International Sustainable Business: Food Retailing - Report Example

?A Brief Introduction on Global Food Retailing Industry Introduction In recent times, food retailing industry with the emergence of different supermarkets and hypermarkets has gained global eminence. Though, the emergence of this era started long back after 1950s. At that time such introduction was mostly centered on North America and Europe. Historically these regions are bestowed with high income and that allured the shoppers of food item there towards greater ease while shopping; especially while considering grocery, vegetables and food beverages. In order to attract the food shoppers a combination of music and comfortable environment around the shopping complex were used. A fair price tag with all the food products also contributed to the greater attraction of such food retailing complex. This model is even followed today. The food retailing supermarkets also helped the shoppers to select and pick the products before purchasing through prior inspection. This paved the way of global retail food super markets. The present global food retailing markets are dominated by Wal-Mart, Tesco, Metro AG and many others. From this successful concept of the western food retailing industry the East also got impressed and started to follow the footsteps regarding the same. Singapore is considered as one of the leaders in food retailing industry as far as the eastern world is concerned. After Singapore, a similar concept was followed in China, Japan, Malaysia and Thailand. In recent times the food retailing industry has also penetrated the Indian market and flourishing rapidly. (Anand & Nambiar, n.d., pp.1-5; Clapp & Fuchs, 2009, pp.32-33) Major Market Players and Market Scenario: Presently the major global players of food retailing industry are from Europe and US. Wal-Mart as mentioned earlier is the leader of the pack whereas Carrefour is the biggest of the European contenders and second to Wal-Mart. The consideration of the entire retail industry according to the rank of the retailers comprising of both food and non food items might help to understand the spread of the global retail industry and thereby the global food retail industry. The table below portrays the top 15 global retailers ranked according to their retail sales volume. (Anand & Nambiar, n.d. pp. 2-3) Usually purchasing involves bargaining, selecting and finding the right products from the marketplace that are strenuous to the customers nowadays, considering the fast pace of life that they are abide to live through. If that strain can be turned into pleasure through some simple modifications like music, air-conditioner etc. that will eventually also translate into profit then the retail food market industry of the present era is bound to flourish. Moreover the store help and signage systems helps the shoppers to locate the items they need in quick time and provision of discounts and special offers also act as added benefit to the customers. These reasons are the basic factors for the boom of food retailing industry. But day-by-day competition is creeping in within this sector and it is making hard to sustain the profit margins the players has achieved earlier. So, new strategic mixes are required for the new entrants in this industry (Anand & Nambiar, n.d., pp.1-5). Recommendations and innovation of business model The main requisites of food retailing industry are product distribution outlets, supply chain management system, marketing strategy and prompt service delivery. Product distribution outlets: For any food retailer, a perfect location for distribution outlet is a basic necessity. So, locations chosen for outlets must be nearby main centers i.e. workplace, rapid mass transport system depot and railway station or residential area (This is important since food items are often perishable goods). The shoppers will get easy accessibility, visibility and transport availability to the outlets owing to such location. These kinds of location strategies are adopted by major global players of the industry like Wal-Mart, Tesco etc. to ensure better number of potential buyers in the outlets. After, deciding about the location of outlet the most important issue is to analyze the demographic and socio-economic profile of the shoppers of the nearby area along with their cultural background. This information will enable to decide upon the range and quantity of products to be stored and the promotional tools to be employed in future to attract the shoppers. The convenience and comfort factors are very common in all the food retailing outlets. Furthermore major players stresses on positioning of their outlets either by niche or up-market strategies. So the positioning priority should be based on the quality and prompt service delivery of the food product. This will also help to bring in shoppers from both upper and lower income group section of the mass and will definitely ensure profitability. This neutral strategy with quality and prompt service delivery of the food product will help to sustain the new retail chain store amidst the fierce competition of this industry. Supply chain management system: Supply chain management (SCM) is reckoned as the method of transmission of information to the food manufacturers from the consumers end. It is also a system of delivering products from the producers to the end users. The components which mainly comprise the SCM are input from the supply end, production, processing and retailing. Through this process the new organization can generate an additional value by maintaining quality in the products being catered to the consumers. As food retail industry is turning more into a service industry there is a huge need to understand consumer demands (Bourlakis, 2011, p.132). Hence modern technologies should be used to enable the retailers to generate information about the shoppers demand and inform it instantly through the supply chain management system to the suppliers for meeting it. The SCM should keep a vigilant eye on the semi-processed food products with higher emphasis on quality and safety inspection as they are of high value due to their more perishable nature than the bulk commodity. (Sardana, n.d.; Fearne, n.d., p.11; Regmi & Gehlar, 2005, p.8) Figure-1 The figure suggests the direction of flow of information and material. Value added material flow Consumer --- Retailer--- Physical Distribution---Manufacturing---Purchasing---Farm Output--- Farm Input Requirement information flow Figure-2 The figure suggests the different activities performed through SCM. These above mentioned activities can be performed by SCM software with high precision. This will help in demand planning by statistical techniques and analysis. It also makes possible efficient design for manufacturing and processing operation. The system will enable the organization for better scheduling of the orders from outlets as well as dispatch of consignments to the outlets from the warehouses. These will affect the transportation planning and enable in time delivery of the consignments. For better co-ordination and generation of information each floor supervisor should have an electronic data providing system integrated to the ERP (Enterprise Resource Planning) system of the outlet which will help to decrease the idle time between demand identification and informing to the higher authority. This system will help to save time, reduce cost and will result in increased effectiveness regarding meeting shoppers’ needs. Again it will also provide a value addition to the new food retailers. (Rotondi, Marotta, Aden, & Shafers, 2004, pp.7-10) Marketing Strategy: The tactical planning of marketing mix should be well framed. The food products should be of good quality and provide wholesome nutrients. The price should attract shoppers and ensure profitability. The retail outlets as earlier mentioned should be easily accessible, visible and near mass transport systems. Promotion of the products should be made with utmost care as it should maintain a line of balance between company’s profit maximization; sales target fulfillment and market share increment objective as well as it should evoke purchase interest within shoppers to lure them from the competitors (Marketing Mix, n.d., pp. 3-8). The three types of promotional strategies which can be used are explained in the figure below: The above mentioned ways are traditional and most of the retail food outlets like McCains Foods, Wal-Mart, Tesco etc religiously follows them. A very innovative way of promotion can be used by distributing discount coupons during sports events or weekly derby league matches of soccer, cricket, baseball, basket ball or any other, which might lead to higher potential customers in the outlets than other days. This will help to yield higher profits than normal circumstances. Online marketing option for the shoppers with delivery service within a stipulated time and within a certain space will also enable the new retailing chain to generate some value addition (Marketing mix in food industry, n.d.) The strategic planning draws quite an importance in retail food industry. In this industry generally the competitors try to achieve a cost leadership to increase market share, which will ensure increasing their turnover (Jones & George, p.314). There are also cost differentiation and niche marketing strategies but for new retailing chains it is better to avoid all these three marketing strategies (Kotler, 2009, p.201). Cost leadership requires proper operational competencies inside the organization to reduce costs (Porter, 1998, p.13). If the operating costs become high; the new firm will become insolvent following a cost leadership strategy. For this reason it is better to position itself as a retail chain catering good quality and healthy food for shoppers to induce healthy food habits. But to sustain the competition new food chain retailers might resort to systematic development of series of small departmental stores, restaurants and bakery shops to expand and diversify. It will help to bring them close to people and render them good service and win their trust. This strategy will be an initiation to become a brand and it will help to introduce their own label in which people one day will trust and show loyalty (IFR CAPITAL PLC, n.d.; Strategic Management of TESCO supermarket, n.d.) Prompt Service Delivery: Day-by-day food retailing industry is becoming a service based industry and for prompt service there is an urgent need to incorporate sophisticated technologies and IT integration within operational processes of the organization. The organization should be equipped with wireless devices, intelligent measuring scale, electronic shelf labeling, self check-out machine, radio frequency identification to speed up the operational activities. Electronic Point of Sale along with electronic scanners and the presence of an electronic funds transfer system will enable efficient and effective stocking and distribution operations. Service quality also depends on the ambience of the outlet and comfort level of the shoppers during marketing process. The staffs should be well trained, polite and refined enough to address shoppers’ queries. The proper usage of signage inside the outlet will help the shoppers to locate the products they need and about the different discount offers they will get during purchase of items. Announcement of offers should be made occasionally to evoke interest within impulsive shoppers for making purchase. In these suggested ways and as mentioned earlier prompt delivery of online ordered products will enhance shoppers’ loyalty within the new food retailing chain and enable them to sustain the fierce competition. (Strategic Management of TESCO supermarket, n.d; Gilmore, 2003 p.12) Conclusion: The food retailing industry is growing globally and the players are giving fierce competition to each other. The new entrants can only sustain the competition by delivering prompt and quality service. So instead of cost leadership, cost differentiation and niche strategies the new entrants should position themselves as caterer of healthy and quality food with quality service providing abilities. References 1. Anand, V. & V. Nambiar (n.d.), Indian Food Retail Sector In The Global Scenario, Retrieved on June 20, 2011 from: http://www.sathguru.com/Note_on_Retail_Industry.pdf 2. Bourlakis, M. (2011) Intelligent Agrifood chains and networks, John Wiley & Sons. 3. Rotondi, F. Marotta, A. Aden, P. & H. Shafers (2004), Supply Chain Management in the global food industry, Retrieved on June 20, 2011 from: http://www.xn--hnk-qla.de/Studienarbeiten/SupplyChainManagement.pdf 4. Sardana, V. (n.d.), Supply Chain to Address Changing Food Markets, Retrieved on June 20, 2011 from: http://www.pfionline.com/index.php/columns/supply-chain/77-supply-chain-management-to-address-changing-food-markets 5. Strategic Management of TESCO supermarket: PESTLE analysis, Porter's 5 Forces analysis, Critical success factors, SWOT Analysis, VALUE CHAIN analysis, TESCO'S strategic options, Core Competences & Cultural Web., Retrieved on June 20, 2011 from: http://www.ivoryresearch.com/sample5.php 6. Regmi, A. & M. Gehlar (2005), New Directions in Global Food Markets, Retrieved on June 20, 2011 from: citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.98.3379...pdf 7. Fearne, A. (n.d.), Supply Chain Management – Co-operating to Compete in a Global Food Industry, Retrieved on June 20, 2011 from: http://www.agrifood.info/Agrifood/members/proceedings/Dr_Andrew_Fearne.PDF 8. Marketing mix in food industry (n.d.), The Times 100, Retrieved on June 20, 2011 from: http://www.thetimes100.co.uk/case-study--price--101-401-3.php 9. IFR CAPITAL PLC (n.d.), Retrieved on June 20, 2011 from: http://companydatabase.org/c/salads-wholesale/wholesale-bakery/ifr-capital-plc.html 10. Clapp, J. & D. Fuchs (2009), Corporate power in global agrifood governance, Hong Kong: Best Set Type setter Ltd. 11. Kotler, P. (2009), Marketing – Management 13th Edition, Patparganj: Dorling Kinderslay (India) 12. Marketing Mix (n.d.), Retrieved on June 20, 2011 from: http://www.nos.org/srsec319/319-22.pdf 13. Porter, M. (1998), Competitive advantage: creating and sustaining superior performance, New York: Free Press 14. Jones, G. & J. George (2009), Contemporary Management, New York: Tata Mc-Grawhill 15. Gilmore, A. (2003), Services marketing and management, London: Sage Publication Read More