Analysis of HEB Grocery Store - Case Study Example

HEB Grocery Store Table of Contents Contents Page Executive Summary…………….……………………………....3 Introduction and Background…………………………….....….4 HEB SWOT Analysis…………………………………...……...6 HEB Micro-environmental Analysis…………………….......…9 References…………………………………………………......13 Executive Summary HEB Grocery Company is America’s fifteenth largest chain of grocery stores in terms of revenue, as well as being a market leader in its Texas base. It holds the largest market share in San Antonio, Corpus Christi, and Austin. HEB is owned by the H.E. Butts since the commencement of the 21st century when it was established and is the major private company in the state of Texas. The H-E-B slogan possesses the same acronym as its slogan, which reads out, as “Here Everything is better”. To accomplish this, HEBN has committed itself to low prices, exceptional service, and friendly shopping. HEB has altered its marketing mix in accordance to the environment. Since the company is popular with Americans of Mexican origin, they carry many Mexican vegetables that might seem foreign to most Americans. HEB thrives on the unique skills and talents of its diverse, dedicated partners who embody their commitment to excellence and provide a strong, competitive advantage in the extremely competitive Texas market. One show of HEB’s internal strength is the consistently high ranking in industry magazines like Forbes and Progressive Grocer. The company’s long-standing support for charity has also grown a loyal base of customers. However, one of its major weaknesses is the demographical limitation as they mainly serve Texan towns. Externally, the company could look to increase its market share in towns outside Texas. They could also explore the opportunities from setting up shop in Mexico. The threats faced by HEB can all be tied to its numerous competitors, with Walmart a particularly fierce competitor. Various macro-environmental factors will affect the operations of HEB. These are economic factors like the economic crisis and technological ones too like social networking, which provides for a cheaper advertising platform. Additional factors are political and cultural in nature. HEB GROCERY STORE 1. Introduction & Background HEB Grocery Company is America’s fifteenth largest chain of grocery stores in terms of revenue, as well as being a market leader in Texas. It holds the largest market share in San Antonio, Corpus Christi, and Austin. As the largest private company in the state of Texas, HEB is owned by the H.E. Butts since the beginning of the 20th century when it was founded. With 269 stores in operation, most of its business revolves around combination food and pharmacy stores (Plunkett, 2009). Approximately 90 of the stores are small sized pantry stores that boast low prices, are built for convenience purposes and are located between Southwest Louisiana and South east Texas’ rural area. Sixty of the stores feature Gas N Go gasoline self-service islands. HEB also runs stores in Mexico, on top of those in Louisiana and Texas. Among the many products that they process are fruit drinks, meat, tortillas, baked goods, ice cream, cottage cheese, sour cream, yogurt, and milk. HEB also manufactures its own bottles and runs a photofinishing laboratory. The company does not have an official mission statement, although the H-E-B slogan, values, and commitments reveal the daily mission that they are involved. The H-E-B slogan possesses the same acronym, which reads out, as “Here Everything is better”. To accomplish this, HEBN has committed itself to low prices, exceptional service, and friendly shopping. HEB has always believed that hard work is vital, as well as given extra attention to caring for their employees. Additionally, they have always dreamt big, hired great employees, offered the best customer service, as well as sold the safest and freshest product (Hylton & Rossie, 2011). Moreover, they are on a constant lookout for improved products, while ensuring they give customers the best value at low prices. HEB is a perfect example of a company that has altered its marketing mix in accordance to the environment. Since the company is popular with Americans of Mexican origin, they carry many Mexican vegetables that are foreign to most Americans. HEB altered its marketing mix in accordance to the environment presented by the influx of Mexican Americans. Since the company is popular with Mexican Americans, they carry many Mexican vegetables that are foreign to most Americans. Some of their stores possess two aisles that sell Mexican food, which are labelled in Spanish. While most Americans prefer DP or Coke, Mexicans will plump for strawberry and pineapple in a glass bottle. They have thus altered their marketing mix to meet the needs of Mexican immigrants in the area. Additionally, they have an inherently high product quality for goods like seafood, deli goods, and ice cream. They also practice service-product hybrids via premium pricing and promotions. These are aimed at building the company brand (Lamb et al, 2012). HEB thrives on the unique skills and talents of its diverse, dedicated partners who embody their commitment to excellence and provide a strong, competitive advantage in the extremely competitive Texas market (Lamb et al, 2012). HEB has earned its dominant market position as a result of a corporate culture that places increased value on its employees throughout the entire organization. History has repeatedly demonstrated that the most successful organizations are those that are defined by their human element. For HEB, however, the connections established with the local community and its partners in Mexico and Texas have enabled it to stand out from its peers. This is enhanced, by its personal commitment, to celebrate the role of each partner and customer. Their strategy is predicated on four pillars, which are; value and quality service for its clients, the fostering of a culture of employer-of-choice, stable, long-term profits and sales, and creation of authentic bonds with the communities they serve (Plunkett, 2012). This translates into a unique market position that allows its partners to build a community spirit because the clients, employees, and partners matter. 2. HEB Swot Analysis HEB is a private company from Texas that deals in grocery retail. Based mainly in Texas, its main products are general grocery, meat, seafood, snacks, produce, pharmacy, deli, frozen food, bakery, dairy, and gasoline. 2.1 Strengths 2.1.1 The company without failure has continued being on the list of the United State’s largest companies. The company was placed 26th in the year 2006 and has maintained a relatively strong position ever since. 2.1.2 The company was pointed as the top retailer of the 2010 year by the magazine progressive grocer. 2.1.3 The company has been part of charity for a long time and has donated approximately five percent of its revenue to charitable organizations annually. This is one sure way to earn the community’s goodwill. 2.1.4 The company has also marked its name on retailing organic and fine food, which has led to increased brand awareness. 2.1.5 HEB has placed high emphasis on its Hispanic market by developing a sense of community with them, for example, by treating them as regular customers. 2.1.6 HEB has divided itself schematically into various segments in order to attract as many customers as possible; segmentation includes HEB plus, HEB hybrid, pantry food central market, and Mi Tienda. 2.1.7 HEB has initiated a very strong private labelling and advertisement program. 2.1.8 HEB has a highly visible product diversity, which attracts the customers to it. 2.1.9 HEB also holds the loyalty of its over seventy five thousand senior management and employees, who are reliable and strong-willed. 2.1.10 HEB has also taken its brand image very seriously, which has led to the brand being extremely popular across the region that it serves. 2.1.11 Finally, HEB has specific brands that are made by the company, for example, butter, cream, and milk. 2.2 Weaknesses 2.2.1 The company can improve on demographic locations, with the company only concentrated in Texas, it can move to neighbouring states at the very least. 2.2.2 The company is not listed by the capital market because it is a privately owned enterprise. 2.2.3 The company’s labour force is not particularly well organized, especially in the central market. 2.2.4 Finally, HEB lacks offers such as loyalty cards, which declines to offer incentives to customers for them to enjoy, especially when compared to 99 cents and Walmart (Plunkett, 2012). 2.3 Opportunities 2.3.1 HEB possesses a strong progression trajectory in the extension of its market share (Plunkett, 2012). 2.3.2 The company also has special programs under consideration to sell fresh foods instead of frozen foods that come across as user friendly to the customer. 2.3.3 HEB’s expansion into Mexican territory has opened up more opportunities for the organization, as well. 2.3.4 Finally, the company has included many private labelled products on its shelves, which increases the chance of more partnerships in the future. 2.4 Threats 2.4.1 Some retailers like Walmart have a very strong hold on the American retail market, as does Kroger. 2.4.2 In comparison to these national competitors, HEB does not have a strong advertisement network, such as special offers. 2.4.3 The key market in which HEB operates is now at saturation point. 2.4.4 Lack of loyalty card data places the company at a disadvantage compared to other grocers in the market. 3. Macro Environment Analysis 3.1 Economic factors The economic segment refers to the general prevailing economic conditions prevalent in the controllable environment that the grocer operates. 3.1.1 The most notable factor that affected HEB was the recent global financial crisis of the years 2008 and 2009. The recession hit the company’s business by increasing operational costs and decreasing the profit margins; while the consumers of their products saw their prices rise. However, wages remained the same for the employees as unemployment levels rose, creating low morale amongst the employees (Plunkett, 2012). The outlook, however, is improving as confidence increases and the global economy begins to look up. 3.1.2 In the grocery, meat, and dairy products element, HEB competes on two levels. They have the locally produced products and the imported products from Mexico and some Latin American countries. By offering low cost product options to its fringe customers and high cost options to its more affluent clients, the company attempts to sell organic food to all that need or want it (Plunkett, 2009). During the economic crisis, groceries were still purchased, but the customers preferred to buy the low cost locally produced products because of their spending cutbacks. 3.2 Cultural Factors This segment focuses on the manner in which the consumer exerts forces on the company and how it does business. As cultural dynamics change, with an increase in the outcry for fair practices, so too has the company. 3.2.1 HEB implemented a program to address the concerns regarding its social responsibility to perpetuate sustainability among its horticultural suppliers and other suppliers (Plunkett, 2009). The program set out to establish a criterion that is quality and shares responsibility for this across the entire supply chain. HEB also uses third party certifications to become more socially responsible and wear their products like a badge of honour. Examples of these socially responsible accepted labels are organic certification, the rainforest Alliance certification, and Fair-trade certification. 3.2.2 As consumers’ knowledge on health increases, HEB needs to be constantly conscious with the environment and adapt its product offerings according to demand. Although HEB initially resisted using anything else other than whole milk, for example, they eventually buckled under pressure and began to trade in 2% milk, as well as non-fat milk (Hylton & Rossie, 2011). 3.2.3 Recent debate on sugar intake has also been another cultural factor that HEB has been forced to handle (Hylton & Rossie, 2011). Given the pressure from consumer watch groups, HEB stopped all use of artificial sugars in their baked goods and juices, in addition to employing novel ways, of providing with customers flavour and nutrition. 3.3 Political factors The horticultural industry faces many legal and political pressures from the macro-environment. 3.3.1 HEB imports some of its produce from Latin American countries, which have their own tariff regulations and customs (Plunkett, 2012). On a global scale, HEB must first gain expertise on how to get these products from their countries of origin, as well as monitor various political upheavals, policy changes, and the seizure of their assets in these countries by their respective governments. 3.3.2 From the legal perspective, HEB must file for necessary permits and forms in order to be allowed to carry out business in these countries, especially Mexico where it has branches. These could include tax forms, legal contracts, business entity applications, farm leases, as well as store leases. The federal and local government also dictate various laws that govern how a business is to be run. These cover labour laws, regulations on how to handle food, and business practice restrictions in advertising and marketing (Lamb et al, 2012). 3.4 Technological factors The technological factor is especially important in a company that deals in fresh produce. Technology relates to business-customer interactions, customer ambience, as well as product service and innovation. 3.4.1 Technological advancements have allowed HEB to market their products directly to consumers via social networking sites like twitter and Facebook. This form of technology is available to HEB at a much lower cost compared to conventional advertising. HEB also plans to follow Dunkin Donuts by introducing an on-counter billboard that will advertise messages aimed at driving the client back to their stores for same-day buys (Hylton & Rossie, 2011). 3.4.2 HEB has also in the recent past begun work on an online shopping experience for its customers. However, this project was closed down as part of the HEB website revamp. The website is now to be unveiled in two months, although the launch of the online shopping service has been delayed for a while. The online shopping service was put on hold for HEB to decide when the best time to launch it was, especially for the customers. Various Staff members have been working on the service for a long time but have now been assigned to other company-based projects. References Hylton, Hilary. & Rossie, Cam. (2011). The insiders guide to Austin. Guilford: Globe Pequot. Lamb, Charles. Hair, Joseph. & McDaniel, Carl. (2012). Essentials of marketing. Mason : South-Western Cengage Learning. Plunkett, Jack. (2012). Plunketts e-commerce & Internet business almanac 2009: the only comprehensive guide to the e-commerce & Internet industry. Houston : Plunkett Research Ltd. Plunkett, Jack. (2012). Plunketts food industry almanac. Houston: Plunketts Research. Plunkett, Jack. (2009). Plunketts retail industry almanac 2009 : the only comprehensive guide to the retail industry. Houston: Plunkett Research Ltd. Read More