Market Shares of the Leading Supermarket Food Retailers in the UK (%) 1997

Shop numbers 1971 and 1989 compared

Food Retailers 1990

Mixed retail businesses 1990

L de Chernatony, M McDonald, 1992, Creating Powerful Brands, 2nd Ed. Butterworth-Heinemann

Decline of Independents Broad economic and social change (inflation, recession, buying behaviour) Competition from multiples and Co-operatives Increased operating costs Lack of capital for investment Availability of supplies of goods (price, quantity, delivery, etc.) Urban renewal Age of entrepreneur Poor locations Inflexible management attitudes J A Dawson (1983) Independent retailing in Britain: dinosaur or chameleon? Retail and Distribution Management vol. 11 (3) 29-32

Co-operative Movement In 1844, 28 working men collected £28 and used it to open a shop in Toad Lane, Rochdale, Lancs. Key Principles Voluntary and open membership. Democratic control. Share capital should only receive a strictly limited rate of interest. Surplus should be distributed to members in proportion to their purchases from their society.

Co-operatives’ shares of European grocery markets, 1985 (%)

Results of large UK retailers for year ending 1992 (£m)

Decline of Co-operatives in UK 1950’s UK Co-ops accounted for –12% of all retail sales –20% of grocery sales By 1991 t/o fell by 65% profits fell by 81% (using 1957 prices) What went wrong Abolition of RPM, allowed price competition, which in turn reduced profits.

Decline of Co-operatives in UK Insufficient funds to fund developments. Co-ops not quoted on stock market –limited access to funds. Co-ops not single entity –in societies –in societies Structure does not allow decisions to be made in the same way as plcs.

Environmental factors favouring multiples Access to funds via stockmarket and/or banks. Self-funding developments due to cash turnaround. Changes in 1970’s favouring out-of-town retailing. Changes in 1980’s favouring even bigger out-of-town developments.

Developing Core Retailing Strategy Steps in Gaining Strategic Marketing Advantage  Analyse the strategic situation  Determine competitive advantage  Specify strategic objectives

Steps in Gaining Strategic Marketing Advantage  Identify and evaluate strategic options  Select strategy for implementation  Evaluate performance

Analyse the situation  The organisation  The market structure  The industry structure  (Porter’s 5 Forces model)  The environmental forces  PEST, SWOT

Sources of Retail Competitive Advantage  Location  Layout  Merchandising  Pricing  Promotion  Services  Organisation and Personnel

Determine Competitive Advantage  Market Development  Market Domination  Differential Advantage  Market Selectivity  No Advantage Strategic Objectives for Retailers In terms of market position  Increase sales  Increase market share  Regain lost position In terms of performance  Market capitalisation  Profit margins  Profit contribution  Return on Assets  Sales per sq. metre per person

Strategic Objectives for Retailers In terms of market position  Increase sales  Increase market share  Regain lost position

Strategic Objectives for Retailers In terms of performance  Market capitalisation  Profit margins  Profit contribution  Return on Assets  Sales per sq. metre per person

Measurements for Effectiveness Overall effectiveness  Market Share  Total sales volume/value  Sales per employee  Profit margins For effectiveness of promotion/sales effort  Net profit margin  Promotional costs as % of sales  Selling/Distribution costs

Measurements for Effectiveness For effectiveness of promotion/sales effort  Net profit margin  Promotional costs as % of sales  Selling/Distribution costs

Identifying Strategic Alternatives and Selecting Retail Strategy  New product development  Market testing  Market repositioning  Productivity improvements  Organisational design  Exploiting special advantage  Acquisition/Merger/Strategic alliance  Divest

Competitive Advantage Competitive Edge Porter,1980 Competitive Strategy The Free Press

Strategies of Differentiation Price Differentiation Image Differentiation Support Differentiation Quality Differentiation Mintzberg & Quinn 1996, The Strategy Process, Concepts, Contexts and Cases 3rd Ed. Prentice Hall, p89

The Strategy Clock: Bowman’s competitive strategy options

The Value Chain - possible sources of differentiation and cost control

Ansoff’s product-mission matrix Ansoff 1988 Which Direction?

Linear growth Neil Glass, 1996, Chaos, Non-Linear Systems and Day-to-Day Management, European Management Journal

Chaos View of Growth Neil Glass, 1996, Chaos, Non-Linear Systems and Day-to-Day Management, European Management Journal

Example Sainsbury’s April reducing jobs to cut costs

Example Sainsbury’s 1999 and John Cleese

Example Tesco April taking on 3,000 staff for ‘One-in-Front’

Criteria for Core Competences There are 3 criteria to test Core Competences Value for money for customers. Better than competitors. Difficult to imitate.