Business Environment of Wegman Foods - Case Study Example

Business Environment of Wegman Foods Wegman Foods is an active regional player in the continually evolving Supermarket Industry of USA. It runs 75 stores present across New York, Pennsylvania, New Jersey, Virginia and Maryland. With more than 400 superstores currently operating in USA, competition in the supermarket industry has never been greater. To sustain and grow in such an environment necessitates constant monitoring and improvements in the way business is done. To understand the business environment in which Wegman Foods is working, an external and internal analysis was conducted. The findings of the analysis are summarised below. External Business Environment of Wegman Foods Major external environment factors which influence the business of Wegman Foods are discussed below. Major factors influencing Wegman Foods in the remote environment analysis Demographic Factors Wegman Foods operates in the mid-Atlantic region of America. For the three year period from 2006 to 2008, the median age of that region is 38.7 years while for the period from 2005-2007 the median age was 38.4 years. Females constitute around 52% of the total population in 2006-2008 while the figure was 51% in 2005-2007.while children up to 9 years of age constituted 12% of the total population in 2006-2008; the figure was 12.19% in 2005-2007 periods. (U.S. Census Bureau, 2010) The increase in median age of the customers alludes to the shifting preferences of the customers. Also, higher constitution of females warrants different store promotion techniques to target the more frequenting gender. While it is noted that kids play a central role in deciding most of the household goods; with changing demography, the situation might no longer be applicable in future years. Though the above forecasts are remote and far-fetched, they nevertheless enable the organization to be vigilant to gradual changes in the customer profile. Economic Environment Over the past few years, in almost all part of the world, the rich have grown richer and the poor have become poorer. The rising gap between the rich and the poor forces the organizations to revise their target markets and shape their offerings on a continuous basis. In USA, over the past two decades, a two-tier market has developed where affluent buy expensive goods and working class people buy from discount stores and factory outlets. (Franc, 2000) Major factors influencing Wegman Foods in the Industry Environment Analysis: Natural Environmental Factors The increasing population worldwide has put strain on the natural resources worldwide. While the limited arable land and increasingly urbanising population indicate severe shortage of food in the years to come. Wegman being a food supermarket chain, can expect steep hike in food procurement (India, a major exporter of sugar and organic foods to USA experienced an inflation of 16% in food prices). The higher cost of procurement would further thinner the already thinning margins of the supermarket industry in USA. Socio- Cultural Environment There has been increasing trend that customers judge an organisation not just on its services but also based on their other activities which do not touch the customers directly. For example, the community programs, the charity contributions and the workforce treatment by an organisation help in making or marring the image of the organisation in the minds of the end-user. Such activities help in creating ‘views’ about the organisation, and thus, contributing to the growth of the organisation. As the profits margin shrink, the supermarkets are searching for new ways to assert their positive attitude towards social environment. Few supermarkets have directly entered into tie-ups with big product brands, to achieve the goal of fighting for social causes while making money also. Major factor influencing Wegman Foods in the External Operating Environment: Technological Factors Technological innovations are taking the supermarket industry in USA by the storm. The challenge of implementing new technologies lies not only in the clear rise in profit/sales and ultimately in the increased ROI but also in the rise of operational efficiencies. However, technologies that concentrate on pure customer satisfaction might become difficult to justify when the supermarkets are fighting on razor –thin profit margins. But it is only a matter of time when such technologies become the minimum expectations of the customers, raising further challenges for the supermarkets. Internal Strengths of Wegman Foods Human resource is the strongest feature of Wegman Foods. Wegman has been consistently rated among one of the Fortune 100 companies to work with, for the past decade. It has ranked within 10 for the past four years in the Employee Satisfaction criteria. (Wegmans, 2010). The company ensures that its employees are treated with as much care as its customers. This results in higher productivity of the staff and lower, than average, turnover ratio. Employee satisfaction ultimately results in higher customer satisfaction which re-enforces the strengths of the company. Early Technology Adopter: Wegman Foods implemented bar-code scanning in 1974 (when the concept was not even heard of in third world countries) and electronic discounts in 1990 (Wegmans, 2010). The company has been a sort of leader in introducing technological changes to system. Strong Foothold in US Market/High Goodwill: Due to exceptionally large charitable programs (like Food Bank for charity organizations), scholarship arrangements for the needy and willing employees, and continuous pay-backs to the community/neighbourhood, Wegman Foods has created immeasurable goodwill for itself. More than a food store, it carries an image reflects a caring and responsible citizen of the country. Weaknesses of Wegman Foods Litigations and Lawsuits: Wegman Foods is facing too many litigation and lawsuits which might threaten its positive image. Majorly, the litigations pertain to not confirming to the FACTA (Fair and Accurate Credit Transactions Act (FACTA), law to protect consumers from identity theft by limiting the information that can appear on credit card receipts) and non-union policy of the company. Product Recalls: In 2008, Wegman recalled store made bagels due to quality issues and in 2010 they recalled HVP, a flavour enhancer, due to the possibility of Salmonella Tennessee. The above are just a few examples of product recalls made by Legman’s. There in store product quality is definitely not their USP. Wegman Foods- Competitive Positioning and Possibilities Wegman Foods is a later in Frozen and Refrigerated food items. Due to the availability of large product varieties, it is counted amongst the top supermarket chains in US. However, due to its regional nature, it is yet to make a mark in top brand recall of supermarkets in consumer’s minds. Their employee-customer communication is one of the best in the entire service industry. Wegman Foods is planning to expand to Columbia and other parts of USA in coming years. It is only a matter of time before they launch their operations internationally. At Wegmans the management tries to anticipate, monitor, and understand emerging issues long before they are a concern for the customers or employees. They have in-house experts who guide them in this area, including a team of nutritionists and a food scientist. Bibliography Franc, R. H. (2000). Yes The Rich Get Richer, But Their Is More To The Story. Columbia Journalism Review . U.S. Census Bureau. (2010, September). ACS Demographic and Housing Estimates. Retrieved December 2, 2010, from Factfinder.census: http://factfinder.census.gov Wegmans. (2010). History of Wegmans. Retrieved December 3, 2010, from Wegmans.com: http://www.wegmans.com Read More