Service Operations and Organisational Dynamics: Morrison Supermarkets PLC - Case Study Example

Morrison Supermarkets PLC (words: 2667) When operating in Britain a company has to take into consideration that the specific market is offered for a high level of development. However, the competition involved is usually hard and as a result in order for any company to survive, it has to prove that its quality of services/ products offered to customers can be differentiated from the ones of its competitors. Apart from that, it is necessary that the company will apply an innovative strategy when developing its operational units across the country taking into account that from time to time its strategic plans need to be reviewed in accordance with the demands of the market. On the other hand, it could be stated that the level of development of a company in Britain depends on a series of particular issues, like the sector on which the specific firm operates, its financial strength and its customer base. Its potentials for online activity would be also valuable in the long term. Current paper examines the strategies followed by a major supermarket in Britain, Morrison, which has a long history in the country (more than a hundred years). The company managed to survive in its market despite the hard competition of other firms operating in the same industry, like Tesco and Sainsburys. Through the years the corporate strategies have been proved to be quite effective in accordance with the firm’s financial strength and its targets. However, gradually a series of changes were required mostly because of the development of technology which created new standards of activating in the market (in all its sectors). The extremely effective strategic planning and the application of innovative schemes have helped the company not only to survive in its market but also to improve its position towards its competitors. Table of contents Abstract 2 Introduction 4 Analysis 4 1. Morrison’s business and service operations strategy – evaluation of its effectiveness in relation to its principal competitors 4 2. Development of a sustainable and competitive customer retention 9 strategy Conclusion and Recommendations 11 References/ Bibliography 13 Introduction Morrison Supermarkets Plc has been a business operating in the Britain market for more than a hundred years. The company was established in 1899 in Bradford by William Murdoch Morrison. Soon after, it became a private limited company. In 1967 the company entered the London Stock Exchange. The growth of the company throughout its operation has been continuous and impressive. One of the main factors for this development has been the application of innovative methods in the design of the stores across Britain. On the other hand, the company tried to avoid the acquisition of other competitors with the only exception to be the acquisition of Whelan in 1979, an organic food retailer. Today the company is considered to be in an extremely high position within the British market. However, a series of changes in the strategies followed especially in the area of the human resource management and the methods of communication with the customer are necessary in order for the company to survive over its competitors. Analysis 1. Morrison’s business and service operations strategy – evaluation of its effectiveness in relation to its principal competitors Management One of the major characteristics of the corporate strategy, is the active involvement of its Chairman in all firm’s activities – even at the operational level. This is a really positive aspect for the development of the firm’s performance. In this way, any failure that could possibly appear can be handled successfully on time by the firm’s top management. Specifically for the firm’s Chairman it has been stated by a company spokesperson in mid 1980s that ‘it is a company with a Chairman that is involved in the business all the way down to the operational level - he is a hands-on chairman that believes in the continuing independence of the company’. However, no specific details for the structure and the distribution of tasks in the top management team are given. Warehousing The growth of Morrison Supermarkets has been continuous as already explained above. For this reason, through the years the firm’s warehouse has been proved to be inadequate in order to meet the demands of the British market. For this reason, in 1988, the development of ‘a new 600,000 square foot warehousing, packing and distribution centre’ was decided in Wakefield. This warehouse covered an area of approximately 44-acre and was expected to meet the increased demands of customers across Britain. The above warehousing however soon (in 1993) approached its full capacity. For this reason, a further expansion was decided. In this context, it was decided by the firm’s management team that the creation of a new distribution centre was necessary. Indeed, a new distribution centre was established at Northwich in Cheshire. This centre covers an area of 700,000 square feet and it is very close to the M6 motorway. Stores – structure, peripheral development The continuous growth has led the company to the increase of the number of its stores. Indeed the company’s stores were increased ‘from 45 in 1990 to 81 in 1996, with an accompanying 97% increase in retailing area to 2.9 million square feet’. After this increase the firm’s store portfolio became one of the strongest in the particular sector of the British market. However, through the years, the appearance and the development of superstores had a significant impact on the firm’s operational strategies. The company managed to be adapted in the new market conditions without particular losses. The fact that its stores were close to major trunk roads or motorways has been proved to be really important. It should also be noticed that the company has a significant advantage towards its competitors regarding the design of its stores. The relevant scheme is based on the use of photographs and mementoes related with the history of the greater area. On the other hand, although the structure of the firm’s stores is unique compared to its competitors, the amount of money spent on the relevant scheme is relatively low. Indicatively, it could be mentioned that “in 1994 the company paid £13m per site compared to £22m to 23m per site that Sainsbury and Tesco paid”. Another advantage of the firm towards its competitors is the development of the ‘Market Street’, that is of an area occupying two sides of all new and refurbished stores where fresh products are being sold. In this area a wide variety of shops operate (butcher, pie shop, baker etc) which sell fresh products using their own services (ovens, refrigeration units etc.). Apart from the Market Street customers in Morrison can find a variety of products offered on a daily basis (wide range of goods). Development of product line and branding The development of firm’s product line is based on the research over the customer preferences, the availability of products in suppliers, the capacity of stores and the warehousing unit and the performance of the staff. All these issues have been considered by the company in order to formulate its strategy regarding the development of its product line. On the other hand, it has been proved that schemes with specific advantages (ideas that can be launched quickly and are related with low risk) are preferred by the company in all its operational activities. The continuous development of the firm’s product line has been combined with the low pricing of goods offered in the firm’s stores, a strategy that makes the company extremely competitive in its market. Generally, it could be stated that the ‘financial, hygiene and freshness objectives’ as they are presented in the firm’s strategic planning are of significant importance for the firm’s management team and for this reason a constant effort is made to ensure the application of requirements related with the above objectives both in the short and the long term. On the other hand, branding in Morrison is very important. In fact the company’s most important brands are three, the following ones: a) Bettabuy, b) Farmer’s Boy and c) the Morrison logo. Currently approximately 50% of the firm’s profits are derived from its brands, a significant advantage for the company towards its competitors who do not have similar branding performance. Suppliers The criteria set in the cooperation of the firm with its suppliers could be summarized in the following ones: timing, quantity and quality of produce. On the other hand, the accuracy of the orders made can be guaranteed through the use of Electronic Data Interchange (EDI), a system which allows firm’s suppliers to communicate with the firm on a continuous basis avoiding the loss of important time in the placement of orders and the arrangement of the relevant deliveries. This scheme of communication between the firm and its suppliers can also support the production of forecasts regarding the performance of specific products in the future. This scheme also represents a significant advantage of the firm towards its competitors in the relevant industry. Technology Apart from the Electronic Data Interchange that has been presented above, the company uses a series of equipment of advanced technology, like the Electronic Point of Sales and the Electronic Financial Transaction Point of Sales (EPOS/EFTPOS). Moreover, an Electronic Retailing Systems (ERS) gives to the company the advantage to establish two way links. In this way, prices and stocks are represented at their current level through a Local Area Network (LAN). These systems can be considered as significant advantage of the company towards its competitors. There are also other elements of the corporate strategy that offer to the company a significant advantage comparing the other firms of the same industry: a) extremely low pricing of products, b) continuous monitoring of competitors through benchmarking, c) application of various programmes in the area of Human Resources, d) a ‘flat structure and a small board of executive directors (six, including the Chairman and Managing Director)’ and e) use of district managers in order to monitor the firm’s performance and to identify possible failures. All the above elements of the corporate strategy should be considered as offering the firm a major advantage towards its competitors. They also stabilize the position of the company in the market even in periods of financial turbulences. The combination of innovation and change has been proved really successful for the particular firm. 2. Development of a sustainable and competitive customer retention strategy In order for the company to develop a competitive customer retention strategy it is necessary primarily to identify any possible failures of the corporate strategy especially with regard to its customers. In this context, certain negative feedback should be mentioned in order to decide on the appropriate measures for the retention of customers. Moreover, the following ‘negative’ points of firm’s operation have been highlighted by its customers regarding especially the Market Street in one of the firm’s stores: ‘a) the store was too crowded with shoppers, b) extremely large displays existed at the start of the shopping journey through the store, c) it was preferable for the frozen food to be moved to the end of the shopping journey, d) customers could not select their fruit and vegetables (lack of self selection)’ . In order to face similar issues managers in all the firm’s stores could restructure the layout of their stores avoiding large displays and put frozen food at the end of the shopping journey. The cost involved could create constraints towards the completion of this procedure. Moreover, managers should consider the issue of self-selection in fruits and vegetables. On the other hand, the firm’s stores are opened for many hours (approximately 12 to 13 hours per day reaching the 14-15 hours on Thursdays and Fridays). It seems from the above that the company has used all appropriate measures for the development of the services offered to its customers and the retention of the products’ quality while keeping their price at relatively low levels. The methods offered by the company to retain its customers could be criticized using a series of theories developed in the field of human resources management. In this context, we could refer to the study of Santos et al. (2000, 2) who stated that “according to its characteristics, objectives and the resources available (human, physical, financial etc.), each company prioritizes some competitive criteria”. From another point of view, the role of leadership has been found to be decisive in the success of any organization. More specifically, O’Neill (2002, 15) supported that leadership has to address the following issues: “a) what were the critical success factors in previous successful change efforts? b) what caused other efforts to fail? Are you prepared to take on the obstacles? c) who can veto? Can anyone say yes? d) what is the organizations risk profile? e) what has created a window of opportunity? How long might it last? f) what is the up side for stakeholders? g) what Have We Learned?”. Within any company, the leader has the responsibility for the improvement of the corporate performance and the application of the appropriate measures for the retention of customers introducing innovative practices. In this context, Kesler (2000, 26) noticed that innovation should be divided in the following categories: “1. Finance, 2. Process, 3. Offering and 4. Delivery”. Moreover, Gomez et al. (2002, Ch.15) stated that “the following ‘stages’ of the firm’s operation management should be examined: inputs (materials, energy, information, management, technology, facilities and labor), transformation (or conversion process) and disposition (marketing and sales)”. The above issues if considered by the firm’s leader can lead to the increase of the employees’ productivity and the improvement of the firm’s performance. The general structure of the organization should be also examined carefully in order to ensure that the firm follows the appropriate strategy comparing to the performance of its competitors. For this reason, the marketing used by the company should be focused on certain issues: “distinct product, channel, and customer groups focusing on specific functional tasks” (Aufreiter et al., 2000, 53). However, it is noticed by Shama (1993) that this procedure can be extremely complex and for this reason a multi-level strategy would be preferable instead of a single policy. The strategies that would be formulated in order to help towards the retention of the customers should also refer to the firm’s supply chain management which would be developed in order to meet the customers’ demands within a limited period of time. In this context, implementation of new systems, forecasting and cost management (Cook et al., 2001) would be proved to be particularly valuable for the firm’s manager when trying to develop a competitive customer retention strategy. As for the first of the above ‘tools’, the technology, this could be regarded as already implemented by the firm. The other two however, forecasting and cost management are not particularly developed in the firm and they could offer an advantage if combined with the firm’s existed customer retention strategies. Conclusion and Recommendations The development of Morrison in its market has been the result of a long lasting effort. More specifically, the company managed to survive in the British market despite the turbulences occurred in the past and to face successfully the challenges set in modern commercial environment which is extremely competitive for firms operating in all industries. The existence of close coordination and communication inside the firm has been proved to be the most important factor towards the firm’s development throughout its history. Moreover, because of the continuous monitoring of the firm’s operations by its managers it is possible for them to intervene immediately (Rand, 1999) in any issue that possible arise during the daily organizational activities. At this point the study of Robertson et al. (1995) would be mentioned. The above researcher noticed that (1995, 547) “because private sector organizations are driven primarily by market or consumer preferences, organizational effectiveness is more readily measured in terms of efficiency and profitability”. In this context, the strategies followed by the firm regarding the monitoring of its customers’ preferences should be considered to be of primary importance for the development of the firm’s performance both in short and the long term. In general, it could be concluded that the level of the firm’s performance throughout its history could be justified if considered the role of its managers and the feedback of the customers in all the firm’s stores across Britain. References Aufreiter, N., Lawyer, T., Lun, C. (2000). A New Way to Market. The McKinsey Quarterly, 53-58 Cook, J. S., Debree, K., Feroleto, A. (2001). From Raw Materials to Customers: Supply Chain Management in the Service Industry. SAM Advanced Management Journal, 66(4): 14-23 Gomez-Mejia, L., Balkin, D. (2002). Management, 1e. The McGraw-Hill Companies Kesler, G. (2000). Four Steps to Building an HR Agenda for Growth: HR Strategy Revisited. Human Resource Planning, 23(3): 24-38 O’Neill, R. J. (2002). Governments Change-Management Challenge: Key Questions to Which Government Leaders Should Find Answers as They Embark on Systemwide Reform. The Public Manager, 31(1): 15 Rand, T. (1999). Why Businesses Fail: an Organizational Perspective. Emergence, 1(4): 97 Robertson, P. J., Seneviratne, S. J. (1995). Outcomes of Planned Organizational Change in the Public Sector: A Meta-Analytic Comparison to the Private Sector. Public Administration Review, 55(6): 547-558 Santos, A., Silva, D., Barros, J. (2000). A study about application and refinement of a production strategy formulation model in a building company, available at http://strobos.cee.vt.edu/IGLC11/PDF%20Files/50.pdf Shama, A. (1978). Management and Consumers in an Era of Stagflation. Journal of Marketing (July), 43-52 Read More