Basis of Competitive Advantage in the Retail Marketing - Dissertation Example

Basis of Competitive Advantage in the Retail Marketing 1.0 Introduction Retail marketing is regarded as the application of marketing concepts and theories as well as actions within the framework of retail organisation. Marketing is a customer oriented business phenomenon that involves accomplishment of the need of both internal along with external customer. It also entails to balance the requirements of stakeholder of the organisation. Marketing objectives and strategies are developed with an intention of meeting corporate objectives. The concept of retail marketing is quite different from other marketing aspects. The branding in retail industry is based on the service and quality a retail organisation is providing to the customers. In present scenario, retailing has become an international industry (Ailawadi & Keller, 2004). In this paper a company with retail based outlet is selected which has not yet made international expansion. The various important aspects that company i.e. Morrisons Supermarket has to keep a close view on for its intended expansion in international market have been explained in detail. In this paper, the competitive advantage of Morrisons over other competitors has been discussed properly. The paper covers the marketing mix and environmental condition of the retail organisation. Challenges and opportunities which can be faced by the supermarket in their endeavour of entering in the new foreign market have also been explained properly. The relevant theories of retail internationalisation are also provided in this context. 2.0 Choice of Retailer The report is required to be prepared by taking into consideration the retail marketing business of a retail outlet which has no international expansion and is planning to enter into the market of Sweden. The retail company named as Morrisons Supermarket has been chosen which is considered as the fourth leading supermarket chain in the UK. It is selected as it has no international presence and can make a significant expansion in the Swedish market. This supermarket is also selected because it has received honour for maintaining its quality standard of food products. As Sweden is a country which is much concerned with health and fitness, thus it will be a scope for such a supermarket with quality services and products to expand its retail outlet in foreign country. The country is also well known for retail business and several foreign companies get an opportunity to perform their business in this market. 3.0 Analysis of the Basis of Competitive Advantage Morrisons is one of the largest chains of supermarket. They deliver both branded as well as their own brands products. The strategy of the company is to provide customer with best value for money. The prices of their products are also same in every store. They manage in-house commercial operation which includes fresh fruits as well as vegetables, meat processing, fresh food and transport. Fresh foods are delivered in the UK and abroad by keeping them in the controlled temperature in warehouses as well as packing plants of the company. The processing of meat, beef, pork and lamb is done by them and are then supplied to the butcher in their retail stores (Morrisons, n.d.). Morrisons has adopted the strategy to extend qualification of 100,000 staffs by 2011. The staffs are provided 100 courses since 2009. The company has offered diploma at QCF level 2 to the staffs. AdExcel training programme is provided to butchers, bakers, fishmongers as well as greengrocers in order to gain competitive advantage in training and educating the staffs. This strategy will assist the staffs to become skilful butcher and can also guide them in cooking and thus in turn satisfy the customers needs (Retail Gazette, 2011). Morrisons has taken the strategy to buy Kiddicare with a view to ‘quadruple’ its business from the existing one. They have also planned for online retailer platform of retailer so as to introduce its non-food products which may include home wares, cooking kit, bedding and others (Thompson, 2011). The competitive advantage and strategy of the retail outlet can be analysed through Michael Porter’s Five Forces Model (Docstoc, 2010). The five forces are the threat of entry of new competitors, threat of substitute products, bargaining power of buyers, bargaining power of suppliers and degree of rivalry between existing competitors. The productive capacity of the retail industry generally expands when there is an entrance of new retail competitors in the UK market. There are a number of big name retailers existing in the UK market, thus more competition increases the threat for Morrisons when more retailers make entrance in the new market. The competition level also rises by reducing its attractiveness. Due to the new entrants of competitors there may be alteration of major determinants of market environment such as market share, customer loyalty and price (Recklies, 2001). A threat from substitute products will arise when alternative products enter the market with lower price and better quality for the same purpose (Recklies, 2001). The available substitutes of retail products are a strong competitive threat since these creates restrictions in the industry while charging the process of their products and may result in constraints to profitability (Hill & Jones, 2009). The bargaining power of suppliers is high when there is no other supplier in the market for the specific input and the market remains dominated by a few suppliers. As there is sufficient retail market in the UK and sources of supply are less, thus the bargaining power of suppliers gets higher. This threat becomes high when the buying industry possesses higher profitability compared to the supplying industry. And forward integration offer economies of scale for the supplier. The bargaining power of buyers rises when the supplying industry operates with high overhead. The products of the competitors may not be differentiated from one another and may be replaced by substitute products. The customers are also price sensitive and generally they closely monitor the prices charged by a retailer as compared to the other retailer (Recklies, 2001). Competitive rivalry between existing players refers to the strong competencies possessed by the industry players. The retail market of the UK comprises of giant retailers such as Tesco, Walmart and various others, thus there exists incessant competition for Morrisons. High level of competition may lead to pressure on prices, margins as well as profitability for every single company in the industry. The existing retailers of almost similar size in the market develop nearly same strategies. There is not much differentiation exist between players and products, thus the price competition is obvious. The growth of one industry is depended on the expense of other industry (Recklies, 2001). The critical success factors of the company are industry, competitive strategy and industry position, temporal factors, environmental factors and managerial position. These factors play a significant role while developing success for a company and to achieve its missions and objectives (Johnson & Et. Al., 2008). The customer lifetime value (CLV) is considered as one of the vital factors for ‘long term success’ of business. The term value network is the exchange of tangible as well as intangible dynamic value between more than two enterprise, customers and suppliers. Value network analysis (VNA) is a powerful approach to analyse the correlation of tangible as well as intangible exchanges between a firm and its business customers. Tangible exchanges are considered as transaction that entails services, goods, revenue and contractual knowledge of services or products that generate revenue. Intangible exchanges are non-contractual which involves knowledge along with information that flow and support the value chain of core products as well as services. Value network analysis is considered as a business modelling methodology in order to comprehend the value network. This model is important in retail sector because existing CLV models have paid poor attention to networking potential, particularly intangibles, benefits and knowledge. The concept of VNA considers the importance of CRM or the customer-centric view and the value of customers in business relationships (Hosseini & Albadvi, 2010). In retailing the services comprises of five characteristics such as intangibility which means retailers provide emphasis on tangibilizing the brand, for e.g. providing customers loyalty card as well as carrier bags. The heterogeneity means standardisation of procedure of the outlet and perishability facilitate the customer to make maximum shopping in the outlet. Ownership means the retailers need to attempt for stability – in service terms as well as in reliable condition of products. Inseparability is the characteristic which requires retailers to ensure their staffs have positive behaviour and attitude, are well trained and informed, because the staff–customer interaction is an extremely important aspect in ensuring customer satisfaction (Edinburgh Business School, 2008). Morrisons has received national honour for extremely high quality of their products. The company provide excellent services to the customers and develop strong company values. The super market produces highly qualitative and fresh foods in their stores. They also possess highly efficient and skilled staff in their stores. These aspects have helped the company to attain competitive advantages over other retailers in the retail market. The achievement was also due to effective strategy adopted by them in the competitive market (Morrisons, n.d.). Morrisons has been gaining highly competitive advantage in the market of the UK thus by making new entrance in Sweden retail market it can generate further profit by implementing effective strategies. 4.0 Marketing Mix Analysis The retailer brand is to a certain extent different from product brand. The retail branding is quite ‘multi-sensory’ in nature than other product brands and is dependent on experience of the consumer. The brand image of retail stores can be created by attaching exclusive association to the service quality, variety of products, merchandising, pricing, credit policy and others. The good image of the retailer is created in the mind of the customer from their brand equity. Consumer chose the stores depend on various factors. The consumer varies with three dimensions such as pleasantness, arousal and dominance. These factors influence consumer’s perception towards a particular store. The various environmental factors of retail outlet that influence the perception of consumer while purchasing the products are colour, music, crowding and others (Ailawadi & Keller, 2004). Pricing of the product in the retail store also influence the customer. There are three different types of pricing areas which make direct significance of customer’s image and choice of retailers. These are store price perceptions, where a price image of retailer is influenced by certain feature such as average level of prices; it means the quantity of variation takes place in prices over time. The other features are frequency and depth of promotions, and whether the retailer positions itself as EDLP (Every Day Low Price) or HILO (High-Low Promotional Pricing). In retailer pricing format, price format is on a range between EDLP (Every Day Low Price) as well as HILO (High-Low Promotional Pricing) that has an influence on consumers’ store choice in addition to shopping behaviour. In price promotion induced store switching, the retailer price promotion results in store switching by consumer (Ailawadi & Keller, 2004). Morrisons is one of the greatest food specialists. Instead of selling food they make processing and sourcing of their fresh foods by means of manufacturing facilities. This facilitates to have control over their quality and value. The excellent customer service and quality food help them to gain competitive advantage over others (Morrisons, 2011). Morrisons is the one of the largest supermarket chain in the UK. At present, the company holds 11.5% share of grocery sector and from its 382 superstores it serves nearly 10 million shoppers in a week. The pricing strategy of the company is to sell their products at low prices from the large stores (Supermarket.co.uk, 2010). Morrisons in 1980 operated in almost 46 stores in north of England. The company made expansion of its store in 2004, in southern part after takeover of Safeway chain. The Safeway retail stores were rebranded again by the name of Morrisons and then it made their presence on a nationwide basis. The supermarket created their reputation around a no-frills store set-up named as Market Street. In the store there is a counter for butcher, pie shop, bakery, fish counter, deli, a fresh to go counter consists of sandwiches, salad, pizza, pasta and cafeteria as well as cake shop. Petrol stations are also located in the stores. HSBC bank is also a feature of the supermarket which is located in several stores as it offers a scope of financials service to the customers with savings account along with credit card (Supermarket.co.uk, 2010). The quality services and products of the retail supermarket have enabled Morrisons to gain advantage over others. They possess excellent process of shopping starting from choice of the product to the payment of bill. The pricing strategy has attracted more customers. The online marketing is not available but they have taken initiative in adopting the strategy of online shopping. By providing the quality service they maintain the brand promotion. With a number of positive advantages they can easily achieve success in the market of Sweden and attract the customers there. 5.0 Operational Challenges The food market of Sweden is influenced by awareness of consumer for health, environment along social issues. In Sweden, there is a great demand for organic as well as quality food products thus Morrisons has a huge scope in the Swedish market for expanding their retail outlet (Slide share, 2010). But while entering the new market certain challenges will be faced by a retail organisation from political, social, technological and economic environment in that nation. The political condition in Sweden is stable and they provide various facilities for national as well as international market to make its expansion. As a result new entrepreneurial activities can be established in Swedish business market. In certain situations regulations are created which create obstacles to business and can hinder fast increase of country’s GDP. Policy of transparency is a significant factor in the country which ensures that ethical behaviour is adhered by the companies and the interest of the customers are secured. A few rules and regulations need to be accomplished by the company but such a political scenario may facilitate Morrisons to develop its market existence in the retail market of Sweden (Reinert & Et. Al., 2007). The country is concerned with economic condition in order to develop the society. The GDP rate of the country has increased from the year 2006 to 2008 i.e. from SEK 2 838 to SEK 3 187. The level of import has also been raised. Thus, it has increased the opportunities for the companies that are importing in the market of Sweden. The inflation rate in Sweden is circulated around a level of 2%. The increase in inflation will be favourable for the economy which may be attended with an increase in the tax ratio. Other strength of the economy is its efficient international trade policy reforms which allow it to perform transactions without difficulties. Market players face stiff competition and thus it would help the international organisation to make its entrance in Swedish market and acquire benefits from their economic condition (Reinert & Et. Al., 2007). The sociological condition in the country is much tolerant and with increased awareness, general rules, laws together with governmental activities. The opportunities are equally divided between men as well as women in the society. The technology sector of Sweden is much advanced. There is a developed route for communication of highways as well as carriage ways. Transport policy as set by the government maintains the quality standard of roadways, railways, aviation, shipping and others. The electronics communication also exists in the country which can provide an advantage for a retail organisation. The goal of information technology service in the country is to improve the society with updated infrastructure in order to standardise the quality of life. The technology of the country is advancing thus creating scope for international market to expand its business (Reinert & Et. Al., 2007). There can be certain challenges in the endeavour of market expansion of Morrisons but there is a great scope for the retailer to expand its market in Sweden. Thus, for expansion Morrisons should look to follow certain rules of the country correlated with political, economical, social and technological aspects. These may act as barrier but can also provide opportunities to the business. 6.0 Application of Retail Specific Theories Retailing concept is becoming more internationalised and it is expanding its operation in several foreign countries. The internationalisation of retailing can be observed with various theories of retailing. According to Treadgold, internationalisation is the determinants of time along with space. The progress of retailer is from reluctance to caution and then to ambition. The retailers represent itself to international markets at each stage, at first by means of long term growth opportunities in the national market and then expand to geographically close markets (Moore & Et. Al., 2007). Alexander (1995), provided fourfold global potential such as autochthonic, reactive, expansion and proactive. In the first stage saturation in local market is less important and operation of retailer is limited in global basis. In the second case saturation is important in national market and the operation of retailer is limited as well. Expansive means saturation is important and retailer’s operation is also significant in global basis. Proactive represents that saturation is less significant in domestic market but operation is important in global market. Internationalisation may occur at any of these stages of company’s development (Moore & Et. Al., 2007). Morrisons, the retail supermarket will look to make expansion for long term growth in international market by adopting its brand name and marketing mix techniques. They have adopted various such strategies in order to sustain in the international market. 7.0 Conclusion With a reference to above analysis of the paper it can be concluded that Morrissons, a UK based retail supermarket can look to create its presence in international retail market of Sweden. The company has developed various strategies so as to achieve competitive advantages. The company maintained the best quality of products and services in their operations and for this they received an honour. It has been observed that the company is extremely focused on maintaining the quality standards in order to attract customers and fulfil their need. The policy of marketing mix of the company also enhanced their growth in retail market. As the company will enter new international market of Sweden, therefore certain forces may act as barrier in their expansion. There is a great scope for retail market in Sweden, thus the company has an optimistic opportunity to achieve success by adhering to the existing rules and regulations of that country. As the retail industry is now days connected with internationalisation aspect, thus the company must take an initiative to expand its business globally. References Ailawadi, L. K. & Keller, L. K., 2004. Retailers as Brands. Conceptual Insights and Research Priorities. [Online] Available at: http://mba.tuck.dartmouth.edu/pages/faculty/kusum.ailawadi/research_articles/JR-Retail%20Branding.pdf [Accessed April 08, 2011]. Docstoc, 2010. Competitive Advantage. Business Strategy. [Online] Available at: http://www.docstoc.com/docs/68952665/Competitive-Business-Strategy-by-Porter [Accessed April 08, 2011]. Edinburgh Business School, 2008. The Retail Environment. Principles of Retailing. 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