The Current Position of CanadaCo and the Potential Threats - Essay Example

Running head: COMPETITIVE STRATEGY Competitive Strategy for a Discount Retailer This business report analyses the current position of CanadaCo and the potential threats it faces from UsCo. The report then critically evaluates the various options available for CanadaCo and whether CanadaCo should pursue any of the opportunities and the rationale behind the same. To begin with, it is essential to do a thorough analysis of the current position of CanadaCo. Hence a SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis is conducted. SWOT Analysis Strengths: Currently, CanadaCo is the largest discount retailer in Canada with 500 stores while the second largest retailer (who has been bought out by UsCo) has only 300 stores. Also, CanadaCo leads the market with relatively higher market share and profitability. CanadaCo has a wider variety of brand names. CanadaCo uses a franchise model in which each individual store is owned and managed by a franchisee who has invested in the store. This has induced a lot of involvement and commitment from the managers of the stores. CanadaCo stores offer significantly higher level of customer service due to the reason mentioned above. The stores are cleaner, more attractive and better stocked. This has resulted in higher per store sales when compared to the competition and has lead to higher revenue and market share. The Canadian consumers are very familiar with CanadoCo, but they are unaware of UsCo’s existence. CanadaCo stores lean more heavily toward Canadian Suppliers and so have a good relationship with the suppliers. Since its network spans less geographic area and gets more products from Canadian suppliers, CanadaCo has the advantage in distribution costs Weaknesses: CanadaCo and competition cover similar geographic areas. Hence, CanadaCo does not enjoy monopoly in these areas. No competitive edge in terms of the product mix, as CanadaCo’s products is similar to that of the competition. Currently, the average price level is similar to that of the competition and hence there is no price advantage. Opportunities: CanadaCo can expand its stores to rural areas before the competition (UsCo) gains market share and starts expanding. A good deal of products is being shipped from United States. Instead, CanadaCo can concentrate on getting more supplies from the Canadian suppliers. This will help further reduce the costs. Though CanadaCo has a wider variety of products, the product mix is similar to that of the competition. CanadaCo can expand the number of product categories and also include a number of varieties for each category. Threats: Primary concern is that UsCo has bought out 300 stores of CanadaCo’s competition. UsCo is well established in the United States and is centrally managed. Hence UsCo will be able to finance its operations very effectively from its current operations in the United States. UsCo will be retaining a significant price advantage of at least seven to eight percent over CanadaCo. This is a serious threat to CanadaCo as price plays a very crucial role in the consumer market. Competitive Strategy for CanadaCo The SWOT analysis has given a clear picture of the current position of CanadaCo and also the potential challenges it has to face in the future due to the recent course of events. It is clear that UsCo is a big threat to CanadaCo as it has a larger infrastructure in terms of man power and number of stores. Moreover, the stores are centrally managed and hence, UsCo’s initial aim will be to gain a considerable market share in a short span by cutting down the profits. It is evident from UsCo’s approach in the United States, that it gives greater importance to market share. It has expanded rapidly by focussing on gaining consumer trust. UsCo also gives great importance to brand image and positioning, as the cheapest supplier of consumer goods. The pricing policy of UsCo has been set to meet the requirements of the target consumers. Hence CanadaCo has to take some serious measures to overcome this potential threat of competition. Customer Loyalty: It is a well known fact that acquiring a new customer is about six times costlier than retaining an existing customer (Jobber, 2004). Hence CanadaCo can take initiatives to retain the existing customer base. This can be done by the introduction of Customer Loyalty schemes. Customer loyalty card to be issued to CanadaCo customers and their details are captured. Every time a customer makes a purchase, the details are to be recorded in the database. RFM (Recency, Frequency and Monetary Value) metrics can be computed and this can be utilized to provide incentives and special offers to the most valued customers (Evans, 2001). These data can also give valuable information on customer preferences and requirements. Customer Relationship Management (CRM) should be given importance which will lead to better customer relations and would help fight the price competition. This would reduce the acquisition costs and will result in repeat purchase from the existing customers. First Mover: As it is evident that UsCo will take initiatives in the future to expand its market share in Canada, CanadaCo should effectively counteract this by being the first mover in unexplored gaps of the market. CanadaCo should open up new stores in the rural areas and gain the trust and loyalty of the rural consumers. This would give CanadaCo, a strong positioning in these segments, as UsCo is not well known amongst the Canadian consumer population. Increasing the Sources of Finance: CanadaCo should look for potential sources of finance and invest in new stores, as well as on research and development. The management of stores by franchisees is a competitive edge for CanadaCo as the store managers will be totally committed to increasing the profitability of CanadaCo, as they also benefit from it. Mergers and Acquisitions: As said earlier, it is highly likely that UsCo will tend to expand rapidly. In this context, it is evident that UsCo will indulge in mergers and acquisitions (as it ahs already bought out CanadaCo’s competition). As CanadaCo has a high turnover ($750 million), it can potentially generate finances and should focus on mergers and wherever possible, acquisition of smaller players in the sector. This would result in more market share and also increased customer base. Also, this would cut down the opportunity for UsCo to expand rapidly. Corporate Advertising: As CanadaCo is well known amongst the Canadian consumers and a high proportion of its supplies are from Canada, a corporate approach to advertising will prove to be fruitful. The importance of Canadian economy and how much it depends on consumer spending on the goods produced in Canada should be well exposed to the Canadian consumers. Campaigns inducing feelings of patriotism and exposing CanadaCo as a Single Sole supplier of goods produced in Canada will result in consumers feeling related to the company. This would eradicate the price competition to a great extent. Including an element of CSR (Corporate Social Responsibility) will increase customer relations and attitude towards CanadaCo. e-Business: CanadaCo should invest in IT and eBusiness. As the online population is increasing, customers prefer to obtain quality services from the convenience of staying at their home or office. eBusiness will also help reduce the overheads involved and in turn, the cost of goods. These are the crucial strategies to be followed by CanadaCo, in order to face the potential threat raised by UsCo. Read More