Waitrose Strategic Analysis: Waitrose - Research Paper Example

Waitrose Strategic Analysis Table of Contents Introduction 3 External Environment 3 Competitive Forces and Barriers in the Industry and their Impact on Waitrose 7 Resource, Competence and Capabilities of Waitrose Supermarkets 9 Waitrose’s Strategies and Plans with Respect to Business Situation 11 Conclusion 14 References 15 Appendix 1: Positioning Strategy of Waitrose 19 Introduction Waitrose is one of the market leaders in grocery market segment of the United Kingdom. Waitrose was established in the year 1904. The founding members of the organisation were Arthur Rose, Wallace Waite and David Taylor. In the year 1937, the organisation was acquired by John Lewis Partnership. After acquisition, the first supermarket chain of Waitrose was established in the year 1955 in South London. Nowadays, the organisation has about 280 supermarket chains and has strong market share in the UK. Waitrose is renowned for delivering quality food products and it mainly concentrates on high income group people (Andidas, 2003). The report is based on the strategic analysis of the factors which have made Waitrose a successful supermarket in the UK. The report describes several environmental and business related aspects which have impacted the business of Waitrose. External Environment There are several external environmental aspects which have significantly impacted the working culture and business activities of Waitrose. In order to better understand the external environment, PESTEL analysis has been conducted which is described below: Political Environment The political aspects have vital impact on business of any organisation. In Waitrose, several political aspects have significantly determined the business strategies. In general, Waitrose has been affected by two major political influences in the UK. Firstly, the government of the UK is stable which has generated favourable conditions for the business of Waitrose. Secondly, in order to maintain superior product quality, Waitrose makes outsourcing of most of its products from South Africa. The political environment in terms of foreign trade policies and business regulations of both the UK and South Africa is also quite favourable for business expansion of Waitrose. These favourable political aspects have helped the organisation to maintain product quality as well as price. Political factors are quite important for Waitrose since most of the products of the organisation arise from foreign nations (Department of Business Innovation & Skills, 2012). Economic Environment Economic factors have also influenced the business of Waitrose. The supermarket business of the UK is quite strong. Food is considered as one of the core segments of the supermarket chains, which has high potentiality of growth. In the year 2008, the total retail expenditure of food in the UK was almost £132.3 billion representing 3.3% growth than 2007. Furthermore, this industry is also less affected by the economic recession. Regardless of price competition, regular purchase of food products is unaffected. The economic inflation also has not affected the spending patterns and the amount of spending on food products. These economic aspects assisted Waitrose to maintain its sales in the UK (SAS, 2012). Social Environment Social environment is the other vital external environmental factor which impacts the business of an organisation. The food market of the UK seeks for quality as well as healthy products. Furthermore, the demand for organic products has also increased in the UK. These social aspects have helped Waitrose to enhance its business. Waitrose is famous for providing quality products with appropriate prices. Thus, it has facilitated the organisation to enhance the sales. Besides, people in the UK have busier lifestyle where most of them are engaged in certain types of professional activities. This social characteristic has also increased the demand for convenient food items and processed foods which are offered by Waitrose (Huxley, 2003). Technological Environment Technological environment has also influenced the business of Waitrose in several ways. In present days, internet purchasing has become a popular trend of people (Rigby, 2011). This technological trend has generated significant prospects for Waitrose to provide products in a new way and to capture the online market. Besides, improvement in the area of information and communication technology has also enabled Waitrose to attain more refined store management system with comprehensive information of products being sold or available in the inventory. Technological improvements have facilitated the business performance of Waitrose as the organisation can effectively manage the expenses and can increase the sales margin (Andidas, 2003). Environmental Factors The environmental factors which have impacted the business of Waitrose include environmental safety regulations, greenhouse gas emission guidelines, waste disposal principles, and power consumption laws (Crown, 2012). Owing to climate change, global warming, increased pollution and other environmental aspects, the government of the UK has become quite stringent about environmental regulations. Waitrose’s business has significantly been impacted by these environmental regulations. Every organisation performing in the UK requires considering these environmental aspects while conducting business activities. It can be observed that in order to reduce the pollution level, Waitrose has minimised the level of transportation. Furthermore, the organisation has also engaged in certain activities which consume minimum energy. These strategies not only help to reduce the operational expenses, but also bestow a positive brand image in the market (Andidas, 2003). Legal Environment There are several legal environmental aspects which have impacted the business of Waitrose. One of the most vital legal environmental aspects is employment law. The employment law in the UK is highly structured, therefore Waitrose needs to accept the labour regulations and avoid any kind of discriminations on the grounds of disability, race and gender (Geldards LLP, 2007). These labour regulations have impacted the working environment of the organisation and facilitated to develop a positive work culture where every person has equal worth and value. The employment strategies of Waitrose have also been developed on the basis of employment laws in the UK. The second crucial legal aspect which has impacted the business of Waitrose is health and safety regulations. With respect to food products, stringently following health and safety regulations is quite imperative in the UK (Crown, n.d.). As a result, the organisation concentrates more on ensuring heath of its products. Since Waitrose imports most of the products from outside of the UK, the organisation offers education to the major stakeholders. This education not only preserves the health of the products, but also enhances the reputation of the organisation in the market (Andidas, 2003). Competitive Forces and Barriers in the Industry and their Impact on Waitrose The competitive forces as well as the barriers of entry with regard to Waitrose have been described below: Threat of Substitute Products There are substitute products of Waitrose in the market of the UK which emanate from several other food retailing organisations. However, Waitrose has significant advantages with regard to the observed competition from other food retailers. One of the major competitive advantages of Waitrose with respect to substitute products is that the organisation provides quality products to the customers in order to attract them. Furthermore, Waitrose does not target the entire food market, it only targets specific customer segments who prefer branded food products with high quality. Quality is the most vital cause for customer loyalty in Waitrose and it also helps to differentiate products from other competitors. Since the organisation provides quality products it targets the premium customer segments who can afford the price for it (Andidas, 2003). Threat of New Entrants There are significant threats for Waitrose with respect to new entrants in the food market segment. For instance, supermarket chains such as Walmart and Tesco have entered in the food supermarket chain which has posed a considerable threat of competition for Waitrose. However, the customers of Waitrose are quite loyal to the products and services offered by the organisation which helps to counter the threat offered by the new entrants in the food market segment. Furthermore, the association with John Lewis has helped Waitrose to toughen the supply chain procedure and to enjoy higher economies of scale (John Lewis Partnership plc, 2012). Besides, the working environment of Waitrose has also enhanced the brand reputation of the organisation. The customers are also prepared to purchase the products of Waitrose repeatedly and thus, it is difficult for new entrants to challenge Waitrose in the food market segment. Apart from these, Waitrose has also locational advantage which can pose significant barriers to entry for new competitors (Andidas, 2003). Competitive Rivalry The competitive rivalry is quite high in the market operated by Waitrose. There are several strong players in the market of Waitrose such as Marks & Spenser, Tesco, ASDA and Sainsbury among others. These competitors also provide quality food products to the customers. The market share of Waitrose is also quite small in comparison to the competitors. However, the increasing demand of food products has reduced the impact of competition between these established organisations. Due to the quality and preference towards certain brands, there is an augmented demand of branded food products by the target customers. Nevertheless, since Waitrose’s business relies on outsourcing of products, it can cause significant amount of fixed expenses which in turn can have a negative impact on the financial performance of the organisation. High reliance on outsourcing of products can pose a threat for Waitrose in terms of lowering of profit margin (Andidas, 2003). Resource, Competence and Capabilities of Waitrose Supermarkets According to Wernerfelt (1984), resource can be considered as “anything that could be thought of as a strength or weakness of a firm”. Alternatively, Barney (1991) had stated that resources comprise assets, capabilities, organisational procedures, organisational characteristics and skill among others. Strengths With respect to strengths, it can be stared that Waitrose has the readiness to introduce innovative techniques and to provide quality services with low cost. The organisation was the first company which implemented quick scanning devices in the business in order to enhance the performance. The business association with John Lewis has facilitated Waitrose to enhance its capabilities with respect to strong supply chain performance. Besides, the association also has provided advantages for diversifying the risks and assisted in enhancing the brand reputation. Moreover, Waitrose has a range of food products comprising processed and convenient meals. These products are promoted to the customers as to be the offerings that would enable them to maintain their healthy lifestyle (Andidas, 2003). Weaknesses The major weakness that has been recognised in Waitrose is high reliance on outsourcing products. The outsourcing of food products is perceived as quite an expensive method of operation incorporated by the organisation. Furthermore, the introduction of Congestion Law has also resulted in difficulties for Waitrose to expand the business in other areas as it can enhance the operational expenses of the organisation (Transport for London, 2010). Positive Work Environment Positive working environment is considered as one of the most vital competencies as well as capabilities of Waitrose. The work culture of Waitrose helps to motivate the employees for higher productivity. Waitrose provides several advantages to the employees which facilitate to make the employees more satisfied and loyal to the organisation (Andidas, 2003). Store Location Store location is considered as a vital resource for Waitrose which can determine the amount of generated revenue. The locational advantage is considered as a key competency for Waitrose to generate more sales as well as profit. Therefore, it can be observed that most of the supermarket stores of Waitrose are situated in major roads which can provide a pertinent transportation advantage to the customers (Andidas, 2003). Ansoff Matrix With respect to Ansoff matrix framework, the core capabilities of Waitrose can be observed in the areas of market penetration and product development. Market Penetration: Waitrose has enhanced its core capabilities through developing a range of products and services to the customers. The quality of products and services is considered as a critical success factor for Waitrose (NGFL, 2009). Product Development: Waitrose has implemented product development strategy through establishing new outlets where several food as well as non-food products are marketed (NGFL, 2009). Waitrose’s Strategies and Plans with Respect to Business Situation Waitrose intends to deliver expediency in supermarket segment with ensuring proficiency and high quality service from professional food stores. The slogan of Waitrose is “freshness, quality, safety and provenance” which determines its business strategies (John Lewis Partnership, n.d.). With respect to Porter’s generic strategies, Waitrose follows the differentiation strategy by targeting the premium customers with a variety of quality products. In reality, Waitrose has a reputation for providing quality products which has resulted in it creating an awareness of being value price driven organisation (Centaur Media plc., 2006). Waitrose focuses on food market and it did not select to diversify as much as the other major players in this segment. From the strategic analysis, it can be observed that the major competitors of Waitrose include Marks & Spencer and Sainsbury among others that also target the premium customer segment. Thus, unless Waitrose enhances the market share and establishes more stores, it would be difficult for the organisation to ensure sustained performance. Although other supermarket chains in the food segment compete primarily on the basis of price by providing several rewards to the customers such as loyalty schemes or cards, Waitrose attempts to establish brand loyalty by providing differentiated and quality products. Waitrose has account card reward system for customers, but the organisation does not provide financial benefits to the degree of other competitors. The account card system of Waitrose only allows customers to acquire certain food products at lower cost (Andidas, 2003). From the analysis of Waitrose’s strategy, it can be observed that unlike other supermarket chains such as Tesco, Waitrose is not popular for reaching a wider segment of target customers, rather it concentrates on providing a variety of food products and aims to attract only upper income group customers. Appendix 1 will show the position of Waitrose as well as its competitors in the supermarket chain (Andidas, 2004). The other strategy of Waitrose is its corporate social activities. With the increasing concern of people towards environment, Waitrose strives to undertake several corporate social activities, which helps the organisation to maintain its green image in front of its customers. Waitrose has also sponsored various social programmes in order to build a positive brand reputation. Furthermore, Waitrose aggressively promotes its commitment by delivering British products through conglomeration with other organisations such as farms and dairies (John Lewis plc, 2012). Waitrose segments the market with respect to income and geographic location. This market segmentation strategy lets the organisation to recognise different groups of purchasers, having equivalent definable requirements and behaviours. Since the target market of Waitrose is high income group people, they can be regarded as highly concerned about quality, rather than price. Due to this reason, Waitrose focuses on providing quality products under its own brand name. The business association of Waitrose with John Lewis also has helped the organisation to reinforce the target market segment. Waitrose has a “Royal Warrant” for its services and it also supplies produces to “Her Majesty the Queen” which is considered as a sign of product superiority and quality (Argentine Beef Packers, 2011). Waitrose also uses e-commerce strategies in order to enhance the sales. The e-commerce strategies of Waitrose are developed in such a way which can target the wealthy and demanding people who have no time for shopping and who probably do not reside near Waitrose supermarket stores, but still prefer to purchase Waitrose’s products. Its high quality products also help to differentiate the brand in the online platform (Ellis-Chadwick & et. al., 2007). Waitrose formulates its strategic plan by considering the long run future. For instance, the organisation had introduced SEDEX in order to strengthen the selection of product dealers. SEDEX is considered as the procedure which is undertaken by an organisation in order to establish strong relationships with dealers. This procedure follows several aspects such as regulations, ethical grounds and status while choosing a particular dealer. Hence, this strategy helps Waitrose to counter any business related problems (John Lewis plc, n.d.). Conclusion From the above analysis, it can be observed that Waitrose follows the differentiation strategy in order to market the products. The strategies of Waitrose have provided the company with sustainable competitive advantages. The mainstay of the business of Waitrose has been observed to be the maintenance of product quality and brand reputation. The organisation not only has loyal customers, but also loyal employees, which has contributed to the success of Waitrose in the food market segment of the UK. Furthermore, the association of Waitrose with John Lewis has also provided additional advantages to the organisation in terms of better productivity. From the strategic analysis, it can be concluded that rather than competing directly with the major competitors such as Marks & Spencer and Sainsbury, Waitrose concentrates more on maintaining its existing position in the market and on satisfying the target customers. References Andidas, 2003. 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[Online] Available at: http://www.tfl.gov.uk/assets/downloads/corporate/Congestion-charge-factsheet.pdf [Accessed February 24, 2013]. Wernerfelt, B., 1984. A Resource-Based View of the Firm. Strategic Management Journal, Vol. 5 No. 2, pp. 171-180. Appendix 1: Positioning Strategy of Waitrose Source: (Andidas, 2003) Read More