The New Zealand Grocery industry is highly concentrated, with the market being dominated by the two main players, namely Progressive Enterprises Limited and Foodstuffs New Zealand. Together, the two giants control 98% of New Zealands grocery retail market (Nielsen, 2016). New World supermarket, which is owned by Foodstuff New Zealand, is one of the leading grocery outlets in the country. However, the supermarkets dominance has come under the threat of increased competition due to increased activities by competing brands, entry of leading global brands into the New Zealand market as well as the increased popularity of non-traditional grocery retailers (Consumer, 2016). This report presents more details about the current challenge, highlighting some of the probable and possible solutions.
Details and Background of the Challenge
New World Supermarket is coming under pressure because of increased competition. The supermarkets parent company, Foodstuffs New Zealand, has a host of other brands including Four Square and Pak on Save. On the other hand, the total number of supermarkets under Progressive Enterprises control in New Zealand is 165 (Nielsen, 2016). To increase its influence in the New Zealands grocery industry, Progressive Enterprises has over the past few years been increasing the number of its stores. The opening of new stores by both the supermarkets affiliated to New World as well as those owned by Progressive enterprises has led to increased competition (Blischok, Egol & Hodson, 2016).
Consumers have also become more sophisticated. A good share of customers is out looking for better shopping experiences and businesses that would offer greater value for their hard earned money (Consumer, 2016). This has forced many players to come up with strategies to improve both the value and shopping experience, thereby driving up the competition (Blischok, Egol & Hodson, 2016). Competition has also gone up due to the growing influence of discount stores and private labels. Apart from that, the increasing popularity of non-traditional grocery retailers including filling stations and convenient stores has also eaten into a significant portion of the market share controlled by supermarkets (Nielsen, 2016).
The grocery industry in New Zealand comprises of food sold by different food retailers, including mass merchandisers, grocery stores, food service facilities, convenience stores as well as the drug stores (Nielsen, 2016). The food retail channel is dominated by supermarkets and grocery stores which form the largest food retail channel. Different supermarkets and grocery stores sell general lines of food products, including fresh fruits and vegetables, frozen foods as well as fresh and prepared meats (Firstdigital, 2014). Certain issues, including increased awareness by consumers, increased demand for safe and nutritious food as well as the need to cut down on food wastage has led to various changes and developments in the industry (Blischok, Egol & Hodson, 2016).
Non-traditional grocery stores, including drug stores and warehouse club stores, have seen a significant increase in their share of grocery sales. This and other changes are an indicator of the changes in the consumer food choices, which have also led to the increased demand for certain grocery items and contributed to the introduction of new grocery products (Hausman & Leibtag, 2007). In response to the growing popularity of nontraditional grocery stores, traditional food stores have also expanded their range of food items. AIDitionally, many traditional grocery retailers have opted to shift from traditional store formats that offer more convenience (Scherer, 2016). Others have adopted new technologies that make it possible for customers to serve themselves. All these changes have proved to be successful at providing a better shopping experience to customers (Hausman & Leibtag, 2007). As consumers needs increase, different supermarkets have responded by increasing their private labels. Some players have also seen it fit to include other extra services such as filling stations and restaurants in a bid to attract a higher number of customers and push up the overall sales volume (Firstdigital, 2014). With the increased incidences and prevalence of lifestyle diseases, consumers have started to take note of what they consume, a fact that has pushed up the demand for natural and organic grocery items (Hausman & Leibtag, 2007).
Impact of the Challenges on Clients, Customers, and the Organization
With competition threatening to surpass even the current levels, New World supermarkets position as one of the leading retailers in New Zealand in coming under greater scrutiny. The high rate of competition will eventually affect the companys revenues and profitability. A decrease in revenues would mean that the company would have to work with a smaller budget (Aaker, 2014). This translates to downsizing of some operations such as hiring and advertising. With increased competition, the supermarket might be obliged to offer lower prices. This would translate to lower revenues than the levels the supermarket was earning prior to competition becoming stiffer.
Stucke (2013) is of the view that while increased competition may have a negative impact on certain participants in the market, consumers often get the most benefits. Stucke holds the view that competition forms the backbone of most economic policies around the world and that it should be promoted as a way of ensuring that the welfare of consumers is protected. Hausman and Leibtag (2007) are of a similar opinion and state that increased competition provides consumers with many benefits in differentiated product setting. Increased competition means that businesses have to utilize the most innovative and effective strategies that would ensure more consumers buy from it as opposed to buying from key competitors. Higher levels of competition lead to lowering of prices on a wide range of commodities (Lewis, 2007). At lower prices, consumers can afford more goods and services. AIDitionally, increased competition means that businesses will strive to provide high-quality goods and services. Consumers benefit from increased access to better quality products (Stucke, 2013). Higher levels of competition imply that consumers can now choose to shop from a wider range of businesses depending on their tastes and preferences. Higher levels of competition give consumers more freedom in terms of where they want to purchase goods and services. It also gives them more bargaining power (Lewis, 2007).
For suppliers, increased competition may lead to increased demand for certain products or lower demand for another set of products. Suppliers may benefit or be negatively impacted by increased competition (Stucke, 2013). Higher levels of increased competition imply that suppliers have to bring in better quality products. Businesses may opt to look for suppliers of better quality products if the main driver of competition is product quality (Aaker, 2014). This move often pushes suppliers out of the business, forcing others to improve the quality of their offerings. Increased competition often leads to lowering of commodity prices, meaning that suppliers also have to lower their prices (Reading, 2004). Suppliers who refuse to lower their prices usually risk losing business to other suppliers offering better prices.
For an organization, increased competition calls for utilization of alternative strategies that would ensure that the business remains profitable. In the face of increased competition, a business may be obliged to lower its prices, increase its product offerings or improve the quality of its goods and services (Faulkner & Campbell, 2003). Since firms in a competitive market sell similar goods and services, businesses are usually forced to set similar prices. This, in turn, limits the number of profits that the business can make. Therefore, the extent of competition has a strong effect on the price that business charge. AIDitionally, the level of competition affects the nature of products and services that an organization offers.
For companies to effectively respond to the challenge of increased competition, they have to come up with a winning sales strategy. Such a strategy would ensure that the company maintains its profitability levels while tackling key competitors (Faulkner & Campbell, 2003). In such a scenario, a business has to focus on the range of products they deal in and investigate whether the products match the needs of consumers. This knowledge would allow the business to identify the most profitable products and the general customer preferences, thereby allowing the firm to direct its efforts towards satisfying the most prominent customers needs and selling of the most profitable products. Knowledge about consumer needs would allow the business to identify potential buyers. Identifying potential buyers make it possible for the firm to establish a working relationship with them (Cant, 2006).
A firm also has to re-invent its image when faced with increasing competition. The new image the business adopts should show how unique it is. A new image would allow the business to attract new customers and tap into new markets (Ryans, 2013). Tapping into new markets results in a bigger customer base, thereby allowing the business to spread its sales risk. A closer examination of key competitors and learning about their activities is another effective approach to responding to competition. It allows a firm to establish appropriate countermeasures (Kotler, 2009).
The challenge that New World supermarket faces is not unique. Some of the solutions that other retailers in the industry have used include:
Digital and mobile marketing
Better shopper understanding through loyalty programs and data analytics
Service-driven competitive strategy
A Differentiation strategy
The Probables and Possible
Out of the six solutions, the probable solutions are service-driven competitive strategy and a differentiation strategy. The possible solutions are multichannel retailing, cost leadership and digital and mobile marketing.
Multichannel retailing involves using both the offline and online retail platforms. For New World Supermarket, this possible solution would allow it to provide aIDitional services such as home delivery (Ryans, 2013). This will make it possible for the business to attract consumers who prefer to shop from the comfort of their houses. Cost leadership involves offering products at a relatively lower price than competitors since grocery consumers in New Zealand are very sensitive to price changes; this strategy, when used, has the potential to ensure that New World attracts more customers. Digital and mobile marketing is a cheaper alternative to traditional marketing channels (Griffin, 2008). This solution has the potential to enhance the shopping experience for consumers and allow the business to maintain communication with both the current and potential customers. With increased utilization of the internet and digital devices such as smartphones, digital and mobile marketing is becoming a necessity, especially in competitive industries such as grocery retailing (Griffin, 2008).
Analysis of one Probable
The most probable solution to the challenge of increased competition that New World is facing is to adopt a differentiation strategy. This approach would allow the supermarket to separate itself from other supermarkets and stand out as a unique entity. However, it is important to note that the fragmented nature of the grocery industry makes it quite difficult to come up with a differentiation strategy that is generic.
A number of grocery retailers around the globe have successfully utilized the differentiation strategy. One such retailer is USs Whole Foods. The grocery retailer differentiates itself from its competitors by selling natural products only. Whole Foods describes itself as an all-natural grocery chain. Through its hyper-customer focused, enhanced differentiation strategy, the company has been able to achieve great success in an industry that is quite competitive.
Product and service differentiation has for a long time been lauded as one of the effective strategies that business can utilize in the face of increased competition. The strategy requires a business to target a specific section of consumers and communicate to them about how the products and services are positively different from those offered by other players in the market. Reading (2004) holds the view that communicating to customers about the benefits of a product or services is in itself part of the differentiation strategy. He postulates that the efforts directed towards differentiating a product or service offering can go to waste if a business does not communicate the benefits to customers.
Lewis et al. (2006) opine that if a firm is capable of coming up with a line of products or services which consumers can perceive to be better than that offered by competitors, then it should pursue a differentiation strategy. New World supermarket has the potential to provide such services and products, hence the need to adopt a differentiation strategy. They further state that differentiation allows companies to set higher prices, especially if consumers perceive the products or services to be of better quality. Apart from facilitating the creation of value, a differentiation strategy will facilitate non-price competition. AIDitionally, it would allow the business to create the perception among consumers that no substitutes exist and promote brand loyalty.
New World Supermarket can differentiate itself from competitors by offering unique services or a unique line of products. Through the provision of exceptional services and shopping experience, the company will be able to retain and even attract new customers. This strategy will allow New World to aID more value to the sale of their products. A highly differentiated product line would allow the company to sell products that competitors are not selling, thereby facilitating the selling of products to good customers. A differentiated product line ensures that the company can access those customers who are on the lookout for high-value products and are willing to pay for certain products handsomely. Having access to such customers is very important to businesses as it minimizes the risk of losing out to competitors in the market. An enhanced differentiation strategy will make it possible for the company to create and dominate a specific niche.
With increased rates of lifestyle diseases such as diabetes and heart diseases, more consumers have become more concerned about what they eat. Most consumers are out looking for natural grocery products that are preservative-free and have low levels of saturated fat. New World supermarket should take advantage of this new development and differentiate its product line to include only natural products that are free from artificial preservatives and sweeteners. Currently, there is no supermarket chain in New Zealand offering such a line of differentiated products. This strategy will allow New World to attract the ever increasing health- conscious grocery consumers. Most of the health-conscious consumers are less price-sensitive. This means that the supermarket chain will have a stronger bargaining power. Most of the natural grocery products can also be sourced locally. The natural-only strategy will allow the supermarket to promote the consumption of locally produced products, thereby boosting the local agricultural sector. However, the company should ensure that it sets fair price given the dynamic nature of the grocery industry in which consumers change their tastes and preferences rapidly. AIDitionally, chances that other firms might adopt a similar strategy are quite high; hence the need for the company to ensure that it offers aIDitional services, such as home deliveries, that would help it retains its customers.
Likely Responses and Consequences to the Differentiation Strategy
This section highlights the likely responses and consequences of the differentiation strategy. It presents an analysis of the strengths, weaknesses, threats and opportunities that the selected most probable solution offers.
Facilitates creation of value
Allows an organization to set higher prices and achieve higher levels of profitability
Boosts customer loyalty
Allows company to identify and exploit a certain niche
Higher costs involved in adopting a differentiation strategy, especially for a company that has been in existence for a long time such as New World
May call for hiring of new staff members who have more expertise and experience in the type of products the business wishes to focus on
It takes long for success to be achieved. Adopting a differentiation strategy is not a guarantee that success would be achieved immediately
A differentiation strategy offers an opportunity for the business to serve more consumers both within the country and in neighboring countries
Offers a business the opportunity to downsize or eliminate on the products the products that are less profitable
Increased competition in case other businesses opt to adopt a similar strategy. Higher competition will see the business lose out on some of its customers
Poor communication strategy may hinder the overall success of the strategy. Differentiation requires an organization to communicate the benefits of the unique products or services effectively. Failure to do so may render the efforts to differentiate the products of a company from its competitors useless.
Is it of any importance having a hierarchical plan in the New World Grocery industry?
This question helps in highlighting the importance of integrating hierarchical development plan in a project. It as well identifies the procedures used in the integration process.
1a. When is the right time in proposing the writing down of the New Worlds grocery industry hierarchical plan?
This question identifies the right period of time when hierarchical development plan can successfully be instated in a project management system. In the New Worlds Grocery industry, the right time to have a hierarchical plan is when there is a predictable fluctuation in the economy (Andrews, 1999).
1b.What are the features that improve the integration process of hierarchical development plan into New Worlds Grocery industry?
This question helps in identification of the unique features and benefits of hierarchical development plan that enables in to be integrated to project management.
1c.What are the steps for integrating hierarchical decomposition plan into New Worlds grocery industry?
This question analyses the steps that are followed in order to adopt hierarchical development plan successfully in a project management, which include defining where the business is and whats important to the business (Hanson, 2004).
Is hierarchical development plan beneficial to New Worlds grocery and overall agricultural industry?
-This question helps to identify the idea of reader if he it can be of benefit to the industrys management system after an analysis of its benefits, which includes job division and assigning of managerial roles to the fit personnel (Reggiana, 2004).
2a. What is the importance of having an hierarchical development plan to New Worlds Grocery industry?
This question illustrates the benefits that are contributed by use of hierarchical development plan. By using the hierarchical plan, the grocery industry will realise an increase in its overall production.
2b. How does the importance of hierarchical development plan affect the management of the grocery industry?
This question aids in determining the importance of planning in the overall management system of the grocery industry. According to Hanson, (2004), planning aids in the allocation of jobs to the qualified personnel, and this in turn increases the production of a firm.
2c. Are there any indicators that show the success of New Worlds development plan in New Zealands grocery industry?
This question aids in the analysing of the hierarchical planning indicators of success, which include the increase in the overall improved.
Are there challenges to integration of New Worlds Grocery industry?
-This question aids in the establishing of various challenges facing the industry. It also gives the brief concern on possible challenges that might occur to the project when adopting hierarchical development plan in their management system.
Question 3a. What are the possible factors that may hinder successful integration of New Worlds grocery industry?
This question tends to help analyse the various challenges that may affect the implementation process of the hierarchical planning, it also gives the possibility of factors that may influence success of a system when it adopts hierarchical development plan.
Question 3b. In New Worlds grocery industry, what are the challenges that were faced in the implementation process and how were these challenges overcome to ensure success in adoption of hierarchical development plan?
This question aids in the analysing of the various specific measures that are used to overcome the challenges that may be faced in the adoption of the hierarchical planning system
Question 3c. Do these challenges impose any future problems in the management system of the Grocery industry?
-This question is about possibilities of any effects that may occur to the project and its management in the future as a result of the challenges that have been experienced during adoption of hierarchical development in project management.
Is hierarchical development planning the only planning system that can be implemented in the management of the Grocery industry?
This question analyses different kinds of development plans that are available apart from hierarchical development plan. It further compares differences in the development plans with weaknesses and strengths of hierarchical development plan, and how these systems compare and contrast to hierarchical planning.
Question 4a. How many development plans are available in management system of the Grocery industry?
This question analyses different kinds of development plans that are available in management systems of a project. It analyses which of these kinds are applicable to the Grocery industry.
Question 4b. How does these other plans compare to the industrys hierarchical development plan?
This question gives an illustrated comparison of hierarchical development plan to the other development plans that have been identified, sticking to the Grocery industry context. It issues the differences and similarities.
Question 4c. What are the weaknesses and strengths of hierarchical development plan?
This question analyses the available strengths as well as weaknesses of hierarchical development plan.
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Posted on May 31, 2016Author TutorCategories Question, Questions