Excerpt
Table of Contents
Executive Summary
Case Study
Introduction
Issue with the Strategy and focus of Clinton’s
Springbok’s key potential strategic responses
Key Strategy 1: Minimise High Competition
Key Strategy 2: Efficient Internal and External Processes
Key Strategy 3: Expand Target Market
Springbok’s Short Term Actions
Marketing
Accessibility
Management
Competitive Advantage
Springbok’s Long-Term Australian Strategy
Positioning
Growth
Recommendations
Appendix
A. SWOT & Dynamic SWOT
B. VRIE
C. Pest Analysis
D. Industry Analysis
E. Growth Trends
F. Gap Analysis
G. Formulating a strategy
H. The Growth
I. Qualitative Cost Analysis
J. Strategic Tree
K. Gantt Chart
References
Executive Summary
Purpose
South African grocery retailers Springbok Group are looking to expand their business internationally by investing in the Australian grocery retailing market by the acquisition of defunct retailer Clinton’s. In order to have the ability make informed decisions about how to operate in the new market the strategy of the previous Clinton’s retailer has been analysed, strengths and weaknesses of the internal strategy identified as well as opportunities and threats from the external environment, gaps in the existing strategy discovered and suggestions put forward to address all factors.
Summary of Findings
The findings of the analysis identified changes that have been grouped into four categories, marketing, accessibility, management and competitive advantage. Sub groups relating to these were:
Marketing – local advertising for each new store, public promotion of the opening of the stores and the ideals of the company and an ‘opening festival’ for each store.
Accessibility – Longer trading hours, increased access to parking and public transport and information available online via the website or telephone.
Management – Constant evaluation of processes, fine-tuning of these processes when necessary and training for staff.
Competitive Advantage – Low price, No fuss, fresh produce available.
These findings are summarised in an idea tree in appendix J, immediately following this is a Gantt Chart to show the optimal time period for implementation of actions recommended to be carried out.
All information relative to and used in the case have been included in the appendices with a short explanation following. Market research was conducted by surveying a sample of the general population to find out their shopping likes, dislikes, preferences and what they would like to see implemented into a new shopping centre.
Case Study
Introduction
Springbok Group is a South African based grocery retailer looking to invest in the Australian grocery industry. The organization has invested in the Australian market through the acquisition of the floundering retailer, Clinton’s. Clinton’s have been forced to sell their Australian market share due to non-profitability and impending bankruptcy, a result of the incompatibility of the company’s existing strategy and the Australian market. Springbok Group believes that there is potential in the Australian market, as groceries represent 10% of the total GDP (AU$158.4 billion of the Australian economy). In order to tap into this market careful planning of the firm’s strategy must be carried out. Strategy is exclusively concerned with specific competitive advantage, and for Springbok to avoid the mistakes of their predecessors they will need to implement a strategy allowing more efficient operation in the environment and define unique competencies. The following is a strategy designed to ensure a sustainable position for Springbok’s in the Australian grocery market.
Issue with the Strategy and focus of Clinton’s
Issues that the Springbok Group must take into account before the takeover of Clinton’s are outlined in the analysis of internal strategy and it’s interaction with the external environment, shown in the SWOT in appendix A and B.
The issues facing Clinton’s and in turn Springbok can be divided into two categories, weaknesses evident in internal strategy of the organization and threats presented by the external environment. Weakness in the existing internal strategy is that the organization is extremely internally focused, entirely concerned with trying to manage product efficiency and maintain the lowest possible cost of goods sold figure to ensuring maximum profit for the business and lowest prices for consumers. This internal focus fails to recognise changes in the surrounding environment, such as industry, trend, consumer preferences changes and market expansion or diversification.
Additionally, the publics targeted by Clinton’s are extremely narrow, namely low income. While this is good as it allows the organization to formulate messages to a specific public, reducing the scope of possible customers and the business’s potential profit.
The final point of concern for Springbok is that existing strategy for the business’s current and future development is focused on best practise strategy rather than creating specific competencies. This means that the business is imitating strategies of the industry leaders and trying to be ‘just as good’ as they are. This action places the organization in a cycle of reacting to environmental changes, trying to keep pace with its competitors. It would make much better strategic sense to pay more attention to factors in the external environment that have an effect on the business and aim for pro-activity, anticipating changes before they become threats (Refer to Appendix C for PEST analysis).
Threats to Springbok’s are the high concentration of competition present in the Australian market, retailers Diamond’s and Lawson’s control 70% of the overall market share, leaving just 30% of the market to be shared between the remaining 6 competitors. The effect of this situation on Springbok is that they will have to fight hard to gain control of and maintain even a small market share. Added to this threat is the possibility of international buying power, i.e. the ability of suppliers to market their products globally, creating price wars in the domestic market and causing product price increases. In the current situation local buying power is high and retailers can dictate the price of certain products, however with the influx of buyers from international groups, local suppliers could gain higher prices from international buyers and cause scarcity of products for the local buyers creating market rivalry. In this situation rivalry is also spurred on by high substitution and low switching costs (Refer to Appendix D for a detailed industry analysis using Porter’s 5 Theory).
The final threat faced by Springbok is that of new entrants. While this threat is kept in check by high concentration of competitors within the industry, stable returns in the market are attracting new entrants and will continue to do so in the future.
Springbok’s key potential strategic responses
As depicted in the dynamic swot (appendix A, fig i) the issues that affect the introduction of the Springbok Group into the Australian market were identified as high competition, inefficiencies with internal processes and a narrow target market. Cited as major downfalls of Clinton’s strategies these issues will have an adverse effect on the introduction of the Springbok Group into the Australian market. To ensure smooth adaptability, key potential strategic plans were identified in order to oppress these concerns and to help the Springbok Group flourish within the Australian market.
Key Strategy 1: Minimise High Competition
As previously mentioned, competition for market share in the Australian grocery industry is very high. Factors such as spacious parking, convenient locations, high competitor concentration and the possibility of global buying power all compete against Springbok while forming a stronghold for the current market leaders. In order to combat this, a key strategy for the Springbok Group would be to compete with ideals such as convenience, low cost and accessibility but differentiate their business on the basis of efficiency and specialisation. This would also mean the acquisition of land area without aggravating current small grocers. A strategy would include, for example, acquiring land from small grocers in exchange for business-within-business retailing. Helping small grocers will also encourage a “community-friendly” attitude rather than competing for customers and inducing a much more competitive environment. A factor in Springbok’s favour is that Australian supermarkets are not efficient businesses compared with those of global leaders. Also Australian food retailers must improve their supply chain management in order to realise latent value. With this knowledge Springbok can compete by implementing efficient supply chain management to attain profitable outcomes.
Key Strategy 2: Efficient Internal and External Processes
A key strategy to combat the issue of inefficiencies in internal processes is redirecting the internal focus to also include the external environment. As Clinton’s mainly concentrated on their own products and low cost production, they instigated loss of sight of the consumer trends, competitive activity and industry changes in the external environment. The basic foundation for a global company is to have the ability to adapt to different environments. This includes taking the external environment into consideration when conducting internal processes. Since the grocery industry is different from Hong Kong or South Africa, Springbok must take into account the consumer trends within the Australian grocer industry. This strategy would include focusing on accessible shop locations, selling fresh food and recruiting dependable suppliers. To attain valuable information on consumer trends and industrial changes an updated PESTL analysis would be conducted for the Australian market.
Key Strategy 3: Expand Target Market
In order to achieve maximum exposure throughout the Australian market, Springbok should also look at expanding their target market beyond the “low cost-low income” range and including middle-class markets, as there are more and more people who are willing to pay for quality rather than quantity (Australian Bureau of Statistics, 2006). This would also encourage people to spend more on the quality products rather than the budget option. Accommodating these social trends would also be effective in highlighting the ideals of high quality, choice and convenience for shoppers. Although a high variety of choice can baffle some shoppers providing a small selection of the most popular brands for shoppers to choose from could alleviate this confusion. Expanding the target market would be an effective strategy to enable more exposure for the Springbok group.
Springbok’s Short Term Actions
The short-term actions should start to show results immediately. It is important to make the right impression in the first month otherwise the wrong brand image will be perceived. In the worst case scenario customers may not notice the business and its defining characteristics. As there are few short-term actions it is important that tasks are clearly defined. These tasks have been defined as marketing, management, accessibility of the stores and competitive advantage within the market. It is recommended that the following tasks be executed in the first year.
Marketing
The customer must notice the new business immediately. Clinton’s is positioned in the no frills sector, which implies that they want to be cost-leader in their market, meaning in order to gain this position it is very important to get attention in the first weeks. The locations of the small stores are in the suburbs, since research has shown that customers prefer shopping frequently and close to their homes. Advertising in local newspapers will help draw exposure to the stores, and promotion of the opening of the stores with an opening festival, including a family day with special offers for children will ensure the familiarity of their parents with the stores.
Every sector of a market has its own favourites and it is important to find out what people prefer to buy, e.g. a special brand of bottled water. With customer cards shoppers’ purchase behaviour is easy to record and can then be encouraged by giving discounts on the popular brands while at the same time increasing customer loyalty to the company.
Accessibility
To satisfy customers a higher flexibility with trading hours should be implemented. The target public works during the week and most often will want to shop either before or after work. To satisfy this need, opening times should be from 7a.m.-9p.m. and on the weekend from 7a.m.-8p.m. Since people buy a lot of groceries they find it easier to park their cars near the market, and carrying goods on foot to their homes is unpopular. To meet this need the availabilities of trolleys and parking spaces close to the store should be abundant. A small parking fee can be charged for the people that park near the shopping centre who are not customers, however this will be waived if the person produces a shopping docket showing that they have purchased something in the market. A bus stop close to the market should also be available for easy access.
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