Competition of Migros and Coop - Essay Example

Table of Contents Table of Contents 1 Introduction 2 2 Environmental Analysis 3 2 Strength 3 2.2 Weakness 3 2.3 Opportunities 4 2.4 Threats 4 3 Positioning 5 4 Four P’s 5 5 Theoretical Principles 6 6 Marketing and Communication Strategy: Promotion 9 6.1 Below the Line Marketing 10 6.2 Direct Marketing 11 7 Conclusion 12 8 References 14 1 Introduction Migros is Switzerland’s leading retailer and has occupied that position for decades but, as it is operating within a highly competitive market and against major national and regional players, the maintenance of its leadership position is both a challenge and a problem. Its primary national competitor, Coop, operates alongside the same market philosophy as does Migros and has as much credibility. While Migros dominates Coop insofar as prices are concerned, the latter is more adept at the exploitation of aggressive promotional strategies as which allow it to retain its status as a tough competitor despite price differentials. As regards its regional competitors, Carrefour is currently Migros’ biggest threat. By 2005 it was operating 12 mega, or hyper-markets in Switzerland, with net sales totalling € 402 million. Added to that, there is significant incoming competition from Germany’s leading retailers, Aldi and Lidl, who announced their intention to expand into the Swiss market. The implication here is that both present and prospective competition are expanding and intensifying, with it being incumbent of Migros to design a strategic marketing plan, based on a careful and critical study of the market situation and environment, should it want to retain its leadership position in the Swiss retail market. The intent of this report is to draw on strategic marketing and communications theory for the design of a marketing plan as would allow, or enable, Migros to maintain its leadership position in the Swiss retail market. 2 Environmental Analysis An analysis of an organisation’s market and its external environment function as the building block for the design of any marketing strategy/campaign. This section of the report will, therefore, present a brief overview of Migros’ strengths, weaknesses, opportunities and threats (SWOT). 2.1 Strength On the intra-organisational level, Migros has several exploitable strengths, not least of which its decades-long history in the Swiss market and the resultant bond forged with consumers; its ownership structure in that it is owned by its customers, by the Swiss people themselves; its highly competitive prices; its strong market presence in more than one industry/sector, implying high visibility; consumer perceptions of it as an ethical company which only carries goods which are ethical/produced within strict ethical guidelines; and the fact that its suppliers are, ultimately its consumers all function as strengths unique to Migros. 2.2 Weakness The primary intra-organisational weakness confronting Migros, as may be deduced from the case study, is its decentralised organisational structure, its defensive, as opposed to offensive, reactions to market and industry developments and quality of suppliers. 2.3 Opportunities The nature of the opportunities existent in the external market is such that Migros is in a unique position to capitalise upon them, starting with the increasing shift towards organic and ethical produce. The market, as in consumers, is becoming much more health conscious at the same time as which it is growing increasing concerned over animal husbandry and poultry farm practices. Insofar as Migros has long taken a stand on these two issues and has, over the years, determinedly linked itself to organic and ethical produce, the identified opportunities work in its favour. 2.4 Threats The identified threats, as may be partially inferred from the introductory section and as affirmed through the case study, come in the form of present competitors, such as Coop and Carrefour and potential ones, such as Aldi and Lidl. Compounded with that, Switzerland’s “deregulation of the agricultural markets and the entry of discounters onto the market” as well as the reduction of import tariffs, function as added threats in themselves as well as the gateway for the entry of new competitors into the Swiss market (Reinhardt, Dessain and Sjoman, 2006, 12). The SWOT analysis undertaken in the preceding is important insofar as it provides an understanding on the intra- and extra organisational conditions and environments confronting Migros. It is within the framework of this analysis that the proposed marketing strategy will emerge. 3 Positioning Positioning, referring to the way in which consumers/market perceive of and define a product/corporation, is essential for the later determination of marketing strategies. In order that it retain its leadership position in the Swiss market and withstand the threats identified in the preceding SWOT analysis, Migros needs to position itself, its product, in such a way as which engage consumers and appeal to their demands. The facts of the case, however, indicate that Migros is already doing so. It is, therefore, emphasizing its Swiss identity, Swiss ownership, its ethical criteria for inclusion of products on its shelves, quality, price and its health concerns. It is, in other words, effectively positioning itself as a caring company, an integral part of the Swiss national fabric and a company which, by virtue of its being owned and supplied by its consumers, determinedly meets the twin objectives of price and quality even as it maintains strict ethics and health guidelines for product inclusion. 4 Four P’s The four P’s of marketing, also referred to as the marketing mix, comprise the core of any marketing strategy. Referring to the product, place, price and promotion strategies which will be deployed, the 4P’s function as the guidelines/framework of any marketing and communications plan. Insofar as Migros is concerned, place is primarily identified as Migros outlets. Considering, however, that the retailer produces its own brand, the optimal strategy at this point would be the expansion of the parameters of place, not in the sense of going beyond the Swiss borders as it is currently doing but, in the sense of the more aggressive distribution and promotion of its products in non-Migros outlets. Doing so will increase both visibility and convenient accessibility. As pertains to products, Migros is currently involved in the production of a wide array of food stuff, differentiated according to quality and price category. While not arguing for the expansion of the current range, considering that it is extensive enough as it is, the marketing strategy need focus on its ethical and organic products in light of the fact that this addresses the consumer market’s current tendencies and preferences. In direct relation to the factor of price, and as noted in the preceding, Migros offers a wide array of price ranges, thereby targeting various segments of the market within which it is located. It currently undercuts competition by as much as 30%. The implication here is that Migros’ prices are highly competitive and, accordingly, it should be highlighted in the marketing and communications campaign. As regards the last, P, promotion, both direct and below the line marketing strategies should be utilized. The particulars of this campaign, or Migros’ marketing promotion, however, will be dealt with more extensively in subsequent sections of this report. 5 Theoretical Principles The marketing strategy must aim towards the exploitation of Migros’ internal strengths and identified opportunities within the external environment and the minimization of the potentially adverse effects of its weaknesses and threats existent within its environment, in addition to which it must address the issue of positioning. In order to effectively do so, it is imperative for the campaign to have a solid theoretical or scientific basis, to proceed from an understanding of communication strategies, consumer theories and buyer behaviour. As emphasized by Rossiter and Bellman (2005) the greater the extent to which a campaign is based upon theoretical principles and knowledge, the more likely it is to have practical results. The marketing communications programme must effectively create a form of “dialogue” between Migros, as a shopping outlet, and consumers over the benefits, whether ethical or practical, of shopping at a Migros outlet versus shopping at a competitor outlet. Within the framework of this aim, the campaign will both borrow from Schramm’s Linear Model of Communication and Kelman’s Model of Source Characteristics (Rossiter and Bellman, 2005). The communications theories chosen to foreground Migros’ marketing strategy have been determined by the specific position and reputation of Migros in the Swiss retail market. Thus, on the most basic of levels, Schramm’s Linear Model of Communication is integral to the process and purpose insofar as it will effectively communicate an informative product quality vs. value message, eliciting positive response and purchase action among receivers: Proceeding from the above, it is important to note that as value is not realised until the product in question is used, Kelman’s model of Source Characteristics is important. With some modifications to the stated theory, a case can be made for pre-existing credibility drawn from approximately eight decades of operation within the Swiss market. Its status as one of the country’s first convenience store, signalling a history of satisfied customers, can be exploited within the framework of the marketing campaign for the specific purpose of establishing a link between convenience, or supermarket shopping and Migros. Therefore, it is essential that the communications’ campaign bring this particular aspect to the forefront and establish an image which combines between modernity and traditional shopping, emphasizing that consumers will both experience the modern shopping model that they have been accustomed to while being indulged with the traditional personal attention, should they require it, that they are denied by other modern supermarket chains. In further compliance with the Kelman Model and following the Linear Model, the content of the message relayed could benefit from addressing health concerns. As stated by Doyle et. al. in “Japanese Marketing Strategies,” (1986, 30-31), one of the primary reasons for the successful introduction of Japanese firms into numerous markets across the world is that they very efficiently design marketing campaigns that address, exploit and encourage consumer concerns for the purpose of positioning their product as the answer to that concern. Basically, Migros is in a very good position to do so. The market, as in consumers, is increasingly concerned with a number of product characteristics, included amongst which are price quality, ethics and health. Migros satisfies these concerns with competitively priced quality products which are organic and ethical. This needs to be emphasised. In addition to the above, the campaign needs to be grounded in consumer behaviour. According to Rossiter and Bellman (2005) a successful marketing strategy and campaign study consumer behaviour and the means to influence buyer behaviour. Basically, there are three main theories of consumer-behaviour and its impact on the buying decision, all of which focus upon the level of involvement between consumer and product. These may be defined as follows: Product-centred Approach: Consumer involvement with a product emanates from his/her perception of its importance (trivial, unimportant, etc.) Subject-centred Approach: “Consumer differ in terms of involvement-type variables” (Berry 1969). Interest/importance Relevancy as in goal and consequence of use Commitment as in ego (Zaichkowsky, 1985) Response-centred Approach: Involvement with a product emerges as a response to participation in information processing (Lastovicka and Gardner, 1979). Currently, and as may be inferred from Reinhardt, Dessain and Sjoman’s (2006) analysis, Migros is focusing on both subject and response centred approaches, as evidenced in its determination, or decision, to include more engaging products. This is a positive and potentially profitable strategy insofar as it motivates the purchase decision by presenting the product as one which satisfies consumer needs and demands even as it addresses their concerns. 6 Marketing and Communication Strategy: Promotion As may be understood from the preceding, the marketing strategy and communications campaign has a set of very clear aims to achieve and very well-defined obstacles to overcome. It must communicate a message which effectively informs and persuades the target audience that Migros provides consumers with an extensive range of products that are manufactured with the consumer’s health and benefit in mind, always maintaining the highest ethical standards of production. To achieve this specified aim, Migros’ communication/promotion campaign must not simply launch an advertising and marketing campaign but needs to further undertake an information campaign. According to Young and Aiken (2007), while advertisements do influence consumer perceptions and buying habits, many consumers are sceptical of advertising campaigns, dismissing messages as unsupported “weasel words.” For Migros to achieve its objective, therefore, the tone of its campaign needs to be friendly, serious, trustworthy ad family-oriented. In other words, it should promote information regarding the quality of service and products found at the stores, emphasizing the health and cost benefits of shopping at a Migros outlet, inasmuch as products are organic and hence, advantageous rather than detrimental to the heath. This, as one my assume, is a message which families with children will take very seriously due to concern over their children’s welfare, not to mention the more health-conscious consumers. However, as stated, in order to avoid having these claims dismissed as empty and meaningless, or “weasel words,” they must be communicated in the form of infomercials supported by scientific evidence, and in a serious yet trustworthy tone, rather than in commercial form. 6.1 Below the Line Marketing The campaign needs to use marketing tools in such a way that would both promote the utility of shopping at a Migros outlet while simultaneously focusing on the price variable. Thus, while ensuring that price level factors in cost, demand, competition and perceived value, Migros must constantly monitor both the targeted segment’s and competitors’ reactions to Migros product prices in order to attain a competitive balance between the cluster’s average budget and market expansion and profit increase targets. Thus, Migros must apply a price-value balance model here and the marketing communication mix should communicate the characteristics of that balance. Therefore, in response to theories stating that buyer decision-making is primarily influenced by perception of desirability measured in subjective terms of pleasure to be derived from purchase and use, promotion and advertisements must focus upon marketing the chain itself in terms of rational utility (Young and Aiken, 2007). Additionally, Migros should promote sales through the automatic entrance of buyers into competitions. Furthermore, the marketing campaign would benefit from infomercials informing the targeted cluster that products at these outlets are organic and hence are a reasonably, even low-priced source of nutrition satisfaction and comfort. That message needs to be relayed by a communicated source (reputable professional background). 6.2 Direct Marketing Smith and Taylor (2004) emphasize the tremendous value of a well-designed and effective direct marketing campaign, further stressing that the most successful and effective ones are those that rely on creativity and not on set strategies. While flyers and door to door informative advertisements do attain results, these results are limited due to two important reasons. In the first place, they have been used so much that the targeted groups hardly react to them. In the second place, they are used by so many marketers that targeted consumers often receive a significant amount of flyers and information sheets promoting a new product or outlet per week that they just throw them all out (Smith and Taylor, 2004). Accordingly, instead of using the traditional methods of direct marketing, more innovative approaches should be used. For instance, members of the target group should be drawn into the marketing process through contests, coupons, surprise shopping sprees, and even be recruited as tasters for the evaluation of Migros products. In other words, the objective approach to direct marketing, which is the most commonly used one according to Smith and Taylor (2004) needs to be disregarded in favour of a more subjective approach which puts randomly selected members of the targeted cluster at the centre of the direct marketing campaign as participants. This particular strategy for direct marketing should be composed of several innovative and creative ideas and scenarios, such as those stated in the above. 7 Conclusion In the final analysis, the marketing strategy and communications campaign outlined in the above should be implemented as a primary strategy for attaining Migros’ goal of retaining its leadership position in the Swiss retail market. The mentioned retailer has long enjoyed the aforementioned status due, not only to the nature of its products and its position in the Swiss market but because of agricultural regulations and the absence of strong competitors. The external environment, however, is now introducing threats to that position, whether in the form of the deregulation of agriculture, the lowering of tariffs or the entry of large retailers such as Carrefour, and potentially Aldi and Lidl, into the market. The mentioned changes function as a direct threat to Migros’ leadership position and it is incumbent upon the marketing and the communications’ strategists to address, even negate, this threat. This strategy shall emphasise Migros’ ethical standards and its tradition of providing quality products which are organic and ethical, in addition to being cost-effective. The marketing and communication strategy outlined in the preceding can negate the threats outlined in the preceding and, by capitalising on Migros’ strength and through the exploitation of existent opportunities, enable the company to retain its leadership position. 8 References Berry, J.W. (1969) On cross-cultural comparability. International Journal of Psychology. 4, 119-128. Doyle, P. et. al. (1986) Japanese marketing strategies in the UK. Journal of International Business Studies. 17(1), 27-46. Lastovicka, J.L. and Gardner, D. M. (1979) Components of involvement. Attitude Research Plays for High Stakes. J.C. Malony & B. Silverman (eds.). Chicago: American Marketing Association, 53-73. Rossiter, J.R. and Bellman, S. (2005) Marketing Communications. London: Prentice Hall. Smith, P.R. and Taylor, J. (2004) Marketing Communications: An Integrated Approach. London: Kegan Page. Young, A. and Aiken, L. (2007) Profitable Marketing Communications: A Guide to Marketing Return on Investment. London: Kegan Paul. Zaichkowsky, J.L. (1985, Dec. 12) Measuring the involvement construct. Journal of Consumer Research, 341-35. Read More