negotiator” (Marketing Week, 2006). Morrison’s can capitalise on its supplier strengths and its ethical focus on business and the provision of quality foods in order to make Morrison’s appeal more focused toward meeting customer needs. Short-term promotional alliances with supplier groups can also help in marketing literature to reinforce the company’s commitment to all of its stakeholders. This would provide marketing value to the company and also differentiate Morrison’s from its high volume of competition. This would be especially valuable at a time where Tesco’s profits are rising at their slowest rate ever (Singh, 2008). There is also negative consumer sentiment against the giant Tesco because of the impact that new store developments leave on local produce and meat sellers in smaller marketplaces. In Wells, UK, one independent, local producer stated, “If Tesco opened up here, I’d close down within weeks” in reference to Tesco’s enormous buying power causing local producers to get beat on pricing in most food categories (Tomkins, 2006, p.1). Using similar promotional strategy, Morrison’s has the opportunity to use local producers as part of their existing supply chain to promote the benefits of sustaining local agriculture and the economic health of communities. This would not require adjustment of any existing business segment just a focus on differentiation through promotion. The community-minded, mass market customer of Morrison’s would be the target segment for this type of promotion at a time where brand image is not superior for competition. Morrison’s can also find added value in operations by considering the current efforts of competitors Tesco and Asda who have teamed with different mobile communications company and now offer a unique prepaid mobile phone service (Donnelly). Morrison’s should explore partnering with similar mobile phone companies as a short-term strategic alliance to give the company a new diversified brand image and also boost sales from mobile markets as well. The price conscious consumer looking for value-priced, quality prepaid mobile service, if they perceive Morrison’s to be a positive shopping experience, will likely pursue low cost service from Morrison’s. This is also part of a differentiation strategy which shows that the business understands the need of the lower-end consumer and is seeking to come up with brand solutions to make their entire retail shopping a one-stop experience. Coupled with the ongoing branding strategy which paints Morrison’s as a total customer service experience, the company can bring higher value to the operational budget in terms of sales revenue increases due to mobile phone sales. The use of regular incentives marketing would also be a value-added activity for Morrison’s by using regional print newspaper and circulars to give consumers certain percentage points off of selected foods products. These same promotions for Morrison’s can occur in the online environment. The consumer trend toward price-conscious shopping and brand abandonment in favour of lower cost options is of considerable concern and will likely, in the short-term, impact Morrison’s sales volumes for name brand products. Therefore, incentives to give consumers discounts on their favourite brands might appeal to their level of price sensitivity and make them choose their favourite brands even though the costs are still higher than generic brands or discount brands. Incentives marketing as ongoing promotion could give consumers the perception of added value by shopping at Morrison’s and bring their repeat businesses. Conclusion Morrison’s has many risks to its business from the external environment, including radical changes in consumer buying behaviour in the face of tougher economic times, social changes in food variety and perception in certain consumer groups, and modernised technologies which change the pace and location where foods sales occur. These changes have altered how the business considers its supply chain and in the delivery of customer service, changing the internal organisational culture to a more dedicated team of professionals who believe in Morrison’s success and the ability to turnaround the faltering Safeway brand. Morrison’s current business model is one which is bringing high profit success over that of competition, therefore a focus on keeping the company differentiated is a major success strategy. Areas where Morrison’s can improve to find more value in operations are through promotion and incentives marketing, along with a variety of other recommended marketing and sales strategies. Morrison’s is clearly on the path toward sustainable growth and can compete successfully in a saturated marketplace. Bibliography Benady, David. (2009). The Tesco test. Marketing, London. 22 April, pp.26-30. Braithwaite, T. and Urry, M. (2008). Morrison steals a march on rival Tesco. Financial Times, London. 5 December, p.22. Black, Halmud. (2008). William Morrison Supermarkets: Turnaround strategy on fresh foods has helped drive customer numbers. Wall Street Journal, NY. 14 March, p.A.16. Chain Store Age. (2003). Employee ignorance hindering kiosk use. 79(4): 81. Donnelly, Alison. (2008). Supermarkets extend battle to mobile offers. Marketing, London. 27 August, p.2. Johnson, Sarah. (2009). Tesco to scrap in-store TV network presence. Marketing, London. 4 March, p.3. In-Store. (2006). 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