One of the major retail industries which face high competition in the market is grocery retail industry. Customers mainly expect value for their money from such industries. They are more likely to visit a store which offers best quality products for comparatively lowest price in the market. Hence, it is very important for such an industry to survive through these tough competitions, to understand the needs of a customer, to become the best company in the market. Employers are not only the key factor of an organisations success. Implementation of a better strategic management plan help an organisation to achieve success, even if other companies have similar business conditions in the market. Successful implementation of such an action plan and its outcome is being discussed as follows.
Two brothers were determined enough to establish a German based company X in the early 1948s, which successfully secured top position among world’s biggest grocery retail business with over more than 7000 stores around the world. Company X started their first business in Australia and gradually grown over many years. The business strategy which helped company X to achieve their success over these years was by following a standard policy worldwide- ‘Best quality products at lower rate for all customers’. This business strategy helped them to become one of the bests grocery retail industry in the market. Company X is now 7th ranked among the world’s best grocery retail industry. Company X have an approximate turnover of around 25 billion euros in a year. The exact financial turnover is not disclosed by the company due to their company policy. Several challenges faced by the company have led them down in the imperative competitive advantage in the market among the other companies.
Following report will discuss on the challenges faced by the company analysing PESTLE factors. And later SWOT analysis is performed to differentiate weakness, strengths, opportunities and threats faced by the company.
Political, environmental, socio-cultural, technological, ecological environment and legal factors are the major factors which plays a vital role in the business operations.
Political – Legal
Political and legal factors which influence the retail industry are discussed here. Each governing party introduce new laws and policies during their ruling period. Whenever the ruling party is changed, the laws also change. For example, the tax policies is being changed by each ruling party which can lead to a great loss for the company. Governments basically introduce several food standard codes to ensure the quality of food and beverages. This can affect the new products which is being introduced by the company. Government introduced restriction in the purchasing and selling of foreign products thereby giving more importance for the home country products. This can cause an enormous impact in the future growth of the industry. Increased concerns of government on packaged food industry increased the legal requirements as well. Thereby making the companies to give more importance in providing best quality products in the future.
Economic factors can largely affect the grocery retail industry. These factors can influence cost of production, price of the products, demand for products and profits. Increase in the unemployment is one of the most important economic factors which can cause a decrease in the demand for many products, thereby affecting the demand for the production. Company can never take over the control of these economic factors, but the effects of these economic factors largely affect the performance and the strategic marketing. Company X is still dependant on the international market and expect a better contribution over the next few years.
Population in the country is reducing dramatically which can eventually lead to shortage of employees in the industry and an increase in the medical and education needs. This can lead to an increase in tax or a decrease in the pension and other personal benefits, to provide health insurances and other expenses. Increasing expenses of products can force the company to compromise on their policy of providing quality products at low price. More than half of the population is about 65 years old and their main income comes in the form of pension. So the prefer reducing their expenses as far as possible. Since company X provide best quality food for low price, they prefer purchasing from this grocery retail industry.
Many of the grocery retail companies introduced self-service checkouts which helps the customers to avoid unnecessary wait at the counter. Company X have still not introduced this technology. Usage of manual settings for the day to day works can cause a drop in the operational efficiency of the company. And reduced use of social media and internet can affect the customer relationship.
Company X help the local producers and farmers from the locality, where they operate by purchasing products and stocking them. The fresh fruits and vegetables purchased from the farmers can help to improve the company’s food quality.
PESTEL analysis explains about the changes that is happening in the market and in the world that would affect the proper function of the company X. Hence, they should improve their strategy to compete other companies in the market.
SWOT analysis helps the company to identify its strengths and weaknesses which can cause an impact and it explains about the opportunities threats from the external environment.
Company’s base in Germany is strong over several years and have a strong brand image help the company to progress. Company X exhibits excellent marketing efficiency. Company X have total control over their products because they produce its themselves. Company X’s brand value helped them to have a good increase in sales, even if they spend low cost on advertisements. Company X keeps a better relationship with both suppliers and customers. Company X still conduct studies and researches on products which have lesser demands and always trying to replace it. Manager maintain the product standard by carrying regular product testing and sampling.
Limited number of products could be a major weakness. Majority of own product brands leads to have a decrease in the ability to borrow from the market. Company X mainly depends on a few number of well-trained staffs to maintain cost efficiency, which is a drawback. To remain customer oriented, they reduce advertising which will adversely affect them in marketing. Limited amount of technology usage compared to other competitive companies.
Increase in advertisements can attract more customers. Expanding the business to other marketing fields, for example home appliances, can make the business more attractive. Quality standard can be improved by introducing new strategies. Penetrate more in to the market to expand the company. Try to implement innovative marketing trends. Finding out proper opportunities and using it wisely can improve the standard.
Customer will get attracted to the competitor company due to globalization. Massive expansion of company X could be resisted by organisation culture which can affect the company in future. Compared to company X, other companies introduce lots of marketing strategies. Other companies came up with improved technologies like self-counters in the stores, but company X failed to improve technologically. Local supermarkets provide quality products with comparatively low price which can affect the company’s sales. Domestic markets are slowly growing across the countries which is a major threat for company X.
Discussing SWOT and PESTEL analysis shown that company X should implement more strategies which will help to change business environment. Company X should take proper advantage over their strengths and work carefully on their weakness to survive in the market.